AL-SALAM REIT ANNUAL REPORT 2019

Independent Auditors’ Report AL-SALĀM REIT • 105 ANNUAL REPORT 2019 To The Unitholders of Al-Salām Real Estate Investment Trust Report on the Audit of the Financial Statements Opinion We have audited the financial statements of AL-SALĀM REAL ESTATE INVESTMENT TRUST (“the Fund”), which comprise the statements of financial position of the Group and of the Fund as of 31 December 2019, and the statements of other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Fund for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information as set out on pages 108 to 151. In our opinion, the accompanying financial statements of the Group and of the Fund give a true and fair view of the financial position of the Group and of the Fund as of 31 December 2019, and of their financial performance and their cash flows for the year then ended in accordance with applicable provisions of the Restated Trust Deed dated 25 November 2019, Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Securities Commission Malaysia’s Guidelines on Real Estate Investment Trusts and Islamic Real Estate Investment Trusts (“SC Guidelines”). Basis for Opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and Other Ethical Responsibilities We are independent of the Fund in accordance with the By-Laws (On Professional Ethics, Conduct and Practice) issued by the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”) and we have fulfilled our other ethical responsibilities in accordance with the said By-Laws and the IESBA Code. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the current year. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matters Our audit performed and responses thereon Valuation of investment properties Investment properties of the Group and of the Fund amounting to RM1.19 billion as of 31 December 2019 (2018: RM1.09 billion) are the most quantitatively material account balance in the financial statements. Further, the investment properties are measured at fair value which inherently is subject to significant valuation estimates. The fair values of the Group’s and of the Fund’s investment properties, as determined by a firm of independent valuers, are primarily based on the capitalisation of net income method with comparison and cost methodologies used as a secondary check. The accounting policy and key sources of estimation uncertainty for valuation of investment properties are set out in Note 3 and Note 4.2(a) to the Financial Statements, respectively, and the details of the investment properties of the Group and of the Fund have been disclosed in Note 11 to the Financial Statements. Our audit procedures included the following: (a) Assessed and discussed with management their process for evaluating the work of the independent valuers. (b) Assessed the competency, independence and integrity of the independent valuers. (c) Obtained the valuation reports and discussed with the independent valuers the results of their work. (d) Tested the integrity of the data provided to the independent valuers to underlying lease agreements. (e) Benchmarked and challenged the key assumptions to external industry data and comparable property transactions, in particular the allowance for void, term yield rates, reversionary yield rates, capitalisation rates and discount rates. (f) We have also assessed the adequacy and appropriateness of the disclosures on valuation methodology and estimation made in the financial statements.