DAMANSARA REALTY BERHAD ANNUAL REPORT 2011 CONTENTS

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2 CONTENTS 1 Contents Notice of Annual General Meeting Statement Accompanying the Notice of Annual General Meeting Corporate Information Board of Directors Profile of the Board of Directors Corporate Statement Audit Committee Report Statement of Corporate Governance Statement of Internal Control Statement on Directors Responsibility Recurrent Related Party Transactions Directors Report Statement by Directors Statutory Declaration Independent Auditors Report Statements of Comprehensive Income Statements of Financial Position Statements of Changes in Equity Statements of Cash Flows Notes to the Financial Statements Supplementary Information Breakdown of Accumulated Losses Into Realised and Unrealised List of Properties Shareholding Statistics Proxy Form

3 2 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT the 50th Annual General Meeting of Damansara Realty Berhad will be held at Permata 3, Level B2, The Puteri Pacific Johor Bahru, Jalan Abdullah Ibrahim, Johor Bahru, Johor on Thursday, 28 June 2012 at noon for the following purposes: AS ORDINARY BUSINESSES: 1. To receive and adopt the Report and the Audited Financial Statements for the financial year ended 31 December 2011 and the Reports of the Directors and Auditors thereon; Resolution 1 2. To reelect the following Directors who retire in accordance with the Company s Articles of Association: (i) Kamaruzzaman bin Abu Kassim (Article 81) (ii) Yahaya bin Hassan (Article 81) (iii) Yusof bin Rahmat (Article 81) (iv) Datuk Ahmad Zaki bin Zahid (Article 87) (v) Leung Kok Keong (Article 87) (vi) Wan Mohd Firdaus bin Wan Mohd Fuaad (Article 87) 3. To approve the payment of Directors fees in respect of the financial year ended 31 December 2011; 4. To reappoint Messrs Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration; Resolution 2 Resolution 3 Resolution 4 Resolution 5 Resolution 6 Resolution 7 Resolution 8 Resolution 9 5. To transact any other business of which due notice shall have been given; AS SPECIAL BUSINESSES: 6. To consider, and if deemed fit, to pass the following Resolutions as Ordinary Resolutions: 6.1 Proposed Renewal of Shareholders Mandate and New Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature ( Proposed Shareholders Mandate ) Resolution 10 THAT, subject to the provisions of the 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 and to obtain new 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 5 June 2012 ( the Circular to Shareholders ), which are necessary for the daytoday 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: (a) the transactions are in the ordinary course of business, on arm s length basis and are on normal commercial terms which are not more favourable to the related parties than those generally available to the public and not to the detriment of the minority shareholders; and

4 3 NOTICE OF ANNUAL GENERAL MEETING (CONT D.) (b) disclosure is made in the Annual Report of the aggregate value of transactions conducted pursuant to the Proposed Shareholders Mandate during the financial year including amongst others, the following information: (i) (ii) the type of Recurrent Transactions; and the names of the Related Party involved in each Recurrent Transaction entered into and their relationship with the Company; AND THAT such approval shall continue to be in force until: (a) (b) (c) the conclusion of the next Annual General Meeting of the Company; or the expiration of the period within which the next Annual General Meeting of the Company subsequent to the date it is required to be held pursuant to section 143(1) of the Malaysian Companies Act, 1965 ( the Act ) (but shall not extend to such extensions as may be allowed pursuant to section 143(2) of the Act); or 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. 7. To consider, and if deemed fit, to pass the following Resolution as Special Resolution: 7.1 Proposed Amendments to the Articles of Association of the Company ( Proposed Amendments ) Resolution 11 THAT the amendments to the existing Articles of the Company as proposed and detailed in Appendix B of the Circular to shareholders dated 5 June 2012 be and are hereby approved and adopted and that the Directors of the Company be authorized to do all acts and things and take all such steps as they may consider necessary to give effect to the amendments to the Articles of Association of the Company. By Order of the Board JAMALLUDIN BIN KALAM (LS ) HASLINDA BINTI MD MOHD NOAH (LS ) Secretaries Venue : JOHOR BAHRU Dated : 5 June 2012

5 4 NOTICE OF ANNUAL GENERAL MEETING (CONT D.) Resolution 10 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 daytoday operations of the Group, subject to the transactions being in the ordinary course of business, on arm s 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 5 June 2012 for further information. Resolution 11 The proposed Special Resolution under item 7, if passed will streamline the Company s Articles of Association with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. Please refer to the Circular to Shareholders dated 5 June 2012 for further information. EXPLANATORY NOTES ON SPECIAL BUSINESSES: Notes: 1. A member entitled to attend and vote at this meeting is entitled to appoint a proxy and vote instead of him. A proxy may but need not be a member of the Company. 2. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing or if the appointer is a corporation/company either under its common seal or under the hand of its attorney duly authorised. 3. If a member appoints two proxies to attend at the same meeting, the instrument of proxy must specify the proportion of his shareholdings to be represented by each proxy. 4. The instrument appointing a proxy must be deposited at the Registered Office of the Company, at Suite 12B, Level 12, Menara Ansar, 65 Jalan Trus, Johor Bahru, Johor not less than 48 hours before the time appointed for holding the meeting or at any adjournment thereof.

6 Directors who are standing for reelection at the 50th Annual General Meeting are as follows: 5 (i) Kamaruzzaman bin Abu Kassim (Article 81) Resolution 2 (ii) Yahaya bin Hassan (Article 81) Resolution 3 (iii) Yusof bin Rahmat (Article 81) Resolution 4 (iv) Datuk Ahmad Zaki bin Zahid (Article 87) Resolution 5 (v) Leung Kok Keong (Article 87) Resolution 6 (vi) Wan Mohd Firdaus bin Wan Mohd Fuaad (Article 87) Resolution 7 The details of the Directors standing for reelection are on pages 8 to 13 STATEMENT ACCOMPANYING THE NOTICE OF ANNUAL GENERAL MEETING

7 6 CORPORATE INFORMATION BOARD OF DIRECTORS KAMARUZZAMAN BIN ABU KASSIM (Chairman) NonIndependent NonExecutive Chairman DATUK AHMAD ZAKI BIN ZAHID (Appointed on 8 November 2011) (Managing Director) WAN AZMAN BIN ISMAIL (Executive Director) ZAINAH BINTI MUSTAFA Independent NonExecutive Director DATO MANI USILAPPAN Independent NonExecutive Director DATUK YAHYA BIN YA ACOB Independent NonExecutive Director LUKMAN BIN HJ. ABU BAKAR NonIndependent NonExecutive Director YAHAYA BIN HASSAN NonIndependent NonExecutive Director YUSOF BIN RAHMAT NonIndependent NonExecutive Director LEUNG KOK KEONG (Appointed on 9 November 2011) Independent NonExecutive Director WAN MOHD FIRDAUS BIN WAN MOHD FUAAD (Appointed on 9 November 2011) NonIndependent NonExecutive Director AUDIT COMMITTEE ZAINAH BINTI MUSTAFA (Chairman) DATO MANI USILAPPAN LUKMAN BIN HJ. ABU BAKAR COMPANY SECRETARIES Jamalludin bin Kalam (LS ) Haslinda binti Md Mohd Noah (LS ) REGISTERED OFFICE Suite 12B, Level 12, Menara Ansar 65 Jalan Trus Johor Bahru Johor Tel : Fax : Share Registrar Pro Corporate Management Services Sdn Bhd (Company No M) Suite 12B, Level 12, Menara Ansar 65 Jalan Trus Johor Bahru Johor Tel : Fax : sheila@procorporate.com.my STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad AUDITORS Ernst & Young PRINCIPAL BANKERS CIMB Bank Berhad Affin Bank Berhad

8 7 BOARD OF DIRECTORS Standing from left to right: [ 1 ] LUKMAN BIN HJ. ABU BAKAR NonIndependent NonExecutive Director [ 2 ] DATO MANI USILAPPAN Independent NonExecutive Director [ 3 ] YUSOF BIN RAHMAT NonIndependent NonExecutive Director [ 4 ] YAHAYA BIN HASSAN NonIndependent NonExecutive Director [ 5 ] WAN MOHD FIRDAUS BIN WAN MOHD FUAAD NonIndependent NonExecutive Director [ 6 ] LEUNG KOK KEONG Independent NonExecutive Director [ 7 ] ZAINAH BINTI MUSTAFA Independent NonExecutive Director [ 8 ] DATUK YAHYA BIN YA ACOB Independent NonExecutive Director Sitting from left to right: [ 9 ] DATUK AHMAD ZAKI BIN ZAHID Managing Director [ 10 ] KAMARUZZAMAN BIN ABU KASSIM Chairman NonIndependent NonExecutive Director [ 11 ] WAN AZMAN BIN ISMAIL Executive Director

9 8 PROFILE OF THE BOARD OF DIRECTORS KAMARUZZAMAN BIN ABU KASSIM, aged 48, a Malaysian, is a NonIndependent NonExecutive Director and the Chairman of Damansara Realty Berhad ( DBhd ). He was appointed to the Board of DBhd on 11 December 1995 before assuming the position of Executive Director on 16 August He was later appointed as its Deputy Chairman on 2 October 2006 and redesignated as DBhd s Managing Director on 1 January He resigned as the Managing Director of DBhd on 12 January 2011 and was appointed as the Chairman on the same date. He is also the Chairman of the Nomination and Remuneration Committee of DBhd. He graduated with a Bachelor of Commerce majoring in Accountancy from the University of Wollongong, New South Wales, Australia in He embarked his career as an Audit Assistant at Messrs K.E Chan & Associates in May 1988 and later joined an international accounting firm, Messrs Pricewaterhouse Coopers (formerly known as Messrs Coopers & Lybrand) in In December 1992, he left the firm and joined Perbadanan Kemajuan Ekonomi Negeri Johor (currently known as Johor Corporation) as a Deputy Manager in the Corporate Finance Department and later promoted to General Manager in He is the President and Chief Executive of Johor Corporation effective 1 December He had served as the Acting President and Chief Executive of Johor Corporation from 29 July 2010 to 30 November Prior to that, he had served as the Chief Operating Officer of Johor Corporation beginning 1 August 2006, before his appointment as the Senior Vice President, Corporate Services and Finance of Johor Corporation beginning 1 January During his tenure as Johor Corporation s Chief Operating Officer and the Senior Vice President, Corporate Services & Finance, Johor Corporation had received the Excellence Award For Financial Management Accountability Index with 4star ratings from the National Audit Department for four consecutive years from He sits as Chairman of Damansara REIT Managers Sdn Bhd, the Manager of AlAqar KPJ REIT beginning 12 January He is also the Chairman of Kulim (Malaysia) Berhad, KPJ Healthcare Berhad, which are Johor Corporation s Group of Companies listed on the Main Market of Bursa Malaysia Securities Berhad. He is also a Director of Waqaf AnNur Corporation Berhad, an Islamic endowment institution that spearheads Johor Corporation s CSR programmes. He also sits as Chairman and/or Director of several other companies within Johor Corporation Group. Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of DBhd. He has no personal interest in any business arrangement involving DBhd. He has not been convicted for any offences. He attended all five (5) Board of Directors Meetings of the Company in the financial year ended 31 December He does not own any units of ordinary shares of DBhd.

10 9 PROFILE OF THE BOARD OF DIRECTORS (CONT D.) DATUK AHMAD ZAKI BIN ZAHID, aged 40, was appointed to the Board of DBhd as the Managing Director on 8 November He holds a Bachelor of Laws, University of Bristol, England in He was the Executive Director, Malaysian Resources Corporation Berhad from May 2009 to October 2011 and was an Independent Director, Malaysian Resources Corporation Berhad from January 2005 to April He was a Senior Executive Officer at the Issues and Investment Division of Securities Commission of Malaysia from November 1994 to July Thereupon, from August 1998 to February 2000, he worked as a Senior Consultant at Booz Allen & Hamilton (Kuala Lumpur and Singapore). He assumed the role of Special Assistant to YB Dato Seri Hishammuddin Tun Hussein, Minister of Youth & Sports, Malaysia from March 2000 June In July 2001, he joined the Deputy Prime Minister s office as the Special Officer to YAB Tun Abdullah Hj Ahmad Badawi and was promoted to Special Officer to YAB Tun Abdullah Hj Ahmad Badawi and Head of Policy Unit, Prime Minister s Office from November 2003 to April WAN AZMAN BIN ISMAIL, aged 48, a Malaysian, was appointed as the Executive Diretor of DBhd on 1 February He graduated with a BA (Hons) in Accounting and Financial Analysis, University of Newcastle upon Tyne, United Kingdom in He was attached to the Corporate Finance Division, Perwira Affin Merchant Bank from September 1990 to March He later joined the Corporate Finance Division of BSN Merchant Bank Berhad from March 1999 until July He was employed by JCorp from September 1999 to December 2000 and later joined DBhd, in January Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of DBhd. He has no personal interest in any business arrangement involving DBhd. He has not been convicted for any offences. He attended all five (5) Board of Directors Meetings of the Company in the financial year ended 31 December He does not own any units of ordinary shares of DBhd. He is also the Executive Director of Kulim (Malaysia) Berhad and the Managing Director of Damansara Assets Sdn Bhd. Besides that, he is also a Director of several other companies within the JCorp Group. Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of DBhd. He has no personal interest in any business arrangement involving DBhd. He has not been convicted for any offences. He does not own any units of ordinary shares of DBhd.

11 10 PROFILE OF THE BOARD OF DIRECTORS (CONT D.) ZAINAH BINTI MUSTAFA, aged 57, a Malaysian, is an Independent NonExecutive Director of DBhd and the Chairman of the Audit Committee. She was appointed to the Board as a Director on 17 April She is also a member of the Nomination and Remuneration Committee of DBhd. She started her career as an Assistant Senior Auditor in Perbadanan Nasional Berhad in 1977 after graduating from Institut Teknologi MARA (presently Universiti Teknologi MARA). She obtained her Association of Chartered Certified Accountants (ACCA) United Kingdom in She is now a Fellow of Association of Certified Chartered Accountant (FCCA). She joined JCorp in October 1978 and rose through the ranks to the Group Chief Financial Officer before retiring on 31 October She is an Independent NonExecutive Director and an Audit Committee Member of KPJ Healthcare Berhad, a company within the JCorp Group, which is listed on the main market of Bursa Malaysia Security Berhad. She is also an Independent NonExecutive Director of Damansara REIT Managers Sdn Bhd. She also sits on the Board of several other companies within the JCorp Group. Other than as disclosed, she does not have any family relationship with any director and/or major shareholder of DBhd. She has no personal interest in any business arrangement involving DBhd. She has not been convicted for any offences. She attended all five (5) Board of Directors Meetings of the Company in the financial year ended 31 December She does not own any units of ordinary shares of DBhd. DATO MANI USILAPPAN, aged 62, a Malaysian, is an Independent NonExecutive Director of DBhd and was appointed to the Board on 15 November He is a member of the Audit Committee and also the Nomination and Remuneration Committee of DBhd. He passed the Final Examination of the Royal Institution of Chartered Surveyors in He obtained Masters in Property Development from Southbank University London with Distinction in He served nine (9) years as Deputy Director General and subsequently retired as Director General of the Valuation and Property Services Department, Ministry of Finance, Government of Malaysia in He is also an Independent and NonExecutive Director of Damansara REIT Managers Sdn Bhd (Al`Aqar KPJ REIT). Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of DBhd. He has no personal interest in any business arrangement involving DBhd. He has not been convicted for any offences. He attended four (4) out of five (5) Board of Directors Meetings of the Company in the financial year ended 31 December He currently owns 31,680 units of ordinary shares of DBhd.

12 11 PROFILE OF THE BOARD OF DIRECTORS (CONT D.) DATUK YAHYA BIN YA ACOB, aged 68, a Malaysian, is an Independent NonExecutive Director of DBhd and was appointed to the Board on 6 August He graduated with a Bachelor of Arts (Honours) degree and Diploma in Public Administration from University of Malaya in 1967 and 1970 respectively and holds a Master s Degree in Business Management from the Asian Institute of Management in He held the position of Secretary General, Ministry of Works for five (5) years before his retirement in His other postings include Secretary General of the Ministry of Information ( ), Secretary of Contracts Division (Treasury), Ministry of Finance ( ), Deputy Director of the Implementation & Coordination Unit, Prime Minister s Department ( ) and Deputy Secretary of the Federal Treasury (Finance Division) ( ). His directorships in other public companies include, amongst others, as NonIndependent NonExecutive Director of Emas Kiara Industries Berhad, LBI Capital Berhad, UDA Holdings Berhad, IJM Corporation Berhad and Pelaburan Johor Berhad. He is the Chairman of Zabima Engineering & Construction Sdn Bhd and Selia Ekuiti Sdn Bhd. Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of DBhd. He has no personal interest in any business arrangement involving DBhd. He has not been convicted for any offences. He attended four (4) out of five (5) Board of Directors Meetings of the Company in the financial year ended 31 December He does not own any units of ordinary shares of DBhd. LUKMAN BIN HJ. ABU BAKAR, aged 52, a Malaysian, is a NonIndependent NonExecutive Director of DBhd and also a member of the Audit Committee. He was appointed to the Board on 2 October He graduated with a Bachelor of Urban and Regional Planning (Hons) from the Universiti Teknologi Malaysia in 1982 before joining JCorp as a Town Planning Officer in the same year. He also holds a Post Graduate Diploma (Housing, Building and Planning) from Institute for Housing Studies, Rotterdam, Holland in He held various positions in JCorp and its Group of companies. He was a Deputy Manager of JCorp in He was promoted to Manager cum Deputy Secretary of Pasir Gudang Local Authority (now known as Pasir Gudang Municipal Council), in On 1 September 1993, he was seconded to Sindora Berhad as Deputy General Manager and later promoted to General Manager in On 1 April 2004, he was appointed as the Secretary of Pasir Gudang Local Authority. Subsequently on 1 January 2006, he was promoted to Senior General Manager of JCorp while still holding the position of Secretary of Pasir Gudang Local Authority. Upon Pasir Gudang Local Authority being upgraded as a fullfledged Pasir Gudang Municipal Council, on 1 July 2008, he was appointed as its first President until 31 August 2009 when the Council was handed over to the administration of the State Government of Johor. He was then promoted as a Senior Vice President in JCorp. He is currently the Managing Director of Johor Land Berhad which he held since 1 January 2010 and the Chief Executive of Property Division of JCorp, a post he held since 1 January He is also the Chairman of Syarikat Pengangkutan Maju Berhad as well as few other companies within the JCorp Group. Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of DBhd. He has no personal interest in any business arrangement involving DBhd. He has not been convicted for any offences and he attended all five (5) Board of Directors Meetings of the Company in the financial year ended 31 December He does not own any units of ordinary shares of DBhd.

13 12 PROFILE OF THE BOARD OF DIRECTORS (CONT D.) YAHAYA BIN HASSAN, aged 54, a Malaysian, is a NonIndependent NonExecutive Director of DBhd. He was appointed as Managing Director and Director of DBhd on 15 October On 16 November 2009, his position was redesignated to Executive Director and held the posts until 1 February He graduated with a Bachelor of Science majoring in Civil Engineering from the University of Nottingham, United Kingdom in He subsequently furthered his studies and obtained his Master in Engineering Business Management from the University of Warwick, United Kingdom in He is a member of the Institute of Engineers, Malaysia and is a registered professional engineer with the Board of Engineers since He is also the Lead Surveyor of Health Quality Association, Malaysia for engineering and environment services since He is one of the Principal Interviewers for the Professional Examination with the Board of Engineers, Malaysia since 2003 and a specialist panel to Universiti Teknologi Malaysia s graduate paper from the Faculty of BioMedical Engineering. He is a Committee Member of the Surveyors Committee of Malaysian Society for Quality in Health ( MSQH ). He embarked his career as a Civil Engineer with JCorp in 1980 and was later promoted to Manager of the Technical Department in He was further promoted to Deputy General Manager of TPM Sdn Bhd in 1990, a subsidiary of JCorp, in charge of managing all construction and development projects of JCorp. In 1992, he was promoted to General Manager of TPM Sdn Bhd. In 1995, he was appointed as General Manager of TPM Technopark Sdn Bhd, a subsidiary of JCorp. In 1997, he joined KPJ Healthcare Berhad as the Chief Operating Officer until In 2003, he was appointed as Managing Director of Healthcare Technical Services Sdn Bhd (HTS), a subsidiary of DBhd and assumes the position todate. HTS specializes in design and planning of hospitals, manages the construction and development of the hospitals in KPJ Healthcare Berhad. He is also Chairman and Director of several other companies within the JCorp Group. YUSOF BIN RAHMAT, aged 55, a Malaysian, is a NonIndependent NonExecutive Director of DBhd. He was appointed to the Board as a Director on 1 January He graduated with a Bachelor of Engineering (Honours) in Civil and Structural Engineering from University of Sheffield, United Kingdom in 1980 before joining JCorp in the same year. He held various position in subsidiary companies within the JCorp Group. In January 1997, he was appointed as the Chief Executive of the Project Development Division, JCorp. He is currently the Vice President (Property and Amal Business Division) of JCorp and is also the Managing Director of TPM Technopark Sdn Bhd, a whollyowned subsidiary of JCorp since January Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of DBhd. He has no personal interest in any business arrangement involving DBhd. He has not been convicted for any offences and he attended all five (5) Board of Directors Meetings of the Company in the financial year ended 31 December He does not own any units of ordinary shares of DBhd. Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of DBhd. He has no personal interest in any business arrangement involving DBhd. He has not been convicted for any offences and he attended all five (5) Board of Directors Meetings of the Company in the financial year ended 31 December He does not own any units of ordinary shares of DBhd.

14 13 PROFILE OF THE BOARD OF DIRECTORS (CONT D.) LEUNG KOK KEONG, aged 45, was appointed to the Board of DBhd as an Independent NonExecutive Director on 9 November He obtained his Bachelor Degree in Accounting, Curtin University of Technology, Australia in December 1989 and is a Certified Practising Accountant & Chartered Accountant, CPA Australia & Malaysian Institute of Accountants. Trained as an investment banker, he has significant experience in corporate finance and business development as well as management. He was the founding member and former Executive Director of Newfields Advisors Sdn Bhd, a boutique financial and corporate advisory firm from August 2001 August He was the Chief Executive Officer, Platinum Energy Group from September 2006 February His wide and vast experience spanned from his earlier years as an Investment & Corporate Planning Manager, Hong Leong Credit Berhad from 1994 to 2001 and was an Audit Senior, Coopers & Lybrand Kuala Lumpur from He is currently an Independent NonExecutive Director of Kulim (Malaysia) Berhad, a Company within the JCorp Group. In addition, he is also an Independent NonExecutive Director of Tebrau Teguh Berhad and a NonIndependent NonExecutive Director of Asia Bioenergy Technologies Berhad. WAN MOHD FIRDAUS BIN WAN MOHD FUAAD, aged 29, was appointed to the Board of DBhd as a NonIndependent NonExecutive Director on 9 November He graduated with a Bachelor of Laws (Honours) from the University of Nottingham, United Kingdom in July He is currently the Special Officer to the Menteri Besar of Johor. He is the founder of the Young Corporate Malaysians (YCM), a business club for young Malaysian professionals and founder of the Institute for Democracy and Economic Affairs (IDEAS), a think tank promoting free market values. He is currently a NonIndependent NonExecutive Director of Kulim (Malaysia) Berhad. Besides that, he is also a Director of other companies within the JCorp Group. Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of DBhd. He has no personal interest in any business arrangement involving DBhd. He has not been convicted for any offences. He does not own any units of ordinary shares of DBhd. Other than as disclosed, he does not have any family relationship with any director and/or major shareholder of DBhd. He has no personal interest in any business arrangement involving DBhd. He has not been convicted for any offences. He does not own any units of ordinary shares of DBhd.

15 CORPORATE STATEMENT

16 15 CORPORATE STATEMENT (CONT D.) The Board Of Directors Is Pleased To Present The 50th Annual Report And The Audited Financial Statements Of Damansara Realty Berhad ( DBhd Or The Company ) And Its Subsidiaries ( DBhd Group Or The Group ) For The Financial Year Ended 31 December 2011 FINANCIAL PERFORMANCE For the financial year ended 31 December 2011 ( FY2011 ), the Group s focus was on strengthening its balance sheet, namely reduction of borrowings, repayment of its long outstanding creditors as well as providing for doubtful debts and impairment of assets. With the remedial measures in place, the Group has embarked on efforts to improve its existing businesses and at the same time introduce new incomegenerating assets to the Group. During the year under review, the Group recorded a total revenue of RM8.9 million. The Group s turnover comprises revenue contributed primarily by property development activities of RM1.8 million (20.6%) and healthcarerelated property services of RM6.9 million (77.5%). The gross profit margin increased to 35.4% compared to 11.7% in The Group recorded a loss before taxation of RM2.4 million. The loss was recorded due to an increase in other operating expenses as well as provisions for doubtful debts and impairment on assets, gain arising from modification of terms of payment pertaining to a trade payable. OPERATION OVERVIEW Property Development Division Property development activities contributed a total of RM1.8 million in FY2011, primarily from land sale activities in Bandar Damansara Kuantan ( BDK ). There was no new housing scheme launched during the year under review. The Group s property development activities have been inactive for the past few years due to the Group s rehabilitation programme. Nevertheless, the Group is committed towards reinstating its property development activities. The Group has amended the layout plan of TDA to improve the marketability and value of the development as well as to take into account the changes in market demand in the intervening years. The amendment was subsequently approved by Majlis Bandaraya Johor Bahru in December Property Services Division The Group s healthcarerelated property services business is led by its 70% owned subsidiary, namely Healthcare Technical Services Sdn Bhd ( HTS ). HTS is among the few companies in Malaysia that provides comprehensive endtoend technical services in the healthcare sector starting from technical design and technical consultancy on hospital designs, to project management and construction management with respect to hospital development, to biomedical engineering maintenance and facilities engineering maintenance ( FEM ) for operational hospitals. HTS has been involved in managing more than 20 KPJ Healthcare Berhad s hospital designs and construction projects in Malaysia, Indonesia and Bangladesh, with a total project value of more than RM800 million.

17 16 CORPORATE STATEMENT (CONT D.) The recent proposal announced by the Group on 9 May 2012 relating to the proposed acquisition of companies within the facilities management industry will complement the Group s property services activities. Further details of the proposal are set out in the Prospects section. Healthcarerelated property services contributed a total of RM6.9 million in revenue to the Group, approximately 76.8% from the total revenue. The division achieved RM1.8 million in profit before tax on the back of a higher profit before tax margin of 26.3% in the year under review. Bandar Baru Klang Specialist Hospital Renovation of Damansara Specialist Hospital a. Planning, Construction and Project Management activities Construction and project management activities remain as the major contributor to the healthcarerelated property services sector revenue, with a total contribution of RM3.9 million. Healthcare design and planning activities contributed a total of RM0.8 million. During FY2011, HTS has successfully managed the construction of the new Bandar Baru Klang Specialist Hospital. Currently, HTS is involved in managing hospital projects with a combined project value of approximately RM810 million which consists of the development of new hospitals, expansion of existing hospitals as well as hospital renovation works. One of the substantial projects under HTS s portfolio is the development of Bandar Dato Onn Specialist Hospital worth RM120 million. The building consists of a Cardiac Centre, Geriatric Centre, Orthopedic Centre, Cancer Centre, Woman and Child Centre and Cosmetic and Reconstructive Centre. The overall project is expected to be completed by b. Manpower Services and Facilities Engineering Management Activities In FY2011, Manpower services and FEM activities contributed a total of RM2.1 million in revenue. HTS has also been appointed as the Maintenance Manager for 21 hospital buildings under AlAqar KPJ REIT. With the appointment, HTS has been entrusted to manage the upgrading, refurbishment and renovation works of the hospital while at the same time providing the planning for their annual maintenance program. Artist s impression of Bandar Dato Onn Specialist Hospital

18 17 CORPORATE STATEMENT (CONT D.) PROSPECTS Over the past few years, the Group has instituted the following phases of its restructuring scheme: Phase 1: CleanUp i. reorganized its shares via share capital reduction, ii. repaid its long outstanding borrowings and creditors, and iii. disposed of its nonperforming assets. The exercise was aimed at fortifying the Group s balance sheet and to improve its operational efficiency. The Group has successfully implemented this cleanup phase and is currently implementing Phase 2. Phase 2: Revival The Group has on 9 May 2012, announced its proposal to acquire companies that are involved in the property services sector. The acquiree companies are as follows: 1. Metro Parking Sdn Bhd 2. TMR Urusharta Sdn Bhd 3. HC Duraclean Sdn Bhd Metro Parking is Malaysia s premier parking operator with 114 car parks, consisting of 43,895 parking bays. The Metro Parking Group also operates in 5 other countries namely, Singapore, Brunei, Philippines, Hong Kong and India. TMR Urusharta offers a complete range of facilities management solutions. It is currently managing approximately 10 million square feet of property with clients such as Sarawak Shell Berhad, UMW Toyota and Celcom. HC Duraclean is a professional care and cleaning company offering a diverse range of cleaning services to properties, aircraft and airports. The company is currently serving 12 hospitals under KPJ Healthcare Group. HC Duraclean Sdn Bhd is a Master Franchisee for Duraclean International Incorporation (USA). The proposal is consistent with the Group s direction of integrating its property services businesses under one roof. The Group s experience and expertise in the property services sector began in 2007 when it acquired HTS. It is expected that the proposal will maximize the synergy elements among the acquiree companies as well as HTS and at the same time enable them to combine their assets and capabilities within the enlarged Group. HTS Energy & Utilities Vertical Transportation HTS/TMR HTS/TMR Civil & Structural Building Audits HTS/TMR HTS/ TMR HTS/TMR HTS/TMR Electrical & Mechanical HVAC Project Management Interior Design & Renovation Work MParking Car Park Property Management CMMS Call Center Cleaning Services Security MParking TMR TMR/ HC Duraclean Evolution of the Group s Property Services activities Landscaping HTS/TMR

19 18 CORPORATE STATEMENT (CONT D.) As such, the Group is building comprehensive property capabilities by reviving its property development activities while at the same time enhancing its property services business with the inclusion of facilities management, cleaning and parking within its portfolio of services. Phase 2 of the Scheme is subject to the shareholders approval at an EGM to be held on 28 June If approved, this Scheme is expected to be completed in Q The Board is optimistic that with the implementation of the Scheme, the Group s financial result for 2012 and beyond will show positive improvements. ACKNOWLEDGEMENT The Board would like to welcome Datuk Ahmad Zaki bin Zahid as the Managing Director effective from 8 November, 2011 and look forward to his guidance to bring the Group to greater heights. The Board of Directors would also like to welcome Encik Wan Mohd Firdaus bin Wan Mohd Fuaad and Encik Leung Kok Keong on the Board. Encik Wan Mohd Firdaus was appointed as a NonIndependent NonExecutive Director while Encik Leung was appointed as an Independent NonExecutive Director. Both were appointed to the Board on 9 November, We would like to express our utmost gratitude to our shareholders, customers, financiers, business associates and relevant authorities for their continuous support. Finally, our heartfelt appreciation to the Management and staff for their unwavering loyalty, commitment, professionalism and dedication shown towards the Group. It is our hope that they would continue to work as one towards the Group s success, as it moves forward. Thank you.

20 19 AUDIT COMMITTEE REPORT Composition of Members The Audit Committee currently comprises the following three (3) Directors: Chairman 1. Zainah binti Mustafa Independent NonExecutive Director Members 2. Dato Mani Usilappan Independent NonExecutive Director 3. Lukman bin Hj. Abu Bakar NonIndependent NonExecutive Director Meetings The Audit Committee met six (6) times during the year under review. The Directors holding executive positions, JCIA Services Sdn Bhd and DBhd s Internal Auditor, representatives of the Company s External Auditors and members of the Management are normally invited to the meetings. The attendance of each Committee Member during the financial year ended 31 December 2011 was as follows: Members 31January (Special ACM) 25 February 21 March 18 May 15 August 21 November (Special ACM) Zainah binti Mustafa Yes Yes Yes Yes Yes Yes Dato' Mani Usilappan Yes Yes Yes Yes Yes Yes Lukman bin Hj. Abu Bakar Yes Yes Yes Yes Yes Yes Terms of Reference Objectives The objectives of the Audit Committee are: 1. To assist the Board in discharging its responsibilities relating to the Group and the Company s management of principal risks, internal controls, corporate governance, financial reporting and compliance of statutory and legal requirements. 2. To provide, by way of regular meetings, a line of communication between the Board of Directors, 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 the Company. Authorities The Audit Committee is authorized by the Board of Directors: 1. To investigate any matter within its terms of reference. 2. To have full, free and unrestricted access to any information, records, properties and personnel of the Company and any other companies within the Group. 3. To have direct communication channels with the External Auditors and person(s) carrying out the internal audit functions or activities. 4. To obtain independent professional or other advice. 5. To convene meetings with the External Auditors, without the presence of the Management (executive members) at least twice a year.

21 20 AUDIT COMMITTEE REPORT (CONT D.) Duties and Responsibilities 1. To review with the Management and recommend acceptance or otherwise of major accounting policies, principles and practices especially on management accounting, financial reporting, risk management and business practices. 2. To review the Group s quarterly and yearend financial statements before submission to the Board. 3. To consider the appointment of the External Auditors, the terms of reference of their appointment, the audit fee and any proposal of their resignation as auditors. 4. To review with the External Auditors, the nature and scope of their audit plan and their audit reports. 5. To review the External Auditor s management letter and discuss any matter that the External Auditors may wish to raise in the absence of Management, where necessary. 6. To review the internal audit charter and the yearly audit plan to ensure that the internal audit functions are adequately resourced to undertake its functions and have appropriate standing in the Group. 7. To review the internal audit functions and the result of the internal audit programmes or investigations undertaken and whether or not Management has taken appropriate actions on the recommendations made by the Internal Auditors. 8. To review any related party transactions and conflict of interest situation that may arise within the Company or Group including any transactions, procedures or courses of conduct that raise questions of Management s integrity. 9. To review inspection and examination reports issued by any regulatory authority and to ensure prompt and appropriate actions are taken in respect of any findings. 10. To receive reports and deliberate on the implementation of the riskcontrol process and the progress of risk management activities undertaken by the Group. 11. To perform any other functions as authorized by the Board. Activities of the Audit Committee The following activities were performed by the Audit Committee during the financial year under review: 1. Reviewed and approved the annual internal audit plan for the year Reviewed and deliberated on the audit findings and issues highlighted by the internal audit functions. 3. Reviewed the External Auditors management letter. 4. Reviewed and appraised the adequacy and effectiveness of Management s response and control in resolving the audit issues highlighted by the External Auditors. 5. Reviewed the audit findings and risk analysis on each internal audit assignment and emphasized on followup audits to ensure that appropriate corrective actions are taken and internal audit s recommendations are implemented. 6. Reviewed the quarterly financial results and made recommendations for the Board s approval prior to submission to the authorities. 7. Reviewed RiskControl reports prepared and summarized by the respective risk owners and assessed the adequacy and effectiveness of actions taken to mitigate the underlying risks.

22 21 AUDIT COMMITTEE REPORT (CONT D.) Internal Audit Functions The Internal Auditor and JCIA Services Sdn Bhd, (cosourcing of internal audit activities) ultimately report to the Audit Committee. It has carried out its internal audit functions for the Group independently with impartiality, proficiency and due professional care. The core function of an Internal Auditor is to perform an independent appraisal of the Group s activities as a service to the Management. The internal audit functions play an important role in helping Management to establish and maintain the best possible internal control environment within the Group. The sound internal control environment would ensure the Group s compliance with legal and regulatory requirements, safeguarding of assets, adequacy of records, prevention or early detection of frauds, material errors and irregularities as well as efficiency of operations. The Internal Auditor and JCIA Services Sdn Bhd had ensured that: The internal audit plans and programmes were appropriately developed to commensurate with the Group s activities and appropriate focus and resources were allocated; The internal audit plans and programmes were continuously reviewed and where necessary were adjusted accordingly to reflect any significant changes in the Group s business environment, structure, activities, risk exposures or systems; and The activities of internal audit are consistent with the long term goals of the Group and are in line with its internal controls, policies and procedures. The scope of internal audit covers the audits of all of the Group s operational units, including its subsidiary companies based on the approved 2011 s audit plan. In addition, the internal audit also conducts special audits at the Management s request. During the year, numerous audit activities, investigations and followups were undertaken throughout the Group. The audit reports are presented to the Audit Committee for further deliberations. An audit report generally presents the purpose, scope and results of the audit, including findings, conclusions and recommendations. Internal audit findings in 2011 continued to reflect a good internal control system as potential weaknesses in system and risks in areas under review are eliminated or reduced within manageable levels. Internal audit reports provide a formal means of communicating audit results and recommended actions to the Management and Audit Committee. Audit reports provide the basis for the Audit Committee to highlight significant weaknesses and the Management s proposed remedial measures to the Board. The Internal Auditors recommendations are for reducing risks, strengthening internal controls and correcting errors. There were no major unresolved audit issues outstanding at the end of the year. The cost incurred during the financial year ended 31 December 2011 for the internal audit functions for the Group level was approximately RM47,000 inclusive of cost of cosourcing the internal audit activities to JCIA Services Sdn Bhd of approximately RM28,000 (audit fee per visit plus out of pocket expenses). Statement on Employees Share Option Scheme (ESOS) The Company did not offer any Share Option Scheme to its employees in the year under review.

23 22 STATEMENT OF CORPORATE GOVERNANCE The Board of DBhd is pleased to report to the shareholders in particular and other stakeholders in general on the manner the Company has applied the Principles as set out in Part 1 of the Malaysian Code on Corporate Governance ( the Code ) as well as the extent of compliance with the Best Practices as set out in Part 2 of the Code. This disclosure is made pursuant to Paragraph of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. Board of Directors Composition, Size and Board Balance The Board is made up of 11 members, comprising: 1. A NonIndependent NonExecutive Chairman, 2. A Managing Director, 3. An Executive Director, 4. Four (4) Independent NonExecutive Directors and; 5. Four (4) NonIndependent NonExecutive Directors. In accordance with Paragraph of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, that requires at least onethird of the Board to comprise Independent Directors, the presence of four (4) Independent NonExecutive Directors lead to the Board being satisfied that the size and composition of the Independent NonExecutive Directors has fulfilled this requirement adequately. In the opinion of the Board, the number of members is sufficient and well balanced for the Company to carry out its duties effectively, whilst providing greater assurance that no individual or small group of individuals can dominate the Board s decision. There is a clear distinction of responsibilities between the Chairman and the Managing Director to ensure a balance of power and authority. The Board is led by the Chairman, Kamaruzzaman bin Abu Kassim, while the post of Managing Director is held by Datuk Ahmad Zaki bin Zahid. All members of the Board contribute significantly in the areas of formulation of strategic direction and policies, performance monitoring and allocation of resources and enhancement of controls and governance. The Managing Director has the principal responsibility of reporting, clarifying, communicating and recommending key strategic and operational matters and proposals to the Board for approval as well as implementation of policies and strategies. The Board has also appointed Zainah binti Mustafa as the Senior Independent NonExecutive Director, to whom concerns may be conveyed. The presence of Independent Directors is essential as to provide an unbiased and independent views, advice and judgment to safeguard the interest of stakeholders. Directorship in Other Companies None of the Directors holds more than 10 directorships in public listed companies and more than 15 in nonlisted companies, thus ensuring sufficient commitment and resources from Directors to ensure effective input during Board meetings. Supply of Information The Board has unrestricted access to timely and accurate information on various aspects of the Company s operations and performance. All Board reports are normally issued in sufficient time to all Directors to enable the Directors to review the reports prior to the Board meeting and understand the issues to be discussed. In addition, the Board has unrestricted access to the advice and services of Company Secretaries and where necessary, in the furtherance of their duties, obtain independent professional advice with the Company paying the related costs.

24 23 STATEMENT OF CORPORATE GOVERNANCE (CONT D.) The Board The Board has delegated certain specific responsibilities to two (2) committees which operate within clearly defined terms of references, with the main objective to assist the Board in discharging its duties and responsibilities. Nomination and Remuneration Committee ( NRC ) The Board on 21 March 2011 resolved to establish its own Nomination and Remuneration Committee (NRC). With the establishment of the Company s NRC, the functions and responsibilities of the Company s NRC previously vested with JCorp Group NRC are now dissolved. The Board is of the view that the composition of the NRC meets the objectives and principles of good corporate governance. In line with the principles and best practices of Corporate Governance, the Nomination Committee should consist of exclusively NonExecutive Directors, the majority of whom are independent whilst the Remuneration Committee should consist of wholly or mainly NonExecutive Directors. The terms of reference of the NRC are as follows: 1. Purpose The NRC is established primarily to: A. Nomination (i) Identify and recommend candidates for Board directorship; (ii) Recommend directors to fill the seats on Board Committees; (iii) Evaluate the effectiveness of the Board and Board Committees (including the size and composition) and contributions of each individual director; (iv) Ensure an appropriate framework and plan for Board succession. B. Remuneration 2. Membership (i) Provide assistance to the Board in determining the remuneration of Executive Directors and Senior Management of the Company. In fulfilling these responsibilities, the NRC is to ensure that Executive Directors and applicable Senior Management of the Company: are fairly rewarded for their individual contribution to overall performance; are compensated reasonably in light of the Company s objectives; and are compensated similar to other companies. (ii) Establish the Managing Director s / Chief Executive Officer s goals and objectives; and (iii) Review the Managing Director s / Chief Executive Officer s performance against the goals and objectives set. The NRC consists of the following members: (i) (ii) (iii) Kamaruzzaman bin Abu Kassim Chairman Zainah binti Mustafa Independent NonExecutive Director Dato Mani Usilappan Independent NonExecutive Director The appointment of a NRC member terminates when the member ceases to be a director of the Company. The NRC shall have no executive powers. In the event of equality of votes, the Chairman of the NRC shall have a casting vote. In the absence of the Chairman of the NRC, the members present shall elect one of them to chair the meeting. The NRC shall meet at least once a year. Additional meetings shall be scheduled as considered necessary by the Chairman of the NRC. The NRC may establish procedures from time to time to govern its meeting, keeping of minutes and its administration.

25 24 STATEMENT OF CORPORATE GOVERNANCE (CONT D.) 3. Meetings The NRC had met twice (2) during the financial year, attended by all members. The Executive Director upon invitation of the Chairman of the Committee attended the meetings. The NRC shall have access to such information and advice, both from within the Group and externally, as it deems necessary or appropriate in accordance with the procedures determined by the Company. The NRC may request other directors, members of management, counsels and consultants as applicable to participate in NRC s meetings, as necessary, to carry out the NRC s responsibilities. NonNRC directors and members of Management in attendance may be required by the Chairman to leave the meeting of the NRC when so requested. The Secretary of the NRC shall be the Company Secretary. NRC s meeting agenda shall be the responsibility of the Chairman of the NRC with input from the NRC members. The Chairman may also request Management to participate in this process. The agenda of each meeting including supporting information shall be circulated at least seven (7) days before each meeting to the NRC members and all those who are required to attend the meeting. The NRC shall cause the minutes to be duly entered in the books provided for the purpose of all resolutions and proceedings of all meetings of the NRC. Such minutes shall be signed by the Chairman of the meeting at which the proceedings were held or by the Chairman of the next succeeding meeting, and if so signed, shall be the conclusive evidence without any further proof of the facts thereon stated. The NRC, through its Chairman, shall report to the Board at the next Board of Directors meeting after each NRC meeting. When presenting any recommendation to the Board, the NRC shall provide such background and supporting information as may be necessary for the Board to make an informed decision. The NRC shall provide such information to the Board as necessary to assist the Board in making a disclosure in the Annual Report of the Company in accordance with the Best Practices of the Code Part 2 AAIX. The Chairman of the NRC shall be available to answer questions about the NRC s work at the Annual General Meeting of the Company. 4. Scope of Activities The duties of the NRC shall include the following: A. Nomination (i) (ii) To determine the criteria for Board membership, including qualities, experience, skills, education and other factors that will best qualify a nominee to serve on the Board; To review annually and recommend to the Board with regard to the structure, size, balance and composition of the Board and Committees including the required mix of skills and experience, core competencies which NonExecutive Directors should bring to the Board and other qualities to function effectively and efficiently;

26 25 STATEMENT OF CORPORATE GOVERNANCE (CONT D.) (iii) To consider, evaluate and propose to the Board any new board appointments, whether of executive or nonexecutive position. In making a recommendation to the Board on the candidate for directorship, the NRC shall have regard to: Size, composition, mix of skills, experience, competencies and other qualities of the existing Board, level of commitment, resources and time that the recommended candidate can contribute to the existing Board; and Best Practices of the Code Part 2 AAIII which stipulate that NonExecutive Directors should be persons of calibre, credibility and have the necessary skill and experience to bring an independent judgment to bear on issues considered by the Board and that Independent NonExecutive Directors should make up at least onethird of the membership of the Board. (iv) (v) (vi) (vii) To propose to the Board the responsibilities of NonExecutive Directors, including membership and Chairpersonship of Board Committees. To evaluate and recommend the appointment of Senior Executive positions, including that of the Managing Director or Chief Executive and their duties and the continuation (or not) of their service. To establish and implement processes for assessing the effectiveness of the Board as a whole, the Committees of the Board and for assessing the contribution of each director. To evaluate on an annual basis: a. The effectiveness of each director s ability to contribute to the effectiveness of the Board and the relevant Board Committees and to provide the necessary feedback to the directors in respect of their performance; b. The effectiveness of the Committees of the Board; and c. The effectiveness of the Board as a whole. (viii) To recommend to the Board: a. Whether directors who are retiring by rotation should be put forward for reelection; and b. Termination of membership of individual director in accordance with policy, for cause or other appropriate reasons. (ix) (x) (xi) To establish appropriate plans for succession at Board level, and if appropriate, at senior management level. To provide for adequate training and orientation of new directors with respect to the business, structure and management of the Group as well as the expectations of the Board with regard to their contribution to the Board and Company. To consider other matters as referred to the NRC by the Board.

27 26 STATEMENT OF CORPORATE GOVERNANCE (CONT D.) B. Remuneration (i) (ii) (iii) (iv) (v) (vi) (vii) To establish and recommend the remuneration structure and policy for directors and key executives, if applicable and to review for changes to the policy as necessary. To ensure that a strong link is maintained between the level of remuneration and individual performance against agreed targets, the performancerelated elements of remuneration setting forming a significant proportion of the total remuneration package of Executive Directors. To review and recommend the entire individual remuneration packages for the Managing Director and Executive Director and, as appropriate, other senior executives, including: the terms of employment or contract of employment/service; any benefit, pension or incentive scheme entitlement; any other bonuses, fees and expenses; and any compensation payable on the termination of the service contract. To review with the Managing Director/Chief Executive Officer, his/her goals and objectives and to assess his/her performance against these objectives as well as contribution to the corporate strategy. To review the performance standards for key executives to be used in implementing the Group s compensation programs where appropriate. To consider and approve compensation commitments/severance payments for Executive Directors and key executives, where appropriate, in the event of early termination of the employment/service contract. To consider other matters as referred to the NRC by the Board. Tender Board Committee The Company has also established a Tender Committee at Board level comprising Independent NonExecutive, NonIndependent NonExecutive and Executive Directors. The functions of the said Tender Committee are to evaluate, deliberate and approve the recommendations made by the Management prior to awarding of major contracts and tenders to potential contractors. The Company has also established an Audit Committee comprising both Independent NonExecutive Directors and NonIndependent NonExecutive Directors. The functions of the said Audit Committee are to ensure compliance with Paragraph 15, Part C of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the independence of the External Auditors, the integrity of Management and the adequacy of disclosures to Shareholders. The Audit Committee acts to assist the Board of Directors in fulfilling its fiduciary responsibilities by ensuring that the results of internal and external audit findings are fully considered and properly resolved. The members of the Tender Board Committee are as follows: Chairman Zainah binti Mustafa (Independent NonExecutive Director) Members Lukman bin Hj. Abu Bakar (NonIndependent NonExecutive Director) Yusof bin Rahmat (NonIndependent NonExecutive Director ) Wan Azman bin Ismail (Executive Director appointed on 1 February 2011) Yahaya bin Hassan (NonIndependent NonExecutive Director resigned on 1 February 2011) Board Meeting For the financial year ended 31 December 2011, there were five (5) meetings held. Certain schedule of matters such as acquisition and disposal of assets of the Company or subsidiaries that are material, investment in capital projects and level of authority are specifically reserved to the Board for decision.

28 27 STATEMENT OF CORPORATE GOVERNANCE (CONT D.) Board Responsibilities As prescribed by the Malaysian Code of Corporate Governance, the Board assumes six (6) principals stewardship responsibilities: 1. Reviewing, monitoring and where appropriate, approving fundamental financial and business strategies and major corporate actions. 2. Overseeing the conduct of the Group s business to evaluate whether the business is properly managed. 3. Establishing the Group s EnterpriseWide Risk Management (EWRM) framework. 4. Formulating a succession plan for the Managing Director and Senior Executives. 5. Establishing an investor relations programme. 6. Ensuring processes are in place for maintaining the integrity of the Company, integrity of the financial statements, compliance with law and ethics, relationships with customers and suppliers, and relationship with stakeholders. At the same time, the Board also ensures the sustenance of a dynamic and robust corporate climate focused on strong ethical values. This emphasizes active participation and dialogue on a structured basis involving key personnel at all levels, as well as ensuring accessibility to information and transparency on all executive actions. The corporate climate is also continuously nourished by valuecentered programmes for teambuilding and active subscription to core values. Details of attendance of Directors at the Board Meetings are as follows: Directors New Appointment / Resignation NonExecutive Independent Attendance Kamaruzzaman bin Abu Kassim Yes No 5/5 (100%) Wan Azman bin Ismail (Executive Director) No No 5/5 (100%) Zainah binti Mustafa Yes Yes 5/5 (100%) Dato Mani Usilappan Yes Yes 4/5 (80%) Datuk Yahya bin Ya acob Yes Yes 4/5 (80%) Lukman bin Hj. Abu Bakar Yes No 5/5 (100%) Yahaya bin Hassan Yes No 5/5 (100%) Yusof bin Rahmat Yes No 5/5 (100%) Datuk Ahmad Zaki bin Zahid (Managing Director) Appointed on 8 November 2011 No No Leung Kok Keong Appointed on 9 November 2011 Yes Yes Wan Mohd Firdaus bin Wan Fuaad Appointed on 9 November 2011 Yes No

29 28 STATEMENT OF CORPORATE GOVERNANCE (CONT D.) Appointment and Reelection of Directors Paragraph 7.26 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad requires all Directors to submit for reelection once at least every three (3) years. In accordance with the Company s Articles of Association, at least one third of the remaining Directors are required to submit themselves for reelection by rotation at each Annual General Meeting (AGM). The retiring Directors who are standing for reelection at the forthcoming AGM are as follows: Reelection in accordance with Article 81 of the Company s Articles of Association: Kamaruzzaman bin Abu Kassim Yahaya bin Hassan Yusof bin Rahmat Reelection in accordance with Article 87 of the Company s Articles of Association: Datuk Ahmad Zaki bin Zahid Leung Kok Keong Wan Mohd Firdaus bin Wan Mohd Fuaad Directors Training In compliance with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, all members of the Board have completed the Mandatory Accreditation Programme (MAP) conducted by Bursatra Training Sdn Bhd or relevant courses recognized by the Bursa. 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.

30 29 STATEMENT OF CORPORATE GOVERNANCE (CONT D.) During the financial year, Directors attended the following courses: No Name of Directors MAP / Relevant Courses Kamaruzzaman bin Abu Kassim Wan Azman bin Ismail Zainah binti Mustafa Dato Mani Usilappan Datuk Yahya bin Ya acob Lukman Hj. Abu Bakar Yahaya bin Hassan Yusof Bin Rahmat Leung Kok Keong Wan Mohd Firdaus bin Wan Mohd Fuaad 1. Johor Corporation Directors Conference 2011 Towards Boardroom Excellence and Corporate Governance Best Practices 2728 October Johor Corporation Directors Conference 2011 Towards Boardroom Excellence and Corporate Governance Best Practices 2728 October Governance Programme Series The Board's Responsibility for Corporate Culture by Bursa Malaysia Berhad 5 May Mandatory Accreditation Programme for Directors of PLC by Bursatra Sdn Bhd 2324 February Institute of Internal Auditors: Black Hole of Assurance Is Your Board and audit committee aware of the Red Flags 4 and 5th October Johor Corporation Directors Conference 2011 Towards Boadroom Excellence and Corperate Governance Best Practies 2728 October Malaysia National Property Summit by PEPS 18 January th South East Asian Congress by ISM 2224 June Dialogue on Valuation Estate Agency Property Management by ISM 10 August Professional Negligence by ISM 8 September Talk on Whistleblower Protection Act 2010, Personal Data Protection Act 2010 & Price Control & AntiProfiteering Act 2011 by IJM Corporation Berhad 6 April Talk on Chindia Rising How China and India Can Help Your Business by IJM Corporation Berhad 26 July Improving Corporate Governance in Malaysian Capital Markets The Role of The Audit Committee by The Malaysian Institute of Certified Public Accountants 11 August Corporate Governance Blueprint 2011Towards Excellence in Corporate Governance by IJM Corporation Berhad 7 September Talk on Malaysian Competition Act 2010: Overview & Compliance Challenges by IJM Corporation Berhad 22 November IJM Senior Management Dialogue by IJM Corporation Berhad 1 July Johor Corporation Directors Conference 2011 Towards Boardroom Excellence and Corporate Governance Best Practices 2728 October FIABCI Seminar: Asia Pacific: The sky is the limit. Setting Tempo for Growth. 1. Johor Corporation Directors Conference 2011 Towards Boardroom Excellence and Corporate Governance Best Practices 2728 October Johor Corporation Directors Conference 2011 Towards Boardroom Excellence and Corporate Governance Best Practices 2728 October Bursa Malaysia Berhad Half Day Governance Programme: Assessing the Risk & Control Environment 22 August The New Corporate Governance Blueprint and Regulatory Updates Seminar 2011 What Directors and CoSec should Know 14 December Mandatory Accreditation Programme for Directors of PLC by Bursatra Sdn Bhd 1213 December 2011

31 30 STATEMENT OF CORPORATE GOVERNANCE (CONT D.) Directors Remuneration For the financial year ended 31 December 2011, the Company s NRC was responsible for making recommendations on the framework, policy and procedures in reviewing and determining the specific remuneration package of the Directors of DBhd. The Company s remuneration scheme for Executive Directors commensurate with performance, seniority, experience and scope of responsibility and is benchmarked to market/industry standards. For NonExecutive Directors, the level of remuneration reflects the level of responsibilities undertaken by them. All Directors except for the Executive Director are paid meeting allowances for each Board and Committee meeting they attend. Directors fees are subject to approval by the shareholders. Details of the remuneration paid/payable to each Director for the financial year ended 31 December 2011 are as below: Directors Basic Salary (RM) Directors Fees (RM) Meeting Allowance (RM) Allowance (RM) Bonuses (RM) Benefits Inkind (RM) Gratuity Payment (RM) Total (RM) NonExecutive Directors Tan Sri Dato Muhammad Ali Hashim Kamaruzzaman bin Abu Kassim Lukman bin Hj. Abu Bakar Yahaya bin Hassan Yusof bin Rahmat Wan Mohd Firdaus bin Wan Mohd Fuaad 1,200 36,000 30,000 30,000 30,000 4,402 2,300 2,400 1,200 1,200 28,913 1,200 67,213 32,400 31,200 31,200 4,402 Independent Directors Zainah binti Mustafa Dato Mani Usilappan Datuk Yahya bin Ya acob Leung Kok Keong 30,000 30,000 30,000 4,402 3,400 2,600 1,200 33,400 32,600 31,200 4,402 Managing Director Datuk Ahmad Zaki bin Zahid 4,402 4,402 Executive Director Wan Azman bin Ismail 194,700 27,500 20,000 13, ,900 Investor Relations and Communication with Shareholders The Group recognizes the importance of establishing a direct line of communication with shareholders, investors and other stakeholders through timely dissemination of relevant information. Dissemination of information includes the distribution of annual reports and relevant circulars to shareholders, issuance of press releases, announcing the quarterly financial results and performance of the Group to Bursa Malaysia Securities Berhad and the public as well as holding press conferences. A website: is maintained to create greater awareness of the Group activities, performance and other relevant information among the stakeholders and general public.

32 31 STATEMENT OF CORPORATE GOVERNANCE (CONT D.) Corporate Social Responsibility The Group s Corporate Social Responsibility (CSR) Policy is ultimately to ensure the accountability of the Group to all of its stakeholders in all its operations and activities. The aim would be to achieve sustainable development not only in economic parameters but also in social and environmental parameters. Community The Group believes in a strong sense of community responsibility and has accordingly contributed by means of donations to NGOs. Health & Safety The Group is committed to best practices in health and safety as an integral part of its business activities. The Group complies with all relevant health and safety legislation and statutory provisions and had established a Health & Safety Policy. During 2011, there were no work related fatalities suffered by the Group. Environment The Group is committed to ensure that its activities will not have a significant negative impact on the environment. It will also support the international commitment towards sustainable development. Employees The Group recognizes the need for a comprehensive training regime for its employees. Accordingly, the Group has spent RM18,391 on training in Annual General Meeting (AGM) 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 date of the meeting. The Chairman and the Board encourage shareholders to attend and participate in the AGM held annually. The shareholders are given the opportunity to seek clarification by making use of the Question and Answer session during the AGM on any matters pertaining to the business and financial performance of the Company. Accountability and Audit Financial Reporting Pursuant to Paragraph 15.26(a) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, all the Company Directors are collectively responsible in ensuring that the financial statements and the quarterly results are drawn up in accordance with the approved accounting standards adopted by the Financial Reporting Standard (FRS), the provisions of the Companies Act, 1965, and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. It is the responsibility of the Directors to ensure that the financial reporting of the Group presents a true and fair view of the state of affairs of the Company and its subsidiary companies as of the end of the financial year together with the financial results and cash flows for the year ended. 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 financial statements of the Company and of the subsidiaries. The financial 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 financial statements with reasonable accuracy.

33 32 STATEMENT OF CORPORATE GOVERNANCE (CONT D.) Internal Control The Board acknowledges its full responsibility to ensure a sound system of internal control covering the financial, operational and compliance aspects of the business. The Statement of Internal Control that provides an overview of the state of internal control is set out on page 34 to 36. Relationship with Auditors The Board, via the Audit Committee, maintains a formal and transparent professional relationship with the External Auditors, Ernst & Young, in seeking professional advice and ensuring compliance with the applicable accounting standards and statutory requirements. Other Information Material Contracts Involving Directors and Substantial Shareholders Except as otherwise disclosed in the report, there were no material contracts involving Directors and substantial shareholders entered by the Company for the financial year ended 31 December Sanctions and/or Penalties Imposed There were no substantial sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or Management by the relevant regulatory bodies. Utilisation of Proceeds There were no proceeds raised by the Company from any corporate proposals during the financial year ended 31 December Share Buyback The Company has not been authorized by shareholders to purchase its own shares and has not purchased any of its own shares during the financial year ended 31 December As such, there are no shares being retained as treasury shares by the Company. Options, Warrants or Convertible Securities During the financial year ended 31 December 2011, the Company has not issued any options to any parties to take up unissued shares in the Company. The Company has not issued any warrants or convertibles to any parties during the financial year ended 31 December American Depository Receipt (ADR) and Global Depository Receipt (GDR) Programme During the financial year ended 31 December 2011, the Company did not sponsor any ADR or GDR programme. NonAudit Fees Nonaudit fees totaling RM59,000 were paid to the External Auditors during the financial year ended 31 December 2011, for the provision of corporate tax advisory and planning. Profit Forecast No profit forecast was issued by the Company during the financial year ended 31 December Profit Guarantees There were no profit guarantees given by the Company during the financial year ended 31 December 2011.

34 33 STATEMENT OF CORPORATE GOVERNANCE (CONT D.) Variation in Results There was no material variation between the audited results for the financial year ended 31 December 2011 and the unaudited results previously released by the Company. Compliance to the Code The Board is of the opinion that DBhd Group had complied with the principles and best practices of Corporate Governance throughout the financial year ended 31 December Signed on behalf of the Board of Directors in accordance with the resolution dated 22 March Kamaruzzaman bin Abu Kassim Chairman Datuk Ahmad Zaki bin Zahid Managing Director

35 34 STATEMENT ON INTERNAL CONTROL Introduction Paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad requires Directors of listed companies to include a statement in the annual report on the state of the Group s internal control. The Malaysian Code on Corporate Governance amongst others requires the Board to identify the Group s critical business risks and implement a system to manage these risks as well as to review the adequacy and the integrity of the Group s internal control system to safeguard shareholder s investment and the Group s assets. Set out below is the Board s Internal Control Statement, which has been prepared in accordance with the Guidance. Directors Responsibility The Board acknowledges its responsibility in instituting a system of internal controls that covers all aspects of the business including strategic, commercial, operational and financial areas. It recognizes that reviewing the Group s system of internal control is a concerted and continuing process, designed to manage rather than eliminate the risk of failure to achieve business objectives. Accordingly, the system effected by the Company s Board and Management, can only provide reasonable but not absolute assurance with regard to the achievement of the Group s objectives. Risk Management Framework The Board believes that internal control is a process, effected by the Company s Directors, Management and other personnel, designed to provide reasonable assurance regarding the achievement of the following objectives: Effectiveness and efficiency of operations; Reliability of financial reporting; Compliance with applicable laws and regulations; and Safeguarding of the Group s assets. The purpose of the internal control system is to control and manage risks. In order to properly manage risks, the Board recognizes the fact that an appropriate and sound system of internal control should be in place. The Board has adopted the Committee of Sponsoring Organisations of the Treadway Commission s (COSO) Internal Control Integrated Framework which comprises the following five (5) fundamental components that include Control Environment, Risk Assessment, Control Activity, Information and Communication and Monitoring: 1. Control Environment The Board and the management set the tone of the organization and influence the control consciousness within all levels of employees. The Group is committed in ensuring that an adequate control environment is maintained. Among the measures taken are as follows: The Group has formulated a Risk Management Policy to guide personnel in identifying, assessing, managing and reporting the risks; The Group had also established and distributed to all levels of personnel the Internal Policy and Procedures on Property Development, Project Management, Tendering as well as Construction Management. The said policies and procedures, amongst others, define the authority, responsibility and accountability of the relevant personnel within the Group business functions. Changes in strategic plans, objectives and goals are immediately disseminated and communicated to the employees; In line with the existence of Human Resource Policies and Procedures in place, the Group had also adopted and practised the Ethical Code of Conduct which further provides guidance to all employees in their daytoday conduct of business transactions. Added to that, all employees are requested to make a formal disclosure as to whether they are engaged in activities that may have any conflict with the Company s interests.

36 35 STATEMENT ON INTERNAL CONTROL (CONT D.) 2. Risk Assessment The Board is aware that every organization faces a variety of risks from external and internal sources that must be assessed. A precondition to risk assessment is the establishment of objectives, linked at different levels and internally consistent. Risk assessment is the identification and analysis of relevant risks affecting the achievement of the objectives, forming a basis for determining how the risks should be managed. In order to ensure that the Board is satisfied that the key business risks have been identified and are being addressed, a structured RiskControl process has been established. Risk issues are updated and reviewed by the Management and Internal Auditor. All riskcontrol reports from the respective risk owners / operating units are compiled and assessed quarterly. Results are presented to the Audit Committee for notification and endorsement from time to time. 3. Control Activities Control activities help to ensure that necessary actions are taken to address risks that may hinder the achievement of the organization s objectives. Control activities occur throughout the organization, at all levels and in all functions. Internal controls are enforced through policy manuals, jobs description and functions, operating procedures, delegation, authorisation, etc. Appropriate control activities have been designed and put in place on all aspects of business operating functions. Among the key control activities currently undertaken by the Group are: Regular review of comprehensive information/reports provided by the Management to the Board covering financial and operational performance and key business indicators; Regular Management meetings to obtain feedback on the progress of activities undertaken by the operating/business units in order to rectify any shortcomings or problems affecting the implementation plan; Visits to operating/business units by members of the Board and senior management; Regular internal audit visits to the Sales Offices to review and appraise the systems of internal controls in place to ensure that these controls are effective and working as intended; Regular reconciliations, for example intercompany balances and banks reconciliations, to ensure that all transactions are accounted for; Efforts to safeguard the Company s assets through adequate insurance coverage over the Group s major assets against fire peril; Segregation of duties and physical security of assets e.g. limit access to assets, systems and records; establish clear control of assets and custodial responsibility; and RiskControl reports together with action plans are prepared by the risk owners and submitted to the Risk Management Coordinator for monitoring purposes. The Risk Management Coordinator shall ensure that all action plans are implemented.

37 36 STATEMENT ON INTERNAL CONTROL (CONT D.) 4. Information and Communication Process The Group has a well defined and clear line of communication within the Group s organizational structure. The structure ensures that the Board receives timely, relevant and reliable reports on business activities, progress and related information for decisionmaking. Periodic reports are compiled containing operational, financial, compliancerelated information and information on external events and activities for business decisionmaking and external reporting. The Group has effective communication channels, through reports, briefings, meetings, discussions, internal memorandum and website, to communicate and disseminate relevant and important information on a timely basis. 5. Continuous Monitoring Process on the Adequacy and Integrity of the System of Internal Control The Board recognizes the fact that internal control systems need to be continuously monitored, a process that assesses the quality of the system s performance over time. This is accomplished through ongoing monitoring activities, separate evaluations or a combination of both. Ongoing monitoring occurs in the course of operations through regular internal audit reviews on internal control system as well as management and supervisory activities over the business functions. The Management provides regular and comprehensive information/reports to the Board covering financial performance and key business indicators. The Internal Auditor and JCIA Sdn Bhd, through cosourcing of internal audit have been in existence and are independent of the activities they audit. The Internal Auditor reports functionally to the Audit Committee and administratively to the Managing Director. The internal audit function performs regular reviews of business processes to assess the effectiveness of the internal controls. The internal audit function also conducts audit visits to key business units of the Group on a planned basis and issues audit reports on its findings and recommendations for the review of the Audit Committee. The Audit Committee conducts a review on the results of the internal audit programme or investigation undertaken and determines whether the Management has taken the appropriate actions on the recommendations made by the internal auditors. Signed on behalf of the Board of Directors in accordance with their resolution dated 22 March Zainah binti Mustafa Chairman, Audit Committee Datuk Ahmad Zaki bin Zahid Managing Director

38 37 STATEMENT ON DIRECTORS RESPONSIBILITY Pursuant to Paragraph 15.26(a) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad The Directors consider that, in preparing the financial statements of the Group and of the Company for the financial year ended 31 December 2011, the Group and the Company have used appropriate accounting policies, consistently applied and supported by reasonable and prudent of judgments and estimates. The Directors also consider that all applicable approved accounting standards in Malaysia have been followed and confirm that the financial statements have been prepared on a going process basis. The Directors are responsible for ensuring that the Company and its subsidiaries keep accounting records which disclose with reasonable accuracy at any time the financial position of the Group and the Company and which enable them to ensure that the financial statements comply with the provisions of the Companies Act, 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. Signed on behalf of the Board of Directors in accordance with their resolution dated 22 March Kamaruzzaman bin Abu Kassim Chairman Datuk Ahmad Zaki bin Zahid Managing Director

39 38 RECURRENT RELATED PARTY TRANSACTIONS Details of the recurrent related party transactions during the financial year since shareholders mandate was obtained at the 49th Annual General Meeting are as follows: Company Transacting Party Nature of Transaction Relationship of Transacting Party Aggregate Value of Transaction During Validity Period of Mandate (RM 000) (A) DBhd and/or subsidiaries JCorp Group Rental of office space to DBhd Group and other related operational expenses JCorp is a major shareholder of DBhd, by virtue of Section 6A of the Act 167 (B) DBhd and/or subsidiaries JCorp Miscellaneous services rendered by JCorp to DBhd Group JCorp is a major shareholder of DBhd, by virtue of Section 6A of the Act 302 (C) DBhd and/or subsidiaries Damansara Assets Sdn. Bhd. Legal services provided by DBhd A subsidiary of JCorp. JCorp is a major shareholder of DBhd by virtue of Section 6A of the Act 747 (D) DBhd and/or subsidiaries JCorp Group Provide consultancy services for hospital planning, commissioning, construction and operation as well as facility management. JCorp is a major shareholder of DBhd by virtue of Section 6A of the Act 6,582 (E) DBhd and/or subsidiaries JCorp Group Insurance services provided between DBhd and JCorp Group. JCorp is a major shareholder of DBhd by virtue of Section 6A of the Act 38

40 FINANCIAL STATEMENTS Directors report Statement by directors Statutory declaration Independent auditors report Statements of comprehensive income Statements of financial position Statements of changes in equity Statements of cash flows Notes to the financial statements Supplementary information breakdown of accumulated losses into realised and unrealised List of Properties Shareholding Statistics Proxy Form