Growth Momentum Annual Report 2013
SYNERGY • RELIABILITY • STRATEGY INTEGRITY • SUSTAINABILITY
GROWTH MOMENTUM BHB Group has evolved into a bigger and an increasingly relevant Islamic financial services provider who is able to meet the more diverse needs of its customers and shareholders. By inculcating positive changes throughout our businesses and strengthening our foothold in an increasingly competitive marketplace, we have continued our Growth Momentum and strengthened our overall performance. We are confident that the direction set by the Group will continue to reinforce our presence and provide a progressive future for the organisation.
CONTENTS OVERVIEW
PERSPECTIVES
002 Notice of 17th Annual General Meeting 006 Statement Accompanying Notice of 17th Annual General Meeting
028 Letter to Shareholders 038 Corporate Responsibility 044 2013 Event Highlights
CORPORATE FRAMEWORK
ACCOUNTABILITY
007 Corporate Profile 008 Corporate Information 012 Group Corporate Structure
056 Statement of Corporate Governance 080 Internal Control Statement 084 Additional Compliance Information
LEADERSHIP
AUDITED FINANCIAL STATEMENTS
014 Directors’ Profile 022 CEOs in the Group 023 Management Committee
088 Financial Statements
PERFORMANCE REVIEW 024 5-Year Group Financial Highlights
ADDITIONAL INFORMATION 239 Properties Owned by BHB Group 245 Shareholding Statistics 249 Regional Group Network Form of Proxy for 17th AGM of the Company
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Annual Report 2013
NOTICE OF 17TH ANNUAL GENER AL MEETING NOTICE IS HEREBY GIVEN that the 17th Annual General Meeting of BIMB Holdings Berhad (“BHB” or “the Company”) will be held at Ballroom 1, Sime Darby Convention Centre, 1A, Jalan Bukit Kiara 1, 60000 Kuala Lumpur on Thursday, 15 May 2014 at 10.00 a.m. for the following purposes: ORDINARY BUSINESS 1. To receive the Audited Financial Statements for the financial year ended 31 December 2013 together with the Reports of the Directors and Auditors thereon. (Ordinary Resolution 1)
6. To approve the payment of Directors’ fees of RM1,110,700 for the financial year ended 31 December 2013 (For the financial year ended 31 December 2012: RM855,000). (Ordinary Resolution 8)
2. To approve the payment of final single-tier dividend of 8.5% in respect of the financial year ended 31 December 2013. (Ordinary Resolution 2)
7. To re-appoint Messrs. KPMG Desa Megat & Co. as External Auditors of the Company until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration. (Ordinary Resolution 9)
3. To re-elect the following Directors who are retiring by rotation in accordance with Article 61 of the Company’s Articles of Association and being eligible, have offered themselves for re-election:-
a) Dato’ Paduka Ismee bin Ismail (Ordinary Resolution 3) b) Datuk Zaiton binti Mohd Hassan (Ordinary Resolution 4)
SPECIAL BUSINESS 8. Proposed Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature.
4. To re-elect Puan Rifina binti Md Ariff, a Director who is retiring in accordance with Article 66 of the Company’s Articles of Association and being eligible, has offered herself for re-election. (Ordinary Resolution 5) 5. To consider and if thought fit, to pass the following resolutions in accordance with Section 129 of the Companies Act, 1965:
a) The transactions carried out are in the ordinary course of business and are on normal commercial terms that do not favour the related parties more than the general public;
“That Encik Salih Amaran bin Jamiaan, who is retiring in accordance with Section 129 of the Companies Act, 1965, be and is hereby re-appointed as a Director of the Company to hold office until the conclusion of the next Annual General Meeting of the Company.” (Ordinary Resolution 6) “That Encik Zahari @ Mohd Zin bin Idris, a Director who is retiring in accordance with Section 129 of the Companies Act, 1965, be and is hereby re-appointed as a Director of the Company to hold office until the conclusion of the next Annual General Meeting of the Company and also to be retained as an Independent Non-Executive Director in accordance with Recommendation 3.3 of the Malaysian Code of Corporate Governance 2012.” (Ordinary Resolution 7)
“That subject to the Companies Act 1965, Memorandum and Articles of Association of the Company and the Listing Requirements of Bursa Malaysia Securities Berhad approval be and is hereby given to BIMB Holdings Berhad and its subsidiaries to enter into the category of recurrent related party transactions of a revenue or trading nature with those related parties as specified in Section 2.1.3 of the Circular to Shareholders dated 23 April 2014 which are necessary for the Group’s day to day operations subject to the followings:-
b) Are not detrimental to the minority shareholders of the Company; and c) Will be disclosed in the annual report with the breakdown of the aggregate value of transaction conducted during the financial year pursuant to the shareholders’ mandate during the financial year (“Mandate“).
And that the Mandate conferred by this resolution shall commence immediately upon the passing of this Resolution;
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And that such Mandate shall continue to be in force until:i)
the conclusion of the next AGM of the Company, at which time it will lapse, unless by a resolution passed at the meeting, the authority is renewed;
ii) the expiration of the period within which the next AGM after the date is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of Companies Act 1965); or iii) it is revoked or varied by a resolution passed by the shareholders in a general meeting.
whichever is the earlier.”
(Ordinary Resolution 10)
9. To transact any other ordinary business of which due notice shall have been given in accordance with the Companies Act 1965.
NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT NOTICE IS HEREBY GIVEN that subject to the shareholders’ approval at the 17th Annual General Meeting of the Company to be held on Thursday, 15 May 2014, a final single-tier dividend of 8.5% in respect of the financial year ended 31 December 2013 will be paid on 29 May 2014 to depositors whose names appear in the Record of Depositors as at 7 May 2014. FURTHER NOTICE IS HEREBY GIVEN that a depositor shall qualify for dividend entitlement only in respect of: a) Shares transferred to the depositor’s securities account before 4.00 p.m. on 7 May 2014 in respect of ordinary transfer.
NOTES: 1. A member of the Company entitled to attend and vote at the meeting may appoint a proxy or proxies to attend and vote instead of him. 2. A member shall not be entitled to appoint more than two (2) proxies to attend and vote at the same general meeting. Where a member appoints two (2) proxies the appointments shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. 3. Where a member of the company is an exempt authorised nominee which holds ordinary shares in the company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. An exempt authorised nominee refers to an authorised nominee defined under the Securities Industry (Central Depositories) Act 1991 (“SICDA”) which is exempted from compliance with the provisions of subsection 25A(1) of SICDA. 4. The instrument appointing a proxy shall:i) in case of individual, be signed by the appointer or by his attorney; and ii) in case of a corporation be either under its common seal or signed by its attorney or by an officer on behalf of the corporation. 5. All proxy forms should be deposited at the Company’s Registered Office, 31st Floor, Menara Bank Islam, 22 Jalan Perak, 50450 Kuala Lumpur not less than forty eight (48) hours before the time fixed for holding of the meeting or any adjournment thereof 6. Explanatory Notes: 6.1 Re-election of Independent Director in accordance with Article 61 of the Company’s Articles of Association
Datuk Zaiton binti Mohd Hassan
Datuk Zaiton was appointed as Independent Non-Executive Director of the Company on 2 February 2006. She has satisfied the definition of ‘independent director’ and other requirements set out in Paragraph 1.01 of Bursa Malaysia Securities Berhad Listing Requirements. In its 2013 assessment, the Board was satisfied with the performance and contribution made by Datuk Zaiton. Datuk Zaiton has demonstrated her commitment as Director of BHB by not only attending Board meeting held during the financial year but also actively participate and provide valuable inputs to the Board. The Board concurs that Datuk Zaiton having the right skill set, qualities and experience which will contribute towards the benefits of BHB.
6.2 Retention of Independent Director in accordance with Recommendation 3.3 of the Malaysian Code of Corporate Governance
Encik Zahari @ Mohd Zin bin Idris
Encik Zahari was appointed as Independent Non-Executive Director on 20 September 2002. As at the date of the 17th Annual General Meeting of BHB, he has served as Director of the Company for 11 years, and therefore he has exceeded the tenure of 9 years as recommended by the Malaysian Code of Corporate Governance 2012. Nevertheless, based on the Directors’ Assessment for 2013, the Board is of the view that Encik Zahari’s presence as a BHB’s independent director is pertinent to the Board collectively. He actively participate and provide invaluable independent views to the Board and other Board Committees particularly on the quarterly financial report and audited financial account notwithstanding his tenure has reached 11 years. His vast experience (34 years) in banking would thus enable BHB to tap on his expertise for the development of BHB and its subsidiaries. Apart from being well-prepared for meetings, he has also met with the attendance requirements for Board meetings pursuant to the Listing Requirements. This testifies his dedication in discharging the responsibilities expected of an independent director.
Apart from the above, Encik Zahari has satisfied the definition of ‘independent director’ and other requirements set out in Paragraph 1.01 of Bursa Malaysia Securities Berhad Listing Requirements. Based on the aforesaid, the Board strongly recommend to shareholders of BHB to retain Encik Zahari as Director at the 17th Annual General Meeting of the Company.
b) Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the rules of Bursa Malaysia Securities Berhad. By Order of the Board
MARIA BINTI MAT SAID (LS 0009400) Company Secretary Kuala Lumpur 23 April 2014
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6.3 For further details on Ordinary Resolution 10, please refer to Circular to Shareholders dated 23 April 2014.
Growing from a position of strength From a place of strength, we will continue to move forward in our business activities to meet current market demands as well as future needs. We have a wealth of experience, expertise and our ability to seek business opportunities sets us apart from our competitors.
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STATEMENT ACCOMPANYING NOTICE OF 17TH ANNUAL GENER AL MEETING Pursuant to Paragraph 8.27(2) of the Listing Requirements of Bursa Malaysia Securities Berhad, BHB wishes to highlight the Directors who are standing for re-election at the 17th AGM of the Company are as follows:1. Article 61 of the Company’s Articles of Association • Dato’ Paduka Ismee bin Ismail • Datuk Zaiton binti Mohd Hassan 2. Article 66 of the Company’s Articles of Association • Puan Rifina binti Md Ariff 3. Recommendation 3.3 of the Malaysian Code of Corporate Governance 2012 • Encik Zahari @ Mohd Zin bin Idris 4. Section 129 of the Companies Act, 1965 • Encik Salih Amaran bin Jamiaan • Encik Zahari @ Mohd Zin bin Idris Profiles of the above Directors are set out on pages 14 to 18 of this Annual Report.
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BIMB HOLDINGS BERHAD
Annual Report 2013
007
CORPOR ATE PROFILE
BIMB Holdings Berhad (“BHB”) was established on 20 March, 1997 and listed on the Main Market of Bursa Malaysia on 16 September 1997. BHB acts as an investment holding company for Malaysia’s pioneer Shariah-compliant business entities, involve mainly in Islamic banking, takaful and stockbroking. Being the premier Shariah-compliant financial services provider with an authorised capital of RM2 billion and paid-up capital of RM1,493,505,934, BHB is well-positioned to assist the Government’s aspirations in establishing the country as a vibrant International Islamic Financial Center. BHB has gained in strength and stature over the years as a champion of Islamic banking, takaful and stockbroking industries via its stable of strategic investments in Malaysia’s pioneer Shariah-compliant entities.
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CORPOR ATE INFORMATION
BOARD OF DIRECTORS
AUDIT & EXAMINATION COMMITTEE
Tan Sri Samsudin bin Osman Chairman/Non-Independent Non-Executive Director
Encik Zahari @ Mohd Zin bin Idris (Chairman) Datuk Zaiton binti Mohd Hassan Encik Salih Amaran bin Jamiaan
Encik Johan bin Abdullah Group Managing Director/Chief Executive Officer/ Non-Independent Executive Director Tan Sri Ismail bin Adam Senior Independent Non-Executive Director Dato’ Paduka Ismee bin Ismail Non-Independent Non-Executive Director Datuk Zaiton binti Mohd Hassan Independent Non-Executive Director Datuk Rozaida binti Omar Non-Independent Non-Executive Director Encik Zahari @ Mohd Zin bin Idris Independent Non-Executive Director Encik Salih Amaran bin Jamiaan Non-Independent Non-Executive Director Puan Rifina binti Md Ariff Non-Independent Non-Executive Director
NOMINATION & ASSESSMENT COMMITTEE Datuk Zaiton binti Mohd Hassan (Chairman) Dato’ Paduka Ismee bin Ismail Encik Zahari @ Mohd Zin bin Idris
REMUNERATION COMMITTEE Datuk Zaiton binti Mohd Hassan (Chairman) Dato’ Paduka Ismee bin Ismail Encik Zahari @ Mohd Zin bin Idris
SHARIAH SUPERVISORY COUNCIL, BANK ISLAM MALAYSIA BERHAD Dr. Ahmad Shahbari @ Sobri bin Salamon (Chairman) Dato’ Mohd Bakir bin Haji Mansor Assistant Professor Dr. Uzaimah binti Ibrahim Professor Dr. Ahmad Hidayat bin Buang Dr. Muhammad Syafii bin Antonio
Puan Maria binti Mat Said Company Secretary
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SHARIAH ADVISORY BODY, SYARIKAT TAKAFUL MALAYSIA BERHAD Dr. Ahmad Shahbari @ Sobri bin Salamon (Chairman) Dato’ Mohd Bakir bin Hj. Mansor Dr. Aida binti Othman Professor Dr. Muhamad Rahimi bin Osman Dato’ Wan Mohamad bin Dato’ Sheikh Abdul Aziz
SHARIAH ADVISORY COMMITTEE, BIMB SECURITIES SDN. BHD. Dato’ Mohd Bakir bin Haji Mansor (Chairman) Prof. Emeritus Dato’ Paduka Dr. Mahmood Zuhdi bin Hj. Abdul Majid Ir. Dr. Muhamad Fuad bin Abdullah
CEOs IN THE GROUP Encik Johan bin Abdullah Group Managing Director/Chief Executive Officer BIMB Holdings Berhad Dato’ Sri Zukri bin Samat Managing Director Bank Islam Malaysia Berhad Dato’ Mohamed Hassan bin Md. Kamil Group Managing Director Syarikat Takaful Malaysia Berhad Encik Rashid bin Ismail Chief Executive Officer BIMB Securities Sdn. Bhd.
COMPANY SECRETARY Puan Maria binti Mat Said (LS 0009400)
AUDITORS KPMG Desa Megat & Co. (AF0759) Level 10, KPMG Tower 8, First Avenue, Bandar Utama 47800 Petaling Jaya Selangor Darul Ehsan
REGISTERED OFFICE BIMB Holdings Berhad (423858-X) 31st Floor, Menara Bank Islam No. 22, Jalan Perak 50450 Kuala Lumpur Tel : +603 2781 2999 Fax : +603 2781 2998
SHARE REGISTRAR Symphony Share Registrars Sdn. Bhd. Level 6, Symphony House Pusat Dagangan Dana 1 Jalan PJU1A/46 47301 Petaling Jaya Selangor Darul Ehsan Tel : +603 7841 8000 Fax : +603 7841 8152
STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad 16 September 1997
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A foundation of growth We will continue to enhance our pool of talent and be guided by our principles to ensure we attain even greater levels of success. A talented and empowered workforce is truly the foundation and motivating factor that ensures competitive advantage for our company.
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Annual Report 2013
GROUP CORPOR ATE STRUCTURE
54.69%
5.05%
5.11%
60.5%
100%
100%
51% 49% 100%
BIMB Investment Management Bhd
100%
BIMB Foreign Currency Clearing Agency Sdn Bhd
100%
Al-Wakalah Nominees (Tempatan) Sdn Bhd
100%
Farihan Corporation Sdn Bhd
100%
Bank Islam Trust Co (Labuan)
63.09%
Asean Retakaful International Ltd
56.00%
PT Syarikat Takaful Indonesia
57.24% 52.67%
PT Asuransi Takaful Keluarga PT Asuransi Takaful Umum
BIMB SECURITIES SDN BHD (290163-V)
100%
BIMSEC Nominees (Tempatan) Sdn Bhd
100%
BIMSEC Nominees (Asing) Sdn Bhd
100%
BIMSEC Assets Management Sdn Bhd
42.73%
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Others
9.43%
25.72%
100% Syarikat Al-Ijarah Sdn Bhd
48% Islamic Banking & Finance Institute Malaysia Sdn Bhd
Notes: Shareholding structure as at 31 March 2014
Core Business Units
Associate/Investment
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Other Business Units
Subsidiaries of Core Business Units
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Annual Report 2013
DIRECTORS’ PROFILE
Tan Sri Samsudin bin Osman Chairman/Non-Independent Non-Executive Director
Master of Public Administration, Pennsylvania State University (USA) Bachelor of Arts (Hons), University of Malaya Diploma in Public Administration, University of Malaya
Tan Sri Samsudin, 67, a Malaysian, was appointed as a Director and Chairman of the Board of BHB on 1 February 2007. He is currently the Chairman of the Employees Provident Fund (“EPF”) Board, the EPF Investment Panel and Universiti Utara Malaysia. He is also a Director of Sime Darby Berhad. Prior to his retirement, he was the Chief Secretary to the Government of Malaysia from 2001 to 2006. He does not have any family relationship with any director and/or major shareholder of BHB nor does he have any conflict of interest with BHB except by virtue of being a nominee Director of Lembaga Tabung Haji. He has not been convicted of any offence within the past ten (10) years. Tan Sri Samsudin attended ten (10) out of eleven (11) Board Meetings held in the 12-month financial period ended 31 December 2013.
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Encik Johan bin Abdullah Group Managing Director/Chief Executive Officer Non-Independent Executive Director
MBA (Finance), Morehead State University (USA) BBA (Finance), Eastern Michigan University (USA) Diploma in Banking, University Technology MARA
Encik Johan, 57, a Malaysian, was appointed as Group Managing Director/Chief Executive Officer of BHB on 15 May 2008. He is also a Director of Bank Islam Malaysia Berhad, Syarikat Takaful Malaysia Berhad and other subsidiaries within BHB Group. He started his professional career with the Kuala Lumpur Stock Exchange (now Bursa Malaysia Securities Berhad) as a Listing Officer. In 1989, he joined the Corporate Finance division of Bumiputra Merchant Bankers Berhad and left the bank in early 1995 as a Senior Manager. He later served at Damansara Realty Berhad as General Manager, Corporate Planning until he re-joined Bursa Malaysia Securities Berhad in 1999, where he took up various senior positions including that of Deputy Chief Regulatory Officer, Group Regulation. Encik Johan has no family relationship with any director and/or major shareholder of BHB nor does he have any conflict of interest with BHB. He has not been convicted of any offence within the past ten (10) years. Encik Johan attended all eleven (11) Board Meetings held in the 12-month financial period ended 31 December 2013.
Tan Sri Ismail bin Adam Senior Independent Non-Executive Director
Master of Arts (Economics), Vanderbilt University (USA) Bachelor of Arts (Hons), University of Malaya Diploma in Public Administration (Post-Baccalaureate Diploma), University of Malaya Advanced Management Program, Harvard Business School
Tan Sri Ismail, 63, a Malaysian, was appointed as a Director of BHB on 3 January 2011 and as a Senior Independent Director on 25 May 2011. He is currently the Chairman of Syarikat Prasarana Negara Berhad and an Advisor to the Hay Group Sdn. Bhd. He is also a Director of Westport Holdings Berhad. He has 38 years of experience in policy management and administration, starting his career in the civil service where he held increasingly senior positions including that of Chief Administration Officer of the Department of Statistics, Director General of the National Productivity Corporation, and Secretary General of the Ministry of Health. He was the Director General of Public Service Malaysia from June 2006 until his retirement in 2010. Tan Sri Ismail does not have any family relationship with any director and/or major shareholder of BHB nor does he have any conflict of interest with BHB. He has not been convicted of any offence within the past ten (10) years. Tan Sri Ismail attended nine (9) out of eleven (11) Board Meetings held in the 12-month financial period ended 31 December 2013.
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DIRECTORS’ PROFILE (CONTINUED)
Dato’ Paduka Ismee bin Ismail Non-Independent Non-Executive Director
Associate Member of Chartered Institute of Management Accountants Member of Malaysian Institute of Accountants
Dato’ Paduka Ismee, 49, a Malaysian, was appointed as a Director of BHB on 9 October 2006. He is a member of the Nomination and Assessment Committee and Remuneration Committee of BHB. He is currently the Group Managing Director and Chief Executive Officer of Lembaga Tabung Haji. He is also Chairman of Syarikat Takaful Malaysia Berhad and Director of Bank Islam Malaysia Berhad, TH Plantations Berhad, Felda Global Ventures Holdings Berhad and 1Malaysia Development Berhad. Prior to joining Lembaga Tabung Haji, he was the Chief Executive Officer of ECM Libra Securities and a Director of ECM Libra Capital Sdn Bhd. He has also served as Chief Accountant at Pengurusan Danaharta Nasional Berhad, General Manager of Business Development at Arab Malaysian Development Berhad and has held several financerelated positions at Shell Malaysia. Dato’ Paduka Ismee does not have any family relationship with any director and/or major shareholder of BHB nor does he have any conflict of interest with BHB except by virtue of being a nominee Director of Lembaga Tabung Haji. He has not been convicted of any offence within the past ten (10) years. Dato’ Paduka Ismee attended ten (10) out of eleven (11) Board Meetings held in the 12-month financial period ended 31 December 2013.
Datuk Zaiton binti Mohd Hassan Independent Non-Executive Director
Fellow of the Association of Chartered Certified Accountants (FCCA) Member of the Malaysian Institute of Accountants (MIA) Member of the Malaysian Institute of Certified Public Accountants (MICPA)
Datuk Zaiton, 57, a Malaysian, was appointed as a Director of BHB on 2 February 2006. She is the Chairman of the Nomination and Assessment Committee as well as the Remuneration Committee, and a member of the Audit and Examination Committee of BHB. She is currently the Managing Director of Capital Intelligence Advisors Sdn Bhd. She is the Chairman of the Private Pension Administrator Malaysia and also a Director of Bank Islam Malaysia Berhad, Sime Darby Berhad and Credit Guarantee Corporation Malaysia Berhad. She was formerly the President/Executive Director of Malaysian Rating Corporation Berhad (“MARC”). Prior to joining MARC, Datuk Zaiton served twelve (12) years with Malayan Banking Berhad in various senior positions including that of General Manager, Group Strategic Planning, a post she held until her resignation in 1996. She does not have any family relationship with any director and/or major shareholder of BHB nor does she have any conflict of interest with BHB. She has not been convicted of any offence within the past ten (10) years. Datuk Zaiton attended ten (10) out of eleven (11) Board Meetings held in the 12-month financial period ended 31 December 2013.
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Annual Report 2013
Datuk Rozaida binti Omar Non-Executive Non-Independent Director
Member of the Association of Chartered Certified Accountants (ACCA) UK
Datuk Rozaida, 51, a Malaysian, was appointed as a Director of BHB on 1 December 2009. She is currently the Group Chief Financial Officer of Lembaga Tabung Haji. She is also a Director of Syarikat Takaful Malaysia Berhad and Pelikan International Corporation Berhad. She started her career as a financial accountant in FELDA in 1986. For a year from 1990, she was a Credit Manager at Citibank Berhad. Datuk Rozaida then joined Guthrie Trading Sdn Bhd as a finance manager from 1992-1993, following which she became a Finance Director of Glaxo SmithKline Consumer Healthcare Sdn Bhd from 1994 until 2003. She does not have any family relationship with any director and/or major shareholder of BHB nor does she have any conflict of interest with BHB except by virtue of being a nominee Director of Lembaga Tabung Haji. She has not been convicted of any offence within the past ten (10) years. Datuk Rozaida attended eight (8) out of eleven (11) Board Meetings held in the 12-month financial period ended 31 December 2013.
Encik Zahari @ Mohd Zin bin Idris Independent Non-Executive Director Senior Cambridge Certificate
Encik Zahari, 70, a Malaysian, was appointed as a Director of BHB on 20 September 2002. He is the Chairman of the Audit and Examination Committee, and a member of the Nomination and Assessment Committee and the Remuneration Committee of BHB. He is also a Director of Bank Islam Malaysia Berhad. Encik Zahari began his career at Malayan Banking Berhad where, he spent thirty four (34) years with the bank before he retired in 1996 with his last position as General Manager, Commercial Banking Division. From 2000 to 2005, Encik Zahari was the Managing Director of Inter-City MPC (M) Sdn Bhd. He does not have any family relationship with any director and/or major shareholder of BHB nor does he have any conflict of interest with BHB. He has not been convicted of any offence within the past ten (10) years. Encik Zahari attended all eleven (11) Board Meetings held in the 12-month financial period ended 31 December 2013.
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DIRECTORS’ PROFILE (CONTINUED)
Encik Salih Amaran bin Jamiaan Non-Independent Non-Executive Director
Master in Business Administration, Wharton School, University of Pennsylvania (USA) Post-Graduate Diploma in Public Administration, Victoria University, Wellington (New Zealand) Bachelor of Science (Economics), London School of Economics and Political Science, University of London (UK)
Encik Salih, 74, a Malaysian, was appointed as a Director of BHB on 18 February 2005. He is a member of the Audit and Examination Committee of BHB. Prior to this, he had served as Deputy Secretary, Finance Division of the Ministry of Finance; General Manager, International Banking Division of Malayan Banking Berhad; Special Advisor (Economics) of the Commonwealth Secretariat, London; and Deputy Director, Trade Finance and Promotion Department of the Islamic Development Bank (“IDB”) in Jeddah. He was also the Regional Representative of IDB for Brunei, Indonesia and Malaysia based in Kuala Lumpur. He does not have any family relationship with any director and/or major shareholder of BHB nor does he have any conflict of interest with BHB except by virtue of being a nominee Director of Permodalan Nasional Berhad. He has not been convicted of any offence within the past ten (10) years. Encik Salih attended all eleven (11) Board Meetings held in the 12-month financial period ended 31 December 2013.
Puan Rifina binti Md Ariff Non-Executive Non-Independent Director
B.A (Honours) Accounting & Financial Analysis, University of Newcastle Upon-Tyne, UK
Puan Rifina binti Md Ariff, 47, a Malaysian, was appointed as a Director of BHB on 1 April 2014. She is currently the General Manager, Corporate Services, Lembaga Tabung Haji. She started her career as a Senior Officer in Permata Merchant Bank in 1990 until 1994. From 1994 until 2000, she was Senior Manager at Amanah Saham MARA Berhad. She was also Assistant Vice President of Affin Merchant Bank Berhad for two (2) years prior to joining Lembaga Tabung Haji in 2002. She does not have any family relationship with any director and/or major shareholder of BHB nor does she have any conflict of interest with BHB except by virtue of being a nominee Director of Lembaga Tabung Haji. She has not been convicted of any offence within the past ten (10) years. Puan Rifina did not attend any Board Meetings held in 2013 as she was appointed after the financial year period.
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Puan Maria binti Mat Said Company Secretary
Puan Maria is the General Manager, Legal & Secretarial Division of Bank Islam Malaysia Berhad. Holder of a Bachelor of Law, Puan Maria binti Mat Said has been with Bank Islam since August 2005. With over twenty one (21) years of experience, she is responsible for providing legal and corporate secretarial services. Puan Maria was appointed as the Company Secretary of Bank Islam effective 29 January 2009 and is responsible for ensuring proper corporate governance in Bank Islam.
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Growing from strength to strength In line with our aspirations to grow and expand our business activities, we will strive to maintain value for all our stakeholders and become the preferred choice for customers, shareholders and employees.
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CEOs IN THE GROUP Standing left to right: Encik Rashid bin Ismail Chief Executive Officer BIMB Securities Sdn. Bhd.
Encik Johan bin Abdullah Group Managing Director/Chief Executive Officer BIMB Holdings Berhad
Dato’ Sri Zukri bin Samat Managing Director Bank Islam Malaysia Berhad
Dato’ Mohamed Hassan bin Md. Kamil Group Managing Director Syarikat Takaful Malaysia Berhad
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MANAGEMENT COMMITTEE
Encik Johan bin Abdullah Group Managing Director/Chief Executive Officer
Encik Mohamad Azlan bin Mohamad Alam Chief Financial Officer
Encik Junady bin Nawawi Head, Corporate Strategy & Transformation Management
Encik Aidil Haznul bin Zulkifli Head, Legal, Secretarial & Compliance
Cik Nor Aina binti Hj Kamaruddin Head, Corporate Services
Encik Omar bin Atin Head, Corporate Communications
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5-YEAR GROUP FINANCIAL HIGHLIGHTS 2009 RM’000 Restated
2010 RM’000 Restated (Note 1)
2011 RM’000 Restated
2012 RM’000 Restated
2013 RM’000
Share Capital
1,066,790
1,066,790
1,066,790
1,066,790
1,493,506
Shareholders’ Equity
1,277,644
1,667,102
1,869,847
2,080,775
2,810,337
24,871,451
26,798,107
28,208,203
32,379,000
36,924,367
Takaful liabilities
4,190,220
4,786,882
5,124,602
5,580,755
6,082,001
Financing, advances and others
9,661,864
11,858,599
14,161,837
19,507,799
23,740,948
Marketable securities
9,092,943
18,755,334
16,311,797
19,162,529
18,409,143
32,147,478
35,939,624
38,246,388
43,939,909
49,674,545
1,490,180
2,596,313
2,078,979
2,473,953
2,809,395
Profit before zakat and taxation (PBZT)
299,132
588,155
588,924
717,439
819,427
Net Profit
118,770
238,470
236,642
276,220
279,327
Dividend Less Taxation
9,601
24,802
114,679
128,015
164,286 (Note 2)
Net financing and advances over customer deposits = Net financing and advances/ Customer deposits
38.85
44.25
50.20
60.25
64.30%
Gross NPF ratio = Gross NPF/Gross financing and advances
12.70
4.50
2.61
1.55
1.18%
Net NPF ratio = (Gross NPF – Specific allowance)/(Gross financing and advances – Specific allowance)
4.90
1.06
-0.17
-0.67
-0.91%
13.26
22.35
22.18
25.89
25.84
Net Tangible Assets per Share (RM)
1.20
1.56
1.75
1.95
1.88
Gross Dividend per Share (%) (based on weighted average share capital)
1.20
3.10
10.75
12.00
15.20 (Note 2)
Net Dividend per Share (%) (based on weighted average share capital)
0.90
2.33
10.75
12.00
15.20 (Note 2)
Deposits from Customers
Total Assets Revenue
Earnings per Share (Sen)
Note 1: Change in accounting year from 30 June to 31 December with transitional financial period of 18 months from 2010. Note 2: Including a proposed final single-tier dividend of 8.50% for shareholders approval at the forthcoming Annual General Meeting. www.bimbholdings.com
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Annual Report 2013
`10
23,740,948 9,661,864
`11
www.bimbholdings.com
`12
`13
`09
`10
`11
`12
`13
`09
`10
14,161,837
19,507,799
6,082,001
5,580,755
5,124,602
Financing, Advances and Others (RM’000)
11,858,599
4,190,220
2,080,775
1,869,847
1,667,102
1,277,644 `09
4,786,882
Takaful Liabilities (RM’000)
2,810,337
Shareholders’ Equity (RM’000)
`11
`12
`13
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Annual Report 2013
5-YEAR GROUP FINANCIAL HIGHLIGHTS (CONTINUED)
22.18
25.84
22.35
`11
`12
`13
13.26
32,379,000
28,208,203
26,798,107
24,871,451
`10
25.89
Earnings Per Share (Sen)
36,924,367
49,674,545
43,939,909
Deposits from Customers (RM’000)
38,246,388
35,939,624
32,147,478
Total Assets (RM’000)
`09
`10
`11
`12
`13
`09
`10
`11
`12 `13
`09
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Annual Report 2013
1.88
Profit Before Zakat and Taxation (PBZT) (RM’000)
588,155
588,924
`10
`11
299,132
1.20
717,439
1.56
819,427
1.75
1.95
Net Tangible Assets Per Share (RM)
`09
www.bimbholdings.com
`10
`11
`12
`13
`09
`12
`13
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BIMB HOLDINGS BERHAD
Annual Report 2013
LETTER TO SHAREHOLDERS
Dear Shareholders, The financial year 2013 (FY2013) presented a challenging environment. Yet, BIMB Holdings Berhad (“BHB”) and its subsidiaries (“the Group”) continued to build on our strengths in terms of our financial and operational performance. Our robust foundations have allowed us to weather economic uncertainties and adapt to a new and more demanding regulatory environment while enhancing our business, and the trust of our stakeholders.
Notwithstanding the challenging economic and financial environment, the profitability of our main businesses in Islamic banking and takaful continue to record double digit growth, reiterating our prominence in the domestic Islamic financial landscape. With the strong support of our shareholders, we also embarked on a major initiative to acquire the remaining 49% equity interest in Bank Islam Malaysia Berhad (“Bank Islam” or “the Bank”) held in aggregate by Dubai Financial Group (“DFG”) and Lembaga Tabung Haji (“LTH”) thereby taking full ownership of the country’s pioneering Islamic banking institution. It has been a very exciting and fruitful year, and it gives me great pleasure to share the highlights of our financial and operational performance with you.
www.bimbholdings.com
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*18 months financial period
OPERATING ENVIRONMENT The year saw a gradual move towards global economic recovery. The United States (“US”) announced plans to taper its quantitative easing (“QE”) programme in May. By year end, the US economy had improved significantly such that domestic consumer confidence was at a five-year high. On a similar note, most countries in the Eurozone began to emerge from a debt-ridden recession that had been strangling growth for about 18 months. Full recovery, however, is still only on the horizon and the QE tapering has led to an outflow of funds from emerging markets. Within the generally challenging global economy, the Islamic financial services industry remained a consistent top performer, growing 18.6% year-on-year (“YoY”) to reach an estimated USD1.8 trillion in assets as at end-2013. This was reflected in Malaysia where Islamic finance expanded at an encouraging rate, and the country retained its position as the world’s largest sukuk issuer with a 69% share of total issuances in 2013 amounting to almost USD83 billion. As part of its aspiration to see Malaysia become the international Islamic financial hub, the Government has been supporting further expansion of this sector, and during the year new regulations were implemented to enhance the overall governance of Islamic financial institutions. On 1 July, Bank Negara Malaysia (“BNM”) implemented the Islamic Financial Services Act (“IFSA”) 2013 to replace the Islamic Banking Act
www.bimbholdings.com
`11
`12
`13
`09 `10*
`11
`12
2,809,395
2,473,953
2,078,979
2,596,313 1,490,180
0.90 `09
15.20
`13
12.00
`12
Revenue (RM’000)
2.33
25.84
22.18
25.89
22.35
`11
13.26 `09 `10*
10.75
Net Dividend Per Share (%)
Earnings Per Share (Sen)
`13
*18 months financial period
1983 and the Takaful Act 1984, providing a comprehensive legal and structural framework consistent with Shariah in all aspects of regulation and supervision, from licensing to the winding-up of a licensed institution. The IFSA also requires Islamic financial institutions to create greater clarity in their services and products to enhance consumer confidence. As for the takaful industry, BNM issued a guideline requiring operators to separate their family and general takaful businesses within five years, and to carry out both businesses under two separate licenses. Although this may result in some administrative pressure and initial costs, we believe the initiative would ultimately create more focused strategies in the two different takaful segments and enhance efficiency levels in terms of governance, product offerings and customer service for the benefit of all stakeholders.
ACQUISITION OF 49% EQUITY INTEREST IN BANK ISLAM NOT HELD BY BHB Bank Islam has consistently delivered a strong financial performance over the last few years, spurred by development strategies that aim to enhance growth in assets, financing and profitability, as well as improve its asset utilisation. During this time, BHB has been supportive of the Bank’s various growth initiatives as they contribute towards the Group’s overall earnings and profitability.
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LETTER TO SHAREHOLDERS (CONTINUED)
To reap the full benefits of Bank Islam’s future growth, we made the strategic decision to acquire the remaining 49% aggregate equity in the Bank, comprising DFG’s 30.5% and LTH’s 18.5% equity interests, for a total purchase consideration of USD884.6 million (approximately RM2.9 billion). The acquisitions were successfully completed on 19 December 2013, facilitated by a fund raising exercise comprising: i.
a renounceable rights issue of two new ordinary shares of RM1.00 each in BHB (“BHB Shares”) with two free detachable warrants for every five existing BHB Shares held (“Rights Issue”); and
ii. issuance of 10-year Islamic Sukuk Murabahah securities of RM1.66 billion in nominal value. The Rights Issue to raise USD551.8 million (approximately RM1.8 billion) was awarded the ‘Equity Deal of the Year 2013’ by Islamic Finance News as well as ‘Equity Deal of the Year’ by Asian Legal Business. Going forward, with full ownership of our Islamic banking business, we will be in a better position to further leverage and enhance efficiencies, while creating even greater synergies within the Group with coherent corporate strategies.
FINANCIAL PERFORMANCE Our banking, takaful and stockbroking subsidiaries experienced a very positive financial year ended 31 December 2013, which has been reflected in BHB’s performance. We posted a consolidated Profit Before Zakat and Taxation (“PBZT”) of RM819.4 million, marking an increase of RM102.0 million or 14.2% from the previous financial year. Our consolidated net profit, meanwhile, stood at RM563.2 million, 8.0% higher than the RM521.6 million recorded in the previous year. Despite margin compression due to stiff competition, our total net income grew by 13.9% to RM2.0 billion, supported by net financing growth of RM4.2 billion or 21.7% at Bank Islam, and higher net income of RM80.7 million or 17.1% at Syarikat Takaful Malaysia Berhad (“Takaful Malaysia”).
Group operating overheads grew to RM1.2 billion, in tandem with total revenue growth and continued investment in talent and capital expenditure to support expansion of the Group’s business franchise. Consequently, our cost to net income ratio also increased from 57.9% to 60.1%. Concerted efforts to improve asset quality led to a further reduction of our gross impaired financing ratio from 1.55% (as at end 2012) to 1.18% (as at end 2013). Total allowance for impairment on financing and advances declined by RM81.1 million due to higher recovery of bad debts and financing of RM114.6 million and lower individual impairment on financing of RM5.9 million. However, collective impairment was higher by RM39.4 million in tandem with financing growth. Meanwhile, the total capital ratios of Bank Islam and its subsidiaries have been computed in accordance with requirements of the Capital Adequacy Framework for Islamic Banks (CAFIB) and Basel III as of 1 January 2013. These ratios remained healthy, exceeding BNM’s minimum capital requirements with Common Equity Tier 1 and Total Capital Adequacy Ratio (CAR) at 12.96% and 14.06% respectively as at 31 December 2013. On 19 June 2013, the Company paid out RM37.3 million, or 19.5% of our net profit for the financial year under review, in the form of an interim single-tier dividend of 3.5%. In addition, the Board is proposing a final single-tier dividend of 8.5% for each ordinary share held at our forthcoming Annual General Meeting.
BANK ISLAM FINANCIAL PERFORMANCE Solid financing growth, competitive product offerings and growth in non-fund based income led to Bank Islam Group recording a PBZT of RM677.3 million for the financial year ended 31 December 2013, an increase of RM79.9 million or 13.4% from the RM597.4 million achieved in 2012. This was achieved on the back of RM2.25 billion in revenue, the first time the Bank’s revenue has crossed the RM2 billion mark, a fitting achievement to celebrate its 30th anniversary.
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BIMB HOLDINGS BERHAD
Annual Report 2013
The Bank’s net financing assets grew RM4.2 billion or 21.7% YoY to reach RM23.7 billion, leading to a 14.0% increase (RM240.1 million) in fund-based income mainly from financing. Non-fund based income, meanwhile, grew 5.4% or RM14.5 million mainly from foreign exchange transactions, fees and commission. Customer deposits reported a YoY growth of 14.4% or RM4.7 billion to reach RM37.2 billion as at end 2013. Similarly, the Bank’s low cost current and savings accounts (“CASA”) increased by RM1.1 billion or 8.5% YoY, leading to a CASA ratio of 39.1%, well surpassing the Islamic banking industry ratio of 25.9% as at year end. Along with the improvement in gross impaired financing ratio of 1.18%, the Bank’s net impaired financing ratio further improved from -0.67% as at end 2012 to -0.91% as at end 2013. Both figures mark a commendable performance compared to the gross and net impaired ratios of the Banking System which stood at 1.9% and 0.1% respectively. The Bank’s return on equity and return on assets (based on PBZT) also surpassed that of the Banking System, at 21.1% and 1.7% against 17.5% and 1.6% respectively.
KEY DEVELOPMENTS At the end of the last financial year, Bank Islam launched a new corporate strategic plan to further build its fundamentals up to year 2015. Under this new plan, themed Hijrah to Excellence (“H2E”), the management aims for, amongst others, financing growth of between 20% and 25% per annum and pre-tax profit growth of 10% per annum. It also aims to improve its asset utilisation with a targeted financing to deposit ratio of 75% by 2015, from 65% as at end 2013. These targets are to be achieved by focusing on the following six pillars: robust organic growth, service excellence, Shariah-led innovation, resource optimisation, being an employer of choice and regionalisation.
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In terms of innovation, the Bank introduced a number of products targeting different segments of its customer base. Supporting the Bank’s target of increasing its debit card retail spend by about 40% during the year, it launched a cobranded debit card with the Football Association of Malaysia – the Bank Islam Visa Debit Card-i Team Harimau – offering attractive benefits to football fans. Catering to the higher-end of its market, it subsequently launched the Visa Platinum Credit Card-i, enabling customers to enjoy an exclusive, luxury lifestyle and strengthening the Bank’s commitment to providing world-class service to niche market segments. With pilgrims in mind, the Bank introduced the Labbaik Account-i, a two-in-one Mudharabah savings account tailored to help customers save to perform their Hajj. To facilitate the business development of small enterprises, it collaborated with ManagePay Systems Berhad to launch a mobile e-payment initiative that allows for payments through smartphones. Pressing on with efforts to increase its customer deposits, Bank Islam took the Al-Awfar Million Ringgit Campaign launched in 2012 one step further with the Fast Lane to Become a Millionaire campaign, this time offering the chance for three customers who either deposit a minimum of RM1,000 in new accounts or who top up their existing accounts by RM1,000 to win RM1 million each. The successful campaign contributed to a 25.8% or RM366.5 million YoY increase in Al-Awfar deposits to reach RM1.8 billion as at 31 December 2013. At the same time, the Bank continued to increase its presence nationwide to enable more convenient access to existing and potential customers by opening six (6) new branches in Taman Bukit Indah, Johor; Bandar Baru Tunjung, Kelantan; Sungai Buluh, Selangor; Kuala Lumpur Sentral 2, Kuala Lumpur; Senawang, Selangor; and Sungai Petani 2, Kedah; one (1) new Consumer Business Centre (“CBC”), three (3) new Bureaus de Change (“BDC”) and two (2) new Ar-Rahnu outlets. Its network at year end thus comprised 133 branches, six (6) CBCs, seven (7) BDCs and six (6) Ar-Rahnu outlets.
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LETTER TO SHAREHOLDERS (CONTINUED)
Bank Islam has made very commendable progress over the last few years, under the leadership of its Managing Director, Dato’ Sri Zukri Samat, who has positioned the Bank into a highly-respected Islamic financial institution. Dato’ Sri Zukri’s contributions to the Bank were recognised when he was named the Trailblazer of the Year 2013 by Banking and Payments Asia (“BPA”). BPA also awarded Bank Islam a Special Commendation in the Mobile – Financial Inclusion category for its TAP Mobile Banking-i offering, which is the first mobile banking product that does not require the Internet.
TAKAFUL MALAYSIA FINANCIAL PERFORMANCE Despite stiff competition among takaful players, Takaful Malaysia pulled in a good performance during the year under review to record a 43% increase in PBZT to RM179.3 million from RM125.5 million in 2012. Operating revenue increased by 6% to RM1.71 billion from RM1.61 billion recorded last year. The improved revenue and profit were largely attributable to higher sales generated by the Family and General Takaful business, better underwriting and investment results and higher net wakalah fee income arising from strong business growth. Takaful Malaysia’s total asset size has increased by 9% to RM6.9 billion. Total profit from investment, comprising realised gains and fair value changes, increased by 7% to RM386.6 million in 2013 as compared to RM362.4 million in the previous financial year. The Group Family Takaful and General Takaful gross contribution grew by 8% from the previous financial year. Gross contribution from Family Takaful was RM1,052.5 million compared to RM973.0 million in the previous year, while that for General Takaful was RM428.4 million compared to RM401.4 million in 2012.
MORE VIBRANT SECTOR
However, despite this renewed vibrancy, most of the growth is still within the majority Muslim population, indicating there is a continued need to create awareness of takaful as a viable alternative to conventional insurance. Educating the public on takaful is integral to Takaful Malaysia’s ongoing transformation journey embarked in 2009. This transformation programme has seen the company evolve in a fundamental manner, achieving sustainable top and bottom line growth over the past few years. A cornerstone of its educational efforts is the ‘We Should Talk’ initiative, inaugurated in April 2012, which reaches out to the mass market, spreading the word on Takaful Malaysia’s unique 15% Cash Back offered on all General Takaful and some Family Takaful products. In June 2013, Takaful Malaysia offered an extra 5% to the existing 15% Cash Back reward for non-motor certificates ending in 2013. To promote this special deal, an on-ground ‘We Should Talk’ campaign was launched in July, during which over one million flyers were distributed at high-traffic areas in the Klang Valley. Takaful Malaysia also collaborated with Tesco Stores Malaysia in an advertising blitz that runs from November 2013 to mid-April 2014, during which its Cash Back offer was displayed on Tesco trolleys in 14 outlets throughout Malaysia. The objective was to increase Takaful Malaysia’s brand presence and to promote the company as a household name and the preferred choice for protection. In addition to these initiatives, Takaful Malaysia’s comprehensive strategic planning also focuses on introducing competitively priced products, enhancing operational efficiencies and service delivery, building the company’s human resources, and expanding its distribution capabilities. In terms of products, the company launched an enhanced version of its investment-linked Takaful myGenLife, designed with elements of extra flexibility for the customers to choose from.
The takaful sector in general has become more dynamic, with operators offering more innovative products resulting in an upsurge in the take-up of takaful plans, especially by the corporate sector.
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Operations have been enhanced by new technology-driven initiatives. The launch of an e-payment service gives customers greater convenience, while the implementation of an On-Base system which helps to track and interface with Takaful Malaysia’s Customer Relationship Management (CRM) system facilitates the sales and underwriting teams in following proper processes with quotations and proposals. This will assist in the long-term plans to achieve Takaful Malaysia’s targeted Service Level Turnaround Time. At the same time, efforts to create a performance culture were intensified during the year via training and development programmes aimed at enhancing employee efficiency. Given the rapid growth of the industry and the need for more talent, suitable personnel were recruited. Meanwhile, to retain talent as well as establish itself as an employer of choice, Takaful Malaysia became the first insurance-related company in the country to introduce the Long Term Incentive Plan (LTIP) offering up to 10% of its issued and paid up share capital to eligible employees and Executive Directors. In a move to further expand its sales and services network, and to provide the best service to its customers, Takaful Malaysia established three new Takaful myCare Centres (“TMCC”) in three different locations and states. In total, there are now 20 TMCCs in Takaful Malaysia’s network. In recognition of its exemplary performance, Takaful Malaysia was named the Best Takaful Company in Malaysia at the 7th International Takaful Awards held in Cairo. The company was also awarded the Best Performing Stock – Highest Returns to Shareholders over Three Years under the Finance Sector at the Edge Billion Ringgit Club Corporate Awards 2013. These awards represents honour and recognition given to the Management of Takaful Malaysia, led by Dato’ Mohamed Hassan Md. Kamil.
BIMB SECURITIES In November, the Securities Commission implemented its revised, and more stringent, screening methodology for Shariah-compliant stocks, which saw 158 stocks from the previous list issued in May 2013 being struck off while 16 new stocks were added. Consequently, a total of 653 securities listed on Bursa Malaysia, or 71% of the total, are now Shariah-compliant as opposed to 88% previously. Investors are given six months until 29 May 2014 to dispose of the Shariah non-compliant securities. As this revision took place towards year end, it did not have a significant impact on BIMB Securities Sdn. Bhd. (“BIMB Securities”) in 2013. The company achieved an increase of 51% in its value of dealing as compared to 2012. This led to a 54% increase in gross brokerage income to RM12.8 million, and a 48% growth in the total net dealing income from the previous year. The stockbroking group recorded a total income of RM13.2 million, an increase of 22% as compared to the previous year, with a PBZT of RM2 million. Meanwhile, several technological innovations and improvements were deployed in 2013, including synchronisation of internal systems with Bursa Malaysia’s initiatives on Nominees Rights Subscription (NRS), an electronic Rights processing, and Bursa Trade System 2 (BTS2), Bursa’s latest trading engine which is faster and more efficient. BIMB Securities also deployed trade related systems for institutional clients, to facilitate trade confirmation and to send their orders to BIMB Securities. In addition, BIMB Securities launched the Mobile Trading application for its Internet trading platform, BISonline, on Android and Apple operating systems. This afforded greater convenience to investors who prefer to trade via mobile devices and provided greater reach for BIMB Securities to the investing public.
SYARIKAT AL-IJARAH Syarikat Al-Ijarah Sdn. Bhd. is the Group’s leasing arm. For the financial year ending December 2013, it posted a PBZT of RM0.42 million, which was 12.5% lower than the PBZT of RM0.48 million in 2012. Its Profit After Zakat and Tax, meanwhile, stood at RM0.29 million.
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LETTER TO SHAREHOLDERS (CONTINUED)
CORPORATE GOVERNANCE
OUTLOOK
BHB is committed to upholding the highest standards of corporate governance and to maintaining transparent operations, as we believe this is critical in enhancing stakeholder value while building the trust of our consumers. The principles of corporate governance, moreover, reinforce our leadership as the premier Islamic financial services holding company in Malaysia. Corporate Governance at BHB is led by our Board of Directors and is cascaded down to all levels across the Group. In maintaining standards of business integrity, ethics and professionalism, we abide by the Malaysian Code on Corporate Governance as well as other guidelines published by BNM, Bursa Malaysia Securities and the Putrajaya Committee on GLC High Performance.
Prospects for the year 2014 look positive as Malaysia’s financial health continues to be bolstered with more projects unfolding under the Government’s Economic Transformation Programme. Economists are forecasting Gross Domestic Product (“GDP”) growth of between 5.0% and 5.5% in 2014 as compared to 4.7% in 2013, indicating a more vibrant economic landscape compared to the year under review.
CORPORATE RESPONSIBILITY BHB and our group of companies have been conscious of our responsibility to give back to the community from our very beginnings, given that our business models are based on Islamic principles of ethical banking, insurance and stockbroking. This is reflected in our annual zakat (business tithes) payments as well as in our extensive donations and outreach programmes in which our Management and employees volunteer their time and physical effort to uplift the lives of the underprivileged. Over and above our contributions to society, all our business operations and dealings are conducted with the highest level of ethics and integrity. We are committed to treating all our shareholders, customers, business partners and employees in a fair, equitable and transparent manner, as we focus on creating mutually beneficial outcomes at all times. As a caring and responsible corporation, moreover, we are conscious of the need to play our part in protecting and preserving the environment, especially in the current global landscape in which climate change and its consequences present a real and urgent issue. Our efforts to contribute to the Community, Workplace, Marketplace and Environment are described in greater detail in the Corporate Responsibility section of this annual report.
The country’s strong fundamentals has enabled Malaysia to be ranked 6th place in the World Bank’s Ease of Doing Business Index 2014 which takes into consideration, amongst others, parameters such as credit review, investors’ protection and cross-border trade. In each of these categories, Malaysia was accorded high ratings, reflecting positively on investors’ confidence in the domestic business, regulatory environment and the soundness of the financial services industry. In addition, initiatives introduced by BNM to curb consumer spending and tighten the property market will stabilise the country’s household debt. Compounded by an expected increase in interest rates and inflationary pressure, this could lead to a contraction in consumer loan demand. However, we foresee this will be counter-balanced by increased private and corporate investments. For Bank Islam, the implementation of the IFSA will require the Bank to reclassify its deposit and investment accounts. Customers who hold Mudarabah and Wakalah based demand deposits and investment products will have to decide whether to continue with a deposit account, which guarantees the full principal invested; or transfer their funds into an investment account, which carries the risk of conventional investments. Although this may lead to initial increase in costs, the Bank is confident of managing the transition guided by its new three-year corporate strategic plan, H2E, which adopts a multi-pronged approach to further grow its business that focuses on operations, internal resources, geographic expansion and service delivery.
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Operationally, Bank Islam has also embarked on a major review of its key end-to-end business processes to increase efficiency and streamline procedures thus ensuring consistent delivery of its brand promise. In terms of building its internal resources, it aspires to become a Knowledge Centre for applied Islamic finance through the establishment of a Shariah Centre of Excellence. This will place Bank Islam in a better strategic position to take its expertise to neighbouring countries. The Bank is always looking for the possibility of foreign expansion based on the growth potential for Islamic banking in the region. Within the takaful sector, the impending implementation of the Goods and Services Tax (“GST”) is likely to increase the cost of insurance products, hence constrict margins on tariffcontrolled classes, such as motor and fire insurance. Although this would increase competition in the takaful sector, industry players with an edge in the marketplace will be able to find innovative ways to manage their expenses and handle customers’ reaction towards the payment of GST.
ACKNOWLEDGEMENTS BHB has come a long way since the challenges faced in FY2006, building on our successive achievements every year to reinforce our foundations. While the organisation itself plays a significant role in our progress, we are also dependent on the support of our stakeholders. And I would like to take this opportunity to thank all our customers, business partners and shareholders for their belief in the Group and invaluable contributions to our growth. On behalf of the Board of Directors, I would also like to acknowledge our appreciation of the continuous efforts made by the Government and its regulatory bodies – in particular BNM, the Securities Commission and Bursa Malaysia – to promote a healthy Islamic financial environment in the country. BHB and our subsidiaries have been able to flourish because of the conducive ecosystem that has been nurtured over the years.
In this regard, Takaful Malaysia is confident of continued growth of Islamic insurance in the country. To leverage on this growth, the company will enhance its multi-distribution channels, strengthen its relationship with Islamic bank partners, and double its agency force to 2,500 agents. It will also continue to explore the possibility of expanding to foreign markets.
I would also like to express my sincere appreciation to all my colleagues on the Board of BHB and our subsidiaries for their wise counsel which has helped to keep the Group going even in the most challenging times. At the same time, I speak for my colleagues when I say that we fully acknowledge and appreciate all the hard work and effort of every single employee in the Group. Our journey thus far has been made possible because of you.
Liquidity in Malaysia’s equity market has led to a premium market valuation compared to our regional peers. However, with the ongoing QE tapering exercise, we anticipate some outflow of foreign funds. On a positive note, it would also provide the opportunity for domestic retail and corporate investors to restructure their investment portfolios. Leveraging on this, BIMB Securities will play an active role to monitor the market and identify value propositions for our institutional and retail clients.
Thank you.
At BHB, we feel confident of being able to withstand the challenges of a more dynamic global and local economy to take our own journey to the next level.
www.bimbholdings.com
Tan Sri Samsudin bin Osman Chairman
A growing success Strategic developments in our respective business segments are key to our growing success. By raising the bar in delivering products and services that are of the highest standards, we are confident of continued sustainable growth.
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CORPOR ATE RESPONSIBILITY The principles of integrity and responsibility towards all stakeholders, built on the tenets of Islam, are integral to BIMB Holdings Berhad (“BHB”). The concept of Corporate Responsibility (“CR”), therefore, infuses the very fabric of the organisation and guides all our actions, decisions and strategies.
It ensures that we observe the highest level of ethics in all our dealings internally as well as with shareholders, customers, business partners, employees and the local communities involved in our outreach programmes. Our CR framework also reminds us of our responsibility towards protecting and preserving the country’s natural resources, hence the environment which supports our current and future generations.
While we believe in the inherent value of CR, we are also convinced that balancing our financial performance with our social and environmental impacts strengthens our sustainability as a corporate entity in an increasingly competitive marketplace. We therefore take great pride in our CR initiatives, which we have categorised in this annual report under four pillars of the Community, Marketplace, Workplace and Environment.
COMMUNITY BHB and our subsidiaries regularly support charitable organisations and causes that benefit the underprivileged and needy. In line with the tenets of Islam, every year we contribute zakat (business tithes) to the fourteen (14) state religious departments for their
distribution to those who require aid. In 2013, the Group presented a total of RM10,419,906 comprising RM9,251,220 from Bank Islam, RM1,161,716 from Takaful Malaysia and RM6,970 from Syarikat Al-Ijarah, for the purpose. In addition to contributing via the state zakat bodies, we also donate directly to worthy causes as well as offer our time and effort to support those in need. In terms of direct donations, this year we presented RM2,000 to the Muslim Autism Association of Malaysia and thirty (30) wheelchairs to the Persatuan Bekas Polis Cawangan Ampang in Kuala Lumpur.
In the spirit of volunteerism our subsidiary, Bank Islam, took part in a Street Feeding Programme conducted at the Klang Bus Stand in Kuala Lumpur for the homeless in conjunction with Chinese New Year. We cooked bubur lambuk at Menara Kuala Lumpur for 80 children from two orphanages – Pertubuhan Kebajikan Anak Yatim/ Anak Miskin Klang (PENYAKIN) and Asrama Darul Falah (ASDAF). We also held a gotong-royong session at the Positive Shelter Home (POSHe) for HIV patients in Kg. Kerayong, Klang, Selangor, attracting the participation of no less than 40 volunteers. In addition, communal activities were carried out at two homes – Rumah Kasih Harmoni Paya Jaras, Selangor and Rumah Perlindungan Nur Qaseh at Taman Melawati, Kuala Lumpur – which also received a total of RM7,135.
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Our community outreach calendar is always packed during the month of Ramadan, which fell from early July to early August last year. During this time, an extensive range of community-centric programmes were held. This included four Ceria Ramadan – Iftar sessions beginning with the Eastern zone where we broke fast with the underprivileged at the Swiss Garden Resort & Spa in Kuantan, Pahang. Similar sessions were held subsequently at the Darulaman Golf Resort in Jitra, Kedah; Hotel Seri Malaysia in Melaka; and Hotel UiTM in Shah Alam, Selangor. A total of RM145,000 was spent on the food and cash contributions to the 740 recipients, and on contributions to the homes.
Al-Khaadem residence, at which senior Takaful Malaysia management and employees also presented duit raya to all the children. On a separate occasion, Takaful Malaysia management and staff took 50 children from Rumah Amal Nur El-Amin at AEON Bandar Utama, Petaling Jaya on a Raya shopping spree.
We also maintained our tradition of contributing to Pertubuhan Al-Khadeem by donating RM100,000 to the home at a breaking of fast event held at the
Under the Indahnya Ramadan Bank Islam, two separate and extensive programmes were held with indigenous communities in Sabah – one with the
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Suluk Tribe at Kg. Mumiang in Sandakan; the other with the Murut Tribe (Muallaf) at Kg. Tinanduk in Pagalungan. At both events, prayers and religious ceramah (discussions) were held; zakat, essential items and clothes were donated to the poor; and a grand breaking of fast was organised with the villagers. The two communities were selected for the programme because the Group had also rehabilitated a local mosque and surau serving them, as well as built a new surau for the Muallaf in Kg Salong.
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CORPOR ATE RESPONSIBILITY (CONTINUED)
On 15-16 August, Bank Islam volunteers performed the Qurban to feed the underprivileged in Klang, Selangor; Port Dickson, Negeri Sembilan; Simunjan, Sarawak; Kepala Batas, Pulau Pinang; and Marang, Terengganu. This served to foster closer relationships with existing and potential customers and instil a spirit of volunteerism among our staff. We also believe in helping others help themselves. Towards this end, we contributed RM140,000 towards building a mobile Tabung Masjid Bank Islam to be used by mosques to collect donations, especially after Friday prayers.
Our Group community service extends to supporting health initiatives, and the year saw Takaful Malaysia contribute RM40,000 towards Sayangi Jantung Anda, a medical outreach programme organised by the New Straits Times Press (Malaysia) Berhad, Media Prima Berhad and the National Heart Institute (IJN) in January and February. Under the programme, more than 5,000 residents in Muar, Batu Pahat, Air Hitam, Kodiang and Kota Siputeh were given basic medical and cardiology check-ups by IJN specialists, as early detection of heart disease leads to better treatment outcomes.
HELPING VICTIMS OF NATURAL DISASTERS In December, Bank Islam’s team mobilised basic necessities and cash to the victims of the annual floods. Under the Program Prihatin Bantuan Mangsa Banjir, we visited Kemaman, Trengganu; Kuantan, Pahang; and Segamat in Johor where we spent a total of RM25,000 on basic necessities and donated a further RM24,000 to help about 450 victims overcome the calamity and get their lives back on track.
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PROMOTING A HIGHER LEVEL OF EDUCATION BHB Group are keen advocates of education as an enabler of development, and we have always promoted the attainment of academic excellence. Through Bank Islam, we support the holistic development of underprivileged school children in rural and semi-urban areas via the Khazanah Nasionalinspired PINTAR school adoption programme. We currently have five schools under our PINTAR umbrella – SK Gombak Setia in Selangor, SK Sg. Jejawi and SK Sg. Ranggam in Perak; SK Pasir Puteh in Kelantan; and SK Kuala Kupang in Kedah. Throughout the year, we conducted various programmes to motivate the students at these schools to aspire for better scholastic performance, as well as to develop their leadership skills and religious knowledge. The programmes also focused on inspiring the teachers and equipping them with the latest methodologies, and motivating the parents to play more positive and influential roles in their children’s lives. Most of these programmes saw the participation of Bank Islam volunteers wh o a ct ive ly c o nt r i bu t e d t o t he successful outcomes. Through Takaful Malaysia, we contributed a total of RM80,000 to five schools for special children with hearing and visual impairment. The five schools were Sekolah Menengah Pendidikan Khas Vokasional, Shah Alam; Sekolah Kebangsaan Pendidikan Khas Kuala Trengganu, Trengganu; Sekolah Kebangsaan Pendidikan Khas Alor Setar, Kedah; Sekolah Kebangsaan
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Pendidikan Khas Johor Bahru, Johor and Sekolah Kebangsaan Pendidikan Khas Kuching, Sarawak. Apart from the financial contribution, we also donated computers, and Braille and sign language dictionaries.
sponsorship is part of our contribution to the ummah, and especially towards the blind in helping them to read and understand the Quran printed in Braille.
At the tertiary level, Bank Islam was a major sponsor of the Invention, Innovation, Design Expo 2013 at UiTM Shah Alam, Selangor; while Takaful Malaysia became the first company in Malaysia to create a yearly fund of RM50,000 for five years for diploma and undergraduate students of University Technology Mara`s (UiTM) Actuarial Programme.
In addition to the donations outlined above, Bank Islam and Takaful Malaysia assist the underprivileged and victims of natural or other crisis via contributions to charitable funds and to religious bodies. During the year, both subsidiaries channelled a total of RM10,412,936 in zakat towards this end.
SUPPORTING DEVELOPMENT
Within the Marketplace, we are conscious of our responsibility towards our key stakeholders, namely our shareholders and customers. We have in place various policy guidelines to ensure we maintain the highest level of professionalism and integrity in all our dealings with these stakeholder groups.
RELIGIOUS
BHB believes firmly in the principles of caring and sharing, and supports events that aim to increase awareness of the teachings of Islam in order to lead more meaningful, ethical and communityoriented lives. We also assist Malaysians who seek to perform the Haj and, together with our subsidiaries, we regularly contribute towards the Sahabat Korporat Tabung Haji, which provides financial aid to pilgrims. During the year, the Group donated a total of RM211,000 to the fund, in addition to donating useful items for the pilgrims such as 35,000 spray water bottles and pouches. In addition, we contributed to Muslim Professional Forum Berhad by sponsoring 10 blind Palestinian students from the School of Hope and Light to attend a Quran Memorization Camp at Dar Al Quran Al Karim Wa Sunnah in Gaza, Palestine. This meaningful
CHARITABLE DONATIONS
MARKETPLACE
Our key duty towards our customers is to continually offer quality products that meet their needs and demands and help them enhance their livelihood. This sense of responsibility drives our product development and is reflected in our growing suite of offerings. This year, for example, the mobile point-ofsale (mPOS) initiative launched by Bank Islam provides small businesses with a secure way to accept electronic payments, empowering them to grow their businesses. The product launch in a wet market in Kota Bharu, Kelantan, was symbolic of our intention to help entrepreneurs.
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CORPOR ATE RESPONSIBILITY (CONTINUED)
We are also committed to a high level of service delivery, and Takaful Malaysia constantly does the Group proud by excelling in this regard. Guided by its ‘We Protect, We Care, We Share’ tagline, the company has maintained an exemplary record in delivering its claims on time. As an example, following the deaths of four policemen during the intrusion in Lahad Datu, Sabah, Takaful Malaysia delivered their death claim benefit payment to the beneficiaries promptly, and added a token sum of RM5,000 to each family to help with their immediate expenses. We believe in the value of our services, hence take it upon ourselves to educate the young as to the benefits they can derive from us. This saw Bank Islam staff conduct a workshop with students of SK Oran in Kangar, Perlis in conjunction with Minggu Saham Amanah Malaysia to educate them on the importance of starting the saving habit early. Our primary duty towards our shareholders is to ensure the viability of the organisation, by strengthening our business fundamentals. Towards this end, Bank Islam has been successfully turned around over the last five years and is today a fast-growing and vibrant player with a keen focus on asset quality. In recognition of the bank’s spectacular improvement, Managing Director Dato’ Sri Zukri Samat was named Trailblazer of the Year 2013 by Banking and Payments Asia (BPA). The award was created to recognise outstanding financial institutions and individuals that have exhibited a high degree of innovation and enterprise in product development, service delivery or process improvement.
Capital adequacy is another key indicator of financial strength, and as of end December Takaful Malaysia was one of the few takaful operators in the country that met the requirements of the Risk-Based Capital (RBC) Framework, which is to be implemented in 2014. BHB also believes in promoting a higher level of professionalism and integrity in the financial industry in Malaysia and contributes regularly towards seminars and workshops that encourage knowledge-sharing as well as enhance local standards. In 2013, BHB Group contributed RM250,000 towards the 8th National Blue Ocean Strategy Programme, which aimed to instil a spirit of volunteerism and appreciation of the environment among one million youth nationwide. We also sponsored a table at a dinner talk on Corporate Accountability – the Blessings Within by Imam Afroz Ali, the Founder and President of Al-Ghazalli Center for Islamic Sciences and Human Development, based in Sydney, Australia. Our management and representatives of our subsidiaries benefitted from being reminded of the positive ramifications of maintaining high levels of corporate accountability. In support of the 1Malaysia Training Scheme (SL1M) undertaken by our parent company, Tabung Haji (TH), we provided funds for SL1M-TH participants in Sabah to carry out a community programme with orphans from Tambunan.
Bank Islam, meanwhile, has been building up its relationship with the media and organised various events involving journalists such as the Media Treasure Hunt to Cameron Highlands and Iftar with Berita Harian at Kg. Pasir Panjang Laut in Seri Manjung, Perak
WORKPLACE BHB acknowledges that the Group is only as good as its people, and we have in place human resources policies that reward our employees for outstanding performance, while encouraging them to enhance their skills and increase their productivity. In addition to building employees’ capabilities through structured and customised training and development programmes, we ensure our performance reviews are relevant to our business and drive the right behaviours. We have established a solid performance management strategy and automated key processes in order to provide the Company with a competitive advantage to achieve greater heights. Takaful Malaysia has gone one step further towards incentivising high performers and retaining talent, by becoming the first insurance-related company in the country to introduce the Long Term Incentive Plan (LTIP). Through the LTIP, it will offer up to 10% of its issued and paid-up share capital to eligible employees and executive director.
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ENVIRONMENT BHB is fully aware of the critical need to protect the environment given the urgency of climate change issues. While we try to maintain eco-friendly initiatives at work, such as recycling, we also actively contribute to external efforts to enhance the environment.
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On 28 April 2013, Bank Islam conducted an extensive Green Day programme at Pantai Puteri, in Melaka that included cleaning up the beach; educating local fishermen, primary school children and the general public on conservation; distributing reusable bags and absorbent papers to hawkers; and donating marine life books to nine schools. About 100 Bank Islam’s staff
took part in the programme which also involved 1,000 individuals from the local communities. A total of RM53,285 was spent on this initiative.
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2013 EVENT HIGHLIGHTS 5 JANUARY 2013
30 JANUARY 2013 Bank Islam donated 30 wheelchairs to Persatuan Bekas Polis Cawangan Ampang, Kuala Lumpur. The donation was handed over by Tuan Haji Bostamam Hassan, Bank Islam Central Region’s Head to En Attan Salleh, Chairman of the association.
Bank Islam held a special briefing for delegates from the Financial Access for Investing and Development of Afghanistan (FAIDA) Project at Menara Bank Islam, Kuala Lumpur.
10 JANUARY 2013
6 FEBRUARY 2013 BIMB Holdings Berhad and its group of companies contributed RM250,000.00 in support of the Ministry of Finance’s My Beautiful Malaysia Day programme, which saw one million youth nationwide gather in selected hot spots. The programme aims to instil a spirit of volunteerism while encouraging greater appreciation of the environment and promoting society’s well-being.
JANUARY AND FEBRUARY 2013 Takaful Malaysia established a RM50,000 yearly fund for the next five years for actuarial students at Universiti Teknologi Mara. The initiative will go a long way towards meeting the urgent demand for qualified actuaries in Malaysia.
Takaful Malaysia contributed RM40,000 to ‘Sayangi Jantung Anda’ – a medical outreach programme jointly organised by the New Straits Times Press (Malaysia), Media Prima and Institut Jantung Negara (IJN).
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FEBRUARY AND MARCH 2013
1 – 3 MARCH 2013
Takaful Malaysia contributed a total amount of RM80,000 to five special schools for hearing and visually impaired students in Shah Alam, Kuala Terengganu, Alor Setar, Johor Bahru and Kuching. Computers, Braille and sign language dictionaries were also donated.
23 FEBRUARY 2013 Six volunteers from Bank Islam spent two hours distributing food to the homeless at the Klang Bus Stop, as part of the Bank’s Corporate Responsibility programme.
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Five volunteers from Bank Islam facilitated in a SelfMotivation Camp for students from three schools under the PINTAR Programme: SMK Gombak Setia, SMK Jejawi and SMK Sungai Ranggam. The programme was held at Kem Bentong, Pahang.
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2013 EVENT HIGHLIGHTS (CONTINUED)
5 MARCH 2013 Bank Islam was named the Best Islamic Bank in Malaysia at the Islamic Finance News Awards 2012 ceremony at the Grand Hyatt, Kuala Lumpur.
14 MARCH 2013 The Al-Awfar Million Ringgit winner Puan Che Limah Binti Che Cob received a mock cheque from Managing Director of Bank Islam, Dato’ Sri Zukri Samat, at a prize presentation ceremony at Menara Bank Islam, Kuala Lumpur.
15 MARCH 2013 Managing Director of Bank Islam, Dato’ Sri Zukri Samat, was named the Trailblazer of the Year 2013 by Banking and Payments Asia (“BPA”) at an event in Singapore.
17 MARCH 2013 Bank Islam was once again the main sponsor for the Invention, Innovation, Design Expo 2013 held at UiTM Shah Alam, Selangor.
21 MARCH 2013 Bank Islam launched the Thanks A Million Visa Debit Card-i Campaign as a token of appreciation to its customers for having hit the one million visa debit card issuance.
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25 MARCH 2013 Takaful Malaysia delivered RM210,000 in death claim benefits to the beneficiaries of the four policemen who sacrificed their lives for the nation in Lahad Datu and Semporna. The company also gave each family RM5,000 to help pay for immediate expenses.
27 MARCH 2013 Bank Islam contributed to a Leadership Programme for students of one of its PINTAR schools, SMK Sg. Jejawi in Teluk Intan, Perak.
21 APRIL 2013 En Mazlan Moin, Corporate Responsibility Manager of Bank Islam and En Mohd Yusri Saidin, Bank Islam’s Kangar Branch Manager spent a day with students of SMK Oran in Kangar, Perlis to educate them about the importance of saving from young and maintaining good relationships within the school environment.
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28 APRIL 2013 Bank Islam organised a Green Day at Pantai Tanjung Kling, Melaka in support of the Government’s Cleanliness Campaign as well as to celebrate Earth Day.
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2013 EVENT HIGHLIGHTS (CONTINUED)
21 MAY 2013 Bank Islam in partnership with the Football Association Malaysia (FAM) launched the Bank Islam Visa Debit Card-i Team Harimau, which was unveiled by the Crown Prince Of Pahang.
1 JUNE 2013 A Leadership Camp under the PINTAR Programme was held at three schools, namely SMK Pasir Puteh Kelantan, SMK Sungai Jejawi, Perak and SMK Sungai Ranggam, Perak.
15-16 JUNE 2013 31 MAY – 2 JUN 2013 A second Self-Motivation Camp under the PINTAR Programme was held at the 25th Batallion of Rejimen Askar Melayu DiRaja in Bentong, Pahang for three other schools: SMK Gombak Setia, SMK Pasir Puteh (Lelaki) Kelantan and SMK Kuala Kupang, Kedah.
Bank Islam organised a Media Treasure Hunt to the Orang Asli Settlement in Kg. Leryar, Cameron Highlands. Thirty-six cars from media houses and 30 Bank staff took part in the event.
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24 JUNE 2013 Bank Islam welcomed a delegation from the International Centre for Development in Islamic Finance - Indonesian Banking Development Institute (ICDIF-LPPI) Jakarta, Indonesia at Menara Bank Islam, Kuala Lumpur.
29 JUNE 2013 Bank Islam organised a bubur lambuk cook-out at Menara Kuala Lumpur to share in the spirit of Ramadan with 80 orphans from Pertubuhan Anak-Anak Yatim/Miskin Klang (PENYAKIN) and Asrama Darul Falah (ASDAF).
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7 JULY 2013 Bank Islam Klang Branch organised a clean-up of the Positive Shelter Home (POSHe) for HIV patients in Kg. Kerayong, Klang, Selangor.
9 JULY 2013 Bank Islam launched its Platinum Visa Credit Card-i and TruRewards Loyalty Programme at Menara Bank Islam, Kuala Lumpur.
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2013 EVENT HIGHLIGHTS (CONTINUED)
15 JULY 2013 Bank Islam received a Special Recognition Award for Payments Innovation from Wells Fargo Bank, for innovative use of Wells Fargo’s web-based payment system, Cyberpay.
23 JULY 2013 Takaful Malaysia contributed RM100,000 to the Pertubuhan Al-Khadeem. The Senior Management team and 50 employees from the head office also gave ‘duit raya’ to all the children in Al-Khadeem.
JULY 2013
26 JULY 2013
Bank Islam organised a Ceria Ramadan programme by hosting seven Iftar sessions with the underprivileged at various locations nationwide. At the events, Bank Islam also presented business tithes to those eligible.
Ustaz Mohd Nazri Chik, Head of Shariah, Bank Islam, officially handed over the newly built Surau Al-Hidayah to the Chairman of JKKK Kg. Salong; and the renovated Surau An Nusrah to the Chairman of JKKK Surau An Nusrah.
5 JULY 2013 BIMB Holdings contributed to a community outreach initiative with orphans in Tambunan organised by participants of Tabung Haji Sabah’s Skim Latihan 1 Malaysia (SL1M) Programme.
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28 JULY 2013
29 JULY 2013
Ustaz Mohd Nazri Chik, Head of Shariah Bank Islam, officially handed over the renovated Masjid Al-Wasilah to Datuk Bung Mokhtar Radin, MP for Kinabatangan.
Takaful Malaysia took 50 orphans from Rumah Amal Nur El-Amin on a Raya shopping spree at AEON Bandar Utama, Petaling Jaya. The children were joined by more than 50 staff and Management.
JULY 2013
1 AUGUST 2013
In conjunction with Ramadan, the Retail Agency Division of Takaful Malaysia took the opportunity to help the less fortunate via various events organised in the East Coast, Northern, Southern as well as Central Regions.
BIMB Holdings, Bank Islam Malaysia Berhad and Syarikat Takaful Malaysia Berhad were invited to a special event organised by Lembaga Tabung Haji to recognise companies that contributed to the Sahabat Korporat Tabung Haji.
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2013 EVENT HIGHLIGHTS (CONTINUED)
2 AUGUST 2013 BIMB Holdings, via its wholly-owned subsidiary, Syarikat Al-Ijarah made a contribution to 10 blind Palestinian students at the School of Light and Hope in Gaza, Palestine through the Muslim Professionals Forum Berhad, a NGO that collaborates with Viva Palestina Malaysia and Braille Association of Malaysia. Encik Johan bin Abdullah, GMD/CEO of BIMB Holdings Berhad presented the cheque to Puan Azra Banu of Muslim Professional Forum Berhad.
12 SEPTEMBER 2013 The Management of BIMB Holdings and representatives of its subsidiaries attended a Dinner Talk on Corporate Accountability – The Blessings Within at the Sime Darby Convention Centre.
13 SEPTEMBER 2013 Bank Islam celebrated the opening of its 131st branch at the Departure Hall of the KL City Air Terminal, KL Sentral Station, Kuala Lumpur.
23 AUGUST 2013 Datuk Zamani Abdul Ghani, Chairman of Bank Islam, launched Tabung Masjid Bank Islam to standardise all mobile Tabung Masjid which are used to collect donations, especially before and after Friday prayers.
30 SEPTEMBER 2013 Delegates from the Bank of Muscat, Oman visited Bank Islam at Menara Bank Islam, Kuala Lumpur.
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15-16 OCTOBER 2013 Bank Islam organised a Program Ibadah Korban across five regions in Malaysia with the objective of fostering better ties with its customers.
7 NOVEMBER 2013 Bank Islam co-sponsored the UUM Pencipta ‘13 – the International Conference and Exposition on Invention of Institutions of Higher Learning at the KL Convention Centre, Kuala Lumpur.
21 OCTOBER 2013 Bank Islam organised a Corporate Luncheon Talk at the Hilton Kuala Lumpur on Five Denials of the Human Brain in conjunction with its 30th anniversary.
11 NOVEMBER 2013
22 OCTOBER 2013 Bank Islam was the Lead Partner at the IFN 2013 - Issuers & Investors Asia Forum held at the Kuala Lumpur Convention Centre.
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Bank Islam participated in the Islamic Financial Intelligence Summit 2013 at Sasana Kijang, Bank Negara Malaysia and received an award for The Best Islamic Bank 2013 by The Banker.
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2013 EVENT HIGHLIGHTS (CONTINUED)
23 NOVEMBER 2013
6 DECEMBER 2013
Encik Mizan Masram, AGM of Recovery & Rehabilitation, together with 60 volunteers represented Bank Islam at a Corporate Responsibility event held at Rumah Kasih Harmoni, Paya Jaras, Selangor.
Bank Islam provided RM12,000 and aid in kind at a flood relief effort in Kuantan, Pahang which benefitted 200 victims.
6 DECEMBER 2013 Bank Islam celebrated the opening of its 132nd branch in Senawang, Negeri Sembilan.
26 NOVEMBER 2013 Bank Islam’s Managing Director was named Islamic Banker of the Year 2013 at the Global Islamic Finance Awards 2013 (GIFA) ceremony in Dubai, United Arab Emirates.
7 DECEMBER 2013 Bank Islam provided RM12,000 and physical aid at a flood relief initiative in Kemaman, Trengganu benefitting 200 flood victims.
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13 DECEMBER 2013 Bank Islam opened its 133rd branch in Sungai Petani.
19 DECEMBER 2013 BIMB Holdings completed its acquisition of Bank Islam, which is now a wholly-owned subsidiary.
17 DECEMBER 2013 Bank Islam organised a flood relief programme in Segamat, Johor where it provided essentials to 50 flood victims.
17 DECEMBER 2013 Bank Islam was selected as a Strategic Partner for the Sistem Perakaunan Luar Negeri (SPLN) with Jabatan Akauntan Negara Malaysia and the Foreign Ministry, specifically for the use of the Bank’s eBanker online payment.
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22 DECEMBER 2013 Forty-four volunteers represented Bank Islam at a Corporate Responsibility Programme at Rumah Perlindungan Nur Qaseh, Taman Melawati, Kuala Lumpur at which RM3,035 donated by staff was presented to the home.
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STATEMENT OF CORPOR ATE GOVERNANCE
(Pursuant to Paragraph 15.25 of the Listing Requirements of Bursa Malaysia Securities Berhad)
The Board of Directors of BIMB Holdings Berhad (“BHB” or “the Company”) is committed in upholding the highest standards of corporate governance and practices to enhance stakeholders’ value and building consumer trust in line with BHB Group’s positioning as a premier Islamic financial services provider. This includes the practice of Islamic Principles for the benefit of society. The Board is also committed to achieve the highest standards of business integrity, ethics and professionalism across the BHB Group. In order to achieve the said objectives, BHB Group adheres to the guidelines on corporate governance best practices as well as the following requirements: i) Bank Negara Malaysia’s (“BNM”) Guidelines on Corporate Governance for Licensed Institutions (BNM GP1-i); ii) Bursa Malaysia Securities Berhad’s (“Bursa Securities”) Main Market Listing Requirements (“Listing Requirements”); iii) t h e M a l a y s i a n C o d e o n C o r p o r a t e Governance 2012 (“the MCCG 2012”); iv) Green Book on Enhancing Board Effectiveness (“Green Book”) by the Putrajaya Committee on Government Linked Company High Performance; and v) Corporate Governance Guide (“CG Guide”) by Bursa Securities.
Based on the above, the Board is pleased to present the following report on the application of the principles and best practices as follows:
1. BOARD OF DIRECTORS 1.1 BOARD CHARTER The Board of Directors (“the Board”) of BHB is constantly mindful of the need to protect the interest of its shareholders and other stakeholders. In discharging its duties effectively, the Board is guided by its Terms of Reference (“TOR”), a document which specifies amongst others the Board’s role, powers, duties and functions. The TOR reflects, amongst others, applicable rules and regulations, processes and procedures to ensure the effectiveness and efficiency of the Board and its committees. It is a dynamic document that is reviewed and updated from time to time to reflects, amongst others, relevant changes to policies, procedures and processes as well as amendments to rules and regulations.
1.2 ROLES AND RESPONSIBILITY OF THE BOARD The Board has the responsibility to periodically review and approve the overall strategies, business and pertinent policies of the Company. There are specific matters that are reserved for the Board’s deliberation and approval. These include amongst others: • Reviewing and approving all strategic and policy matters including the business plan and pertinent operating policies and monitoring the management performance based on Key Performance Indicators; • Monitoring and reviewing the overall performance of the Company and BHB Group against the targets and objectives; • Overseeing the conduct of the Company’s business to evaluate whether the business is being properly managed;
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• Reviewing the risk management practices within BHB Group and the Company to ensure there are adequate internal controls and infrastructure and to identify and manage principal risks and ensuring the implementation of appropriate systems to manage these risks; • Reviewing and approving succession plan, including appointing, training, fixing the compensation of and where appropriate replacement of senior management; • Approving policies pertaining to staff salary and benefits; • Approving the appointment of Directors and Directors’ emoluments and benefits; • Approving investor relations programme or shareholder communication policy for the Company; • Reviewing the adequacy and integrity of the Company’s internal control systems and infrastructure and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines; • Approving transactions in accordance with the authority limit and to ensure that the business operations of the Company are conducted in accordance with the Shariah principles; and • Reviewing relevant reports or proposals to ensure the operations of the Company are in compliance with the securities laws, the Companies Act 1965, Bursa Securities Listing Requirements and the Articles of Association of the Company and any regulations and guidelines under the relevant laws. The Management of the Company is headed by the Group Managing Director/Chief Executive Officer (“GMD/CEO”). He is accountable to the Board in ensuring the Company is operating effectively.
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1.3 BOARD COMPOSITION AND BALANCE The Board of BHB currently consists of nine (9) members, with one (1) Executive Director and eight (8) Non-Executive Directors. Out of the eight (8) Non-Executive Directors, three (3) are Independent Non-Executive Directors. The five (5) Non-Independent Non-Executive Directors consist of four (4) nominees of Lembaga Tabung Haji (“TH”) (including the Chairman) and one (1) nominee of Permodalan Nasional Berhad (“PNB”). The current composition of the Board complies with Paragraph 15.02(1) of Bursa Securities Listing Requirements and BNM/GP1-i as one-third (1/3) of its members are Independent Non-Executive Directors. Recommendation 3.5 of MCCG 2012 states that, where the Chairman of the Board is not an independent director, then the majority of the directors must be independent. However, the Board strongly believes that the present Chairman has the ability and capability to ensure proper check and balance to facilitate the Board proceedings and decision making. It is also pertinent to note that there is a separation of authority between the Chairman and the GMD/CEO. Their duties and responsibilities are distinct and separate and this facilitates check and balance in the operations of the Company. Within the Board there is diversity and a wealth of knowledge, experience and skills in the field of accountancy, banking, regulation, international business operations and development, finance and risk management. A brief profile of each member of the Board are presented on pages 014 to 019 of this Annual Report. The selection of Directors is based on merit, guided by Fit and Proper Criteria for Key Responsible Person Policy (“KRP Policy”) for Appointment of Chairman, Directors and GMD/CEO based on the assessment by the Nomination and Assessment Committee (“NAC”).
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STATEMENT OF CORPOR ATE GOVERNANCE (CONTINUED) (Pursuant to Paragraph 15.25 of the Listing Requirements of Bursa Malaysia Securities Berhad)
The Board has taken note of recommendation 2.2 of MCCG 2012 on its approach to gender diversity and the number of female directors, in line with the announcement by the Government. BHB has three (3) female directors on its Board, representing 33% of its board composition.
whether an independent director can continue to bring independence and objective judgment to board deliberations. For the year under review, the Board has approved and adopted a set of criteria for the purpose of conducting an assessment of independence of its Independent Directors.
The Board also took note of the expectation on time commitment to carry out their responsibilities outlined in Recommendation 4.1 of MCCG 2012. In this respect, members of the Board will notify the Chairman prior to their acceptance of any new directorship outside the Group. With effect from 1 June 2013, pursuant to Paragraph 15.06 of Bursa Securities Listing Requirements, a director must not hold more than 5 directorships in listed companies.
In view of the above, the Board had agreed that all INED are to declare their independence as INED of BHB on a monthly basis and the results were tabled to the Board on quarterly basis.
1.4 INDEPENDENT NON-EXECUTIVE DIRECTORS (“INED”) The proportion of INED within the current Board composition would facilitate the Board to ensure and provide effective and independent oversight over Management. The composition also reflects the interest of the Company’s majority shareholder which is adequately represented by the appointment of its nominee directors whilst balancing the interest of the minority shareholders. The INED do not participate in the day-to-day management of the Company and do not engage in any business dealing or other relationship with the Company (other than in situations permitted by the applicable rules and regulations) in order to ensure that they are in a position to exercise independent judgment. Pursuant to Recommendation 3.1 of the MCCG 2012, the Board is required to undertake an annual assessment on the independence of its INED. In its assessment, the Board focuses amongst others on economic and family relationships, beyond the independent director’s background and considers
Pursuant to Recommendation 3.2 of the MCCG 2012 (on the tenure of an Independent Director which should not exceed a cumulative term of nine (9) years), one of BHB’s Independent Directors (Encik Zahari @ Md Zin bin Idris) has reached a cumulative term of nine (9) years. In this regard, the Board is of the view that the said independent director’s presence and contribution is pertinent considering his wealth of experience. He also actively participates and provides invaluable independent views to the Board and Board Committees particularly on the quarterly financial reports, audited financial statements and other operational aspects of the Group. His vast experience of thirty four (34) years in banking would enable BHB to tap on his expertise for the development of BHB and its subsidiaries. In addition, he had also complied with the attendance requirements for Board and Board Committees meetings under Bursa Securities Listing Requirements. This testifies his commitment and dedication in discharging his responsibilities as an independent director. The shareholders of the Company at the 16th Annual General Meeting held on 15 May 2013 had also approved the retention of the above Independent Director who has exceeded the cumulative term of nine (9) years pursuant to recommendation 3.3 of MCCG 2012.
www.bimbholdings.com
059
BIMB HOLDINGS BERHAD
Annual Report 2013
As provided in the Notice of the upcoming 17th AGM dated 23 April 2014, the Board is proposing to seek shareholders’ approval to retain the said Independent Director of the Company. In line with paragraph 2.27 of BNM/GP1-i, none of the BHB’s INED has more than 5% equity interest in the licensed institution or in its related companies, or is connected to a substantial shareholder of the licensed institution. The Board also ensures that all INED have the following attributes:• The ability to challenge the assumption, beliefs or viewpoint of others with objective questioning, constructive and rigorous challenging in the interest of the Company; • Willingness to stand up and defend his/her own views, beliefs and opinions for the ultimate good of the Company; and • A good understanding of the Company’s business activities in order to appropriately provide responses on the various strategic and technical issues put forth and deliberated by the Board. The Board is of the view that all three (3) INEDs of the Company comply with the above requirements.
1.5 S E N I O R I N D E P E N D E N T N O N - E X E C U T I V E DIRECTOR In accordance with the best practices on corporate governance, Tan Sri Ismail bin Adam continues to play his role as the Senior Independent Director (“SID”) of the Board to whom concerns of shareholders and other stakeholders can be conveyed to. Tan Sri Ismail can be reached at ismailadam@ bimbholdings.com
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1.6 BOARD APPOINTMENT PROCESS Appointment of a new director is set out in a formal and transparent process, whereby the primary responsibility is delegated to the NAC. The procedure is in line with the Company’s KRP Policy (which has been implemented since August 2011) and BNM/GP1-i. Under the said procedure, the NAC recommends to the Board, suitable candidate(s) for directorship and appointment of key personnel of the Company. NAC is also responsible to ensure candidates satisfy the requisite skills and the core competencies to be deemed as fit and proper, in accordance with the KRP Policy of the Company, Bursa Securities Listing Requirements and the Corporate Governance Blueprint 2011 issued by Securities Commission. The KRP Policy, outlines the attributes/qualifications required for a candidate in order to determine his/ her suitability, which include amongst others, his/ her skill-set and leadership. In addition, the KRP Policy also takes into consideration the candidate’s overall experience in areas such as banking, insurance/takaful, finance/accounting, risk management etc. The Board, with the assistance of the NAC, also considers the following criterion in the selection process:a) Probity, personal integrity and reputation – the person must have key qualities such as integrity, diligence, independence of mind and fairness; b) Competence and capability – the person must have the necessary skills, ability and commitment to carry out the role; and c) Financial integrity – the person must manage his/her debts or financial affairs prudently.
060
BIMB HOLDINGS BERHAD
Annual Report 2013
STATEMENT OF CORPOR ATE GOVERNANCE (CONTINUED) (Pursuant to Paragraph 15.25 of the Listing Requirements of Bursa Malaysia Securities Berhad)
The process flow for the appointment of new directors is as follows:-
Identification of candidates
Evaluation of suitability of candidates
Meeting with candidates
Deliberation by NAC
Recommendation to Board
Thereafter, the application for the appointment of such candidate would be submitted to BNM for approval pursuant to BNM/GP1-i.
1.7 B O A R D A N D EFFECTIVENESS
INDIVIDUAL
DIRECTOR’S
Annually, the NAC undertakes a formal and transparent process, to assess the effectiveness of individual Directors and the Board as a whole. This is conducted through a Board evaluation process which consists of Board and Peer Annual Assessment (“Board Evaluation”). The Board Evaluation process is a detailed set of questionnaires which covers amongst others, the responsibilities of the Board in relation to strategic planning, risk management, performance management, financial reporting, communication and corporate governance. The Board composition and size, the contribution of each and every member of the Board at meetings, the Board’s decision-making and output, information and support rendered to the Board as well as meeting arrangements were also incorporated in the questionnaires. Upon completion of the assessments, the results are tabulated and reviewed by the NAC for endorsement prior to deliberation by the Board. The Chairman, on need basis would then engage and discuss with individual members on peer assessment results.
1.8 ROLES AND RESPONSIBILITIES OF THE CHAIRMAN AND THE GMD/CEO The roles and responsibilities of the Chairman and the GMD/CEO are distinct and separate, in accordance with the relevant best practice. This is to ensure appropriate supervision of the Management, with a clear hierarchical structure. This distinction allows for a better understanding and distribution of jurisdictional responsibilities and accountabilities. This clear structure and focused approach facilitates efficiency and expedites informed decision-making.
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061
BIMB HOLDINGS BERHAD
Annual Report 2013
1.8.1 CHAIRMAN The Chairman provides leadership to the Board. His main duties and responsibilities are to steer the Board to achieve its objectives. In order to ensure that relevant issues are discussed, the Chairman will lead the agenda for Board meetings and would request for views and inputs from other directors. Timely dissemination of pertinent information and analysis are part of the Board meeting process where the Chairman shall encourage a healthy level of deliberation. This is to ensure that the Board discharges its responsibilities and that all directors participate in the discussion. The Chairman also ensures that consensus is reached at Board meetings. Where deemed necessary, the Chairman shall call for a vote such that a decision will be reached by a simple majority. In the event a consensus cannot be obtained, the Chairman may elect to defer the agenda, with further analysis conducted on the subject matter, to the next meeting. 1.8.2 GMD/CEO The GMD/CEO is responsible for the dayto-day operations of BHB and is accountable to the Board. He leads the BHB’s Management team and is also responsible for regulatory compliance. In managing the business affairs, the GMD/CEO is assisted by a Management Committee, which meets on a monthly basis. The GMD/CEO is also responsible for the implementation of the Board’s policies and decisions.
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1.9 COMPANY SECRETARY The Company Secretary is responsible for advising the Board on issues relating to the relevant laws, rules, procedures and regulations affecting the Board, as well as best governance practices. She is also responsible for advising the directors of their obligations and duties, disclosure of their interest in securities, disclosure of any conflict of interest in a transaction involving the Company, prohibition on dealing in securities and restrictions on disclosure of price-sensitive information. All directors have direct and unlimited access to the advice and services of the Company Secretary.
1.10 DIRECTORS’ RETIREMENT AND RE-ELECTION In accordance with the Company’s Articles of Association, one-third (1/3) of the Directors shall retire from office at each Annual General Meeting (“AGM”) and are eligible for re-election. Directors who are appointed by the Board in each financial year are subject to re-election by the shareholders at the next AGM following their appointments. Details of directors who are due for re-election at the forthcoming AGM are disclosed on page 016 to 018 of the Annual Report.
062
BIMB HOLDINGS BERHAD
Annual Report 2013
STATEMENT OF CORPOR ATE GOVERNANCE (CONTINUED) (Pursuant to Paragraph 15.25 of the Listing Requirements of Bursa Malaysia Securities Berhad)
1.11 BOARD MEETINGS Board meetings are scheduled in advance at the beginning of a new calendar year to enable directors to plan ahead and fit the year’s meeting into their own schedules. The Board meets on a scheduled basis every quarter of the year. When the need arises, Special Board meetings are also convened. The Board continues to proactively engage with senior management or external advisors to advise the Board and to furnish the Directors with information and clarification needed on relevant matters to ensure that the various concerns and issues relevant to the operations of the Company are duly addressed. All Board members have complied with Bursa Securities Listing Requirements on attendance for Board meetings held during the year under review. During the financial year ended 31 December 2013, the Company had eleven (11) Board meetings and the directors’ attendance are as follows:-
Directors
No. of Meetings *Held
Attended
%
Tan Sri Samsudin bin Osman Chairman/Non-Independent Non-Executive Director
11
10
90.91
Tan Sri Ismail bin Adam Senior Independent Non-Executive Director
11
9
81.82
Dato’ Paduka Ismee bin Ismail Non-Independent Non-Executive Director
11
10
90.91
Zahari @ Mohd Zin bin Idris Independent Non-Executive Director
11
11
100
Datuk Zaiton binti Mohd Hassan Independent Non-Executive Director
11
10
90.91
Salih Amaran bin Jamiaan Non-Independent Non-Executive Director
11
11
100
Datuk Rozaida binti Omar Non-Independent Non-Executive Director
11
8
72.73
Johan bin Abdullah Group Managing Director/Chief Executive Officer
11
11
100
0
N/A***
N/A***
Rifina binti Md Ariff** Non-Independent Non-Executive Director
* Reflects the number of meetings held during the time the Director held office. ** Appointed as Director of BHB with effect from 1 April 2014 *** Not applicable
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063
BIMB HOLDINGS BERHAD
Annual Report 2013
1.12 ACCESS TO INFORMATION
1.13 NUMBER OF DIRECTORSHIPS
The Board of Directors have full and unrestricted access to all information pertaining to BHB’s affairs including inter alia, financial results, annual budgets, business reviews against business plans and progress reports on BHB’s corporate developments to enable them to discharge their duties effectively.
In accordance with BNM/GP1-i, Directors must not hold more than ten (10) directorships in listed companies and not more than 15 directorships in non listed companies. Bursa Securities Listing Requirements would require that a Director of a listed issuer must not hold more than five (5) directorships in listed issuers.
The schedules of Board Meetings would be circulated in advance to the Board members. The Agenda and Board meeting papers are disseminated to the Directors at least 5 days prior to the Board meeting to allow sufficient time for the Directors to study and review on the issues and, where necessary, to obtain further information and explanations to facilitate an informed decision making. During the Board meeting, the directors will deliberate the business as per the agenda at length prior to making their conclusions and decision.
At present, all directors of BHB have complied with the best practice recommendation of the Green Book which states that directors should not sit on the board of more than five (5) listed companies. This is to ensure that their commitment, resources and time are focused to enable them to discharge their duties more effectively.
Senior Management and external advisers may be invited to attend the Board meetings when necessary, to furnish the Board with explanations on the relevant agenda items tabled at the Board meetings or to provide clarification on issue(s) that may be raised by any director(s). The deliberation and resolution passed by the Board will be properly recorded and subsequently the minutes of the meeting will be confirmed at the next scheduled Board Meeting. The Board is also regularly updated from time to time by the Company Secretary and/or management on updates to the regulations and guidelines, as well as any amendments thereto issued by Bank Negara Malaysia, Bursa Securities, Securities Commission, Companies Commission of Malaysia and other relevant regulatory authorities. All directors have direct and unlimited access to the advice and services of Senior Management and may seek independent professional advice at the Company’s expenses, if required, in furtherance of their duties.
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Pursuant to the MCCG 2012 Recommendation 4.1, the Board had on 27 November 2012 agreed that all directors will be required to set out their expectations on time commitment before accepting a new directorship.
1.14 DIRECTORS’ TRAINING The Board recognises the value of enhancing the skills and knowledge of its members on relevant new laws and regulations and changing business environment and risk profile, as well as aspects on the latest development and key challenges in the financial sector. The Board is mindful of the need for continuous training to keep abreast of new developments and is encouraged to attend forums and seminars facilitated by external professionals in accordance with their respective needs in discharging their duties as directors. The Board will continue to evaluate and determine the training needs of its directors to enhance their skills and knowledge.
064
BIMB HOLDINGS BERHAD
Annual Report 2013
STATEMENT OF CORPOR ATE GOVERNANCE (CONTINUED) (Pursuant to Paragraph 15.25 of the Listing Requirements of Bursa Malaysia Securities Berhad)
The Company provides a dedicated training budget for director’s continuing education. Relevant training programmes are arranged by the Company for the directors and members of the Board Committees. The directors may also request to attend additional training courses according to their specific requirements as a director or member of the Board Committees. The key areas of focus for training programmes attended by the directors for the financial year ended 31 December 2013 are as follows:i) B o a r d L e a d e r s h i p a n d M a n a g e m e n t Effectivenes:– FIDE CORE Programme 2013 – FIDE Elective Program: The Nomination and Remuneration Committee – Securities Commission: Invitation for an Industry Briefing on Unlisted Market – ACCA-KPMG-TARC BEST Leadership Development Programme Finale – FIDE FORUM: Dialogue on FSA and IFSA – FIDE FORUM’s Exclusive Invite: “Managing Talent at Board and Management” ii)
Corporate Governance and Risk Management:– PNB Investment Institute: Risk Management Forum – Embracing Risk for Long-Term Corporate Success_ Boosting Your Risk Governance – Bursa Malaysia: Advocacy Session on Corporate Disclosure for Directors – Securities Commission: International Corporate Governance Seminar 2013
iii) Accounting, Finance and Capital Markets:– ACCA President’s Lecture: Change of Global Economy and the Future of Accounting – Advancement in Business Training (IABT), Swap Master Class: Pricing-TradingHedging & Accounting Issues – Institut Bank-Bank Malaysia (IBBM): Forum (Swap, Options, Warrants & Structured products)
iv) Others:– MSWG: Special Dialogue & Presentation Session on Asean CG Scorecard 2013 – Public Lecture: Market Power and institutions – The State of Competitiveness in Malaysia’s Services Sector by Prof Dr Rajah Rasiah by UM – L e m b a g a T a b u n g H a j i : T a k l i m a t Pemerkasaan Agenda Bumiputera – MOODYS Forum. Five Key Credit Issues in Asian Ratings All directors have attended the Mandatory Accreditation Programme as required by Bursa Securities.
1.15 CONFLICT OF INTEREST In accordance with statutory requirements on the disclosure of director’s interest, members of the Board would declare their interests, including whether such interest arises through close family members to relevant regulators, and will be subsequently noted at Board meetings. Interested Director(s) would abstain from voting and not participate in any deliberations and decisions of the Board, and where appropriate, excused themselves from the meeting.
1.16 DIRECTORS TRADING DURING CLOSED PERIOD Directors and principal officers of BHB are prohibited from trading in any affected securities based on price sensitive information and/or knowledge which have not been publicly announced in accordance with Bursa Securities Listing Requirements and the relevant provisions of the Capital Markets & Services Act 2007. Notices on the closed period for trading in BHB and/or any affected securities are circulated to directors and principal officers who are deemed to be privy to any price sensitive information in advance of the closed period, wherever applicable.
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065
BIMB HOLDINGS BERHAD
Annual Report 2013
2. DIRECTORS’ REMUNERATION The Remuneration Committee (“RC”) of BHB comprised solely of Non-Executive Directors. Amongst its duties is to recommend to the Board the remuneration package for the Executive Director. The remuneration package for Executive Director is structured on the basis of linking rewards to financial and individual performance. Performance is measured against the Key Performance Indicators as approved by the Board. It is the ultimate responsibility of the Board to approve the remuneration of the Executive Director. In the case of Non-Executive Directors, the remuneration package is determined by the Board as a whole, based on the experience and level of expertise and responsibilities undertaken by the Non-Executive Directors.
2.1 REMUNERATION PACKAGE POLICY The policy on remuneration package of directors is as follows:Executive Director (a) Basic Salary The basic salary for Executive Director is recommended by the Remuneration Committee to the Board, taking into account the responsibility, contribution and performance of the Executive Director, as well as the marketrate for similar positions in comparable companies.
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(b) Bonus Scheme The Group adopted a bonus scheme for all employees, including the Executive Director. The criteria for the scheme would include the overall level of financial achievements by the Group against the target, together with other qualitative assessment of individual’s performance during the period. The bonus payable to the Executive Director is reviewed and recommended by the Remuneration Committee and thereafter approved by the Board. There is no bonus scheme provided to Non-Executive Directors. Non-Executive Director (c) Fees and Other Emoluments Non-Executive Directors are remunerated by way of monthly fee, sitting allowance and other emoluments. Fees payable to NonExecutive Directors are subject to shareholders’ approval at the Annual General Meeting. (d) Benefits-In-Kind Other benefits (such as Directors & Officers’ Liability insurance and travelling allowance) are made available as appropriate. Remuneration of the Directors in office during the financial year is disclosed in the BHB’s Financial Statements section Note 31(a) of the Annual Report.
066
BIMB HOLDINGS BERHAD
Annual Report 2013
STATEMENT OF CORPOR ATE GOVERNANCE (CONTINUED) (Pursuant to Paragraph 15.25 of the Listing Requirements of Bursa Malaysia Securities Berhad)
A summary of the aggregate remuneration of the directors, distinguishing between Executive and Non-Executive Directors for the financial year ended 31 December 2013 are as follows:Group
Company
1.1.2013 to 31.12.2013 RM’000
1.1.2012 to 31.12.2012 RM’000
1.1.2013 to 31.12.2013 RM’000
1.1.2012 to 31.12.2012 RM’000
284 1907 77
231 1,749 115
– 1,907 54
– 1,749 76
2,268
2,095
1,961
1,825
Non-Executive Directors: Fees and allowances Benefit-in-Kind
2,065 346
1,826 227
957 154
771 84
Total
4,679
4,148
3,072
2,680
Total (excluding benefits-in-kind)
4,256
3,806
2,864
2,520
367
330
–
–
Executive Director: Fees and allowances Salaries, bonuses and EPF contributions Benefit-in-kind
Shariah Supervisory Council
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067
BIMB HOLDINGS BERHAD
Annual Report 2013
The number of Directors whose remuneration are paid/payable for their services, fall within the following bands: Group 1.1.2013 to 31.12.2013
1.1.2012 to 31.12.2012
Executive Director RM2,000,001 and RM2,500,000
1
1
Non-Executive Directors Below RM50,000 RM 50,001 and RM100,000 RM100,001 and RM150,000 RM150,001 and RM200,000 RM200,001 and RM250,001 RM300,001 and RM350,000 RM350,001 and RM400,000 RM400,001 and RM450,000 RM450,001 and RM500,000 RM500,001 and RM550,000 RM550,001 and RM600,000
– – – 3 – 1 – – 1 1 1
1 2 – 1 1 – – 1 1 – 1
Total
8
9
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068
BIMB HOLDINGS BERHAD
Annual Report 2013
STATEMENT OF CORPOR ATE GOVERNANCE (CONTINUED) (Pursuant to Paragraph 15.25 of the Listing Requirements of Bursa Malaysia Securities Berhad)
3. BOARD COMMITTEES To assist the Board in discharging its duties and responsibilities, the Board delegates certain responsibilities to the following Board Committees, which operate within clearly defined terms of reference, primarily to assist the Board in the execution of its duties and responsibilities. Although the Board has delegated its authority to these Board Committees to deliberate and decide on certain key and operational matters, the ultimate responsibility for final decision on all matters lies with the entire Board.
Board of Directors
Audit and Examination Committee
Nomination and Assessment Committee
Remuneration Committee
3.1 NOMINATION AND ASSESSMENT COMMITTEE (“NAC” or “Committee”) The Committee comprises Non-Executive Directors, majority of whom are independent. Meetings are held every quarter and as and when necessary for the Committee to deliberate on relevant matters. Details of committee members attendance are as follows:Committee Member
Attendance
%
Datuk Zaiton binti Mohd Hassan (Chairman) Independent Non-Executive Director
4/4
100
Encik Zahari @ Mohd Zin bin Idris Independent Non-Executive Director
4/4
100
Dato’ Paduka Ismee bin Ismail Non-Independent Non-Executive Director
4/4
100
The Committee is responsible to assess and recommend to the Board, candidates for directorships and/or executive directors to be appointed in the Company and its key subsidiaries. The other responsibilities of the Committee are as follow:• Assessing the overall competency requirements for the Board and the performance of the GMD/CEO; • Overseeing the overall composition of the Board to ensure amongst others, whether it has the appropriate size, mix of skills and gender diversity; • Recommending and assessing the overall suitability of directors as well as the nominees for the GMD/CEO’s position to the Board prior to submission of such application to Bank Negara Malaysia for approval; • Establishing a formal mechanism to assess the effectiveness of the Board as a whole, contribution by each respective director to the effectiveness of the Board/Board’s committees as well as the independence of independent non-executive directors; www.bimbholdings.com
069
BIMB HOLDINGS BERHAD
Annual Report 2013
• Ensuring all directors receive appropriate continuous training; • Overseeing the appointment, management succession planning and performance evaluation of Directors and Key Senior Management; and • Ensuring that the Board has the right balance between executive directors, non-independent non-executive directors and independent nonexecutive directors and the core competencies required throughout the annual review. The Company has also conducted the annual assessment on the performance of the Board as a whole as well as on the effectiveness of all individual directors.
The Committee had also complied with recommendation 2.1 of the MCCG 2012, where the NAC should comprise exclusively of Non Executive Directors, a majority of whom must be independent. In relation to the chair of the NAC having to be the Senior Independent Director, the Board had deliberated and expressed its view that the current expertise and composition of the NAC are sufficient to meet the needs and requirements of the Company. In addition, the Board has also concurred that the existing gender diversity on the Board composition is acceptable; i.e. three (3) members or 33% of the Board are ladies.
3.2 REMUNERATION COMMITTEE (“RC” or “Committee”) The Committee comprises non-executive directors, majority of whom are independent. Meetings are scheduled in advance at the beginning of a new calendar year to enable directors to plan ahead and fit the year’s meeting into their own schedules. The Committee meets on a scheduled basis every quarter of the year. When the need arises, special meetings are convened. Details of the attendance are as follows:Committee Members
Attendance
%
Datuk Zaiton binti Mohd Hassan (Chairman) Independent Non-Executive Director
6/6
100
Encik Zahari @ Mohd Zin bin Idris Independent Non-Executive Director
6/6
100
Dato’ Paduka Ismee bin Ismail Non-Independent Non-Executive Director
6/6
100
The Committee’s role is to assist and support the Board’s responsibility by recommending to the Board, remuneration of directors, executive directors and senior management of the Company. The responsibilities of the RC would include: • Recommending a framework of remuneration for Directors, GMD/CEO and Key Senior Management; • Recommending specific remuneration packages for Directors, GMD/CEO and Key Senior Management; • Reviewing and recommending to the Board, policies pertaining to staff salary, remuneration scheme and benefits; and • Reviewing and recommending to the Board, the quantum of bonus payments to the staff of the Company.
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070
BIMB HOLDINGS BERHAD
Annual Report 2013
STATEMENT OF CORPOR ATE GOVERNANCE (CONTINUED) (Pursuant to Paragraph 15.25 of the Listing Requirements of Bursa Malaysia Securities Berhad)
3.3 AUDIT AND EXAMINATION COMMITTEE (“AEC” OR “COMMITTEE”) The AEC is authorised by the Board to conduct activities within its Terms of Reference and has unrestricted access to both the internal and external auditors and members of the Senior Management. The activities carried out by the Committee, which met six (6) times during the year under review, are summarised in the AEC’s Report and its Terms of Reference as set out on pages 075 – 079 of this Annual Report. The composition of AEC are also disclosed on page 075 of this Annual Report.
3.4 GROUP SHARIAH COMMITTEE There are three (3) separate Shariah Committees that provide Shariah guidance and consultation for BHB’s respective key subsidiaries (Islamic Banking, Takaful and Stockbroking). In compliance with BNM’s Guidelines on the Governance Framework and the Company’s Memorandum and Articles of Association, the Shariah Committees responsibility is to ensure that the operations of the key subsidiaries are in accordance with Shariah principles. a) The members of the Shariah Supervisory Council of Bank Islam: Members
Nationality
Dr. Ahmad Shahbari @ Sobri bin Salamon (Chairman)
Malaysian
Dato’ Mohd Bakir bin Haji Mansor
Malaysian
Associate Professor Dr. Uzaimah binti Ibrahim
Malaysian
Professor Dr. Ahmad Hidayat bin Buang
Malaysian
Dr. Muhammad Syafii Antonio
Malaysian
b) The members of the Shariah Advisory Body of Syarikat Takaful Malaysia Berhad: Members
Nationality
Dr. Ahmad Shahbari @ Sobri bin Salamon (Chairman)
Malaysian
Dato’ Mohd Bakir bin Haji Mansor
Malaysian
Dr. Aida binti Othman
Malaysian
Professor Dr. Muhammad Rahimi bin Osman
Malaysian
Dato’ Wan Mohamad bin Dato’ Sheikh Abdul Aziz
Malaysian
c) The members of the Shariah Committee of BIMB Securities Sdn. Bhd.: Members
Nationality
Dato’ Mohd Bakir bin Haji Mansor (Chairman)
Malaysian
Prof. Emeritus Dato’ Paduka Dr. Mahmood Zuhdi bin Haji Abdul Majid
Malaysian
Ir. Dr. Muhammad Fuad bin Abdullah
Malaysian
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071
BIMB HOLDINGS BERHAD
Annual Report 2013
4. SHAREHOLDERS
4.4 ANNUAL REPORT
The Board recognises the importance of timely, complete, accurate and equal dissemination of information with regard to the Company and the Group’s performance and other matters affecting shareholders’ interest, investors and the general public.
One of the most important methods of communication to shareholders is through the Annual Report of the Company. The Annual Report contains comprehensive and sufficient details about the financial results and overall performance of the Company and BHB Group.
4.1 INVESTOR RELATIONS
In addition, the Annual Report also contains the Chairman’s Statement which provides an overview of the Company and BHB Group’s performance, operations and other matters affecting the shareholders’ interest. The Company also disclosed its corporate governance and internal control statements in the Annual Report. The information stated in the Annual Report would allow shareholders and investors to make an informed investment decision on BHB Group.
Investor Relations (“IR”) is an important part of BHB Corporate Governance framework to ensure that shareholders, stakeholders, investors and the investment community, both local and international, are provided with relevant, timely and comprehensive information about BHB. The Company is committed to provide an effective and open communication in order to improve disclosure and transparency. IR provides an important avenue to update stakeholders on the Group and the Company’s corporate activities, such as dialogues and discussions with fund managers, financial analysts and the media. These initiatives provide vital channels of communication for better understanding of the business and operation within the Group. Where relevant, members of the media are also invited to attend the Company’s major events.
4.2 CONFERENCES AND ROADSHOWS The Company and its subsidiaries participated in various domestic and international conferences and road shows, whereby information on business outlook, strategy and direction are communicated to the relevant stakeholders.
4.3 FINANCIAL RESULTS The Company and Group’s unaudited quarterly and audited annual financial results are released within the stipulated regulatory timeline to Bursa Securities, together with the accompanying press release for the respective periods.
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4.5 ANNUAL GENERAL MEETING (“AGM”) The AGM is regarded as the main forum for dialogue and communication during which shareholders and investors are informed of the financial performance and current developments of the Group. Shareholders are encouraged to attend the AGM and participate in the proceedings. At the AGM, shareholders are invited to ask questions or seek clarifications before any resolutions are put forth for approval. The GMD/CEO will also conduct a presentation to brief shareholders on financial performance. All Board members, Senior Management, BHB Groups’ Management team and the Company’s external auditor are available to respond to shareholders’ enquiries during the AGM. A press conference is held after each AGM, where the Company’s GMD/CEO together with the GMD/ CEOs of major operating subsidiaries, shall brief the media on the financial performance and other corporate development of the Group. This would also enable the Board and Management to clarify issues and to answer questions raised by the members of the media.
072
BIMB HOLDINGS BERHAD
Annual Report 2013
STATEMENT OF CORPOR ATE GOVERNANCE (CONTINUED) (Pursuant to Paragraph 15.25 of the Listing Requirements of Bursa Malaysia Securities Berhad)
4.6 MEDIA COVERAGE The Company’s major operating subsidiaries, namely Bank Islam, Takaful Malaysia and BIMB Securities, do from time to time engage the media on matters pertaining to their respective products and services that are of interest to the public.
4.7 WEBSITE BHB’s corporate website at www.bimbholdings.com is also another channel of communication with the stakeholders. It contains amongst others, information on the Company and BHB Group such as corporate profile, senior management, investor information, financial results and corporate news. Any queries or concerns relating to the Company and BHB Group can be conveyed to the following persons:Tan Sri Ismail bin Adam (Senior Independent Director) Email: ismailadam@bimbholdings.com Encik Omar bin Atin (Manager, Corporate Communication) Email: omar@bimbholdings.com
The Board also ensures that the Company and BHB Group’s financial reporting are made in accordance with the Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards (“IFRS”) and Companies Act, 1965 (“Act”).
5.2 DIRECTORS’ RESPONSIBILITY STATEMENT Pursuant to the Act, the Directors are required to provide annual financial statements which have been made out in accordance with the provisions of the Act and applicable approved accounting standards. The Statement by Directors pursuant to Section 169(15) of the Act is set out on page 235 of this Annual Report.
5.3 INTERNAL CONTROL The Board recognises the importance for maintaining a sound internal control system that cover financial, operational and compliance controls to safeguard shareholders’ investments and the Company’s assets. The Statement of Internal Control which provides an overview of the state of internal control is set out in page 080 of this Annual Report.
5.4 POLICIES 5. ACCOUNTABILITY AND AUDIT 5.1 FINANCIAL REPORTING AND DISCLOSURE The Board has a fiduciary responsibility to present a clear, balanced and comprehensive assessment of the Company and the Group’s performance and prospects. This is presented at the end of each financial year primarily through annual financial statements, quarterly and half-yearly announcement of results to shareholders as well as the Letter to Shareholders in the Annual Report. In order to meet the fiduciary responsibility expected of the Board, the Board is assisted by the AEC to ensure that the financial statement present a true and fair view of BHB Group’s financial performance and state of affairs.
(i) Corporate Disclosure Policy Corporate Disclosure Policy (“CDP”) is formulated to enhance the standard of BHB’s corporate governance particularly in the area of transparent disclosures to the public. The purpose of CDP is to enable shareholders and stakeholders to gain access to the Company’s business information not limiting to just financial reporting disclosure. In addition, it also maintains an effective communication tool which enable both the Board and Management to communicate effectively with its stakeholders on a timely basis.
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BIMB HOLDINGS BERHAD
Annual Report 2013
(ii) Corporate Social Responsibility (“CSR”) and the Environment The Company has adopted an objective and positive stand by promoting a wide range of CSR activities through various community programs and use of natural resources. The directors are of the view that the Company had adopted a good balance between value creation and corporate responsibility. Details of the Company’s corporate responsibility initiatives are set out on pages 038 to 043 of this Annual Report.
(iii) Whistle-Blowing Policy BHB is committed to the values of transparency, integrity, impartially and accountability in the conduct of its business and affairs. Wrongdoings such as fraud, corruption, financial impropriety and gross mismanagement should be reported and dealt with in accordance with the Company’s established due process. A whistle-blowing policy reflects BHB’s commitment to be vigilant at all times. It is also to assist BHB to manage its risks and contingencies as well as to avoid recurring wrongdoings. BHB promotes an open communication and transparent work culture by setting up internal procedures to address concerns for any likely wrongdoing. The policy complements the normal channels of communication and reporting lines within BHB. It also provides an alternative route for employees to raise concerns if the usual lines of communication is not available when the complaint relates to his or her immediate supervisor or head of department.
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BHB encourages its employees to aspire to achieve the highest possible compliance and ethical standards. Whistle blowing policies, integrated into BHB’s practices and culture help to deter fraud, corruption and mismanagement. Through an effective implementation of this policy, BHB is able to preserve its integrity and transparency. This in turn enhances and builds credibility with BHB’s stakeholders. (iv) Directors’ Code of Conduct and Ethics BHB adopts and practices the Code of Ethics for Company Directors issued by the Companies Commission of Malaysia. The Code of Ethics provides guidance for proper standards of conduct with sound and prudent business practices as well as standards of ethical behaviour for directors, based on the principles of integrity, responsibility, sincerity and corporate social responsibility. BHB’s Directors’ Code of Conduct and Ethics encompass three (3) major areas, namely:1. Corporate Governance 2. Relationship with shareholders, employees, creditors and customers 3. Social responsibilities and the environment Based on the aforesaid, BHB’s Directors are required to uphold the highest integrity in discharging their duties and in dealings with various stakeholders. This is in line with the Company’s core values which emphasise on behavioural ethics when dealing with third parties and employees.
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BIMB HOLDINGS BERHAD
Annual Report 2013
STATEMENT OF CORPOR ATE GOVERNANCE (CONTINUED) (Pursuant to Paragraph 15.25 of the Listing Requirements of Bursa Malaysia Securities Berhad)
(v) Sustainability Policy As a pioneer Shariah-compliant financial services provider, BHB and its subsidiaries strive to be responsible corporate citizens. BHB is committed to uphold the Shariah principles in relation to its business and social responsibilities: • Marketplace BHB Group is committed in its effort to strengthen Shariah governance, adopting customer-centric philosophy for service excellence and promote literacy in the areas of our Shariah-compliant banking, takaful and stockbroking products. • Workplace BHB Group aspires to be an employer of choice by providing a conducive working environment, continuous education and development of talent, encouraging volunteerism and managing responsibly our most valuable asset which is our staff. • Community BHB Group is focused on its effort in enriching deserving communities via education, social development and economic inclusion, poverty alleviation and humanitarian relief. • Environment BHB Group champions conservation and protection of the natural environment and educating its business constituents the importance of environmental preservation.
5.5 RELATIONSHIP WITH AUDITORS a) Internal Auditors The Company’s Internal Auditors (currently the function is outsourced to the Internal Audit Department of Bank Islam) report directly to the AEC and have unrestricted access to its members. The internal audit function is independent of the activities or operations of other operating units. The Internal Auditors conduct regular audits to evaluate the operating effectiveness of internal controls, compliance with internal and regulatory requirements across the Company. The audit report which highlights any findings, along with the recommendations and management’s responses, are tabled to the AEC. Minutes of the AEC meetings are subsequently tabled to the Board for notation, which serves as useful reference on pertinent issues that the AEC wishes to highlight to the Board. b) External Auditors The Board has established transparent and appropriate relationship with its external auditors through the AEC. The AEC and the Board maintain a strong emphasis on the objectivity and independence of the Auditors, in providing the relevant and transparent reports to shareholders. In ensuring full disclosure, the external auditor is regularly invited to attend AEC Meetings as well as the AGM, apart from the bi-annual discussions with the AEC without the presence of the management. In this regard, the external auditors have an obligation to highlight any concerns in the Group’s system of internal control and compliance to the Management, AEC and the Board. A report of the AEC outlining its role in relation to the internal and external auditors is set out on pages 075 to 079 of this Annual Report.
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075
BIMB HOLDINGS BERHAD
Annual Report 2013
6. AUDIT AND EXAMINATION COMMITTEE REPORT (“AEC” OR “COMMITTEE”) 6.1 COMMITTEE:
b) The Committee shall not consist of any alternate director of the Company and shall be formally appointed and/or terminated by the Board.
Encik Zahari @ Mohd Zin bin Idris (Chairman) (Independent Non-Executive Director) (Senior Cambridge Certificate)
c) The Members shall elect a Chairman from amongst themselves who must be an independent non-executive Director.
Datuk Zaiton binti Mohd Hassan (Independent Non-Executive Director) (Fellow of the ACCA, Member of MIA and MICPA)
d) All Members shall hold office only for so long as they serve as directors of the Company and Members of the Committee may relinquish their membership in the Committee with prior written notice to the Secretary and may continue to serve as Directors of the Company.
Encik Salih Amaran bin Jamiaan (Non-Independent Non-Executive Director) (Master of Business Administration) The Committee is authorised by the Board to conduct its activities within its Terms of Reference and has full access to internal and external auditors and members of the management of the Company. The terms of reference of the Committee are as follows:
6.2 COMPOSITION a) The Committee shall comprise only non-executive Directors with at least three (3) members of which the majority must be independent directors. The Chairman shall be an independent non-executive director and at least one (1) member of the committee must be:• A member of the Malaysian Institute of Accountant (MIA); or • If he/she is not a member of MIA, he/she must have at least three (3) years working experience with the following conditions:– He/she, must have passed examinations specified in Part I of the First Schedule of the Accountants Act, 1967; or – He/she must be a member of one (1) of the association of accountants specified in Part II of the First Schedule of the Accountants Act, 1967.
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6.3 CHAIRMAN OF THE AEC The following are the main duties and responsibilities of the Chairman of the AEC:• To steer the Committee to achieve its objectives; • To provide leadership to the Committee and ensure proper flow of information to the Committee, review adequacy and timing of documentation; • To provide a reasonable time for discussion at the Committee meetings. Organises and leads the agenda for Committee meetings based on input from the Members and ensure that all relevant issues are on the agenda; • To ensure that consensus is reached on every Committee resolution and where considered necessary, call for a vote and the decision will be made by simple majority; OR in the event a consensus cannot be obtained, the Chairman may elect to defer the agenda with further analysis conducted on the subject matter to the next meeting; • To manage the process and working of the Committee and ensure that the Committee discharges its responsibilities; and • To ensure all Members participate in the discussion to enable and encourage effective decision making.
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BIMB HOLDINGS BERHAD
Annual Report 2013
STATEMENT OF CORPOR ATE GOVERNANCE (CONTINUED) (Pursuant to Paragraph 15.25 of the Listing Requirements of Bursa Malaysia Securities Berhad)
6.4 COMMITTEE MEMBERS
c)
Each AEC Member is expected:• To provide independent opinion to the factfinding, analysis and decision making process of the Committee, based on their experience and knowledge; • To consider viewpoints from other Committee members, make decisions and recommendations in the best interest of the Company collectively; • To keep abreast of the latest corporate governance guidelines in relation to the Committee as a whole; and • To continuously seek out best practices in terms of the processes utilized by the Committee, following which these should be discussed with the rest of the Committee for possible adoption.
6.5 SECRETARY The Secretary of the Committee shall be the Company Secretary and/or Joint Secretary of the Company and the Company Secretary shall record the proceedings and resolutions of all proceedings of AEC.
6.6 DISCLOSURE The Committee shall assist the Board in making certain disclosures concerning the activities of the Committee pursuant to Bursa Securities Listing Requirements.
6.7 MEETINGS AND PROCEEDINGS
d) If within half an hour from the time appointed for the meeting a quorum is not present, the meeting shall be dissolved. The meeting shall stand adjourned to such day and at such time and place as the Members may determine. e) The Chairman of the Committee shall chair the Committee meetings and in his absence, the members present shall elect one Member among themselves to chair the meeting subject always that person must be an Independent Non-Executive Director. f)
All decision and/or approvals are to be made on unanimous basis, whilst always adhering to the quorum of meeting.
g) The Secretary shall draft out the agenda for each meeting, in consultation with the Chairman of the Committee. The agenda shall be sent to all Members of the Committee and any other persons who may be required to attend the meeting. h) All minutes of the meeting including the recommendations and findings of the Committee shall be submitted to the Board for notification. i)
In appropriate circumstances, the Committee may deal with matters by way of circular reports and/or resolutions. A resolution in writing signed by all the members who may at the time be present in Malaysia, shall be as valid and effectual as if had been passed by a meeting of the Committee duly called and constituted. The decision shall be presented at the next Committee subsequent meeting, for notation and minutes.
j)
In order to avoid conflict of interest, a member of the Committee shall abstain from participating in discussions and/or decisions on matters directly involving him/her.
a) Meetings shall be held not less than four (4) times a year with additional meetings for particular matters, convened as and when required. The external auditors may be requested to attend the meeting when necessary. b) The Chairman of the Committee, or the Secretary on the requisition of the members, shall at any time summon a meeting of the Members by giving due notice. It shall not be necessary to give notice of a Committee meeting to any Member for the time being absent from Malaysia.
No business shall be transacted at any meeting of the Committee unless a quorum is present. In order to form a quorum in respect of a meeting of an audit committee, the majority of members present must be independent directors.
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BIMB HOLDINGS BERHAD
Annual Report 2013
6.8 QUORUM The quorum shall be three (3) with majority must be Independent Directors.
6.9 ATTENDANCE AND INVITEES The GMD/CEO is invited to attend the meeting. Subject to Chairman’s consent with the advice from GMD/CEO, the Senior Management or any other persons shall be invited to attend the meeting as and when required. Other Board members shall also have the right to attend. At least twice a year, the Committee shall meet with the external auditors without executive Board member/Senior Management presence. A total of six (6) meetings were held during the financial year under review. The details of attendance of each of the members at the AEC meetings held during the year are as follows:Committee Members
Attendance
%
Encik Zahari @ Mohd Zin bin Idris (Chairman) Independent Non-Executive Director
6/6
100
Datuk Zaiton binti Mohd Hassan Independent Non-Executive Director
6/6
100
Encik Salih Amaran bin Jamiaan Non-Independent Non-Executive Director
6/6
100
6.10 AUTHORITY OF THE AEC The AEC is empowered by the Board to carry out the following:a) Investigate any activity or matter within its terms of reference; b) Promptly report to Bursa Securities matters which have not been resolved satisfactorily thus resulting in a breach of the Listing Requirements; c) Obtain external independent professional advice, legal or otherwise deemed necessary; d) Maintain direct communication channels with external auditors, person(s) carrying out the internal audit function and senior management of the Company and its subsidiaries; and e) Convene meetings with internal and external auditors, without the attendance of the management, whenever deemed necessary.
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078
BIMB HOLDINGS BERHAD
Annual Report 2013
STATEMENT OF CORPOR ATE GOVERNANCE (CONTINUED) (Pursuant to Paragraph 15.25 of the Listing Requirements of Bursa Malaysia Securities Berhad)
In discharging the above functions, the AEC is also empowered to:a) Seek any information it requires from any employee of the Company in order to perform its duties; b) Obtain, at the Company’s expenses, any professional advice including the advice of independent consultant and to secure the attendance of the external advisers at its meeting if it considers necessary to help it fulfill its obligation; c) Have full and unrestricted access to the Company’s records, properties and personnel; and d) Have full and unrestricted access to advice and services of the Company Secretary.
6.11 DUTIES AND RESPONSIBILITIES The primary duties and responsibilities of the AEC are as follows:A) Internal Audit • Review the adequacy of the internal audit programme, internal audit findings and recommend actions to be taken by management on deficiencies in controls and procedures that are identified. • To recommend to the Board on the appointment or termination of the Chief Internal Auditor.
B) Internal Controls • Review the effectiveness of internal controls and risk management processes. • Review the Company’s statement on internal control prior to endorsement by the Board. C) External audit • Review the external auditors’ audit scope and plan. • Review the appointment of external auditors and the audit fee and to deal with any issues pertaining to resignation or dismissal and to make recommendations to the Board. • Review and monitor the effectiveness of the external auditors’ performance and their independence and objectivity by way of an assessment to be conducted annually. • Review the external auditors’ letter to Management and Management’s responses, including the previous audit recommendations and make recommendations to the Board. • Approve the provision of non-audit service by external auditor. D) Financial Reporting Review and recommend the quarterly and year-end financial statements of the Company before submission to the Board, focusing particularly on:-
• Assess the performance of the internal auditors and determine and recommend the remuneration and annual increment of the internal auditors.
• Any changes in accounting policies and practice.
• Take cognisance of the resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning.
• The going concern assumption.
• Significant adjustments resulting from the audit.
• Compliance with applicable Financial Reporting Standard and other legal and regulatory requirements.
(Currently the function of Internal Audit is outsourced to the Internal Audit Department of Bank Islam) www.bimbholdings.com
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Annual Report 2013
E) Related Party Transactions Review and report to the Board any related party transactions that may arise within the Company or Group. F)
Annual Report Annual reporting on the overall AEC’s activities and the number of audit meeting held in a year.
G) General • The Committee may consider other matters as referred to the AEC by the Board. • The Committee is not delegated with decision making power but is required to submit its recommendation to the Board for decision. • The Committee will, in carrying out its activities as well as in making its recommendation to the Board of Directors, take into consideration the latest guidelines prescribed by Bursa Securities, Bank Negara Malaysia and other relevant regulatory bodies. • To perform any other functions as may be agreed by the Board.
6.12 FUNCTIONS AND ACTIVITIES A) Internal Audit Function The internal audit function for BHB and its wholly-owned subsidiaries has been outsourced to the Internal Audit Department of Bank Islam Malaysia Berhad (“Bank Islam”, a wholly owned subsidiary of BHB), since December 2008. The internal audit function for Bank Islam and Syarikat Takaful Malaysia Berhad (“Takaful Malaysia”) is carried out by their respective internal audit divisions.
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The respective Internal Auditor’s core function is to perform a regular audit and provide an independent appraisal of the Bank Islam Group and Takaful Malaysia Group activities, to provide assurance on compliance to internal controls and risk management processes, and compliance with laws, regulations and policies. The management of Bank Islam and Takaful Malaysia are responsible to ensure that corrective actions on reported weaknesses are undertaken within a reasonable time frame. B) Activities During the Year The following is a summary of activities that were carried out by the AEC during the year under review:i)
Review BHB Group’s quarterly financial statements prior to the submission to the Board for consideration and approval.
ii) Review and approve the external auditors’ scope of work and audit plan for the year. iii) Review the audit report of BHB Group prepared by the external auditors and internal audit department, their findings and management responses thereto. iv) Monitor the progress of the Internal Audit function in completing its audit plan and assessing the performance of the Internal Audit function. v) Review the recurrent related party transactions.
080
BIMB HOLDINGS BERHAD
Annual Report 2013
INTERNAL CONTROL STATEMENT RESPONSIBILITY
INTRODUCTION
Pursuant to Paragraph 15.26(b) of the Listing Requirements of Bursa Malaysia Securities Berhad, the Board of Directors (“Board”) is pleased to provide the following Internal Control Statement (“Statement”) which outlines the nature and scope of risk management and internal controls of the Group during the financial year ended 31 December 2013. For the purpose of disclosure, this Statement is guided by the Statement on Risk Management & Internal Control: Guidelines for Directors of Listed Issuers. The Board is committed and acknowledges its overall responsibility to maintain the BHB Group’s system of internal control and risk management as well as for reviewing its adequacy, integrity and effectiveness to safeguard shareholders’ investments and the Group’s assets.
The Board recognises that a sound system of internal control and risk management practices is essential in ensuring good corporate governance. The system is designed to manage an acceptable risk profile rather than eliminate the risk of failure to achieve the business objectives of the BHB Group. The system of internal control can only provide reasonable but not absolute assurance against material misstatement, fraud or loss. The Board has established appropriate controls and processes for identifying, evaluating, monitoring and managing significant risks that may affect the achievement of its short term and long term business objectives. The control structure and processes which have been instituted throughout the BHB Group is updated and reviewed from time to time to suit the changes in the business environment, including mitigating measures taken by Management, via the respective subsidiary Board Risk Committee/Audit and Examination Committee (“AEC”) to address areas of key risks as identified. This process has been in place for the financial year under review and up to the date of approval of this Statement for inclusion in the Annual Report of the Company. In addition to the above, the Management is also responsible to ensure that the relevant key subsidiaries have performed the following: • Identify the risks relevant to the business and the achievement of its objectives and strategies; • Implement and monitor risk management reporting as part of their risk management framework; and • Identify changes to risks or emerging risks, take actions as appropriate, and promptly bring these to the attention of the Board. The BHB AEC assists the Board to review the adequacy and effectiveness of the systems of internal control and ensures that appropriate methods and procedures are in place to obtain the level of assurance required by the Board. The Group’s Islamic Banking’s Statement of Corporate Governance and Takaful subsidiaries’ Internal Control Statements were approved by their respective AECs and Boards. Any material internal control deficiencies will be presented to the Audit Committee and Board through the Risk Management Dashboard for review.
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BIMB HOLDINGS BERHAD
Annual Report 2013
KEY INTERNAL CONTROL STRUCTURE The key processes that the Board has established in reviewing the adequacy and effectiveness of the system of internal controls include the following:• Risk Management Framework The Board has established an organisation structure and charters with clearly defined lines of responsibility, authority limits and accountability in association with its business and operational requirements in order to maintain a sound control environment. Risk management is considered as an integral part of BHB Group’s day-to-day operations whereby the assessment and management of risks may affect the achievement of BHB’s business objectives as well as to protect shareholders and stakeholders value. In line with Recommendation 6.1 of the Malaysian Code on Corporate Governance (“MCCG 2012”), risk management is embedded in the Group’s key processes and enforced through a Risk Management Dashboard (“RMD”) reporting tool. The Group’s major operating subsidiaries, namely Bank Islam Malaysia Berhad (“Bank Islam”), Syarikat Takaful Malaysia Berhad (“Takaful Malaysia”) and BIMB Securities Sdn. Bhd. (“BIMB Securities”) performs risk reporting via the RMD on a quarterly basis. Both Bank Islam and Takaful Malaysia have each respectively established Board Risk Committee as well as appointed Chief Risk Officers to remain responsible to monitor, assess and ensure the effective conduct of risk management. As for BIMB Securities, the risk management function is directly supervised and managed by its AEC. In this regard, risk management practices are inculcated and embedded in the activities of the Group’s major operating subsidiaries, which amongst others, requires establishing risk tolerance thresholds to actively identify, assess and monitor key business risk. Any matters relating to Risk Management principles, policies, procedures and practices are updated to the respective Boards by their Board Risk Committees/AECs to ensure relevance and compliance with current/ applicable laws and regulations. www.bimbholdings.com
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In addition to the policies and standard operating procedures and processes, BHB Group has also adopted a Whistle Blowing Policy, as an avenue for employees to report actual or suspected malpractice, misconduct or violation of the BHB Group’s policies and regulations. • Audit and Examination Committee (“AEC”) The AEC of BHB and its major operating subsidiaries reviews the internal control issues identified by the respective internal auditors, external auditors, regulatory authorities and Management. The respective AECs would evaluate the adequacy and effectiveness of the risk management and internal control systems. In addition, relevant matters pertaining to Internal Accounting Controls are also reported to each respective AECs on a quarterly basis. The respective AECs also review the scope and quality of findings of the internal as well as external audit functions. The risk responses and internal controls that Management has taken and/or is taking are documented in the minutes of the Board Risk Committee/AEC meetings, as appropriate. In addition, the AECs also assess the independence of internal auditors, their scope of work and resources. Where there are specific issues, Management of the subsidiaries or the Chief Internal Auditor/external auditors are invited to attend the BHB AEC meeting. Pursuant to Paragraph 15.17(f) of the Listing Requirements of Bursa Malaysia Securities Berhad, the BHB AEC had two (2) separate meetings with the external auditors, without the presence of any executive members, to discuss on any issues relating to BHB Group during the financial year ended 31 December 2013. • Internal Audit The internal audit function for BHB and its subsidiaries (save for Islamic Banking and Takaful subsidiaries) is carried out by the Internal Audit Division of Bank Islam. The Head of Internal Audit of Bank Islam is a qualified auditor and is responsible for providing assurance to the AEC that internal controls are operating effectively. The internal audit function is responsible to ensure compliance with policies and procedures and the effectiveness of the Group’s internal control systems. This includes undertaking regular reviews of BHB and its subsidiaries’ operations and business processes; examining and evaluating the
082
BIMB HOLDINGS BERHAD
Annual Report 2013
INTERNAL CONTROL STATEMENT (CONTINUED)
adequacy and efficiency of financial and operating controls; and highlighting significant risks and noncompliance. Where applicable, the internal audit function will provide recommendations to improve on the effectiveness of risk management, control and governance processes. Management will follow up and review the status of actions on recommendations made by the internal and external auditors. The internal audit function also follows up and reports to the AEC the status of implementation by Management on the recommendations highlighted in the internal audit reports. Further details of the activities of the internal audit function are provided in the BHB AEC report. Internal audit is performed for all key Divisions in BHB Group, thus providing the respective AEC an independent assurance on the operational, financial, compliance and risk related activities within the Group. The risk-based internal audit plan is reviewed and approved by the respective AECs of the key subsidiaries. The respective AECs review the internal audit observations highlighted in the internal audit reports. For wholly-owned subsidiaries, the internal audit reports are submitted to each subsidiaries’ Board prior to escalating to the BHB AEC. For Islamic Banking and Takaful subsidiaries, the internal audit function is carried out by its own independent internal audit department. The internal auditors reports directly to the respective AECs.
OTHER KEY ELEMENTS OF INTERNAL CONTROL The other key elements of the internal control systems are described below:• Management Committee The day-to-day operation of BHB is managed by the GMD/CEO assisted by the Management Committee (“MANCO”) to ensure that the operations of BHB are conducted in accordance with corporate objectives, approved annual budget as well as approved policies and procedures.
• Standard Operating Procedures Documented Standard Operating Procedures (“SOPs”) for all departments of BHB were approved by MANCO and endorsed by the BHB AEC. The SOP serves as a day-today operational guide to ensure compliance with financial and operational controls as well as the applicable laws and regulations. All SOPs are updated to reflect changing risks or to resolve operational deficiencies, if any or when it is required. • Human Resources Policies and Procedures The Human Resources SOP of BHB encompass the full spectrum of human resources management such as the recruitment of new employees as well as performance appraisals and training and development. • Annual Business Plan and Budgeting Process The Group’s annual budget is prepared based on the annual business plans from BHB’s operating subsidiaries and subsequently tabled to the BHB Board for approval. Actual performances are reviewed against the targeted results on a quarterly basis allowing timely response and corrective actions to be taken to mitigate risks. The Board regularly reviews reports from Management on key operating statistics, as well as on legal and regulatory matters. The Board also approves any changes or amendments to BHB policies. The major subsidiaries’ business plans and budgets are approved at their respective Boards. The subsidiaries’ performances are assessed against the budgets, and explanations are provided for significant variances on a regular basis to the respective Boards and BHB’s Board. • Information Technology (“IT”) System IT is key in supporting the service efficiency and the delivery systems of the Group. The IT Risk Framework was developed to ensure that risks are correctly identified and mitigated accordingly. BHB’s Banking and Takaful subsidiaries continue to upgrade their IT systems in order to enhance efficiency of their business operations and to facilitate the implementation of their risk-based capital frameworks.
The MANCO comprises the Heads of each Department who are principally responsible for the performance of their respective Departments.
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BIMB HOLDINGS BERHAD
Annual Report 2013
• Performance Review The Board receives and reviews reports from Management on the financial and operational performance, risk as well as legal and regulatory matters on a regular basis. Furthermore, a quarterly Financial Dashboard Report is presented by the respective Chief Executive Officers or Chief Financial Officers of the major subsidiaries within BHB Group, on profitability, capital adequacy, productivity and asset quality. The actual performance of BHB and its operating subsidiaries are assessed against approved budgets and industry averages to indentify and diagnose significant deviations and gaps in order for the respective Management to take remedial measures, where necessary.
CONCLUSION The Board has received assurance from BHB’s Chief Executive Officer and Chief Financial Officer that the Group’s risk management and internal control systems are operating adequately and effectively, in all material aspects, during the financial year under review and up to the date of this Statement. Taking into consideration the assurance from Management and the input from the relevant assurance providers, the Board is of the view that the systems of risk management and internal control is satisfactory and is adequate to safeguard shareholders investments, customers’ interest and Group assets. The Group will continue to take measures to strengthen the internal control and risk management environment.
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REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS The external auditors have reviewed this Statement on Risk Management and Internal Control pursuant to the scope set out in Recommended Practice Guide (“RPG”) 5 (Revised), Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report issued by the Malaysian Institute of Accountants (“MIA”) for inclusion in the annual report of the Group for the year ended 31 December 2013, and reported to the Board that nothing has come to their attention that cause them to believe that the statement intended to be included in the annual report of the Group, in all material respects: (a) has not been prepared in accordance with the disclosures required by paragraphs 41 and 42 of the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers, or (b) is factually inaccurate. RPG 5 (Revised) does not require the external auditors to consider whether the Directors’ Statement on Risk Management and Internal Control covers all risks and controls, or to form an opinion on the adequacy and effectiveness of the Group’s risk management and internal control system including the assessment and opinion by the Board of Directors and management thereon. The auditors are also not required to consider whether the processes described to deal with material internal control aspects of any significant problems disclosed in the annual report will, in fact, remedy the problems.
084
BIMB HOLDINGS BERHAD
Annual Report 2013
ADDITIONAL COMPLIANCE INFORMATION 1. SHARE BUYBACKS
BHB did not purchase any of its own shares during the financial year ended 31 December 2013.
2. O P T I O N S , W A R R A N T S CONVERTIBLE SECURITIES
OR
ANY
BHB had on 11 December 2013 issued 426,715,958 Free Detachable Warrants pursuant to the Renounceable Rights Issue of 426,715,958 new ordinary shares of RM1.00 each in BHB in respect of the financial year ended 31 December 2013.
BHB had not issued any Options or any other convertible securities in respect of the financial year ended 31 December 2013.
3. AMERICAN DEPOSITORY RECEIPT (ADR) OR GLOBAL DEPOSITORY RECEIPT (GDR)
BHB has not sponsored any ADR or GDR programme in the financial year ended 31 December 2013.
4. NON-AUDIT FEES
The amount of non-audit fees paid/payable to external auditors and their affiliated companies by BHB for the financial year ended 31 December 2013 is set out in Note 32 on page 176 of the Annual Report.
5. PROFIT GUARANTEE
There was no profit guarantees given by BHB during the financial year under review.
6. LIST OF PROPERTIES
The list of properties is set out on pages 239 to 244 of the Annual Report.
7. M A T E R I A L C O N T R A C T S I N V O L V I N G DIRECTORS AND MAJOR SHAREHOLDERS
Save as disclosed below and the related party transactions disclosed in Note 37 of the Financial Statements, there are no other material contracts entered into by BHB and its subsidiary companies involving Directors and Major Shareholders’ interest either still subsisting at the end of financial year or entered into since the end of the previous financial year.
(a) BHB, Dubai Financial Group LLC. (“DFG”) and Lembaga Tabung Haji (“TH”) had on 31 July 2013 entered into a sale and purchase agreement (as varied by the supplemental agreement dated 30 September 2013) for the acquisition of 690,196,000 ordinary shares of RM1.00 each in Bank Islam Malaysia Berhad held by DFG, representing approximately 30.47% of the issued and paid-up share capital of Bank Islam; and the acquisition of 419,894,000 ordinary shares of RM1.00 each in Bank Islam held by TH, representing approximately 18.53% of the total issued and paid-up capital of Bank Islam for a cash consideration of USD550 million and the RM equivalent of USD334,603,069 respectively. (b) BHB had on 11 September 2013 entered into a Foreign Exchange Forward Contract with Standard Chartered Saadiq Berhad and TH for the purchase of up to USD550 million by BHB. (c) Deed Poll dated 25 October 2013 executed by BHB constituting the issuance of 426,715,958 free detachable warrants pursuant to the renounceable rights issue of 426,715,958 Rights Shares. (d) TH had on 31 July 2013 provided the undertaking in respect of the renounceable rights issue of 426,715,958 Right Shares together with 426,715,958 Warrants at an issue price of RM4.25 per Rights Share on the basis of two (2) Rights Shares together with two (2) Warrants for every five (5) existing BHB shares held. (e) TH had on 31 July 2013 provided an irrevocable written undertaking to subscribe for such portion of the Sukuk Issue not subscribed by the other investors (up to RM1.66 billion in nominal value) which had been accepted by BHB (as varied by a letter agreement dated 24 September 2013 between BHB and TH).
8. I M P O S I T I O N O F S A N C T I O N S A N D / O R PENALTIES
There were no public sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or Management arising from any significant breach of rules/guidelines/legislations by the relevant regulatory bodies during the financial year under review.
www.bimbholdings.com
085
BIMB HOLDINGS BERHAD
Annual Report 2013
9. VARIATION ON RESULTS
There was no variation in results (differing by 10% or more) from any profit estimated forecast/projection unaudited results announced.
10. GENERAL MANDATE
BHB Group had, at the last AGM obtained a general mandate from its shareholders to allow BHB and/or its subsidiaries in their normal course of business, to enter into recurrent transactions of a revenue or trading nature
with related parties (RRPTs) which are necessary for its day to day operations, on terms not more favourable to the related party than those available in the general public and not to the detriment of the minority shareholders. The RRPTs Mandate is valid until the conclusion of the forthcoming AGM of the Company. The Board proposes to seek the renewal of the existing RRPTs Mandate at the forthcoming 17th AGM of the Company which will be held on 15 May 2014 at 10.00 a.m. This Mandate, if approved by shareholders, would be valid until the conclusion of the next AGM of the Company in the year 2015.
Nature of Transactions
Related Party/ Principal Activities
Interested Director and/ or major shareholders1
• Rental of office premises payable by Bank Islam Malaysia Berhad (“Bank Islam”) to TH3.
Lembaga Tabung Haji (“TH”) TH is principally involved in providing pilgrimage management services, saving and depository services, investment holding and rental of buildings.
Interested major shareholder TH is a major shareholder of BHB with 54.69% shareholding. Interested Directors 1) Dato’ Paduka Ismee bin Ismail, being the Group Managing Director and Chief Executive Officer of TH is also a Director of BHB and Bank Islam. Dato’ Paduka Ismee has no direct/indirect shareholding in TH, BHB and Bank Islam. 2) Tan Sri Samsudin bin Osman, Datuk Rozaida binti Omar and Puan Rifina binti Md Ariff are nominee directors of TH in BHB. They have no direct/indirect shareholding in TH and BHB. 3) Encik Johan bin Abdullah, being the Group Managing Director/Chief Executive Officer of BHB is also a Director of Bank Islam. Encik Johan has no direct/indirect shareholding in BHB and Bank Islam. 4) Encik Zahari @ Mohd Zin bin Idris and Datuk Zaiton binti Mohd Hassan are Directors of Bank Islam and they are also Directors of BHB. They have no direct/indirect shareholding in Bank Islam and BHB.
www.bimbholdings.com
Actual Value Transacted from 15 May 2013 (being the date of the last AGM) to 31 March 20142 RM’000 18,623
086
BIMB HOLDINGS BERHAD
Annual Report 2013
ADDITIONAL COMPLIANCE INFORMATION (CONTINUED)
Nature of Transactions
Related Party/ Principal Activities
Interested Director and/ or major shareholders1
• Rental of office premises payable by Bank Islam to Takaful Malaysia3.
Syarikat Takaful Malaysia Berhad (“Takaful Malaysia”) Takaful Malaysia is principally involved in family and general takaful business.
Interested Directors
Actual Value Transacted from 15 May 2013 (being the date of the last AGM) to 31 March 20142 RM’000 2,372
1) Dato’ Paduka Ismee bin Ismail is Chairman/ Director of Takaful Malaysia. Dato’ Paduka Ismee is also a Director of Bank Islam and BHB. Dato’ Paduka Ismee has no direct/ indirect shareholding in Takaful Malaysia, Bank Islam and BHB. 2) Encik Johan bin Abdullah is a Director of Takaful Malaysia. Encik Johan is also Director of Bank Islam and Group Managing Director/ Chief Executive Officer of BHB. Encik Johan has no direct/indirect shareholding in Takaful Malaysia, Bank Islam, and BHB. 3) Datuk Rozaida binti Omar is a Director of Takaful Malaysia and she is also a Director of BHB. Datuk Rozaida has no direct/indirect shareholding in Takaful Malaysia and BHB. 4) Encik Zahari @ Mohd Zin bin Idris and Datuk Zaiton binti Mohd Hassan are Directors of Bank Islam and they are also Directors of BHB. They have no direct/indirect shareholding in Bank Islam and BHB.
www.bimbholdings.com
087
BIMB HOLDINGS BERHAD
Annual Report 2013
Nature of Transactions
Related Party/ Principal Activities
Interested Director and/ or major shareholders1
• Rental of office premise payable by BHB to Bank Islam3.
Bank Islam Bank Islam is principally involved in the provision of Islamic banking and related activities based on the principles of Shariah.
Interested Directors
• Rental of office premise payable by Bank Islam to Syarikat Al-Ijarah Sdn Bhd (“SAISB”)3.
Actual Value Transacted from 15 May 2013 (being the date of the last AGM) to 31 March 20142 RM’000 774
1) Dato’ Paduka Ismee bin Ismail, Datuk Zaiton binti Mohd Hassan and Encik Zahari @ Mohd Zin bin Idris are Directors of BHB and they are also Directors of Bank Islam. They have no direct/indirect shareholding in Bank Islam and BHB. 2) Encik Johan bin Abdullah, being the Group Managing Director/Chief Executive Officer of BHB is also a Director of Bank Islam and SAISB. Encik Johan has no direct/indirect shareholding in BHB, Bank Islam and SAISB.
155
3) Encik Salih Amaran bin Jamiaan is a Director of BHB. He is also Chairman/Director of SAISB. Encik Salih has no direct/indirect shareholding in SAISB. As at 31 March 2014, Encik Salih holds indirect interest of 14,000 shares in BHB.
There is no amount due and owing to BHB by its related parties pursuant to the RRPTs. Notes 1 The direct and indirect shareholdings of the related parties in BHB above are set out in Section 6 of the Circular to Shareholders dated 23 April 2014. 2
The last practicable date before printing of Circular is 31 March 2014.
3
The rental sum of the properties was arrived at or estimated based on the on-going or expected market rate at the time tenancy agreement was or to be executed. Details of the rental of office premises are set out in the Circular to Shareholders dated 23 April 2014.
www.bimbholdings.com
FINANCIAL STATEMENTS
090 – 094 Directors’ Report 095 Statements of Financial Position 096 – 097 Statements of Profit or Loss and Other Comprehensive Income 098 – 099 Statements of Changes in Equity 100 – 101 Statements of Cash Flow 102 – 234 Notes to the Financial Statements 235 Statement by Directors 236 Statutory Declaration 237 – 238 Independent Auditors’ Report
090
BIMB HOLDINGS BERHAD
Annual Report 2013
DIRECTORS’ REPORT
for the financial year ended 31 December 2013
The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2013.
PRINCIPAL ACTIVITIES The Company is principally engaged as an investment holding company with business transacted in accordance with Islamic principles, whilst the principal activities of the subsidiaries are as stated in Note 14 to the financial statements. There has been no significant change in the nature of these activities during the financial year.
RESULTS
Profit for the year attributable to: Owners of the Company Non-controlling interests
Group RM’000
Company RM’000
279,327 283,827
192,131 –
563,154
192,131
RESERVES AND PROVISIONS There were no material transfers to or from reserves and provisions during the financial year under review except as disclosed in the financial statements.
ISSUE OF SHARES AND DEBENTURES During the financial year, the Company issued by way of renounceable rights issue of 426,715,958 new ordinary shares of RM1.00 each together with 426,715,958 free detachable warrants at an issue price of RM4.25 per rights share on the basis of two (2) rights shares together with two (2) warrants for every five (5) existing BHB shares held by the entitled shareholders of BHB as at 12 November 2013, for a total cash consideration of RM1,813,542,822, to partly fund the Company’s acquisition of 49% of Bank Islam Malaysia Berhad. The Company also issued a 10-year Islamic securities of RM1,660,000,000 in nominal value with profit rate of 1.50% per annum and yield to maturity at 6.25% to Lembaga Tabung Haji as at 12 November 2013 with a gross proceeds raised for RM1,086,585,810. There were no other changes in the authorised, issued and paid-up capital of the Company during the financial year.
OPTIONS GRANTED OVER UNISSUED SHARES No options were granted to any person to take up unissued shares of the Company during the financial year.
www.bimbholdings.com
BIMB HOLDINGS BERHAD
Annual Report 2013
091
DIVIDENDS The amount of dividends paid by the Company since 31 December 2012 are as follows: RM’000 In respect of the financial year ended 31 December 2012: Final single tier dividend of 5.00% per ordinary share, paid on 17 June 2013 53,339 In respect of the financial year ended 31 December 2013: Interim single tier dividend of 3.50% per ordinary share, paid on 21 October 2013 37,338 90,677 The Directors recommend a final single-tier ordinary dividend of 8.5% per ordinary share totalling RM126,947,988 for the financial year ended 31 December 2013.
IMPAIRED FINANCING Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that proper actions had been taken in relation to the writing off of bad financing and the making of impairment provisions for impaired financing, and have satisfied themselves that all known bad financing have been written off and adequate impairment provisions made for impaired financing. At the date of this report, the Directors are not aware of any circumstances that would render the amount written off for bad financing, or the amount of impairment provisions for impaired financing in the financial statements of the Group and of the Company, inadequate to any substantial extent.
CURRENT ASSETS Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that any current assets, other than financing, which were unlikely to be realised in the ordinary course of business at their values as shown in the accounting records of the Group and of the Company have been written down to their estimated realisable value. At the date of this report, the Directors are not aware of any circumstances that would render the values attributed to the current assets in the financial statements of the Group and of the Company to be misleading.
www.bimbholdings.com
092
BIMB HOLDINGS BERHAD
Annual Report 2013
DIRECTORS’ REPORT (CONTINUED) for the financial year ended 31 December 2013
VALUATION METHODS At the date of this report, the Directors are not aware of any circumstances which have arisen which would render adherence to the existing methods of valuation of assets or liabilities of the Group and of the Company to be misleading or inappropriate.
CONTINGENT AND OTHER LIABILITIES At the date of this report, there does not exist: (a) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year and which secures the liabilities of any other person, or (b) any contingent liability in respect of the Group and of the Company that has arisen since the end of the financial year other than those incurred in the ordinary course of the business. No contingent or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet its obligations as and when they fall due.
CHANGE OF CIRCUMSTANCES At the date of this report, the Directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements that would render any amount stated in the financial statements of the Group and of the Company misleading.
ITEMS OF AN UNUSUAL NATURE The results of the operations of the Group and of the Company for the financial year were not, in the opinion of the Directors, substantially affected by any item, transaction or event of a material and unusual nature. There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature, likely to affect substantially the results of the operations of the Group and of the Company for the current financial year in which this report is made.
SIGNIFICANT EVENTS DURING THE YEAR The significant events during the financial year are as disclosed in Note 48 and Note 49 to the financial statements.
www.bimbholdings.com
BIMB HOLDINGS BERHAD
Annual Report 2013
093
DIRECTORS Directors who served since the date of the last report are: Tan Sri Samsudin bin Osman Tan Sri Ismail bin Adam Dato’ Paduka Ismee bin Ismail Datuk Zaiton binti Mohd Hassan Datuk Rozaida binti Omar Johan bin Abdullah Zahari @ Mohd Zin bin Idris Salih Amaran bin Jamiaan
DIRECTORS’ INTERESTS IN SHARES The interests and deemed interests in the shares and options over shares of the Company and of its related corporations (other than wholly-owned subsidiaries) of those who were Directors at financial year end (including the interests of the spouses or children of the Directors who themselves are not Directors of the Company) as recorded in the Register of Directors’ shareholdings are as follows: Interest in the Company: Zahari @ Mohd Zin bin Idris – own Salih Amaran bin Jamiaan – own – others
Number of ordinary shares of RM1 each At At 1 January 31 December 2013 Bought Sold 2013
90,000 – 90,000 –
– – – – – 14,000 – 14,000 90,000 14,000 90,000 14,000
None of the other Directors holding office at 31 December 2013 had any interest in the shares and options over shares of the Company and of its related corporations during the financial year.
www.bimbholdings.com
094
BIMB HOLDINGS BERHAD
Annual Report 2013
DIRECTORS’ REPORT (CONTINUED) for the financial year ended 31 December 2013
DIRECTORS’ BENEFITS Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the Directors as shown in the financial statements or the fixed salary of a full time employee of the Company or of related corporations) by reason of a contract made by the Company or a related corporation with the Director or with a company of which the Director is a member, or with a firm in which the Director has a substantial financial interest. There was no arrangement during and at the end of the financial year which had the object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.
AUDITORS The auditors, Messrs KPMG Desa Megat & Co., have indicated their willingness to accept re-appointment. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:
………………………………… Tan Sri Samsudin bin Osman
………………………………… Johan bin Abdullah Kuala Lumpur, Date: 26 March 2014
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095
BIMB HOLDINGS BERHAD
Annual Report 2013
STATEMENTS OF FINANCIAL POSITION
as at 31 December 2013
Group Company
Restated Restated Note 31.12.2013 31.12.2012 1.1.2012 31.12.2013 31.12.2012 RM’000 RM’000 RM’0000 RM’000 RM’000 Assets Cash and short-term funds 3 3,953,896 2,063,444 3,785,354 149,559 68,329 Deposits and placements with financial institutions 4 701,302 519,646 1,692,220 – – Financial assets held-for-trading 5 1,405,198 1,831,606 1,403,344 – – Derivative financial assets 6 29,118 16,736 15,877 – – Financial assets available-for-sale 7 16,536,010 16,862,202 14,271,540 17,860 17,290 Financial assets held-to-maturity 8 467,935 468,721 636,913 – – Financing, advances and others 9 23,740,948 19,507,799 14,161,837 – – Other assets 10 250,801 473,983 278,212 2,451 10,446 Takaful assets 11 753,089 531,316 525,238 – – Statutory deposits with Bank Negara Malaysia 12 1,297,100 1,059,900 912,000 – – Current tax assets 9,448 38,890 28,657 45 2,463 Deferred tax assets 13 69,191 55,830 41,201 10 10 Investments in subsidiaries 14 – – – 4,647,369 1,704,433 Investments in associates 15 1 22,913 21,181 1 1 Property, plant and equipment 16 436,578 454,413 439,166 2,058 2,589 Investment properties 17 16,721 29,136 32,980 – – Assets classified as held for sale 7,209 3,374 668 – – Total assets
49,674,545
43,939,909
38,246,388
4,819,353 1,805,561
Liabilities and equity Deposits from customers 18 36,924,367 32,379,000 28,208,203 – – Deposits and placements of banks and other financial institutions 19 1,529,975 860,278 384,628 – – Derivative financial liabilities 6 13,565 14,339 23,299 – – Bills and acceptances payable 170,598 385,138 259,153 – – Other liabilities 20 774,566 869,414 736,526 12,025 1,458 Takaful liabilities 21 6,082,001 5,580,755 5,124,602 – – Sukuk liabilities 1,089,935 – – 1,089,935 – Zakat and taxation 39,598 22,595 17,800 – – Total liabilities 46,624,605 40,111,519 34,754,211 1,101,960 1,458 Equity Share capital 22 1,493,506 1,066,790 1,066,790 1,493,506 1,066,790 Reserves 23 1,316,831 1,013,985 803,057 2,223,887 737,313 Equity attributable to owners of the Company Non-controlling interests
2,810,337 2,080,775 1,869,847 3,717,393 1,804,103 239,603 1,747,615 1,622,330 – –
Total equity 3,049,940 3,828,390 3,492,177 3,717,393 1,804,103 Total liabilities and equity 49,674,545 43,939,909 38,246,388 4,819,353 1,805,561 Commitments and contingencies 47 11,211,680 10,928,790 9,423,109 The notes on pages 102 to 234 are an integral part of these financial statements. www.bimbholdings.com
– –
096
BIMB HOLDINGS BERHAD
Annual Report 2013
STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the financial year ended 31 December 2013
Group Company Restated Note 31.12.2013 31.12.2012 31.12.2013 31.12.2012 RM’000 RM’000 RM’000 RM’000 Income derived from investment of depositors’ funds 25 1,851,278 1,650,642 – – Income derived from investment of shareholders’ funds 26 405,059 350,978 283,574 174,447 Net income from Takaful business 27 553,058 472,333 – – Reversal of/(Allowance for) impairment on financing and advances 28 15,009 (66,073) – – (Allowance for)/Reversal of impairment on investments 29 (9,211) 577 – – Allowance for impairment on other assets 5,570 3,413 – – Provision for contingent liability – (14,769) – – Direct expenses (25,773) (31,153) – – Total distributable income 2,794,990 2,365,948 283,574 174,447 Income attributable to depositors 30 (772,801) (590,595) – – Total net income Personnel expenses 31 Other overhead expenses 32
2,022,189 1,775,353 283,574 174,447 (593,921) (524,459) (7,219) (5,830) (605,143) (535,187) (24,414) (2,843)
823,125 715,707 251,941 165,774 Finance cost (3,349) – (3,349) – Share of results of associate company, net of tax (349) 1,732 – – Profit before zakat and tax 819,427 717,439 248,592 165,774 Zakat (14,108) (10,121) – – Tax expense 34 (242,165) (185,736) (56,461) (24,308) Profit for the year 563,154 521,582 192,131 141,466 Attributable to: Owners of the Company Non-controlling interests
279,327 276,220 283,827 245,362
– 141,466 – –
Profit for the year 563,154 521,582 192,131 141,466 Earnings per share (sen)
35
25.84 25.89
Dividend per ordinary share-net (sen)
36
8.50 14.25
The notes on pages 102 to 234 are an integral part of these financial statements. www.bimbholdings.com
097
BIMB HOLDINGS BERHAD
Annual Report 2013
Group Company Restated Note 31.12.2013 31.12.2012 31.12.2013 31.12.2012 RM’000 RM’000 RM’000 RM’000 Profit for the year 563,154 521,582 192,131 141,466
Other comprehensive income Items that may be reclassified subsequently to profit or loss: Currency translation differences in respect of foreign operations Fair value reserve: Net change in fair value Net amount transferred to profit or loss
(27,843) 5,235
– –
(113,172) 38,644 (14,547) (31,919)
571 500 (749) (634)
Other comprehensive income for the year, net of tax (155,562) 11,960
(178) (134)
Total comprehensive income for the year 407,592 533,542 191,953 141,332
Attributable to: Owners of the Company 202,346 283,916 191,953 141,332 Non-controlling interests 205,246 249,626 – – Total comprehensive income for the year 407,592 533,542 191,953 141,332
The notes on pages 102 to 234 are an integral part of these financial statements. www.bimbholdings.com
098
BIMB HOLDINGS BERHAD
Annual Report 2013
STATEMENTS OF CHANGES IN EQUITY for the financial year ended 31 December 2013
Attributable to owners of the Company Non-distributable Total RM’000
Noncontrolling interests RM’000
Total equity RM’000
(1,133,837) 37,246
1,832,601 37,246
1,622,330 –
3,454,931 37,246
1,296,018
(1,096,591)
1,869,847
1,622,330
3,492,177
–
–
276,220
276,220
245,362
521,282
–
–
4,061
–
4,061
1,174
5,235
– –
– –
21,069 (17,434)
– –
21,069 (17,434)
17,575 (14,485)
38,644 (31,919)
– – – – – –
– – – – – –
7,696 105,237 – – – (349,011)
276,220 (46,266) (152,018) – 20,059 349,011
283,916 58,971 (152,018) – 20,059 –
249,626 (58,971) – (85,530) 20,160 –
533,542 – (152,018) (85,530) 40,219 –
–
–
(631,507)
631,507
–
–
–
At 31 December 2012, restated
1,066,790
603,630
428,433
(18,078)
2,080,775
1,747,615
3,828,390
At 1 January 2013
1,066,790
603,630
428,433
(18,078)
2,080,775
1,747,615
3,828,390
–
–
–
279,327
279,327
283,827
563,154
–
–
(12,052)
–
(12,052)
(15,791)
(27,843)
– –
– –
(56,440) (8,489)
– –
(56,440) (8,489)
(56,732) (6,058)
(113,172) (14,547)
– – 426,716 – – – – –
– – 1,257,527 (1,529) – – – –
(76,981) 125,370 129,300 – – – – (1,199,747)
279,327 (125,370) – – (90,677) – 4,406 –
202,346 – 1,813,543 (1,529) (90,677) – 4,406 (1,199,747)
205,246 – – – – (58,315) 3,551 (1,659,290)
407,592 – 1,813,543 (1,529) (90,677) (58,315) 7,957 (2,859,037)
–
–
1,220
–
1,220
796
2,016
1,493,506
1,859,628
(592,405)
49,608
2,810,337
239,603
3,049,940
Share capital RM’000
Share premium RM’000
Other reserves RM’000
Accumulated losses RM’000
1,066,790 –
603,630 –
1,296,018 –
1,066,790
603,630
Profit for the year Other comprehensive income Currency translation differences in respect of foreign operations Fair value reserve: Net change in fair value Net amount reclassified to profit or loss
–
Total comprehensive income for the year Transfer to statutory reserve Dividends paid to shareholders Dividends paid to non-controlling interests Disposal of interest in subsidiary Zerorisation of accumulated losses in subsidiary Transfer to accumulated losses
Group At 1 January 2012, as previously stated Prior year adjustment
Note
41
At 1 January 2012, restated
36
Profit for the year Other comprehensive income Currency translation differences in respect of foreign operations Fair value reserve: Net change in fair value Net amount reclassified to profit or loss Total comprehensive income for the year Transfer to statutory reserve Issue of shares and warrants Share issue expense Dividends paid to shareholders Dividends paid to non-controlling interests Disposal of interest in subsidiary Acquisition of interest in subsidiary Share-based payment transactions At 31 December 2013
36
Note 22
Note 23.2
The notes on pages 102 to 234 are an integral part of these financial statements.
www.bimbholdings.com
099
BIMB HOLDINGS BERHAD
Annual Report 2013
Non-distributable
Company
Note
At 1 January 2012 Profit for the year Other comprehensive income Fair value reserve: Net change in fair value Net amount reclassified to profit or loss Total comprehensive income for the year Dividends paid to shareholders
36
At 31 December 2012/1 January 2013 Profit for the year Other comprehensive income Currency translation differences in respect of foreign operations Fair value reserve: Net change in fair value Net amount reclassified to profit or loss Total comprehensive income for the year Issue of shares and warrants Shares issue expense Dividends paid to shareholders At 31 December 2013
36
Share capital RM’000
Share premium RM’000
Warrant reserves RM’000
Fair value reserves RM’000
Retained earnings RM’000
Total equity RM’000
1,066,790
603,630
–
267
144,102
1,814,789
–
–
–
–
141,466
141,466
– –
– –
– –
500 (634)
– –
500 (634)
– –
– –
– –
(134) –
141,466 (152,018)
141,332 (152,018)
1,066,790
603,630
–
133
133,550
1,804,103
–
–
–
–
192,131
192,131
–
–
–
–
–
–
– –
– –
– –
571 (749)
– –
571 (749)
– 426,716 – –
– 1,257,527 (1,529) –
– 129,300 – –
(178) – – –
192,131 – – (90,677)
191,953 1,813,543 (1,529) (90,677)
1,493,506
1,859,628
129,300
(45)
235,004
3,717,393
Note 22
The notes on pages 102 to 234 are an integral part of these financial statements. www.bimbholdings.com
(Accumulated losses)/
100
BIMB HOLDINGS BERHAD
Annual Report 2013
STATEMENTS OF CASH FLOW
for the financial year ended 31 December 2013
Cash flows from operating activities Profit before zakat and tax Adjustments for: Depreciation Impairment losses on financial assets available-for-sale Reversal of impairment losses on financial assets held-to-maturity Reversal of impairment on other assets Collective assessment allowance Individual assesment allowance Provision for contingent liability Dividends from securities Dividends from subsidiaries Loss/(Gain) on disposal of property, plant and equipment Gain on disposal of assets held for sale Net loss/(gain) on sale of financial assets held-for-trading Net gain on sale of financial assets available-for-sale Fair value gain on financial assets held-for-trading Share of losses/(profit) of associate companies Net derivative gain Property, plant and equipment write off Gain on disposal of interest in subsidiary Loss on redemption on financial assets held-to-maturity Finance cost
Group Company 31.12.2013 31.12.2012 31.12.2013 31.12.2012 RM’000 RM’000 RM’000 RM’000
819,427 717,439 248,592 165,774 60,623 56,838 675 494 9,537 – – – (326) (577) – – (5,570) (9,994) – – 141,621 102,185 – – 79,103 85,042 – – – 14,769 – – (7,232) (38,382) (749) (500) – – (270,285) (137,714) 1,514 (84) (2) 39 – (62) – – 9,449 (4,351) – – (14,412) (142,708) – – (9,150) (23,600) – – 349 (1,732) – – (9,163) (9,805) – – 4,659 315 – 140 – – (6,900) (33,539) 459 – – – 3,349 – 3,349 –
Operating profit/(loss) before working capital changes Changes in working capital: Deposits and placements of banks and other financial institutions Financing of customers Statutory deposits with Bank Negara Malaysia Other assets Deposits from customers Other liabilities Bills payable
669,697 475,650 – – (4,453,873) (5,547,958) – – (237,200) (147,900) – – 462 (190,613) 7,996 – 4,545,367 4,170,797 – – 416,803 597,345 10,567 (25,200) (214,540) 125,985 – –
Cash generated from/(used in) operations Zakat paid Tax paid Tax refund
1,810,953 228,599 (6,757) (30,506) (10,277) (6,737) – – (215,716) (211,487) – (18) 2,804 2,300 2,714 –
Net cash generated from/(used in) operating activities
1,587,764 12,675 (4,043) (30,524)
1,084,237 745,293 (25,320) (5,306)
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Group Company 31.12.2013 31.12.2012 31.12.2013 31.12.2012 RM’000 RM’000 RM’000 RM’000 Cash flows from investing activities Net proceeds from disposal of securities 652,673 – – – Purchase of Securities – (2,681,075) – (5,128) Purchase of property, plant and equipment (47,066) (73,403) (144) (2,329) Proceeds from disposal of property, plant and equipment 820 435 2 11 Proceeds from disposal of assets held for sale – 596 – – Dividends from securities 7,232 38,382 – 500 Dividends from subsidiaries – – 213,528 127,700 Disposal of investment in subsidiary 7,957 40,219 7,957 40,219 Acquisition of non-controlling interests (2,859,037) – (2,859,037) – Subscription of ordinary shares pursuant to Dividend Reinvestment Plan – – (84,956) – Net cash (used in)/generated from investing activities
(2,237,421) (2,674,846) (2,722,650) 160,973
Cash flows from financing activities Dividends paid by holding company (90,677) (152,018) (90,677) (152,018) Dividends paid to non-controlling interests (58,315) (85,530) – – Proceeds from share issues 1,813,543 – 1,813,543 – Share issue expense (1,529) – (1,529) – Proceeds from issuance of Islamic Securities by Company 1,086,586 – 1,086,586 – Net cash generated from/(used in) financing activities
2,749,608 (237,548) 2,807,923 (152,018)
Net increase/(decrease) in cash and cash equivalents 2,099,951 (2,899,719) 81,230 (21,569) Cash and cash equivalents at 1 January 2,583,090 5,477,574 68,329 89,898 Foreign exchange differences (27,843) 5,235 – – Cash and cash equivalents at 31 December 4,655,198 2,583,090
Cash and cash equivalents comprise: Cash and short-term funds Deposits and placements with financial institutions
149,559 68,329
3,953,896 2,063,444 149,559 68,329 701,302 519,646 – –
4,655,198 2,583,090 149,559 68,329
The notes on pages 102 to 234 are an integral part of these financial statements. www.bimbholdings.com
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NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2013
1. PRINCIPAL ACTIVITIES AND GENERAL INFORMATION BIMB Holdings Berhad is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad. The address of its registered office and principal place of business are as follows: Registered office and principal place of business 31st Floor, Menara Bank Islam No. 22, Jalan Perak 50450 Kuala Lumpur The consolidated financial statements for the financial year ended 31 December 2013 comprise the Company and its subsidiaries (together referred to as the Group) and the Group’s interest in an associate. The Company is principally engaged in investment holding activities while the other Group entities are primarily involved in Islamic banking business, managing family and general takaful, and stock-broking businesses. The ultimate holding corporation of the Company during the financial year is Lembaga Tabung Haji, a statutory body established under the Tabung Haji Act 1995 (Act 535). These financial statements were authorised for issue by the Board of Directors on 26 March 2014.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently in the preparation of these consolidated financial statements to all periods presented in these financial statements.
2.1 Basis of preparation (a) Statement of compliance The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards, and the Companies Act, 1965 in Malaysia. The following accounting standards, amendments and interpretations of the MFRS framework that have been issued by the Malaysian Accounting Standards Board (“MASB”) but have not been adopted by the Group and the Company:
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.1 Basis of preparation (continued) (a) Statement of compliance (continued) MFRSs, Interpretations and Amendments effective for annual periods beginning on or after 1 January 2014 Amendments to MFRS 10, Consolidated Financial Statements: Investment Entities Amendments to MFRS 12, Disclosure of Interests in Other Entities: Investment Entities Amendments to MFRS 127, Separate Financial Statements (2011): Investment Entities Amendments to MFRS 132, Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities • Amendments to MFRS 136, Impairment of Assets – Recoverable Amount Disclosures for Non-Financial Assets • Amendments to MFRS 139, Financial Instruments: Recognition and Measurement – Novation of Derivatives and Continuation of Hedge Accounting • IC Interpretation 21, Levies • • • •
MFRSs, Interpretations and Amendments effective for annual periods beginning on or after 1 July 2014 • Amendments to MFRS 1, First-time adoption of Malaysian Financial Reporting Standards (Annual improvements 2011-2013 Cycle) • Amendments to MFRS 2, Share-based payment (Annual Improvements 2010-2012 Cycle) • Amendments to MFRS 3, Business Combinations (Annual Improvements 2010-2012 Cycle and 2011-2013 Cycle) • Amendments to MFRS 8, Operating Segments (Annual Improvements 2010-2012 Cycle) • Amendments to MFRS 13, Fair Value Measurement (Annual Improvements 2010-2012 Cycle and 20112013 Cycle) • Amendments to MFRS 116, Property, Plant and Equipment (Annual Improvements 2010-2012 Cycle) • Amendments to MFRS 119, Employee Benefits, Defined Benefits Plans: Employee Contributions • Amendments to MFRS 124, Related Party Disclosures (Annual Improvements 2010-2012 Cycle) • Amendments to MFRS 138, Intangible Assets (Annual Improvements 2010-2012 Cycle) • Amendments to MFRS 140, Investment Property (Annual Improvements 2011-2013 Cycle) MFRSs, Interpretations and Amendments effective for a date yet to be confirmed • • • •
MFRS 9, Financial Instruments (2009) MFRS 9, Financial Instruments (2010) MFRS 9, Financial Instruments – Hedge Accounting and Amendments to MFRS 9, MFRS 7 and MFRS 139 Amendments to MFRS 7, Financial Instruments: Disclosures – Mandatory Effective Date of FRS 9 and Transition Disclosures
The Group and the Company plan to apply the abovementioned accounting standards, amendments and interpretations: • from the annual period beginning on 1 January 2014 for those accounting standards, amendments or interpretation that are effective for annual periods beginning on or after 1 January 2014, except for IC Interpretation 21, Levies which is not applicable to the Group. • from the annual period beginning on 1 January 2015 for those accounting standards, amendments or interpretations that are effective for annual periods beginning on or after 1 July 2014.
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.1 Basis of preparation (continued) (a) Statement of compliance (continued) The initial application of the accounting standards, amendments or interpretations are not expected to have any material impacts to the financial statements of the Group and the Company except as mentioned below: MFRS 9, Financial Instruments MFRS 9 replaces the guidance in MFRS 139, Financial Instruments: Recognition and Measurement on the classification and measurement of financial assets. Upon adoption of MFRS 9, financial assets will be measured at either fair value or amortised cost. It is expected that the Group’s investment in unquoted shares will be measured at fair value through other comprehensive income. The adoption of MFRS 9 may result in a change in accounting policy. The Group is currently assessing the financial impact of adopting MFRS 9.
(b) Basis of measurement The financial statements have been prepared on the historical cost basis except for the following assets as explained in their respective accounting policy notes: • Financial assets held-for-trading • Financial assets available-for-sale • Derivative financial instruments
(c) Functional and presentation currency These financial statements are presented in Ringgit Malaysia (RM), which is the Group’s and the Company’s functional currency. All financial information presented in RM has been rounded to the nearest thousand (RM’000), unless otherwise stated.
(d) Use of estimates and judgements The preparation of the financial statements in conformity with MFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.1 Basis of preparation (continued) (d) Use of estimates and judgements (continued) Significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following note: • Note • Note • Note • Note • Note
2.5 – 2.11 – 2.14 –
2.15 –
2.23 –
Financial instruments: Determination of fair value Impairment General Takaful Fund – Provision for outstanding claims – Expense reserves Family Takaful Fund – Actuarial reserves – Expenses reserves – Provision for outstanding claims Deferred tax assets
2.2 Basis of consolidation (a) Subsidiaries Subsidiaries are entities, including structured entities, controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The Group adopted MFRS 10, Consolidated Financial Statements in the current financial year. This resulted in changes to the following policies: • Control exist when Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In the previous financial years, control exist when the Group has the ability to exercise its power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. • Potential voting rights are considered when assessing control only when such rights are substantive. In the previous financial years, potential voting rights are considered when assessing control when such rights are presently exercisable. • The Group considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return. In the previous financial years, the Group did not consider de facto power in its assessment of control.
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 Basis of consolidation (continued) (a) Subsidiaries (continued) The change in accounting policy has been made retrospectively and in accordance with the transitional provision of MFRS 10. The adoption of MFRS 10 has no significant impact to the financial statements of the Group. Investments in subsidiaries are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale or distribution. The cost of investments includes transaction costs.
(b) Business combinations Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group. For new acquisitions, the Group measures the cost of goodwill at the acquisition date as: • The fair value of the consideration transferred; plus • The recognised amount of any non-controlling interest in the acquiree; plus • If the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less • The net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed When the excess is negative, a bargain purchase gain is recognised immediately in the profit or loss. For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair value or at proportionate share of the acquiree’s identifiable net assets at the acquisition date. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.
(c) Acquisition or disposal of non-controlling interest The Group treats all changes in its ownership interest in subsidiary that do not result in loss of control as equity transactions between the Group and its non-controlling interest holders. Any difference between the Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 Basis of consolidation (continued) (d) Loss of control Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in the profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured as fair value at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or as a financial asset available-for-sale depending on the level of influence retained.
(e) Associates Associates are entities, including unincorporated entities, in which the Group has significant influence, but not control, over the financial and operating policies. Investments in associates are accounted for in the Group’s consolidated financial statements using the equity method less any impairment losses. The cost of investment includes transaction costs. The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of the associates, after adjustments, if any, to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an associate company, the carrying amount of that interest including any long-term investments, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the associate. When the Group ceases to have significant influence over an associate, any retained interest in the former associate at the date when significant influence is lost is measured at fair value and this amount is regarded as the initial carrying amount of a financial asset. The difference between the fair value of any retained interest plus proceeds from the interest disposed of and the carrying amount of the investment at the date when equity method is discontinued is recognised in the profit or loss. When the Group’s interest in an associate decreases but does not result in a loss of significant influence, any retained interest is not re-measured. Any gain or loss arising from the decrease in interest is recognised in profit or loss. Any gains or losses previously recognised in other comprehensive income are also reclassified proportionately to profit or loss if that gain or loss would be required to be reclassified to profit or loss on the disposal of the related assets or liabilities. Investments in associates are measured in the Company’s statement of financial position at cost less impairment losses, unless the investment is classified as held for sale or distribution. The cost of investments includes transaction costs.
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 Basis of consolidation (continued) (f) Non-controlling interests Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or indirectly to the equity holders of the Company, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated statement of profit or loss and other comprehensive income as an allocation of the profit or loss and the comprehensive income for the year between non-controlling interests and the owners of the Company. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.
(g) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity-accounted associates and joint ventures are eliminated against the investment to the extent of the Group’s interest in the investees. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
2.3 Foreign currency (a) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting date, except for those that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments or a financial instrument designated as a hedge of currency risk, which are recognised in other comprehensive income.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.3 Foreign currency (continued) (b) Operations denominated in functional currencies other than Ringgit Malaysia The assets and liabilities of operations denominated in functional currencies other than RM, including goodwill and fair value adjustments arising on acquisition, are translated to RM at exchange rates at the end of the reporting period, except for goodwill and fair value adjustments arising from business combinations before 1 January 2011 (the date when the Group first adopted MFRS) which are treated as assets and liabilities of the Company. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to RM at exchange rates at the dates of the transactions. Foreign currency differences are recognised in other comprehensive income and accumulated in the foreign currency translation reserve (“FCTR�) in equity. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the FCTR related to that foreign operation is reclassified to profit or loss as part of the profit or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss. In the consolidated financial statements, when settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented in the FCTR in equity.
2.4 Cash and cash equivalents Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in fair value with original maturities of three months or less, and are used by the Group and the Company in the management of their short term commitments. For the purpose of the statement of cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.5 Financial instruments (a) Initial recognition and measurement A financial asset or a financial liability is recognised in the statement of financial position when, and only when, the Group or the Company becomes a party to the contractual provisions of the instrument. A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument. An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.
(b) Financial instrument categories and subsequent measurement The Group and the Company categorise financial instruments as follows: Financial assets
(i) Financial assets at fair value through profit or loss Fair value through profit or loss category comprises financial assets that are held for trading, including derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial assets that are specifically designated into this category upon initial recognition. Derivatives that are linked to and must be settled by delivery of unquoted equity instruments whose fair values cannot be reliably measured are measured at cost. Other financial assets categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss.
(ii) Held-to-maturity investments Held-to-maturity investments category comprises Islamic debt instruments that are quoted in an active market and the Group or the Company has the positive intention and ability to hold them to maturity. Financial assets categorised as held-to-maturity investments are subsequently measured at amortised cost using the effective profit method.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.5 Financial instruments (continued) (b) Financial instrument categories and subsequent measurement (continued) Financial assets (continued)
(ii) Held-to-maturity investments (continued) Any sale or reclassification of more than an insignificant amount of financial assets held-to-maturity not close to their maturity would result in the reclassification of all financial assets held-to-maturity to financial assets available-for-sale and the Group would be prevented from classifying any financial assets as financial assets held-to-maturity for the current and following two financial years.
(iii) Financing and receivables Financing and receivables category comprises Islamic debt instruments that are not quoted in an active market. Financial assets categorised as financing and receivables are subsequently measured at amortised cost using the effective profit method.
(iv) Available-for-sale financial assets Available-for-sale category comprises investment in equity and Islamic debt securities instruments that are not held for trading. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost. Other financial assets categorised as available-for-sale are subsequently measured at their fair values with the gain or loss recognised in other comprehensive income, except for impairment losses, foreign exchange gains and losses arising from monetary items and gains and losses of hedged items attributable to hedge risks of fair value hedges which are recognised in profit or loss. On derecognition, the cumulative gain or loss recognised in other comprehensive income is reclassified from equity into profit or loss. Profit income calculated for an Islamic debt instrument using the effective profit method is recognised in profit or loss.
(v) Takaful receivables Takaful receivables are recognised when due and measured on initial recognition at the fair value of the consideration received or receivable. Subsequent to initial recognition, takaful receivables are measured at amortised cost, using the effective profit method. All financial assets, except for those measured at fair value through profit or loss, are subject to review for impairment (see note 2.11).
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.5 Financial instruments (continued) (b) Financial instrument categories and subsequent measurement (continued) Financial liabilities All financial liabilities are initially measured at amortised cost other than those categorised as fair value through profit or loss. Fair value through profit or loss category comprises financial liabilities that are derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial liabilities that are specifically designated into this category upon initial recognition. Derivatives that are linked to and must be settled by delivery of equity instruments that do not have a quoted price in an active market for identical instruments whose fair values cannot be reliably measured are measured at cost. Other financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss.
(c) Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Fair value arising from financial guarantee contracts are classified as deferred income and is amortised to profit or loss using a straight-line method over the contractual period or, when there is no specified contractual period, recognised in profit or loss upon discharge of the guarantee. When settlement of a financial guarantee contract becomes probable, an estimate of the obligation is made. If the carrying value of the financial guarantee contract is lower than the obligation, the carrying value is adjusted to the obligation amount and accounted for as provision.
(d) Regular way purchase or sale of financial assets A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned. A regular way purchase or sale of financial assets is recognised and derecognised, as applicable, using trade date accounting. Trade date accounting refers to: (i) the recognition of an asset to be received and the liability to pay for it on the trade date, and (ii) derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a receivable from the buyer for payment on the trade date.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.5 Financial instruments (continued) (e) Derecognition A financial asset or part of it is derecognised when, and only when the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in the profit or loss. A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
2.6 Property, plant and equipment Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct labour. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing cost. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. The cost of property, plant and equipment recognised as a result of a business combination is based on fair value at acquisition date. The fair value of property is the estimated amount for which a property could be exchanged between a knowledgeable willing parties in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The fair value of other items of property, plant and equipment is based on the quoted market prices for similar items when available and replacement cost when appropriate. When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and is recognised net within “other income” or “other overhead expenses” respectively in the profit or loss.
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.6 Property, plant and equipment (continued) Subsequent costs The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group or the Company, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised to profit or loss. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
Depreciation Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed, and if a component has a useful life that is different from the remainder of that asset then that component is depreciated separately. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group and the Company will obtain ownership by the end of the lease term. Freehold land is not depreciated. Property, plant and equipment under construction are not depreciated until the assets are ready for their intended use. The • • • • • • •
estimated useful lives for the current and comparative years are as follows: Buildings 50 years Building improvement and renovations 6 – 10 years Furniture, fixtures and fittings 2 – 10 years Office equipment 2 – 6 years Motor vehicles 4 – 5 years Computer equipment and software 2 – 7 years Leasehold buildings 50 – 100 years
Depreciation methods, useful lives and residual values are reviewed at end of the reporting period, and adjusted as appropriate.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.7 Investment property (i) Investment property carried at amortised costs Investment properties are properties which are owned or held under a leasehold interest to earn rental income or for capital appreciation or for both but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. These include land held for a currently undetermined future use. Investment properties are stated at cost less accumulated depreciation and impairment losses, consistent with the accounting policy for property, plant and equipment as stated in accounting policy note 2.6. Cost includes expenditure that is directly attributable to the acquisition of the investment property. Depreciation is charged to the profit or loss on a straight-line basis over the estimated useful lives of 50 years for buildings. Freehold land is not depreciated. An investment property is derecognised on its disposal, or when it is permanently withdrawn from use and no future economic benefit are expected from its disposal. The difference between the net disposal proceeds and the carrying amount is recognised in profit or loss in the period in which the item is derecognised.
(ii) Reclassifications to/from investment property carried at amortised costs When an item of property and equipment is transferred to investment property following a change in its use, the carrying amount of the item is reclassified to investment property as the Group adopts the cost model for investment property.
2.8 Leased assets – Finance lease Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic profit rate on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. Leasehold land which in substance is a finance lease is classified as property, plant and equipment or as investment property if held to earn rental income or for capital appreciation or for both.
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.9 Leased assets – Operating lease Leases, where the Group or the Company does not assume substantially all the risks and rewards of ownership are classified as operating leases and, except for property interest held under operating lease, the leased assets are not recognised on the statement of financial position. Property interest held under an operating lease, which is held to earn rental income or for capital appreciation or both, is classified as investment property and measured using fair value model. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred. Leasehold land which in substance is an operating lease is classified as prepaid lease payments.
2.10 Bills and other receivables Bills and other receivables are stated at cost less any allowance for impairment.
2.11 Impairment Financial assets The Group and the Company assess at each reporting date whether there is objective evidence that financing and receivables, financial assets held-to-maturity or financial assets available-for-sale are impaired. A financial asset or a group of financial assets are impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the assets and prior to the statement of financial position date (“a loss event�) and that loss event or events has an impact on the estimated future cash flow of the financial asset or the group of financial assets as that can be reliably estimated. Losses expected as a result of future events, no matter how likely, are not recognised. For an investment in an equity instrument, a significant or prolonged decline in the fair value below its cost is an objective evidence of impairment. If any such objective evidence exists, then the impairment loss of the financial assets is estimated.
(a) Financing, advances and others For financing, advances and others, the criteria that is used to determine that there is objective evidence of an impairment loss include: i) ii) iii) iv)
significant financial difficulty of the issuer or obligor; or a breach of contract, such as default or delinquency in profit or principal payments; or it becomes probable that the borrower will enter bankruptcy or other financial reorganisation; or consecutive downgrade of two notches for external ratings.
Financing is classified as impaired when the principal or profit or both are past due for three (3) months or more or where a financing is in arrears for less than three (3) months, the financing exhibits indications of credit weakness.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.11 Impairment (continued) Financial assets (continued) (a) Financing, advances and others (continued) For financing and receivables, the Group first assesses whether objective evidence of impairment exists individually for financing and receivables that are individually significant, and collectively for financing and receivables that are not individually significant. If the Group determines that no objective evidence of impairment exist for an individually assessed financing and receivables, whether significant or not, it includes the assets in a group of financing and receivables with similar credit risk characteristics and collectively assesses them for impairment. Financing and receivables that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in the collective assessment for impairment. The amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective profit rate. The amount of the loss is recognised using an allowance account and recognised in the profit or loss. For the purposes of a collective evaluation of impairment, financing and receivables are grouped on the basis of similar risk characteristics, taking into account the asset type, industry, geographical location, collateral type, past-due status and other relevant factors. These characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the counterparty’s ability to pay all amounts due according to the contractual terms of the assets being evaluated. Future cash flows for a group of financing and receivables that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets in the group and historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted based on current observable data to reflect the effects of current conditions that did not affect the year on which the historical loss experience is based and remove the effects of conditions in the historical year that do not currently exist. When a financing is uncollectable, it is written off against the related allowance for impairment. Such financing are written off after all the necessary procedures have been completed and the amount of the loss has been determined. Subsequently recoveries of amounts previously written off are credited to the profit or loss. If, in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed by adjusting the allowance for impairment account. The amount of reversal is recognised in the profit or loss.
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Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.11 Impairment (continued) Financial assets (continued) (b) Available-for-sale financial assets In the case of available-for-sale equity securities, a significant or prolonged decline in their fair value of the security below its cost is also considered in determining whether impairment exists. Where such evidence exists, the cumulative net loss that has been previously recognised directly in equity is removed from equity and recognised in the profit or loss. In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as all other financial assets. Reversals of impairment of debt instruments are recognised in the other comprehensive income. Reversals of impairment of equity shares are not recognised in the profit or loss, increases in the fair value of equity shares after impairment are recognised directly in equity.
(c) Unquoted equity instruments An impairment loss in respect of unquoted equity instrument that is carried at cost is recognised in profit or loss and is measured as the difference between the financial asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.
(d) Takaful receivables If there is objective evidence that the takaful receivable is impaired, the Group reduce the carrying amount of the takaful receivable accordingly and recognises that impairment loss in profit or loss. The Group gather the objective evidence that a takaful receivable is impaired using the same process adopted for financial assets carried at amortised cost. The impairment loss is calculated under the same method used for those financing, advances and others.
Other assets The carrying amounts of other assets (except for deferred tax asset and investment property measured at fair value and non-current assets classified as held for sale) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.11 Impairment (continued) Other assets (continued) An impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to profit or loss in the financial year in which the reversals are recognised.
2.12 Bills and acceptances payable Bills and acceptances payable represents the Group’s own bills and acceptances rediscounted and outstanding in the market.
2.13 Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.
2.14 General Takaful Fund The General Takaful Fund is maintained in accordance with the Takaful (Amendment) Act, 1984. Included in General Takaful Fund is fund arising from: • General Takaful; and • General retakaful funds The General Takaful underwriting results are determined for each class of takaful business after taking into account retakaful, unearned contributions, claims incurred and administrative fees.
Contribution income Contributions are recognised in a financial period in respect of risks assumed during that particular financial period based on the inception date. Inward treaty retakaful contributions are recognised on the basis of periodic advices received from ceding takaful operators.
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Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.14 General Takaful Fund (continued) Unearned contribution reserves The Unearned Contribution Reserves (“UCR”) represent the portion of the net contributions of takaful certificates written that relate to the unexpired periods of the certificates at the end of the financial year. In determining the UCR at the end of the reporting period, the method that most accurately reflects the actual unearned contributions is used, as follows: a) 1/365th method for all General Takaful business. b) 1/8th method for all classes of General Treaty Inward Retakaful business
Provision for outstanding claims A liability for outstanding claims is recognised in respect of direct takaful business. The amount of outstanding claims is the best estimate of the expenditure required together with related expenses less recoveries, if any, to settle the present obligation at the end of the reporting period. Any difference between the current estimated cost and subsequent settlement is dealt with in the takaful statement of comprehensive income of the Group and of the Company in the year in which the settlement takes place. Provision is also made for the cost of claims (together with related expenses) and Incurred But Not Reported Claims (“IBNR”) at the end of the reporting period, using a mathematical method of estimation by a qualified external actuary where historical claims experience are used to project future claims. The provision includes a risk margin for adverse deviation. As with all projections, there are elements of uncertainty and the projected claims may be different from actual. These uncertainties arise from changes in underlying risk, changes in spread of risks, claims settlement pattern as well as uncertainties in the projection model and underlying assumptions.
Expense reserves The expense reserve for mudharabah certificates is calculated based on best estimate of the provision for unexpired expense risk (“UER”) and the provision of risk margin for adverse deviation (“PRAD”). The expense reserve for wakalah certificates refers to the higher of aggregate of the Unearned Wakalah Fee (“UWF”) for all lines of business or best estimate of the provision for UER and the PRAD at total fund level.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.15 Family Takaful Fund Included in family takaful fund is fund arising from: • Family Takaful; • Group Family Takaful; and • Family retakaful funds. The Family Takaful Fund is maintained in accordance with the requirements of the Takaful Act, 1984 (repealed on 30 June 2013), Islamic Financial Services Act 2013 (effective on 30 June 2013) and includes the amounts attributable to participants which represents the participants’ share of the underwriting surplus and return on the investments, where applicable and are distributable in accordance with the terms and conditions prescribed by the Group. The surplus transfer from the Family Takaful Fund to the profit or loss is based on the predetermined profit sharing ratio of the underwriting surplus and return on investments.
Contribution income Contribution is recognised as soon as the amount of the contribution can be reliably measured. Initial contribution is recognised from inception date and subsequent contribution is recognised when it is due. For individual family takaful contribution, recognition is up to the extent of one due amount. At the end of each financial period, all due contributions are accounted for to the extent that they can be reliably measured.
Investment-linked business Investments of the investment-linked business are stated at closing market prices. Any increase or decrease in value of these investments is taken into the investment-linked business revenue accounts.
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.15 Family Takaful Fund (continued) Actuarial reserves Actuarial reserves comprise the Prospective Actuarial Valuation, Cash Flow Projection Valuation and Unearned Contribution Valuation as explained below:
(a) Prospective Actuarial Valuation
For credit-related products, the liabilities of Family Takaful Fund shall be valued based on the sum of present value of future benefits and any expected future expenses payable from the takaful funds, less the present value of future gross tabarru’ arising from the certificate, discounted at the appropriate risk discount rate as defined in the valuation guidelines.
For a credit-related takaful certificate whose sustainability of tabarru’ deductions is depended on the performance of Participants Investment Fund (“PIF”), the calculation is subject to adjusting the future gross tabarru’ cash flow such that it is limited to the period where the PIF can sustain the tabarru’ and assuming that the takaful coverage is in force for the full duration of the takaful contract.
(b) Cash Flow Projection Valuation
For products with PIF other than credit-related products, the liabilities shall be valued by projecting future cash flows to ensure that all future obligations can be met without recourse to additional finance or capital support at any future time during the duration of the certificate. The cash flow projection shall use a basis that is consistent with the requirements of the valuation guidelines.
(c) Unearned Contribution Valuation
For yearly renewable products or extensions shall be valued according to the following: (i) For a certificate covering death or survival, the liabilities shall be valued on an unexpired risk basis using a prospective estimate of expected future payments arising from future events covered as at the valuation date. These future payments shall include allowance for direct claims related expenses, direct investment-related expenses, cost of retakaful and expected future contribution refunds expected during the unexpired period. (ii) For a certificate covering contingencies other than death or survival, the net liability is the maximum of unexpired risk reserve or unearned contribution reserve.
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Annual Report 2013
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.15 Family Takaful Fund (continued) Provision for outstanding claims Claims and provisions for claims arising on family and group family takaful certificates, including settlement costs, are accounted for using the case basis method and for this purpose the benefits payable under a family takaful certificate are recognised as follows: (a) Maturity or other policy benefit payments due on specified dates are accounted for as claims payable on the due dates. (b) Death, surrender and other benefits without due dates are treated as claims payable on the date of receipts of intimation of death of the participant or occurrence of contingency covered. (c) For individual family, group health and medical business, provision is made for the cost of claims (together with related expenses) and IBNR at the end of the reporting period, using a mathematical method of estimation by a qualified internal actuary where historical claims experience are used to project future claims. The provision includes a risk margin for adverse deviation. As with all projections, there are elements of uncertainty and the projected claims may be different from actual. These uncertainties arise from changes in underlying risk, changes in spread of risks, claim settlement pattern as well as uncertainties in the projection model and underlying assumptions.
Expense reserves The expense reserves is reported as a liability in Shareholder’s Fund. Expense reserves consists the followings:
(a) Expense liabilities
The method used to value expense liabilities shall be consistent with the method used to value takaful liabilities of the corresponding family takaful certificate (for example, for a long-term ordinary takaful certificate, the valuation method for expense liabilities should also be long-term in nature).
(b) Deficiency Reserve for Skim Anuiti Takaful KWSP
In addition to the expense liabilities above, an additional requirement is also complied as stipulated below:
If PIF is expected to be insufficient to meet future annuity certain benefit and/or future life annuity tabarru’, another provision shall be set aside that is in line with requirement of the valuation guideline. Upon PIF insufficiency, the Shareholders’ Fund shall honour the annuity certain benefit payment to participants as well as the tabarru’ to Participant Risk Fund (“PRF”).
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Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.16 Product classification The Family Takaful Fund and General Takaful Fund consist of certificate contracts that transfer takaful risk. Takaful contracts are those contracts that transfer significant takaful risk. A takaful contract is a contract under which the fund has accepted significant takaful risk from another party (the certificate holders) by agreeing to compensate the participants if a specified uncertain future event (the takaful event) adversely affects the participants. As a general guideline, to determine whether a contract has significant takaful risk, benefits paid are compared with benefits payable if the takaful event did not occur. Investment contracts are those contracts that do not transfer significant insurance risk. There are no contracts that are classified as investment contracts in the Family and General Takaful Funds. Once a contract has been classified as a takaful contract, it remains a takaful contract for the remainder of its life-time, even if the takaful risk reduces significantly during this period, unless all rights and obligations are extinguished or expired. Takaful contracts in the current portfolio are classified as being without discretionary participation features (“DPF”) as it does not satisfy the criteria for DPF. DPF is a contractual right to receive, as a supplement to guaranteed benefits, additional benefits that are: • likely to be a significant portion of the total contractual benefits; • whose amount or timing is contractually at the discretion of the issuer; and • that are contractually based on the: – performance of a specified pool of contracts or a specified type of contract; – realised and/or unrealised investment returns on a specified pool of assets held by the issuer; or – the profit or loss of the company, fund or other entity that issues the contract.
2.17 Retakaful The fund cedes takaful risk in the normal course of business. Retakaful assets represent balances receivable and recoverable from retakaful operators. Amounts recoverable from retakaful operators are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the retakaful’s certificates and are in accordance with the related retakaful contracts. Ceded retakaful arrangements do not relieve the fund from its obligations to participants. Contributions and claims are presented on a gross basis for both ceded and assumed retakaful.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.17 Retakaful (continued) Retakaful assets are reviewed for impairment at each reporting date or more frequently when an indication of impairment arises during the reporting period. Impairment occurs when there is objective evidence as a result of an event that occurred after initial recognition of the retakaful asset that the Family and General Takaful Fund may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the Family and General Takaful Fund will receive from the retakaful operator. The impairment loss is recorded in profit or loss. Gains or losses on buying retakaful, if any, are recognised in profit or loss immediately at the date of purchase and are not amortised. The fund also assumes retakaful risk in the normal course of business for Family Takaful and General Takaful contracts when applicable. Contributions and claims on assumed retakaful are recognised as revenue or expenses in the same manner as they would be if the retakaful were considered direct business, taking into account the product classification of the retakaful business. Retakaful liabilities represent balances due to retakaful operators. Amounts payable are estimated in a manner consistent with the related retakaful contract. Retakaful assets or liabilities are derecognised when the contractual rights are extinguished or expired or when the contract is transferred to another party. Retakaful contracts that do not transfer significant takaful risk are accounted for directly through the statement of financial position. These are deposit assets or financial liabilities that are recognised based on the consideration paid or received less any explicit identified contributions or fees to be retained by the retakaful operators. Investment income on these contracts is accounted for using the effective yield method when accrued.
2.18 Contingent liabilities Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is not recognised in the statements of financial position and is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.
2.19 Contingent assets Where it is not possible that there is an inflow of economic benefits, or the amount cannot be estimated reliably, the asset is not recognised in the statements of financial position and is disclosed as a contingent asset, unless the probability of inflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent assets unless the probability of inflow of economic benefits is remote.
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.20 Operating segments An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segment’s operating results are reviewed regularly by the chief operating decision maker, which in this case is the Group Managing Director cum Chief Executive Officer of the Group, to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.
2.21 Share capital Ordinary shares are classified as equity in the statement of financial position. Cost directly attributable to the issuance of new equity shares are taken to equity as a deduction from the proceeds.
2.22 Recognition of income Financing income – banking business Financing income is recognised in the profit or loss on an accrual basis using the effective profit rate method. The effective profit rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instruments or, when appropriate, a shorter year to the net carrying amount of the financial instruments. When calculating the effective profit rate, the Group has considered all contractual terms of the financial instruments but does not consider future credit losses. The calculation includes all fees and transaction costs integral to the effective profit rate, as well as premium or discounts. Once a financial asset or a group of financial assets has been written down as a result of an impairment loss, income is recognised using the profit rate used to discount the future cash flows for the purpose of measuring the impairment loss. Financing income – Takaful business Income from financing are recognised on an accrual basis, except where financing is considered impaired, i.e. where repayments are in arrears for more than 90 days, in which case recognition of such income is suspended. Subsequent to suspension, income is recognised on the receipt basis until all arrears have been paid. Income is recognised on a time propotion basis that takes into account the effective yield of the asset. Wakalah fees Wakalah fees are recognised as income or expenses by the respective funds based on a predetermined percentage of gross contributions upon inception of certificates. Wakalah surplus/(deficit) is arrived at after deducting commission and management expenses against the Wakalah fees charged.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.22 Recognition of income (continued) Fee and other income recognition Financing arrangement, management and participation fees, underwriting commissions and brokerage fees are recognised as income based on contractual arrangements. Fees from advisory and corporate finance activities are recognised net of service taxes and discounts on completion of each stage of the assignment. Dividend income from subsidiary and associated companies and other investments are recognised when the Company’s rights to receive payment is established.
2.23 Income tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to items recognised directly in equity or other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous financial years. Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither, accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted by the end of the reporting period. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Unutilised reinvestment allowance and investment tax allowance, being tax incentives that is not a tax base of an asset, is recognised as a deferred tax asset to the extent that it is probable that the future profits will be available against which the unutilised tax incentive can be utilised.
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Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.24 Zakat This represents business zakat. It is an obligatory amount payable by the Group and the Company to comply with the principles of Shariah.
2.25 Employee benefits Short-term employee benefits Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group and the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. State plans The Group’s and the Company’s contributions to the statutory pension funds are charged to profit or loss in the financial year to which they relate. Once the contributions have been paid, the Group and the Company have no further payment obligations. Share-based payment transactions The grant date fair value of share-based payment granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. The fair value of the employee share options is measured using a binomial lattice model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), expected dividends, and the risk-free profit rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.26 Non-current assets held for sale Non-current assets, or disposal group comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. Immediately before classification as held for sale, the assets, or components of a disposal group, are remeasured in accordance with the Group’s accounting policies. Thereafter generally the assets, or disposal group, are measured at the lower of their carrying amount and fair value less cost to sell. Any impairment loss on a disposal group is first allocated to goodwill, and then to remaining assets and liabilities on pro rata basis, except that no loss is allocated to financial assets, deferred tax assets and investment property, which continue to be measured in accordance with the Group’s accounting policies. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss. Intangible assets and property and equipment once classified as held for sale are not amortised or depreciated. In addition, equity accounting of equity-accounted investees ceases once classified as held for sale.
2.27 Earnings per ordinary shares The Group presents basic data for its ordinary shares (“EPS”). Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.
2.28 Borrowing costs Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective profit method. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets.
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.28 Borrowing costs (continued) The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
2.29 Fair value measurements From 1 January 2013, the Group adopted MFRS 13, Fair Value Measurement which prescribed that fair value of an asset or a liability, except for share-based payment and lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market. For non-financial asset, the fair value measurement takes into account a market participant’s ability to generate economic benefits by using the assets in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. In accordance with the transitional provision of MFRS 13, the Group applied the new fair value measurement guidance prospectively, and has not provided any comparative fair value information for new disclosures. The adoption of MFRS 13 has not significantly affected the measurements of the Group’s assets or liabilities other than the additional disclosures.
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3. CASH AND SHORT-TERM FUNDS Group Cash and balances with banks and other financial institutions Money at call and interbank placements with remaining maturity
600,969 1,228,798 3,352,927 834,646
3,953,896 2,063,444
2013 2012 RM’000 RM’000
Company Cash and balances with banks and other financial institutions
149,559 68,329
149,559 68,329
Included in cash and balances with banks and other financial institutions of the Group are clients’ monies held in trust of RM7,873,000 (2012: RM2,736,368)
4. DEPOSITS AND PLACEMENTS WITH FINANCIAL INSTITUTIONS Group 2013 2012 RM’000 RM’000 Licensed banks Other financial institutions
688,324 519,646 12,978 –
701,302 519,646
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
5. FINANCIAL ASSETS HELD-FOR-TRADING Group 2013 2012 RM’000 RM’000 At fair value: Quoted securities in Malaysia – Shares 51,239 40,502 Quoted securities outside Malaysia – Shares 29,583 32,330 – Unit trusts 18,451 29,580
99,273 102,412
Unquoted securities in Malaysia – Malaysian Government Investment Issues – Islamic Commercial Papers – Bank Negara Negotiable Notes – Islamic Debt Securities – Investment funds – Malaysian Islamic Treasury Bills Unquoted securities outside Malaysia – Islamic Debt Securities
726,353 20,190 – 49,884 178,058 846,786 328,751 698,158 – 59,662 – 9,807 72,763 44,707
1,305,925 1,729,194
1,405,198 1,831,606
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6. DERIVATIVE FINANCIAL ASSETS/LIABILITIES The following tables summarise the contractual or underlying principal amounts of derivatives financial instruments held at fair value through profit or loss and hedging purposes. The principal or contractual amounts of these instruments reflect the volume of transactions outstanding at financial position date, and do not represent amounts at risk. Trading derivative financial instruments are revalued on a gross position and the unrealised gains or losses are reflected as derivative financial assets and liabilities respectively. Notional Fair value Amount Assets Liabilities Group RM’000 RM’000 RM’000 31.12.2013 Forward contracts 1,381,894 8,681 (6,594) Profit rate swaps 1,311,481 19,855 (6,389) Structured deposits 110,495 582 (582) 2,803,870 29,118 (13,565) 31.12.2012 Forward contracts Profit rate swaps Structured deposits
680,789 1,434,000 114,095
2,523 12,200 2,013
(1,365) (10,961) (2,013)
16,736
(14,339)
2,228,884
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
7. FINANCIAL ASSETS AVAILABLE-FOR-SALE Group 2013 2012 RM’000 RM’000 At fair value Quoted securities in Malaysia – Unit trusts 148,399 88,253 – Shares 930,897 516,460 Quoted securities outside Malaysia – Unit trusts 73,827 88,941 – Shares 542 52 – Islamic Debt Securities 5,134 –
1,158,799 693,706
At fair value Unquoted securities in Malaysia – Malaysian Government Islamic Papers – Malaysian Government Investment Issues – Negotiable Islamic Debt Certificates – Islamic Debt Securities – Shares – Unit trusts Unquoted securities outside Malaysia – Shares – Islamic Debt Securities – Islamic Development Bank Unit Trusts
455,731 664,459 1,269,943 1,893,477 447,825 2,239,370 12,868,937 11,063,793 380 380 298,897 284,981 36 43 1,345 10,617 1,647 1,530
15,344,741 16,158,650
At cost Unquoted securities in Malaysia – Unquoted shares in Malaysia Less: Accumulated impairment loss*
23,456 22,477 (14,740) (13,761)
8,716 8,716
Unquoted securities outside Malaysia – Unquoted shares outside Malaysia
23,754 1,130
16,536,010 16,862,202
* Movement in accumulated impairment loss due to translation differences.
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135
7. FINANCIAL ASSETS AVAILABLE-FOR-SALE (CONTINUED) Company 2013 2012 RM’000 RM’000 At fair value Quoted securities in Malaysia – Unit trusts 17,860 17,290
8. FINANCIAL ASSETS HELD-TO-MATURITY Group 2013 2012 RM’000 RM’000 Unquoted securities in Malaysia – Malaysian Government Islamic Papers 145,391 145,502 – Islamic Debt Securities 319,089 327,156 Less: Accumulated impairment loss (7,125) (19,738) Unquoted securities outside Malaysia – Islamic Debt Securities
www.bimbholdings.com
10,580 15,801 467,935 468,721
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
9. FINANCING, ADVANCES AND OTHERS (a) By type and Shariah contract Group 31 December 2013
Bai’ Ijarah Ijarah Bithaman Bai At- Muntahiah Thumma Ajil Murabahah Al-Inah Tawarruq Bit-Tamleek Al-Bai Istisna’ Ar-Rahnu Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At amortised cost Cash line Term financing House financing Syndicated financing Leasing financing Bridging financing Personal financing Other term financing Staff financing Credit cards Trade bills discounted Trust receipts Pawn broking
5,442,107 – – 1,190,950 – – 67,995 – 6,701,052 30,874 – 193,387 475,200 – 33,216 – – 732,677 – – – – 57,931 159,750 – – 217,681 – – – – – – 40,052 – 40,052 – – 734,250 7,597,961 – – – – 8,332,211 3,565,043 – 7,034 2,326,624 – – 1,884 – 5,900,585 124,320 – 708 25,736 – – 21,944 – 172,708 – – 157,089 288,153 – – – – 445,242 – 805,381 14,107 – – – – – 819,488 – 35,957 – – – – – – 35,957 – – – – – – – 95,621 95,621
9,162,344
–
– 175,923 573,323
841,338 1,282,498 12,477,947
–
57,931
–
–
192,966 131,875
Allowance for impaired financing, advances and others – collective assessment allowance – individual assessment allowance Net financing, advances and others
– 749,246
95,621 24,242,520
(365,375) (136,197)
23,740,948
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9. FINANCING, ADVANCES AND OTHERS (CONTINUED) (a) By type and Shariah contract (continued) Group 31 December 2012
Bai’ Ijarah Ijarah Bithaman Bai At- Muntahiah Thumma Ajil Murabahah Al-Inah Tawarruq Bit-Tamleek Al-Bai Istisna’ Ar-Rahnu Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At amortised cost Cash line Term financing House financing Syndicated financing Leasing financing Bridging financing Personal financing Other term financing Staff financing Credit cards Trade bills discounted Trust receipts Pawn broking
5,123,177 – – – – – 63,076 – 5,186,253 41,745 – 170,209 180,177 – 33,935 – – 426,066 – – – – 30,626 172,954 – – 203,580 – – – – – – 151,127 – 151,127 – – 876,635 5,731,481 – – – – 6,608,116 3,429,173 – 27,129 1,075,425 – – 12,777 – 4,544,504 125,103 – 2,279 18,363 – – 19,635 – 165,380 – – 216,360 217,079 – – – – 433,439 – 1,352,851 – 127,364 – – – – 1,480,215 – 50,314 – – – – – – 50,314 – – – – – – – 80,572 80,572
8,720,001
803
– 219,981
397,771
1,403,165 1,512,593 7,747,660
–
30,626
–
–
206,889 246,615
–
618,555
80,572 19,948,121
Allowance for impaired financing, advances and others – collective assessment allowance – individual assessment allowance
(313,334) (126,988)
Net financing, advances and others 19,507,799
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
9. FINANCING, ADVANCES AND OTHERS (CONTINUED) Group 2013 2012 RM’000 RM’000 (b) By type of customer Domestic non-bank financial institutions Domestic business enterprise Small medium industries Government and statutory bodies Individuals Other domestic entities Foreign entities
352,438 57,558 4,630,194 4,327,447 631,069 493,352 200,885 165,550 18,216,908 14,679,594 5,483 5,646 205,543 218,974
24,242,520 19,948,121
(c) By profit rate sensitivity Fixed rate House financing Others Floating rate Others
1,512,408 1,552,555 7,954,409 8,926,966 14,775,703 9,468,600
24,242,520 19,948,121
(d) By remaining contractual maturity Maturity within one year More than one year to three years More than three years to five years More than five years
2,927,612 3,065,264 816,371 969,154 1,373,079 1,082,872 19,125,458 14,830,831
24,242,520 19,948,121
(e) By geographical distribution Central Region Eastern Region Northern Region Southern Region East Malaysia Region
10,699,889 8,570,148 4,455,488 3,635,878 3,928,233 3,165,074 3,191,397 2,920,068 1,967,513 1,656,953 24,242,520 19,948,121
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9. FINANCING, ADVANCES AND OTHERS (CONTINUED) Group 2013 2012 RM’000 RM’000 (f) By sector Primary agriculture 243,148 223,163 Mining and quarrying 8,135 5,334 Manufacturing (including agro-based) 829,577 1,016,127 Electricity, gas and water 365,014 175,743 Wholesale & retail trade, and hotels & restaurants 750,364 673,210 Construction 1,872,011 1,725,523 Real estate 517,731 572,787 Transport, storage and communications 236,616 208,945 Finance, insurance and business activities 850,283 391,521 Education, health and others 342,942 254,018 Household sectors 18,216,799 14,693,126 Other sectors 9,900 8,624
24,242,520 19,948,121
(g) Movement in impaired financing and advances (“impaired financing”) are as follows: Group 2013 2012 RM’000 RM’000 At 1 January 2013/1 January 2012 Classified as impaired during the year Reclassified as not impaired during the year Amount recovered Amount written off Exchange differences
308,709 379,790 440,665 427,775 (236,056) (254,872) (71,626) (92,264) (160,388) (151,472) 3,998 (248)
At 31 December 2013/31 December 2012
285,302 308,709
Gross impaired financing as a percentage of gross financing, advances and others
www.bimbholdings.com
1.18% 1.55%
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BIMB HOLDINGS BERHAD
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
9. FINANCING, ADVANCES AND OTHERS (CONTINUED) Group 2013 2012 RM’000 RM’000 (h) Impaired financing by geographical distribution Central Region 129,930 130,400 Eastern Region 28,106 26,053 Northern Region 52,873 66,894 Southern Region 13,702 22,199 East Malaysia Region 60,691 63,163
285,302 308,709
(i) Impaired financing by sector Primary agriculture Manufacturing (including agro-based) Electricity, gas and water Wholesale & retail trade, and hotels & restaurants Construction Real estate Transport, storage and communications Finance, insurance and business activities Household sectors Other sectors
– 207 32,302 46,483 108 160 15,525 17,422 21,601 74,341 – 101 33,117 722 61,393 9,977 121,226 159,273 30 23
285,302 308,709
(j) Movement of allowance for impaired financing Group 2013 2012 RM’000 RM’000 Collective assessment allowance At 1 January 2013/1 January 2012 Allowance made during the year Amount written off Exchange differences
313,334 327,688 141,621 102,185 (90,373) (116,848) 793 309
At 31 December 2013/31 December 2012
365,375 313,334
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141
BIMB HOLDINGS BERHAD
Annual Report 2013
9. FINANCING, ADVANCES AND OTHERS (CONTINUED) (j) Movement of allowance for impaired financing (continued) Group 2013 2012 RM’000 RM’000 Individual assessment allowance At 1 January 2013/1 January 2012 Allowance made during the year Amount written off Exchange differences
126,988 75,770 79,103 85,042 (69,901) (33,824) 7 –
At 31 December 2013/31 December 2012
136,197 126,988
10. OTHER ASSETS Group 2013 2012 RM’000 RM’000 Clients’ and dealers’ debit balances 47,879 160,871 Deposits and prepayments 43,173 36,837 Other financing 87,832 82,322 Other receivables 71,917 193,953 250,801 473,983
Company 2013 2012 RM’000 RM’000 Amount due from subsidiaries 40 9,955 Deposits and prepayments 2,411 491 2,451
10,446
Other financing of the Group are stated net of impairment allowances of RM1,927,000 (2012: RM1,935,000). Other receivables of the Group are stated net of impairment allowance of RM115,215,000 (2012: RM92,967,000). Amount due from subsidiaries are non trade in nature not subject to financing charges in nature and has no fixed term of repayments. www.bimbholdings.com
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
11. TAKAFUL ASSETS Group Note 2013 2012 RM’000 RM’000 Retakaful assets: – Claims liabilities 21(a)(i) 407,393 301,150 – Contribution liabilities 21(a)(ii) 80,200 72,297 – Actuarial liabilities 21(a)(iii) 148,340 63,856
635,933 437,303 Takaful receivables – Due contributions 88,353 82,378 – Due from retakaful/co-takaful 37,325 22,518
125,678 104,896 Less: Allowance for impaired receivables (8,522) (10,883)
117,156 94,013
753,089 531,316 Offsetting of financial assets and financial liabilities There is no financial assets and liabilities that have been set off for presentation purpose.
12. STATUTORY DEPOSITS WITH BANK NEGARA MALAYSIA The non-interest bearing statutory deposits are maintained with Bank Negara Malaysia (“BNM”) in compliance with Section 26(2)(c) of the Central Bank of Malaysia Act, 2009, the amount of which are determined as set percentages of total eligible liabilities.
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143
BIMB HOLDINGS BERHAD
Annual Report 2013
13. DEFERRED TAX ASSETS Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Group
Assets Liabilities Total 2013 2012 2013 2012 2013 2012 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Property, plant and equipment Investment properties Unabsorbed capital allowances Provisions
91 63 (28,843) (33,495) (28,752) (33,432) 640 783 – – 640 783 28,579 30,246 – – 28,579 30,246 68,724 58,233 – – 68,724 58,233
Tax assets/(liabilities)
98,034 89,325 (28,843) (33,495) 69,191 55,830
Company Tax assets
10 10 – – 10 10
Deferred tax assets have not been recognised in respect of the following items: Unabsorbed capital allowances
www.bimbholdings.com
Group 2013 2012 RM’000 RM’000
27,303 30,424
144
BIMB HOLDINGS BERHAD
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
13. DEFERRED TAX ASSETS (CONTINUED) Recognised Effect of Recognised Effect of in other movement in other movement Recognised compre- in As at Recognised compre- in As at in profit hensive exchange 31.12.2012/ in profit hensive exchange As at 1.1.2012 or loss income rate 1.1.2013 or loss income rate 31.1.2013 Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Property and equipment (29,530) (3,255) (662) 25 (33,422) 4,527 146 (3) (28,752) Investment properties 121 – 662 – 783 (143) – – 640 Unabsorbed capital allowances 34,589 (4,343) – – 30,246 (1,667) – – 28,579 Provisions 36,021 23,527 (939) (386) 58,223 11,934 (839) (594) 68,724 Total assets
41,201 15,929
(939) (361) 55,830 14,651
(693) (597) 69,191
Note 34 Note 34 Note 34 Note 34
14. INVESTMENTS IN SUBSIDIARIES Company 2013 2012 RM’000 RM’000 At cost Quoted shares in Malaysia Unquoted shares in Malaysia
99,249 100,306 4,548,120 1,604,127
4,647,369 1,704,433 In December 2013, the Company completed its acquisition of 49% equity interest in Bank Islam Malaysia Berhad (a subsidiary of BIMB Holdings Berhad) (the “Bank”) for a total purchase consideration of RM2,859,037,233 from Dubai Financial Group LLC and Lembaga Tabung Haji. Subsequent to the acquisition, the Bank become a wholly-owned subsidiary of the Company. In addition, on 31 December 2013, the Company subscribed to Bank Islam Malaysia Berhad’s Dividend Reinvestment Plan, with the issuance 32,675,366 new ordinary shares of RM1.00 at total consideration of RM84,955,952.
www.bimbholdings.com
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BIMB HOLDINGS BERHAD
Annual Report 2013
14. INVESTMENTS IN SUBSIDIARIES (CONTINUED) Details of the subsidiaries are as follows: Effective Ownership Interest 2013 2012 Name of Company Principal activities % % Islamic banking business
100 51
BIMB Investment Management Berhad
Managing Islamic Unit Trust Funds
100 100
BIMB Foreign Currency Clearing Agency Sdn. Bhd.
Dormant (in the process of members voluntary liquidation)
100 100
Al-Wakalah Nominees (Tempatan) Sdn. Bhd.
Provide nominee services
100
100
Farihan Corporation Sdn. Bhd.
Managing Islamic pawn broking business
100
100
Bank Islam Trust Company (Labuan) Ltd.
Provide services as Labuan registered trust company
100
100
Bank Islam Malaysia Berhad Subsidiaries of Bank Islam Malaysia Berhad
Subsidiary of Bank Islam Trust Company (Labuan) Ltd. BIMB Offshore Company Management Services Sdn. Bhd.
Resident Corporate Secretary and Director for Offshore Companies
Syarikat Takaful Malaysia Berhad
Family and General Takaful business
60.50 61.14
ASEAN Retakaful International (L) Ltd**
Family and General retakaful business
63.09 63.09
P.T. Syarikat Takaful Indonesia*#
Investment holding
100 100
Subsidiaries of Syarikat Takaful Malaysia Berhad
www.bimbholdings.com
56 56
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BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
14. INVESTMENTS IN SUBSIDIARIES (CONTINUED) Effective Ownership Interest 2013 2012 Name of Company Principal activities % % Syarikat Takaful Malaysia Berhad (continued) Subsidiaries of P.T. Syarikat Takaful Indonesia P.T. Asuransi Takaful Umum*#
General Takaful business
64.70 64.70
P.T. Asuransi Takaful Keluarga*#
Family Takaful business
74.80 74.80
BIMB Securities (Holdings) Sdn. Bhd.
Investment holding
100 100
Stockbroking
100 100
BIMSEC Asset Management Sdn. Bhd.**
Investment management services
100 100
BIMSEC Nominees (Tempatan) Sdn. Bhd.
Nominee services
100
BIMSEC Nominees (Asing) Sdn. Bhd.
Nominee services
100 100
Syarikat Al-Ijarah Sdn. Bhd.
Leasing of assets
100 100
Subsidiary of BIMB Securities (Holdings) Sdn. Bhd. BIMB Securities Sdn. Bhd. Subsidiaries of BIMB Securities Sdn. Bhd
*
Incorporated in Indonesia.
#
Audited by a firm of auditors other than KPMG Desa Megat & Co.
100
** Under members’ Voluntary Winding-up commenced in 2013. The subsidiaries have been consolidated based on management accounts.
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147
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Annual Report 2013
14. INVESTMENTS IN SUBSIDIARIES (CONTINUED) Non-controlling interests in subsidiaries The Group’s subsidiaries that have material non-controlling interests (“NCI”) are as follows:
2013
Bank Syarikat Islam Takaful Malaysia Malaysia Berhad Berhad
Total
NCI percentage of ownership interest and voting interest
–
Carrying amount of NCI (RM’000)
– 239,603 239,603
Profit allocated to NCI (RM’000)
163,814 41,432 205,246
39.50%
In December 2013, Bank Islam Malaysia Berhad (“Bank Islam”) became a wholly-owned subsidiary of the Company, upon the completion of the acquisition of 49% equity interest in the Bank from Dubai Financial Group LLC and Lembaga Tabung Haji. Summarised financial information before intra-group elimination As at 31 December 2013 (RM’000)
Bank Syarikat Islam Takaful Malaysia Malaysia Berhad Berhad
Assets Liabilities
– 6,924,543 – (6,334,644)
Net Assets
– 589,899
Year ended 31 December 2013 (RM’000)
Revenue Profit for the year Total comprehensive income
2,245,105 561,988 485,726 134,380 334,313 130,905
Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities
1,293,078 328,219 874,375 (250,203) (110,443) (84,665)
Net increase in cash and cash equivalents
2,057,010 (6,649)
Dividends paid to NCI
www.bimbholdings.com
24,997 33,338
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BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
14. INVESTMENTS IN SUBSIDIARIES (CONTINUED) Non-controlling interests in subsidiaries (continued)
2012
Bank Syarikat Islam Takaful Malaysia Malaysia Berhad Berhad
Total
NCI percentage of ownership interest and voting interest 49.00% 38.86% Carrying amount of NCI (RM’000) 1,520,453 227,162 1,747,615 Profit allocated to NCI (RM’000)
209,357
40,269
249,626
Summarised financial information before intra-group elimination As at 31 December 2012 (RM’000)
Bank Syarikat Islam Takaful Malaysia Malaysia Berhad Berhad
Assets 37,422,891 6,371,644 Liabilities (34,319,926) (5,846,283) Net Assets
3,102,965
525,361
Year ended 31 December 2012 (RM’000) Revenue 1,990,478 477,115 Profit for the year 427,259 100,144 Total comprehensive income 441,756 104,301 Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities
(162,592) (2,153,311) (146,634)
739,059 (621,973) (40,704)
Net increase in cash and cash equivalents
(2,462,537)
76,382
Dividends paid to NCI
71,851
13,679
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149
BIMB HOLDINGS BERHAD
Annual Report 2013
15. INVESTMENTS IN ASSOCIATES
Group Company 2013 2012 2013 2012 RM’000 RM’000 RM’000 RM’000
At cost Unquoted shares Less: – Share of results of associate company – Accumulated impairment loss
5,019 27,582 5,019 5,019 – 349 – – (5,018) (5,018) (5,018) (5,018) 1 22,913
1 1
The principal activities of the associates and the interest of the Group are as follows: Effective Ownership Interest Place of 2013 2012 Name of Company Principal activities Incorporation % % Islamic Banking and Finance Provides training and consultancy Malaysia 48 48 Institute Malaysia Sdn Bhd services Amana Bank Limited
Provides Islamic financial services
Sri Lanka
17.79 20
The Group via Bank Islam Malaysia Berhad had 20% stake in Amana Bank Limited (“Amana Bank”) which provides Shariah compliant banking and related financial services in Sri Lanka. The Central Bank of Sri Lanka has capped foreign ownership to 15% and had given the Bank until 2015 to reduce the Bank’s shareholding. Amana Bank recently issued a rights issue as part of their capital planning which the Bank did not subscribe to. As a result, the Bank’s shareholding in Amana Bank has reduced to 17.79% as at 31 December 2013. The investment in Amana Bank is now classified as part of financial assets available-for-sale. The summarised financial information of Amana Bank Ltd. is not adjusted for the percentage ownership held by the Group as follows: Group 2013 2012 RM’000 RM’000 Total assets – 405,556 Total liabilities – 329,797 Operating revenue – 21,772 Profit after tax – 8,662
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150
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
16. PROPERTY, PLANT AND EQUIPMENT
Furniture, Computer **Land fixtures equipment and and Office Motor and buildings fittings equipment vehicles software Total Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Cost At 1 January 2012 Additions Reclassifications Disposals Write off Exchange difference
273,437 195,728 73,504 3,272 353,907 899,848 4,460 27,472 11,078 1,190 29,203 73,403 (658) 603 55 – – – (537) (433) (1,741) (427) (1,560) (4,698) (579) (2,201) (3,430) – (187) (6,397) (1,283) (987) (32) (78) (91) (2,471)
At 31 December 2012/ 1 January 2013 274,840 220,182 79,434 3,957 381,272 959,685 Additions 7,786 12,247 5,847 465 20,721 47,066 Reclassifications (109) 73 (41) – 77 – Disposals (2,579) (5,191) (2,276) (429) (3,044) (13,519) Write off (1,837) (11,573) (12,667) (57) (2,503) (28,637) Transfer from investment properties 5,267 – – – – 5,267 Transfer to asset held for sale (1,060) – – – – (1,060) Exchange difference (2,045) (1,449) 50 (160) 141 (3,463) At 31 December 2013
280,263 214,289 70,347
3,776 396,664 965,339
Depreciation At 1 January 2012 Depreciation for the year Reclassifications Disposals Write off Exchange difference
27,935 131,742 44,320 1,786 254,899 460,682 5,994 18,158 7,706 527 23,941 56,326 (54) 2 52 – – – (429) (342) (1,669) (396) (1,511) (4,347) (439) (2,151) (3,403) – (89) (6,082) (254) (885) (30) (47) (91) (1,307)
At 31 December 2012/ 1 January 2013 Depreciation for the year Disposals Write off Transfer to asset held for sale Exchange difference
32,753 146,524 46,976 1,870 277,149 505,272 6,191 17,294 8,926 704 27,232 60,347 (1,768) (4,193) (1,837) (356) (3,031) (11,185) (1,107) (8,477) (11,847) (57) (2,490) (23,978) (33) – – – – (33) (504) (1,271) 49 (73) 137 (1,662)
At 31 December 2013
35,532 149,877 42,267
2,088 298,997 528,761
Carrying amounts At 31 December 2012
242,087
73,658
32,458
2,087
104,123
454,413
At 31 December 2013
244,731
64,412
28,080
1,688
97,667
436,578
www.bimbholdings.com
151
BIMB HOLDINGS BERHAD
Annual Report 2013
16. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Building improvements Freehold Freehold Leasehold Leasehold and land building land building renovations Total Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 ** Land and buildings Cost At 1 January 2012 Additions Reclassifications Disposals Write off Exchange difference
55,735 120,432 12,375 51,310 33,585 273,437 – – – – 4,460 4,460 – – – – (658) (658) – – – – (537) (537) – – – – (579) (579) (11) (13) – (1,255) (4) (1,283)
At 31 December 2012/ 1 January 2013 Additions Reclassifications Disposals Write off Transfer from investment properties Transfer to asset held for sale Exchange difference
55,724 120,419 12,375 50,055 36,267 274,840 – 2,748 – (49) 5,087 7,786 – – – – (109) (109) – – – (621) (1,958) (2,579) – – – – (1,837) (1,837) – 5,267 – – – 5,267 – – – (1,060) – (1,060) (20) (22) – (2,010) 7 (2,045)
At 31 December 2013
55,704
128,412
12,375
46,315
37,457
280,263
Depreciation At 1 January 2012 Depreciation for the year Reclassifications Disposals Write off Exchange difference
– 3,453 812 3,076 20,594 27,935 – 2,553 174 1,468 1,799 5,994 – – – – (54) (54) – – – – (429) (429) – – – – (439) (439) – – – (250) (4) (254)
At 31 December 2012/ 1 January 2013 Depreciation for the year Reclassifications Disposals Write off Transfer to asset held for sale Exchange difference
– 6,006 986 4,294 21,467 32,753 – 2,710 174 1,297 2,010 6,191 – – – – – – – – – (164) (1,604) (1,768) – – – – (1,107) (1,107) – – – (33) – (33) – (4) – (507) 7 (504)
At 31 December 2013
– 8,712 1,160 4,887 20,773 35,532
Carrying amounts At 31 December 2012
55,724
114,413
11,389
45,761
14,800
242,087
At 31 December 2013
55,704
119,700
11,215
41,428
16,684
244,731
www.bimbholdings.com
152
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
16. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Company
Furniture, Office fixtures Motor equipment and fittings Renovation vehicles and computer RM’000 RM’000 RM’000 RM’000
Total RM’000
Cost At 1 January 2012 Additions Reclassifications Disposals Write off
55 452 603 – –
1,544 1,245 (658) (210) (575)
169 415 – (169) –
209 217 55 – (29)
1,977 2,329 – (379) (604)
At 31 December 2012/ 1 January 2013 Additions Reclassifications Disposals
1,110 – (14) –
1,346 – – –
415 – – –
452 144 14 (48)
3,323 144 – (48)
At 31 December 2013
1,096
1,346
415
562
3,419
169 69 – (169) –
181 58 52 – (29)
1,033 494 – (329) (464)
69 104 – –
262 81 6 (48)
734 675 – (48)
173
301
1,361
Depreciation At 1 January 2012 Depreciation for the year Reclassifications Disposals Write off
47 205 2 – –
At 31 December 2012/ 1 January 2013 Depreciation for the year Reclassifications Disposals
254 265 (6) –
149 225 – –
At 31 December 2013
513
374
At 31 December 2012
856
1,197
346
190
2,589
At 31 December 2013
583
972
242
261
2,058
636 162 (54) (160) (435)
Carrying amounts
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153
BIMB HOLDINGS BERHAD
Annual Report 2013
17. INVESTMENT PROPERTIES Group
Freehold Freehold Leasehold Leasehold land building land building Total RM’000 RM’000 RM’000 RM’000 RM’000
Cost At 1 January 2012 Reclassified to asset held for sale Exchange difference
6,491
13,578
636
13,867
34,572
– –
(1,490) –
– (51)
(1,750) (41)
(3,240) (92)
At 31 December 2012/ 1 January 2013 Reclassified to asset held for sale Reclassified to property, plant and equipment Exchange difference
6,491 12,088 – –
585 12,076 31,240 – (6,938) (6,938)
– –
(5,535) –
– (88)
– (70)
(5,535) (158)
6,491
6,553
497
5,068
18,609
– –
952 226
– –
640 286
1,592 512
– – –
1,178 137 –
– – –
926 139 (205)
2,104 276 (205)
– –
(268) –
– (10)
– (9)
(268) (19)
At 31 December 2013 Depreciation At 1 January 2012 Depreciation for the year At 31 December 2012/ 1 January 2013 Depreciation for the year Reclassified to asset held for sale Reclassified to property, plant and equipment Exchange difference At 31 December 2013
–
1,047
(10)
851
1,888
Carrying amounts At 31 December 2012
6,491
10,910
585
11,150
29,136
At 31 December 2013
6,491
5,506
507
4,217
16,721
Investment properties comprise a number of commercial properties that are leased to third parties. Each of the leases contains an initial non-cancelable period of 3 years. Subsequent renewals are negotiated with the lessee and on average renewal periods of 3 years.
www.bimbholdings.com
154
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
17. INVESTMENT PROPERTIES (CONTINUED) Fair value of the Group’s investment properties are categorised as follows: Level 1 Level 2 Level 3 Total 2013 RM’000 RM’000 RM’000 RM’000 Freehold land and buildings Leasehold land and buildings with unexpired lease period of more than 50 years Leasehold land and buildings with unexpired lease period of less than 50 years
–
–
6,344
6,344
–
–
8,655
8,655
–
–
4,715
4,715
–
–
19,714
19,714
Freehold land and buildings Leasehold land and buildings with unexpired lease period of more than 50 years Leasehold land and buildings with unexpired lease period of less than 50 years
–
–
11,879
11,879
–
–
17,749
17,749
–
–
1,751
1,751
–
– 31,379 31,379
2012
The following are amounts arising from investment properties that have been recognised in profit or loss during the financial year. Group 2013 2012 RM’000 RM’000 Rental income (net of direct operating expenses)
3,087 4,901
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BIMB HOLDINGS BERHAD
Annual Report 2013
155
18. DEPOSITS FROM CUSTOMERS Group 2013 2012 RM’000 RM’000 (a) By type of deposit Non Mudharabah fund Demand deposits Savings deposits Negotiable Islamic Debt Certificates (NIDC) Waheed-i Ziyad * Others
9,790,057 8,962,434 2,379,204 2,515,341 1,466,205 1,638,528 358,516 2,217,203 98,457 101,664 88,022 78,562
14,180,461 15,513,732
Mudharabah fund Savings deposits General investment deposits Special investment deposits
2,295,278 1,942,190 2,012,162 2,173,818 18,436,466 12,749,260
22,743,906 16,865,268
36,924,367 32,379,000
* Structured deposits
www.bimbholdings.com
156
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
18. DEPOSITS FROM CUSTOMERS (CONTINUED)
Maturity structure of NIDCs, Waheed-i, Ziyad and investment deposits are as follows: Group 2013 2012 RM’000 RM’000 Due within six months 20,152,221 16,813,222 More than six months to one year 2,036,519 1,243,158 More than one year to three years 136,897 775,333 More than three years to five years 46,169 48,760
22,371,806 18,880,473
(b) By type of customer Government and statutory bodies Business enterprises Individuals Others
8,069,129 7,378,695 9,688,640 8,771,118 5,124,757 5,263,990 14,041,841 10,965,197
36,924,367 32,379,000
19. DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS Group 2013 2012 RM’000 RM’000 Non-Mudharabah fund Licensed banks 1,538 1,475 Other financial institutions 44,564 50,153
46,102 51,628
Mudharabah fund Licensed banks Other financial institutions
1,298,873 768,360 185,000 40,290
1,483,873 808,650
1,529,975 860,278
www.bimbholdings.com
157
BIMB HOLDINGS BERHAD
Annual Report 2013
20. OTHER LIABILITIES Group
2013 2012 RM’000 RM’000
Accruals and other payables Clients’ and dealers’ credit balances Trust account
724,208 714,982 47,861 154,432 2,497 –
774,566 869,414
Company Accruals and other payables Amount due to subsidiaries
11,361 1,458 664 –
12,025 1,458
The amount due to subsidiaries is non-trade, unsecured, not subject to financing charge and repayable on demand.
21. TAKAFUL LIABILITIES Group 2013 2012 Note RM’000 RM’000 Takaful contract liabilities 21(a) 5,875,051 5,448,143 Expense reserves 21(b) 131,522 89,486 Takaful payables 21(c), 39.5(b) 75,428 43,126
www.bimbholdings.com
6,082,001 5,580,755
158
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
21. TAKAFUL LIABILITIES (CONTINUED) (a) Takaful contract liabilities The takaful contract liabilities comprise the following: Provision for outstanding claims Provision for unearned contributions Participants’ fund
Group 2013 2012 Note RM’000 RM’000 21(a)(i) 21(a)(ii) 21(a)(iii)
861,274 733,074 296,425 295,439 4,717,352 4,419,630
5,875,051 5,448,143 (i) Provision for outstanding claims The provision for outstanding claims and its movements are further analysed as follows: Group Gross Retakaful Net Note RM’000 RM’000 RM’000 31.12.2013 Provision for claims reported by participants 39.5(b) 473,365 (293,578) 179,787 Provision for IBNR* 387,909 (113,815) 274,094 Provision for outstanding claims
861,274 (407,393) 453,881
Note 11
31.12.2012 Provision for claims reported by participants 39.5(b) Provision for IBNR*
417,944 315,130
(224,743) (76,407)
193,201 238,723
Provision for outstanding claims
733,074
(301,150)
431,924
* Incurred-but-not-reported (“IBNR”)
Note 11
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159
BIMB HOLDINGS BERHAD
Annual Report 2013
21. TAKAFUL LIABILITIES (CONTINUED) (a) Takaful contract liabilities (continued) (i) Provision for outstanding claims (continued) Movement of provision for outstanding claims: Group Gross Retakaful Net RM’000 RM’000 RM’000 At 1 January 2012 634,182 (262,019) 372,163 Claims incurred during the year 675,824 (81,515) 594,309 Adjustment to claims incurred in prior accident years (18,639) 15,631 (3,008) Claims paid during the year (654,024) 55,998 (598,026) Increase in IBNR 98,827 (31,041) 67,786 Effect of movement in exchange rates (3,096) 1,796 (1,300) At 31 December 2012/1 January 2013 Claims incurred during the year Adjustment to claims incurred in prior accident years Claims paid during the year Increase in IBNR Effect of movement in exchange rates
733,074 (301,150) 431,924 918,583 (225,695) 692,888 (91,255) 74,157 (17,098) (769,419) 79,843 (689,576) 72,779 (37,408) 35,371 (2,488) 2,860 372
At 31 December 2013
861,274
(407,393)
453,881
(ii) Provision for unearned contributions Group Gross Retakaful Net RM’000 RM’000 RM’000 31.12.2013 296,425 (80,200) 216,225 Note 11 31.12.2012 295,439 (72,297) 223,142
www.bimbholdings.com
Note 11
160
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
21. TAKAFUL LIABILITIES (CONTINUED) (a) Takaful contract liabilities (continued) (ii) Provision for unearned contributions (continued) Movement of provision for unearned contributions:
Group Gross Retakaful Net RM’000 RM’000 RM’000 At 1 January 2012 352,154 (88,597) 263,557 Contributions written during the year 400,960 (105,688) 295,272 Contributions earned during the year (456,652) 121,955 (334,697) Effect of movement in exchange rates (1,023) 33 (990) At 31 December 2012/1 January 2013 295,439 (72,297) 223,142 Contributions written during the year 428,406 (141,347) 287,059 Contributions earned during the year (424,992) 132,969 (292,023) Effect of movement in exchange rates (2,428) 475 (1,953)
At 31 December 2013
296,425
(80,200)
216,225
(iii) Participants’ fund Participants’ fund balance at end of the reporting period comprises the following:
Group Gross Retakaful Net RM’000 RM’000 RM’000 31.12.2013 Actuarial liabilities Unallocated surplus/accumulated surplus AFS reserve Translation reserve Net assets value attributable to unitholders
3,708,819 (148,340) 3,560,479 897,061 – 897,061 1,379 – 1,379 1,129 – 1,129 108,964 – 108,964
4,717,352 (148,340) 4,569,012 Note 11 31.12.2012 Actuarial liabilities 3,273,504 (63,856) 3,209,648 Unallocated surplus/accumulated surplus 877,426 – 877,426 AFS reserve 107,790 – 107,790 Translation reserve 1,335 – 1,335 Net assets value attributable to unitholders 159,575 – 159,575
4,419,630
(63,856)
4,355,774
Note 11 www.bimbholdings.com
161
BIMB HOLDINGS BERHAD
Annual Report 2013
21. TAKAFUL LIABILITIES (CONTINUED) (a) Takaful contract liabilities (continued) (iii) Participants’ fund (continued) Group 2013 2012 Gross Retakaful Net Gross Retakaful Net Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January Net earned contributions Investment income Realised gains and (losses) Fair value gains and (losses) Other operating income Net benefis and claims Fees deducted (net) Other operating expenses Profit paid to participants Increase in actuarial liabilities Profit attributable to the Takaful Operator Excess payment transferred to participants Change in AFS reserve Withholding tax Effect of movement in exchange rates
4,419,630 (63,856) 4,355,774 4,072,779 (64,808) 4,007,971 1,391,017 (51,952) 1,339,065 1,322,835 (46,869) 1,275,966 211,900 – 211,900 217,412 – 217,412 132,936 – 132,936 111,590 – 111,590 9,621 – 9,621 10,328 – 10,328 2,931 – 2,931 12,262 – 12,262 (782,178) 63,696 (718,482) (702,973) 40,233 (662,740) (362,158) – (362,158) (276,096) – (276,096) (11,641) – (11,641) (17,390) – (17,390) (31,639) – (31,639) (29,888) – (29,888) 38,482 (85,501) (47,019) (14,309) 489 (13,820)
At 31 December
4,717,352
6,636 (193,771)
(145,792) (11,745) (157,537) (200,407) 3,236 (106,411) (4,030)
– 3,236 (7,086) – (106,411) (12,300) – (4,030) (42,809)
(48,552) 1,018 (47,534) (24,318)
– (7,086) – (12,300) – (42,809) 463 (23,855)
(148,340)
4,569,012
4,419,630
(63,856)
4,355,774
(b) Expense reserves
Group 2013 2012 RM’000 RM’000
At 1 January Provision for the year, net Effect of movement in exchange rates
89,486 19,739 42,770 70,110 (734) (363)
At 31 December
131,522 89,486
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162
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
21. TAKAFUL LIABILITIES (CONTINUED) (c) Takaful payables Group 2013 2012 RM’000 RM’000 Due to retakaful companies Due to Intermediaries/Participants
61,359 31,743 14,069 11,383
75,428 43,126
22. SHARE CAPITAL
Group and Company 2013 2012 RM‘000 RM‘000
Authorised: Ordinary shares of RM1 each
2,000,000 2,000,000
Issued and fully paid: Ordinary shares of RM1 each As at 1 January Issued and paid during the year
1,066,790 1,066,790 426,716 –
As at 31 December
1,493,506 1,066,790
In December 2013, the Company increased its issued and paid-up share capital from RM1,066,789,896 to RM1,493,505,854 via the renounceable rights issue of 426,715,958 new ordinary shares of RM1.00 each, together with 426,715,958 free detachable warrants at an issue price of RM4.25 per rights share on the basis of two (2) rights share together with two (2) warrants for every five (5) existing shares.
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BIMB HOLDINGS BERHAD
Annual Report 2013
163
23. RESERVES 23.1 Share premium and reserves
Breakdown of share premium and reserves are as follows: Group Restated 2013 2012 Note RM’000 RM’000 Share premium 1,859,628 603,630 Other reserves 23.2 (592,405) 428,433 Retained Earnings/(Accumulated losses) 49,608 (18,078)
1,316,831 1,013,985 Company 2013 2012 RM’000 RM’000 Share premium 1,859,628 603,630 Fair value reserves (45) 133 Warrant reserves 129,300 – Retained earnings 235,004 133,550
2,223,887 737,313
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164
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
23. RESERVES (CONTINUED) 23.2 Other reserves Group At 1 January 2012 Foreign exchange translation differences Fair value reserve: Net change in fair value Net amount reclassified to profit or loss Transfer from current year profit Zerorisation of accumulated losses in subsidiary Transfer to accumulated losses
Capital Statutory Warrant Acquisition Fair value Translation LTIP reserve reserve reserve Reserve reserve reserve reserve Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 638,370 602,493
–
–
65,541 (10,386)
–
–
–
–
–
–
–
–
21,069
– 105,237
– –
– –
(17,434) –
– (349,011) (631,507) –
– –
– –
6,863 358,719
–
–
– –
–
– –
4,061
– 1,296,018 –
4,061
–
–
21,069
– –
– –
(17,434) 105,237
– –
– (349,011) – (631,507)
At 31 December 2012/ 1 January 2013 Foreign exchange translation differences Fair value reserve: Net change in fair value Net amount reclassified to profit or loss Transfer from current year profit Issuance of rights issue shares with warrants Acquisition of additional interest in subsidiary from non-controlling interests Share-based payment transactions
69,176
(6,325)
–
428,433
– – – – – (12,052) – (12,052) – – – – (56,440) – – (56,440) – – – – (8,489) – – (8,489) – 125,370 – – – – – 125,370 – – 129,300 – – – – 129,300
– – – (1,199,747) – – – (1,199,747) – – – – – – 1,220 1,220
At 31 December 2013
6,863 484,089 129,300 (1,199,747)
4,247
(18,377)
1,220 (592,405)
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BIMB HOLDINGS BERHAD
Annual Report 2013
165
23. RESERVES (CONTINUED) 23.2 Other reserves (continued) Acquisition reserve The acquisition reserve is the difference between the consideration paid and the 49% equity interest in Bank Islam Malaysia Berhad acquired during the financial year. Warrant reserve The warrant reserve arose from the Company’s issuance of 426,715,958 free detachable warrants on 11 December 2013. Capital reserve The capital reserve arose out of the issuance of bonus issue in a subsidiary of RM6,863,000. Share premium Share premium comprises the premium paid on subscription of shares in the Company over and above the par value of the shares. Translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations. Fair value reserve The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets recognised in other comprehensive income until the investments are derecognised or impaired. Statutory reserve The statutory reserve in maintained in compliance with Section 57(2)(f) of the Islamic Financial Services Act, 2013 and is not distributable as cash dividends. LTIP (Long Term Incentive Plan) reserve The LTIP reserve comprises the cumulative value of employee services received for the issue of Restricted Share Plan and Performance Share Plan. When the LTIP is exercised, the amount from the LTIP reserve is transferred to share premium. When the LTIP expire, the amount from the share option reserve is transferred to retained earnings. LTIP is disclosed in note 24.
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166
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
24. EMPLOYEE BENEFITS Share-based payments arrangement At the Extraordinary General Meeting of Syarikat Takaful Malaysia Berhad (“Takaful Malaysia”) a subsidiary of the Company, held on 24 July 2013, the shareholders approved the establishment of a Long Term Incentive Plan (“LTIP”), which comprises a Restricted Share Plan (“RSP”) and a Performance Share Plan (“PSP”), of not more than 10% of issued and paid-up share capital of Takaful Malaysia (excluding treasury shares) to eligible employees and executive directors of Takaful Malaysia. The LTIP was effected on 20 August 2013 following the submission of the By-Laws for the LTIP to Bursa Malaysia Securities Berhad, the receipt of all required approvals and the compliance with the requirements pertaining to the LTIP. The salient features of the LTIP are, inter alia, as follows: i)
The RSP is a restricted share plan for selected key employees and the executive directors of Takaful Malaysia and its subsidiaries (collectively known as “Takaful Malaysia Group”). The RSP Grant is intended as a one-off grant, subject to the discretion of the LTIP Committee for future grants, to retain key employees for the development, growth and success of Takaful Malaysia Group. The RSP will be vested to the RSP Grantees at no consideration over a period of up to three (3) years pro-rata which may include additional holding periods for each vesting as determined by the LTIP committee, whereby selected employees will be assessed based on, amongst others, the individual performance and achievement, which may include but are not limited to, profit after zakat and taxation and/or other financial measures as may be relevant, in accordance with terms and conditions stipulated and determined by the LTIP Committee in its discretion. The LTIP Committee is a committee established by the Board to implement and administer the LTIP in accordance with the LTIP By-Laws.
ii) The PSP is a performance share plan for selected key employees and the executive directors of Takaful Malaysia Group. The PSP Grant is an annual grant to incentivise key employees for the long-term success and growth of Takaful Malaysia Group as well as shareholders’ value enhancement. The PSP will be vested to the RSP Grantees at no consideration over a period of up to three (3) years cliff vesting schedule whereby selected employees will be assessed based on, amongst others, the total shareholders’ return, which is the improvement in stock price including dividends paid, and the long-term financial performance of Takaful Malaysia over a period of three (3) financial years, or such other period of time should the LTIP committee choose to do so, in accordance with terms and conditions stipulated and determined by the LTIP committee in its discretion. iii) Eligible employees are those executives (including executive directors) of Takaful Malaysia Group (other than subsidiaries which are dormant) who have attained the age of 18 years; entered into a full-time or fixed-term contract of employment with and is on the payroll of a company within the Takaful Malaysia Group; have not served notice of resignation or received notice of termination on the date of the offer; whose service/employment have been confirmed in writing; and have fulfilled other eligibility criteria which has been determined by the Longterm Incentive Plan Committee (LTIP Committee) at its sole and absolute discretion from time to time. iv) The total number of Takaful Malaysia Shares to be offered to any one of the employees and/or to be vested in any one of the grantees shall not be more than 10% of the Takaful Malaysia Shares made available under the LTIP and shall not either singly or collectively through persons connected with the said employee, holds 20% or more of Takaful Malaysia’s issued and paid up share capital.
www.bimbholdings.com
167
BIMB HOLDINGS BERHAD
Annual Report 2013
24. EMPLOYEE BENEFITS (CONTINUED) The salient features of the LTIP are, inter alia, as follows (continued): v) The maximum number of Takaful Malaysia Shares to be allotted and issued under LTIP shall not be more than in aggregate 10% of the issued and paid-up ordinary share capital of Takaful Malaysia at any point in time during the duration of the LTIP. vi) The LTIP shall be in force for a period of ten (10) years from the effective date of implementation of the LTIP. vii) The new Takaful Malaysia Shares to be allotted and issued pursuant to the LTIP shall, upon allotment and issuance, rank pari passu in all respects with the then existing issued Takaful Malaysia Shares and shall be entitled to any rights, dividends, allotments and/or distributions attached thereto and/or which may declared, made or paid to the Takaful Malaysia’s shareholders, provided that the relevant allotment date of such new shares is before the record date (as defined in the LTIP By-Laws) for any right, allotment or distribution. viii) If the LTIP Committee so decides (but not otherwise), in the event of any alteration in the capital structure of Takaful Malaysia during the duration of the LTIP, such corresponding alterations (if any) may be made in the number of unvested Takaful Malaysia Shares and/or the method and/or manner in the vesting of the Takaful Malaysia Shares comprised in a grant. During the year, the number of the shares granted are as follows: Restricted Performance Shares Shares Number Number of shares of shares Total (‘000) (‘000) (‘000) At 1 January, 2013 – – – Granted during the year
607 724 1,331
Outstanding at 31 December, 2013
607 724 1,331
Exercisable at 31 December, 2013
www.bimbholdings.com
–
–
–
168
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
24. EMPLOYEE BENEFITS (CONTINUED) The fair value of services received in return for Restricted Shares and Performance Shares granted are based on the fair value of Restricted Shares and Performance Shares granted respectively, measured using Monte Carlo Simulation, with the following inputs: Restricted Performance Shares Shares 2013 2013 Fair value and assumption Fair value at grant date (RM)
7.194 6.996
Weighted average share price (RM) Share price at grant date (RM) Expected volatility (weighted average volatility) Option life (expected weighted average life) Expected dividends (RM) Risk-free interest rate (based on Malaysian government bonds)
7.194 6.996 7.755 7.755 34.30% 34.30% 3 3 0.0384 0.0384 3.30% to 3.52% 3.43%
Value of employee services received for issue of shares
Group Restricted Performance shares shares Total RM’000 RM’000 RM’000 Expense recognised as share-based payments Share option and performance share granted in 2013
1,148
868
2,016
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169
BIMB HOLDINGS BERHAD
Annual Report 2013
25. INCOME DERIVED FROM INVESTMENT OF DEPOSITORS’ FUNDS Group 2013 2012 RM’000 RM’000 Income derived from investment of: (i) General investment deposits (ii) Other deposits
118,442 120,644 1,732,836 1,529,998
1,851,278 1,650,642 (i) Income derived from investment of general investment deposits Group 2013 2012 RM’000 RM’000 Financing income and hibah Financing, advances and others 86,619 82,259 Financial assets: – Held-for-trading 1,903 847 – Available-for-sale 24,173 25,918 – Held-to-maturity 652 4,360 Money at call and deposit with financial institutions 4,211 4,004 117,558 117,388 Other dealing income Net gain/(loss) from sale of financial assets held-for-trading Net gain on revaluation of financial assets held-for-trading
(594) 321 596 1,273
2 1,594 Other operating income Net gain from sale of financial assets available-for-sale Loss on redemption of financial assets held-to-maturity
911 1,662 (29) –
882 1,662 118,442 120,644 Of which Financing income earned on impaired financing 1,696 2,043
www.bimbholdings.com
170
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
25. INCOME DERIVED FROM INVESTMENT OF DEPOSITORS’ FUNDS (CONTINUED) (ii) Income derived from investment of other deposits Group 2013 2012 RM’000 RM’000 Financing income and hibah Financing, advances and others 1,267,866 1,045,032 Financial assets: – Held-for-trading 27,903 11,279 – Available-for-sale 353,419 328,135 – Held-to-maturity 9,495 55,732 Money at call and deposits with financial institutions 61,476 49,974
1,720,159 1,490,152
Other dealing income Net (loss)/gain from sale of financial assets held-for-trading (8,948) 4,009 Net gain on revaluation of financial assets held-for-trading 8,554 15,993
(394) 20,002
Other operating income Net gain from sale of financial assets available-for-sale Loss on redemption of financial assets held-to-maturity
13,501 19,844 (430) –
13,071 19,844
1,732,836 1,529,998
Of which Financing income earned on impaired financing
24,744 26,408
www.bimbholdings.com
171
BIMB HOLDINGS BERHAD
Annual Report 2013
26. INCOME DERIVED FROM INVESTMENT OF SHAREHOLDERS’ FUNDS
Group Company 2013 2012 2013 2012 RM’000 RM’000 RM’000 RM’000
Financing income and hibah Financing, advances and others 4,429 6,796 – – Financial assets available-for-sale 103,988 104,320 – – Money at call and deposits with financial institutions 15,919 4,785 5,634 2,508
124,336 115,901
5,634 2,508
Other dealing income Net gain from foreign exchange transactions Net gain from sale of financial assets held-for-trading Net gain on revaluation of financial assets held-for-trading Net derivatives gains
83,797 51,599
– –
93 21 – – – 39 – – 9,163 9,805 – –
93,053 61,464
– –
Other operating income Profit on sale of foreign currencies Reversal of allowance for diminution in value of investments Reversal of allowance for doubtful debts Gross dividend income from securities: – Quoted in Malaysia – Unit trust in Malaysia – Unit trust outside Malaysia – Unquoted in Malaysia Gross dividend income from subsidiary companies Fees and commission Net (loss)/gain on disposal of property, plant and equipment Net gain on disposal of shares in subsidiary Rental income Others
– 3,124
– –
– – – 80 201 240 – –
6 8 – – 768 587 749 573 – 56 – – 6,458 3,217 – – – – 270,285 137,714 178,632 164,116 – – (1,514) 114 2 (146) – – 6,900 33,539 2,770 1,594 – – 349 557 4 179
187,670 173,613 277,940 171,939
405,059 350,978 283,574 174,447
www.bimbholdings.com
172
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
27. NET INCOME FROM TAKAFUL BUSINESS Group 2013 2012 Note RM’000 RM’000 Net earned contributions Gross earned contributions 1,523,388 1,444,313 Contribution ceded to retakaful (184,921) (168,824)
27(a) 1,338,467 1,275,489 Other income Administration income Investment income Realised gains and losses Fair value gains and losses Other operating income
30,954 23,345 230,061 231,034 144,072 121,289 3,575 6,334 6,593 16,543
415,255 398,545 Net benefits and claims Gross benefits and claims paid Claims receded to retakaful Gross change to contract liabilities Change to contract liabilities ceded to takaful
(769,419) (654,024) 79,843 55,998 (130,688) (101,988) 109,103 40,927
27(b) (711,161) (659,087) Expense reserves
(42,770) (70,110)
Income from takaful business 999,791 944,837 Profits attributable to participants/takaful operator (446,733) (472,504)
Net income from takaful business 553,058 472,333
www.bimbholdings.com
BIMB HOLDINGS BERHAD
Annual Report 2013
173
27. NET INCOME FROM TAKAFUL BUSINESS (CONTINUED) (a) Net earned contributions Group 2013 2012 RM’000 RM’000
Gross contributions Change in actuarial reserves/unearned contributions reserves
1,480,301 1,373,965 43,087 70,348
Gross earned contributions
1,523,388 1,444,313
Retakaful Change in actuarial reserves/unearned contributions reserve
(193,299) (151,486) 8,378 (17,338)
Net earned contributions
1,338,467 1,275,489
(b) Net benefits and claims Group 2013 2012 RM’000 RM’000
Gross benefits/claims paid Retakaful recoveries
(769,419) (654,024) 79,843 55,998
Net benefits/claims paid
(689,576) (598,026)
Gross change in contract liabilities: At 31 December Less: At 1 January Effect of movement in exchange rates
(861,274) (733,074) (733,074) (634,182) (2,488) (3,096)
(130,688) (101,988)
Change in contract liabilities ceded to retakaful companies: At 31 December Less: At 1 January Effect of movement in exchange rates
407,393 301,150 301,150 262,019 2,860 1,796
109,103 40,927
(711,161) (659,087)
www.bimbholdings.com
174
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
28. ALLOWANCE FOR IMPAIRMENT ON FINANCING AND ADVANCES Group 2013 2012 RM’000 RM’000
Allowance for impaired financing, advances and others – collective assessment allowance 141,621 102,185 – individual assessment allowance 79,103 85,042 Bad debts and financing recovered (235,733) (121,154) (15,009) 66,073
29. ALLOWANCE FOR/(REVERSAL) OF IMPAIRMENT ON INVESTMENTS Group 2013 2012 RM’000 RM’000
Financial assets: – available-for-sale 9,537 – – held-to-maturity (326) (577) 9,211 (577) Investments in subsidiaries – – 9,211 (577)
30. INCOME ATTRIBUTABLE TO DEPOSITORS Group 2013 2012 RM’000 RM’000
Deposits from customers – Mudharabah Fund – Non-Mudharabah Fund Deposits and placements of banks and other financial institutions – Mudharabah Fund – Non-Mudharabah Fund
593,296 387,899 155,773 190,924 19,237 11,772 4,495 – 772,801 590,595
www.bimbholdings.com
175
BIMB HOLDINGS BERHAD
Annual Report 2013
31. PERSONNEL EXPENSES
Group Company 2013 2012 2013 2012 RM’000 RM’000 RM’000 RM’000
Salaries and wages Employees’ Provident Fund Directors’ remuneration Others
452,974 419,514 3,260 2,280 56,129 50,141 432 428 20,370 16,193 3,072 2,680 64,448 38,611 455 442
593,921 524,459
7,219 5,830
(a) Aggregate remuneration of Directors of the Group and the Company categorised into appropriate components are as follows: Directors of the Company Executive Directors: Fees and allowances Salaries, bonuses and EPF contributions Benefits-in-kind
Group Company 2013 2012 2013 2012 RM’000 RM’000 RM’000 RM’000
284 231 – – 1,907 1,749 1,907 1,749 77 115 54 76
Non-Executive Directors: Fees and allowances Benefits-in-kind
2,268 2,095 1,961 1,825
Total
4,679 4,148 3,072 2,680
Directors of the subsidiary companies Executive Directors: Salaries, bonuses and EPF contributions Benefits-in-kind
2,065 1,826 957 771 346 227 154 84
13,195 10,129 477 301
– – – –
Non-Executive Directors: Fees and allowances Benefits-in-kind
13,672 10,430
– –
Total
15,691 12,045
www.bimbholdings.com
1,773 1,491 246 124
– – – – – –
176
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
31. PERSONNEL EXPENSES (CONTINUED)
Aggregate remuneration of Directors of the Group and the Company categorised into appropriate components are as follows (continued):
Group Company 2013 2012 2013 2012 RM’000 RM’000 RM’000 RM’000
Grand Total
20,370 16,193 3,072 2,680
Total (excluding benefits-in-kind)
19,224 15,426 2,864 2,520
(b) Shariah Supervisory Council
367 330
– –
32. OTHER OVERHEAD EXPENSES
Group Company 2013 2012 2013 2012 RM’000 RM’000 RM’000 RM’000
Promotion Establishment General expenses
200,393 166,694 275 206 207,546 207,554 1,869 1,654 197,204 160,939 22,270 983
605,143 535,187 24,414 2,843
Included in other overhead expenses are: Auditors’ remuneration – Statutory audit – KPMG – Other auditors – Other services – KPMG Depreciation of property, plant and equipment Depreciation of investment properties Rental of properties Property, plant and equipment write off Rental of equipment
1,482 1,222 97 60 – 96 – – 360 508 360 25 60,347 56,326 675 494 276 512 – – 51,907 48,976 852 592 4,659 315 – 140 5,384 5,786 99 –
www.bimbholdings.com
177
BIMB HOLDINGS BERHAD
Annual Report 2013
33. KEY MANAGEMENT PERSONNEL Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel include all the Directors of the Group, and certain senior management members of the Group. The compensation for key management personnel other than Directors’ remuneration is as follows:
Group Company 2013 2012 2013 2012 RM’000 RM’000 RM’000 RM’000
Other key management personnel: – Short-term employee benefits – Benefits-in-kind
43,381 35,663 1,210 1,049 681 579 54 52
44,062 36,242 1,264 1,101
34. TAX EXPENSE Major components of tax expense Group Company Restated 2013 2012 2013 2012 RM’000 RM’000 RM’000 RM’000 Current tax expense: Malaysia – current year – prior years
254,306 201,242 56,711 24,320 2,510 423 (250) (12)
256,816 201,665 56,461 24,308
Deferred tax expense: Origination and reversal of temporary differences Over provision in prior years
(8,802) (15,737) (5,849) (192)
– – – –
(14,651) (15,929)
– –
242,165 185,736 56,461 24,308
www.bimbholdings.com
178
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
34. TAX EXPENSE (CONTINUED) A reconciliation of effective tax expense for the Group and Company are as follows: Group Company Restated 2013 2012 2013 2012 RM’000 RM’000 RM’000 RM’000 Profit before tax
819,427 717,439 248,592 165,774
Income tax using Malaysia tax rate of 25% Non-deductible expenses
204,857 179,360 62,148 41,444 44,142 18,433 7,252 1,905
Non-taxable income
(3,495) (12,288) (12,689) (19,029)
245,504 185,505 56,711 24,320
Under/(Over) provision in prior years 2,510 423 (250) (12) Over provision of deferred tax (5,849) (192) – – Tax expense
242,165 185,736 56,461 24,308
The existing Section 60AA of the Income Tax Act 1967 (ITA) does not provide deduction on commission expense incurred by Shareholders’ Fund of Takaful Malaysia (also known as Takaful Operator). Based on the recent amendment of Section 60AA of the Income Tax Act 1967 (ITA) pursuant to Finance Act 2014 (Act 761) gazetted on 23 January 2014, a tax deduction is only allowed on commission expenses incurred by Shareholders’ Fund in connection with the General Business. The deductibility of commission payment relating to family business was not provided in the Finance Act 2014. The Malaysian Takaful Association has presented the issue on non-deductibility of commission expenses incurred by the Shareholders’ Fund in connection with Family business to Ministry of Finance (MOF) on 16 January 2014. The MOF noted the disparity of tax treatment on the said commission expenses between takaful and conventional insurance and is currently assessing/studying the matter to determine the appropriate tax treatment for the said commission expenses. Based on the opinion of the Takaful Malaysia’s tax agent, the Directors of Takaful Malaysia are of the view that the Group and Takaful Malaysia has reasonable ground to claim the deduction of the said commission expenses. Accordingly, Takaful Malaysia continues to deduct the said commission expenses in estimating the provision for income tax.
www.bimbholdings.com
179
BIMB HOLDINGS BERHAD
Annual Report 2013
35. EARNINGS PER SHARE Basic earnings per ordinary share The calculation of basic earnings per ordinary share at 31 December 2013 was based on the profit attributable to owners of the Company and the weighted average number of ordinary shares in issue during the year: Group Restated 2013 2012 RM’000 RM’000
Profit attributable to owners of the Company
279,327 276,220
Group 2013 ’000
Weighted average number of ordinary shares
2012 ’000
1,080,819 1,066,790
Group Restated 2013 2012 RM’000 RM’000
Basic earnings per ordinary share
www.bimbholdings.com
25.84 25.89
180
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
36. DIVIDENDS Dividends recognised by the Company: Total Sen amount per share RM’000 2013 Final 2012 ordinary First interim 2013 ordinary
5.00 3.50
Total amount
8.50 90,677
53,339 37,338
Date of payment
17 June 2013 21 October 2013
2012 Final 2011 ordinary First interim 2012 ordinary Second interim 2012 ordinary
7.25 3.50 3.50
77,342 13 June 2012 37,338 31 October 2012 37,338 27 December 2012
Total amount
14.25
152,018
After the reporting period, the following dividend was proposed by the Directors. This dividend will be recognised in subsequent financial year upon approval by the owners of the Company. Total Sen amount per share RM’000 2013 Final ordinary
8.50
126,948
www.bimbholdings.com
BIMB HOLDINGS BERHAD
Annual Report 2013
181
37. RELATED PARTY TRANSACTIONS Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions, or where the parties are subject to common control or common significant influence. Related parties may be individuals or other entities. The Group or the Company has a related party relationship with its subsidiaries (see note 14), associates (see note 15) and holding corporation of the Company. (a) The significant related party transactions of the Group and the Company, other than key management personnel compensation, are as follows: Group Company transactions for transactions for 2013 2012 2013 2012 RM’000 RM’000 RM’000 RM’000 Holding Company (Loss)/gain on forex transaction (11,263) 150 – – Profit attributable on deposits placed 108,750 30,126 – – Rental of premises paid 20,128 20,177 – – Brokerage income 3,678 1,838 – – Contribution income for General Takaful 2,677 2,204 – – Claims paid for Family Takaful – 600 – – Claims paid for General Takaful 1,726 183 – – Other rental 227 210 – – Fees and commission received 6 – – – Subsidiaries Income receivable on deposits placed Office rental paid Others Contribution paid for General Takaful
– – 3,056 1,284 – – 845 422 – – 17 – – – 15 18
Other related companies Income received from financing, advances and others Net gain on forex transaction Profit attributable on deposits placed Fees and commission received
www.bimbholdings.com
1,279 13,146 – – 563 842 – – 4,818 4,842 – – 60 – – –
182
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
37. RELATED PARTY TRANSACTIONS (CONTINUED) (b) The significant outstanding balances of the Group and the Company with related party, are as follows: Holding company Amount due from Others Amount due to Demand and investment deposits Profit payable to investment deposit Commitment and contingencies
Group Company Net balance Net balance outstanding as at outstanding as at 2013 2012 2013 2012 RM’000 RM’000 RM’000 RM’000
30 – – – 4,308,191 2,665,880 – – 1,851 51 – – 127 127 – –
Subsidiaries Amount due from Current account and investment deposits Profit payable to investment deposit Others Amount due to Others
– – 147,106 58,778 – – 86 – – – – – – – 664 3
Other related companies Amount due from Financing, advances and others 77,448 48,041 – – Amount due to Demand and investment deposits 200,846 209,601 – – Commitment and contingencies 5,726 6,731 – – Profit payable to investment deposit 204 – – –
www.bimbholdings.com
BIMB HOLDINGS BERHAD
Annual Report 2013
183
38. CAPITAL ADEQUACY The Total Capital Ratio computation consists of the capital adequacy ratios of Bank Islam Malaysia Berhad and its subsidiaries (“Bank Islam” or “the Bank”). The Company is not required to maintain any capital adequacy ratios. Capital Adequacy Ratios The bank is required to comply with the Common Equity Tier 1 (CET 1) Capital Ratio, Total Tier 1 Capital Ratio and Total Capital Ratio prescribed by BNM. With effect from 1 January 2013, total capital and capital adequacy ratios of Bank Islam have been computed based on BNM’s Capital Adequacy Framework for Islamic Banks (Capital Components and Risk-Weighted Assets) issued on 28 November 2012. The comparative total capital and capital adequacy ratios are computed in accordance to the approach set out in the then prevailing capital framework and are thus not directly comparable to those pertaining to dates from 1 January 2013 onwards. The Bank has adopted the Standardised Approach for Credit Risk and Market Risk and the Basic Indicator Approach for Operational Risk. The capital adequacy ratios of Bank Islam are set out below: Common Equity Tier I (CET I) Capital Ratio Total Tier 1 Capital Ratio Total Capital Ratio
* After deducting proposed final dividend declared subsequent to the financial year end.
www.bimbholdings.com
2013 2012 % %
12.964 N/A 12.964 12.942* 14.056 13.986*
184
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
38. CAPITAL ADEQUACY (CONTINUED) The components of CET I, Tier I and Tier II capital of Bank Islam: (a) CAFIB Basel III capital structure with effect 1 January 2013 2013 RM’000 Tier I capital Paid-up share capital # Share premium Retained earnings Other reserves Less: Deferred tax assets
2,298,165 52,281 253,822 722,567 (24,613)
Total Common Equity Tier I Capital Total Additional Tier I Capital
3,302,222 –
Total Tier I Capital
3,302,222
Collective assessment allowance ^
278,155
Total Tier II Capital
278,155
Total Capital
3,580,377
^ Collective assessment allowance on non-impaired financing subject to maximum of 1.25% of total credit riskweighted assets. #
The increase in paid-up share capital of 32,675,366 is due to the allotment of new ordinary shares of RM1.00 each on 31 December 2013 at a consideration of RM2.60 each arising from the Dividend Reinvestment Plan of the Bank.
www.bimbholdings.com
BIMB HOLDINGS BERHAD
Annual Report 2013
185
38. CAPITAL ADEQUACY (CONTINUED) (b) CAFIB Basel II capital structure applicable until 31 December 2012 2012 RM’000 Tier I capital Paid-up share capital Retained earnings Other reserves Less: Deferred tax assets
2,265,490 209,318 505,651 (18,455)
Total Tier I capital 2,962,004 Collective assessment allowance # 257,769 Total Tier II capital 257,769 Total capital Less: Investments in associate company
3,219,773 (22,912)
Capital base 3,196,861 #
Excludes collective assessment allowance on impaired financing restricted from Tier II capital amounting to RM55,565,000.
(c) The breakdown of risk-weighted assets by each major risk category is as follows: 2013 2012 RM’000 RM’000 Credit risk 22,252,433 19,369,281 Market risk 761,777 917,234 Operational risk 2,457,803 2,207,161 25,472,013 22,493,676
www.bimbholdings.com
186
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
38. CAPITAL ADEQUACY (CONTINUED) (d) The off-balance sheet and counterparties credit risk for Bank Islam is as follows: Positive Fair Value of Credit Risk Principal Derivative Equivalent Weighted Amount Contracts Amount Asset RM’000 RM’000 RM’000 RM’000 31 December 2013 Nature of item Credit related exposures Direct credit substitutes 319,032 – 319,032 312,160 Assets sold with recourse 2 – 2 2 Transaction related contingent items 877,246 – 438,623 386,730 Short term self-liquidating trade related contingencies 278,297 – 55,659 54,695 Other commitments, such as formal standby facilities and credit lines, with an original maturity of: – not exceeding one year 1,714 – 343 327 – exceeding one year 823,818 – 411,909 338,294 Unutilised credit card lines 991,097 – 198,219 148,665 Any commitments that are unconditionally cancelled at any time by the bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrower’s creditworthiness 5,116,604 – – –
8,407,810
– 1,423,787 1,240,873
Derivative Financial Instruments Foreign exchange related contracts – less than one year 1,381,894 8,681 18,546 10,290 Profit rate related contracts – less than one year 100,000 695 250 50 – one year to less than five years 500,000 2,705 9,000 1,800 – five years and above 711,481 16,455 35,660 19,660 Equity related contracts – one year to less than five years 110,495 582 8,840 4,420
2,803,870 29,118 72,296 36,220
Total
11,211,680
29,118 1,496,083 1,277,093
www.bimbholdings.com
187
BIMB HOLDINGS BERHAD
Annual Report 2013
38. CAPITAL ADEQUACY (CONTINUED) (d) The off-balance sheet and counterparties credit risk for Bank Islam is as follows (continued): Positive Fair Value of Credit Risk Principal Derivative Equivalent Weighted Amount Contracts Amount Asset RM’000 RM’000 RM’000 RM’000 31 December 2012 Nature of item Credit related exposures Direct credit substitutes 562,654 – 562,654 Assets sold with recourse 2 – 2 Transaction related contingent items 910,688 – 455,344 Short term self-liquidating trade related contingencies 338,488 – 67,698 Other commitments, such as formal standby facilities and credit lines, with an original maturity of: – not exceeding one year 82 – 16 – exceeding one year 662,657 – 331,329 Unutilised credit card lines 949,115 – 189,823 Any commitments that are unconditionally cancelled at any time by the bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrower’s creditworthiness 5,276,220 – –
555,499 2 444,161 64,913
6 302,722 142,367
–
8,699,906
– 1,606,866 1,509,670
Derivative Financial Instruments Foreign exchange related contracts – less than one year Profit rate related contracts – less than one year – one year to less than five years – five years and above Equity related contracts – one year to less than five years
680,789
2,523
100,000 600,000 734,000
70 2,210 9,920
114,095
2,013
7,390
4,223
100 15,000 42,462
20 3,000 23,262
9,128
4,564
2,228,884 16,736 74,080 35,069
Total
www.bimbholdings.com
10,928,790
16,736 1,680,946 1,544,739
188
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
39. FINANCIAL RISK MANAGEMENT POLICIES 39.1 Categories of financial instruments The tables below provide an analysis of financial instruments categorised as follows: • • • • •
Financing, advances and receivables (“F&R”) Fair value through profit or loss (“FVTPL”) Financial assets available-for-sale (“AFS”) Financial assets held-to-maturity (“HTM”) Financial liabilities measured at amortised cost (“FL”)
Group 31 December 2013 RM’000
Carrying amount
F&R/(FL)
FVTPL
AFS
HTM
Derivatives
Financial assets Cash, balances and placements with banks
4,655,198
4,655,198
–
–
–
–
Financial assets held-for-trading
1,405,198
–
1,405,198
–
–
–
Derivative financial assets Financial assets available-for-sale Financial assets held-to-maturity Financing, advances and others Takaful assets Statutory deposits with Bank Negara Malaysia Other assets
29,118
–
–
–
–
29,118
16,536,010
–
–
16,536,010
–
–
467,935
–
–
–
467,935
–
23,740,948
23,740,948
–
–
–
–
753,089
753,089
–
–
–
–
1,297,100
1,297,100
–
–
–
–
207,628
207,628
–
–
–
–
49,092,224
30,653,963
1,405,198
16,536,010
467,935
29,118
(36,924,367) (36,924,367)
–
–
–
–
Financial liabilities Deposits from customers Deposits and placements of banks and other financial institutions
(1,529,975)
(1,529,975)
–
–
–
–
Derivative financial liabilities
(13,565)
–
–
–
–
(13,565)
Bills and acceptance payable
(170,598)
(170,598)
–
–
–
–
Other liabilities
(774,566)
(774,566)
–
–
–
–
(75,428)
(75,428)
–
–
–
–
(1,089,935)
(1,089,935)
–
–
–
–
(40,578,434) (40,564,869)
–
–
–
(13,565)
Takaful liabilities Susuk liabilities
www.bimbholdings.com
189
BIMB HOLDINGS BERHAD
Annual Report 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.1 Categories of financial instruments (continued)
Group 31 December 2012 RM’000
Carrying amount
F&R/(FL)
FVTPL
AFS
HTM
Derivatives
2,583,090
2,583,090
–
–
–
–
16,736
–
–
–
–
16,736
16,862,202
–
– 16,862,202
–
–
468,721
–
–
–
468,721
–
19,507,799 19,507,799
–
–
–
–
Financial assets Cash, balances and placements with banks Derivative financial assets Financial assets available-for-sale Financial assets held-to-maturity Financing, advances and others Takaful assets Statutory deposits with Bank Negara Malaysia Other assets
531,316
531,316
–
–
–
–
1,059,900
1,059,900
–
–
–
–
460,265
460,265
–
–
–
–
41,490,029
24,142,370
–
16,862,202
468,721
16,736
(32,379,000) (32,379,000)
–
–
–
–
Financial liabilities Deposits from customers Deposits and placements of banks and other financial institutions
(860,278)
(860,278)
–
–
–
–
Derivative financial liabilities
(14,339)
–
–
–
–
(14,339)
Bills and acceptance payable
(385,138)
(385,138)
–
–
–
–
Other liabilities
(869,414)
(869,414)
–
–
–
–
Takaful liabilities
(43,126)
(43,126)
–
–
–
–
(34,551,295) (34,536,956)
–
–
–
(14,339)
www.bimbholdings.com
190
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.1 Categories of financial instruments (continued)
Company 31 December 2013 RM’000
Carrying amount
F&R/(FL)
FVTPL
AFS
HTM
Derivatives
Financial assets Cash, balances and placements with banks
149,559
149,559
–
–
–
–
Financial assets available-for-sale
17,860
–
–
17,860
–
–
40
40
–
–
–
–
167,459
149,599
–
17,860
–
–
Other liabilities
12,025
12,025
–
–
–
–
Sukuk liabilities
1,089,935
1,089,935
–
–
–
–
1,101,960
1,101,960
–
–
–
–
F&R/(FL)
FVTPL
AFS
HTM
Derivatives
Other assets
Financial liabilities
31 December 2012 RM’000
Carrying amount
Financial assets Cash, balances and placements with banks
68,329
68,329
–
–
–
–
Financial assets available-for-sale
17,290
–
–
17,290
–
–
9,955
9,955
–
–
–
–
95,574
78,284
–
17,290
–
–
1,458
1,458
–
–
–
–
1,458
1,458
–
–
–
–
Other assets
Financial liabilities Other liabilities
www.bimbholdings.com
BIMB HOLDINGS BERHAD
Annual Report 2013
191
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.2 Financial risk management The Group has exposure to the following risks from its use of financial instruments: • • • •
Credit risk Market risk Liquidity risk Operational risk
The Group’s exposures to the above risks are mainly attributed to its main operating subsidiaries, Bank Islam and Takaful Malaysia. The Company’s exposure to these risks is not presented separately as it is not material to the Group. 39.3 Credit risk Credit risk is the risk of a financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group’s exposure to credit risk arises principally from its financing, advances and others and investment securities. The Company’s exposure to credit risk arises principally from investment securities. (a) Banking Bank Islam’s credit risk arises from all transactions that could lead to actual, contingent or potential claims against any party, borrower or obligor. The types of credit risks that the Bank considers to be material includes: Default Risk, Pre-Settlement Risk, Counterparty Risk, Credit Concentration Risk, Residual/Credit Mitigation Risk and Migration Risk. Credit risk governance The management of credit risk is principally carried out by using sets of policies and guidelines approved by Bank Islam’s Board Risk Committee (“BRC”), guided by the Risk Appetite Statement approved by Bank Islam’s Board of Directors. The Bank’s Management Risk Control Committee (“MRCC”) is responsible under the authority delegated by the Bank’s BRC for managing credit risk at strategic level. The Bank’s MRCC reviews the Bank’s credit risk frameworks and guidelines, aligns credit risk management with business strategies and planning, reviews credit profile of the credit portfolios and recommends necessary actions to ensure that the credit risk remains within established risk tolerance level. The Bank’s credit risk management governance includes the establishment of comprehensive credit risk policies, guidelines and procedures which documents the Bank’s financing standards, discretionary powers for financing approval, credit risk ratings methodologies and models, acceptable collaterals and valuation, and the review, rehabilitation and restructuring of problematic and delinquent financing.
www.bimbholdings.com
192
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.3 Credit risk (continued) (a) Banking (continued) Management of Credit Risk The management of credit risk is being performed by two distinct departments within the Bank’s Risk Management Department (“RMD”), Credit Analysis and Credit Risk Management and two departments outside of the RMD domain, namely, Credit Administration and Credit Recovery. The combined objectives are, amongst others: • To build a high quality credit portfolio in line with the Bank’s overall strategy and risk appetite; • To ensure that the Bank is compensated for the risk taken, balancing/optimising the risk/return relationship; • To develop an increasing ability to recognise, measure and avoid or mitigate potential credit risk problem areas; and • To conform with statutory, regulatory and internal credit requirements. The Bank monitors its credit exposures either on a portfolio basis or individual basis through annual reviews. Credit risk is proactively monitored through a set of early warning signals that could trigger immediate reviews of (certain part of) the portfolio. The affected portfolio or financing is placed on a watch list to enforce close monitoring and prevent financing from turning impaired and to increase chances of full recovery. A comprehensive limit structure is in place to ensure that risks taken are within the risk appetite as set by the Bank’s Board and to avoid credit risk contagion to a single customer, sector, product, Shariah contract, etc. Credit risk arising from dealing and investing activities are managed by the establishment of limits which includes counter parties limits and permissible acquisition of private entities’ instruments, subject to specified minimum rating threshold. Furthermore, the dealing and investing activities are monitored by an independent middle office unit. (b) Takaful Credit risk is the potential financial loss resulting from the failure of a customer, an intermediary or counterparty to settle its financial and contractual obligations to the Takaful Malaysia Group as and when they fall due. The Takaful Malaysia Group’s portfolio of Islamic debt securities, and to a lesser extent short-term and other investments, are subject to credit risk. The risk is defined as the potential loss resulting from adverse changes in a borrower’s ability to repay the debt. The Takaful Malaysia Group’s objective is to earn competitive relative returns by investing in a diversified portfolio of securities. Management has an investment credit risk policy in place. Limits are established to manage credit quality and concentration risk.
www.bimbholdings.com
BIMB HOLDINGS BERHAD
Annual Report 2013
193
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.3 Credit risk (continued) (b) Takaful (continued) Takaful Malaysia has takaful and other receivables and investment securities balances that are subject to credit risk. To mitigate the risk of the counterparties not paying the amount due, Takaful Malaysia has established certain business and financial guidelines for brokers/retakaful approval, incorporating ratings by major agencies where applicable and considering currently available market information. Takaful Malaysia also periodically review the financial stability of brokers/retakaful companies from public and other sources and the settlement trend of amounts due from these parties. Cash and deposits are generally placed with banks and financial institutions licensed under the Banking and Financial Institutions Act 1989 (repealed on 30 June 2013), Financial Services Act 2013 (effective on 30 June 2013), the Islamic Banking Act 1983 (repealed 30 June 2013) and Islamic Financial Services Act 2013 (effective on 30 June 2013) which are regulated by Bank Negara Malaysia. Maximum exposure to credit risk The following table presents the Group’s maximum exposure to credit risk of on-balance sheet and off-balance sheet financial instruments, without taking into account of any collateral held or other credit enhancements. For on-balance sheet assets, the exposure to credit risk equals their carrying amount. For contingent liabilities, the maximum exposure to credit risk is the maximum amount that the Group would have to pay if the obligations of the instruments issued are called upon. For credit commitments, the maximum exposure to credit risk is the full amount of the undrawn credit facilities granted to customers.
Group 2013 2012 RM’000 RM’000
Cash and short-term funds Deposits and placements with banks and other financial institutions Financial assets held-for-trading (excluding shares, unit trusts, and investment funds) Derivative financial assets Financial assets available-for-sale (excluding shares, unit trusts and investment funds) Financial assets held-to-maturity Financing, advances and others Other assets (net of prepayments) Takaful assets Statutory deposits with Bank Negara Malaysia
15,048,915 15,871,716 467,935 468,721 23,740,948 19,507,799 207,628 460,265 753,089 531,316 1,297,100 1,059,900
Sub-total
47,505,856 42,169,075
3,953,896 2,063,444 701,302 519,646 1,305,925 1,669,532 29,118 16,736
Credit related obligation: Credit commitments
8,407,810 8,699,906
Sub-total
8,407,810 8,699,906
Total credit exposures www.bimbholdings.com
55,913,666 50,868,981
194
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.3 Credit risk (continued) (i) Credit quality of gross financing and advances Gross financing and advances of the main subsidiary, Bank Islam, are classified as follows: • Neither past due nor impaired financing Financing for which the borrower has not missed a contractual payment (profit or principal) when contractually due and is not impaired as there is no objective evidence of impairment. • Past due but not impaired financing
Financing for which its contractual profit or principal payments are past due, but the Group believes that impairment is not appropriate on the basis of the level of collateral available and/or the stage of collection amounts owed to the Group.
• Impaired financing
Financing is classified as impaired when the principal or profit or both are past due for three months or more, or where a financing is in arrears for less than three months, but the financing exhibits indications of significant credit weakness.
The table below summarises the credit quality of the Group’s gross financing according to the above classifications.
Group 2013 2012 RM’000 RM’000
Financing, advances and others Neither past due nor impaired – Excellent to good – Satisfactory – Fair
18,909,824 15,185,608 4,249,300 3,722,405 368,334 338,170
Past due but not impaired Impaired
23,527,458 19,246,183 429,760 393,229 285,302 308,709
Allowance for impaired financing,advances and others – collective assessment allowance – individual assessment allowance
24,242,520 19,948,121
23,740,948 19,507,799
(365,375) (313,334) (136,197) (126,988)
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195
BIMB HOLDINGS BERHAD
Annual Report 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.3 Credit risk (continued) (i) Credit quality of gross financing and advances (continued) For management of credit risk, the Bank applies an internal credit risk rating for its neither past due nor impaired financing which is defined as follows: • Excellent to Good: Sound financial position with no difficulty in meeting its obligations. • Satisfactory: Adequate safety of meeting its obligations but more time is required to meet its obligation in full. • Fair: High risks on payment obligations. Financial performance may continue to deteriorate. The age analysis of financing and advance past-due but not impaired as at the end of the reporting period was as follows:
Group 2013 2012 RM’000 RM’000
By aging Month-in-arrears 1 Month-in-arrears 2
294,267 268,737 135,493 124,492
429,760 393,229 (ii) Credit quality of takaful receivables The table below summarises the credit quality of the Group’s Takaful receivable:
Group 2013 2012 RM’000 RM’000
Takaful receivables Neither past due nor impaired 101,441 77,408 Past due but not impaired 15,715 16,605 Impaired 8,522 10,883 125,678 104,896 Allowance for impairment (8,522) (10,883) 117,156 94,013
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196
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.3 Credit risk (continued) (ii) Credit quality of takaful receivables (continued) The age analysis of takaful receivables past-due but not impaired as at the end of the reporting period based on days past-due was as follows:
Group 2013 2012 RM’000 RM’000
Days past-due 1-30 days 31-60 days 61-90 days 91-180 days > 180 days
2,306 2,341 785 1,305 480 753 3,035 3,723 9,109 8,483
15,715 16,605
Impairment loss of takaful receivables A reconciliation of the allowance for impairment losses for takaful receivables was as follows:
RM’000 At 1 January 2012 Writeback of impairment loss
15,089 (4,206)
At 31 December 2012/1 January 2013 Writeback of impairment loss
10,883 (2,361)
At 31 December 2013
8,522
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197
BIMB HOLDINGS BERHAD
Annual Report 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.3 Credit risk (continued) (iii) Credit quality of investments’ portfolio Investments’ portfolio (excluding equity securities, unit trusts and investment units in closed end funds) of the Group by external party rating are as follows: Group As at 31 December 2013 AAA AA A Below A Unrated Sovereign Unit-linked Financial institution Corporate
Financial Financial Financial assets assets assets held-for- Derivative available- held-totrading assets for-sale maturity Total RM’000 RM’000 RM’000 RM’000 RM’000
175,428 – 4,527,435 99,419 4,802,282 103,489 – 3,414,274 33,955 3,551,718 11,745 – 59,984 7,157 78,886 – – 6,807 351 7,158 20,781 – 236,455 181,662 438,898 958,694 – 6,803,960 145,391 7,908,045 35,788 – – – 35,788 – 21,350 – – 21,350 – 7,768 – – 7,768
1,305,925
29,118 15,048,915
467,935 16,851,893
As at 31 December 2012 AAA 508,543 – 3,849,231 – 4,357,774 AA 113,890 – 2,916,795 – 3,030,685 A – – 14,214 48,501 62,715 Below A – – 1,800 112,854 114,654 Unrated 634 – 342,655 161,863 505,152 Sovereign 988,125 – 8,747,021 145,503 9,880,649 Unit-linked 58,340 – – – 58,340 Financial institution – 16,736 – – 16,736
www.bimbholdings.com
1,669,532
16,736 15,871,716
468,721 18,026,705
198
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.4 Market risk Overview All the Group’s businesses are subject to the risk that market prices and rates will move, resulting in profit or losses to the Group. Furthermore, significant or sudden movements in rates could affect the Group’s liquidity / funding position. The Group is exposed to the following main market risk factors: • Rate of Return or Profit Rate Yield Risk: the potential impact on the Group’s profitability caused by changes in the market rate of return, either due to general market movements or due to issuer / borrower specific causes; • Foreign Exchange Risk: the impact of exchange rate movements on the Group’s currency positions; • Equity Investment Risk: the profitability impact on the Group’s equity positions or investments caused by changes in equity prices or values; • Commodity Inventory Risk: the risk of loss due to movements in commodity prices; • Displaced Commercial Risk: the risk arising from assets managed by the Group on behalf of profit sharing investment account holders as the Group follows the practice of potentially foregoing part or all of its Mudarib share of profit on these assets; The objective of the Group’s market risk management is to manage and control market risk exposures in order to optimise return on risk while maintaining a market risk profile consistent with the Group’s approved risk appetite. The key features of the Group’s market risk management practices and policies are represented by the Banking and Takaful segments. (a) Banking Bank Islam separates exposures to market risk into either trading or non-trading portfolios. Trading portfolios include those positions arising from market making, proprietary position taking and other marked-to-market positions so designated as per the approved Trading Book Policy Statements. Non-trading portfolios primarily arise from the re-pricing mismatches of the Bank’s customer driven assets and liabilities and from the Bank’s investment of its surplus funds. Market risk governance The management of market risk is principally carried out by using risk limits approved by the Bank’s BRC, guided by the Risk Appetite Statement approved by the Board of Directors of the Bank. The Asset and Liability Management Committee (“ALCO”) is responsible under the authority delegated by the Bank’s BRC for managing market risk at strategic level.
www.bimbholdings.com
BIMB HOLDINGS BERHAD
Annual Report 2013
199
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.4 Market risk (continued) (a) Banking (continued) Management of market risk Bank Islam’s market risk exposures are managed by its Treasury. The aim is to ensure that all market risks are consolidated at Treasury, which has the necessary skills, tools, management and governance to manage such risks professionally. Limits are set for portfolios, products and risk types, with market liquidity and credit quality being the principal factors in determining the level of limits set. The Bank’s Market Risk Management Department (“MRMD”) is an independent risk control function, responsible for ensuring efficient implementation of market risk management policies. The Bank’s MRMD is also responsible for developing market risk management guidelines, measurement techniques, behavioural assumptions and limit setting methodologies. Any excesses against the prescribed limits are reported immediately to the Senior Management. Strict escalation procedures are documented and approved by the Bank’s BRC. In addition, the market risk exposures and limits are regularly reported to the Bank’s ALCO and BRC. Other controls to ensure market risk exposures remain within tolerable levels include stress testing, rigorous new product approval procedures and a list of permissible instruments than can be traded. Stress test results are produced monthly to determine the impact of changes in profit rates, foreign exchange rates and other risk factors on the profitability, capital adequacy and liquidity of the respective operating subsidiaries. The stress test provides the Bank’s Management and the BRC with an assessment of the financial impact of identified extreme events on the market risk exposures of the respective businesses. (i) Profit rate risk The table below summarises the Bank’s exposure to profit rate risk. The table indicates average profits rates at the reporting date and the period in which the financial instruments reprice or mature, whichever is earlier.
www.bimbholdings.com
200
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.4 Market risk (continued) (a) Banking (continued) (i) Profit rate risk (continued) Bank Islam
Non trading book Up to 1 >1-3 >3-12 1-5 Over 5 Non profit Trading Effective month months months years years sensitive book Total profit rate RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %
As at 31 December 2013 Assets Cash, balances and placements with banks 2,984,281 130,491 18 – – 616,133 – 3,730,923 2.26 Financial assets held-for-trading – – – – – – 1,216,895 1,216,895 2.51 Derivative financial assets – – – – – – 29,118 29,118 1.04 Financial assets available-for-sale 291,837 978,243 1,979,158 5,727,754 3,439,929 – – 12,416,921 3.96 Financial assets held-to-maturity – – – – 63,327 – – 63,327 9.06 Financing, advances and others – non-impaired 1,014,025 1,125,266 580,605 2,130,053 19,107,269 – – 23,957,218 6.25 – impaired net of allowances* – – – – – (216,270) – (216,270) – Other assets – – – – – 1,613,239 – 1,613,239 – Total assets
4,290,143 2,234,000 2,559,781 7,857,807 22,610,525 2,013,102 1,246,013 42,811,371
Note 46 * This is arrived at after deducting collective assessment allowance and individual assessment allowance from the outstanding gross impaired financing.
www.bimbholdings.com
201
BIMB HOLDINGS BERHAD
Annual Report 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.4 Market risk (continued) (a) Banking (continued) (i) Profit rate risk (continued) Bank Islam
Non trading book Up to 1 >1-3 >3-12 1-5 Over 5 Non profit Trading Effective month months months years years sensitive book Total profit rate RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %
As at 31 December 2013 Liabilities Deposits from customers 17,553,433 2,771,729 2,093,107 175,956 154 14,650,623 – 37,245,002 2.16 Deposits and placements of banks and other financial institutions 1,314,564 151,538 63,873 – – – – 1,529,975 2.20 Derivative financial liabilities – – – – – – 13,565 13,565 0.48 Bills and acceptance payable 20,421 4,855 – – – 145,322 – 170,598 3.45 Other liabilities – – – – – 525,396 – 525,396 – Total liabilities
18,888,418 2,928,122 2,156,980 175,956
154 15,321,341
13,565 39,484,536
Note 46 Equity Equity attributable to equity holders of the Bank – – – – – 3,326,835 – 3,326,835 Total equity
– – – – – 3,326,835 – 3,326,835
Total liabilities and shareholders’ equity of the Bank 18,888,418 2,928,122 2,156,980 175,956
On-balance sheet profit sensitivity gap Off-balance sheet profit sensitivity gap (profit rate swaps)
13,565 42,811,371
(14,598,275)
(694,122)
402,801
7,681,851
22,610,371
(16,635,074)
1,232,448
–
400,000
600,000
(100,000)
(500,000)
(400,000)
–
–
–
Total profit sensitivity gap (14,198,275)
www.bimbholdings.com
154 18,648,176
(94,122) 302,801 7,181,851 22,210,371 (16,635,074) 1,232,448
–
202
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.4 Market risk (continued) (a) Banking (continued) (i) Profit rate risk (continued) Bank Islam
Non trading book Up to 1 >1-3 >3-12 1-5 Over 5 Non profit Trading Effective month months months years years sensitive book Total profit rate RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %
As at 31 December 2012 Assets Cash, balances and placements with banks 903,366 10,004 – – – 782,538 – 1,695,908 2.74 Financial assets held-for-trading – – – – – – 1,610,558 1,610,558 3.46 Derivative financial assets – – – – – – 16,736 16,736 0.75 Financial assets available-for-sale 749,025 1,615,996 2,108,217 5,438,251 3,004,566 – – 12,916,055 4.00 Financial assets held-to-maturity 20,933 7,630 6,577 47,544 95,607 – – 178,291 6.33 Financing, advances and others – non-impaired 700,832 1,626,216 532,539 1,846,082 14,933,743 – – 19,639,412 6.78 – impaired net of allowances* – – – – – (131,613) – (131,613) – Other assets – – – – – 1,497,544 – 1,497,544 – Total assets
2,374,156 3,259,846 2,647,333 7,331,877 18,033,916 2,148,469 1,627,294 37,422,891
Note 46 * This is arrived at after deducting collective assessment allowance and individual assessment allowance from the outstanding gross impaired financing.
www.bimbholdings.com
203
BIMB HOLDINGS BERHAD
Annual Report 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.4 Market risk (continued) (a) Banking (continued) (i) Profit rate risk (continued) Bank Islam
As at 31 December 2012 Liabilities Deposits from customers 17,902,252 916,898 127,964 103,891 – 13,499,985 – 32,550,990 1.99 Deposits and placements of banks and other financial institutions 858,802 1,476 – – – – – 860,278 1.37 Derivative financial liabilities – – – – – – 14,339 14,339 0.64 Bills and acceptance payable 65,414 111,416 – – – 208,308 – 385,138 – Other liabilities – – – – – 509,181 – 509,181 – Total liabilities
18,826,468 1,029,790 127,964 103,891
– 14,217,474
14,339 34,319,926
Note 46 Equity Equity attributable to equity holders of the Bank – – – – – 3,102,965 – 3,102,965 Total equity Total liabilities and shareholders’ equity of the Bank
Non trading book Up to 1 >1-3 >3-12 1-5 Over 5 Non profit Trading Effective month months months years years sensitive book Total profit rate RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %
On-balance sheet profit sensitivity gap Off-balance sheet profit sensitivity gap (profit rate swaps) Total profit sensitivity gap
www.bimbholdings.com
– – – – – 3,102,965 – 3,102,965
18,826,468 1,029,790 127,964 103,891
– 17,320,439
14,339 37,422,891
(16,452,312)
2,230,056
2,519,369
7,227,986
18,033,916
(15,171,970)
1,612,955
–
400,000
600,000
–
(600,000)
(400,000)
–
–
–
(16,052,312) 2,830,056 2,519,369 6,627,986 17,633,916 (15,171,970) 1,612,955
–
204
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.4 Market risk (continued) (a) Banking (continued) (ii) Profit rate risk in the non-trading portfolio Profit rate risk in the non-trading portfolio is managed and controlled using measurement known as economic value of equity (“EVE”) and earnings-at-risk (“EaR”). EVE and EaR limits are approved by the Bank’s BRC and independently monitored monthly by the Bank’s MRMD. Exposures and limits are regularly discussed and reported to the Bank’s ALCO and BRC. The Bank manages market risk in non-trading portfolios by monitoring the sensitivity of projected EaR and EVE under varying profit rate scenarios (simulation modelling). For simulation modelling, a combination of standard scenarios and non-standard scenarios relevant to the local market are used. The standard scenarios monitored monthly include a 100 and 200 basis points parallel fall or rise in profit rates and historical simulation of past events. The scenarios assume no management action. Hence, they do not incorporate actions that would be taken by the Bank’s Treasury to mitigate the impact of the profit rate risk. In reality, depending on the view on future market movements, the Bank’s Treasury would proactively seek to change the profit rate exposure profile to minimise losses and to optimize net revenues. The nature of the hedging and risk mitigation strategies corresponds to the market instruments available. These strategies range from the use of traditional market instruments, such as profit rate swaps, to more intricate hedging strategies to address inordinate profit rate risk exposures. The table below shows the projected sensitivity at the Bank’s level to a 100 basis points parallel shift to profit rates across all maturities applied on the Bank’s profit rate sensitivity gap as at reporting date.
2013 2012 -100bps +100bps -100bps +100bps Increase/(Decrease) RM million
Bank Islam Impact on EaR Impact on EVE
(38.68) (214.26)
38.68 (54.20) 54.20 214.26 (232.16) 232.16
Note: EVE and EaR as at 31 December 2012 were revised due to the new EVE behavioural assumption that was approved by the Bank’s ALCO in July 2013.
www.bimbholdings.com
205
BIMB HOLDINGS BERHAD
Annual Report 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.4 Market risk (continued) (a) Banking (continued) (ii) Profit rate risk in the non-trading portfolio (continued) Other controls to contain profit rate risk in the non-trading portfolio include stress testing and applying sensitivity limits to the available for sale financial assets. Sensitivity is measured by the present value of a 1 basis point change (“PV01”) and is independently monitored by the Bank’s MRMD on a weekly basis against limits approved by the BRC. PV01 exposures and limits are regularly discussed and reported to the Bank’s ALCO and BRC. (iii) Market risk in the trading portfolio Market risk in the trading portfolio is monitored and controlled using value-at-Risk (“VaR”). VaR limit is approved by the Bank’s BRC and independently monitored daily by MRMD. Exposures and limits are regularly discussed and reported to the Bank’s ALCO and BRC. A summary of the VaR position of the Bank’s trading portfolios at the reporting date is as follows:
Bank Islam
As at 1.1.2013 to 31.12.2013 31.12.2013 Average Maximum Minimum RM’million RM’million RM’million RM’million
Profit rate risk Foreign exchange risk
1.48 1.64 3.33 0.43 0.78 0.26 1.06 0.01
Overall
2.26 1.90 3.64 0.55
Bank Islam
As at 1.1.2012 to 31.12.2012 31.12.2012 Average Maximum Minimum RM’million RM’million RM’million RM’million
Profit rate risk Foreign exchange risk
2.55 1.66 4.16 0.33 0.03 0.16 0.93 0.01
Overall
2.58 1.83 4.22 0.36
www.bimbholdings.com
206
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.4 Market risk (continued) (a) Banking (continued) (iii) Market risk in the Trading Portfolio (continued) Value-at-risk VaR is a technique that estimates the potential losses that could occur on risk positions as a result of movements in market rates and prices over a specified time horizon and to a given level of confidence. The VaR models used by Bank Islam are based on historical simulation. These models derive plausible future scenarios from past series of recorded market rates and prices, taking into account interrelationships between different markets and rates such as profit rates and foreign exchange rates. The historical simulation models used by the Bank incorporate the following features: • potential market movements are calculated with reference to data from the past four years; • historical market rates and prices are calculated with reference to foreign exchange rates and profit rates; and • VaR is calculated to a 99 per cent confidence level and for a one-day holding period. The nature of the VaR models means that an increase in observed market volatility will lead to an increase in VaR without any changes in the underlying positions. Statistically, the Bank would expect to see losses in excess of VaR only 1 per cent of the time over a one-year period. The actual number of excesses over this period can therefore be used to gauge how well the models are performing. Although a valuable guide to risk, VaR should always be viewed in the context of its limitations. For example: • The use of historical data as a proxy for estimating future events may not encompass all potential events, particularly those which are extreme in nature; • The use of a 1-day holding period assumes that all positions can be liquidated or hedged in one day. This may not fully reflect the market risk arising at times of severe illiquidity, when a 1-day holding period may be insufficient to liquidate or hedge all positions fully; • The use of a 99 per cent confidence level, by definition, does not take into account losses that might occur beyond this level of confidence; • VaR is calculated on the basis of exposures outstanding at the close of business and therefore does not necessarily reflect intra-day exposures; and • VaR is unlikely to reflect the loss potential on exposures that might arise under significant market movements.
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BIMB HOLDINGS BERHAD
Annual Report 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.4 Market risk (continued) (a) Banking (continued) (iii) Market risk in the Trading Portfolio (continued) Value-at-risk (continued) The Bank recognises these limitations by augmenting the VaR limits with other limits such as maximum loss limits, position limits and PV01 limits structures. These limits are approved by the Bank’s BRC and independently monitored daily by the Bank’s MRMD. Exposures and limits are regularly discussed and reported to the Bank’s ALCO and BRC. Other controls to contain market risk at an acceptable level are through stress testing, rigorous new product approval processes and a list of permissible instruments to be traded. Stress tests are produced monthly to determine the impact of changes in profit rates, foreign exchange rates and other main economic indicators on the Bank’s profitability, capital adequacy and liquidity. The stress-testing provides the Bank’s Management and BRC with an assessment of the financial impact of identified extreme events on the market risk exposures of the Bank. (iv) Foreign exchange risk Trading positions In addition to VaR and stress testing, the Bank controls the foreign exchange risk within the trading portfolio by limiting the open exposure to individual currencies, and on an aggregate basis. Overall (trading and non-trading positions) The Bank controls the overall foreign exchange risk by limiting the open exposure to non-Ringgit positions on an aggregate basis. Foreign exchange limits are approved by the Bank’s BRC and independently monitored daily by the Bank’s MRMD. Exposures and limits are regularly discussed and reported to the Bank’s ALCO and BRC. Sensitivity Analysis Considering that other risk variables remain constant, the foreign currency revaluation sensitivity for the Group as at reporting date is summarised as follows: Bank Islam
US Dollar Euro Others
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2013 2012 -1% +1% -1% +1% Depreciation Appreciation Depreciation Appreciation RM’000 RM’000 RM’000 RM’000
8,604 (8,604) 1,762 (1,762) 6,306 (6,306) 55 (55) (148) 148 (181) 181
208
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.4 Market risk (continued) (a) Banking (continued) (v) Displaced Commercial Risk Overview Displaced Commercial Risk (“DCR”) refers to the risk arising from assets managed on behalf of the Bank’s profit sharing investment account holders (“PSIAH”) which is effectively transferred to the Bank’s own capital because the Bank forgoes part or all of its Mudharib’s share (profit) of on such fund, when it considers this necessary as a result of commercial pressure in order to increase the return that would otherwise be payable to the Bank’s PSIAH’s. The management of Displaced Commercial Risk The Bank uses the following approach to manage the DCR: a) Forgoing part or all of the Bank’s share of profit as Mudharib to the Bank’s PSIAH by way of varying the percentage of profit taken as the Mudharib share in order to increase the share attributed to the Bank’s PSIAH in any particular year; b) Transferring the Bank’s current profits or retained earnings to the Bank’s PSIAH on the basis of hibah (gift); and c) Utilising the Waiver of Entitlement Clause based on the Tanazul (waiver) principle. In this context, when a partner who has agreed to a certain profit sharing ratio may waive the rights to profits to be given to another partner on the basis of Tanazul at the time of profit realisation and distribution as well as at the time of the contract. The Bank does not use or maintain Profit Equalisation Reserve to manage its DCR.
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39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.4 Market risk (continued) (b) Takaful The key features of Takaful Malaysia’s market risk management practices and policies are as follows: –
A group-wide market risk policy setting out the evaluation and determination of components of market risk for the Takaful Malaysia Group. Compliance with the policy is monitored and reported monthly to Takaful Malaysia’s Risk Management Committee (“RMC”) and exposures and breaches are reported as soon as practicable.
–
Set asset allocation, portfolio limit structure and diversification benchmark to ensure that assets back specific contract liabilities and that assets are held to deliver income and gains for certificate holders in line with terms of the respective contracts expectations of policies. Takaful Malaysia’s policies on asset allocation, portfolio limit structure and diversification benchmark have been set in line with Takaful Malaysia’s risk management policy after taking cognisance of the regulatory requirements in respect of maintenance of assets and solvency.
Takaful Malaysia also issue unit-linked investment policies. In the unit-linked business, the certificate holders bear investment risk on the assets held in the unit-linked funds as the certificate benefits are directly linked to value of the assets in the funds. Takaful Malaysia’s exposure to market risk on this business is limited to the extent that income arising from asset management charges is based on the value of the assets in the funds. (i) Profit yield risk Profit yield risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market profit yield. Floating rate/yield instruments expose Takaful to cash flow risk, whereas fixed rate/yield instruments expose Takaful to fair value risk. Takaful Malaysia’s profit risk policy requires its Management to manage the risk by maintaining an appropriate mix of variable and fixed rate/yield instruments. The policy also requires the Takaful management to manage the maturities of profit-bearing financial assets and liabilities. Floating rate/yield instruments will be re-priced at intervals of not more than one (1) year. Profit on fixed rate/yield instruments is priced at inception of the financial instrument and is fixed until maturity.
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210
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.4 Market risk (continued) (b) Takaful (continued) (i) Profit yield risk (continued) The profit yield profile of the Takaful Malaysia Group and its subsidiaries’ significant profit-bearing financial instruments, based on carrying amounts as at the end of the reporting period was as follows:
Takaful Takaful Family General Malaysia Operator Takaful Takaful Group RM’000 RM’000 RM’000 RM’000
Fixed rate instruments 2013 AFS financial assets FVTPL financial assets HTM financial assets Financing and receivables
250,115 2,043,811 375,414 2,669,340 4,041 84,989 – 89,030 1,965 366,741 35,902 404,608 194,337 694,446 104,501 993,284
450,458 3,189,987 515,817 4,156,262
2012 AFS financial assets FVTPL financial assets HTM financial assets Financing and receivables
220,743 2,318,556 430,967 2,970,266 634 58,340 – 58,974 1,585 253,271 35,575 290,431 157,914 632,130 137,110 927,154
380,876 3,262,297 603,652 4,246,825
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211
BIMB HOLDINGS BERHAD
Annual Report 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.4 Market risk (continued) (b) Takaful (continued) (i) Profit yield risk (continued) Takaful has no significant concentration of profit yield risk. A change of 50 basis points in profit rates at the end of the reporting period would have increased/ (decreased) other comprehensive income/equity, Family and General Takaful participants’ fund by the amounts shown below. The analysis assumes that all other variables remain constant
Impact Impact on Impact on Change in on profit Impact operating Participants’ variables before tax on equity* surplus fund RM’000 RM’000 RM’000 RM’000 2013 AFS financial assets FVTPL financial assets
+50bps +50bps
– 11
(8,351) 11
– (135,002) (325) (325)
11 (8,340) (325) (135,327) AFS financial assets FVTPL financial assets
-50bps -50bps
– (11)
10,603 (11)
– 368
179,063 368
(11) 10,592
368 179,431
2012 AFS financial assets FVTPL financial assets
+50bps +50bps
– –
(5,218) –
– (217)
(93,295) (217)
–
(5,218)
(217)
(93,512)
AFS financial assets FVTPL financial assets
-50bps -50bps
– –
5,284 –
– 223
104,755 223
–
5,284
223
104,978
* impact on equity reflects adjustments for tax, when applicable.
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212
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.4 Market risk (continued) (b) Takaful (continued) (ii) Other price risk Equity price risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from profit yield risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer or factors affecting similar financial instruments traded in the market. Takaful’s equity price risk exposure relates to financial assets whose values will fluctuate as a result of changes in market prices (excluding those investment securities held for the account of unit-linked business). Takaful’s price risk policy requires it to manage such risks by setting and monitoring objectives and constraints on investments, diversification plans, limits on investments in each country, sector, market and issuer, having regard also to such limits stipulated by BNM. Takaful and its subsidiaries comply with BNM stipulated limits during the financial year and has no significant concentration of price risk. Equity price risk sensitivity analysis The analysis below is performed for reasonably possible movements in key variables with all other variables held constant, showing the impact on OCI/Equity for Takaful Operator, and showing the impact on operating surplus/participants’ fund for Investment-linked Fund, and participants’ fund for Family Takaful Fund and General Takaful Fund accordingly. The correlation of variables will have a significant effect in determining the ultimate impact on price risk, but to demonstrate the impact due to changes in variables, variables had to be changed on individual basis. It should be noted that movements in these variables are non-linear.
Impact on Impact on Impact on Change in profit Impact on operating Participants’ variables before tax equity* surplus fund RM’000 RM’000 RM’000 RM’000 2013 Market price Market price
+15bps -15bps
(39) 39
13,045 (13,045)
5,736 (5,736)
91,178 (91,178)
+15bps +15bps
– –
7,967 (7,967)
15,249 (15,249)
105,941 (105,941)
2012 Market price Market price * impact on equity reflects adjustments for tax, when applicable.
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39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.4 Market risk (continued) (b) Takaful (continued) (iii) Foreign exchange risk Takaful Malaysia’s primary transactions are carried out in Ringgit Malaysia (RM) and its exposure to foreign exchange risk arises principally with respect to Indonesia Rupiah (Rp) and US Dollar (USD). As Takaful Malaysia’s business is conducted primarily in Malaysia, the Takaful Malaysia Group and its subsidiaries’ financial assets are also primarily maintained in Malaysia as required under the Takaful Act, 1984 and the Islamic Financial Services Act 2013 (effective on 30 June 2013), and hence, primarily denominated in the same currency (the local RM) as its takaful and investment contract liabilities. Accordingly, the main foreign exchange risk from recognised assets and liabilities arises from transactions other than those in which takaful and investment contract liabilities are expected to be settled. As Takaful Malaysia’s main foreign exchange risk from recognised assets and liabilities arises from retakaful transactions for which the balances are expected to be settled and realised in less than a year, the impact arising from sensitivity in foreign exchange rates is deemed minimal as the Takaful Malaysia has no significant concentration of foreign currency risk. Takaful Malaysia’s exposure to currency risk is immaterial in the context of the financial statements and hence, sensitivity analysis is not presented. 39.5 Liquidity risk Overview Liquidity risk is the risk that the Group does not have sufficient financial resources to meet its obligations when they fall due, or might have to fund these obligations at excessive cost. This risk can arise from mismatches in the timing of cash flows. Funding risk arises when the necessary liquidity to fund illiquid asset positions cannot be obtained at the expected terms when required. The management reviews both Banking and Takaful business’ liquidity risk based on different maturity brackets due to the different nature of both businesses. (a) Banking
In respect of Bank Islam, the Bank maintains a diversified and stable funding base comprising core retail, commercial, corporate customer deposits and institutional balances. This is augmented by wholesale funding and portfolios of highly liquid assets.
The objective of the Bank’s liquidity and funding management is to ensure that all foreseeable funding commitments and deposit withdrawals can be met when due and that wholesale market access remains accessible and cost effective.
Current accounts and savings deposits payable on demand or at short notice form a significant part of the Bank’s funding, and the Bank places considerable importance on maintaining their stability. For deposits, stability depends upon preserving depositors’ confidence in the Bank and the Bank’s capital strength and liquidity, and on competitive and transparent pricing.
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214
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.5 Liquidity risk (continued) (a) Banking (continued)
The management of liquidity and funding is primarily carried out in accordance with the BNM Liquidity Framework and practices and limits and triggers approved by the Bank’s BRC and ALCO. These limits and triggers vary to take account of the depth and liquidity of the local market in which the Bank operates. The Bank maintains a strong liquidity position and manages the liquidity profile of its assets, liabilities and commitments to ensure that cash flows are appropriately balanced and all obligations are met when due.
The Bank’s liquidity and funding management process includes: • Daily projection of cash flows and ensuring that the Bank has sufficient liquidity surplus and reserves to sustain a sudden liquidity shock; • Projecting cash flows and considering the level of liquid assets necessary in relation thereto; • Maintain liabilities of appropriate term relative to the asset base; • Maintain a diverse range of funding sources with adequate back-up facilities; • Monitor depositors’ concentration in order to avoid undue reliance on large individual depositors and ensure a satisfactory overall funding mix; and • Manage the maturities and diversify funding liabilities across products and counterparties.
Liquidity and funding risk governance The management of liquidity and funding risk is principally undertaken using risk limit mandates approved by the Bank’s BRC and management action triggers assigned by the Bank’s ALCO. The Bank’s ALCO is responsible under the authority delegated by the Bank’s BRC for managing liquidity and funding risk at strategic level.
Management of liquidity and funding risk All liquidity risk exposures are managed by the Bank’s Treasury. The aim is to ensure that liquidity and funding risk are consolidated at the Bank’s Treasury, which has the necessary skills, tools, management and governance to manage such risks professionally. Limits and triggers are set to meet the following objectives: • Sufficient liquidity surplus and reserves to sustain a sudden liquidity shock; • Cash flows are relatively diversified across all maturities; • Deposit base is not overly concentrated to a relatively small number of depositors; • Sufficient borrowing capacity in the Interbank market and highly liquid financial assets to back it up; and • Not over-extending financing activities relative to the deposit base.
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39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.5 Liquidity risk (continued) (a) Banking (continued)
Management of liquidity and funding risk (continued) The Bank’s MRMD is the independent risk control function and is responsible for ensuring efficient implementation of liquidity and funding risk management policies. It is also responsible for developing the Bank’s liquidity and funding risk management guidelines, measurement techniques, behavioural assumptions and limit setting methodologies. Any excess against the prescribed limits and triggers are reported immediately to the Bank’s Senior Management. Strict escalation procedures are documented and approved by the Bank’s BRC, with proper authorities to ratify or approve the excess in place. In addition, the market risk exposures and limits are regularly reported to the Bank’s ALCO and BRC. Another control to ensure that liquidity and funding risk exposures remain within tolerable levels includes stress testing. Stress testing and scenario analysis are important tools in the Bank’s liquidity management framework. This will also include an assessment of asset liquidity under various stress scenarios. Stress test results are produced monthly to determine the impact of a sudden liquidity shock. The stress-testing provides the Bank’s Management and BRC with an assessment of the financial impact of identified extreme events on the liquidity and funding risk exposures of the Bank. A final key control feature of the Bank’s liquidity and funding risk management are the approved and documented liquidity and funding contingency plans. These plans identify early indicators of stress conditions and describe actions to be taken in the event of difficulties arising from systemic or other crises while minimising adverse long-term implications to the Bank.
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216
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.5 Liquidity risk (continued) (a) Banking (continued) Maturity analysis The table below summarises the Bank’s assets and liabilities based on remaining contractual maturities.
On Up to >1 to 3 >3 to 6 >6 to 12 Over demand 1 month months months months 1 year Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 As at 31 December 2013 Assets Cash, balances and placements with banks Securities portfolio Derivatives financial assets Financing and advances Other assets
616,133 2,984,281 130,491 13 5 – 3,730,923 – 291,837 1,338,465 967,987 1,342,489 9,756,365 13,697,143 – 8,374 3,828 (200) (259) 17,375 29,118 – 1,014,025 1,125,266 224,711 355,894 21,021,052 23,740,948 – – – – – 1,613,239 1,613,239
Total assets
616,133 4,298,517 2,598,050 1,192,511 1,698,129 32,408,031 42,811,371
Note 46 Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Derivative financial liabilities Other liabilities
14,650,623 17,553,433 2,771,729 1,531,244
561,863
176,110 37,245,002
– 1,314,564 151,538 32,755 31,118 – 1,529,975 – 6,915 4,368 91 24 2,167 13,565 – – – – – 695,994 695,994
Total liabilities
14,650,623 18,874,912 2,927,635 1,564,090
593,005
874,271 39,484,536
Note 46 Equity Equity attributable to equity holders of the Bank – – – – – 3,326,835 3,326,835 On Balance Sheet Net liquidity gap Commitments and contingencies
(14,034,490) (14,576,395) (329,585) (371,579) 1,105,124 28,206,925
–
2,186,831 2,011,842 1,358,059 873,122 1,898,539 2,883,287 11,211,680
Net liquidity gap
(16,221,321)
(16,588,237)
(1,687,644)
(1,244,701)
(793,415)
25,323,638
(11,211,680)
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217
BIMB HOLDINGS BERHAD
Annual Report 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.5 Liquidity risk (continued) (a) Banking (continued) Maturity analysis (continued)
On Up to >1 to 3 >3 to 6 >6 to 12 Over demand 1 month months months months 1 year Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
As at 31 December 2012 Assets Cash, balances and placements with banks 782,538 903,366 10,004 – – – 1,695,908 Securities portfolio – 1,084,696 2,001,491 1,333,789 1,015,240 9,269,688 14,704,904 Derivative financial assets – 373 1,712 107 402 14,142 16,736 Financing, advances and others – 700,833 1,626,216 340,675 191,864 16,648,211 19,507,779 Other assets – – – – – 1,497,544 1,497,544 Total assets
782,538 2,689,268 3,639,423 1,674,571 1,207,506 27,429,585 37,422,891
Note 46 Liabilities Deposits from customers 13,483,878 17,918,359 916,898 7,455 120,509 103,891 32,550,990 Deposits and placements of banks and other financial institutions – 858,802 1,476 – – – 860,278 Derivative financial liabilities – 576 631 103 162 12,867 14,339 Other liabilities – – – – – 894,319 894,319 Total liabilities
13,483,878 18,777,737
919,005
7,558
120,671 1,011,077 34,319,926
Note 46 Equity Equity attributable to equity holders of the Bank – – – – – 3,102,965 3,102,965 On Balance Sheet Net liquidity gap Commitments and contingencies
(12,701,340) (16,088,469)
2,720,418
1,667,013
1,086,835
23,315,543
–
2,444,639 1,079,178 1,101,488 799,376 2,158,206 3,345,903 10,928,790
Net liquidity gap
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(15,145,979) (17,167,647)
1,618,930
867,637
(1,071,371) 19,969,640 (10,928,790)
218
BIMB HOLDINGS BERHAD
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.5 Liquidity risk (continued) (a) Banking (continued) Maturity analysis (continued) Contractual maturity of financial liabilities on an undisclosed basis The table below present the cash flows payable by the bank under financial liabilities by remaining contractual maturities at the end of the reporting period. The amount disclosed in the table are the contractual undiscounted cash flows:
Up to >1 to 3 >3 to 6 >6 to 12 Over 1 month months months months 1 year Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
As at 31 December 2013 Financial Liabilities Deposit from customers Deposit from placements of banks and other financial institutions Derivatives financial liabilities Forward contract Islamic Profit Rate Swap Structured deposits Bills and acceptance payable Other liabilities
32,200,635 2,789,081 1,568,999 590,880 164,023 37,313,618
1,315,794 152,164 32,875 31,254 – 1,532,087 6,919 4,332 93 (43) 2,756 14,057 3,208 3,347 39 – – 6,594 3,711 985 54 (43) 2,174 6,881 – – – – 582 582 166,018 4,927 – – – 170,945 14,115 – – – – 14,115
33,703,481 2,950,504 1,601,967 622,091 166,779 39,044,822
Commitments and Contingencies Direct credit substitutes Transaction related contingent items Short term self liquidating trade related contingencies
124,675 23,240 25,662 51,935 44,396 269,908
248,261 131,531 210,152 332,151 544,091 1,466,186
32,471 55,936 58,809 131,843 39,973 319,032 91,115 52,355 125,681 148,373 459,722 877,246
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39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.5 Liquidity risk (continued) (a) Banking (continued) Maturity analysis (continued) Contractual maturity of financial liabilities on an undisclosed basis (continued)
Up to >1 to 3 >3 to 6 >6 to 12 Over 1 month months months months 1 year Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
As at 31 December 2012 Financial Liabilities Deposit from customers Deposit from placements of banks and other financial institutions Derivatives financial liabilities Forward contract Islamic Profit Rate Swap Structured deposits Bills and acceptance payable Other liabilities
26,753,882
3,376,167
429,447
864,389
1,212,278
32,636,163
859,667 4,437
1,477 1,785
– 910
– 1,783
– 5,647
861,144 14,562
575 525 103 162 – 1,365 3,862 1,260 807 1,621 3,634 11,184 – – – – 2,013 2,013 274,110 112,113 – – – 386,223 37,909 – – – – 37,909
27,930,005 3,491,542 430,357 866,172 1,217,925 33,936,001
Commitments and Contingencies Direct credit substitutes Transaction related contingent items Short term self liquidating trade related contingencies
303,760 199,469 361,868 436,751 515,444 1,817,292
72,053
57,214
221,418
167,476
44,493
562,654
113,248
64,265
92,614
221,601
418,952
910,680
118,459
77,990
47,836
47,674
51,999
343,958
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220
BIMB HOLDINGS BERHAD
Annual Report 2013
Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
39. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 39.5 Liquidity risk (continued) (b) Takaful The following policies and procedures are in place to mitigate exposure to liquidity risk at Takaful Malaysia level:• Wide liquidity risk policy setting out the evaluation and determination of the components of liquidity risk. Compliance with the policy is monitored and reported monthly and exposures and breaches are reported to the Risk Management Committee as soon as practicable. The policy is regularly reviewed for pertinence and for changes in the risk environment. • Setting up guidelines on asset allocations, portfolio limit structures and maturity profiles of assets, in order to ensure sufficient funding is available to meet takaful contracts obligations. • Setting up contingency funding plans which specify minimum proportions of funds to meet emergency calls as well as specifying events that would trigger such plans. • The Takaful’s catastrophe excess-of-loss retakaful contract contains clauses permitting the immediate drawdown of funds to meet claims payments should claims events exceed certain amount. Maturity analysis The table below summarises the maturity profile of the financial liabilities of the Takaful Malaysia Group based on remaining undiscounted contractual obligations, including profit payable. For takaful contract liabilities, maturity profiles are determined based on estimated timing of net cash outflows from the recognised takaful liabilities. Investment-linked liabilities are repayable or transferable on demand and are included in the “up to a year” column. Carrying Up to >1 to 3 >3 to 5 More than No value a year* years years 5 years maturity Total Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
2013 Provision for outstanding claims 21(a)(i) 473,365 202,498 151,911 101,253 17,703 – 473,365 Takaful payables 21 75,428 74,692 736 – – – 75,428 Other payables 227,876 223,486 2,012 251 2,127 – 227,876 776,669 500,676 154,659 101,504 19,830
– 776,669
2012 Provision for outstanding claims 21(a)(i) 417,944 158,727 181,398 54,683 23,136 – 417,944 Takaful payables 21 43,126 41,423 1,703 – – – 43,126 Other payables 236,013 217,965 2,965 83 5,964 9,036 236,013
697,083 418,115 186,066 54,766 29,100
9,036 697,083
* expected utilisation or settlement is within 12 months from the reporting date. www.bimbholdings.com
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40. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES Financial instruments comprise financial assets, financial liabilities and off-balance sheet instruments. Fair value is the amount at which the financial assets could be exchanged or a financial liability settled, between knowledgeable and willing parties in an arm’s length transaction. The information presented herein represents the estimates of fair values as at the financial position date. Quoted and observable market prices, where available, are used as the measure of fair values of the financial instruments. Where such quoted and observable market prices are not available, fair values are estimated based on a range of methodologies and assumptions regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Fair value information for non-financial assets and liabilities are excluded as they do not fall within the scope of MFRS 132, “Financial Instruments: Disclosure and Presentation� which requires the fair value information to be disclosed. The fair values are based on the following methodologies and assumptions: Cash and short term funds and deposits and placements with banks and other financial institutions For cash and short term funds and deposits and placements with financial instruments with maturities of less than six months, the carrying value is a reasonable estimate of fair values. For deposits and placements with maturities six months and above, the estimated fair values are based on discounted cash flows using prevailing money market profit rates at which similar deposits and placements would be made with financial instruments of similar credit risk and remaining year to maturity.
Financial assets held-for-trading and financial assets available-for-sale The estimated fair values are generally based on quoted and observable market prices. Where there is no ready market in certain securities, fair values have been estimated by reference to market indicative yields or net tangible asset backing of the investee. Non-market observable inputs also includes valuation technique based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. The main asset class in this category are unquoted equity securities.
Financing, advances and others Their fair value is estimated by discounting the estimated future cash flows using the prevailing market rates of financings with similar credit risks and maturities. The fair values are represented by their carrying value, net of specific allowance and income-in-suspense, being the recoverable amount.
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
40. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (CONTINUED) Deposits from customers The fair values of deposits are deemed to approximate their carrying amounts as rate of returns are determined at the end of their holding periods based on the profit generated from the assets invested.
Deposits and placements of banks and other financial institutions The estimated fair values of deposits and placements of banks and other financial institutions with maturities of less than six months approximate the carrying values. For deposits and placements with maturities of six months or more, the fair values are estimated based on discounted cash flows using prevailing money market profit rates for deposits and placements with similar remaining year to maturities.
Bills and acceptance payable The estimated fair values of bills and acceptance payables with maturity of less than six months approximate their carrying values. For bills and acceptance payable with maturities of six months or more, the fair values are estimated based on discounted cash flows using prevailing market rates for borrowings with similar risks profile. Investment properties The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wheren the parties had each acted knowledgeably. Fair value hierarchy FRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques adopted M are observable or unobservable. Observable inputs reflect market data obtained from independent sources and unobservable inputs reflect the Group’s assumptions. The fair value hierarchy is as follows: •
Level 1 – Quoted price (unadjusted) in active markets for the identical assets or liabilities. This level includes listed equity securities and debt instruments.
•
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This level includes profit rates swap and structured debt. The sources of input parameters include Bank Negara Malaysia (BNM) indicative yields or counterparty credit risk.
There has been no transfer between Level 1 and 2 Fair values during the financial year.
•
Level 3 – Inputs for asset or liability that are not based on observable market data (unobservable inputs). This level includes equity instruments and debt instruments with significant unobservable components.
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40. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (CONTINUED) Fair value information The table below analyses financial instruments carried at fair value and those not carried at fair value for which fair value is disclosed, together with their fair values and carrying amounts shown in the statement of financial position.
Fair value of financial instruments Fair value of financial instruments at fair value not carried at fair value 2013 Total Group fair Carrying RM’000 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total value Amount
Financial assets Financial assets held-for-trading Derivative financial assets Financial assets available-for-sale Financial assets held-to-maturity Financing, advances and others
172,036 1,233,162 – 1,405,198 – – – – 1,405,198 1,405,198 – 29,118 – 29,118 – – – – 29,118 29,118 1,083,423 15,116,184 303,517 16,503,124
–
– 34,481 34,481 16,537,605 16,536,010
– – – – 10,451 392,470 85,318 488,239 488,239 467,935 – – – – – – 24,040,733 24,040,733 24,040,733 23,740,948
Total assets
1,255,459 16,378,464
303,517 17,937,440
10,451
392,470 24,160,532 24,563,453 42,500,893 42,179,209
Financial liabilities Derivative financial liabilities
– 13,565 – 13,565 – – – – 13,565 13,565
Total liabilities
– 13,565 – 13,565 – – – – 13,565 13,565
2013 Company Financial assets Financial assets available-for-sale
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17,860 – – 17,860
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
40. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (CONTINUED) Fair value information (continued) Fair value of financial instruments Fair value of financial instruments not carried carried at fair value at fair value 2012 Group Total Carrying RM’000 Level 1 Level 2 Level 3 Total Total* fair value Amount
Financial assets Financial assets held-for-trading 72,083 1,699,112 59,662 1,830,857 – 1,830,857 1,831,606 Derivative financial assets – 16,736 – 16,736 – 16,736 16,736 Financial assets available-for-sale 720,806 15,827,095 305,204 16,853,105 11,857 16,864,962 16,862,202 Financial assets held-to-maturity – – – – 172,852 172,852 468,721 Financing, advances and others – – – – 19,941,755 19,941,755 19,507,799 Total assets
792,889 17,542,943
364,866 18,700,698 20,126,464 38,827,162 38,687,064
Financial liabilities Derivative financial liabilities
– 14,339
– 14,339
– 14,339 14,339
Total liabilities
– 14,339
– 14,339
– 14,339 14,339
2012 Company Financial assets Financial assets available-for-sale
17,290
–
–
17,290
* Comparative figures have not been analysed by levels, by virtue of transitional provision given in Appendix C2 of MFRS 13.
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40. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (CONTINUED) The following table presents the changes in Level 3 instruments for the financial year ended 31 December 2013 for the Group: Group 2013 2012 RM’000 RM’000 Financial assets held-for-trading At 1 January 2013/2012 Redemption Settlement Fair value gains/(Losses)
59,662 63,906 (588) (2,350) (60,288) – 1,214 (1,894)
At 31 December 2013/31 December 2012
– 59,662
Group 2013 2012 RM’000 RM’000 Financial assets available-for-sale
At 1 January 2013/2012 Purchases Gains Settlement Impairment Exchange difference
305,204 275,909 – 15,087 13,493 14,212 (5,643) – (9,537) – – (4)
At 31 December 2013/31 December 2012
303,517 305,204
The following table shows the valuation techniques used in the determination of fair values within Level 3, as well as the key unobservable inputs used in the valuation models. (a) Financial instruments carried at fair value
Type
Valuation technique
Significant unobservable inputs
Financial assets available -for-sale
Valued at cost less impairment
Not applicable
Not applicable
Institutional trust account
Discounted cash flows using market profit rate for a similar instrument at the measurement date
3.58%
The estimated fair value would increase (decreased) if the discount rate were (lower) higher.
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Inter-relationship between significant unobservable inputs and fair value measurement
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
40. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (CONTINUED) (a) Financial instruments carried at fair value (continued) Valuation processes applied by the Group for Level 3 fair value
The Group has an established control framework in respect to the measurement of fair value of financial instruments. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the Chief Financial Officer. The valuation team regularly reviews significant unobservable inputs and valuation adjustments.
Sensitivity analysis for Level 3
2013 Market price Market price
Impact on Impact on profit equity Change in before tax RM’000 variables RM’000
Impact on operating surplus RM’000
Impact on Participants’ fund RM’000
+1% – (707) 2,496 (2,496) –1% – 733 (2,565) 2,265
(b) Financial instruments not carried at fair value The following methods and assumptions are used to estimate the fair values of the following classes of financial instruments: (i) Financial investments held-to-maturity (“HTM”)
The fair values of securities that are actively traded is determined by quoted bid prices. For non-actively traded securities, the fair values are valued at cost less impairment or estimated using discounted cash flows analysis. Where discounted cash flows technique is used, the estimated future cash flows are discounted using applicable prevailing market or indicative rates of similar instruments at the reporting date.
(ii) Financing and advances The fair values of variable rate financing are estimated to approximate their carrying values. For fixed rate financing, the fare values are estimated based on expected future cash flows of contractual instalment payments, discounted at applicable and prevailing rates at reporting date offered for similar facilities to new borrowers with similar credit profiles. In respect of impaired financing, the fair values are deemed to approximate the carrying values which are net of impairment allowances.
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41. PRIOR YEAR ADJUSTMENTS AND COMPARATIVE FIGURES
In previous financial years, tax expenses arising from dividend income received from a subsidiary were not eliminated at consolidation. As a result, the consolidated net profit attributable to owner of the Company had been understated, and correspondingly the Group’s net tax liabilities had been overstated, by the following amount:
RM’000
For financial years prior to 1 January 2012 For financial years ended 31 December 2012
37,246 23,951
Adjustments had been applied retrospectively with the comparative amounts restated as follows:
Group
As previously As reported restated RM’000 RM’000
Statements of Profit or Loss and other Comprehensive Income For the year ended 31 December 2012 Tax expense (209,687) Profit for the year 497,631 Profit for the year attributable to Owners of the Company 252,269 Total comprehensive income for the year 509,591 Total comprehensive income for the year attributable to Owners of the Company 259,965 Earnings per share (sen) 23.65
(185,736) 521,582 276,220 533,542 283,916 25.89
Statements of Financial Position As at 31 December 2012 Current tax assets 6,604 38,890 Zakat and taxation (51,506) (22,595) Reserves (952,788) (1,013,985)
As at 1 January 2012 Current tax assets Zakat and taxation Reserves
8,226 28,657 (34,615) (17,800) (765,811) (803,057)
Statements of Changes in equity For the financial year ended 31 December 2012 Accumulated losses at 1 January 2012 1,133,837 Accumulated losses at 31 December 2012 79,275
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1,096,591 18,078
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
42. CAPITAL COMMITMENTS Group 2013 2012 RM’000 RM’000
Property, plant and equipment Contracted but not provided for in the financial statements Approved but not contracted for and not provided
49,521 49,461 31,179 24,468
80,700 73,929
43. LEASE COMMITMENTS Leases as lessee Non-cancellable operating lease rentals are payable as follows: Group 2013 2012 RM’000 RM’000
Within one year Between one and five years More than five years
47,262 32,066 132,770 145,318 323,942 343,715
503,974
521,099
Leases as lessor The Group leases out its investment properties (see Note 17). The future minimum lease receivables under non-cancellable leases are as follows: Group 2013 2012 RM’000 RM’000
Within one year Between one and five years
6,520 7,046 4,818 3,640
11,338 10,686
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229
44. CAPITAL MANAGEMENT The Group’s objectives when managing capital is to maintain a strong capital base and safeguard the Group’s ability to continue as a going concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Directors monitor the adequacy of capital on an ongoing basis. There were no changes in the Group’s approach to capital management during the financial year. Under the Listing Requirement of Bursa Malaysia Practice Note No. 17/2005, the Company is required to maintain a consolidated shareholders’ equity equal to or not less than the 25 percent of the issued and paid-up capital (excluding treasury shares) and such shareholders’ equity is not less than RM40 million. The Company has complied with this requirement. The capital requirements in respect of Bank Islam Malaysia Berhad, Syarikat Takaful Malaysia Berhad and BIMB Securities Sdn Bhd are subject to regulatory requirements from Bank Negara Malaysia and Bursa Malaysia Berhad.
45. CONTINGENT LIABILITY Banking On 20 April 2010, Bank Islam Malaysia Berhad (“Bank Islam”) referred a dispute in connection with a Services Agreement and a Software Agreement (Agreements) with a vendor for arbitration. Bank Islam claimed rescission of the Agreements and a refund of the sum paid (to-date of RM19.03 million) and/or damages, compensation/cost of fund on all sums found to be due to it and an appropriate order as to costs. The vendor filed a counterclaim. The arbitration commenced on 15 February 2012. On 6 August 2013, Bank Islam was informed that the International Chamber of Commerce (“ICC”) had decided in favour of the vendor on issue of liability. The ICC will be dealing with the vendor’s counterclaim and determining the damages in the second phase of the arbitration (the date was yet to be determined). However, in November 2013, following from the lengthy arbitration proceedings, the parties have decided to settle their differences amicably on mutually accepted terms.
46. OPERATING SEGMENT INFORMATION Performance is measured based on segment profit/(loss) before zakat and taxation, as included in the internal management reports that are reviewed by the Group Managing Director/Chief Executive Officer. Segment profit/(loss) before zakat and taxation is used to measure performance as management believes that such information is the most relevant in evaluating segmental results relative to other entities that operate within these industries. In the preceding year, performance was measured based on segmental results from operating activities and included items directly attributable to a segment as well as those that could be allocated on a reasonable basis. T he Group operates predominantly in Malaysia and accordingly, information by geographical location on the Group’s operation is not presented. Segment information is presented in respect of the Group’s main business segment. Business segments The Group comprises of the following main business segments: Banking Takaful Others www.bimbholdings.com
Islamic banking and provision of related services. Underwriting of family and general Islamic insurance (“Takaful”). Investment holding, currency trading, ijarah financing, stockbroking and unit trust.
230
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Notes to the financial statements (CONTINUED) for the financial year ended 31 December 2013
46. OPERATING SEGMENT INFORMATION (CONTINUED)
Banking RM’000
Takaful RM’000
Others RM’000
Elimination RM’000
Consolidated RM’000
2013 Business segments Segment result Revenue from external customers Inter-segment revenue
2,244,205 553,058 12,132 – 2,809,395 900 2,644 285,642 (289,186) –
Total revenue 2,245,105 555,702
297,774 (289,186) 2,809,395
Net income from operations (before allowance for impairment on financing and other assets) Operating overheads
297,774 (282,522) 2,036,594 (42,916) (528) (1,224,837)
1,465,640 555,702 (799,376) (382,017)
Operating results Reversal of impairment on financing Allowance for impairment on investment Reversal for impairment on other assets Finance cost Share in the results of associate company
666,264 173,685 254,858 (283,050) 811,757 15,009 – – – 15,009 (9,211) – – – (9,211) 5,570 – – – 5,570 – – (3,349) – (3,349) (349) – – – (349)
Profit before zakat and taxation 677,283 173,685 251,509 (283,050) 819,427 Segment assets
42,811,371 6,893,085 5,093,767 (5,123,678) 49,674,545
Segment liabilities
39,484,536 6,316,044 1,209,750
(385,725) 46,624,605
Note 39.4(a)(i), 39.5(a)
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46. OPERATING SEGMENT INFORMATION (CONTINUED)
Banking RM’000
Takaful RM’000
Others RM’000
Elimination RM’000
Consolidated RM’000
– (177,387)
2,473,953 –
2012 Business segments Segment result Revenue from external customers Inter-segment revenue
1,990,478 –
472,333 2,535
11,142 174,852
Total revenue 1,990,478 474,868 185,994 (177,387) 2,473,953 Net income from operations (before allowance for impairment on financing and other assets) Operating overheads
1,397,424 (724,924)
474,868 (350,068)
185,994 (18,639)
(174,928) 2,832
1,883,358 (1,090,799)
Operating results Allowance for impairment on financing Allowance for contingent liability Allowance for impairment on other assets Share in the results of associate company
672,500 124,800 167,355 (172,096) 792,559 (66,073) – – – (66,073) (14,769) – – – (14,769)
Profit before zakat and taxation
597,380 124,800 167,355 (172,096) 717,439
3,990
–
–
–
3,990
1,732
–
–
–
1,732
Segment assets 37,422,891 6,349,415 2,155,519 (1,987,916) 43,939,909 Segment liabilities
34,319,926
Note 39.4(a)(i), 39.5(a)
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5,831,326
184,533
(224,266)
40,111,519
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Notes to the financial statements (CONTINUED)
for the financial year ended 31 December 2013
47. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Group makes various commitments and incur certain contingent liabilities with legal recourse to their customers. No material losses are anticipated as a result of these transactions. These exclude all contracts cleared in the normal course of the takaful business. Group 2013 2012 RM’000 RM’000
Credit-related Exposures Direct credit substitutes Assets sold with recourse Transaction related contingent items Other commitments, such as formal standby facilities and credit lines, with an original maturity of: – not exceeding one year – exceeding one year Short term self liquidating trade related contingencies Unutilised credit card lines Any commitments that are unconditionally cancelled at any time by the bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrower’s creditworthiness
5,116,604 5,276,220
8,407,810 8,699,906
319,032 562,654 2 2 877,246 910,688
1,714 82 823,818 662,657 278,297 338,488 991,097 949,115
Derivative Financial Instruments Foreign exchange related contracts Less than one year 1,381,894 680,789 Profit rate related contracts Less than one year 100,000 100,000 One year to less than five years 500,000 600,000 5 years and above 711,481 734,000 Equity related contracts One year to less than five years 110,495 114,095
2,803,870 2,228,884
Obligations under an on-going underwriting agreement
– –
11,211,680 10,928,790
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233
48. ACQUISITION OF NON-CONTROLLING INTERESTS – BANK ISLAM MALAYSIA BERHAD In December 2013, the Group acquired an additional 49% interest in Bank Islam Malaysia Berhad (“Bank Islam”) for RM2,859.0 million in cash, increasing its ownership from 51% to 100%. The carrying amount of Bank Islam Malaysia Berhad’s net assets in the Group’s financial statements on the date of acquisition was RM3,241.9 million. With the completion of the acquisition of 49% interest in Bank Islam, the Group recognised a decrease in NCI of RM1,659.3 million and an increase in the accumulated losses of RM1,199.7 million. The following summarises the effect of changes in the equity interest in Bank Islam that is attributable to owners of the Company: Group 2013 RM’000
Equity interest at 1 January 2013 Net comprehensive income attributable to owners of the Company at 51% equity interest Dividend received by the owners of the Company Bank Islam Dividend Reinvestment Plan Effect of increase in Company’s ownership interest of 49%
1,582,512 170,499 (170,422) 84,956 1,659,290
Equity interest at 31 December 2013
3,326,835
49. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (a) BIMB Foreign Currency Clearing Agency Sdn. Bhd. (BIFCA)’s license The management of Bank Islam Malaysia Berhad (the Bank) had on 21 November 2012 decided to surrender the wholesale license accorded to BIFCA, to Bank Negara Malaysia (BNM) effective 25 November 2012, and to proceed with voluntary winding-up of the said entity. Following this decision, BIFCA had ceased operation with its last trading day being Friday, 23 November 2012. Liquidators were appointed in December 2013 and the liquidation is in progress. (b) Investment in Amana Bank Limited, Sri Lanka (Amana Bank) The Bank had 20% stake in Amana Bank which provides Shariah compliant banking and related financial services in Sri Lanka. The Central Bank of Sri Lanka has capped foreign ownership to 15% and had given the Bank until 2015 to reduce the Bank’s shareholding. Amana Bank recently issued right issues as part of their capital planning which the Bank did not subscribe to. As a result, the Bank’s shareholding in Amana Bank has reduced to 17.79% as at 31 December 2013. The investment in Amana Bank is now classified as part of financial assets available-for-sale. www.bimbholdings.com
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Notes to the financial statements (CONTINUED)
for the financial year ended 31 December 2013
50. SUPPLEMENTARY INFORMATION ON THE BREAKDOWN OF REALISED AND UNREALISED PROFITS OR LOSSES The breakdown of the accumulated losses of the Group and of the Company as at 31 December, into realised and unrealised profits or losses, pursuant to Paragraphs 2.06 and 2.23 of Bursa Malaysia Main Market Listing Requirements, are as follows:
Group Company 2013 2012 2013 2012 RM’000 RM’000 RM’000 RM’000
Total retained earnings of the Company and its subsidiaries – realised – unrealised
850,447 652,449 234,994 133,540 38,833 25,270 10 10
Less: Consolidation adjustments
889,280 677,719 235,004 133,550 (839,672) (695,797) – –
Total retained earnings/(accumulated losses)
49,608 (18,078) 235,004 133,550
The determination of realised and unrealised profits is based on the Guidance of Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by Malaysian Institute of Accountants on 20 December 2010.
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STATEMENT BY DIRECTORS
pursuant to Section 169(15) of the Companies Act, 1965
In the opinion of the Directors, the financial statements set out on pages 95 to 233 are drawn up in accordance with Malaysian Financial Reporting Standards (MFRS), International Financial Reporting Standards (IFRS), and the requirements of the Companies Act, 1965 in Malaysia, and Shariah requirements so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2013 and of its financial performance and cash flows for the financial year then ended. In the opinion of the Directors, the information set out in Note 50 on page 234 to the financial statements has been compiled in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:
Tan Sri Samsudin bin Osman
Johan bin Abdullah Kuala Lumpur, Date: 26 March 2014
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STATUTORY DECLAR ATION
pursuant to Section 169(16) of the Companies Act, 1965
I, Mohamad Azlan bin Mohamad Alam, the officer primarily responsible for the financial management of BIMB Holdings Berhad, do solemnly and sincerely declare that the financial statements set out on pages 95 to 234 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.
Subscribed and solemnly declared by the above named in Kuala Lumpur on 26 March 2014.
Mohamad Azlan bin Mohamad Alam
Before me:
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237
INDEPENDENT AUDITORS’ REPORT to the members of BIMB Holdings Berhad
(Company No. 423858-X) (Incorporated in Malaysia)
REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of BIMB Holdings Berhad, which comprise the statements of financial position as at 31 December 2013 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 095 to 233.
Directors’ Responsibility for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements so as to that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as of 31 December 2013 and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.
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REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following: a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. b) We have considered the accounts and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 14 to the financial statements. c) We are satisfied that the accounts of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes. d) The audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.
OTHER REPORTING RESPONSIBILITIES Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The information set out in Note 50 on page 234 to the financial statements has been compiled by the Company as required by the Bursa Malaysia Securities Berhad Listing Requirements and is not required by the Malaysian Financial Reporting Standards or International Financial Reporting Standards. We have extended our audit procedures to report on the process of compilation of such information. In our opinion, the information has been properly compiled, in all material respects, in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants and presented based on the format prescribed by Bursa Malaysia Securities Berhad.
OTHER MATTERS This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
KPMG Desa Megat & Co. Firm Number: AF 0759 Chartered Accountants Petaling Jaya
Ow Peng Li Approval Number: 2666/09/15(J) Chartered Accountant
Date: 26 March 2014
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PROPERTIES OWNED BY BHB GROUP PROPERTY LISTING FOR SYARIKAT TAKAFUL MALAYSIA BERHAD
No.
Location
Description of Existing Use
Tenure
Age of Building (years)
Land, Built-up Area (square feet)
Net Book Value as at 31.12.2013 (RM)
Date of Revaluation
Date of Sale and Purchase Agreement
1
No.325A & 325B Blok 41, Kompleks Perniagaan Fajar 91000 Tawau Sabah
Three units of 4 storey Commercial Complex/Office
999 years town lease expiring on 31.12.2895
22
4,025/6,037
2,950,000
31.12.2013
12.07.1991
2
No. 64 & 65 Kompleks Jitra Jalan Sungai Korok 06000 Jitra Kedah Darul Aman
Two units of 2 storey Shophouse/ Office
Freehold
27
3,095/6,935
1,080,000
31.12.2013
30.09.1991
3
No. 23 Medan Istana 3 Bandar Ipoh Raya 30450 Ipoh Perak Darul Ridzuan
One unit of 3 storey 99 years Shophouse/Office lease expiring on 30.03.2081
18
1,539/4,255
550,000
31.12.2013
20.09.1995
4
No. 84 Batu 3 1/4 Jalan Gombak 53000 Kuala Lumpur
One unit of 5 storey Freehold Shophouse/Office
27
1,883/8,700
1,388,000
31.12.2013
22.12.1995
5
Lot 54 & 55 Bandar Wilayah Jasa Jalan Bunga Raya 91100 Lahad Datu Sabah
Two units of 3 storey Shophouse/ Office
18
2,400/7,200
1,680,000
31.12.2013
27.12.1995
6
No. 24 Jalan USJ 10/1B 47620 UEP Subang Jaya Selangor Darul Ehsan
Pejabat 3 tingkat Freehold One unit of 3 storey Shophouse/Office
19
3,200/9,600
5,140,000
31.12.2013
08.06.1996
7
No. 15 & 17 Jalan Kelibang Langkawi Mall 07000 Kuah, Langkawi Kedah Darul Aman
Two units of 2 storey Shophouse/ Office
Freehold
20
1,440/7,720
650,000
31.12.2013
17.07.1993
8
No. 26 & 28 Jalan Perda Barat Bukit Mertajam Seberang Prai 14000 Penang
Two units of 3 storey Shophouse/ Office
Freehold
15
3,293/8,840
1,200,000
31.12.2013
04.10.1996
9
No.433 & 434 Jalan Kulas 93400 Kuching Sarawak
Two units of 4 storey Shophouse/ Office
Freehold
18
3,589/12,855
3,550,000
31.12.2013
02.01.1996
www.bimbholdings.com
99 years town lease expiring on 31.12.2090
240
BIMB HOLDINGS BERHAD
Annual Report 2013
PROPERTIES OWNED BY BHB GROUP (CONTINUED)
PROPERTY LISTING FOR SYARIKAT TAKAFUL MALAYSIA BERHAD (CONTINUED)
No.
Location
Description of Existing Use
Tenure
Age of Building (years)
Land, Built-up Area (square feet)
Net Book Value as at 31.12.2013 (RM)
Date of Revaluation
Date of Sale and Purchase Agreement
10 No. 312 Jalan Bandar 13 Taman Melawati 53100 Kuala Lumpur
One unit of 4 storey Freehold Shophouse/Office
19
1,920/7,070
1,653,000
31.12.2013
30.06.1994
11 No.20, Fasa 1A Jalan Haji Manan 86000 Kluang Johor Darul Takzim
One unit of 4 storey 99 years Shophouse/Office lease expiring on 10.12.2108
17
2,658/9,930
2,000,000
31.12.2013
27.03.1992
12 Lot 13 & 14 Lazenda Commercial Centre Jalan Okk Abdullah 87007 Wilayah Persekutuan Labuan
Two units of 3 storey Office building
999 years lease expiring on 30.06.2902
19
2,504/7,200
2,200,000
31.12.2013
14.01.1997
13 Lot 28, 30 & 32 Jalan 2/3A, Pasar Borong 68100 Selayang Selangor Darul Ehsan
Three units of 4 storey Shophouse/ Office
99 years lease expiring on 11.03.2086
26
4,447/16,800
2,850,000
31.12.2012
Lot No. 28 & 30 17.02.1997
14 Lot 12680 Level 1 & Mezzanine Jalan Bukit Timbalan 80000 Johor Bahru Johor Darul Takzim
Two floors of 13 storey Office building
99 years lease expiring on 26.07.2080
15
8,354*
1,730,000
31.12.2012
09.03.1998
15 Lot 12680 Level 3, Jalan Bukit Timbalan 80000 Johor Bahru Johor Darul Takzim
One floor of 13 storey Office building
99 years lease expiring on 26.07.2080
15
6,594*
1,000,000
31.12.2012
06.01.1999
16 No. 1 & 2 Jalan Kelicap Taman Pekan Baru 34200 Parit Buntar Perak Darul Ridzuan
Two units of 2 storey Shophouse/ Office
99 years lease expiring on 05.09.2078
26
3,956/7,044
790,000
31.12.2013
18.09.1999
17 No. 46 & 47 Jalan Rahmat 83000 Batu Pahat Johor Darul Takzim
Two units of 4 storey Shophouse/ Office
Freehold
24
3,220/12,092
1,480,000
31.12.2013
18.09.1999
18 No. 180 & 181 Jalan Tuan Hitam 22000 Jerteh Terengganu Darul Iman
Two units of 4 Storey Shophouse/ Office
Freehold
23
3,200/12,250
1,714,000
31.12.2013
18.09.1999
Lot No. 32 12.05.1997
www.bimbholdings.com
241
BIMB HOLDINGS BERHAD
Annual Report 2013
PROPERTY LISTING FOR SYARIKAT TAKAFUL MALAYSIA BERHAD (CONTINUED)
No.
Location
Description of Existing Use
Tenure
Age of Building (years)
Land, Built-up Area (square feet)
Net Book Value as at 31.12.2013 (RM)
Date of Revaluation
Date of Sale and Purchase Agreement
19 Lot 82, 84 & 86 Jalan Rugbi 13/30 Seksyen 13 40100 Shah Alam Selangor Darul Ehsan
Three units of 2 storey Shophouse/ Office
99 years lease expiring on 22.01.2102
14
6,339/11,309
3,047,000
31.12.2013
07.05.1997
20 No. 229, Jalan Shahab 2 Shahab Perdana Jalan Sultanah Sambungan 05350 Alor Star Kedah Darul Aman
One unit of 2 1/2 storey Shophouse/ Office
Freehold
17
1,400/3,570
500,000
31.12.2013
15.07.1999
21 Lot No. 3803 Jalan Dato’ Ulu Muar 72000 Kuala Pilah Negeri Sembilan Darul Khusus
One unit of 3 storey 99 years Shophouse/Office lease expiring on 06.10.2079
14
2,001/3,120
523,300
31.12.2013
01.07.1997
22 No. 45 Jalan Teluk Sisek 25000 Kuantan Pahang Darul Makmur
One unit of 4 storey 99 years Shophouse/Office lease expiring on 18.09.2068
13
3,200/8,019
2,500,000
31.12.2013
15.09.2000
23 No. 27, 29 & 31 Pusat Komersil Temerloh 28000 Temerloh Pahang Darul Makmur
Three units of 2 1/2 storey Shophouse/Office
99 years lease expiring on 01.04.2095
13
4,195/15,050
1,936,000
31.12.2013 (No.27)
02.10.2000
24 No. 2 & 4 Jalan 6C/7 43650 Bandar Baru Bangi Selangor Darul Ehsan
Two units of 2 storey Shophouse/ Office
99 years lease expiring on 08.07.2086
26
6,383/8,032
1,914,000
31.12.2013
08.09.1999
25 Lot 14 Seremban City Centre Jalan Tuanku Munawir 70000 Seremban Negeri Sembilan Darul Khusus
One unit of 6 storey 99 years Shophouse/Office lease expiring on 07.04.2082
17
1,500/14,589
3,644,000
31.12.2013
19.05.2000
26 No. 29, Jalan Delima Pusat Perdagangan Pontian 82000 Pontian Johor Darul Takzim
One unit of 3 storey 99 years Shophouse/Office lease expiring on 25.09.2097
12
3,899/10,248
1,640,000
31.12.2013
23.03.2002
27 Lot 1129 & 1130 Bangunan Darul Takaful Jalan Sultan Ismail 20100 Kuala Terengganu Terengganu Darul Iman
One unit of 12 storey Office building
11
3,600/23,637
6,390,000
31.12.2013
29.12.1997
www.bimbholdings.com
35 years sub lease expiring on 27.02.2037
31.12.2012 (No. 29 & 31)
242
BIMB HOLDINGS BERHAD
Annual Report 2013
PROPERTIES OWNED BY BHB GROUP (CONTINUED)
PROPERTY LISTING FOR SYARIKAT TAKAFUL MALAYSIA BERHAD (CONTINUED)
No.
Location
Description of Existing Use
Tenure
Age of Building (years)
Land, Built-up Area (square feet)
Net Book Value as at 31.12.2013 (RM)
Date of Revaluation
Date of Sale and Purchase Agreement
28 No. 616 & 617 Jalan Besar 73000 Tampin Negeri Sembilan Darul Khusus
Two units of 2 storey Office building
99 years lease expiring on 05.10.2088
21
4,498/8,685
1,694,000
31.12.2013
17.09.1999
29 No. 6, Jalan 6C/7 43650 Bandar Baru Bangi Selangor Darul Ehsan
One unit of 2 storey 99 years Shophouse/Office lease expiring on 08.07.2086
26
1,905/3,508
763,000
31.12.2013
09.08.2002
30 Suite 3B/G Blok 3B, Plaza Sentral Jalan Stesen Sentral 5 50470 Kuala Lumpur
One floor of 22 storey Office building
Freehold
12
6,409*
8,500,000
31.12.2013
26.06.2001
31 No. 26 & 27 Jalan Tanjung Pasar Baru 18500 Machang Kelantan Darul Naim
Two units of 2 storey Office building
66 years lease expiring on 18.02.2069
32
1,600/4,000
700,000
31.12.2013
17.09.1999
32 No. 330 & 331 Jalan Sultan Yahya Petra 15720 Kota Bharu Kelantan Darul Naim
Two units of 4 1/2 storey Office building
99 years lease expiring on 09.12.2069
31
3,200/15,200
2,032,000
31.12.2013
03.07.2002
33 Menara Takaful Malaysia No.4, Jalan Sultan Sulaiman 50000 Kuala Lumpur
Two units of Office building Main Block - 26 storey Annex Block - 29 storey
Freehold
31.12.2013
08.10.2004
Main Block - 40
90,427/393,508 170,000,000
Annex Block - 33
34 No. 2408 Taman Samudera 32040 Sri Manjung Perak Darul Ridzuan
One unit of 2 storey 99 years Shophouse/Office lease expiring on 19.05.2091
17
2,800/5,300
800,000
31.12.2013
10.08.2004
35 No. 76A & 76 Pusat Perniagaan Jalan Tupai 34000 Taiping Perak Darul Ridzuan
Two units of 3 storey Office building
Freehold
10
3,134/18,304
1,530,000
31.12.2013
18.08.2003
36 No. 10 & 11 Jalan Sultan Yahya Petra 15200 Kota Bharu Kelantan Darul Naim
Two units of 3 storey Office building
33 years lease expiring on 08.09.2037
11
3,852/9,120
2,179,000
31.12.2013
03.07.2002
www.bimbholdings.com
243
BIMB HOLDINGS BERHAD
Annual Report 2013
PROPERTY LISTING FOR SYARIKAT TAKAFUL MALAYSIA BERHAD (CONTINUED)
Date of Revaluation
Date of Sale and Purchase Agreement
Age of Building (years)
Land, Built-up Area (square feet)
Net Book Value as at 31.12.2013 (RM)
11
8,716/18,440
1,800,000
31.12.2013
27.07.2002
99 years lease expiring on 16.02.2099
8
3,080/8,024
1,900,000
31.12.2013
30.11.2004
39 No. 4, Kompleks Seri Temin Jalan Ibrahim 08000 Sungai Petani Kedah Darul Aman
One unit of 4 storey 99 years Office building lease expiring on 03.10.2080
28
1,400/5,510
670,000
31.12.2013
11.09.2005
40 No. 16, Jalan Cenderawasih Jalan Kilang Lama 09000 Kulim Kedah Darul Aman
One unit of 3 storey Freehold Office building
14
1,600/4,172
400,000
31.12.2013
29.11.2005
41 Lot 1340, Miri Waterfront Commercial Centre 98000 Miri Sarawak
One unit of 4 storey 60 years Office building lease expiring on 30.09.2066
9
1,400/5,500
1,384,000
31.12.2013
20.01.2006
No.
Location
37 No. 4197 Jalan Teluk Wanjah 05200 Alor Star Kedah Darul Aman
Description of Existing Use
Tenure
One unit of 4 storey Freehold Office building
38 No. 10 & 8, Jalan Padi Two units of 3 Emas 5/2, Bandar Baru UDA storey Office 81200 Johor Bahru building Johor Darul Takzim
42 No. 6, Jalan Padi Emas 5/2 One unit of 3 storey Bandar Baru UDA Office building 81200 Johor Bahru Johor Darul Takzim
99 years lease expiring on 16.02.2099
8
1,540/4,012
950,000
31.12.2013
14.02.2006
43 No. 148, Kompleks Munshi Abdullah 75200 Melaka
One unit of 4½ storey Office building
99 years lease expiring on 23.04.2102
20
1,470/6,117
1,014,000
31.12.2013
21.03.2006
44 No. 16474 & 16475 Pusat Perniagaan Inderapura Jalan Tras, Raub Pahang Darul Makmur
Two units of 3 storey Office building
99 years lease expiring on 29.06.2092
14
3,218/9,280
1,610,000
31.12.2013
27.10.2006
45 No. 435, Jalan Kulas 93400 Kuching Sarawak
One unit of 4 Storey Shophouse/ office
Freehold
18
1,214/4,262
1,370,000
31.12.2013
02.01.1996
* Build-up Area
www.bimbholdings.com
244
BIMB HOLDINGS BERHAD
Annual Report 2013
PROPERTIES OWNED BY BHB GROUP (CONTINUED)
PROPERTY LISTING FOR BANK ISLAM MALAYSIA BERHAD
No.
Location
Description of Existing Use
Tenure
Age of Building (years)
Land, Built-up Area (square feet)
Net Book Value as at 31.12.2013 (RM)
Date of Revaluation
Date of Sale and Purchase Agreement
1
HS (D) 80625 PT 45 Seksyen 87 Jalan Tun Razak Bandar Kuala Lumpur
Building site
Leasehold for 99 years expiring on 29.12.2093
NA
6,597 12,999,918.61
30.12.1994
NA
2
No PT 1708 & 1709 H S (M) 2660 & 2661 Batu 5 1/2 Jalan Cheras Kuala Lumpur
Vacant land
Leasehold for 99 years expiring on 02.04.2085
NA
4,443
64,603.66
03.04.1986
NA
3
Lot No PT 805-HSD 1323 Mukim Bagan Nakhoda Omar, Sabak Bernam Selangor
Vacant land
Leasehold for 99 years expiring on 03.02.2101
NA
405,000
590,572.81
25.03.1999
NA
Land, Built-up Area (square feet)
Net Book Value as at 31.12.2013 (RM)
171 & 273
890,509.95
PROPERTY LISTING FOR SYARIKAT AL-IJARAH SDN. BHD.
No. 1
Location
No. P.T. Lot 002600 & H.S.(D) 815 & 816, Lot 002601. No. 71 & 73, Jalan Taman Selat Off, Jalan Bagan Luar Butterworth Pulau Pinang
Description of Existing Use
Tenure
4-storey shophouse/ Freehold office for Bank Islam Operation
Age of Building (years) 28
Date of Revaluation 30.09.1985
Date of Sale and Purchase Agreement NA
www.bimbholdings.com
245
BIMB HOLDINGS BERHAD
Annual Report 2013
SHAREHOLDING STATISTICS ANALYSIS OF HOLDINGS AS AT 31 MARCH 2014 Authorised Share Capital : RM2,000,000,000 Paid-up Capital : RM1,493,505,934 Class of Shares : Ordinary Shares of RM1.00 each Voting Rights : One (1) vote per ordinary share No. of Holders Size of Shareholdings
No. of Holdings
%
Malaysian
Foreign
Malaysian
Foreign
Malaysian
Foreign
499
5
4,650
137
0.00
0.00
100 – 1,000
1,367
21
902,975
12,345
0.06
0.00
1,001 – 10,000
3,280
62
13,090,107
352,660
0.88
0.02
10,001 – 100,000
834
52
22,573,686
2,135,440
1.51
0.14
100,001 – 74,675,295(*)
214
53
328,542,603
35,207,408
22.00
2.36
4
0
1,090,683,923
0
73.03
0.00
6,198
193
1,455,797,944
37,707,990
97.48
2.52
1 – 99
74,675,296 and above(**) TOTAL * **
Less than 5% of Issued Holdings 5% and above of Issued Holdings
DIRECTORS’ SHAREHOLDINGS AS AT 31 MARCH 2014 Direct Holdings
Indirect Holdings
No.
%
No.
%
Tan Sri Samsudin bin Osman
–
–
–
–
2
Encik Zahari @ Mohd Zin bin Idris
–
–
–
–
3
Encik Salih Amaran bin Jamiaan
–
–
15,000
–
4
Datuk Zaiton binti Mohd Hassan
–
–
–
–
5
Dato’ Paduka Ismee bin Ismail
–
–
–
–
6
Encik Johan bin Abdullah
–
–
–
–
7
Datuk Rozaida binti Omar
–
–
–
–
8
Tan Sri Ismail bin Adam
–
–
–
–
Nos.
Name of Directors
1
www.bimbholdings.com
246
BIMB HOLDINGS BERHAD
Annual Report 2013
SHAREHOLDING STATISTICS (CONTINUED)
DISTRIBUTION TABLE ACCORDING TO CATEGORY OF HOLDERS AS AT 31 MARCH 2014 No. of Holders Malaysian Category of Shareholders 1
Individual
2
Body Corporate
Foreign
Non Bumiputra Bumiputra
Malaysian
Foreign
Malaysian
Foreign
Bumiputra
Non Bumiputra
Non Bumiputra Bumiputra
6,778,813
24,418,467
950,098
0.45
1.63
0.06
1,327,700
0
68.68
0.09
0.00
3,695
63
3
0 1,025,727,756
1
0
0
2,412,540
0
0
0.16
0.00
0.00
C) Other Types of Companies
35
31
1
12,117,836
4,957,699
130,000
0.81
0.33
0.01
Government Agencies/ Institutions
20
0
0
92,190,316
0
0
6.17
0.00
0.00
597
520
133
93,760,934 192,105,883 36,627,892
6.28
12.86
2.45
0
0
0.00
0.00
0.00
193 1,232,988,195 222,809,749 37,707,990
82.56
14.92
2.52
B) Investments Trusts/ Foundation/ Charities
4
Nominees
5
Others
0
0
TOTAL
1,949
4,249
59
%
1,233
A) Banks/Finance Companies
3
No. of Shares
0
0
HOLDERS WITH HOLDINGS OF 5% AND ABOVE AS AT 31 MARCH 2014 No.
Name
Holdings
%
1
Lembaga Tabung Haji
816,725,300
54.69
2
Citigroup Nominees (Tempatan) Sdn Bhd Employees Provident Fund Board
122,114,980
8.18
3
Permodalan Nasional Berhad
76,373,003
5.11
4
Amanahraya Trustees Berhad Skim Amanah Saham Bumiputera
75,470,640
5.05
www.bimbholdings.com
247
BIMB HOLDINGS BERHAD
Annual Report 2013
LIST OF TOP 30 HOLDERS AS AT 31 MARCH 2014 No. Name
Holdings
%
1.
Lembaga Tabung Haji
816,725,300
54.69
2.
Citigroup Nominees (Tempatan) Sdn Bhd Employees Provident Fund Board
122,114,980
8.18
3.
Permodalan Nasional Berhad
76,373,003
5.11
4.
Amanahraya Trustees Berhad Skim Amanah Saham Bumiputera
75,470,640
5.05
5.
Amsec Nominees (Tempatan) Sdn Bhd Amtrustee Berhad for CIMB Islamic Dali Equity Growth Fund (UT-CIMB-DALI)
34,424,560
2.30
6.
Kumpulan Wang Persaraan (Diperbadankan)
32,266,080
2.16
7.
Lembaga Kemajuan Tanah Persekutuan (FELDA)
24,947,998
1.67
8.
Citigroup Nominees (Tempatan) Sdn Bhd Employees Provident Fund Board (CIMB Prin)
15,073,120
1.01
9.
Majlis Agama Islam dan Adat Melayu Terengganu
10,405,000
0.70
10. Majlis Ugama Islam Sabah
10,318,999
0.69
11. Majlis Ugama Islam Sabah
9,178,000
0.61
12. Cartaban Nominees (Tempatan) Sdn Bhd Exempt An for Eastspring Investments Berhad
9,164,238
0.61
13. CIMB Group Nominees (Tempatan) Sdn Bhd Amtrustee Berhad for CIMB Islamic Dali Equity Theme Fund
8,969,080
0.60
14. Amin Baitulmal Johor
8,316,000
0.56
15. Citigroup Nominees (Tempatan) Sdn Bhd Kumpulan Wang Persaraan (Diperbadankan) (CIMB Equities)
6,703,700
0.45
16. Maybank Nominees (Tempatan) Sdn Bhd Etiqa Takaful Berhad (Family PRF EQ)
5,739,100
0.38
17. Affin Nominees (Tempatan) Sdn Bhd Affin Fund Management Sdn Bhd for Majlis Ugama Islam dan Adat Resam Melayu Pahang
5,544,000
0.37
18. Majlis Agama Islam Negeri Pulau Pinang
5,544,000
0.37
19. Majlis Amanah Rakyat
5,544,000
0.37
20. Majlis Agama Islam Selangor
5,223,488
0.35
www.bimbholdings.com
248
BIMB HOLDINGS BERHAD
Annual Report 2013
SHAREHOLDING STATISTICS (CONTINUED)
LIST OF TOP 30 HOLDERS AS AT 31 MARCH 2014 (CONTINUED) No. Name
Holdings
%
21. Citigroup Nominees (Asing) Sdn Bhd CBNY for Dimensional Emerging Markets Value Fund
4,771,745
0.32
22. HSBC Nominees (Asing) Sdn Bhd BNY Brussels for Wisdomtree Emerging Markets Smallcap Dividend Fund
4,669,728
0.31
23. Majlis Agama Islam dan Adat Istiadat Melayu Kelantan
4,532,799
0.30
24. Citigroup Nominees (Tempatan) Sdn Bhd Universal Trustee (Malaysia) Berhad for CIMB-Principal Equity Fund
4,331,500
0.29
25. Maybank Nominees (Tempatan) Sdn Bhd Etiqa Insurance Berhad (Sharehldr’s Fd)
3,992,700
0.27
26. Amanah Raya Berhad Kumpulan Wang Bersama Syariah
3,900,000
0.26
27. Amanahraya Trustees Berhad Public Islamic Select Treasures Fund
3,449,940
0.23
28. Citigroup Nominees (Tempatan) Sdn Bhd Kumpulan Wang Persaraan (Diperbadankan) (I-VCAP)
3,367,300
0.23
29. HSBC Nominees (Tempatan) Sdn Bhd HSBC (M) Trustee Bhd for Pertubuhan Keselamatan Sosial (CIMB-P 6939-404)
3,315,720
0.22
30. HSBC Nominees (Asing) Sdn Bhd Exempt An for JPmorgan Chase Bank, National Association (U.S.A.)
3,297,536
0.22
www.bimbholdings.com
249
BIMB HOLDINGS BERHAD
Annual Report 2013
REGIONAL GROUP NETWORK BIMB HOLDINGS BERHAD 31st Floor, Menara Bank Islam No. 22, Jalan Perak 50450 Kuala Lumpur Tel : +603-27812999 Fax : +603-27812998 Website : www.bimbholdings.com BANK ISLAM MALAYSIA BERHAD Level 32, Menara Bank Islam No. 22, Jalan Perak 50450 Kuala Lumpur Tel : +603-20888000 Fax : +603-20888033 Website : www.bankislam.com.my
SYARIKAT TAKAFUL MALAYSIA BERHAD 26th Floor, Annexe Block Menara Takaful Malaysia No. 4, Jalan Sultan Sulaiman 50000 Kuala Lumpur P.O. Box 11483 50746 Kuala Lumpur Tel : 1300-8-TAKAFUL (825 2385) Fax : +603-22740237 Email : csu@takaful-malaysia.com.my
PT SYARIKAT TAKAFUL INDONESIA Graha A, Graha Takaful Indonesia Jalan Mampang Prapatan Raya No. 100, Jakarta 12790 Indonesia BIMB INVESTMENT MANAGEMENT BERHAD Tel : +6221-7991234 19th Floor, Menara Bank Islam : +6221-7992345 No. 22, Jalan Perak Fax : +6221-7901435 50450 Kuala Lumpur Website : www.takaful.com Tel : +603-21612524/2924 Toll Free : 1800881196 PT ASURANSI TAKAFUL KELUARGA Fax : +603-21612464 Graha B, Graha Takaful Indonesia Jalan Mampang Prapatan Raya BANK ISLAM TRUST COMPANY No. 100, Jakarta (LABUAN) LTD. 12790 Indonesia Level 5(A), Main Office Tower Tel : +6221-7991234 Financial Park Complex : +6221-7992345 Jalan Merdeka Fax : +6221-7901435 87000 F.T. Labuan Website : www.takaful.com Tel : +6087-451806 Fax : +6087-451808 PT ASURANSI TAKAFUL UMUM Graha A, Graha Takaful Indonesia FARIHAN CORPORATION SDN. BHD. Jalan Mampang Prapatan Raya 19th Floor, Menara Bank Islam No. 100, Jakarta No. 22, Jalan Perak 12790 Indonesia 50450 Kuala Lumpur Tel : +6221-7991234 Tel : +603-27821333 : +6221-7992345 Fax : +603-27821355 Fax : +6221-7901944 Website : www.takaful.com AL-WAKALAH NOMINEES (TEMPATAN) SDN. BHD. 21st Floor, Menara Bank Islam Menara Bank Islam No. 22, Jalan Perak 50450 Kuala Lumpur Tel : +603-27267724 Fax : +603-27267733
www.bimbholdings.com
BIMB SECURITIES (HOLDINGS) BERHAD 31st Floor, Menara Bank Islam No. 22, Jalan Perak 50450 Kuala Lumpur Tel : +603-27812999 Fax : +603-27812998 BIMB SECURITIES SDN. BHD. Level 32, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Tel : +603-26918887 Fax : +603-26918854 Website : www.bimbsec.com.my Online Trading : www.bisonline.com.my BIMSEC NOMINEES (TEMPATAN) SDN. BHD. Level 32, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Tel : +603-26918887 Fax : +603-26918854 BIMSEC NOMINEES (ASING) SDN. BHD. Level 32, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Tel : +603-26918887 Fax : +603-26918854 BIMSEC ASSET MANAGEMENT SDN. BHD. Level 32, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur Tel : +603-26918887 Fax : +603-26918854 SYARIKAT AL-IJARAH SDN. BHD. 31st Floor, Menara Bank Islam No. 22, Jalan Perak 50450 Kuala Lumpur Tel : +603-27812999 Fax : +603-27812998
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(Company No. 423858-X) (Incorporated in Malaysia under the Companies Act, 1965)
I/We
FORM OF PROXY
NRIC No./Passport No./Company No
of
(ADDRESS)
telephone no
being a member/members of BIMB Holdings Berhad (“the Company”), hereby appoint in respect of
shares of
(ADDRESS)
and/or
in respect of
shares of
(ADDRESS)
or failing him/her, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us and on my/our behalf at the 17th Annual General Meeting of the Company to be held at Ballroom 1, Sime Darby Convention Centre, 1A, Jalan Bukit Kiara 1, 60000 Kuala Lumpur on Thursday, 15 May 2014 at 10.00 a.m. and at any adjournment thereof. I/We indicate with an “x” in the appropriate spaces below as to how I/we wish my/our vote to be cast: FOR Ordinary Resolution 1
To receive the Audited Financial Statements for the financial year ended 31 December 2013 together with the Reports of the Directors and Auditors thereon.
Ordinary Resolution 2
To approve the payment of final single tier dividend of 8.5% in respect of the financial year ended 31 December 2013.
Ordinary Resolution 3
To re-elect Dato’ Paduka Ismee bin Ismail, a Director who is retiring by rotation in accordance with Article 61 of the Company’s Articles of Association and being eligible has offered himself for re-election.
Ordinary Resolution 4
To re-elect Datuk Zaiton binti Mohd Hassan, a Director who is retiring by rotation in accordance with Article 61 of the Company’s Articles of Association and being eligible has offered herself for re-election.
Ordinary Resolution 5
To re-elect Puan Rifina binti Md Ariff, a Director who is retiring in accordance with Article 66 of the Company’s Articles of Association and being, has offered herself for re-election.
Ordinary Resolution 6
To re-appoint Encik Salih Amaran bin Jamiaan, a Director who is retiring pursuant to Section 129 of the Companies Act, 1965 and has offered himself for re-appointment.
Ordinary Resolution 7
To re-appoint Encik Zahari @ Mohd Zin bin Idris, a Director who is retiring pursuant to Section 129 of the Companies Act, 1965 who has offered himself for reappointment and also to retain him as an Independent Non-Executive Director of the Company in accordance with Recommendation 3.3 of the Malaysian Code of Corporate Governance 2012.
Ordinary Resolution 8
To approve the payment of Directors’ fees of RM1,110,700 for the financial year ended 31 December 2013 (For the financial year ended 31 December 2012: RM855,000).
Ordinary Resolution 9
To re-appoint Messrs. KPMG Desa Megat & Co. as External Auditors of the Company until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration.
AGAINST
Ordinary Resolution 10 To approve the Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature. Subject to the abovestated voting instructions, my/our proxy may vote or abstain from voting on any resolution as *he/*she/*they may think fit. If appointment of proxy is under hand Signed by *individual member/*officer or attorney of member/*authorised nominee of (beneficial owner)
No. of shares held : Securities Account No. : Date :
If appointment of proxy is under seal
Seal
The Common Seal of was hereto affixed in accordance with its Articles of Association in the presence of:
Director
Director/Secretary
In its capacity as *member/*attorney of member/*authorised nominee of (beneficial owner)
No. of shares held : Securities Account No. : Date :
Important Notes: 1. A member of the Company entitled to attend and vote at this meeting is entitled to appoint one or more proxies to attend and vote for him. 2. A member shall not be entitled to appoint more than two proxies to attend and vote at the same general meeting. Where a member appoints two proxies the appointments shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy. 3. Where a member of the company is an exempt authorised nominee which holds ordinary shares in the company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. An exempt authorised nominee refers to an authorised nominee defined under the Securities Industry (Central Depositories) Act 1991 (“SICDA”) which is exempted from compliance with the provisions of subsection 25A(1) of SICDA. 4. The instrument appointing a proxy shall: (i) in case of an individual, be signed by the appointor or by his attorney; and (ii) in case of a corporation, be either under its common seal or signed by its attorney or by an officer on behalf of the corporation. 5. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 31st Floor, Menara Bank Islam, No. 22 Jalan Perak, 50450 Kuala Lumpur, Malaysia not less than 48 hours before the time fixed for holding of the meeting or any adjournment thereof. 6. A proxy may vote on a show of hands and on a poll. If the form of proxy is returned without an indication as to how the proxy shall vote on any particular matter, the proxy may exercise his discretion as to whether to vote on such matter. 7. The lodging of a form of proxy does not preclude a member from attending and voting in person at the meeting should the member subsequently decide to do so. *Delete if inappropriate
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STAMP
BIMB HOLDINGS BERHAD (423858-X) 31st Floor, Menara Bank Islam 22, Jalan Perak 50450 Kuala Lumpur
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BIMB Holdings Berhad 31st Floor, Menara Bank Islam 22, Jalan Perak, 50450 Kuala Lumpur Tel: +603 2781 2999 Fax: +603 2781 2998
www.bimbholdings.com