bank islam holding-financial-statement 2014.pdf
TRANSCRIPT
1
BIMB Holdings Berhad (Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries
Directors’ report for the financial year ended
31 December 2014
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 2014.
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 Group
RM’000 Company
RM’000
Profit for the year attributable to:
Owners of the Company 532,329 127,088
Non-controlling interests 54,575 -
586,904 127,088
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
There were no changes in the authorised, issued and paid-up capital of the Company during
the financial year.
There were no debentures issued 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.
2
Company No. 423858-X
Dividends
The amount of dividends paid by the Company since 31 December 2013 are as follows:
RM’000
In respect of the financial year ended 31 December 2013:
Final single tier dividend of 8.50% per ordinary share,
paid on 29 May 2014 126,948
In respect of the financial year ended 31 December 2014:
Interim single tier dividend of 14.70% per ordinary share,
declared on 25 November, ex-date on 12 December 2014,
and paid on 13 January 2015 219,545
_______
346,493
======
The directors do not recommend any final dividend to be paid for the year under review.
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.
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.
3
Company No. 423858-X
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 49 to the financial
statements.
4
Company No. 423858-X
Directors
Directors who served since the date of the last report are:
Tan Sri Samsudin bin Osman
Tan Sri Ismail bin Adam
Tan Sri Ismee bin Ismail
Datuk Zaiton binti Mohd Hassan
Datuk Rozaida binti Omar
Rifina binti Md Ariff
Zahari @ Mohd Zin bin Idris
Salih Amaran bin Jamiaan
Dato’ Johan bin Abdullah (resigned as Non-Independent Executive Director w.e.f
15.01.2015 and appointed as Non-Independent Non-
Executive Director w.e.f 17.02.2015)
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: Number of ordinary shares of RM1 each
At At
1 January 31 December
2014 Bought Sold 2014
Interest in the Company:
Salih Amaran bin Jamiaan
- others 14,000 3,000 - 17,000
___________________________________
14,000 3,000 - 17,000
================================
None of the other Directors holding office at 31 December 2014 had any interest in the shares
and options over shares of the Company and of its related corporations during the financial
year.
5
Company No. 423858-X
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
…………………………………
Dato’ Johan bin Abdullah
Kuala Lumpur,
Date: 31 March 2015
6
BIMB Holdings Berhad (Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries
Statements of Financial Position as at 31 December 2014
Group Company
As at As at
31.12.2014 31.12.2013 31.12.2014 31.12.2013
Note RM’000 RM’000 RM’000 RM’000
Assets Cash and short-term funds 3 3,898,172 3,953,896 123,566 149,559
Deposits and placements with
financial institutions 4 721,324 701,302 - -
Financial assets held-for-trading 5 1,165,590 1,405,198 - -
Derivative financial assets 6 62,541 29,118 - -
Financial assets available-for-sale 7 13,815,889 16,536,010 18,559 17,860
Financial assets held-to-maturity 8 547,258 467,935 - -
Financing, advances and others 9 29,524,571 23,740,948 - -
Other assets 10 580,985 250,801 1,189 2,451
Takaful assets 11 811,051 753,089 - -
Statutory deposits with
Bank Negara Malaysia 12 1,335,000 1,297,100 - -
Current tax assets 41,872 9,448 510 45
Deferred tax assets 13 65,816 69,191 10 10
Investments in subsidiaries 14 - - 4,707,615 4,647,369
Investments in associates 15 1 1 1 1
Property, plant and equipment 16 446,933 436,578 1,431 2,058
Investment properties 17 11,506 16,721 - -
Assets classified as held for sale 18 1,696 7,209 - - ____________ ____________ ___________ ___________
Total assets 53,030,205 49,674,545 4,852,881 4,819,353
======== ======== ======= =======
7
BIMB Holdings Berhad (Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries
Statements of Financial Position as at 31 December 2014
(continued)
Group Company
As at As at
31.12.2014 31.12.2013 31.12.2014 31.12.2013
Note RM’000 RM’000 RM’000 RM’000
Liabilities and equity Deposits from customers 19 40,678,379 36,924,367 - -
Deposits and placements of banks
and other financial institutions 20 300,000 1,529,975 - -
Derivative financial liabilities 6 32,407 13,565 - -
Bills and acceptances payable 127,524 170,598 - -
Other liabilities 21 1,195,304 774,566 221,541 12,025
Takaful liabilities 22 6,323,577 6,082,001 - -
Sukuk liabilities 23 1,133,256 1,089,935 1,133,256 1,089,935
Zakat and taxation 50,498 39,598 - - ____________ ____________ ___________ ___________
Total liabilities 49,840,945 46,624,605 1,354,797 1,101,960
------------- ------------- ------------ ------------
Equity Share capital 24 1,493,506 1,493,506 1,493,506 1,493,506
Reserves 25 1,455,531 1,316,831 2,004,578 2,223,887 ____________ ____________ ___________ ___________
Equity attributable to owners
of the Company 2,949,037 2,810,337 3,498,084 3,717,393
Non-controlling interests 240,223 239,603 - - ____________ ____________ ___________ ___________
Total equity 3,189,260 3,049,940 3,498,084 3,717,393
------------- ------------- ------------ ------------
Total liabilities and equity 53,030,205 49,674,545 4,852,881 4,819,353
======== ======== ======= =======
Commitments and contingencies 48 12,135,967 11,211,680 - -
======== ======== ======= =======
The accompanying notes form an integral part of these financial statements.
8
BIMB Holdings Berhad (Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries 1
Statements of Profit or Loss and Other Comprehensive
Income for the financial year ended 31 December 2014
Group Company
2014 2013 2014 2013
Note RM’000 RM’000 RM’000 RM’000
Income derived from investment
of depositors’ funds 27 2,032,085 1,851,278 - -
Income derived from investment
of shareholders’ funds 28 392,585 405,059 207,727 283,574
Net income from Takaful business 29 542,803 553,058 - -
Reversal of/(Allowance for)
impairment on financing
and advances 30 (59,993) 15,009 - -
(Allowance for)/Reversal of
impairment on investments 31 2,978 (9,211) - -
Reversal of impairment on
other assets 710 5,570 - -
Direct expenses (17,966) (25,773) - - __________ __________ __________ __________
Total distributable income 2,893,202 2,794,990 207,727 283,574
Income attributable to depositors 32 (845,001) (772,801) - - __________ __________ __________ __________
Total net income 2,048,201 2,022,189 207,727 283,574
Personnel expenses 33 (599,052) (593,921) (7,745) (7,219)
Other overhead expenses 34 (565,543) (605,143) (4,350) (24,414) __________ __________ __________ __________
883,606 823,125 195,632 251,941
Finance cost (68,222) (3,349) (68,222) (3,349)
Share of results of associate
company, net of tax - (349) - - __________ __________ __________ __________
Profit before zakat and tax 815,384 819,427 127,410 248,592
Zakat (13,202) (14,108) - -
Tax expense 36 (215,278) (242,165) (322) (56,461) __________ __________ __________ __________
Profit for the year 586,904 563,154 127,088 192,131
======= ======= ======= =======
Attributable to:
Owners of the Company 532,329 279,327 127,088 192,131
Non-controlling interests 54,575 283,827 - - __________ __________ __________ __________
Profit for the year 586,904 563,154 127,088 192,131
======= ======= ======= =======
Earnings per share (sen) 37 35.64 25.84
======= =======
Dividend per ordinary share-net (sen) 38 23.20 8.50
======= =======
9
BIMB Holdings Berhad (Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries
Statements of Profit or Loss and Other Comprehensive
Income for the financial year ended 31 December 2014
(continued)
Group Company
2014 2013 2014 2013
RM’000 RM’000 RM’000 RM’000
Profit for the year 586,904 563,154 127,088 192,131
======= ======= ======= =======
Other comprehensive income, net of tax
Items that may be reclassified
subsequently to profit or loss:
Currency translation differences
in respect of foreign operations (18,041) (27,843) - -
Fair value reserve:
Net change in fair value (7,198) (113,172) 699 571
Net amount transferred to profit or loss (24,553) (14,547) (603) (749)
________ ________ ________ ________
Other comprehensive income for
the year, net of tax (49,792) (155,562) 96 (178)
------------ ------------ ------------ ------------
Total comprehensive income for
the year 537,112 407,592 127,184 191,953
======= ======= ======= =======
Total comprehensive income
attributable to:
Owners of the Company 481,507 202,346 127,184 191,953
Non-controlling interests 55,605 205,246 - -
________ ________ ________ ________
Total comprehensive income
for the year 537,112 407,592 127,184 191,953
======= ======= ======= =======
The accompanying notes form an integral part of these financial statements.
10
BIMB Holdings Berhad (Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries
Statements of Changes in Equity for the financial year ended 31 December 2014 Attributable to owners of the Company
Non-distributable Distributable
Retained Earnings/
Share Share Other (Accumulated Non-controlling Total
capital premium reserves Losses) Total interests equity
Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 January 2013 1,066,790 603,630 428,433 (18,078) 2,080,775 1,747,615 3,828,390
Profit for the year - - - 279,327 279,327 283,827 563,154
Other comprehensive income
Currency translation differences in respect
of foreign operations - - (12,052) - (12,052) (15,791) (27,843)
Fair value reserve:
Net change in fair value - - (56,440) - (56,440) (56,732) (113,172)
Net amount reclassified to profit or loss - - (8,489) - (8,489) (6,058) (14,547)
Total comprehensive income for the year - - (76,981) 279,327 202,346 205,246 407,592
Transfer to statutory reserve - - 125,370 (125,370) - - -
Issue of shares and warrants 426,716 1,257,527 129,300 - 1,813,543 - 1,813,543
Share issue expense - (1,529) - - (1,529) - (1,529)
Dividends paid to shareholders 38 - - - (90,677) (90,677) - (90,677)
Dividends paid to non-controlling interests - - - - - (58,315) (58,315)
Disposal of interest in subsidiary - - - 4,406 4,406 3,551 7,957
Acquisition of interest in subsidiary - - (1,199,747) - (1,199,747) (1,659,290) (2,859,037)
Share-based payment transactions - - 1,220 - 1,220 796 2,016 _______________________________________________________________________________________
At 31 December 2013 1,493,506 1,859,628 (592,405) 49,608 2,810,337 239,603 3,049,940
================================================================= Note 24 Note 25.2
The accompanying notes form an integral part of these financial statements.
11
Company No. 423858-X
Statements of Changes in Equity for the financial year ended 31 December 2014
(continued) Attributable to owners of the Company
Non-distributable Distributable
Retained Earnings/
Share Share Other (Accumulated Non-controlling Total
capital premium reserves Losses) Total interests equity
Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 January 2014 1,493,506 1,859,628 (592,405) 49,608 2,810,337 239,603 3,049,940
Profit for the year - - - 532,329 532,329 54,575 586,904
Other comprehensive income
Currency translation differences in
respect of foreign operations - - (21,906) - (21,906) 3,865 (18,041)
Fair value reserve:
Net change in fair value - - (5,609) - (5,609) (1,589) (7,198)
Net amount reclassified to profit or loss - - (23,307) - (23,307) (1,246) (24,553)
Total comprehensive income for the year - - (50,822) 532,329 481,507 55,605 537,112
Transfer to statutory reserve - - 254,517 (254,517) - - -
Dividends paid to shareholders 38 - - - (346,493) (346,493) - (346,493)
Dividends paid to non-controlling interests - - - - - (51,603) (51,603)
Disposal of interest in subsidiary - - - 1,807 1,807 694 2,501
Share-based payment transactions - - 2,903 - 2,903 1,911 4,814
Long Term Incentive Plan exercised - - (1,024) - (1,024) 1,024 -
Distributions to non-controlling interests - - - - - (7,011) (7,011)
_______________________________________________________________________________
At 31 December 2014 1,493,506 1,859,628 (386,831) (17,266) 2,949,037 240,223 3,189,260
=======================================================================
Note 24 Note 25.2
The accompanying notes form an integral part of these financial statements.
12
Company No. 423858-X
Statements of Changes in Equity for the financial year
ended 31 December 2014 (continued) Attributable to owners of the Company
Non-distributable Distributable
Share Share Warrant Fair value Retained Total
capital premium reserves reserves earnings equity
Company Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 January 2013 1,066,790 603,630 - 133 133,550 1,804,103
Profit for the year - - - - 192,131 192,131
Other comprehensive
income
Fair value reserve:
Net change in fair value - - - 571 - 571
Net amount reclassified
to profit or loss - - - (749) - (749)
Total comprehensive
income for the year - - - (178) 192,131 191,953
Issue of shares and warrants 426,716 1,257,527 129,300 - - 1,813,543
Share issue expenses - (1,529) - - - (1,529)
Dividends paid to
shareholders 38 - - - - (90,677) (90,677)
_________________________________________________________
At 31 December 2013/
1 January 2014 1,493,506 1,859,628 129,300 (45) 235,004 3,717,393
Profit for the year - - - - 127,088 127,088
Other comprehensive
income
Fair value reserve:
Net change in fair value - - - 699 - 699
Net amount reclassified
to profit or loss - - - (603) - (603)
Total comprehensive
income for the year - - - 96 127,088 127,184
Dividends paid to
shareholders 38 - - - - (346,493) (346,493)
_________________________________________________________
At 31 December 2014 1,493,506 1,859,628 129,300 51 15,599 3,498,084
===================================================
Note 24
The accompanying notes form an integral part of these financial statements.
13
BIMB Holdings Berhad (Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries
Statements of Cash Flows for the financial year ended
31 December 2014
Group Company 2014 2013 2014 2013
RM’000 RM’000 RM’000 RM’000
Cash flows from operating activities
Profit before zakat and tax 815,384 819,427 127,410 248,592
Adjustments for:
Depreciation 61,235 60,623 681 675
(Reversal)/impairment losses on financial
assets available-for-sale (106) 9,537 - -
Reversal of impairment losses
on financial assets held-to-maturity (2,872) (326) - -
Reversal of impairment on other assets (710) (5,570) - -
Collective assessment allowance 162,878 141,621 - -
Individual assessment allowance 34,055 79,103 - -
Dividends from securities (44,771) (51,705) (603) (749)
Dividends from subsidiaries - - (201,610) (270,285)
Loss/(Gain) on disposal of property,
plant and equipment 1,394 1,514 - (2)
Gain on disposal of investment properties (2,639) - - -
Gain on disposal of assets held for sale (169) 680 - -
Net loss/(gain) on sale of financial
assets held-for-trading 3,262 9,449 - -
Net gain on sale of financial assets
available-for-sale (66,628) (159,298) - -
Fair value gain on financial assets
held-for-trading (12,840) (12,725) - -
Share of losses of associate
companies - 349 - -
Net derivative losses/(gains) 2,370 (9,163) - -
Property, plant and equipment
write off 52 4,659 - -
Gain on disposal of interest in subsidiary - - (2,305) (6,900)
Loss on redemption on financial
assets held-to-maturity - 459 - -
Finance cost 68,222 3,349 68,222 3,349
________ ________ ________ _______
Operating profit/(loss) before working
capital changes 1,018,117 891,983 (8,205) (25,320)
------------ ------------ ------------ ----------
14
Company No. 423858-X
Statements of Cash Flows for the financial year ended
31 December 2014 (continued)
Group Company 2014 2013 2014 2013
RM’000 RM’000 RM’000 RM’000
Operating profit/(loss) before working
capital changes 1,018,117 891,983 (8,205) (25,320)
Changes in working capital:
Deposits and placements of banks
and other financial institutions (1,229,975) 669,697 - -
Financing of customers (5,980,556) (4,453,873) - -
Statutory deposits with Bank
Negara Malaysia (37,900) (237,200) - -
Other assets (422,556) (3,328) 1,262 7,996
Deposits from customers 3,754,012 4,545,367 - -
Other liabilities 464,055 416,803 (10,030) 10,567
Bills payable (43,074) (214,540) - -
________ ________ _______ _______
Cash generated (used in)/from operations (2,477,877) 1,614,909 (16,973) (6,757)
Zakat paid (13,745) (10,277) - -
Tax paid (231,920) (215,716) (787) -
Tax refund 341 2,804 - 2,714
________ ________ _______ _______
Net cash generated (used in)/from
operating activities (2,723,201) 1,391,720 (17,760) (4,043)
------------ ------------ ---------- ----------
Cash flows from investing activities
Net proceeds from disposal of securities 2,927,839 801,134 - -
Purchase of property, plant and
equipment (74,891) (47,066) (54) (144)
Proceeds from disposal of property,
plant and equipment 694 820 - 2
Proceeds from disposal of investment
properties 7,710 - - -
Proceeds from disposal of assets held
for sale 7,378 3,110 - -
Dividends from securities 44,771 51,705 - -
Dividends from subsidiaries - - 201,610 213,528
Disposal of investment in subsidiary 2,501 7,957 2,501 7,957
Acquisition of non-controlling interests - (2,859,037) - (2,859,037)
Subscription of ordinary shares pursuant to
Dividend Reinvestment Plan - - (60,442) (84,956)
________ ________ ________ ________
Net cash generated from/(used in)
investing activities 2,916,002 (2,041,377) 143,615 (2,722,650)
------------ ------------ ------------ ------------
The accompanying notes form an integral part of these financial statements.
15
Company No. 423858-X
Statements of Cash Flows for the financial year ended
31 December 2014 (continued)
Group Company 2014 2013 2014 2013
RM’000 RM’000 RM’000 RM’000
Cash flows from financing activities
Dividends paid by holding company (126,948) (90,677) (126,948) (90,677)
Dividends paid to non-controlling interests (51,603) (58,315) - -
Distributions non-controlling interests (7,011) - - -
Payment of coupon on Sukuk (24,900) - (24,900) -
Proceeds from share issues - 1,813,543 - 1,813,543
Share issue expenses - (1,529) - (1,529)
Proceeds from issuance of Islamic Securities
by Company - 1,086,586 - 1,086,586
________ ________ ________ _______
Net cash (used in)/generated from
financing activities (210,462) 2,749,608 (151,848) 2,807,923
------------ ------------ ------------ ----------
Net (decrease)/increase in cash and
cash equivalents (17,661) 2,099,951 (25,993) 81,230
Cash and cash equivalents at 1 January 4,655,198 2,583,090 149,559 68,329
Foreign exchange differences (18,041) (27,843) - -
________ ________ _______ _______
Cash and cash equivalents at 31 December 4,619,496 4,655,198 123,566 149,559
======= ======= ====== ======
Cash and cash equivalents comprise:
Cash and short-term funds 3,898,172 3,953,896 123,566 149,559
Deposits and placements with financial
institutions 721,324 701,302 - -
________ ________ _______ _______
4,619,496 4,655,198 123,566 149,559
======= ======= ====== ======
The accompanying notes form an integral part of these financial statements.
16
BIMB Holdings Berhad (Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries
Notes to the financial statements
for the financial year ended 31 December 2014
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 is 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 2014
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 (“LTH”), 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 31
March 2015.
17
Company No. 423858-X
2. Summary of significant accounting policies
The accounting policies set out below have been applied consistently to all the periods
presented in these financial statements and have been applied consistently by Group
entities, unless otherwise stated.
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 (“MFRS”),
International Financial Reporting Standards (“IFRS”), the requirements of the
Companies Act, 1965 in Malaysia.
The following are accounting standards, amendments and interpretations that have
been issued by the Malaysian Accounting Standards Board (“MASB”) but have
not been adopted by the Group and the Company:
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 2011-2013 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)
18
Company No. 423858-X
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 2016
Amendments to MFRS 5, Non-current Assets Held for Sale and Discontinued
Operations (Annual Improvements 2012-2014 Cycle)
Amendments to MFRS 7, Financial Instruments: Disclosures (Annual
Improvements 2012-2014 Cycle)
Amendments to MFRS 10, Consolidated Financial Statements and MFRS
128, Investments in Associates and Joint Ventures – Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture
Amendments to MFRS 10, Consolidated Financial Statements and MFRS 12,
Disclosure of Interests in Other Entities and MFRS 128, Investments in
Associates and Joint Ventures – Investment Entities: Applying the
Consolidation Exception
Amendments to MFRS 11, Joint Arrangements – Accounting for Acquisitions
of Interests in Joint Operations
MFRS 14, Regulatory Deferral Accounts
Amendments to MFRS 101, Presentation of Financial Statements –
Disclosure Initiative
Amendments to MFRS 116, Property, Plant and Equipment and MFRS 138,
Intangible Assets – Clarification of Acceptable Methods of Depreciation and
Amortisation
Amendments to MFRS 116, Property, Plant and Equipment and MFRS 141,
Agriculture – Agriculture: Bearer Plants
Amendments to MFRS 119, Employee Benefits (Annual Improvements 2012-
2014 Cycle)
Amendments to MFRS 127, Separate Financial Statements – Equity Method
in Separate Financial Statements
Amendments to MFRS 134, Interim Financial Reporting (Annual
Improvements 2012-2014 Cycle)
MFRSs, Interpretations and Amendments effective for annual periods
beginning on or after 1 January 2017
MFRS 15, Revenue from Contracts with Customers
MFRSs, Interpretations and Amendments effective for annual periods
beginning on or after 1 January 2018
MFRS 9, Financial Instruments (2014)
19
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.1 Basis of preparation (continued)
(a) Statement of compliance (continued)
The Group and the Company plan to apply the abovementioned standards,
amendments and interpretations:
from the annual period beginning on 1 January 2015 for those accounting
standards, amendments or interpretation that are effective for annual periods
beginning on or after 1 July 2014, except for Amendments to MFRS 1 and
Amendments to MFRS 138 which are not applicable to the Group and the
Company.
from the annual period beginning on 1 January 2016 for those accounting
standards, amendments or interpretations that are effective for annual periods
beginning on or after 1 January 2016, except for Amendments to MFRS 11
and MFRS 14 which are not applicable to the Group and the Company.
from the annual period beginning on 1 January 2017 for those accounting
standards, amendments or interpretations that are effective for annual periods
beginning on or after 1 January 2017.
from the annual period beginning on 1 January 2018 for those accounting
standards, amendments or interpretations that are effective for annual periods
beginning on or after 1 January 2018.
The initial application of the accounting standards, amendments or interpretations
are not expected to have any material financial impacts to the current period and
prior period financial statements of the Group and of the Company except as
mentioned below:
MFRS 15, Revenue from Contracts with Customers
MFRS 15 replaces the guidance in MFRS 111, Construction Contracts, MFRS
118, Revenue, IC Interpretation 13, Customer Loyalty Programmes, IC
Interpretation 15, Agreements for Construction of Real Estate, IC Interpretation
18, Transfers of Assets from Customers and IC Interpretation 131, Revenue -
Barter Transactions Involving Advertising Services.
The Group is currently assessing the financial impact that may arise from the
adoption of MFRS 15.
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 and
financial liabilities, and on hedge accounting.
The Group is currently assessing the financial impact that may arise from the
adoption of MFRS 9.
20
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.1 Basis of preparation (continued)
(b) Basis of measurement
The financial statements have been prepared on the historical cost basis other than
as disclosed in Note 2.
(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.
Significant areas of estimation, uncertainty and critical judgements used in
applying accounting policies that have significant effect in determining the
amount recognised in the financial statements are described in the following note:
Note 2.5 – Financial instruments: Determination of fair value
Note 2.10 – Impairment
Note 2.13 – General Takaful Fund
– Provision for outstanding claims
– Expense reserves
Note 2.14 – Family Takaful Fund
– Actuarial reserves
– Provision for outstanding claims
– Expenses reserves
Note 2.21 – 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.
21
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.2 Basis of consolidation (continued)
(a) Subsidiaries (continued)
The Group controls an entity when it 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. Potential voting rights are considered when
assessing control only when such rights are substantive. The Group also 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.
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.
22
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.2 Basis of consolidation (continued)
(c) Acquisition or disposal of non-controlling interest
The Group accounts for 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.
(d) Acquisition from entities under common control
Business combinations arising from transfers of interest in entities that are under
the control of the shareholder that controls the Group are accounted for as if the
acquisition had occurred at the beginning of the earliest comparative period
presented or, if later, at the date that common control was established; for this
purpose comparatives are restated. The assets and liabilities acquired are
recognised at the carrying amounts recognised previously in the Group controlling
shareholder’s consolidated financial statements. The components of equity of the
acquired entities are added to the same components within Group equity and any
resulting gain/loss is recognised directly in equity.
(e) 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.
(f) 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.
23
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.2 Basis of consolidation (continued)
(f) Associates (continued)
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 investment includes transaction costs.
(g) 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.
24
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.2 Basis of consolidation (continued)
(h) 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 associates 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.
In the consolidated financial statements, when settlement of a monetary item
receivable from or payable to a foreign operation is neither planned nor likely to
occur 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 foreign currency translation reserve (“FCTR”) in equity.
25
Company No. 423858-X
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 fair value adjustments arising on acquisition, are translated to
RM at exchange rates at the end of the reporting period. The income and expenses
of foreign operations 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 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.
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.
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.
26
Company No. 423858-X
2. Summary of significant accounting policies (continued) (b) 2.5 Financial instruments (continued)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.
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.
27
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.5 Financial instruments (continued)
(b) Financial instrument categories and subsequent measurement
(continued)
Financial assets (continued)
(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 2.10).
Financial liabilities
All financial liabilities are initially measured at fair value and subsequently
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.
28
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.5 Financial instruments (continued)
(b) Financial instrument categories and subsequent measurement
(continued)
Financial liabilities (continued)
Derivatives that are linked to and must be settled by delivery of equity
instruments that do not have quoted price in an active market for identical
instruments whose fair value otherwise 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.
29
Company No. 423858-X
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
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.
30
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.6 Property, plant and equipment (continued)
Recognition and measurement (continued)
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.
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 improvements 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
31
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.6 Property, plant and equipment (continued)
Depreciation (continued)
Depreciation methods, useful lives and residual values are reviewed at end of the
reporting period, and adjusted as appropriate.
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 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
(i) 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.
32
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.8 Leased assets
(ii) Finance lease (continued)
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.
(iii) 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.
2.9 Bills and other receivables
Bills and other receivables are stated at cost less any allowance for impairment.
33
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.10 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 as a result of one or more events having an
impact on the estimated future cash flows of the asset. 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) significant financial difficulty of the issuer or obligor; or
ii) a breach of contract, such as default or delinquency in profit or principal
payments; or
iii) it becomes probable that the borrower will enter bankruptcy or other
financial reorganisation; or
iv) 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.
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.
34
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.10 Impairment (continued)
Financial assets (continued)
(a) Financing, advances and others (continued) 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. The
estimation of the amount and timing of the future cash flows requires
management judgement. In estimating these cash flows, judgements are made
about the realisable value of the collateral pledged and the borrower financial
position. These estimations are based on assumptions and the actual results may
differ from these, hence resulting in changes to impairment losses recognised.
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.
35
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.10 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 reduces 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.
36
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.10 Impairment (continued)
Other assets
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.
2.11 Bills and acceptances payable
Bills and acceptances payable represents the Group’s own bills and acceptances
rediscounted and outstanding in the market.
2.12 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.
2.13 General Takaful Fund
The General Takaful Fund is maintained in accordance with the Islamic Financial
Services Act 2013. Included in General Takaful Fund are funds 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.
37
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.13 General Takaful Fund (continued)
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.
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.
38
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.13 General Takaful Fund (continued)
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.
2.14 Family Takaful Fund
Included in family Takaful fund are funds arising from:
Family Takaful;
Group Family Takaful; and
Family retakaful funds.
The Family Takaful Fund is maintained in accordance with the requirements of
the Islamic Financial Services Act 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. 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.
39
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.14 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 dependant 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.
40
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.14 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 receipt 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”).
41
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.15 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.
2.16 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.
42
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.16 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.
2.17 Contingencies
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.
43
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.17 Contingencies (continued)
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.
2.18 Operating segments
An operating segment is a component of the Group that engages in business
activities from which it may earn revenue and incur expenses, including revenue
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.
2.19 Share capital
Ordinary shares
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.
2.20 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 period 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.
44
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.20 Recognition of income (continued)
Financing income – Banking business (continued)
Income from a sale-based contract is recognised on effective profit rate basis over
the period of the contract based on the principal amounts outstanding whereas
income from Ijarah (lease-based contract) is recognised on effective profit rate
basis over the lease term.
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 proportion 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.
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 Group’s rights to receive payment is established.
2.21 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.
45
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.21 Income tax (continued)
Current tax is the expected tax payable or receivable on the taxable income or loss
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 assets and liabilities 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.
2.22 Zakat
This represents business zakat. It is an obligatory amount payable by the Group
and the Company to comply with the principles of Shariah.
2.23 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.
46
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.23 Employee benefits (continued)
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 Monte Carlo
Simulation. 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.
2.24 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.
47
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.24 Non-current assets held for sale (continued)
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.
2.25 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.
2.26 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.
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.
48
Company No. 423858-X
2. Summary of significant accounting policies (continued)
2.26 Borrowing costs (continued)
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.
2.27 Fair value measurements
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 asset 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.
When measuring the fair value of an asset or liability, the Group uses observable
market data as far as possible. Fair value are categorised into different levels in a
fair value hierarchy based on the input used in the valuation technique as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or
liabilities that the Group can access at the measurement date.
Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly.
Level 3: unobservable inputs for the asset or liability.
The Group recognises transfers between levels of the fair value hierarchy as of the
date of the event or change in circumstances that caused the transfers.
49
Company No. 423858-X
3. Cash and short-term funds
2014 2013
RM’000 RM’000
Group
Cash and balances with banks
and other financial institutions 796,588 600,969
Money at call and interbank
placements with remaining maturity
not exceeding one month 3,101,584 3,352,927
________ ________
3,898,172 3,953,896
======= =======
Company
Cash and balances with banks
and other financial institutions 123,566 149,559
________ ________
123,566 149,559
======= =======
4. Deposits and placements with financial institutions
Group
2014 2013
RM’000 RM’000
Licensed banks 715,238 688,324
Other financial institutions 6,086 12,978
________ ________
721,324 701,302
======= =======
50
Company No. 423858-X
5. Financial assets held-for-trading Group
2014 2013
RM’000 RM’000
At fair value:
Quoted securities in Malaysia
- Shares 66,725 51,239
Quoted securities outside Malaysia
- Shares 43,594 29,583
- Unit trusts 22,943 18,451
________ ________
133,262 99,273
------------ ------------
Unquoted securities in Malaysia
- Malaysian Government Investment Issues 50,767 726,353
- Bank Negara Negotiable Notes 394,808 178,058
- Islamic Debt Securities 205,492 328,751
- Negotiable Islamic Debt Certificates 279,628 -
Unquoted securities outside Malaysia
- Islamic Debt Securities 101,633 72,763
________ ________
1,032,328 1,305,925
------------ ------------
1,165,590 1,405,198
======= =======
51
Company No. 423858-X
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
31.12.2014
Forward contracts 1,840,778 45,508 (28,798)
Profit rate swaps 1,187,694 17,018 (3,594)
Structured deposits 106,680 15 (15)
_____________________________
3,135,152 62,541 (32,407)
==========================
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)
==========================
52
Company No. 423858-X
7. Financial assets available-for-sale Group
2014 2013
RM’000 RM’000
At fair value
Quoted securities in Malaysia
- Unit trusts 208,161 148,399
- Shares 428,420 930,897
Quoted securities outside Malaysia
- Unit trusts 82,902 73,827
- Shares 14,747 542
- Islamic Debt Securities 1,173 5,134
_________ _________
735,403 1,158,799
------------- -------------
At fair value
Unquoted securities in Malaysia
- Malaysian Government Islamic Papers 241,466 455,731
- Malaysian Government Investment Issues 1,202,058 1,269,943
- Negotiable Islamic Debt Certificates - 447,825
- Islamic Debt Securities 11,452,570 12,868,937
- Shares 380 380
- Unit trusts 149,313 298,897
Unquoted securities outside Malaysia
- Shares 38 36
- Islamic Debt Securities 1,405 1,345
- Islamic Development Bank Unit Trusts 1,647 1,647
_________ _________
13,048,877 15,344,741
------------- -------------
At cost
Unquoted securities in Malaysia
- Unquoted shares in Malaysia 24,450 23,456
Less: Accumulated impairment loss* (15,734) (14,740)
_________ _________
8,716 8,716
------------- -------------
Unquoted securities outside Malaysia - Unquoted shares outside Malaysia 22,893 23,754
------------- -------------
13,815,889 16,536,010
======== ========
* Movement in accumulated impairment loss due to translation differences.
53
Company No. 423858-X
7. Financial assets available-for-sale (continued)
Company
2014 2013
RM’000 RM’000
At fair value
Quoted securities in Malaysia
- Unit trusts 18,559 17,860
===== =====
8. Financial assets held-to-maturity Group
2014 2013
RM’000 RM’000
Unquoted securities in Malaysia
- Malaysian Government Islamic Papers 145,276 145,391
- Islamic Debt Securities 387,306 319,089
Less: Accumulated impairment loss (7,019) (7,125)
Unquoted securities outside Malaysia
- Islamic Debt Securities 21,695 10,580
_______ _______
547,258 467,935
====== ======
54
Company No. 423858-X
9. Financing, advances and others
(a) By type and Shariah contract
Bai’ Ijarah Ijarah
Bithaman Bai Muntahiah Thumma
Group Ajil Murabahah Al-Inah At-Tawarruq Bit-Tamleek Al-Bai Istisna’ Ar-Rahnu Total
31 December 2014 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At amortised cost Cash line - - 133,369 711,351 - - - - 844,720
Term financing
House financing 5,205,901 - - 3,869,009 - - 66,730 - 9,141,640
Syndicated financing 19,841 - 180,731 998,462 - 148,543 - - 1,347,577
Leasing financing - - - - 64,141 5,030 - - 69,171
Bridging financing - - - - - - 72,533 - 72,533
Personal financing - - 372,209 9,234,012 - - - - 9,606,221
Other term financing 3,137,330 403,814 21,576 3,717,813 - - 1,822 - 7,282,355
Staff financing 111,203 - 69 44,610 - - 18,466 - 174,348
Credit cards - - 89,635 346,003 - - - - 435,638
Trade bills discounted - 1,013,823 - - - - - - 1,013,823
Trust receipts - 33,398 - - - - - - 33,398
Pawn broking - - - - - - - 90,288 90,288
_________ _________ _________ _________ _________ _________ _________ ________ _________
8,474,275 1,451,035 797,589 18,921,260 64,141 153,573 159,551 90,288 30,111,712
======== ======== ======== ======== ======== ======== ======== =======
Allowance for impaired financing, advances and others
- collective assessment allowance (444,388)
- individual assessment allowance (142,753)
__________
Net financing, advances and others 29,524,571
=========
55
Company No. 423858-X
9. Financing, advances and others (continued)
(a) By type and Shariah contract (continued)
Bai’ Ijarah Ijarah
Bithaman Bai Muntahiah Thumma
Group Ajil Murabahah Al-Inah At-Tawarruq Bit-Tamleek Al-Bai Istisna’ Ar-Rahnu Total
31 December 2013 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At amortised cost
Cash line - - 175,923 573,323 - - - - 749,246
Term financing
House financing 5,442,107 - - 1,190,950 - - 67,995 - 6,701,052
Syndicated financing 30,874 - 193,387 475,200 - 33,216 - - 732,677
Leasing financing - - - - 57,931 159,750 - - 217,681
Bridging financing - - - - - - 40,052 - 40,052
Personal financing - - 734,250 7,597,961 - - - - 8,332,211
Other term financing 3,565,043 - 7,034 2,326,624 - - 1,884 - 5,900,585
Staff financing 124,320 - 708 25,736 - - 21,944 - 172,708
Credit cards - - 157,089 288,153 - - - - 445,242
Trade bills discounted - 805,381 14,107 - - - - - 819,488
Trust receipts - 35,957 - - - - - - 35,957
Pawn broking - - - - - - - 95,621 95,621
_________ _________ _________ _________ _________ _________ _________ ________ _________
9,162,344 841,338 1,282,498 12,477,947 57,931 192,966 131,875 95,621 24,242,520
======== ======== ======== ======== ======== ======== ======== =======
Allowance for impaired financing, advances and others
- collective assessment allowance (365,375)
- individual assessment allowance (136,197)
__________
Net financing, advances and others 23,740,948
=========
56
Company No. 423858-X
9. Financing, advances and others (continued)
Group
2014 2013
RM’000 RM’000
(b) By type of customer
Domestic non-bank financial institutions 471,181 352,438
Domestic business enterprise 5,884,575 4,630,194
Small medium industries 658,763 631,069
Government and statutory bodies 292,201 200,885
Individuals 22,336,404 18,216,908
Other domestic entities 8,230 5,483
Foreign entities 460,358 205,543
_________ _________
30,111,712 24,242,520
======== ========
(c) By profit rate sensitivity
Fixed rate
House financing 1,563,643 1,512,408
Others 7,553,928 7,954,409
Floating rate
Others 20,994,141 14,775,703
_________ _________
30,111,712 24,242,520
======== ========
(d) By remaining contractual maturity
Maturity within one year 3,147,023 2,927,612
More than one year to three years 992,088 816,371
More than three years to five years 1,468,082 1,373,079
More than five years 24,504,519 19,125,458
_________ _________
30,111,712 24,242,520
======== ========
(e) By geographical distribution
Central Region 13,567,565 10,699,889
Eastern Region 5,037,536 4,455,488
Northern Region 4,722,950 3,928,233
Southern Region 4,411,954 3,191,397
East Malaysia Region 2,371,707 1,967,513
_________ _________
30,111,712 24,242,520
======== ========
57
Company No. 423858-X
9. Financing, advances and others (continued)
Group
2014 2013
RM’000 RM’000
(f) By sector
Primary agriculture 331,524 243,148
Mining and quarrying 20,481 8,135
Manufacturing (including agro-based) 1,011,749 829,577
Electricity, gas and water 549,284 365,014
Wholesale & retail trade, and hotels
& restaurants 879,627 750,364
Construction 2,316,754 1,872,011
Real estate 693,563 517,731
Transport, storage and communications 563,955 236,616
Finance, insurance and business activities 924,120 850,283
Education, health and others 483,863 342,942
Household sectors 22,336,792 18,216,799
Other sectors - 9,900
_________ _________
30,111,712 24,242,520
======== ========
(g) Movement in impaired financing and advances (“impaired financing”) are
as follows:
Group
2014 2013
RM’000 RM’000
At 1 January 285,302 308,709
Classified as impaired during the year 438,837 440,665
Reclassified as not impaired during the year (194,739) (236,056)
Amount recovered (72,983) (71,626)
Amount written off (115,145) (160,388)
Exchange differences 3,267 3,998
________ _______
At 31 December 344,539 285,302
======= =======
Gross impaired financing as a percentage of
gross financing, advances and others 1.14% 1.18%
======= =======
58
Company No. 423858-X
9. Financing, advances and others (continued)
Group
2014 2013
RM’000 RM’000
(h) Impaired financing by geographical distribution
Central Region 148,240 129,930
Eastern Region 44,509 28,106
Northern Region 30,618 52,873
Southern Region 13,307 13,702
East Malaysia Region 107,865 60,691
_______ _______
344,539 285,302
====== ======
(i) Impaired financing by sector
Primary agriculture 1,854 -
Manufacturing (including agro-based) 7,669 32,302
Electricity, gas and water 54 108
Wholesale & retail trade, and hotels
& restaurants 14,732 15,525
Construction 72,192 21,601
Transport, storage and communications 42,689 33,117
Finance, insurance and business activities 60,258 61,393
Education, health and others 590 -
Household sectors 144,501 121,226
Other sectors - 30
_______ _______
344,539 285,302
====== ======
(j) Movement of allowance for impaired financing
Group
2014 2013
RM’000 RM’000
Collective assessment allowance
At 1 January 365,375 313,334
Allowance made during the year 162,878 141,621
Amount written off (84,416) (90,373)
Exchange differences 551 793
_______ _______
At 31 December 444,388 365,375
====== ======
59
Company No. 423858-X
9. Financing, advances and others (continued)
(j) Movement of allowance for impaired financing (continued)
Group
2014 2013
RM’000 RM’000
Individual assessment allowance
At 1 January 136,197 126,988
Allowance made during the year 34,055 79,103
Amount written off (30,802) (69,901)
Exchange differences 3,303 7
________ _______
At 31 December 142,753 136,197
======= =======
10. Other assets 2014 2013
Group RM’000 RM’000
Clients’ and dealers’ debit balances 179,229 47,879
Deposits and prepayments 42,781 43,173
Other financing 78,290 87,832
Other receivables 280,685 71,917
_______ _______
580,985 250,801
====== ======
Company
Amount due from subsidiaries 281 40
Deposits and prepayments 436 2,411
Income receivable 472 -
_______ _______
1,189 2,451
====== ======
Other financing of the Group are stated net of impairment allowances of RM1,713,000
(2013: RM1,927,000).
Amount due from subsidiaries are non trade in nature, not subject to financing charges
and has no fixed term of repayments.
60
Company No. 423858-X
11. Takaful assets Group
2014 2013
Note RM’000 RM’000
Retakaful assets:
- Claims liabilities 22(a)(i) 405,867 407,393
- Contribution liabilities 22(a)(ii) 69,949 80,200
- Actuarial liabilities 22(a)(iii) 206,644 148,340
_______ _______
682,460 635,933
---------- ----------
Takaful receivables
- Due contributions 95,074 88,353
- Due from retakaful/co-takaful 38,004 37,325
_______ _______
133,078 125,678
Less: Allowance for impaired receivables (4,487) (8,522)
_______ _______
128,591 117,156
---------- ----------
811,051 753,089
====== ======
Offsetting of financial assets and financial liabilities
There is no financial assets and liabilities that have been set off for presentation
purposes.
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.
61
Company No. 423858-X
13. Deferred tax assets
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets Liabilities Total
2014 2013 2014 2013 2014 2013
Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Property, plant and
equipment - 91 (23,342) (28,843) (23,342) (28,752)
Investment properties 654 640 - - 654 640
Unabsorbed capital
allowances 27,863 28,579 - - 27,863 28,579
Provisions 60,641 68,724 - - 60,641 68,724
______ ______ ______ ______ ______ ______
Tax assets/(liabilities) 89,158 98,034 (23,342) (28,843) 65,816 69,191
===== ===== ===== ===== ===== =====
Company
Tax assets 10 10 - - 10 10
===== ===== ===== ===== ===== =====
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
2014 2013
Group RM’000 RM’000
Unabsorbed capital allowances 28,047 27,518
Unutilised tax losses 7,158 7,158
Deductible temporary differences 653 (154)
______ ______
35,858 34,522
===== =====
62
Company No. 423858-X
13. Deferred tax assets (continued)
Movement in temporary differences during the year:
Recognised Effect of Recognised Effect of
Recognised in other movement As at Recognised in other movement
As at in profit comprehensive in exchange 31.12.2013 / in profit comprehensive in exchange As at
1.1.2013 or loss income rate 1.1.2014 or loss income rate 31.12.2014
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
Property, plant and equipment (33,422) 4,527 146 (3) (28,752) 5,409 - 1 (23,342)
Investment properties 783 (143) - - 640 14 - - 654
Unabsorbed capital allowances 30,246 (1,667) - - 28,579 (716) - - 27,863
Provisions 58,223 11,934 (839) (594) 68,724 (10,603) 2,351 169 60,641
_________ _________ _________ _________ _________ _________ _________ _________ ________
Total assets 55,830 14,651 (693) (597) 69,191 (5,896) 2,351 170 65,816
======== ======== ======== ======== ======== ======== ======== ======== =======
Note 36 Note 36
63
Company No. 423858-X
14. Investments in subsidiaries Company
2014 2013
RM’000 RM’000
At cost
Quoted shares in Malaysia 99,053 99,249
Unquoted shares in Malaysia 4,608,562 4,548,120
________ ________
4,707,615 4,647,369
======= =======
Details of the subsidiaries are as follows:
Effective Ownership
Interest
2014 2013
Name of Company Principal activities % %
Bank Islam Malaysia Berhad Islamic banking business 100 100
Subsidiaries of Bank Islam Malaysia Berhad
BIMB Investment Management Managing Islamic Unit 100 100
Berhad Trust Funds
BIMB Foreign Currency Dormant (in the process of 100 100
Clearing Agency Sdn. Bhd. members voluntary liquidation)
Al-Wakalah Nominees Provide nominee services 100 100
(Tempatan) Sdn. Bhd.
Farihan Corporation Sdn. Bhd. Provide manpower for the
provision of Islamic pawn
broking services 100 100
Bank Islam Trust Company Provide services as Labuan 100 100
(Labuan) Ltd. registered trust company
Subsidiary of Bank Islam Trust Company (Labuan) Ltd.
BIMB Offshore Company Resident Corporate Secretary 100 100
Management Services and Director for Offshore
Sdn. Bhd. Companies
Syarikat Takaful Malaysia Family and General 60.31 60.50
Berhad Takaful business
64
Company No. 423858-X
14. Investments in subsidiaries (continued) Effective Ownership
Interest
2014 2013
Name of Company Principal activities % %
Subsidiaries of Syarikat Takaful Malaysia Berhad
ASEAN Retakaful Family and General 63.09 63.09
International (L) Ltd.** retakaful business
P.T. Syarikat Takaful Investment holding 56 56
Indonesia*#
Subsidiaries of P.T. Syarikat Takaful Indonesia
P.T. Asuransi Takaful Umum*# General Takaful business 64.70 64.70
P.T. Asuransi Takaful Family Takaful business 74.80 74.80
Keluarga*#
BIMB Securities (Holdings) Investment holding 100 100
Sdn. Bhd.
Subsidiary of BIMB Securities (Holdings) Sdn. Bhd.
BIMB Securities Sdn. Bhd. Stockbroking 100 100
Subsidiaries of BIMB Securities Sdn. Bhd
BIMSEC Asset Management Dormant - 100
Sdn. Bhd.***
BIMSEC Nominees Nominee services 100 100
(Tempatan) Sdn. Bhd.
BIMSEC Nominees Nominee services 100 100
(Asing) Sdn. Bhd.
Syarikat Al-Ijarah Sdn. Bhd. Leasing of assets 100 100
* Incorporated in Indonesia.
# Audited by a firm of auditors other than KPMG Desa Megat & Co.
** Members’ Voluntary Winding-up commenced on 21 May 2012. The subsidiary has
been consolidated based on management accounts.
*** The Company had been dissolved under the Companies Commission of Malaysia
on 16 July 2014.
65
Company No. 423858-X
14. Investments in subsidiaries (continued)
Non-controlling interests in subsidiaries The Group’s subsidiaries that have material non-controlling interests (“NCI”) are as
follows:
2014
Bank Syarikat
Islam Takaful
Malaysia Malaysia
Berhad Berhad Total
NCI percentage of ownership
interest and voting interest - 39.69%
Carrying amount of NCI (RM’000) - 240,223 240,223
Profit allocated to NCI (RM’000) - 55,605 55,605
Summarised financial information before intra-group elimination
Bank Syarikat
Islam Takaful
Malaysia Malaysia
Berhad Berhad
RM’000 RM’000
As at 31 December 2014
Assets - 7,164,788
Liabilities - (6,568,342) ____________ ____________
Net Assets - 596,446
======= =======
Year ended 31 December 2014
Revenue - 545,937
Profit for the year - 138,735
Total comprehensive income - 139,073
======= =======
Cash flows from operating activities - 170,111
Cash flows from investing activities - 387,206
Cash flows from financing activities - (137,340) ____________ ____________
Net increase in cash and cash - 419,977
equivalents ======= =======
Distributions to NCI - 7,011
======= =======
Dividends paid to NCI - 51,603
======= =======
66
Company No. 423858-X
14. Investments in subsidiaries (continued)
Non-controlling interests in subsidiaries (continued)
2013
Bank Syarikat
Islam Takaful
Malaysia Malaysia
Berhad Berhad Total
NCI percentage of ownership
interest and voting interest - 39.50%
Carrying amount of NCI (RM’000) - 239,603 239,603
Profit allocated to NCI (RM’000) 163,814 41,432 205,246
In December 2013, Bank Islam Malaysia Berhad became a wholly-owned subsidiary of
the Company, upon the completion of the acquisition of 49.0% equity interest in Bank
Islam Malaysia Berhad from Dubai Financial Group LLC and Lembaga Tabung Haji.
Summarised financial information before intra-group elimination
Bank Syarikat
Islam Takaful
Malaysia Malaysia
Berhad Berhad
RM’000 RM’000
As at 31 December 2013
Assets - 6,924,543
Liabilities - (6,334,644)
________ ________
Net Assets - 589,899
======= =======
Year ended 31 December 2013
Revenue 2,245,105 561,988
Profit for the year 485,726 134,380
Total comprehensive income 334,313 130,905
======= =======
Cash flows from operating activities 1,293,078 328,219
Cash flows from investing activities 874,375 (250,203)
Cash flows from financing activities (110,443) (84,665)
________ ________
Net increase/(decrease) in cash and cash 2,057,010 (6,649)
equivalents ======= =======
Dividends paid to NCI 24,997 33,338
======= =======
67
Company No. 423858-X
15. Investments in associates
Group and Company
2014 2013
RM’000 RM’000
At cost
Unquoted shares 5,019 5,019
Less:
- Accumulated impairment loss (5,018) (5,018)
_______ _______
1 1
====== ======
The principal activities of the associates and the interest of the Group are as follows:
Effective Interest
Place of 2014 2013
Name of Company Principal activities Incorporation % %
Islamic Banking and Finance Provides training and Malaysia 48 48
Institute Malaysia Sdn Bhd consultancy services
68
Company No. 423858-X
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 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 2013/1 January 2014 280,263 214,289 70,347 3,776 396,664 965,339
Additions 5,386 27,574 7,560 1,285 33,086 74,891
Reclassifications (2,035) 1,526 509 - - -
Disposals (3,709) (4,071) (2,560) (359) (23,180) (33,879)
Write off - (482) - - - (482)
Transfer to asset held for sale (1,750) - - - - (1,750)
CMDF Incentive - - - - (31) (31)
Exchange difference 495 422 21 54 15 1,007
__________________________________________________ ________
At 31 December 2014 278,650 239,258 75,877 4,756 406,554 1,005,095
============================================= =======
69
Company No. 423858-X
16. Property, plant and equipment (continued)
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
Depreciation At 1 January 2013 32,753 146,524 46,976 1,870 277,149 505,272
Depreciation for the year 6,191 17,294 8,926 704 27,232 60,347
Disposals (1,768) (4,193) (1,837) (356) (3,031) (11,185)
Write off (1,107) (8,477) (11,847) (57) (2,490) (23,978)
Transfer to asset held for sale (33) - - - - (33)
Exchange difference (504) (1,271) 49 (73) 137 (1,662)
__________________________________________________ ________
At 31 December 2013/1 January 2014 35,532 149,877 42,267 2,088 298,997 528,761
Depreciation for the year 6,128 14,910 8,420 743 30,876 61,077
Disposals (2,754) (3,133) (2,428) (323) (23,153) (31,791)
Write off - (430) - - - (430)
Transfer to asset held for sale (54) - - - - (54)
Exchange difference 167 375 20 25 12 599
__________________________________________________ ________
At 31 December 2014 39,019 161,599 48,279 2,533 306,732 558,162
============================================= =======
Carrying amounts
At 1 January 2013 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
============================================= =======
At 31 December 2014 239,631 77,659 27,598 2,223 99,822 446,933
============================================= =======
70
Company No. 423858-X
16. Property, plant and equipment (continued) Building
improvements
Freehold Freehold Leasehold Leasehold and
land building land building renovations Total
** Land and buildings - Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Cost At 1 January 2013 55,724 120,419 12,375 50,055 36,267 274,840
Additions - 2,748 - (49) 5,087 7,786
Reclassifications - - - - (109) (109)
Disposals - - - (621) (1,958) (2,579)
Write off - - - - (1,837) (1,837)
Transfer from investment properties - 5,267 - - - 5,267
Transfer to asset held for sale - - - (1,060) - (1,060)
Exchange difference (20) (22) - (2,010) 7 (2,045)
___________________________________________________ ________
At 31 December 2013/1 January 2014 55,704 128,412 12,375 46,315 37,457 280,263
Additions - 1,160 - - 4,226 5,386
Reclassifications - 3,326 - (3,326) (2,035) (2,035)
Disposals (220) (409) - - (3,080) (3,709)
Transfer from investment properties - - - - - -
Transfer to asset held for sale - - - (1,750) - (1,750)
Exchange difference - - - 494 1 495
____________________________________________________ ________
At 31 December 2014 55,484 132,489 12,375 41,733 36,569 278,650
=============================================== =======
71
Company No. 423858-X
16. Property, plant and equipment (continued)
Building
improvements
Freehold Freehold Leasehold Leasehold and
land building land building renovations Total
** Land and buildings - Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Depreciation At 1 January 2013 - 6,006 986 4,294 21,467 32,753
Depreciation for the year - 2,710 174 1,297 2,010 6,191
Disposals - - - (164) (1,604) (1,768)
Write off - - - - (1,107) (1,107)
Transfer to asset held for sale - - - (33) - (33)
Exchange difference - (4) - (507) 7 (504)
__________________________________________________ ________
At 31 December 2013/1 January 2014 - 8,712 1,160 4,887 20,773 35,532
Depreciation for the year - 2,612 174 1,143 2,199 6,128
Reclassifications - 142 - (142) - -
Disposals - (46) - - (2,708) (2,754)
Transfer to asset held for sale - - - (54) - (54)
Exchange difference - - - 166 1 167
____________________________________________________ ________
At 31 December 2014 - 11,420 1,334 6,000 20,265 39,019
=============================================== =======
Carrying amounts At 1 January 2013 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
============================================= =======
At 31 December 2014 55,484 121,069 11,041 35,733 16,304 239,631 ============================================= =======
72
Company No. 423858-X
16. Property, plant and equipment (continued)
Furniture, Office
fixtures equipment
and Motor and
fittings Renovation vehicles computer Total
Company RM’000 RM’000 RM’000 RM’000 RM’000
Cost
At 1 January 2013 1,110 1,346 415 452 3,323
Additions - - - 144 144
Reclassifications (14) - - 14 -
Disposals - - - (48) (48)
_______________________________________ _____
At 31 December 2013/
1 January 2014 1,096 1,346 415 562 3,419
Additions - - - 54 54
_______________________________________ _____
At 31 December 2014 1,096 1,346 415 616 3,473
=================================== =====
Depreciation
At 1 January 2013 254 149 69 262 734
Depreciation for the year 265 225 104 81 675
Reclassifications (6) - - 6 -
Disposals - - - (48) (48)
_______________________________________ _____
At 31 December 2013/
1 January 2014 513 374 173 301 1,361
Depreciation for the year 260 224 104 93 681
_______________________________________ _____
At 31 December 2014 773 598 277 394 2,042
=================================== =====
Carrying amounts At 1 January 2013 856 1,197 346 190 2,589 =================================== ===== At 31 December 2013 583 972 242 261 2,058 =================================== ===== At 31 December 2014 323 748 138 222 1,431 =================================== =====
73
Company No. 423858-X
17. Investment properties Freehold Freehold Leasehold Leasehold
land building land building Total
Group RM’000 RM’000 RM’000 RM’000 RM’000
Cost
At 1 January 2013 6,491 12,088 585 12,076 31,240
Reclassified to asset
held for sale - - - (6,938) (6,938)
Reclassified to property,
plant and equipment - (5,535) - - (5,535)
Exchange difference - - (88) (70) (158) _______________________________________________ _______
At 31 December 2013
/1 January 2014 6,491 6,553 497 5,068 18,609
Disposals - (4,720) - (488) (5,208)
Exchange difference - - - 18 18 _______________________________________________ _______
At 31 December 2014 6,491 1,833 497 4,598 13,419
=================================== =====
Depreciation
At 1 January 2013 - 1,178 - 926 2,104
Depreciation for the year - 137 - 139 276
Reclassified to asset
held for sale - - - (205) (205)
Reclassified to property,
plant and equipment - (268) - - (268)
Exchange difference - - (10) (9) (19) ______________________________________________ _______
At 31 December 2013
/ 1 January 2014 - 1,047 (10) 851 1,888
Depreciation for the year - 70 - 88 158
Disposals - (62) - (75) (137)
Exchange difference - - - 4 4 _______________________________________________ _______
At 31 December 2014 - 1,055 (10) 868 1,913 =================================== =====
Carrying amounts At 1 January 2013 6,491 10,910 585 11,150 29,136 =================================== ===== At 31 December 2013 6,491 5,506 507 4,217 16,721 =================================== =====
At 31 December 2014 6,491 778 507 3,730 11,506 =================================== =====
Investment properties comprise a number of commercial properties that are leased to
third parties. Each of the leases contains an initial non-cancellable period of 3 years.
Subsequent renewals are negotiated with the lessee and on average renewal periods of 3
years.
74
Company No. 423858-X
17. Investment properties (continued)
Fair value of the Group’s investment properties are categorised as follows:
Level 1 Level 2 Level 3 Total
2014 RM’000 RM’000 RM’000 RM’000
Freehold land and buildings - - 5,320 5,320
Leasehold land and buildings
with unexpired lease period of
more than 50 years - - 3,820 3,820
Leasehold land and buildings
with unexpired lease period of
less than 50 years - - 2,782 2,782
_______ _______ _______ _______
- - 11,922 11,922
====== ====== ====== ======
2013
Freehold land and buildings - - 6,344 6,344
Leasehold land and buildings
with unexpired lease period of
more than 50 years - - 8,655 8,655
Leasehold land and buildings
with unexpired lease period of
less than 50 years - - 4,715 4,715
_______ _______ _______ _______
- - 19,714 19,714
====== ====== ====== ======
The following are amounts arising from investment properties that have been
recognised in profit or loss during the financial year:
Group
2014 2013
RM’000 RM’000
Rental income (net of direct operating expenses) 3,887 3,087
====== ======
18. Assets classified as held for sale Group
2014 2013
RM’000 RM’000
At 1 January 7,209 3,374
Settlement for asset held for sale (7,209) (3,925)
Transferred from property, plant and equipment 1,696 1,027
Transferred from investment properties - 6,733
_______ _______
At 31 December 1,696 7,209
====== ======
The carrying value of investment properties is the same as its carrying value before being
reclassified to current assets.
75
Company No. 423858-X
19. Deposits from customers
(a) By type of deposit
Group
2014 2013
RM’000 RM’000
Savings deposits 5,091,650 4,674,482
Wadiah 3,052,428 2,379,204
Mudharabah 2,039,222 2,295,278
Demand deposits
Wadiah 10,470,568 9,790,057
Term Deposit 25,029,432 22,371,806
Special Investment Accounts
Mudharabah 4,755,488 18,436,466
General Investment Accounts
Mudharabah 919,816 2,012,162
Term & Special term deposit-i
Tawarruq 17,895,591 -
Negotiable Islamic Debt Certificates (NIDC) 1,229,025 1,466,205
Waheed-i 134,453 358,516
Ziyad 95,059 98,457
Others 86,729 88,022 ______________ ______________
Total Deposits 40,678,379 36,924,367 ============ ============
(b) Maturity structure of term deposits are as follows:
Group
2014 2013
RM’000 RM’000
Due within six months 21,933,815 20,152,221
More than six months to one year 2,834,535 2,036,519
More than one year to three years 224,132 136,897
More than three years to five years 36,950 46,169 ______________ ______________
25,029,432 22,371,806 ============ ============
(c) By type of customer
Government and statutory bodies 7,022,205 8,069,129
Business enterprises 9,638,052 9,688,640
Individuals 5,565,494 5,124,757
Others 18,452,628 14,041,841 ______________ ______________
40,678,379 36,924,367 ============ ============
76
Company No. 423858-X
20. Deposits and placements of banks and other financial
institutions Group
2014 2013
RM’000 RM’000
Non-Mudharabah fund
Licensed banks - 1,538
Other financial institutions - 44,564
_______ _______
- 46,102
---------- ----------
Mudharabah fund
Licensed banks 280,000 1,298,873
Other financial institutions 20,000 185,000
________ ________
300,000 1,483,873
------------ ------------
300,000 1,529,975
======= =======
21. Other liabilities 2014 2013
RM’000 RM’000
Group
Accruals and other payables 805,461 724,208
Clients’ and dealers’ credit balances 170,298 50,358
Dividend payable 219,545 -
________ _______
1,195,304 774,566
======= ======
Company
Accruals and other payables 1,944 11,361
Amount due to subsidiaries 52 664
Dividend payable 219,545 -
_______ _______
221,541 12,025
====== ======
The amount due to subsidiaries is non-trade, unsecured, not subject to financing charge
and repayable on demand.
77
Company No. 423858-X
22. Takaful liabilities Group
2014 2013
Note RM’000 RM’000
Takaful contract liabilities 22(a) 6,120,133 5,875,051
Expense reserves 22(b) 142,127 131,522
Takaful payables 22(c), 41.5(b) 61,317 75,428
________ ________
6,323,577 6,082,001
======= =======
(a) Takaful contract liabilities
The takaful contract liabilities comprise the following:
Group
2014 2013
Note RM’000 RM’000
Provision for outstanding claims 22(a)(i) 808,491 861,274
Provision for unearned contributions 22(a)(ii) 290,899 296,425
Participants’ fund 22(a)(iii) 5,020,743 4,717,352
________ ________
6,120,133 5,875,051
======= =======
(i) Provision for outstanding claims
The provision for outstanding claims and its movements are further analysed
as follows:
2014
Gross Retakaful Net
Note RM’000 RM’000 RM’000
Family Takaful
Provision for claims reported
by participants 33,310 (3,352) 29,958
Provision for IBNR* 169,748 (49,805) 119,943
________ ________ ________
Provision for outstanding
claims 203,058 (53,157) 149,901
======= ======= =======
General Takaful
Provision for claims reported
by participants 375,636 (259,623) 116,013
Provision for IBNR* 229,797 (93,087) 136,710
________ ________ ________
Provision for outstanding
claims 605,433 (352,710) 252,723
======= ======= =======
Note 42(b)
78
Company No. 423858-X
22. Takaful liabilities (continued)
(a) Takaful contract liabilities (continued)
(i) Provision for outstanding claims (continued)
2014
Gross Retakaful Net
Note RM’000 RM’000 RM’000
Group
Provision for claims reported
by participants 41.5(b) 408,946 (262,975) 145,971
Provision for IBNR* 399,545 (142,892) 256,653
________ ________ ________
Provision for outstanding
claims 808,491 (405,867) 402,624
======= ======= =======
Note 11
2013
Gross Retakaful Net
Note RM’000 RM’000 RM’000
Family Takaful
Provision for claims reported
by participants 40,150 (2,278) 37,872
Provision for IBNR* 155,657 (32,845) 122,812
________ ________ ________
Provision for outstanding
claims 195,807 (35,123) 160,684
======= ======= =======
General Takaful
Provision for claims reported
by participants 433,215 (291,300) 141,915
Provision for IBNR* 232,252 (80,970) 151,282
________ ________ ________
Provision for outstanding
claims 665,467 (372,270) 293,197
======= ======= =======
Group
Provision for claims reported
by participants 41.5(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
* Incurred-but-not-reported (“IBNR”)
79
Company No. 423858-X
22. 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 2013 733,074 (301,150) 431,924
Claims incurred during the year 918,583 (225,695) 692,888
Adjustment to claims incurred in
prior accident years (91,255) 74,157 (17,098)
Claims paid during the year (769,419) 79,843 (689,576)
Increase in IBNR 72,779 (37,408) 35,371
Effect of movement in exchange rates (2,488) 2,860 372
_______ _______ _______
At 31 December 2013/
1 January 2014 861,274 (407,393) 453,881
Claims incurred during the year 796,871 (135,998) 660,873
Adjustment to claims incurred in
prior accident years (66,989) 45,418 (21,571)
Claims paid during the year (796,785) 121,754 (675,031)
Increase in IBNR 11,636 (29,077) (17,441)
Effect of movement in exchange rates 2,484 (571) 1,913
_______ _______ ________
At 31 December 2014 808,491 (405,867) 402,624
====== ====== =======
(ii) Provision for unearned contributions
The provision for unearned contributions and its movements are further
analysed as follows:
Group
Gross Retakaful Net
RM’000 RM’000 RM’000
31.12.2014 290,899 (69,949) 220,950
====== ====== ======
Note 11
31.12.2013 296,425 (80,200) 216,225
====== ====== ======
Note 11
80
Company No. 423858-X
22. 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 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/
1 January 2014 296,425 (80,200) 216,225
Contributions written during the year 451,319 (170,096) 281,223
Contributions earned during the year (457,441) 180,457 (276,984)
Effect of movement in exchange rates 596 (110) 486
_______ _______ _______
At 31 December 2014 290,899 (69,949) 220,950
====== ====== ======
(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
31.12.2014
Actuarial liabilities 4,022,862 (206,644) 3,816,218
Unallocated surplus/accumulated surplus 923,020 - 923,020
AFS reserve (68,235) - (68,235)
Translation reserve 999 - 999
Net assets value attributable to unitholders 142,097 - 142,097
________ ________ ________
5,020,743 (206,644) 4,814,099
======= ======= =======
Note 11
31.12.2013
Actuarial liabilities 3,708,819 (148,340) 3,560,479
Unallocated surplus/accumulated surplus 897,061 - 897,061
AFS reserve 1,379 - 1,379
Translation reserve 1,129 - 1,129
Net assets value attributable to unitholders 108,964 - 108,964
________ ________ ________
4,717,352 (148,340) 4,569,012
======= ======= =======
Note 11
81
Company No. 423858-X
22. Takaful liabilities (continued)
(a) Takaful contract liabilities (continued)
(iii) Participants’ fund (continued)
Group
2014 2013
Gross Retakaful Net Gross Retakaful Net
Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 January 4,717,352 (148,340) 4,569,012 4,419,630 (63,856) 4,355,774
Net earned contributions 1,235,114 (65,737) 1,169,377 1,391,017 (51,952) 1,339,065
Investment income 221,114 - 221,114 211,900 - 211,900
Realised gains 42,009 - 42,009 132,936 - 132,936
Fair value gains 12,871 - 12,871 9,621 - 9,621
Other operating income 6,540 - 6,540 2,931 - 2,931
Net benefits and claims (696,349) 69,152 (627,197) (782,178) 63,696 (718,482)
Fees deducted (net) (321,367) - (321,367) (362,158) - (362,158)
Other operating expenses (24,625) - (24,625) (11,641) - (11,641)
Profit paid to participants (30,429) - (30,429) (31,639) - (31,639)
Increase in actuarial liabilities 58,295 (58,016) 279 38,482 (85,501) (47,019)
Profit attributable to the Takaful Operator (130,812) (3,414) (134,226) (145,792) (11,745) (157,537)
Excess payment transferred to participants (1,239) - (1,239) 3,236 - 3,236
Change in AFS reserve (69,613) - (69,613) (106,411) - (106,411)
Withholding tax (11,281) - (11,281) (4,030) - (4,030)
Effect of movement in exchange rates 13,163 (289) 12,874 (48,552) 1,018 (47,534)
_____________________________ _____________________________
At 31 December 5,020,743 (206,644) 4,814,099 4,717,352 (148,340) 4,569,012
========================== ==========================
82
Company No. 423858-X
22. Takaful liabilities (continued)
(b) Expense reserves
Group
2014 2013
RM’000 RM’000
At 1 January 131,522 89,486
Provision for the year, net 10,415 42,770
Effect of movement in exchange rates 190 (734)
_______ _______
At 31 December 142,127 131,522
====== ======
(c) Takaful payables
Group
2014 2013
RM’000 RM’000
Due to retakaful companies 46,409 61,359
Due to Intermediaries/Participants 14,908 14,069
_______ _______
61,317 75,428
====== ======
23. Sukuk liabilities Group and Company
2014 2013
RM’000 RM’000
Sukuk liabilities 1,133,256 1,089,935
======= =======
The amount refers to the 10-year Islamic securities (“Sukuk”) of RM1.66 billion in
nominal value issued by the Company on 12 December 2013.
24. Share capital Group and Company
2014 2013
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 2014 1,493,506 1,066,790
Issuance of shares via the renounceable rights - 426,716
Issuance of shares under conversion of warrants * - ____________ ____________
Ordinary shares of RM1 each as at 31 December 2014 1,493,506 1,493,506
======= =======
83
Company No. 423858-X
24. Share capital (continued)
(a) Ordinary shares
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.
There is no change in the authorised and issued and fully paid shares of the
Company during the financial year.
(b) Warrants
On 11 December 2013, the Company issued 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. The warrants will expire at the end of ten
years from the date of issuance.
Warrants converted during the financial year resulted in 80 (2013: Nil) new ordinary
shares of RM1.00 each being issued.
As at 31 December 2014, 426,715,878 (2013: 426,715,958) warrants remained
unexercised.
25. Reserves
25.1 Share premium and reserves
Breakdown of share premium and reserves are as follows:
Group
2014 2013
Note RM’000 RM’000
Share premium 1,859,628 1,859,628
Other reserves 25.2 (386,831) (592,405)
(Accumulated losses)/Retained earnings (17,266) 49,608
________ ________
1,455,531 1,316,831
======= ======= Company
2014 2013
RM’000 RM’000
Share premium 1,859,628 1,859,628
Fair value reserves 51 (45)
Warrant reserves 129,300 129,300
Retained earnings 15,599 235,004
________ ________
2,004,578 2,223,887
======= =======
84
Company No. 423858-X
25. Reserves (continued)
25.2 Other reserves
Capital Statutory Warrant Acquisition Fair value Translation LTIP*
reserve reserve reserve Reserve reserve reserve reserve Total
Group RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At 1 January 2013 6,863 358,719 - - 69,176 (6,325) - 428,433
Foreign exchange translation differences - - - - - (12,052) - (12,052)
Fair value reserve:
Net change in fair value
-
-
-
-
(56,440)
-
-
(56,440)
Net amount reclassified to profit or loss - - - - (8,489) - - (8,489)
Transfer from current year profit - 125,370 - - - - - 125,370
Issuance of rights issue shares with warrants - - 129,300 - - - - 129,300
Acquisition of additional interest in subsidiary
from non – controlling interests - - - (1,199,747) - - - (1,199,747)
Share-based payment transactions - - - - - - 1,220 1,220
__________ ___________ __________ _________ __________ __________ _________ __________
At 31 December 2013/1 January 2014 6,863 484,089 129,300 (1,199,747) 4,247 (18,377) 1,220 (592,405)
Foreign exchange translation differences - - - - - (21,906) - (21,906)
Fair value reserve:
Net change in fair value
-
-
-
-
(5,609)
-
-
(5,609)
Net amount reclassified to profit or loss - - - - (23,307) - - (23,307)
Transfer from current year profit - 254,517 - - - - - 254,517
Share-based payment transactions - - - - - - 2,903 2,903
LTIP* exercised - - - - - - (1,024) (1,024)
__________ ___________ _________ _________ __________ __________ _________ __________
At 31 December 2014 6,863 738,606 129,300 (1,199,747) (24,669) (40,283) 3,099 (386,831)
========= ========== ======== ========= ========= ========= ======== =========
* Long Term Incentive Plan
85
Company No. 423858-X
25. Reserves (continued)
25.2 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 in December 2013.
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 is maintained in compliance with Section 57(2)(f) of the
Islamic Financial Service Act, 2013 and is not distributable as cash dividends.
Long Term Incentive Plan (“LTIP”) reserve The LTIP reserve comprises the cumulative value of employee services received
for the issue of Restricted Share Plan and Performance Share Plan in Takaful
Malaysia. When the LTIP is exercised, the amount from the LTIP reserve is
transferred to share premium. When the LTIP expires, the amount from the LTIP
reserve is transferred to retained earnings. LTIP is disclosed in Note 26.
86
Company No. 423858-X
26. 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 Long-term Incentive Plan Committee (“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 LTIP Committee at its sole and
absolute discretion from time to time.
87
Company No. 423858-X
26. Employee benefits (continued)
The salient features of the LTIP are, inter alia, as follows (continued):
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 the Takaful Malaysia’s issued and paid up share capital.
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 be
declared, made or paid to 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’s 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 in Takaful Malaysia granted are as follows:
Restricted Performance
Shares Shares
Number Number
of of
shares shares Total
('000) ('000) ('000)
At 1 January 2013 - - -
Granted during the year 607 724 1,331
_______ _______ _______
Outstanding at 31 December 2013/1 January 2014 607 724 1,331
Granted during the year - 460 460
Exercised during the year (189) - (189)
Forfeited during the year (39) (111) (150)
_______ _______ _______
Outstanding at 31 December 2014 379 1,073 1,452
====== ====== ======
88
Company No. 423858-X
26. Employee benefits (continued)
During the financial year, 189,500 shares in Takaful Malaysia were vested. The weighted
average share price at the date of exercise for the year was RM8.96 (2013: Nil).
The fair value in Takaful Malaysia 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
Fair value and assumption 2014 2013 2014 2013
Fair value at grant date (RM) 7.194 7.194 10.533 6.996
======= ======= ======= =======
Weighted average share price (RM) 7.194 7.194 10.533 6.996
Share price at grant date (RM) 7.755 7.755 12.580 7.755
Expected volatility 31.19% to
(weighted average volatility) 34.30% 34.30% 34.30% 34.30%
Option life
(expected weighted average life) 3 3 3 3
0.0384 to
Expected dividends (RM) 0.0384 0.0384 0.0431 0.0384
Risk-free profit rate (based on 3.30% to 3.30% to 3.43% to 3.43%
Malaysian government bonds) 3.52% 3.52% 3.52%
======= ======= ======= =======
Value of employee services received for issue of Takaful Malaysia shares
Group
2014 2013
RM’000 RM’000
Expense recognised as share-based payments
Shares granted in 2013
- Restricted shares 2,327 1,148
- Performance shares 2,017 868 ____________ ____________
4,344 2,016 ____________ ____________
Shares granted in 2014
- Performance shares 470 - ____________ ____________
4,814 2,016
======= =======
89
Company No. 423858-X
27. Income derived from investment of depositors’ funds
Group
2014 2013
RM’000 RM’000 Income derived from investment of:
(i) General investment deposits 114,634 118,442
(ii) Other deposits 1,917,451 1,732,836
________ ________
2,032,085 1,851,278
======= =======
(i) Income derived from investment of general investment deposits
Group
2014 2013
RM’000 RM’000
Financing income and hibah
Financing, advances and others 89,451 86,619
Financial assets:
- Held-for-trading 2,399 1,903
- Available-for-sale 19,152 24,173
- Held-to-maturity 286 652
Money at call and deposit with financial institutions 2,138 4,211
_______ _______
113,426 117,558
---------- ----------
Other dealing income Net loss from sale of financial assets
held-for-trading (192) (594)
Net gain on revaluation of financial assets
held-for-trading 173 596
_______ _______
(19) 2
---------- ----------
Other operating income
Net gain from sale of financial assets available-for-sale 1,227 911
Loss on redemption of financial assets held-to-maturity - (29)
_______ _______
1,227 882
---------- ----------
114,634 118,442
====== ======
of which
Financing income earned on impaired financing 1,409 1,696
====== ======
90
Company No. 423858-X
27. Income derived from investment of depositors’ funds
(continued)
(ii) Income derived from investment of other deposits
Group
2014 2013
RM’000 RM’000
Financing income and hibah Financing, advances and others 1,498,013 1,267,866
Financial assets:
- Held-for-trading 39,970 27,903
- Available-for-sale 318,176 353,419
- Held-to-maturity 4,961 9,495
Money at call and deposits with financial institutions 36,171 61,476
________ ________
1,897,291 1,720,159
------------ ------------
Other dealing income
Net loss from sale of financial assets
held-for-trading (3,172) (8,948)
Net gain on revaluation of financial assets
held-for-trading 2,558 8,554
________ ________
(614) (394)
------------ ------------
Other operating income
Net gain from sale of financial assets available-for-sale 20,774 13,501
Loss on redemption of financial assets held-to-maturity - (430)
________ ________
20,774 13,071
------------ ------------
1,917,451 1,732,836
======= =======
of which
Financing income earned on impaired financing 23,612 24,744
======= =======
91
Company No. 423858-X
28. Income derived from investment of shareholders’ funds
Group Company
2014 2013 2014 2013
RM’000 RM’000 RM’000 RM’000
Financing income and hibah Financing, advances and others 6,133 4,429 - -
Financial assets available-for-sale 119,197 103,988 - -
Money at call and deposits with
financial institutions 7,342 15,919 3,178 5,634
_______ _______ _______ _______
132,672 124,336 3,178 5,634
----------- ---------- ---------- ----------
Other dealing income
Net gain from foreign exchange
transactions 95,443 83,797 - -
Net gain from sale of financial
assets held-for-trading 102 93 - -
Net gain on revaluation of financial
assets held-for-trading 295 - - -
Net derivatives (loss)/gain (2,370) 9,163 - -
_______ _______ _______ _______
93,470 93,053 - -
----------- ---------- ---------- ----------
Other operating income
Net loss from sale of financial assets
available-for-sale (316) - - -
Reversal of allowance for doubtful debts - 201 - -
Gross dividend income from securities:
- Quoted in Malaysia 309 6 - -
- Unit trust in Malaysia 616 768 603 749
- Unit trust outside Malaysia 16 - - -
- Unquoted in Malaysia 2,619 6,458 - -
Gross dividend income from
subsidiary companies - - 201,610 270,285
Fees and commission 161,454 178,632 - -
Net (loss)/gain on disposal of
property, plant and equipment (1,394) (1,514) - 2
Net gain on disposal of shares in
subsidiary - - 2,305 6,900
Rental income 2,923 2,770 - -
Others 216 349 31 4
________ ________ _______ _______
166,443 187,670 204,549 277,940
------------ ------------ ----------- -----------
392,585 405,059 207,727 283,574
======= ======= ====== ======
92
Company No. 423858-X
29. Net income from Takaful business
Group
2014 2013
Note RM’000 RM’000
Net earned contributions
Gross earned contributions 1,415,806 1,523,388
Contribution ceded to retakaful (246,194) (184,921)
________ ________
29(a) 1,169,612 1,338,467
________ ________
Other income
Administration income 40,524 30,954
Investment income 240,317 230,061
Realised gains and losses 47,544 144,072
Fair value gains and losses 11,701 3,575
Other operating income 9,581 6,593
_______ _______
349,667 415,255
---------- ----------
Net benefits and claims
Gross benefits and claims paid (796,785) (769,419)
Claims receded to retakaful 121,754 79,843
Gross change to contract liabilities 55,267 (130,688)
Change to contract liabilities ceded to takaful (2,097) 109,103
_______ _______
29(b) (621,861) (711,161)
---------- ----------
Expense reserves (10,415) (42,770)
---------- ----------
Income from takaful business 887,003 999,791
Profits attributable to participants/takaful operator (344,200) (446,733)
_______ _______
Net income from takaful business 542,803 553,058
====== ======
93
Company No. 423858-X
29. Net income from Takaful business (continued)
(a) Net earned contributions
Group
2014 2013
RM’000 RM’000
Gross contributions 1,409,614 1,480,301
Change in actuarial reserves/unearned
contributions reserves 6,192 43,087
________ ________
Gross earned contributions 1,415,806 1,523,388
------------ ------------
Retakaful (235,833) (193,299)
Change in actuarial reserves/unearned
contributions reserve (10,361) 8,378
________ ________
Net earned contributions 1,169,612 1,338,467
======= =======
(b) Net benefits and claims
Group
2014 2013
RM’000 RM’000
Gross benefits/claims paid (796,785) (769,419)
Retakaful recoveries 121,754 79,843
________ ________
Net benefits/claims paid (675,031) (689,576)
----------- -----------
Gross change in contract liabilities:
At 31 December (808,491) (861,274)
Less:
At 1 January (861,274) (733,074)
Effect of movement in exchange rates 2,484 (2,488)
----------- -----------
55,267 (130,688)
----------- -----------
Change in contract liabilities ceded to retakaful companies:
At 31 December 405,867 407,393
Less:
At 1 January 407,393 301,150
Effect of movement in exchange rates (571) 2,860
________ ________
(2,097) 109,103
----------- -----------
(621,861) (711,161)
======= =======
94
Company No. 423858-X
30. Allowance for/(Reversal of) impairment on financing and
advances
Group
2014 2013
RM’000 RM’000
Allowance for impaired financing, advances and others
- collective assessment allowance 162,878 141,621
- individual assessment allowance 34,055 79,103
Bad debts and financing recovered (136,940) (235,733)
_______ _______
59,993 (15,009)
====== ======
31. (Reversal of)/Allowance for impairment on investments
Group
2014 2013 RM’000 RM’000
Financial assets:
- available-for-sale (2,872) 9,537
- held-to-maturity (106) (326)
______ ______
(2,978) 9,211
===== =====
32. Income attributable to depositors Group
2014 2013
RM’000 RM’000 Deposits from customers
- Mudharabah Fund 594,380 593,296
- Non-Mudharabah Fund 227,159 155,773
Deposits and placements of banks and
other financial institutions
- Mudharabah Fund 23,155 19,237
- Non-Mudharabah Fund 307 4,495
_______ _______
845,001 772,801
====== ======
95
Company No. 423858-X
33. Personnel expenses
Group Company
2014 2013 2014 2013
RM’000 RM’000 RM’000 RM’000
Salaries and wages 460,097 452,974 3,302 3,260
Employees’ Provident Fund 56,417 56,129 456 432
Directors’ remuneration 22,427 20,370 3,535 3,072
Others 60,111 64,448 452 455
_______ _______ _______ _______
599,052 593,921 7,745 7,219
====== ====== ====== ======
(a) Aggregate remuneration of Directors of the Group and the Company
categorised into appropriate components are as follows:
Group Company
2014 2013 2014 2013
RM’000 RM’000 RM’000 RM’000
Directors of the Company
Executive Director:
Fees and allowances 355 284 - -
Salaries, bonuses and EPF
contributions 2,202 1,907 2,202 1,907
Benefits-in-kind 191 77 90 54
______ ______ ______ ______
2,748 2,268 2,292 1,961
Non-Executive Directors:
Fees and allowances 2,206 2,065 992 957
Benefits-in-kind 532 346 251 154
______ ______ ______ ______
Total 5,486 4,679 3,535 3,072
===== ===== ===== =====
Directors of the subsidiary companies
Executive Directors:
Salaries, bonuses and EPF
contributions 13,913 13,195 - -
Benefits-in-kind 474 477 - -
______ ______ ______ ______
14,387 13,672 - -
--------- --------- --------- ----------
Non-Executive Directors:
Fees and allowances 2,181 1,773 - -
Benefits-in-kind 373 246 - -
______ ______ ______ ______
Total 16,941 15,691 - -
===== ===== ===== =====
96
Company No. 423858-X
33. Personnel expenses (continued)
(a) Aggregate remuneration of Directors of the Group and the Company
categorised into appropriate components are as follows (continued):
Group Company
2014 2013 2014 2013
RM’000 RM’000 RM’000 RM’000
Grand Total 22,427 20,370 3,535 3,072
===== ===== ===== =====
Total (excluding benefits
-in-kind) 20,857 19,224 3,194 2,864
===== ===== ===== =====
(b) Shariah Supervisory Council 731 603 - -
===== ===== ===== =====
34. Other overhead expenses Group Company
2014 2013 2014 2013
RM’000 RM’000 RM’000 RM’000
Promotion 177,287 200,393 333 275
Establishment 220,135 207,546 1,994 1,869
General expenses 168,121 197,204 2,023 22,270
_______ _______ _______ _______
565,543 605,143 4,350 24,414
====== ====== ====== ======
Included in other overhead expenses are:
Auditors’ remuneration
- Statutory audit - KPMG 1,239 1,361 115 97
- Other auditors 100 121 - -
- Other services - KPMG 694 360 17 360
Depreciation of property,
plant and equipment 61,077 60,347 681 675
Depreciation of investment
properties 158 276 - -
Rental of properties 53,734 51,907 882 852
Property, plant and equipment
write off 52 4,659 - -
Rental of equipment 5,890 5,384 100 99
====== ====== ====== ======
97
Company No. 423858-X
35. 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
are as follows:
Group Company
2014 2013 2014 2013
RM’000 RM’000 RM’000 RM’000
Other key management personnel:
- Short-term employee benefits 45,837 43,381 1,218 1,210
- Benefits-in-kind 656 681 52 54
______ ______ ______ ______
46,493 44,062 1,270 1,264
===== ===== ===== =====
36. Tax expense
Major components of tax expense
Group Company
2014 2013 2014 2013
RM’000 RM’000 RM’000 RM’000
Malaysian income tax:
Current year 228,447 254,306 705 56,711
(Over)/Under provision in prior years (19,065) 2,510 (383) (250)
_______ _______ _______ _______
209,382 256,816 322 56,461
---------- ---------- ---------- ----------
Deferred tax expense:
Origination and reversal of
temporary differences (2,008) (8,802) - -
Under/(Over) provision in prior years 7,904 (5,849) - -
_______ _______ _______ _______
5,896 (14,651) - -
---------- ---------- ---------- ----------
215,278 242,165 322 56,461
====== ====== ====== ======
98
Company No. 423858-X
36. Tax expense (continued)
A reconciliation of effective tax expense for the Group and Company are as follows:
Group Company
2014 2013 2014 2013
RM’000 RM’000 RM’000 RM’000
Profit before tax 815,384 819,427 127,410 248,592
====== ====== ====== ======
Income tax calculated using
Malaysian tax rate of 25%
(2013: 25%) 203,846 204,857 31,853 62,148
Non-deductible expenses 30,584 44,142 19,982 7,252
Non-taxable income (7,767) (3,495) (51,130) (12,689)
Deferred tax assets not recognised (224) - - -
_______ _______ _______ _______
226,439 245,504 705 56,711
(Over)/Under provision in
prior years (19,065) 2,510 (383) (250)
Under/(Over) provision of deferred tax 7,904 (5,849) - -
_______ _______ _______ _______
Tax expense 215,278 242,165 322 56,461
====== ====== ====== ======
Recognised in other comprehensive
income:
Deferred tax expense
Provisions 2,351 839 - -
Property, plant and equipment - (146) - -
_______ _______ _______ _______
2,351 693 - -
====== ====== ====== ======
Based on the recent amendments of Section 60AA of the Income Tax Act 1967 (ITA),
the wakalah fee received by Shareholders’ fund from Family Business is not subjected
to income tax. Accordingly, commission and management expenses incurred by
Shareholders’ fund in relation to Family Business are disallowed as deductible
expenses. The amended Section 60AA of ITA will be effective for year of assessment
2015 onwards.
99
Company No. 423858-X
37. Earnings per share
Basic earnings per ordinary share
The calculation of basic earnings per ordinary share at 31 December 2014 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
2014 2013
RM’000 RM’000
Profit attributable to owners of the Company 532,329 279,327
====== ======
Group
2014 2013
’000 ’000
Weighted average number of ordinary shares 1,493,506 1,080,819
======= =======
Group
2014 2013
Sen Sen
Basic earnings per ordinary share 35.64 25.84
===== =====
Diluted earnings per share
The Group have no dilution in their earnings per ordinary share as the warrants are
currently out-of-money in view that the exercise price for each warrant is higher than
the closing market price of the Company’s shares as at 31 December 2014.
100
Company No. 423858-X
38. Dividends
Dividends recognised by the Company:
Sen Total
per share amount Date of
2014 RM’000 payment
Final 2013 ordinary 8.50 126,948 29 May 2014
Interim 2014 ordinary 14.70 219,545 13 January 2015
______ _______
Total amount 23.20 346,493
===== ======
2013
Final 2012 ordinary 5.00 53,339 17 June 2013
First interim 2013 ordinary 3.50 37,338 21 October 2013
______ _______
Total amount 8.50 90,677
===== ======
The Directors do not recommend any final dividend to be paid for the year under
review.
101
Company No. 423858-X
39. 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
2014 2013 2014 2013
RM’000 RM’000 RM’000 RM’000
Holding Company
Gain/(Loss) on forex transaction 95 (11,263) - -
Profit attributable on deposits placed 84,996 108,750 - -
Rental of premises paid 21,608 20,128 - -
Brokerage income 3,292 3,678 - -
Contribution income for
Family Takaful 5,823 - - -
Contribution income for
General Takaful 2,675 2,677 - -
Claims paid for Family Takaful 985 - - -
Claims paid for General Takaful 718 1,726 - -
Other rental 292 227 - -
Office rental received 17 - - -
Fees and commission received 1 6 - -
Commission paid for Takaful 56 - - -
====== ====== ====== ======
Subsidiaries
Income receivable on deposits placed - - 3,220 3,056
Office rental paid - - 929 845
Others - - 20 17
Contribution paid for General Takaful - - 17 15
Contribution paid for Family Takaful - - 81 -
Claims receivable for General Takaful - - 187 -
====== ====== ====== ======
Other related companies
Income received from financing,
advances and others 12 1,279 - -
Net gain on forex transaction 1,086 563 - -
Profit attributable on deposits placed 5,986 4,818 - -
Fees and commission received 27 60 - -
Office rental paid 421 - - -
====== ====== ====== ======
102
Company No. 423858-X
39. Related party transactions (continued)
(b) The significant outstanding balances of the Group and the Company with related
party, are as follows:
Group Company
Net balance Net balance
outstanding as at outstanding as at
2014 2013 2014 2013
RM’000 RM’000 RM’000 RM’000
Holding company
Amount due from
Others - 30 - -
Amount due to
Demand and investment
deposits 2,639,396 4,308,191 - -
Profit payable to investment
deposit 3,347 1,851 - -
Commitment and
contingencies 187 127 - -
Sukuk liabilities 1,133,256 1,089,935 1,133,256 1,089,935
======= ======= ======= =======
Subsidiaries
Amount due from
Current account and
investment deposits - - 123,834 147,106
Profit payable to investment
deposit - - 472 86
Others - - 271 -
Amount due to
Others - - 52 664
====== ====== ====== ======
Other related companies
Amount due from
Financing, advances and
others 205 77,448 - -
Amount due to
Demand and investment
deposits 618,454 200,846 - -
Commitment and contingencies 3,478 5,726 - -
Profit payable to investment
deposit 247 204 - -
====== ====== ====== ======
103
Company No. 423858-X
40. 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
Total capital and capital adequacy ratios of the Bank 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 minimum regulatory capital
adequacy ratios requirement for Common Equity Tier I (“CET I”) capital ratio, Tier I
capital ratio and total capital ratio are 4.0%, 5.5% and 8.0% respectively for year 2014.
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:
2014 2013
% %
Common Equity Tier I (CET I) Capital Ratio 12.240 12.964
Total Tier 1 Capital Ratio 12.240 12.964
Total Capital Ratio 13.355 14.056
The components of CET I, Tier I and Tier II capital of Bank Islam:
2014 2013
RM’000 RM’000
Tier I capital
Paid-up share capital # 2,319,907 2,298,165
Share premium 90,981 52,281
Retained earnings 388,923 253,822
Other reserves 929,779 722,567
Less: Deferred tax assets (31,220) (24,613) ____________ ____________
Total CET I and Tier I Capital 3,698,370 3,302,222 ____________ ____________
Collective assessment allowance ^ 336,850 278,155 ____________ ____________
Total Tier II Capital 336,850 278,155 ____________ ____________
Total Capital 4,035,220 3,580,377
======= =======
^ Collective assessment allowance on non-impaired financing subject to
maximum of 1.25% of total credit risk-weighted assets.
104
Company No. 423858-X
40. Capital adequacy (continued)
The breakdown of risk-weighted assets by each major risk category is as follows:
2014 2013
RM’000 RM’000
Credit risk 26,947,994 22,252,433
Market risk 542,910 761,777
Operational risk 2,724,074 2,457,803 _____________ _____________
30,214,978 25,472,013
======== ========
105
Company No. 423858-X
40. Capital adequacy (continued)
The off-balance sheet and counterparties credit risk for Bank Islam is as
follows:
Positive Fair
Value of Credit Risk
31 December 2014 Principal Derivative Equivalent Weighted
Amount Contracts Amount Asset
Nature of item RM’000 RM’000 RM’000 RM’000
Credit related exposures
Direct credit substitutes 360,433 - 360,433 355,715
Assets sold with recourse 2 - 2 2
Transaction related contingent items 1,026,265 - 513,132 451,601
Short term self-liquidating trade
related contingencies 236,874 - 47,375 45,832
Other commitments, such as formal
standby facilities and credit lines,
with an original maturity of:
- not exceeding one year 6,165 - 1,233 1,215
- exceeding one year 942,851 - 471,425 378,793
Unutilised credit card lines 1,023,337 - 204,668 153,502
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 5,404,888 - - -
_________ ________ ________ ________ 9,000,815 - 1,598,268 1,386,660 -------------- ------------ ------------ ------------ Derivative Financial Instruments Foreign exchange related contracts
- less than one year 1,840,778 45,508 65,406 36,492
Profit rate related contracts
- less than one year 300,000 348 308 62
- one year to less than five years 600,000 12,278 20,153 4,031
- five years and above 287,694 4,392 12,996 12,996
Equity related contracts
- one year to less than five years 106,680 15 6,401 3,200
_________ ________ ________ ________ 3,135,152 62,541 105,264 56,781 -------------- ------------ ------------ ------------ Total 12,135,967 62,541 1,703,532 1,443,441 ======== ======= ======= =======
106
Company No. 423858-X
40. Capital adequacy (continued)
The off-balance sheet and counterparties credit risk for Bank Islam is as follows
(continued):
Positive Fair
Value of Credit Risk
31 December 2013 Principal Derivative Equivalent Weighted
Amount Contracts Amount Asset
Nature of item RM’000 RM’000 RM’000 RM’000
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 ======== ======= ======= =======
107
Company No. 423858-X
41. Financial Risk Management policies
41.1 Categories of financial instruments
The tables below provide an analysis of financial instruments categorised as follows:
(a) Financing, advances and receivables (“F&R”)
(b) Fair value through profit or loss (“FVTPL”)
(c) Financial assets available-for-sale (“AFS”)
(d) Financial assets held-to-maturity (“HTM”)
(e) Financial liabilities measured at amortised cost (“FL”)
Group
31 December 2014
RM’000
Carrying
amount F&R/(FL) FVTPL AFS HTM Derivatives
Financial assets
Cash, balances and placements
with banks 4,619,496 4,619,496 - - - -
Financial assets held-for-trading 1,165,590 - 1,165,590 - - -
Derivative financial assets 62,541 - - - - 62,541
Financial assets available-for-sale 13,815,889 - - 13,815,889 - -
Financial assets held-to-maturity 547,258 - - - 547,258 -
Financing, advances and others 29,524,571 29,524,571 - - - -
Takaful assets 811,051 811,051 - - - -
Statutory deposits with Bank
Negara Malaysia 1,335,000 1,335,000 - - - -
Other assets 538,204 538,204 - - - -
52,419,600 36,828,322 1,165,590 13,815,889 547,258 62,541
Financial liabilities
Deposits from customers (40,678,379) (40,678,379) - - - -
Deposits and placements of banks
and other financial institutions (300,000) (300,000) - - - -
Derivative financial liabilities (32,407) - - - - (32,407)
Bills and acceptance payable (127,524) (127,524) - - - -
Other liabilities (1,195,304) (1,195,304) - - - -
Takaful liabilities (61,317) (61,317) - - - -
Sukuk liabilities (1,133,256) (1,133,256) - - - -
(43,528,187) (43,495,780) - - - (32,407)
31 December 2013
RM’000
Carrying
amo
unt 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 29,118 - - - - 29,118
Financial assets available-for-sale 16,536,010 - - 16,536,010 - -
Financial assets held-to-maturity 467,935 - - - 467,935 -
Financing, advances and others 23,740,948 23,740,948 - - - -
Takaful assets 753,089 753,089 - - - -
Statutory deposits with Bank
Negara Malaysia 1,297,100 1,297,100 - - - -
Other assets 207,628 207,628 - - - -
49,092,224 30,653,963 1,405,198 16,536,010 467,935 29,118
Financial liabilities
Deposits from customers (36,924,367) (36,924,367) - - - -
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) - - - -
Takaful liabilities (75,428) (75,428) - - - -
Sukuk liabilities (1,089,935) (1,089,935) - - - -
(40,578,434) (40,564,869) - - - (13,565)
108
Company No. 423858-X
41. Financial Risk Management policies (continued)
41.1 Categories of financial instruments (continued)
41.2 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.
41.3 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.
Company
31 December 2014
RM’000
Carrying
amount F&R/(FL) FVTPL AFS HTM Derivatives
Financial assets
Cash, balances and placements
with banks 123,566 123,566 - - - -
Financial assets available-for-sale 18,559 - - 18,559 - -
Other assets 753 753 - - - -
142,878 124,319 - 18,559 - -
Financial liabilities
Other liabilities 221,541 221,541 - - - -
Sukuk liabilities 1,133,256 1,133,256 - - - -
1,354,797 1,354,797 - - - -
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 - -
Other assets 40 40 - - - -
167,459 149,599 - 17,860 - -
Financial liabilities
Other liabilities 12,025 12,025 - - - -
Sukuk liabilities 1,089,935 1,089,935 - - - -
1,101,960 1,101,960 - - - -
109
Company No. 423858-X
41. Financial Risk Management policies (continued)
41.3 Credit risk (continued)
(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.
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.
110
Company No. 423858-X
41. Financial Risk Management policies (continued)
41.3 Credit risk (continued)
(a) Banking (continued)
Management of Credit Risk (continued)
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. This 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.
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.
111
Company No. 423858-X
41. Financial Risk Management policies (continued)
41.3 Credit risk (continued)
(b) Takaful (continued)
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 Financial Services Act 2013 and Islamic Financial Services
Act 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
2014 2013
RM’000 RM’000
Cash and short-term funds 3,898,172 3,953,896
Deposits and placements with banks and
other financial institutions 721,324 701,302
Financial assets held-for-trading (excluding
shares, unit trusts and investment funds) 1,032,328 1,305,925
Derivative financial assets 62,541 29,118
Financial assets available-for-sale (excluding
shares, unit trusts and investment funds) 12,898,672 15,048,915
Financial assets held-to-maturity 547,258 467,935
Financing, advances and others 29,524,571 23,740,948
Other assets (net of prepayments) 538,204 207,628
Takaful assets 811,051 753,089
Statutory deposits with Bank Negara Malaysia 1,335,000 1,297,100
_________ _________
Sub-total 51,369,121 47,505,856 -------------- -------------- Credit related obligation:
Credit commitments 9,000,815 8,407,810 _________ _________
Sub-total 9,000,815 8,407,810 -------------- -------------- Total credit exposures 60,369,936 55,913,666 ======== ========
112
Company No. 423858-X
41. Financial risk management policies (continued)
41.3 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
2014 2013
RM’000 RM’000
Financing, advances and others
Neither past due nor impaired
- Excellent to good 23,196,518 18,909,824
- Satisfactory 5,741,808 4,249,300
- Fair 407,727 368,334
_________ _________
29,346,053 23,527,458
Past due but not impaired 421,120 429,760
Impaired 344,539 285,302
_________ _________
30,111,712 24,242,520
Allowance for impaired financing,
advances and others
- collective assessment allowance (444,388) (365,375)
- individual assessment allowance (142,753) (136,197)
_________ __________
29,524,571 23,740,948
======== =========
113
Company No. 423858-X
41. Financial risk management policies (continued)
41.3 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
2014 2013
RM’000 RM’000
By aging
Month-in-arrears 1 274,624 294,267
Month-in-arrears 2 146,496 135,493
_________ _________
421,120 429,760
======== ========
114
Company No. 423858-X
41. Financial risk management policies (continued)
41.3 Credit risk (continued)
(ii) Credit quality of takaful receivables
The table below summarises the credit quality of the Group’s Takaful receivable:
Group
2014 2013
RM’000 RM’000
Takaful receivables
Neither past due nor impaired 116,097 101,441
Past due but not impaired 12,494 15,715
Impaired 4,487 8,522 _________ _________
133,078 125,678
Allowance for impairment (4,487) (8,522) _________ _________
128,591 117,156 ======== ========
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
2014 2013
RM’000 RM’000
Days past-due
1-30 days 1,620 2,306
31-60 days 662 785
61-90 days 1,556 480
91-180 days 2,653 3,035
> 180 days 6,003 9,109 _________ _________
12,494 15,715 ======== ========
Impairment loss of takaful receivables
A reconciliation of the allowance for impairment losses for takaful receivables
was as follows:
RM’000
At 1 January 2013 10,883
Writeback of impairment loss (2,361) _________
At 31 December 2013/1 January 2014 8,522
Writeback of impairment loss (4,245)
Allowance for impaired debts 220
Effect of movement in exchange rates (10) _________
At 31 December 2014 4,487 ========
115
Company No. 423858-X
41. Financial risk management policies (continued)
41.3 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:
Financial Financial Financial
assets assets assets
held-for- Derivative available held-to-
trading assets -for-sale maturity Total
Group RM’000 RM’000 RM’000 RM’000 RM’000
As at 31 December 2014
AAA 68,648 - 3,928,609 157,513 4,154,770
AA 280,913 - 2,631,022 3,849 2,915,784
A 68,517 - 142,605 5,588 216,710
Below A - - 20,347 - 20,347
Unrated 36,204 - 229,875 235,032 501,111
Sovereign 541,028 - 5,946,214 145,276 6,632,518
Unit-linked 37,018 - - - 37,018
Financial institution - 57,078 - - 57,078
Corporate - 5,463 - - 5,463
_________ _________ _________ _________ _________
1,032,328 62,541 12,898,672 547,258 14,540,799
======== ======== ======== ======== ========
As at 31 December 2013
AAA 175,428 - 4,527,435 99,419 4,802,282
AA 103,489 - 3,414,274 33,955 3,551,718
A 11,745 - 59,984 7,157 78,886
Below A - - 6,807 351 7,158
Unrated 20,781 - 236,455 181,662 438,898
Sovereign 958,694 - 6,803,960 145,391 7,908,045
Unit-linked 35,788 - - - 35,788
Financial institution - 21,350 - - 21,350
Corporate - 7,768 - - 7,768
_________ _________ _________ _________ _________
1,305,925 29,118 15,048,915 467,935 16,851,893
======== ======== ======== ======== ========
116
Company No. 423858-X
41. Financial risk management policies (continued)
41.4 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.
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.
117
Company No. 423858-X
41. Financial risk management policies (continued)
41.4 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 that 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 profit rates at the reporting date and the period in
which the financial instruments reprice or mature, whichever is earlier.
118
Company No. 423858-X
41. Financial risk management policies (continued)
41.4 Market risk (continued)
(a) Banking (continued)
(i) Profit rate risk (continued)
Non trading book
Non Effective
Bank Islam Up to 1 >1-3 >3-12 1-5 Over 5 profit Trading profit
month months months years years sensitive book Total rate
As at 31 December 2014 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %
Assets
Cash, balances and placements
with banks 2,391,792 104,108 - - - 773,453 - 3,269,353 2.40
Financial assets held-for-trading - - - - - - 921,629 921,629 3.80
Derivative financial assets - - - - - - 62,541 62,541 1.99
Financial assets available-for-sale 56,394 124,169 1,799,758 5,396,262 2,860,080 - - 10,236,663 4.14
Financial assets held-to-maturity - - - - 60,752 - - 60,752 8.44
Financing, advances and others
- non-impaired 1,048,140 1,210,137 777,261 2,318,746 24,412,889 - - 29,767,173 6.01
- impaired net of allowances * - - - - - (242,602) - (242,602)
Other assets - - - - - 1,745,173 - 1,745,173
_________ _________ _________ _________ _________ _________ _________ _________
Total assets 3,496,326 1,438,414 2,577,019 7,715,008 27,333,721 2,276,024 984,170 45,820,682
======== ======== ======== ======== ======== ======== ======== ========
Note 47
* This is arrived at after deducting collective assessment allowance and individual assessment allowance from the outstanding gross impaired
financing.
119
Company No. 423858-X
41. Financial risk management policies (continued)
41.4 Market risk (continued)
(a) Banking (continued)
(i) Profit rate risk (continued)
Non trading book
Non Effective
Bank Islam Up to 1 >1-3 >3-12 1-5 Over 5 profit Trading profit
month months months years years sensitive book Total rate
As at 31 December 2014 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %
Liabilities
Deposits from customers 18,070,797 4,317,866 2,852,504 55,698 - 15,713,467 - 41,010,332 2.19
Deposits and placements of
banks and other financial
institutions 200,000 100,000 - - - - - 300,000 2.99
Derivative financial liabilities - - - - - - 32,407 32,407 1.03
Bills and acceptance payable - - - - - 127,524 - 127,524
Other liabilities - - - - - 620,829 - 620,829
_________ _________ _________ _________ _________ _________ _________ _________
Total liabilities 18,270,797 4,417,866 2,852,504 55,698 - 16,461,820 32,407 42,091,092
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
Note 47
Equity
Equity attributable to equity
holders of the Bank - - - - - 3,729,590 - 3,729,590
_________ _________ _________ _________ _________ _________ _________ _________
Total equity - - - - - 3,729,590 - 3,729,590
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
Total liabilities and share-
holders’ equity of the Bank 18,270,797 4,417,866 2,852,504 55,698 - 20,191,410 32,407 45,820,682
======== ======== ======== ======== ======== ======== ======== ========
120
Company No. 423858-X
41. Financial risk management policies (continued)
41.4 Market risk (continued)
(a) Banking (continued)
(i) Profit rate risk (continued)
Non trading book
Non
Bank Islam Up to 1 >1-3 >3-12 1-5 Over 5 profit Trading
month months months years years sensitive book Total
As at 31 December 2014 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
On-balance sheet profit
sensitivity gap (14,774,471) (2,979,452) (275,485) 7,659,310 27,333,721 (17,915,386) 951,763 -
Off-balance sheet profit
sensitivity gap (profit rate
swaps) 300,000 300,000 - (600,000) - - - -
_________ _________ _________ _________ _________ _________ _________ _________
Total profit sensitivity gap (14,474,471) (2,679,452) (275,485) 7,059,310 27,333,721 (17,915,386) 951,763 -
======== ======== ======== ======== ======== ======== ======== ========
121
Company No. 423858-X
41. Financial risk management policies (continued)
41.4 Market risk (continued)
(a) Banking (continued)
(i) Profit rate risk (continued)
Non trading book
Non Effective
Bank Islam Up to 1 >1-3 >3-12 1-5 Over 5 profit Trading profit
month months months years years sensitive book Total rate
As at 31 December 2013 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %
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 47
* This is arrived at after deducting collective assessment allowance and individual assessment allowance from the outstanding gross impaired
financing.
122
Company No. 423858-X
41. Financial risk management policies (continued)
41.4 Market risk (continued)
(a) Banking (continued)
(i) Profit rate risk (continued)
Non trading book
Non Effective
Bank Islam Up to 1 >1-3 >3-12 1-5 Over 5 profit Trading profit
month months months years years sensitive book Total rate
As at 31 December 2013 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %
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 47
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 share-
holders’ equity of the Bank 18,888,418 2,928,122 2,156,980 175,956 154 18,648,176 13,565 42,811,371
======== ======== ======== ======== ======== ======== ======== ========
123
Company No. 423858-X
41. Financial risk management policies (continued)
41.4 Market risk (continued)
(a) Banking (continued)
(i) Profit rate risk (continued)
Non trading book
Non
Bank Islam Up to 1 >1-3 >3-12 1-5 Over 5 profit Trading
month months months years years sensitive book Total
As at 31 December 2013 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
On-balance sheet profit
sensitivity gap (14,598,275) (694,122) 402,801 7,681,851 22,610,371 (16,635,074) 1,232,448 -
Off-balance sheet profit
sensitivity gap (profit rate
swaps) 400,000 600,000 (100,000) (500,000) (400,000) - - -
_________ _________ _________ _________ _________ _________ _________ _________
Total profit sensitivity gap (14,198,275) (94,122) 302,801 7,181,851 22,210,371 (16,635,074) 1,232,448 -
======== ======== ======== ======== ======== ======== ======== ========
124
Company No. 423858-X
41. Financial risk management policies (continued)
41.4 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 derivative financial 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.
2014 2013
-100bps +100bps -100bps +100bps
Increase/(Decrease)
RM’million
Bank Islam
Impact on EaR (22.45) 22.45 (51.45) 51.45
Impact on EVE (397.43) 397.43 (521.44) 521.44
====== ====== ===== =====
Note: EVE and EaR as at 31 December 2013 were reinstated in line with the
change in methodology from behavioural method to BNM contractual
method as approved by the Special BRC 01/2014 on 30 June 2014.
125
Company No. 423858-X
41. Financial risk management policies (continued)
41.4 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 daily 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:
As at 1.1.2014 to 31.12.2014
31.12.2014 Average Maximum Minimum
Bank Islam RM’million RM’million RM’million RM’million
Profit rate risk 0.67 1.62 2.83 0.63
Foreign exchange risk 0.11 0.22 2.08 0.01
Overall 0.78 1.84 4.71 0.68
====== ======= ======= ======
As at 1.1.2013 to 31.12.2013
31.12.2013 Average Maximum Minimum
Bank Islam RM’million RM’million RM’million RM’million
Profit rate risk 1.48 1.64 3.33 0.43
Foreign exchange risk 0.78 0.26 1.06 0.01
Overall 2.26 1.90 3.64 0.55
====== ======= ======= ======
126
Company No. 423858-X
41. Financial risk management policies (continued)
41.4 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 inter-relationships 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;
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; and
The dataset is updated on weekly basis.
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.
127
Company No. 423858-X
41. Financial risk management policies (continued)
41.4 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:
2014 2013
-1% +1% -1% +1% Depreciation Appreciation Depreciation Appreciation
Bank Islam RM’000 RM’000 RM’000 RM’000
US Dollar (4,855) 4,855 8,604 (8,604)
Euro 5,268 (5,268) 6,306 (6,306)
Others 861 (861) (148) 148
128
Company No. 423858-X
41. Financial risk management policies (continued)
41.4 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 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.
129
Company No. 423858-X
41. Financial risk management policies (continued)
41.4 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 is as follows:
Takaful
Takaful Family General Malaysia
Operator Takaful Takaful Group
Fixed rate instruments RM’000 RM’000 RM’000 RM’000
2014
AFS financial assets 258,447 2,090,635 349,413 2,698,495
FVTPL financial assets 3,236 112,553 - 115,789
HTM financial assets 2,248 442,979 41,279 486,506
Financing and receivables 246,802 1,081,406 177,653 1,505,861
________ ________ ________ ________
510,733 3,727,573 568,345 4,806,651
======= ======= ======= =======
2013
AFS financial assets 250,115 2,043,811 375,414 2,669,340
FVTPL financial assets 4,041 84,989 - 89,030
HTM financial assets 1,965 366,741 35,902 404,608
Financing and receivables 194,337 694,446 104,501 993,284
________ ________ ________ ________
450,458 3,189,987 515,817 4,156,262
======= ======= ======= =======
130
Company No. 423858-X
41. Financial risk management policies (continued)
41.4 Market risk (continued)
(b) Takaful (continued)
(i) Profit yield risk (continued)
Takaful Malaysia 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 on Impact on Impact on
profit Impact on operating Participants’
Change in before tax equity* surplus fund
variables RM’000 RM’000 RM’000 RM’000
2014
AFS financial assets +50bps - (8,020) - (168,963)
FVTPL financial assets +50bps 10 10 (8) (8)
10 (8,010) (8) (168,971)
AFS financial assets -50bps - 8,790 - 147,429
FVTPL financial assets -50bps (10) (10) 4 4
(10) 8,780 4 147,433
2013
AFS financial assets +50bps - (8,351) - (135,002)
FVTPL financial assets +50bps 11 11 (325) (325)
11 (8,340) (325) (135,327)
AFS financial assets -50bps - 10,603 - 179,063
FVTPL financial assets -50bps (11) (11) 368 368
(11) 10,592 368 179,431
* Impact on equity reflects adjustments for tax, when applicable.
131
Company No. 423858-X
41. Financial risk management policies (continued)
41.4 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
profit Impact on operating Participants’
Change in before tax equity* surplus fund
variables RM’000 RM’000 RM’000 RM’000
2014
Market price +15bps 8 7,820 8,136 88,747
Market price -15bps (8) (7,820) (8,136) (88,747)
132
Company No. 423858-X
41. Financial risk management policies (continued)
41.4 Market risk (continued)
(b) Takaful (continued)
(ii) Other price risk (continued)
Equity price risk sensitivity analysis (continued)
Impact on Impact on Impact on
profit Impact on operating Participants’
Change in before tax equity* surplus fund
variables RM’000 RM’000 RM’000 RM’000
2013
Market price +15bps (39) 13,045 5,736 147,610
Market price -15bps 39 (13,045) (5,736) (147,610)
* Impact on equity reflects adjustments for tax, when applicable.
(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 Islamic Financial
Services Act 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 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.
133
Company No. 423858-X
41. Financial risk management policies (continued)
41.5 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 separately
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.
The management of liquidity and funding is primarily carried out in accordance
with the BNM Liquidity Framework, 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.
134
Company No. 423858-X
41. Financial risk management policies (continued)
41.5 Liquidity risk (continued)
(a) Banking (continued)
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.
135
Company No. 423858-X
41. Financial risk management policies (continued)
41.5 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 crisis while minimising
adverse long-term implications to the Bank.
136
Company No. 423858-X
41. Financial risk management policies (continued)
41.5 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
As at 31 December 2014 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Assets
Cash, balances and placements with banks 773,453 2,391,792 104,108 - - - 3,269,353
Securities portfolio - 490,709 259,457 730,579 1,229,869 8,508,430 11,219,044
Derivatives financial assets - 4,323 8,250 26,970 6,328 16,670 62,541
Financing and advances - 1,048,140 1,210,137 509,343 267,918 26,489,033 29,524,571
Other assets - - - - - 1,745,173 1,745,173
_________ _________ _________ _________ _________ _________ _________
Total assets 773,453 3,934,964 1,581,952 1,266,892 1,504,115 36,759,306 45,820,682
------------- ------------- ------------- ------------- ------------- ------------- -------------
Note 47
Liabilities
Deposits from customers 15,713,467 18,070,797 4,317,866 1,860,673 991,831 55,698 41,010,332
Deposits and placements of banks and other
financial institutions - 200,000 100,000 - - - 300,000
Derivative financial liabilities - 2,108 17,720 4,310 4,985 3,284 32,407
Other liabilities - - - - - 748,353 748,353
_________ _________ _________ _________ _________ _________ _________
Total liabilities 15,713,467 18,272,905 4,435,586 1,864,983 996,816 807,335 42,091,092
------------- ------------- ------------- ------------- ------------- ------------- -------------
Note 47
137
Company No. 423858-X
41. Financial risk management policies (continued)
41.5 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
As at 31 December 2014 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Equity
Equity attributable to equity holders of the Bank - - - - - 3,729,590 3,729,590
_________ _________ _________ _________ _________ _________ _________
On Balance Sheet Net liquidity gap (14,940,014) (14,337,941) (2,853,634) (598,091) 507,299 32,222,381 -
Commitments and contingencies 2,410,036 1,676,783 1,434,560 1,434,375 2,372,617 2,807,596 12,135,967
_________ _________ _________ _________ _________ _________ _________
Net liquidity gap (17,350,050) (16,014,724) (4,288,194) (2,032,466) (1,865,318) 29,414,785 (12,135,967)
======== ======== ======== ======== ======== ======== ========
138
Company No. 423858-X
41. Financial risk management policies (continued)
41.5 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
As at 31 December 2013 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Assets
Cash, balances and placements with banks 616,133 2,984,281 130,491 13 5 - 3,730,923
Securities portfolio - 291,837 1,338,465 967,987 1,342,489 9,756,365 13,697,143
Derivatives financial assets - 8,374 3,828 (200) (259) 17,375 29,118
Financing and advances - 1,014,025 1,125,266 224,711 355,894 21,021,052 23,740,948
Other assets - - - - - 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 47
Liabilities
Deposits from customers 14,650,623 17,553,433 2,771,729 1,531,244 561,863 176,110 37,245,002
Deposits and placements of banks and other
financial institutions - 1,314,564 151,538 32,755 31,118 - 1,529,975
Derivative financial liabilities - 6,915 4,368 91 24 2,167 13,565
Other liabilities - - - - - 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 47
139
Company No. 423858-X
41. Financial risk management policies (continued)
41.5 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
As at 31 December 2013 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Equity
Equity attributable to equity holders of the Bank - - - - - 3,326,835 3,326,835
_________ _________ _________ _________ _________ _________ _________
On Balance Sheet Net liquidity gap (14,034,490) (14,576,395) (329,585) (371,579) 1,105,124 28,206,925 -
Commitments and contingencies 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)
======== ======== ======== ======== ======== ======== ========
140
Company No. 423858-X
41. Financial risk management policies (continued)
41.5 Liquidity risk (continued) (a) Banking (continued) Maturity analysis (continued) Contractual maturity of financial liabilities on an undiscounted 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
As at 31 December 2014 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Financial Liabilities
Deposit from customers 33,747,231 4,287,385 1,939,086 1,020,742 59,025 41,053,469
Deposit from placements of banks and other financial institutions 200,425 100,409 - - - 300,834
Derivatives financial liabilities 4,925 18,202 4,310 4,985 15 32,437
Forward contract 2,123 17,410 4,310 4,985 - 28,828
Islamic Profit Rate Swap 2,802 792 - - - 3,594
Structured deposits - - - - 15 15
Bills and acceptance payable 127,524 - - - - 127,524
Other liabilities 579,259 - - - - 579,259
_________ _________ _________ _________ _________ _________
34,659,364 4,405,996 1,943,396 1,025,727 59,040 42,093,523
======== ======== ======== ======== ======== =========
Commitments and Contingencies
Direct credit substitutes 37,603 81,510 56,237 123,881 61,202 360,433
Transaction related contingent items 114,274 74,499 89,310 248,546 499,636 1,026,265
Short term self liquidating trade related contingencies 158,699 32,308 - 3,117 42,750 236,874
_________ _________ _________ _________ _________ _________
310,576 188,317 145,547 375,544 603,588 1,623,572
======== ======== ======== ======== ======== ========
141
Company No. 423858-X
41. Financial risk management policies (continued)
41.5 Liquidity risk (continued) (a) Banking (continued) Maturity analysis (continued) Contractual maturity of financial liabilities on an undiscounted basis (continued) Up to >1 to 3 >3 to 6 >6 to 12 Over
1 month months months months 1 year Total
As at 31 December 2013 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Financial Liabilities
Deposit from customers 32,200,635 2,789,081 1,568,999 590,880 164,023 37,313,618
Deposit from placements of banks and other financial institutions 1,315,794 152,164 32,875 31,254 - 1,532,087
Derivatives financial liabilities 6,919 4,332 93 (43) 2,756 14,057
Forward contract 3,208 3,347 39 - - 6,594
Islamic Profit Rate Swap 3,711 985 54 (43) 2,174 6,881
Structured deposits - - - - 582 582
Bills and acceptance payable 166,018 4,927 - - - 170,945
Other liabilities 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 32,471 55,936 58,809 131,843 39,973 319,032
Transaction related contingent items 91,115 52,355 125,681 148,373 459,722 877,246
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
======== ======== ======== ======== ======== ========
142
Company No. 423858-X
41. Financial risk management policies (continued)
41.5 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.
143
Company No. 423858-X
41. Financial risk management policies (continued)
41.5 Liquidity risk (continued)
(b) Takaful (continued)
Maturity analysis (continued) 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
2014 Provision for outstanding claims 22(a)(i) 408,946 169,739 130,679 106,229 2,299 - 408,946
Takaful payables 22 61,317 61,153 164 - - - 61,317
Other payables 216,471 200,440 13,067 137 2,827 - 216,471
_______ _______ _______ _______ _______ _______ _______
686,734 431,332 143,910 106,366 5,126 - 686,734
====== ====== ====== ====== ====== ====== ======
2013 Provision for outstanding claims 22(a)(i) 473,365 202,498 151,911 101,253 17,703 - 473,365
Takaful payables 22 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
====== ====== ====== ====== ====== ====== ======
* Expected utilisation or settlement is within 12 months from the reporting date.
144
Company No. 423858-X
42. Takaful risk management
(a) Family Takaful Fund
The Family Takaful contracts consist of:
(i) Family Takaful non-investment-linked contracts
The Family Takaful non-investment-linked contracts are mainly credit
related takaful products, group takaful schemes, yearly renewable individual
ordinary medical plans, regular contribution individual ordinary plans and
annuity plans. The main product types are Mortgage Reducing Term
Takaful (MRTT), Group Credit Takaful, Group Term Takaful and Group
Medical Takaful.
(ii) Family Takaful investment-linked contracts
The Family Takaful investment-linked contracts are mainly made up of
regular contribution investment-linked products. The main products are
Takaful myInvest and Takaful myGenLife.
The key coverage for the Family Takaful contracts
The key coverage for the Family Takaful contracts are death, total and permanent
disability, hospital and surgical benefits, personal accident benefits, daily
hospitalisation cash allowance benefits, dread disease benefits, waiver of
contribution benefits and survival benefits (for annuity).
Concentration of Family Takaful risk
The following gives details of Takaful Malaysia Group’s concentration of risks
based on outstanding actuarial reserves by main product categories:
Group
Gross Retakaful Net
Note RM’000 RM’000 RM’000
2014
Term 874,389 (101,692) 772,697
Endowment 1,358,507 (18) 1,358,489
Mortgage 1,466,686 (104,934) 1,361,752
Annuity 323,280 - 323,280
________ ________ ________
Total Family actuarial liabilities 22(a)(iii) 4,022,862 (206,644) 3,816,218
======= ======= =======
145
Company No. 423858-X
42. Takaful risk management (continued)
(a) Family Takaful Fund (continued)
Group
Gross Retakaful Net
Note RM’000 RM’000 RM’000
2013
Term 824,558 (77,821) 746,737
Endowment 1,367,608 - 1,367,608
Mortgage 1,187,668 (70,519) 1,117,149
Annuity 328,985 - 328,985
________ ________ ________
Total Family actuarial liabilities 22(a)(iii) 3,708,819 (148,340) 3,560,479
======= ======= =======
Key assumptions
Reserves for all plans were valued on a basis that the Appointed Actuary
considers adequate and appropriate, and in-line with the valuation basis set out
by BNM in respect of the Guidelines on Valuation Basis for Liabilities of Family
Takaful Business (BNM/RH/GL 004-20) and Risk-Based Capital Framework for
Takaful Operator.
The key assumptions to which the estimation of actuarial liabilities is particularly
sensitive to the followings:
- Mortality and morbidity rates
This is significant for contracts with significant coverage for death, total
permanent disability and critical illness and the increase in the mortality or
morbidity rates would have direct impact on the liability.
- Discount rate
As the liabilities represents the present value of future cash outflow, a
reduction in discount rate would have an increasing impact on the liabilities
and vice-versa.
- Surrender rate
This is only applicable to long-term products, where when the rate is reduced
(products with PIF) or increased (products without PIF), the impact is an
increase of the liability.
146
Company No. 423858-X
42. Takaful risk management (continued)
(a) Family Takaful Fund (continued)
Sensitivities
A summary of key assumptions used for sensitivity analysis is as below:
Group
Mortality and
Morbidity Discount Surrernder
rates rate rate
2014
Endowment +10%(i) -1% -20%
Mortgage +10%(i) -1% -20%
Investment-linked +10%(i) -1% -20%
2013
Endowment +10%(i) -1% -20%
Mortgage +10%(i) -1% -20%
Investment-linked +10%(i) -1% -20%
(i) 10% Industry mortality and morbidity experience tables M8388 and M9903
The analysis below is performed for reasonable possible movements in each of
the key assumptions, with all other assumptions held constant, showing the
impact on gross and net liabilities, and unallocated surplus. The assumptions of
correlation will have a significant effect in determining the ultimate claims
liabilities. However, in order to demonstrate the impact arising from changes in
assumptions, these assumptions had to be changed on an individual basis. It
should also be noted that movement in these assumptions are non-linear.
Sensitivity information will also vary according to the current economic
assumptions.
Group
Impact on Impact on Impact on
Change in gross net unallocated
assumptions liabilities liabilities surplus
RM’000 RM’000 RM’000
2014
Mortality / morbidity rate +10% 196,164 136,580 (136,580)
Discount rate -1% 183,304 161,481 (161,481)
Surrender rate -20% 58,568 44,264 (44,264)
======= ======= ======= =======
2013
Mortality / morbidity rate +10% 180,259 135,607 (135,607)
Discount rate -1% 146,481 130,140 (130,140)
Surrender rate -20% 49,629 42,032 (42,032)
======= ======= ======= =======
147
Company No. 423858-X
42. Takaful risk management (continued)
(b) General Takaful Fund
The General Takaful contracts consist of fire, motor, personal accident,
workmen’s compensation and employers’ liability, liabilities and engineering and
others.
Concentration of General Takaful risk
The table below sets out the concentration of General Takaful gross contribution
by type of business.
Group
Gross Retakaful Net
Note RM’000 RM’000 RM’000
2014
Fire 163,537 (82,606) 80,931
Motor 208,649 (64,912) 143,737
Marine 5,733 (3,320) 2,413
Miscellaneous 73,400 (19,258) 54,142
________ _______ ________
Gross contribution 22(a)(ii) 451,319 (170,096) 281,223
======= ======= =======
2013
Fire 154,544 (80,917) 73,627
Motor 187,435 (30,647) 156,788
Marine 5,134 (2,796) 2,338
Miscellaneous 81,293 (26,987) 54,306
________ _______ ________
Gross contribution 22(a)(ii) 428,406 (141,347) 287,059
======= ======= =======
Key assumptions
The provision for Takaful liabilities is in accordance with the valuation methods
set out by BNM in respect of the Guidelines on Valuation Basis for Liabilities of
General Takaful Business (BNM/RH/GL 004-21) and Risk-Based Capital
Framework for Takaful Operator. The key assumptions underlying the estimation
of liabilities is that the Takaful Malaysia Group’s future claims development will
follow a similar pattern to past claims development experience, including
average claim cost, average claim frequency and business mix for each accident
year.
Additional qualitative judgements are used to assess the extent to which past
trends may not apply in the future, for example, isolated occurrences, changes in
market factors such as public attitude to claiming, economic conditions, as well
as internal factors such as portfolio mix, underwriting policy, policy conditions
and claims handling procedures.
148
Company No. 423858-X
42. Takaful risk management (continued)
(b) General Takaful Fund (continued)
Key assumptions (continued)
Other key circumstances affecting the reliability of assumptions include delays in
settlement and changes in foreign currency rates.
Sensitivities
The General Takaful claim liabilities are sensitive to the above key assumptions
and any changes to these assumptions may have impact on the liabilities and
operating surplus of the General Takaful Fund significantly. It is not possible to
quantify the sensitivity of certain assumptions, such as, legislative changes or
uncertainty in the estimation process.
The analysis below is performed for reasonable possible movements in each of
the key assumptions, with all other assumptions held constant, showing the
impact on gross and net liabilities and operating surplus. The assumptions of
correlation will have a significant effect in determining the ultimate claims
liabilities. However, in order to demonstrate the impact arising from changes in
assumptions, these assumptions had to be changed on an individual basis. It
should also be noted that movement in these assumptions are non-linear.
The key assumptions to which the estimation of actuarial liabilities is particularly
sensitive to the followings:
- Fire loss ratio for latest accident year
This is significant as Fire portfolio forms the largest composition under
general business. A change in loss ratio estimate will have an impact on the
liabilities significantly.
- Motor Act loss ratio for latest accident year
Motor Act business is long term in nature, and would take years before
experiencing claim incidents. A significant impact may result if the ultimate
experience differs from current estimation.
- Average claim cost
Reserves are based on the assumption that historical average claim cost is
reflective of the potential future experience. A change in average cost will
have an impact on future liabilities.
- Average claim frequency
Reserves are based on the assumption that historical average claim number
in each accident year is reflective of the potential future experience. A
change in average number of claims will have an impact on future liabilities.
149
Company No. 423858-X
42. Takaful risk management (continued)
(b) General Takaful Fund (continued)
Sensitivities (continued)
- Average claim settlement period
Reserves are based on the assumption that claim settlement period is
expected to be stable over the years. A change in claim handling practice
will have an impact on claim cost and future liabilities.
The summary of changes in key assumptions and the impact to the gross and net
claim liabilities, and the operating surplus, are shown below:
Group
Impact on Impact on Impact on
Change in gross net unallocated
assumptions liabilities liabilities surplus
RM’000 RM’000 RM’000
2014
Fire loss ratio for AY 2014 +10% 15,709 6,386 (6,386)
Motor Act loss ratio for
AY 2014 +10% 3,247 2,919 (2,919)
Average claim cost +10% 60,263 28,415 (28,415)
Average claim frequency +10% 33,179 20,960 (20,960)
Average claim Increase by
settlement period 6 months 12,523 8,181 (8,181)
======= ======= =======
2013
Fire loss ratio for AY 2013 +10% 14,351 5,884 (5,884)
Motor Act loss ratio for
AY 2013 +10% 2,783 2,478 (2,478)
Average claim cost +10% 58,903 28,075 (28,075)
Average claim frequency +10% 31,943 20,651 (20,651)
Average claim Increase by
settlement period 6 months 11,675 7,541 (7,541)
======= ======= =======
Claims development table
The following tables show the estimate of cumulative incurred claims, including
both claims notified and IBNR for each successive accident year at the end of
reporting period, together with cumulative payments to-date.
In determining the provisions for claims, Takaful Malaysia Group takes into
consideration the probability and magnitude of future experience being more
adverse than expected, and exercises a degree of caution in setting aside reserves
when there is considerable uncertainty.
150
Company No. 423858-X
42. Takaful risk management (continued)
(b) General Takaful Fund (continued)
Claims development table (continued)
In general, the uncertainty associated with the ultimate claims experience in an
accident year is greatest when the accident year is at an early stage of
development and the margin required in order to assure confidence in the
adequacy of provision is relatively at its highest. As claims develop and the
ultimate cost of claims becomes more certain, the level of margin to be
maintained should be relatively lower.
151
Company No. 423858-X
42. Takaful risk management (continued)
(b) General Takaful Fund (continued)
Gross General Takaful contract liabilities for 2014 (Group): Before 2007 2008 2009 2010 2011 2012 2013 2014 Total
Accident year RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At end of accident year 363,421 211,719 151,643 256,026 252,127 235,113 348,058 272,807
One year later 308,462 163,964 159,147 325,009 256,803 226,965 322,024 -
Two years later 269,303 170,990 202,227 314,734 237,588 195,807 - -
Three years later 261,723 194,484 186,882 289,971 216,253 - - -
Four years later 258,296 182,666 172,266 261,764 - - - -
Five years later 257,029 165,483 159,098 - - - - -
Six years later 250,354 161,903 - - - - - -
Seven years later 245,275 - - - - - - -
Current estimate of
cumulative claims incurred 245,275 161,903 159,098 261,764 216,253 195,807 322,024 272,807 1,834,931
At end of accident year (63,455) (50,291) (71,393) (101,724) (58,326) (51,497) (56,640) (64,682)
One year later (179,619) (109,315) (132,370) (174,690) (132,258) (113,394) (130,366) -
Two years later (204,297) (142,410) (146,646) (205,770) (164,490) (147,379) - -
Three years later (219,658) (152,230) (153,005) (221,959) (179,202) - - -
Four years later (227,646) (156,264) (155,143) (230,198) - - - -
Five years later (233,071) (157,581) (155,984) - - - - -
Six years later (234,596) (158,663) - - - - - -
Seven years later (238,380) - - - - - - -
Cumulative payments to-date (238,380) (158,663) (155,984) (230,198) (179,202) (147,379) (130,366) (64,682) (1,304,854)
Gross General Takaful contract liabilities 6,895 3,240 3,114 31,566 37,051 48,428 191,658 208,125 530,077
======== ======== ======== ======== ======== ======== ======= =======
Additional risk margin 79,439
Effect of movement in exchange rates (4,083) ___________
Gross General Takaful contract liabilities per Takaful Malaysia financial position (Note 22(a)(i)) 605,433
=======
152
Company No. 423858-X
42. Takaful risk management (continued)
(b) General Takaful Fund (continued)
Net General Takaful contract liabilities for 2014 (Group): Before 2007 2008 2009 2010 2011 2012 2013 2014 Total
Accident year RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At end of accident year 106,409 102,188 107,014 211,276 179,670 169,228 156,615 156,941
One year later 118,800 86,706 109,700 214,389 183,927 169,004 143,677 -
Two years later 117,551 92,132 115,733 203,874 179,313 152,765 - -
Three years later 119,607 98,093 107,449 197,585 168,629 - - -
Four years later 115,828 96,590 104,480 185,014 - - - -
Five years later 121,362 93,306 100,610 - - - - -
Six years later 120,143 90,836 - - - - - -
Seven years later 123,160 - - - - - - -
Current estimate of
cumulative claims incurred 123,160 90,836 100,610 185,014 168,629 152,765 143,677 156,941 1,121,632
At end of accident year (47,717) (33,040) (44,099) (84,167) (53,570) (47,769) (48,340) (47,835)
One year later (85,148) (60,702) (79,458) (143,180) (119,794) (101,619) (94,643) -
Two years later (94,843) (74,740) (92,171) (158,560) (144,833) (122,291) - -
Three years later (102,483) (84,233) (97,214) (171,555) (152,714) - - -
Four years later (107,236) (87,523) (98,469) (175,176) - - - -
Five years later (114,486) (88,292) (98,930) - - - - -
Six years later (114,787) (88,685) - - - - - -
Seven years later (118,094) - - - - - - -
Cumulative payments to-date (118,094) (88,685) (98,930) (175,176) (152,714) (122,291) (94,643) (47,835) (898,368)
Net General Takaful contract liabilities 5,066 2,151 1,680 9,838 15,915 30,474 49,034 109,106 223,264
======== ======== ======== ======== ======== ======== ======= =======
Additional risk margin 30,046
Effect of movement in exchange rates (587) ___________
Net General Takaful contract liabilities per Takaful Malaysia financial position (Note 22(a)(i)) 252,723
=======
153
Company No. 423858-X
43. Fair value of financial instruments
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. Changes in the assumptions
could materially affect these estimates and the corresponding fair values.
Fair value information for non-financial assets and liabilities are excluded as they do
not fall within the scope of MFRS 7, “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.
154
Company No. 423858-X
43. Fair value of financial instruments (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 wherein the parties
had each acted knowledgeably.
Fair value hierarchy
MFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to
those valuation techniques adopted 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.
155
Company No. 423858-X
43. Fair value of financial instruments (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.
2014 Fair value of financial instruments
carried at fair value
Fair value of financial instruments
not carried at fair value
Group Total Carrying
RM’000 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total fair value Amount
Financial assets
Financial assets held-for-trading 229,805 921,629 - 1,151,434 - - - - 1,151,434 1,165,590
Derivative financial assets - 62,541 - 62,541 - - - - 62,541 62,541
Financial assets available-for-sale 650,677 12,992,952 153,933 13,797,562 - - 32,066 32,066 13,829,628 13,815,889
Financial assets held-to-maturity - - - - 21,089 466,896 60,752 548,737 548,737 547,258
Financing, advances and others - - - - - - 29,527,807 29,527,807 29,527,807 29,524,571
Total assets 880,482 13,977,122 153,933 15,011,537 21,089 466,896 29,620,625 30,108,610 45,120,147 45,115,849
Financial liabilities
Derivative financial liabilities - 32,407 - 32,407 - - - - 32,407 32,407
Sukuk liabilities - - - - - - 1,133,256 1,133,256 1,133,256 1,133,256
Total liabilities - 32,407 - 32,407 - - 1,133,256 1,133,256 1,165,663 1,165,663
2014
Company
Financial assets
Financial assets available-for-sale 18,559 - - 18,559 - - - - 18,559 18,559
Total assets 18,559 - - 18,559 - - - - 18,559 18,559
Financial liabilities
Sukuk liabilities - - - - - - 1,133,256 1,133,256 1,133,256 1,133,256
Total liabilities - - - - - - 1,133,256 1,133,256 1,133,256 1,133,256
156
Company No. 423858-X
43. Fair value of financial instruments (continued)
Fair value information (continued)
2013 Fair value of financial instruments
carried at fair value
Fair value of financial instruments
not carried at fair value
Group Total Carrying
RM’000 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total fair value Amount
Financial assets
Financial assets held-for-trading 172,036 1,233,162 - 1,405,198 - - - - 1,405,198 1,405,198
Derivative financial assets - 29,118 - 29,118 - - - - 29,118 29,118
Financial assets available-for-sale 1,083,423 15,116,18
4
303,517 16,503,12
4
- - 34,481 34,481 16,537,605 16,536,010
Financial assets held-to-maturity - - - - 10,451 392,470 85,318 488,239 488,239 467,935
Financing, advances and others - - - - - - 24,040,73
3
24,040,73
3
24,040,733 23,740,948
Total assets 1,255,459 16,378,46
4
303,517 17,937,44
0
10,451 392,470 24,160,53
2
24,563,45
3
42,500,893 42,179,209
Financial liabilities
Derivative financial liabilities - 13,565 - 13,565 - - - - 13,565 13,565
Sukuk liabilities - - - - - - 1,089,935 1,089,935 1,089,935 1,089,935
Total liabilities - 13,565 - 13,565 - - 1,089,935 1,089,935 1,103,500 1,103,500
2013
Company
Financial assets
Financial assets available-for-sale 17,860 - - 17,860 - - - - 17,860 17,860
Total assets 17,860 - - 17,860 - - - - 17,860 17,860
Financial liabilities
Sukuk liabilities - - - - - - 1,089,935 1,089,935 1,089,935 1,089,935
Total liabilities - - - - - - 1,089,935 1,089,935 1,089,935 1,089,935
157
Company No. 423858-X
43. Fair value of financial instruments (continued)
The following table presents the changes in Level 3 instruments for the financial year
ended 31 December 2014 for the Group:
2014 2013
RM’000 RM’000
Financial assets held-for-trading At 1 January - 59,662
Redemption - (588)
Settlement - (60,288)
Fair value gains/(losses) - 1,214
_______ _______
At 31 December - -
====== ======
2014 2013
RM’000 RM’000
Financial assets available-for-sale At 1 January 303,517 305,204
Maturity (159,474) -
Gains 9,890 13,493
Settlement - (5,643)
Impairment - (9,537)
_______ _______
At 31 December 153,933 303,517
====== ======
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
Inter-relationship
between significant
unobservable inputs and
fair value measurement 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
4.58% The estimated fair value
would increase (decrease)
if the discount rate were
(lower) higher.
158
Company No. 423858-X
43. Fair value of financial instruments (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
Change in Impact on Impact on Impact on
variables profit Impact on operating Participants’
before tax equity surplus fund
RM’000 RM’000 RM’000 RM’000
2014
Market price +1% - (611) - (1,142)
Market price -1% - 633 - 1,175
2013
Market price +1% - (707) - (2,496)
Market price -1% - 733 - 2,565
(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 fair 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.
159
Company No. 423858-X
44. Capital commitments Group
2014 2013
RM’000 RM’000
Property, plant and equipment
Contracted but not provided for in the
financial statements 62,834 49,521
Approved but not contracted for and
not provided 20,427 31,179
_______ _______
83,261 80,700
====== ======
45. Lease commitments
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
Group
2014 2013
RM’000 RM’000 Within one year 46,857 47,262
Between one and five years 131,153 132,770
More than five years 304,209 323,942
_______ _______
482,219 503,974
====== ======
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
2014 2013
RM’000 RM’000 Within one year 7,003 6,520
Between one and five years 8,519 4,818
_______ _______
15,522 11,338
====== ======
160
Company No. 423858-X
46. 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.
47. 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.
The 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 Islamic banking and provision of related services.
Takaful Underwriting of family and general Islamic insurance (“Takaful”).
Others Investment holding, currency trading, ijarah financing, stockbroking and
unit trust.
161
Company No. 423858-X
47. Operating segment information (continued)
Banking Takaful Others Elimination Consolidated
2014 RM’000 RM’000 RM’000 RM’000 RM’000
Business segments
Segment result
Revenue from external customers 2,413,748 542,803 10,922 - 2,967,473
Inter-segment revenue 23,078 2,708 212,564 (238,350) -
___________________________________________________
Total revenue 2,436,826 545,511 223,486 (238,350) 2,967,473
=============================================
Net income from operations (before allowance for
impairment on financing and other assets) 1,585,700 545,511 223,486 (232,225) 2,122,472
Operating overheads (826,644) (357,487) (26,230) 27,800 (1,182,561)
___________________________________________________
Operating results 759,056 188,024 197,256 (204,425) 939,911
Allowance for impairment on financing and advance (59,993) - - - (59,993)
Reversal of impairment on other assets 3,688 - - - 3,688
Finance cost - - (68,222) - (68,222)
___________________________________________________
Profit before zakat and taxation 702,751 188,024 129,034 (204,425) 815,384
=============================================
Segment assets 45,820,682 7,127,028 5,190,914 (5,108,419) 53,030,205
=============================================
Segment liabilities 42,091,092 6,545,264 1,527,373 (322,784) 49,840,945
=============================================
Note 41.4 (a)(i),
41.5(a)
162
Company No. 423858-X
47. Operating segment information (continued) Banking Takaful Others Elimination Consolidated
2013 RM’000 RM’000 RM’000 RM’000 RM’000
Business segments
Segment result
Revenue from external customers 2,244,205 553,058 12,132 - 2,809,395
Inter-segment revenue 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) 1,465,640 555,702 297,774 (282,522) 2,036,594
Operating overheads (799,376) (382,017) (42,916) (528) (1,224,837)
___________________________________________________
Operating results 666,264 173,685 254,858 (283,050) 811,757
Reversal of impairment on financing 15,009 - - - 15,009
Allowance for impairment on investment (9,211) - - - (9,211)
Reversal of impairment on other assets 5,570 - - - 5,570
Finance cost - - (3,349) - (3,349)
Share in the results of associate company (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 41.4 (a)(i),
41.5(a)
163
Company No. 423858-X
48. 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
2014 2013
RM’000 RM’000
Credit-related Exposures
Direct credit substitutes 360,433 319,032
Assets sold with recourse 2 2
Transaction related contingent items 1,026,265 877,246
Other commitments, such as formal
standby facilities and credit lines, with
an original maturity of:
- not exceeding one year 6,165 1,714
- exceeding one year 942,851 823,818
Short term self liquidating trade related contingencies 236,874 278,297
Unutilised credit card lines 1,023,337 991,097
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 5,404,888 5,116,604
9,000,815 8,407,810
Derivative Financial Instruments
Foreign exchange related contracts
Less than one year 1,840,778 1,381,894
Profit rate related contracts
Less than one year 300,000 100,000
One year to less than five years 600,000 500,000
5 years and above 287,694 711,481 Equity related contracts
One year to less than five years 106,680 110,495
3,135,152 2,803,870
12,135,967 11,211,680
164
Company No. 423858-X
49. Significant events during the financial year
On 25 November 2014, the Board of Directors of BIMB Holdings Berhad (“BHB”)
(“Board”) had declared an interim single tier dividend of 14.7% per ordinary share of
RM1.00 each in BHB (“BHB Share”) for the financial year ending 31 December 2014
(“Interim Dividend”) to be paid on 13 January 2015.
From the total dividend amount paid of RM219.5 million on 13 January 2015,
approximately 17.7% or RM38.9 million was distributed as cash dividend whilst the
remaining 82.3% amounting to RM180.6 million was reinvested to subscribe for
48,703,800 new ordinary shares of RM1.00 at RM3.71 each via the Dividend
Reinvestment Plan.
165
Company No. 423858-X
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
2014 2013 2014 2013
RM’000 RM’000 RM’000 RM’000
Total retained earnings of the Company
and its subsidiaries
- realised 761,071 850,447 15,589 234,994
- unrealised 53,510 38,833 10 10
________ ________ ________ ________
814,581 889,280 15,599 235,004
Less: Consolidation adjustments (831,847) (839,672) - -
________ ________ ________ ________
Total (accumulated losses)/ retained earnings (17,266) 49,608 15,599 235,004
======= ======= ======= =======
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.
166
BIMB Holdings Berhad (Company No. 423858-X)
(Incorporated in Malaysia)
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 6 to 164 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 2014 and their financial performance
and cash flows for the financial years then ended.
In the opinion of the Directors, the information set out in Note 50 on page 165 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
……………………………………
Dato’ Johan bin Abdullah
Kuala Lumpur,
Date: 31 March 2015
167
BIMB Holdings Berhad (Company No. 423858-X)
(Incorporated in Malaysia)
Statutory declaration pursuant to
Section 169(16) of the Companies Act, 1965
I, Mohamad Azlan 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 6 to 165 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 31 March 2015.
……………………………………..
Mohamad Azlan Mohamad Alam
Before me:
168
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 2014 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 6 to
164.
Directors’ Responsibility for the Financial Statements
The Directors of the Company are responsible for the preparation of financial statements so
as to 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 entity’s preparation of 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 entity’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.
169
Company No. 423858-X
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 2014 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.
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 165 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.
170
Company No. 423858-X
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. Ow Peng Li
Firm Number: AF 0759 Approval Number: 2666/09/15(J)
Chartered Accountants Chartered Accountant
Petaling Jaya,
Date: 31 March 2015
BIMB Holdings Berhad (Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries
Reports and financial statements
for the financial year
ended 31 December 2014