PJD GROUP GROUP STANDING INSTRUCTION : GROUP INTERNAL AUDIT CIRCULAR NO : GIA/PROP/GSI/

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1 GROUP STANDING INSTRUCTION SOURCE : GROUP INTERNAL AUDIT CIRCULAR NO : GIA/PROP/GSI/ APPLICABLE TO : DATE OF ISSUE :1 JUNE 2001 SUBJECT : CONTENTS SECTION PARTICULARS PAGE SECTION 1 1 BUSINESS RISKS Rules, Regulations, Acts and Laws Investments External Environment, Marketability and Competitiveness Reputation and Image Liquidity Profitability Technology Idle Assets Contingent Liabilities Expertise SECTION 2 2. OPERATION RISKS Approval from various local government authorities, institutions, agencies, etc Selection of Contractors and Professional Consultants Tendering Process Contract/Agreement Contractual Claims Deliverable to Specification/Requirement Time Overrun - Loss of Opportunity, Liquidated and Ascertained Damages (LAD) and Compensation Cost Overrun Variations/Change Orders Quality Control Lease Back Maintenance Services Machinery and Equipment Breakdown SECTION 3 3. FINANCIAL RISKS Cashflow Credit Facilities, Loans and Interest Rates Account Receivables Bad Debts Fraud Penalties/Fines Finalisation of Project Accounts Foreign Exchange Rates cont'd 21

2 GROUP STANDING INSTRUCTION Page 2 SOURCE : GROUP INTERNAL AUDIT CIRCULAR NO : GIA/PROP/GSI/01/2001 APPLICABLE TO : DATE OF ISSUE :1JUNE2001 SUBJECT : CONTENTS SECTION PARTICULARS PAGE SECTION 4 4. OTHER RISKS Fixed Assets, Moveable Assets, Readily Realisable Assets and Associated Documents Insurance for Risk Related Costs, Accidents or Perils Safety and Health Security Information and Communication Retention of Staff EFFECTIVE DATE OF IMPLEMENTATION : 1 JULY 2001 THIS GROUP STANDING INSTRUCTION SHALL BE ADOPTED AND ALL THE EXISTING POLICIES AND PROCEDURES ISSUED VIA GROUP STANDING INSTRUCTIONS (GSI) AND STANDING INSTRUCTIONS (SI) SHALL FORM AN INTEGRATED PART OF THIS OVERALL. Approved by/ Mr. Au ChoYi Choong Chairman, Audit Committee bvetfbyt Dato' Dr. Haji Dzulkarnain bin Shafiee Executive Chairman...cont'dS/

3 GROUP STANDING INSTRUCTION Pages SOURCE : GROUP INTERNAL AUDIT CIRCULAR NO : GIA/PROP/GSI/01/2001 APPLICABLE TO : DATE OF ISSUE : 1 JUNE 2001 SUBJECT : THIS GROUP STANDING INSTRUCTION SHALL BE APPLICABLE TO : NAME OF COMPANY 1. Damai Laut Golf Resort Sdn Bhd 2. PJD Realty Sdn Bhd 3. BindevSdnBhd 4. Bunga Development Sdn Bhd 5. Kota Mulia Sdn Bhd 6. PJD Eastern Land Sdn Bhd 7. PJD Paragon Development Sdn Bhd 8. PJD Properties Mangement Sdn Bhd 9. PJD Management Services Sdn Bhd 10. DLHA Management Services Sdn Bhd 11. Kulai Management Services Sdn Bhd 12. K.G. Management Services Sdn Bhd 13. Acotec-Concrete Products Sdn Bhd 14. PJD Concrete Land (JB) Sdn Bhd 15. PJD Concrete Land (South) Sdn Bhd 16. Olympic Properties Sdn Bhd 17. PJD Land Sdn Bhd 18. WahyuSdnBhd PRINCIPAL ACTIVITIES Development and investment in resort property, hotel and restaurant business and operation of golf course Investment holding Property development Property development Property development and investment Property development and investment Property development Provision of project management services Provision of property management and facilities services Provision of property management services Provision of property management services Provision of property management services Property investment and rental services Property investment Property investment Property investment Dormant Dormant -End-

4 1. BUSINESS RISKS 1.1 Rules, Regulations, Acts and Laws The Company shall abide by all statutory rules and regulations, Acts by Parliament and laws of the Country. 1.2 Investments The Company shall invest in land and property after carefully studying the viability of investment in such a manner that the investment does not jeopardise the growth, profitability and success of the Company as an on-going concern. 1.3 External Environment, Marketability and Competitiveness The Company shall continuously monitor changes in the environment and meet the needs of customers and prospective customers through market research and effective strategy planning. This shall include monitoring the capital markets, industry capacity, technology factors, pressure from substitutes, threat from new entrants, economic factors, political factors, regulatory factors, geographical factors and social factors. This shall be reported in the Operational Reviews / Management Meetings if changes in the external environment have materially affected the marketability, competitiveness and profitability. The Company shall provide distinct quality products and quality services to customers as a value superior to that offered by the competitors and create distinctive and sustainable competitive advantage in market place. 1.4 Reputation and Image The Company shall value its customers and maintain good business relationship by providing assurance of customer satisfaction. 1.5 Liquidity The Company shall have sufficient cash, assets, reserve and adequate working capital to finance the project development and operational activities through internal or external funds and to remain as an on-going concern.

5 1. BUSINESS RISKS 1.6 Profitability The Company shall always be maintained as a profitable ongoing concern barring unforeseen circumstances that may affect its profitability. There shall be an established pricing policy. 1.7 Technology The Company shall develop and exploit its current technology in order to build and maintain sustainable competitive advantage. This shall include facilities, machinery and specialised equipment, communication systems, computer and PC resources and networking capabilities. Where necessary, the Company shall attempt to extend the life of current technology (upgrade) and/or develop or apply new technology especially when there is technology change for market for products or method of production. 1.8 Idle Assets The Company shall make conscious effort to ensure idle assets are developed, leased, sold or do other things necessary within a reasonable time frame to minimise holding costs or financing costs. 1.9 Contingent Liabilities Legal Suits Guarantee and/or Warranties Product Liability The Company shall carry out its activities with due diligence and care to avoid unnecessary legal implications or legal suits that may be brought against it by government or statutory agencies/bodies, individual, customers or suppliers, etc 1.10 Expertise The Company shall identify the core competencies of expertise required to implement the business objectives and strategies. The Company shall then through its stringent recruitment policy, employ qualified, skilled and capable employees.

6 2. OPERATION RISKS 2.1 Approval from various local government authorities, institutions, agencies, etc 2.2 Selection of Contractors and Professional Consultants The Company shall always expedite the approval process from various local government authorities, institutions, agencies, etc to meet the overall business objectives and strategies. The Company shall evaluate the competencies of contractors and professional consultants and select those who have the expertise and who are capable of undertaking the construction activities and works. The final selection of contractors and professional consultants shall be in accordance with the established tender policy and procedures. The Company shall ensure the contractors and professional consultants have appropriate and adequate insurance covers and that the insurance covers are maintained throughout the contract. 2.3 Tendering Process The Company shall ensure the tendering process is fairly conducted in accordance with the established tender policy and procedures to prevent malpractice and frauds. 2.4 Contract/Agreement The Company shall ensure that all construction activities and works are bound by contract documentation which are comprehensive and prepared with due diligence and care to protect the Company's interest and deliverables to specification /requirements, completion period and contract sum and/or budget. The Company shall fulfill its obligations in accordance with the contract/agreement and shall ensure to receive its full benefits as the case may be in accordance with the contract/ agreement. The Company shall ensure there is adequate security or surety available in the event of breach of contract by other party. The Company shall ensure most appropriate form of contract e.g. firm or fixed price, variable price, lump sum, measured work, cost reimbursement, guaranteed maximum price etc is utilised and the Company is adequately protected in the event of default by the other party. Whichever form of contract is utilised, all likely risks shall be identified to take adequate measures to either remove, reduce or counter the identified risks.

7 2. OPERATION RISKS 2.5 Contractual Claims The Company shall take adequate steps to minimise contractual claims and potential costly disputes. If the Company is faced with contractual claims for or against, the damages shall be fully assessed, accurately costed and authorised by the Management. 2.6 Deliverable to Specification/Requirement The Company shall ensure that all construction activities and works are properly supervised and checked by internal staff and/or external professional consultants and all deliverables are certified by them to specifications /requirements. 2.7 Time Overrun - Loss of Opportunity, Liquidated and Ascertained Damages (LAD) and Compensation The Company shall ensure that the construction activities and works are completed within the stipulated/budgeted time frame. If this is not possible due to unforeseen circumstances, the Company shall make conscious effort to complete the construction activities and works within a new time frame and minimise the loss of opportunity and to mitigate payment of LAD or compensation. 2.8 Cost Overrun The Company shall ensure that budget for construction activities and works are accurate and realistic and the contract sums awarded are within the budget. Thereafter, the construction activities and works shall be implemented and managed within the contract sum and budget. If for any reason, the contract sum and budget is not adequate during construction stage, without change in scope of works or change in completion period, proper justification and explanation shall be provided for approval by the Management.

8 2. OPERATION RISKS 2.9 Variations/Change Orders The Company shall ensure that variations/change orders especially those giving rise to additional costs are eliminated during tender preparation and prior to tender award stages. If the variations/change orders are not avoidable, especially for those giving rise to additional costs during construction stage, proper justification and explanation shall be provided for approval by the Management in accordance with established tender policy and procedures. Where variations/change orders relate to omission of scope of works involving cost savings, such omissions shall be brought to the attention of the Management for approval Quality Control The Company shall implement proper quality control processes during construction stage and take proactive actions on quality control issues arising during construction stage to minimise defects. The Company shall ensure that the liabilities of making good defects are bound by the contract with contractors. The Company shall take immediate action against defective products and see that the contractor makes good the defects satisfactorily and on timely basis during the defined defect liability period to enable the Company to hand over the property to customer's satisfaction. The Company shall avoid additional costs associated engaging another contractor to make good the defects. with 2.11 Lease Back The Company shall make conscious efforts to sub-let properties leased back to developer under the Rental Guarantee Scheme so as to generate income to pay out rental amount guaranteed to the parcel owners.

9 2. OPERATION RISKS 2.12 Maintenance Services The Company shall provide maintenance services for properties with Strata Titles, until such time Management Corporation is formed upon issuance of separate Strata Titles to individual parcels in accordance with the Strata Title Act 1985 and agreement with parcel owners. The application for separate Strata Titles shall be promptly submitted to the authorities for early release of the Strata Titles. The cost of maintenance services shall be from the maintenance fees collected from parcel owners and/or prospective parcel owners Machinery and Equipment Breakdown The Company shall maintain its machinery and equipment belonging to properties with Strata Titles in good working condition through routine and preventive maintenance programme and shall take appropriate action as and when necessary to ensure breakdown does not significantly affect the Company's business and operational activities for the duration the Company provides maintenance services.

10 3. FINANCIAL RISKS 3.1 Cashflow The Company shall maintain sustainable cashflow for its working capital to fund and support the business and operational activities. The primary cash in-flow shall come from stringent collection process of outstanding amount from customers, debtors or purchasers (internal fund). The Company may borrow cash from holding company for its working capital, if internal fund is not sufficient. 3.2 Credit Facilities, Loans and Interest Rates The Company shall source for short term or long term credit facilities, loans from licenced financial institutions for working capital only if internal fund or holding company fund is not sufficient to fund and support the business and operational activities. The credit facilities and loans shall be obtained only after detailed and careful study of the Company's capability of meeting its obligations to the licenced financial institutions to repay the principal sum and/or to service the interest. The credit facilities and loans obtained shall be competitive and shall always be favourable to the Company on short term or on long term basis. The Company's Board of Directors shall collectively approve and resolve the credit facilities and loans to be obtained from the licensed financial institutions. The credit facilities and loans obtained shall be secured in such a way as to avoid undue pressure and additional risk for the Company. The Company shall as far as possible not use the credit facilities and loans obtained to fund and support other subsidiary companies' business and operational activities. The Company shall fulfill its obligations to the licensed financial institution pertaining to credit facilities and loans obtained and where possible, obtain early discharge of its obligations.

11 3. FINANCIAL RISKS s 3.3 Account Receivables The Company shall strictly follow the established credit policy to maintain reasonable level of account receivables to minimise credit risk exposure. As a general guideline, the pre-determined or established credit limit and credit period per policy shall be continuously followed and enforced to avoid account receivables from increasing above reasonable level and causing the Company undue credit risk exposure. 3.4 Bad Debts In the event of bad debts for property development, the Company shall resell the property or parcel to realise the sales proceeds. For leasing and property maintenance activities, the Company shall implement stringent collection efforts to minimise bad debts. Where bad debts occur, appropriate actions including legal actions shall be taken against the debtors, customers or purchasers to recover the bad debts. 3.5 Fraud The Company shall protect its revenues, expenditures and properties including fixed and moveable assets and readily realisable assets from any attempt either by its own employees, members of the public, contractors, agents or intermediaries to gain by deceit financial or other benefits. The Company shall: - develop sound financial management system and fraud control policies to ensure opportunities for waste, abuse and mismanagement is minimised or reduced; - develop clear system, standards and procedures to encourage minimisation and deterrence of fraud, waste and mismanagement and for detection and prosecution of offence should they occur; commit at all levels to develop, encourage and insist on sound financial, legal and ethical decision making; - reduce or minimise losses through fraud by rigorous implementation of fraud prevention procedures.

12 3. FINANCIAL RISKS s 3.6 Penalties/Fines The Company shall abide by all statutory rules and regulations, Acts by Parliament and laws of the Country to avoid payment of penalties/fines. 3.7 Finalisation of Project Accounts The Company shall finalise project accounts promptly and accurately upon successful completion of the construction works. 3.8 Foreign Exchange Rates Where business or operational transactions involve foreign exchange rates, the Company shall exercise due care and vigilance on the sensitivity of exchange rates fluctuations to ensure the commitment does not unduly expose the Company to significant risks in foreign exchange losses. The Company shall abide by all statutory rules and regulations, Acts by Parliament and law of the Country pertaining to foreign exchange transactions.

13 4. OTHER RISKS 4.1 Fixed Assets, Moveable Assets, Readily Realisable Assets and Associated Documents The Company shall maintain complete and accurate record of fixed and moveable assets in physical existence. The Company shall promptly update the new purchases, transfers and disposals of the assets in Fixed Assets Register. The Company shall safeguard and institute adequate physical controls and security over the assets including prevention and unauthorised access to readily realisable assets such as shares certificates, title deeds, cheques, cash and certain type of stock and equipment from loss through theft, damage, etc. Cash and cheques collected shall be banked into the Company 's bank account within 2 working days. The Company shall insure all assets against risk of loss through theft, damage, etc at replacement cost. The Company shall conduct physical count of the assets, at least once a year, and reconcile the count with the records and investigate differences. 4.2 Insurance for Risk Related Costs, Accidents or Perils The Company shall adequately insure all risk related costs, accidents, perils or activities associated with : - burglary, theft and/or damage to fixed assets and moveable assets public liabilities employees' safety, casualty or health - fire cash in transit /money fidelity guarantee product liabilities business interruptions/consequential loss 4.3 Safety and Health The Company shall adopt the Occupational Safety and Health Administration (OSHA) laws and regulations. The Company shall provide appropriate safety and health training programmes and upholds the safety and health policies by appropriately disciplining violators. 10

14 4. OTHER RISKS 4.4 Security The Company shall employ physical control to secure the premises, computer installations, materials, moveable assets, fireproof safes etc to prevent unauthorised access. The Company shall establish and control all levels of access and integrity of its computerised information systems, server, software and data processes and ensure they are secured. 4.5 Information and Communication The Company shall ensure information including operational and financial data is accurate, complete and timely, uptodate and appropriately routed to all affected parties. The Company shall ensure information requirements are accurately identified and addressed to provide adequate and appropriate information to support sound and ethical decision making. The Company shall also ensure: information is securely circulated to relevant parties; information is adequately protected from loss, unauthorised access, invalid amendments, etc; key information or events are properly and accurately reported, potential problems, shortcomings and anomalies are detected and appropriate parties are notified. 4.6 Retention of Staff The Company shall develop retention programme to retain key staff so as not to cause disruption in operation and in implementation and realisation of the Company's overall objectives and to keep the Company as an on-going concern. 11