AL-SALAM REIT ANNUAL REPORT 2019

Independent Auditors’ Report AL-SALĀM REIT • 106 ANNUAL REPORT 2019 `To The Unitholders of Al-Salām Real Estate Investment Trust (Cont’d) Key audit matters Our audit performed and responses thereon Revenue recognition - percentage rent Certain tenancy agreements between the Group and the Fund and their tenants contain clauses relating to “percentage rent” whereby rent received and/or receivable is the higher of base rent and a percentage of sales earned by the tenant during the financial year. A reliable estimate of percentage rent is necessarily reliant on the availability of tenants’ audited financial statements and historical sales trends. Percentage rent is only recognised by the Fund when it can be reliably measured. The accounting policy and critical judgement in applying the policy for rental revenue are set out in Note 3 and Note 4.1(a) to the Financial Statements, respectively, and the different revenue streams of the Group and of the Fund have been disclosed in Note 5 to the Financial Statements. Our audit procedures included the following: (a) Read a sample of the tenancy agreements between the Fund and a sample of its tenants. (b) Obtained the reconciliations prepared by the Manager of the Fund pertaining to the calculation of percentage rent and assessed the appropriateness of percentage rent revenue recognition against the accounting policies of the Fund. Our evaluation of revenue recognition includes an assessment of availability of the tenants’ audited financial statements and historical sales trends of the tenants as reported to the property manager of the Fund. (c) Assessed the adequacy and appropriateness of the related disclosures made in the Financial Statements. Information Other than the Financial Statements and Auditors’ Report Thereon The Manager of the Fund is responsible for the other information. The other information comprises information included in the 2019 Annual Report of the Group and of the Fund but does not include the financial statements of the Group and of the Fund and our auditors’ report thereon. Our opinion on the financial statements of the Group and of the Fund does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Group and of the Fund, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Fund or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If based on our work we have performed, we conclude there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Manager and Trustee for the Financial Statements The Manager of the Fund is responsible for the preparation of these financial statements so as to give a true and fair view in accordance with applicable provisions of the 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. The Manager of the Fund is also responsible for such internal controls as the Manager determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Trustee is responsible for ensuring that the Manager maintains proper accounting and other records as are necessary to enable fair presentation of these financial statements. In preparing the financial statements of the Group and of the Fund, the Manager of the Fund is responsible for assessing the Group’s and the Fund’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager of the Fund either intends to liquidate the Group and the Fund or to cease operations, or has no realistic alternative but to do so. Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Fund as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.