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2 FINANCIAL STATEMENTS 130 Directors Report 137 Statements of Financial Position 139 Statements of Profit or Loss and Other Comprehensive Income 141 Statements of Changes in Equity 144 Statements of Cash Flows 146 Notes to the Financial Statements 277 Statement by Directors 278 Statutory Declaration 279 Independent Auditor s Report

3 130 BIMB HOLDINGS BERHAD DIRECTORS REPORT 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 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 559, ,371 Non-controlling interests 70,624 ISSUE OF SHARES AND DEBENTURES 629, ,371 During the financial year, the Company increased its issued and paid-up capital from RM1,542,209,734 to RM1,588,679,214 via the issuance of 46,469,480 new ordinary shares of RM1.00 each at a consideration of RM each arising from the Dividend Reinvestment Plan. During the financial year, there were 800 warrants converted and resulted in the issuance of 800 (2015: Nil) new ordinary shares of RM1.00 each. There were no other 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. As at 31 December 2016, 426,715,078 warrants remained unexercised. 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.

4 ANNUAL REPORT DIRECTORS REPORT Overview DIVIDENDS Since the end of the previous financial year, the amount of dividends paid by the Company were as follows: RM 000 Leadership (i) In respect of the financial year ended 31 December 2015 as reported in the Directors Report of that year: Interim single tier dividend of 12.20% per ordinary share, declared on 30 November 2015, ex-date on 18 December 2015, and paid on 22 January ,150 (ii) In respect of the financial year ended 31 December 2016: Interim single tier dividend of 13.00% per ordinary share, declared on 02 December 2016, ex-date on 28 December 2016, and paid on 27 January , ,679 Perspectives The directors do not recommend any final dividend to be paid for the financial 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 Highlights Accountability Financial Statements Shareholders 20 th AGM 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 render adherence to the existing methods of valuation of assets or liabilities of the Group and of the Company to be misleading or inappropriate.

5 132 BIMB HOLDINGS BERHAD DIRECTORS REPORT CONTINGENT AND OTHER LIABILITIES At the date of this report, there does not exist: (a) any charge on the assets of the Group or of the Company that 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 or 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 liability 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 their 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 In the opinion of the Directors, the results of the operations of the Group and of the Company for the financial year have not been 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. COMPLIANCE WITH BANK NEGARA MALAYSIA S POLICY DOCUMENT ON FINANCIAL REPORTING AND GUIDELINES In the preparation of the financial statements, the Directors have taken reasonable steps to ensure that Bank Negara Malaysia ( BNM ) s expectations on financial reporting have been complied with, including those as set out in the Financial Reporting for Islamic Banking Institutions, Circular on the Application of MFRS and Revised Financial Reporting Requirements for Islamic Banks and the Guidelines on Classification and Impairment Provision for Loans/Financing. SUBSEQUENT EVENTS DURING THE FINANCIAL YEAR The subsequent events during the financial year are as disclosed in Note 53 to the financial statements. DIRECTORS Directors of the Company who served during the financial year until the date of this report are: Tan Sri Samsudin bin Osman (Chairman) Tan Sri Ismail bin Adam Datuk Zaiton binti Mohd Hassan Datuk Rozaida binti Omar Rifina binti Md Ariff Mohd Zin bin Idris Mohd Tarmidzi bin Ahmad Nordin Noraini binti Che Dan

6 ANNUAL REPORT DIRECTORS REPORT Overview DIRECTORS OF THE SUBSIDIARIES Directors of the subsidiaries who served during the financial year until the date of this report are: NAME OF COMPANY DIRECTORS Leadership Bank Islam Malaysia Berhad Subsidiaries of Bank Islam Malaysia Berhad BIMB Investment Management Berhad Al-Wakalah Nominees (Tempatan) Sdn Bhd Datuk Zamani bin Abdul Ghani (Chairman) Dato Sri Zukri bin Samat Tan Sri Dato Dr. Abdul Shukor bin Husin Datuk Zaiton binti Mohd Hassan Mohd Zin bin Idris Mohamed Ridza bin Mohamed Abdulla Noraini binti Che Dan (appointed on ) Nik Mohd Hasyudeen bin Yusoff (appointed on ) Dato Johan bin Abdullah (ceased office on ) Khairul bin Kamaruddin Dato Ghazali bin Awang Malkiat Malkit Singh Maan A/L Delbara Singh Dr. Mohd Hatta bin Dagap Datuk Noripah binti Kamso Najmuddin bin Mohd Lutfi Mustapha bin Hamat (retired on ) Dato Sri Zukri bin Samat (resigned on ) Maria binti Mat Said Mohd Muazzam bin Mohamed (appointed on ) Dato Wan Ismail bin Wan Yusoh (resigned on ) Perspectives Highlights Accountability Farihan Corporation Sdn Bhd Khairul bin Kamaruddin (appointed on ) Maria binti Mat Said Dato Wan Ismail bin Wan Yusoh (resigned on ) Bank Islam Trust Company (Labuan) Ltd. and its subsidiary: BIMB Offshore Company Management Services Sdn Bhd Mohd Zin bin Idris Maria binti Mat Said Financial Statements Syarikat Takaful Malaysia Berhad Tan Sri Dato Ahmad Fuzi bin Haji Abdul Razak (appointed on ) (Chairman) Dato Sri Mohamed Hassan bin Kamil Dato Othman bin Abdullah Datuk Rozaida binti Omar Mahadzir bin Azizan Zakaria bin Ismail Mohd Tarmidzi bin Ahmad Nordin (appointed on ) Datin Sri Azlin binti Arshad (appointed on ) Dato Sulaiman Mohd Yusof (ceased office on ) Dato Johan bin Abdullah (ceased office on ) Shareholders 20 th AGM

7 134 BIMB HOLDINGS BERHAD DIRECTORS REPORT DIRECTORS OF THE SUBSIDIARIES (CONTINUED) Directors of the subsidiaries who served during the financial year until the date of this report are: (continued) NAME OF COMPANY DIRECTORS Subsidiary of Syarikat Takaful Malaysia Berhad P.T. Syarikat Takaful Indonesia Dato Sri Mohamed Hassan bin Kamil Mohamed Zaffarulla bin Sathar Subsidiaries of P.T. Syarikat Takaful Indonesia P.T. Asuransi Takaful Umum P.T. Asuransi Takaful Keluarga BIMB Securities (Holdings) Sdn Bhd Hanifah bin Hussein Bachrum M. Nasution Dato Sri Mohamed Hassan bin Kamil M. Harris Tri Djoko Santoso Mahadzir bin Azizan (appointed on ) Mohd Zin bin Idris (Chairman) Mohd Muazzam bin Mohamed (appointed on ) Dato Johan bin Abdullah (resigned on ) Subsidiary of BIMB Securities (Holdings) Sdn Bhd BIMB Securities Sdn Bhd Mohd Zin bin Idris (Chairman) Rashid bin Ismail Mustapha bin Hamat Dr. Mohd Hatta bin Dagap (appointed on ) Mohd Muazzam bin Mohamed (appointed on ) Abdul Kadir bin Sahlan (resigned on ) Dato Johan bin Abdullah (resigned on ) Mohamad Rani Dali bin Samsudin (resigned on ) Subsidiaries of BIMB Securities Sdn Bhd BIMSEC Nominees (Tempatan) Sdn Bhd BIMSEC Nominees (Asing) Sdn Bhd Syarikat Al-Ijarah Sdn Bhd Rashid bin Ismail Aida Sharini binti Abdul Wahab Roziah binti Jais Mohamad Rani Dali bin Samsudin (resigned on ) Rashid bin Ismail Aida Sharini binti Abdul Wahab Roziah binti Jais Mohamad Rani Dali bin Samsudin (resigned on ) Salih Amaran bin Jamiaan (Chairman) Khairuddin bin Idris Mohamad Azlan bin Mohamad Alam

8 ANNUAL REPORT DIRECTORS REPORT Overview DIRECTORS INTERESTS IN SHARES None of the Directors of the Company and subsidiaries holding office at 31 December 2016 had any interest in the shares and options over shares of the Company and of its related corporations during the financial year. 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 remuneration 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 Company in which the Director has a substantial financial interest. There were no arrangements 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. INDEMNITY AND INSURANCE COST During the financial year, the total amount of insurance cost incurred for Directors and officers of the Group and of the Company are RM290,894 and RM108,677 respectively. ULTIMATE HOLDING COMPANY The Company is a subsidiary of Lembaga Tabung Haji, a hajj pilgrims fund statutory body established in Malaysia and regarded by the Directors as the Company s ultimate holding company, during the financial year and the date of this report. SUBSIDIARIES The details of the Company s subsidiaries are disclosed in Note 14 to the financial statements. Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM 2017 BUSINESS PLAN AND OUTLOOK BUSINESS PLAN, STRATEGY AND FUTURE OUTLOOK For 2017, the gross domestic product ( GDP ) is projected to grow by 4.4%. There is a possibility of excess capacity in certain industries namely oil & gas, electrical and engineering, manufacturing and financial services which could lead to lower demand for capital and labour. The Overnight Policy Rate ( OPR ) is expected to remain at 3.00% while the MYR/USD may remain above RM4.00 for the rest of Although funding conditions in Malaysia are tightening due to heightened macroeconomic risks domestically and abroad, the banking system as a whole remains profitable, liquid and well capitalised. However with the continued challenges, the industry is expected to grow at a modest rate with financing growth of approximately between 3% and 4% in 2017 as banks remain cautious in lending activities and plan on ensuring stable asset quality. The banks are also likely to deepen their engagement with the fintech ecosystem as the trend towards digitisation accelerates.

9 136 BIMB HOLDINGS BERHAD DIRECTORS REPORT 2017 BUSINESS PLAN AND OUTLOOK (CONTINUED) BUSINESS PLAN, STRATEGY AND FUTURE OUTLOOK (CONTINUED) Islamic Banking Taking cognizance of these factors, Bank Islam s strategic focus in 2017 revolves around continuous deposit drive and embracing digitalisation while at the same time focusing on a more balanced growth. The Bank intends to continue to manage liquidity and deploy capital efficiently in line with the Basel III rules. Notwithstanding the need to sustain net income margin, preserving asset quality will be an important agenda for the Bank given the cautious operating outlook. Takaful For 2017, Takaful Malaysia will continue to emphasize the four core areas of customer reach, operational agility, cost competitiveness and stakeholder confidence to increase its overall market shares and continuously improving shareholders value. Through its extensive range of products and services, the Company is poised to sustain its position as the market leader in the Family Takaful business. The Company will amplify its presence as the preferred choice for insurance through various advertising and marketing activities and promote its unique proposition of rewarding a 15% Cash Back to its General Takaful customers for no claims during coverage period. Takaful Malaysia will also undertake an enhanced approach to its distribution channel by accelerating digital initiatives to optimize its operations and marketing activities. The Company will actively cultivate its digital presence through an online sales portal and integrated online marketing initiatives as part of its long term strategy to meet the growing needs of the consumers. AUDITORS The auditors, Messrs KPMG Desa Megat PLT (converted from a conventional partnership, KPMG Desa Megat & Co., on 27 December 2016), have indicated their willingness to accept re-appointment. The auditors remuneration is disclosed in Note 37 to the financial statements. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors: Tan Sri Samsudin bin Osman Director Datuk Zaiton binti Mohd Hassan Director Kuala Lumpur, Date: 23 March 2017

10 ANNUAL REPORT STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2016 Leadership Perspectives Highlights Accountability 20 th AGM Shareholders Financial Statements Overview GROUP COMPANY AS AT AS AT NOTE RM 000 RM 000 RM 000 RM 000 Assets Cash and short-term funds 3 4,502,270 3,304, , ,354 Deposits and placements with financial institutions 4 1,153, ,830 Financial assets held-for-trading 5 777, ,006 Derivative financial assets 6 124, ,259 Financial assets available-for-sale 7 13,755,389 13,797, ,406 19,215 Financial assets held-to-maturity 8 631, ,164 Financing, advances and others 9 39,189,274 34,294,690 Other assets , ,855 2,333 2,341 Takaful assets , ,848 Statutory deposits with Bank Negara Malaysia 12 1,374,876 1,591,460 Current tax assets 8,430 47, Deferred tax assets 13 70,435 64, Investments in subsidiaries 14 4,965,901 4,835,462 Property and equipment , , Investment properties 16 14,126 14,262 Intangible assets 17 43,947 56,211 Total assets 63,145,127 57,363,828 5,309,562 5,072,330

11 138 BIMB HOLDINGS BERHAD STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2016 GROUP COMPANY AS AT AS AT NOTE RM 000 RM 000 RM 000 RM 000 Liabilities and equity Deposits from customers 18 45,491,753 43,118,529 Investment accounts of customers 19 3,573, ,105 Deposits and placements of banks and other financial institutions 20 30,000 Derivative financial liabilities 6 111, ,913 Bills and acceptances payable 46, ,577 Other liabilities 21 1,105,942 1,148, , ,108 Takaful liabilities 22 6,639,096 6,588,888 Sukuk liabilities 23 1,881,751 1,882,965 1,227,494 1,178,585 Zakat and taxation 48,210 28, Total liabilities 58,927,990 53,668,102 1,437,631 1,370,724 Equity Share capital 24 1,588,680 1,542,210 1,588,680 1,542,210 Reserves 25 2,294,172 1,871,448 2,283,251 2,159,396 Equity attributable to owners of the Company 3,882,852 3,413,658 3,871,931 3,701,606 Non-controlling interests 334, ,068 Total equity 4,217,137 3,695,726 3,871,931 3,701,606 Total liabilities and equity 63,145,127 57,363,828 5,309,562 5,072,330 Restricted investment accounts managed by the Bank ,343 82,567 Total Islamic banking asset 63,286,470 57,446,395 5,309,562 5,072,330 Commitments and contingencies 52 13,704,559 12,692,303 Net assets per share attributable to owners of the Company (RM) The accompanying notes form an integral part of these financial statements.

12 ANNUAL REPORT STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME GROUP COMPANY NOTE RM 000 RM 000 RM 000 RM 000 Income derived from investment of depositors funds 28 2,342,204 2,203,683 Income derived from investment account funds ,281 16,793 Income derived from investment of shareholders funds , , , ,824 Net income from Takaful business , ,437 Allowance for impairment on financing and advances 32 (92,105) (69,331) Allowance for impairment on investments 33 (255) (4,488) Reversal of impairment on other assets 608 Direct expenses (20,387) (22,911) Total distributable income 3,410,731 3,213, , ,824 Wakalah performance incentive fees from restricted investment accounts 19 5, Income attributable to depositors 34 (1,061,413) (1,018,145) Income attributable to investment account holders 35 (26,775) (2,743) Total net income 2,327,871 2,192, , ,824 Personnel expenses 36 (673,687) (625,869) (8,736) (8,942) Other overhead expenses 37 (674,474) (649,289) (5,342) (6,180) 979, , , ,702 Finance cost (110,509) (83,395) (73,809) (70,366) Profit before zakat and tax 869, , , ,336 Zakat (13,517) (9,170) Tax expense 40 (226,020) (212,319) (2,455) (1,368) Profit for the year 629, , , ,968 Attributable to: Owners of the Company 559, , , ,968 Non-controlling interests 70,624 65,672 Profit for the year 629, , , ,968 Earnings per share (sen) Dividend per ordinary share-net (sen) Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview The accompanying notes form an integral part of these financial statements.

13 140 BIMB HOLDINGS BERHAD STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME GROUP COMPANY RM 000 RM 000 RM 000 RM 000 Profit for the year 629, , , ,968 Other comprehensive income, net of tax Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit liabilities 1,968 (2,368) Items that may be reclassified subsequently to profit or loss: Currency translation differences in respect of foreign operations (19,036) (79,883) Fair value reserve: Net change in fair value 16,271 16, Net amount transferred to profit or loss (49,761) (17,426) (642) (642) Income tax credit relating to components of other comprehensive income 8,645 7,280 Other comprehensive income for the year, net of tax (41,913) (76,027) Total comprehensive income for the year 587, , , ,981 Total comprehensive income attributable to: Owners of the Company 518, , , ,981 Non-controlling interests 69,492 66,354 Total comprehensive income for the year 587, , , ,981 The accompanying notes form an integral part of these financial statements.

14 ANNUAL REPORT STATEMENTS OF CHANGES IN EQUITY Overview ATTRIBUTABLE TO OWNERS OF THE COMPANY NON-DISTRIBUTABLE DISTRIBUTABLE RETAINED EARNINGS/ NON- SHARE SHARE OTHER (ACCUMULATED 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 Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM At 1 January ,493,506 1,859,628 (386,831) (17,266) 2,949, ,223 3,189,260 Profit for the year 547, ,275 65, ,947 Other comprehensive income Remeasurement of defined liabilities (1,661) (1,661) (707) (2,368) Currency translation differences in respect of foreign operations (83,361) (83,361) 3,478 (79,883) Fair value reserve: Net change in fair value 17,143 17,143 (773) 16,370 Net amount reclassified to profit or loss (16,110) (16,110) (1,316) (17,426) Income tax credit relating to components of other comprehensive income 7,280 7,280 7,280 Total comprehensive income for the year (75,048) 545, ,566 66, ,920 Transfer to statutory reserve 253,416 (253,416) Dividends paid to shareholders 42 (188,150) (188,150) (188,150) Dividends paid to non-controlling interests (22,644) (22,644) Share-based payment transactions 2,326 2,326 1,530 3,856 Long Term Incentive Plan exercised (812) (812) 812 Issue of shares pursuant to Dividend Reinvestment Plan 48, , , ,691 Capital repayment from a subsidiary (4,207) (4,207) At 31 December ,542,210 1,991,615 (206,949) 86,782 3,413, ,068 3,695,726 Note 24 Note 25 The accompanying notes form an integral part of these financial statements.

15 142 BIMB HOLDINGS BERHAD STATEMENTS OF CHANGES IN EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY NON-DISTRIBUTABLE DISTRIBUTABLE NON- SHARE SHARE OTHER RETAINED CONTROLLING TOTAL CAPITAL PREMIUM RESERVES EARNINGS TOTAL INTERESTS EQUITY GROUP NOTE RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 1 January ,542,210 1,991,615 (206,949) 86,782 3,413, ,068 3,695,726 Profit for the year 559, ,040 70, ,664 Other comprehensive income Remeasurement of defined liabilities ,157 1,968 Currency translation differences in respect of foreign operations (15,347) (15,347) (3,689) (19,036) Fair value reserve: Net change in fair value 15,769 15, ,271 Net amount reclassified to profit or loss (50,659) (50,659) 898 (49,761) Income tax credit relating to components of other comprehensive income 8,645 8,645 8,645 Total comprehensive income for the year (41,592) 559, ,259 69, ,751 Transfer to statutory reserve 132,752 (132,752) Dividends paid to shareholders 42 (206,529) (206,529) (206,529) Dividends paid to non-controlling interests (23,835) (23,835) Share-based payment transactions 3,927 3,927 2,631 6,558 Long Term Incentive Plan exercised (3,929) (3,929) 3,929 Issue of shares pursuant to Dividend Reinvestment Plan 46, , , ,462 Issue of shares pursuant to conversion of warrants 1 3 * 4 4 At 31 December ,588,680 2,102,611 (115,791) 307,352 3,882, ,285 4,217,137 Note 24 Note 25 * Conversion of warrants amounted to RM The accompanying notes form an integral part of these financial statements.

16 ANNUAL REPORT STATEMENTS OF CHANGES IN EQUITY Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview 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 ,493,506 1,859, , ,599 3,498,084 Profit for the year 210, ,968 Other comprehensive income Fair value reserve: Net change in fair value Net amount reclassified to profit or loss (642) (642) Total comprehensive income for the year , ,981 Issue of shares pursuant to Dividend Reinvestment Plan 48, , ,691 Dividends paid to shareholders 42 (188,150) (188,150) At 31 December 2015/ 1 January ,542,210 1,991, , ,417 3,701,606 Profit for the year 219, ,371 Other comprehensive income Fair value reserve: Net change in fair value Net amount reclassified to profit or loss (642) (642) Total comprehensive income for the year , ,388 Issue of shares pursuant to Dividend Reinvestment Plan 46, , ,462 Issue of shares pursuant to conversion of warrants 1 3 * 4 Dividends paid to shareholders 42 (206,529) (206,529) At 31 December ,588,680 2,102, , ,259 3,871,931 * Conversion of warrants amounted to RM Note 24 The accompanying notes form an integral part of these financial statements.

17 144 BIMB HOLDINGS BERHAD STATEMENTS OF CASH FLOWS GROUP COMPANY RM 000 RM 000 RM 000 RM 000 Cash flows from operating activities Profit before zakat and tax 869, , , ,336 Adjustments for: Depreciation 72,804 77, Gain on disposal of property and equipment (551) (101) Property and equipment written off 21 1, Collective assessment allowance 161, ,391 Individual assessment allowance 30,662 14,148 Allowance for impairment on financial assets available-for-sale 255 4,620 Reversal of impairment on financial assets held-to-maturity (132) Reversal of impairment on other assets (608) Reversal of allowance for doubtful debts (4) (48) Net gain on sale of financial assets held-for-trading (5,047) (1,801) Net gain on sale of financial assets available-for-sale (51,249) (10,998) Fair value (gain)/loss on financial assets held-for-trading (12,020) 8,686 Net derivative loss 4,515 1,152 Dividends from securities (5,871) (3,572) (811) (642) Dividends from subsidiaries (298,505) (291,264) Change in actuarial reserves/unearned contributions reserve (6,915) 14,270 Equity settled share-based payment 6,558 3,856 Gain on disposal of an associate company (247) (247) Amortisation of intangible assets 12,264 5,110 Finance cost 110,509 83,395 73,809 70,366 Operating profit/(loss) before working capital changes 1,186,191 1,221,356 (3,262) (8,765) Changes in working capital: Deposits and placements of banks and other financial institutions 30,000 (300,000) Financing of customers (5,086,913) (4,973,658) Statutory deposits with Bank Negara Malaysia 216,584 (256,460) Other assets 298,757 (17,145) (115,356) (1,152) Deposits from customers 2,373,224 2,440,150 Investment accounts of customers 2,897, ,105 Other liabilities (45,222) 309,689 (349) 1,962 Bills and acceptance payable (76,299) (4,947) Cash used in operations 1,794,088 (904,910) (118,967) (7,955) Zakat paid (9,009) (12,941) Tax paid (180,864) (226,344) (2,509) (1,284) Tax refund 10, Net cash generated from/(used in) operating activities 1,615,084 (1,143,580) (121,476) (8,782) The accompanying notes form an integral part of these financial statements.

18 ANNUAL REPORT STATEMENTS OF CASH FLOWS Overview GROUP COMPANY RM 000 RM 000 RM 000 RM 000 Cash flows from investing activities Net proceeds from (purchase)/disposal of securities (68,464) 416,931 Purchase of property and equipment (43,339) (74,356) (42) (203) Proceeds from disposal of property and equipment 1, Dividends from securities 5,060 2,930 Dividends from subsidiaries 298, ,264 Disposal of an associate company Subscription of ordinary shares pursuant to Dividend Reinvestment Plan (130,439) (127,847) Intangible assets (61,321) Net cash (used in)/generated from investing activities (105,189) 285, , ,461 Cash flows from financing activities Dividends paid (30,688) (38,854) (30,688) (38,854) Dividends paid to non-controlling interests (23,835) (22,644) Payment of coupon on Sukuk (61,588) (33,686) (24,900) (25,037) Proceeds from issuance of ordinary shares pursuant to conversion of warrants 4 4 Proceeds from issuance of Subordinated Sukuk Murabahah 700,000 Capital repayment (4,207) Leadership Perspectives Highlights Accountability Financial Statements 20 th AGM Shareholders Net cash (used in)/generated from financing activities (116,107) 600,609 (55,584) (63,891) Net increase/(decrease) in cash and cash equivalents 1,393,788 (257,739) (9,036) 90,788 Cash and cash equivalents at 1 January 4,280,835 4,619, , ,566 Foreign exchange differences (19,215) (80,922) Cash and cash equivalents at 31 December 5,655,408 4,280, , ,354 Cash and cash equivalents comprise: Cash and short-term funds 4,502,270 3,304, , ,354 Deposits and placements with financial institutions 1,153, ,830 5,655,408 4,280, , ,354 The accompanying notes form an integral part of these financial statements.

19 146 BIMB HOLDINGS BERHAD 1. PRINCIPAL ACTIVITIES AND GENERAL INFORMATION BIMB Holdings Berhad is a public limited liability company, incorporated and domiciled in Malaysia and is 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 31 st Floor, Menara Bank Islam No. 22, Jalan Perak Kuala Lumpur The consolidated financial statements of the Company as at and for the financial year ended 31 December 2016 comprise the Company and its subsidiaries (together referred to as the Group ). 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 entity is Lembaga Tabung Haji ( LTH ), a hajj pilgrims fund statutory body established in Malaysia under the Tabung Haji Act, 1995 (Act 535). These financial statements were authorised for issue by the Board of Directors on 23 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to 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 the applicable Malaysian Financial Reporting Standards ( MFRS ), International Financial Reporting Standards ( IFRS ), the requirements of Companies Act, 1965 in Malaysia and Shariah requirements. The following are accounting standards, amendments and interpretations of the MFRS framework that have been issued by the Malaysian Accounting Standards Board ( MASB ) but have not been adopted by the Group and the Company. MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2017 Amendments to MFRS 12, Disclosure of Interests in Other Entities (Annual Improvements to MFRS Standards Cycle) Amendments to MFRS 107, Statement of Cash Flows Disclosure Initiative Amendments to MFRS 112, Income Taxes Recognition of Deferred Tax Assets for Unrealised Losses MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2018 MFRS 9, Financial Instruments (2014) MFRS 15, Revenue from Contracts with Customers Clarifications to MFRS 15, Revenue from Contracts with Customers IC Interpretation 22, Foreign Currency Transactions and Advance Consideration Amendments to MFRS 1, First-time Adoption of Malaysian Financial Reporting Standards (Annual Improvements to MFRS Standards Cycle) Amendments to MFRS 2, Share-based Payment Classification and Measurement of Share-based Payment Transactions

20 ANNUAL REPORT Overview 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.1 Basis of preparation (continued) (a) Statement of compliance (continued) Leadership MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2018 (continued) Amendments to MFRS 4, Insurance Contracts Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts Amendments to MFRS 128, Investments in Associates and Joint Ventures (Annual Improvements to MFRS Standards Cycle) Amendments to MFRS 140, Investment Property Transfers of Investment Property Perspectives MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2019 MFRS 16, Leases MFRSs, Interpretations and amendments effective for a date yet to be confirmed 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 The Group and the Company plan to apply the abovementioned standards, amendments and interpretations: 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 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 from the annual period beginning on 1 January 2019 for those accounting standards, amendments or interpretations that are effective for annual periods beginning on or after 1 January The initial application of the accounting standards, amendments and interpretations are not expected to have any material financial impacts to the current period and prior period financial statements of the Group and the Company except as mentioned in the subsequent paragraphs: 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. 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. Highlights Accountability Financial Statements Shareholders MFRS 16, Leases MFRS 16 replaces the guidance in MFRS 117, Leases, IC Interpretation 4, Determining whether an Arrangement contains a Lease, IC Interpretation 115, Operating Leases Incentives and IC Interpretation 127, Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The Group is currently assessing the financial impact that may arise from the adoption of MFRS 15, MFRS 9 and MFRS th AGM

21 148 BIMB HOLDINGS BERHAD 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 except for derivative financial instruments, financial assets held-for-trading and financial assets available-for-sale, which have been measured at fair value. (c) Functional and presentation currency The financial statements are presented in Ringgit Malaysia ( RM ), which is the Group s and the Company s functional currency. All financial information is presented in RM and have been rounded to the nearest thousand (RM 000), unless otherwise stated. (d) Use of estimates and judgements The preparation of the financial statements 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 financial statements 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 notes: Note 2.5 and Note 47 Financial instruments/fair value of financial instruments Note 2.11 Impairment Note 2.14 General Takaful Fund Provision for outstanding claims including IBNR claims and actuarial liabilities Expense reserves Note 2.15 Family Takaful Fund Actuarial reserves Provision for outstanding claims Expenses reserves Note 2.22 and Note 13 Income Tax/Deferred tax assets 2.2 Basis of consolidation (a) Subsidiaries Subsidiaries are entities, including structured entities, controlled by the Company. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. 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 investment includes transaction costs.

22 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 Basis of consolidation (continued) (b) Business combinations Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group. For new acquisitions, the Group measures the cost of goodwill at the acquisition date as: the fair value of the consideration transferred; plus the recognised amount of any non-controlling interest in the acquiree; plus if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed When the excess is negative, a bargain purchase gain is recognised immediately in the profit or loss. For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair value or at proportionate share of the acquiree s identifiable net assets at the acquisition date. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. (c) Acquisition or disposal of non-controlling interest The Group accounts for all changes in its ownership interest in subsidiaries 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 former subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary from the consolidated statement of financial position. 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 former subsidiary, then such interest is measured at 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-forsale depending on the level of influence retained.

23 150 BIMB HOLDINGS BERHAD 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 Basis of consolidation (continued) (f) Non-controlling interests Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or indirectly to the equity holders of the Company, are presented in the consolidated statement of financial position and statement of changes in equity, within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated statement of profit or loss and other comprehensive income as an allocation of the profit or loss and the comprehensive income for the year between non-controlling interests and the owners of the Company. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. (g) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with 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.

24 ANNUAL REPORT Overview 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.3 Foreign currency (continued) (b) Operations denominated in functional currencies other than Ringgit Malaysia ( RM ) Leadership 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 is lost, the cumulative amount in the FCTR related to that foreign operation is reclassified to profit or loss as part of the gain 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 that includes a foreign operation while retaining significant influence, 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 Perspectives Highlights Accountability 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. (b) Financial instrument categories and subsequent measurement Financial Statements 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. Shareholders 20 th AGM

25 152 BIMB HOLDINGS BERHAD 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.5 Financial instruments (continued) (b) Financial instrument categories and subsequent measurement (continued) Financial assets (continued) (ii) Held-to-maturity investments 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 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-forsale 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 are non-derivative financial assets with fixed or determinable payments that are not quoted in active market and the Group does not intend to sell immediately or in the near term. The Group s financing and receivables consist of sale-based contracts (namely Bai Bithaman Ajil, Bai Al-Inah, Murabahah, Bai Al-Dayn and At-Tawarruq), lease-based contracts (namely Ijarah Muntahiah Bit-Tamleek and Ijarah Thumma Al-Bai), construction-based contract (Istisna ) and Ar-Rahnu contract. These financing contracts are recorded in the Group s financial statements as financing and receivables based on concept of substance over form and in accordance with MFRS 139. These contracts are subsequently measured at amortised cost using effective profit rate method. These contracts are stated net of unearned income and any impairment loss. (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 calculated for an Islamic debt instrument using the effective profit method is recognised in profit or loss. (v) Takaful receivables Takaful receivables are recognised when due and measured on initial recognition at the fair value of the consideration received or receivable. Subsequent to initial recognition, takaful receivables are measured at amortised cost, using the effective profit method. All financial assets, except for those measured at fair value through profit or loss, are subject to review for impairment (see Note 2.11).

26 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements 20 th AGM Shareholders Overview 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.5 Financial instruments (continued) (b) Financial instrument categories and subsequent measurement (continued) Derivative financial instruments The Group holds derivative financial instruments to hedge its foreign currency and profit rate exposures. However, the Group elect not to apply hedge accounting. Hence, foreign exchange trading positions, including spot and forward contracts, are revalued at prevailing market rates at statement of financial position date and the resultant gains and losses for the financial year are recognised in the profit or loss. An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract. 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. Derivatives that are linked to and must be settled by delivery of equity instruments that do not have a quoted price in an active market for identical instruments whose fair 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. (a) Investment accounts Investment accounts are either: (i) Unrestricted investment accounts An unrestricted investment account ( URIA ) refers to a type of investment account where the investment account holder ( IAH ) provides the Bank with the mandate to make the ultimate decision without specifying any particular restrictions or conditions. The URIA is structured under Mudharabah and Wakalah contracts.

27 154 BIMB HOLDINGS BERHAD 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.5 Financial instruments (continued) (b) Financial instrument categories and subsequent measurement (continued) Financial liabilities (continued) (a) Investment accounts (continued) (ii) Restricted investment accounts Restricted investment account ( RIA ) refers to a type of investment account where the IAH provides a specific investment mandate to the Bank such as purpose, asset class, economic sector and period of investment. RIA is accounted for as off balance sheet as the Bank has no rights and obligations in respect of the assets related to the RIA or to the residual cash flows from those assets except for the fee income generated by the Bank for managing the RIA. The Bank also has no ability to use power over the RIA to affect the amount of the Bank s return. The RIA is structured under Wakalah contract. Under Wakalah contract, IAH appoints the Bank as the agent to invest the funds provided by IAH to finance customers with a view of earning profits and the Bank will receive fees for the agency service provided. Any impairment allowances required on the assets for investment accounts are charged to and borne by the investors. (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.

28 ANNUAL REPORT Overview 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 control of the asset is not retained or substantially all of the risk and rewards of ownership of the financial asset are transferred to another party. 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, 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 and equipment Recognition and measurement Items of property and equipment are measured at cost less any 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. Leadership Perspectives Highlights Accountability Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. The cost of property 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 and equipment is based on the quoted market prices for similar items when available and replacement cost when appropriate. When significant parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment. The gain or loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with the carrying amount of property and equipment and is recognised net within other income or other overhead expenses respectively in the profit or loss. Financial Statements Shareholders Subsequent costs The cost of replacing a component of an item of property 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 and equipment are recognised in profit or loss as incurred. 20 th AGM

29 156 BIMB HOLDINGS BERHAD 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.6 Property and equipment (continued) 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 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 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 periods are as follows: Buildings Building improvements and renovations Furniture, fixtures and fittings Office equipment Motor vehicles Computer equipment and software Leasehold buildings 50 years 6 10 years 2 10 years 5 6 years 5 years 3 7 years 50 years 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 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 recognised in 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.

30 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.8 Intangible assets (i) Other intangible assets Intangible assets that are acquired by the Group have finite useful lives and are measured at cost less any accumulated amortisation and any accumulated impairment losses. (ii) Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss as incurred. (iii) Amortisation 2.9 Leased assets Intangible assets are amortised from the date that they are available for use. Amortisation is based on cost of an asset less its residual value. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets. The estimated useful lives for the current periods are as follows: Bancatakaful service fees 5 years Amortisation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted, if appropriate. (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. 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 and equipment or as investment property if held to earn rental income or for capital appreciation or for both.

31 158 BIMB HOLDINGS BERHAD 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.9 Leased assets (continued) (ii) 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 Bills and other receivables Bills and other receivables are stated at cost less any allowance for impairment 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, or when the financing is classified as rescheduled and restructured in Central Credit Reference System ( CCRIS ).

32 ANNUAL REPORT Overview 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.11 Impairment (continued) Financial assets (continued) Leadership (a) Financing, advances and others (continued) For financing and receivables, the Group first assesses whether objective evidence of impairment exists individually for financing and receivables that are individually significant, and collectively for financing and receivables that are not individually significant. If the Group determines that no objective evidence of impairment exist for an individually assessed financing and receivable, whether significant or not, it includes the assets in a group of financing and receivables with similar credit risk characteristics and collectively assesses them for impairment. Financing and receivables that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in the collective assessment for impairment. The amount of impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the asset s original effective profit rate. The amount of the loss is recognised using an allowance account and recognised in the profit or loss. 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 s 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 period on which the historical loss experience is based and remove the effects of conditions in the historical period 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 period, 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. (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. Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM

33 160 BIMB HOLDINGS BERHAD 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.11 Impairment (continued) Financial assets (continued) (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, 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. 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 Bills and acceptances payable Bills and acceptances payable represents the Group s own bills and acceptances rediscounted and outstanding in the market 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.

34 ANNUAL REPORT Overview 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.14 General Takaful Fund The General Takaful Fund is maintained in accordance with the Islamic Financial Services Act, Included in General Takaful Fund are funds arising from: Leadership General Takaful; and General retakaful funds The General Takaful underwriting results are determined for each class of takaful business after taking into account retakaful, unearned contributions, claims incurred and administrative fees. Contribution income Contributions are recognised in a financial period in respect of risks assumed during that particular financial period based on the inception date. Inward treaty retakaful contributions are recognised on the basis of periodic advices received from ceding takaful operators. 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) 1/365 th method for all General Takaful business (b) 1/8 th method for all classes of General Treaty Inward Retakaful business Provision for outstanding claims A liability for outstanding claims is recognised in respect of direct takaful business. The amount of outstanding claims is the best estimate of the expenditure required together with related expenses less recoveries, if any, to settle the present obligation at the end of the reporting period. Any difference between the current estimated cost and subsequent settlement is dealt with in the takaful statement of comprehensive income of the Group and of the Company in the year in which the settlement takes place. Provision is also made for the cost of claims (together with related expenses) and Incurred But Not Reported Claims ( IBNR ) at the end of the reporting period, using a mathematical method of estimation by a qualified external actuary where historical claims experience are used to project future claims. The provision includes a risk margin for adverse deviation. As with all projections, there are elements of uncertainty and the projected claims may be different from actual. These uncertainties arise from changes in underlying risk, changes in spread of risks, claims settlement pattern as well as uncertainties in the projection model and underlying assumptions. Expense reserves The expense reserve for mudharabah certificates is calculated based on best estimate of the provision for unexpired expense risk ( UER ) and the provision of risk margin for adverse deviation ( PRAD ). The expense reserve for wakalah certificates refers to the higher of aggregate of the Unearned Wakalah Fee ( UWF ) for all lines of business or best estimate of the provision for UER and the PRAD at total fund level. Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM

35 162 BIMB HOLDINGS BERHAD 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.15 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. 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 dependent 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.

36 ANNUAL REPORT Overview 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.15 Family Takaful Fund (continued) Actuarial reserves (continued) Leadership (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. Perspectives (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. 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. Highlights Accountability Financial Statements 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 Shareholders 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 ). 20 th AGM

37 164 BIMB HOLDINGS BERHAD 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.16 Product classification The Family Takaful Fund and General Takaful Fund consist of certificate contracts that transfer takaful risk. Takaful contracts are those contracts that transfer significant takaful risk. A takaful contract is a contract under which the fund has accepted significant takaful risk from another party (the certificate holders) by agreeing to compensate the participants if a specified uncertain future event (the takaful event) adversely affects the participants. As a general guideline, to determine whether a contract has significant takaful risk, benefits paid are compared with benefits payable if the takaful event did not occur. Investment contracts are those contracts that do not transfer significant insurance risk. There are no contracts that are classified as investment contracts in the Family and General Takaful Funds. Once a contract has been classified as a takaful contract, it remains a takaful contract for the remainder of its life-time, even if the takaful risk reduces significantly during this period, unless all rights and obligations are extinguished or expired. Takaful contracts in the current portfolio are classified as being without discretionary participation features ( DPF ) as it does not satisfy the criteria for DPF. DPF is a contractual right to receive, as a supplement to guaranteed benefits, additional benefits that are: likely to be a significant portion of the total contractual benefits; whose amount or timing is contractually at the discretion of the issuer; and that are contractually based on the: performance of a specified pool of contracts or a specified type of contract; realised and/or unrealised investment returns on a specified pool of assets held by the issuer; or the profit or loss of the company, fund or other entity that issues the contract 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. 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.

38 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.17 Retakaful (continued) 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 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. 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 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. Operating segment results are reviewed regularly by the chief operating decision maker, which in this case is the Group Chief Executive Officer, to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available 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.

39 166 BIMB HOLDINGS BERHAD 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.21 Recognition of income Financing income Banking business Financing income is recognised in the profit or loss 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. 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, brokerage fees and wakalah performance incentive 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 subsidiaries and associates and other investments are recognised when the Group s rights to receive payment is established 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 a business combination or items recognised directly in equity or other comprehensive income. 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 or substantively enacted by the end of the reporting period.

40 ANNUAL REPORT Overview 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.22 Income tax (continued) 2.23 Zakat 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. Leadership Perspectives This represents business zakat. It is an obligatory amount payable by the Group and the Company to comply with the principles of Shariah Employee benefits Short-term employee benefits Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group and the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. State plans The Group s and the Company s contributions to the statutory pension funds are charged to profit or loss in the financial year to which they relate. Once the contributions have been paid, the Group and the Company have no further payment obligations. Share-based payment transactions The grant date fair value of share-based payment granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and nonmarket 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. Highlights Accountability Financial Statements Shareholders 20 th AGM

41 168 BIMB HOLDINGS BERHAD 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.24 Employee benefits (continued) Defined benefit plans The Group s net obligation in respect of defined benefit plan is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets. The calculation of the defined obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Group, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements. Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income. The Group determines the net interest expense or income on the net defined liability or asset for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then net defined benefit liability or asset, taking into account any changes in the net defined benefit liability or asset during the period as a result of contributions and benefit payments. Net interest expense and other expenses relating to defined benefit plans are recognised in profit or loss. When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Group recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs Earnings per ordinary share The Group presents basic earnings per share 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 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.

42 ANNUAL REPORT Overview 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.26 Fair value measurements (continued) 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. 3. CASH AND SHORT-TERM FUNDS RM 000 RM 000 Group Cash and balances with banks and other financial institutions 1,029, ,169 Money at call and interbank placements with remaining maturity not exceeding one month 3,472,346 2,481,836 4,502,270 3,304,005 Company Cash and balances with banks and other financial institutions 205, ,354 Monies held in trust on behalf of client by the Group in respect of the stockbroking business are not recognised as part of the Group s cash and cash equivalents as follows: GROUP RM 000 RM 000 Leadership Perspectives Highlights Accountability Financial Statements Cash at bank 3,694 3, DEPOSITS AND PLACEMENTS WITH FINANCIAL INSTITUTIONS GROUP RM 000 RM 000 Shareholders Licensed banks 1,129, ,716 Other financial institutions 23,878 8,114 1,153, , th AGM

43 170 BIMB HOLDINGS BERHAD 5. FINANCIAL ASSETS HELD-FOR-TRADING GROUP RM 000 RM 000 At fair value: Quoted securities in Malaysia Shares 55,305 64,215 Unit trusts 5,085 5,255 Quoted securities outside Malaysia Shares 65,935 61,435 Unit trusts 14,823 9,392 Sukuk 48,121 94, , ,824 Unquoted securities in Malaysia Malaysian Government Investment Issues 324, ,717 Sukuk 263, , DERIVATIVE FINANCIAL ASSETS/(LIABILITIES) 588, , , ,006 The following tables summarise the contractual or underlying principal amounts of derivatives financial instruments held at fair value through profit or loss for 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 Forward contracts 3,117, ,445 (107,469) Profit rate swaps 836,027 7,127 (3,620) 3,953, ,572 (111,089) Forward contracts 2,323, ,402 (98,593) Profit rate swaps 862,568 12,857 (3,320) 3,185, ,259 (101,913)

44 ANNUAL REPORT Overview 7. FINANCIAL ASSETS AVAILABLE-FOR-SALE GROUP RM 000 RM 000 Leadership At fair value Quoted securities in Malaysia Unit trusts 303, ,679 Shares 343, ,540 Quoted securities outside Malaysia Unit trusts 50,027 72,265 Shares 31,219 53,818 Sukuk , ,613 At fair value Unquoted securities in Malaysia Malaysian Government Islamic Papers 148, ,728 Malaysian Government Investment Issues 2,057,324 2,556,539 Negotiable Islamic Debt Certificate 496,681 Sukuk 10,158,362 9,952,942 Shares Institutional Trust Account 160, ,641 Unquoted securities outside Malaysia Shares ,021,696 12,827,272 Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM At cost Unquoted securities in Malaysia Unquoted shares in Malaysia 25,468 24,319 Less: Accumulated impairment loss* (20,187) (19,328) 5,281 4,991 Unquoted securities outside Malaysia Unquoted shares outside Malaysia Less: Accumulated impairment loss* (310) * Movement in accumulated impairment loss due to translation differences ,755,389 13,797,205

45 172 BIMB HOLDINGS BERHAD 7. FINANCIAL ASSETS AVAILABLE-FOR-SALE (CONTINUED) COMPANY RM 000 RM 000 At fair value Quoted securities in Malaysia Unit trusts 135,406 19, FINANCIAL ASSETS HELD-TO-MATURITY GROUP RM 000 RM 000 Quoted securities outside Malaysia Sukuk 94,009 64,184 Unquoted securities in Malaysia Malaysian Government Islamic Papers 105, ,157 Sukuk 438, ,710 Less: Accumulated impairment loss (6,887) (6,887) 432, , , ,164

46 ANNUAL REPORT FINANCING, ADVANCES AND OTHERS (a) By type and Shariah contract BAI IJARAH IJARAH BITHAMAN BAI BAI AT- MUNTAHIAH THUMMA GROUP AJIL MURABAHAH AL-DAYN AL-INAH TAWARRUQ BIT-TAMLEEK AL-BAI ISTISNA AR-RAHNU TOTAL 31 DECEMBER 2016 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At amortised cost Cash line 37,899 1,199,021 1,236,920 Term financing House financing^ 4,484,247 9,503,014 59,088 14,046,349 Syndicated financing 196,129 1,045, ,189 1,365,207 Leasing financing 90, ,512 Bridging financing 82,313 82,313 Personal financing^ 42,177 11,197,744 11,239,921 Other term financing 2,086, ,316 4,063 7,106,669 1,503 10,131, th AGM Shareholders Financial Statements Highlights Accountability Perspectives Leadership Overview Staff financing 83,743 5,087 98,821 14, ,869 Credit cards 9, , ,392 Trade bills discounted 741, , ,047 Trust receipts 5,169 5,169 Pawn broking 85,315 85,315 Investment Account Platform* 5,690 5,690 6,654,178 1,684, , ,272 30,607,236 90, , ,122 85,315 39,872,443 Allowance for impaired financing, advances and others collective assessment allowance individual assessment allowance (554,971) (128,198) Net financing, advances and others 39,189,274 ^ Included in house financing and personal financing are the underlying assets under the Unrestricted Investment Accounts ( URIA ) amounting RM2,568,123,000 and RM1,005,748,000 respectively as disclosed in Note 19 of these financial statements. * This represents a term financing of the Bank Islam s participation in Investment Account Platform ( IAP ) to finance viable ventures via Restricted Investment Account.

47 174 BIMB HOLDINGS BERHAD 9. FINANCING, ADVANCES AND OTHERS (CONTINUED) (a) By type and Shariah contract (continued) BAI IJARAH IJARAH BITHAMAN BAI BAI AT- MUNTAHIAH THUMMA GROUP AJIL MURABAHAH AL-DAYN AL-INAH TAWARRUQ BIT-TAMLEEK AL-BAI ISTISNA AR-RAHNU TOTAL 31 DECEMBER 2015 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At amortised cost Cash line 62, ,097 1,059,397 Term financing House financing^ 4,851,790 6,628,865 62,580 11,543,235 Syndicated financing 8, ,301 1,021, ,399 1,322,108 Leasing financing 81,223 1,769 82,992 Bridging financing 87,630 87,630 Personal financing 82,054 10,247,851 10,329,905 Other term financing 2,583, ,973 18,444 5,385,013 1,762 8,674,654 Staff financing 96,919 1,515 68,007 16, ,842 Credit cards 12, , ,543 Trade bills discounted 888, ,419 1,139,827 Trust receipts 20,210 20,210 Pawn broking 73,883 73,883 Investment Account Platform* 7,540,774 1,596, , ,794 24,779,486 81, , ,373 73,883 34,960,226 Allowance for impaired financing, advances and others collective assessment allowance (541,065) individual assessment allowance (124,471) Net financing, advances and others 34,294,690 ^ Included in house financing are the underlying assets under Unrestricted Investment Accounts ( URIA ) amounting RM676,105,000 as disclosed in Note 19 of these financial statements. * This represents a term financing of the Bank Islam s participation in Investment Account Platform ( IAP ) to finance viable ventures via Restricted Investment Account.

48 ANNUAL REPORT Overview 9. FINANCING, ADVANCES AND OTHERS (CONTINUED) GROUP RM 000 RM 000 Leadership (b) By type of customer Domestic non-bank financial institutions 1,376,559 1,004,961 Domestic business enterprise 6,908,806 5,907,856 Small medium industries 896, ,552 Government and statutory bodies 938, ,923 Individuals 28,957,975 25,618,163 Other domestic entities 7,239 7,678 Foreign entities 787, ,093 39,872,443 34,960,226 (c) By profit rate sensitivity Fixed rate House financing 1,268,632 1,403,863 Others 4,059,422 4,855,968 Floating rate House financing 13,382,969 10,733,848 Others 21,161,420 17,966,547 39,872,443 34,960,226 Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM (d) By remaining contractual maturity Maturity within one year 4,312,581 3,543,984 More than one year to three years 1,400,480 1,121,154 More than three years to five years 2,197,573 1,613,849 More than five years 31,961,809 28,681,239 39,872,443 34,960,226 (e) By geographical distribution Central Region 18,853,925 16,254,666 Eastern Region 6,534,376 5,856,505 Northern Region 5,864,200 5,297,531 Southern Region 5,499,121 4,725,173 East Malaysia Region 3,120,821 2,826,351 39,872,443 34,960,226

49 176 BIMB HOLDINGS BERHAD 9. FINANCING, ADVANCES AND OTHERS (CONTINUED) GROUP RM 000 RM 000 (f) By sector Primary agriculture 377, ,666 Mining and quarrying 12,931 13,494 Manufacturing (including agro-based) 747, ,013 Electricity, gas and water 868, ,984 Wholesale & retail trade, and hotels & restaurants 1,274,954 1,102,861 Construction 2,161,215 2,225,492 Real estate 1,205,740 1,088,961 Transport, storage and communications 870, ,914 Finance, insurance and business activities 2,134,947 1,406,399 Education, health and others 1,256,209 1,092,052 Household sectors 28,962,874 25,619,390 39,872,443 34,960,226 (g) Movement in impaired financing and advances ( impaired financing ) are as follows: At 1 January 381, ,539 Classified as impaired during the year 580, ,966 Reclassified as not impaired during the year (284,602) (205,690) Amount recovered (112,502) (144,268) Amount written off (178,052) (139,053) Exchange differences 2,990 11,776 At 31 December 389, ,270 Gross impaired financing as a percentage of gross financing, advances and others 0.98% 1.09% (h) Impaired financing by geographical distribution Central Region 142, ,568 Eastern Region 92,848 47,369 Northern Region 36,299 35,880 Southern Region 31,329 29,892 East Malaysia Region 86,128 83, , ,270

50 ANNUAL REPORT Overview 9. FINANCING, ADVANCES AND OTHERS (CONTINUED) GROUP RM 000 RM 000 Leadership Perspectives Highlights Accountability Financial Statements 20 th AGM Shareholders (i) Impaired financing by sector Primary agriculture 1,311 1,307 Manufacturing (including agro-based) 36,739 6,650 Wholesale & retail trade, and hotels & restaurants 25,651 24,986 Construction 13,714 56,344 Transport, storage and communications 15,579 29,332 Finance, insurance and business activities 70,948 69,533 Education, health and others 3,076 7,502 Household sectors 222, , , ,270 (j) Movement of allowance for impaired financing Collective assessment allowance At 1 January 541, ,388 Allowance made during the year 161, ,391 Amount written off (146,725) (94,748) Exchange differences (1,036) 2,034 At 31 December 554, ,065 Individual assessment allowance At 1 January 124, ,753 Allowance made during the year 54,566 46,420 Amount recovered (23,904) (32,272) Amount written off (29,928) (44,139) Exchange differences 2,993 11,709 At 31 December 128, ,471

51 178 BIMB HOLDINGS BERHAD 10. OTHER ASSETS RM 000 RM 000 Group Clients and dealers debit balances 63, ,265 Deposits and prepayments 46,237 47,600 Other financing 81,850 85,496 Other receivables 253, , , ,855 Company Amount due from subsidiaries Deposits and prepayments Income receivable 1, Other receivables Other financing of the Group are stated net of impairment allowances of RM1,290,000 (2015: RM1,244,000). 2,333 2,341 Amount due from subsidiaries are non trade in nature, not subject to financing charges and has no fixed term of repayments. 11. TAKAFUL ASSETS GROUP NOTE RM 000 RM 000 Retakaful assets: Claims liabilities 22(a)(i) 261, ,205 Contribution liabilities 22(a)(ii) 62,969 55,893 Actuarial liabilities 22(a)(iii) 144, , , ,575 Takaful receivables Due contributions 136, ,350 Due from retakaful/co-takaful 42,869 36, , ,790 Less: Allowance for impaired receivables (9,375) (7,517) 169, , , ,848

52 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements 20 th AGM Shareholders Overview 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. 13. DEFERRED TAX ASSETS Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: ASSETS LIABILITIES TOTAL GROUP RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Property and equipment (17,050) (20,387) (17,050) (20,387) Investment properties 2,320 1,593 2,320 1,593 Unabsorbed capital allowances 25,299 25,708 25,299 25,708 Provisions 25,018 26,323 25,018 26,323 Expense reserves 18,923 23,572 18,923 23,572 Change in fair value reserve 15,925 7,280 15,925 7,280 Tax assets/(liabilities) 87,485 84,476 (17,050) (20,387) 70,435 64,089 Company Tax assets Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items: GROUP RM 000 RM 000 Unabsorbed capital allowances 28,475 28,475 Unutilised tax losses 6,701 6,701 Deductible temporary differences ,505 35,505

53 180 BIMB HOLDINGS BERHAD 13. DEFERRED TAX ASSETS (CONTINUED) Movement in temporary differences during the year: RECOGNISED EFFECT OF RECOGNISED EFFECT OF IN OTHER MOVEMENT IN OTHER MOVEMENT RECOGNISED COMPRE- IN AS AT RECOGNISED COMPRE- IN AS AT IN PROFIT HENSIVE EXCHANGE / IN PROFIT HENSIVE EXCHANGE AS AT OR LOSS INCOME RATE OR LOSS INCOME RATE GROUP RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Property and equipment (23,342) 2,955 (20,387) 3,337 (17,050) Investment properties ,593 1,422 (702) 7 2,320 Unabsorbed capital allowances 27,863 (2,155) 25,708 (409) 25,299 Provisions 32,548 (7,634) 1, ,323 (1,082) (320) 97 25,018 Expense reserves 28,093 (4,521) 23,572 (4,649) 18,923 Change in fair value reserve 7,280 7,280 8,645 15,925 Total assets 65,816 (10,416) 8, ,089 (1,381) 7, , INVESTMENTS IN SUBSIDIARIES Note 40 Note 40 COMPANY RM 000 RM 000 At cost Quoted shares in Malaysia 99,053 99,053 Unquoted shares in Malaysia 4,866,848 4,736,409 4,965,901 4,835,462

54 ANNUAL REPORT Overview 14. INVESTMENTS IN SUBSIDIARIES (CONTINUED) Details of the subsidiaries are as follows: EFFECTIVE OWNERSHIP INTEREST NAME OF COMPANY PRINCIPAL ACTIVITIES % % Bank Islam Malaysia Berhad Islamic banking business ( Bank Islam or the Bank ) Subsidiaries of Bank Islam Malaysia Berhad Leadership Perspectives BIMB Investment Management Berhad Managing Islamic Unit Trust Funds BIMB Foreign Currency Clearing Liquidated 100 Agency Sdn. Bhd. Al-Wakalah Nominees (Tempatan) Provide nominee services Sdn. Bhd. Farihan Corporation Sdn. Bhd. Provide manpower for all type of executives, middle management staff, junior level staff, workers, labourers skilled/unskilled for the provision of services in the relevant areas Bank Islam Trust Company (Labuan) Ltd. Provide services as Labuan registered trust company Subsidiary of Bank Islam Trust Company (Labuan) Ltd. Highlights Accountability BIMB Offshore Company Management Resident Corporate Secretary and Director Services Sdn. Bhd. for Offshore Companies Syarikat Takaful Malaysia Berhad Family and General Takaful business ( Takaful Malaysia ) Subsidiaries of Syarikat Takaful Malaysia Berhad ASEAN Retakaful International (L) Ltd.** Family and General retakaful business Financial Statements P.T. Syarikat Takaful Indonesia* # Investment holding Subsidiaries of P.T. Syarikat Takaful Indonesia P.T. Asuransi Takaful Umum* # General Takaful business P.T. Asuransi Takaful Keluarga* # Family Takaful business Shareholders BIMB Securities (Holdings) Sdn. Bhd. Investment holding Subsidiary of BIMB Securities (Holdings) Sdn. Bhd. BIMB Securities Sdn. Bhd. Stockbroking th AGM

55 182 BIMB HOLDINGS BERHAD 14. INVESTMENTS IN SUBSIDIARIES (CONTINUED) Details of the subsidiaries are as follows: (continued) EFFECTIVE OWNERSHIP INTEREST NAME OF COMPANY PRINCIPAL ACTIVITIES % % Subsidiaries of BIMB Securities Sdn. Bhd. BIMSEC Nominees (Tempatan) Sdn. Bhd. Nominee services BIMSEC Nominees (Asing) Sdn. Bhd. Nominee services Syarikat Al-Ijarah Sdn. Bhd. Leasing of assets * Incorporated in Indonesia. # Audited by a firm of auditors other than KPMG Desa Megat PLT. ** Members Voluntary Winding-up commenced on 21 May The subsidiary held its final shareholders meeting on September 2016 and dissolved effective from 5 January On 17 August 2016, Takaful Malaysia has announced its intention to proceed with members voluntary liquidation of a subsidiary, P.T. Asuransi Takaful Umum (ATU), subject to the approvals of the Indonesian s Financial Services Authority [Otoritas Jasa Keuangan (OJK)] pursuant to the Regulation No. 28/POJK.05/2015 on Dissolution, Liquidation and Bankruptcy of Insurance Companies, Syariah Insurance Companies, Reinsurance Companies and Syariah Reinsurance Companies dated 11 December 2015; and the Shareholders of ATU. Non-controlling interests in subsidiaries The Group s subsidiaries that have material non-controlling interests ( NCI ) are as follows: SYARIKAT TAKAFUL MALAYSIA BERHAD NCI percentage of ownership interest and voting interest 40.12% 39.75% Carrying amount of NCI (RM 000) 334, ,068 Profit allocated to NCI (RM 000) 69,492 66,354

56 ANNUAL REPORT Overview 14. INVESTMENTS IN SUBSIDIARIES (CONTINUED) Summarised financial information before intra-group elimination SYARIKAT TAKAFUL MALAYSIA BERHAD RM 000 RM 000 Leadership As at 31 December Assets 7,757,680 7,527,121 Liabilities (7,014,537) (6,818,352) Net Assets 743, ,769 Perspectives Highlights Accountability 20 th AGM Shareholders Financial Statements Year ended 31 December Operating revenue 2,013,253 1,788,574 Profit for the year 174, ,306 Total comprehensive income 186, ,726 Cash flows from operating activities 321, ,123 Cash flows from/(used in) investing activities 216,102 (469,762) Cash flows (used in) financing activities (158,478) (61,259) Net increase/(decrease) in cash and cash equivalents 378,947 (322,898) Distributions to NCI 4,207 Dividends paid to NCI 23,835 22,644

57 184 BIMB HOLDINGS BERHAD 15. PROPERTY 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 , ,258 75,877 4, ,554 1,005,095 Additions 1,847 15,915 11, ,086 74,356 Reclassifications (745) Disposals (1,170) (539) (1,895) (4,971) (8,575) Written off (493) (2,183) (1,398) (683) (5,179) (9,936) Reclassified (to)/from investment properties (646) (646) CMDF Incentive (8) (8) Adjustments 535 6,248 (6,732) 71 6,407 6,529 Exchange difference 1,241 1, ,606 At 31 December 2015/1 January , ,689 79,335 3, ,951 1,069,421 Additions 2,566 2,643 4, ,207 43,339 Reclassifications (1,586) (101,758) 15,717 87,627 Disposals (44) (544) (845) (696) (1,855) (3,984) Written off (1,972) (1,813) (77) (151) (111,167) (115,180) Reclassified (to)/from investment properties CMDF Incentive Adjustments Exchange difference (446) 1,425 2,611 At 31 December , ,373 99,280 2, , ,207

58 ANNUAL REPORT Overview 15. PROPERTY 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 th AGM Leadership Perspectives Highlights Accountability Shareholders Financial Statements Depreciation At 1 January , ,599 48,279 2, , ,162 Depreciation for the year 6,430 17,758 11, ,479 77,664 Disposals (1,060) (521) (1,350) (4,944) (7,875) Written off (326) (1,650) (1,228) (182) (5,168) (8,554) Reclassified from investment properties 1,394 1,394 Exchange difference ,602 At 31 December 2015/1 January , ,634 57,870 1, , ,393 Depreciation for the year 6,621 11,299 8, ,052 72,580 Reclassifications (76,077) 12,474 63,603 Disposals (10) (469) (824) (521) (1,317) (3,141) Written off (1,972) (1,813) (69) (151) (111,154) (115,159) Reclassified from investment properties Exchange difference (39) 1,313 2,456 At 31 December , ,768 78,192 1, , ,193 Carrying amounts At 1 January ,631 77,659 27,598 2,223 99, ,933 At 31 December ,434 82,055 21,465 1, , ,028 At 31 December ,175 47,605 21, , ,014

59 186 BIMB HOLDINGS BERHAD 15. PROPERTY AND EQUIPMENT (CONTINUED) BUILDING IMPROVE- FREEHOLD FREEHOLD LEASEHOLD LEASEHOLD MENTS 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 , ,489 12,375 41,733 36, ,650 Additions 1,847 1,847 Reclassifications (745) (745) Disposals Written off (493) (493) Reclassified (to)/from investment properties 3,935 (651) (3,930) (646) Adjustments (8,529) 8,007 2, (1,416) 535 Exchange difference 1, ,241 At 31 December 2015/1 January , ,845 14,814 39,074 35, ,389 Additions 336 2,230 2,566 Reclassifications (1) 1 (1,586) (1,586) Disposals (44) (44) Written off (845) (30) (539) (558) (1,972) Reclassified (to)/from investment properties Adjustments Exchange difference At 31 December , ,335 14,784 39,484 35, ,301 Depreciation At 1 January ,420 1,334 6,000 20,265 39,019 Depreciation for the year 2, ,192 2,454 6,430 Disposals Written off (326) (326) Reclassified from investment properties ,394 Exchange difference At 31 December 2015/1 January ,907 1,508 8,143 22,397 46,955 Depreciation for the year 2, ,165 2,477 6,621 Disposals (10) (10) Written off (845) (30) (539) (558) (1,972) Reclassified from investment properties Exchange difference At 31 December ,867 1,652 9,301 24,306 52,126 Carrying amounts At 1 January , ,069 11,041 35,733 16, ,631 At 31 December , ,938 13,306 30,931 13, ,434 At 31 December , ,468 13,132 30,183 11, ,175

60 ANNUAL REPORT Overview 15. PROPERTY 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 ,096 1, ,473 Additions At 31 December 2015/1 January ,096 1, ,676 Additions Written off (13) (13) At 31 December ,096 1, ,705 Depreciation At 1 January ,042 Depreciation for the year At 31 December 2015/1 January , ,728 Depreciation for the year Written off Leadership Perspectives Highlights Accountability Financial Statements 20 th AGM Shareholders At 31 December ,096 1, ,134 Carrying amounts At 1 January ,431 At 31 December At 31 December

61 188 BIMB HOLDINGS BERHAD 16. INVESTMENT PROPERTIES LEASEHOLD FREEHOLD FREEHOLD LAND AND LAND BUILDING BUILDING TOTAL GROUP RM 000 RM 000 RM 000 RM 000 Cost At 1 January ,491 1,833 5,095 13,419 Disposals (659) (231) (890) Reclassified from assets held for sale 1,696 1,696 Reclassified from/(to) PPE (3,935) 651 3, Exchange difference At 31 December 2015/1 January ,897 2,253 10,766 14,916 Disposals Reclassified from assets held for sale Reclassified from/(to) PPE Exchange difference At 31 December ,897 2,253 10,864 15,014 Depreciation At 1 January , ,913 Depreciation for the year Reclassified to PPE (877) (517) (1,394) Disposals (20) (20) Exchange difference At 31 December 2015/1 January Depreciation for the year Reclassified to PPE Disposals Exchange difference At 31 December Carrying amounts At 1 January , ,237 11,506 At 31 December ,897 2,028 10,337 14,262 At 31 December ,897 1,983 10,246 14,126 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.

62 ANNUAL REPORT Overview 16. INVESTMENT PROPERTIES (CONTINUED) Fair value of the Group s investment properties are categorised as follows: LEVEL 1 LEVEL 2 LEVEL 3 TOTAL 2016 RM 000 RM 000 RM 000 RM 000 Freehold land and buildings 2,490 2,490 Leasehold land and buildings with unexpired lease period of more than 50 years 11,290 11,290 Leasehold land and buildings with unexpired lease period of less than 50 years 3,005 3,005 16,785 16, Freehold land and buildings 2,480 2,480 Leasehold land and buildings with unexpired lease period of more than 50 years 11,290 11,290 Leasehold land and buildings with unexpired lease period of less than 50 years 2,881 2,881 16,651 16,651 The following are amounts arising from investment properties that have been recognised in profit or loss during the financial year: GROUP RM 000 RM 000 Leadership Perspectives Highlights Accountability Rental income (net of direct operating expenses) 4,753 5,340 Policy on transfer between levels The fair value of an asset to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer. Fair value information Financial Statements Level 1 fair value Level 1 fair value is derived from quoted price (unadjusted) in active markets for identical investment properties that the entity can access at the measurement date. Level 2 fair value Level 2 fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for the investment property, either directly or indirectly. Level 2 fair values of land and buildings have been generally derived using the sales comparison approach. Sales price of comparable properties in close proximity are adjusted for differences in key attributes such as property size. The most significant input into this valuation approach is price per square foot of comparable properties. Shareholders 20 th AGM

63 190 BIMB HOLDINGS BERHAD 16. INVESTMENT PROPERTIES (CONTINUED) Fair value information (continued) Transfer between Level 1 and 2 fair values There is no transfer between Level 1 and 2 fair values during the financial year. Level 3 fair value Level 3 fair value is estimated using unobservable inputs for the investment property. The following table shows the valuation techniques used in the determination of fair values within Level 3, as well as the significant unobservable inputs used in the valuation models. VALUATION TECHNIQUE Comparison method: The valuation method consider the sales and listing of comparable properties recorded in the area and adjustments are made between the subject properties and those similar properties. The adjustments are made in relation to location and accessibility, size and shape of the lot, physical features, legal and legislation constraints, building design and condition, supply and demand, building code and public restriction. SIGNIFICANT UNOBSERVABLE INPUTS Adjustment rate based on the comparable sales in the past that was analysed by the National Property Centre (NAPIC) under Valuation and Property Services Department, Ministry of Finance Malaysia. INTER-RELATIONSHIP BETWEEN SIGNIFICANT UNOBSERVABLE INPUTS AND FAIR VALUE MEASUREMENT The estimated fair value would increase/(decrease) if: the rate were higher or lower the historical sales transaction were higher or lower Valuation processes applied by the Group and the Company for Level 3 fair value The Group s investment properties were valued by independent professional valuer firms, using the comparison, cost and investment methods of valuations, where applicable. In the comparison method approach, the sales and listings of comparable properties within nearby locations are compiled. From the compiled data, adjustments are made by the valuers between the subject property and those similar properties. The adjustments made are in relation to location, size and shape of the lot, physical features, legal and legislative constraints, building design and condition, time element, planning provision, improvements and renovation works made, if any, surrounding developments, facilities and amenities available and other factors that may affect the value of the subject property. These adjustments are therefore subject to uncertainties such as property market outlook, potential increases in rental rates and general economic conditions. In the cost method approach, the indication of values consists of the sum of the present worth of the improvement value. For the valuation of the improvements, the valuers have considered the following: (i) Cost of replacement of the building in accordance with current trend of market prices for materials, labour, contractor s overhead, profit and fees; (ii) Accrued depreciation as evidenced by the observed condition and present and prospective serviceability in comparison with new units of like kind; and (iii) Extent, character and utility of the property. The investment method is the capitalisation of net rent from a property. Net rent is the residue of gross annual rent less annual expenses (outgoings) required to sustain the rent with allowance for void and management fees.

64 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview 16. INVESTMENT PROPERTIES (CONTINUED) Valuation processes applied by the Group and the Company for Level 3 fair value (continued) During the year, the external valuers performed an update of the market values of these investment properties in arriving at the fair value, after considering the properties existing conditions. In the previous financial years, the external valuers have considered the results of all these three methods in their valuation and applied professional judgement in the selection of the fair value of these investment properties. 17. INTANGIBLE ASSETS BANCATAKAFUL SERVICE FEES RM 000 TAKAFUL Cost At 1 January 2015 Additions 61,321 At 31 December 2015/1 January 2016/31 December ,321 Amortisation At 1 January 2015 Amortisation during the year (5,110) At 31 December 2015/1 January 2016 (5,110) Amortisation during the year (12,264) At 31 December 2016 (17,374) Carrying amounts At 1 January 2015 At 31 December 2015/1 January ,211 At 31 December ,947 The intangible asset is in relation to Takaful Malaysia s Bancatakaful Service Agreement with RHB Islamic Bank ( RHB ) pursuant to the term of the Bancatakaful Service Agreement ( the Agreement ) entered on 26 August 2015 for the First period of the term. Takaful Malaysia s and RHB have entered into a ten year term to distribute Family and General takaful products via their distribution channel. The term of the Agreement is divided over two periods, where the First period is for the first five years of the term commencing on the agreement date and the Second Period is for the subsequent five years. Either Party has the right to terminate the Agreement at the expiry of the First period. Subject to the commencement of the Second Period, a service fee of RM45,000,000 (inclusive of Goods and Services Tax) will be payable to RHB. The intangible asset is amortised over its useful life of five years using the straight-line method.

65 192 BIMB HOLDINGS BERHAD 18. DEPOSITS FROM CUSTOMERS (a) By type of deposit GROUP RM 000 RM 000 Savings deposits Wadiah 4,131,604 4,674,687 Demand deposits Wadiah 9,928,598 10,567,552 Term Deposit 31,325,023 27,781,846 Special Investment Deposit Mudharabah 27,711 26,058 General Investment Deposit Mudharabah 394, ,802 Term Deposit-i Tawarruq 27,833,428 23,982,499 Negotiable Islamic Debt Certificates ( NIDC ) 3,069,412 3,287,644 Waheed-i 6,843 Others 106,528 94,444 Total Deposits 45,491,753 43,118,529 (b) Maturity structure of term deposits are as follows: GROUP RM 000 RM 000 Due within six months 26,108,266 22,794,274 More than six months to one year 4,157,963 4,000,106 More than one year to three years 690, ,690 More than three years to five years 368,204 40,776 31,325,023 27,781,846 (c) By type of customer Domestic non-bank financial institutions 15,053,052 11,144,330 Business enterprises 11,730,076 12,183,999 Government and statutory bodies 6,890,474 7,419,397 Individuals 4,817,561 5,576,637 Domestic banking institutions 2,994,256 2,590,445 Others 4,006,334 4,203,721 45,491,753 43,118,529

66 ANNUAL REPORT Overview 19. INVESTMENT ACCOUNTS OF CUSTOMERS GROUP RM 000 RM 000 Leadership (a) By type and Shariah contract Unrestricted investment accounts Without maturity Mudharabah 1,516, ,312 Perspectives Highlights Accountability Financial Statements 20 th AGM Shareholders With maturity Wakalah 2,057, ,793 3,573, ,105 Restricted investment accounts ( RIA ) managed by the Bank^ With maturity Wakalah 141,343 82,567 ^ Included in RIA managed by the Bank is an arrangement between the Bank and its ultimate holding entity where the Bank acts as the investment agent to manage and administer the RIA and its underlying assets amounting RM141,033,000 (2015:RM82,567,000). GROUP RM 000 RM 000 (b) By type of customer Government and statutory bodies 762,888 9 Business enterprises 737, Individuals 1,677, ,801 Non-bank financial institutions 237, ,763 Bank and other financial institutions 45,919 Others 111,732 2,135 3,573, ,105

67 194 BIMB HOLDINGS BERHAD 19. INVESTMENT ACCOUNTS OF CUSTOMERS (CONTINUED) (c) Movement of investment accounts of customers RESTRICTED INVESTMENT UNRESTRICTED INVESTMENT ACCOUNTS ACCOUNTS MUDHARABAH WAKALAH TOTAL WAKALAH GROUP RM 000 RM 000 RM 000 RM 000 As at 1 January 2015 Funding inflows/(outflows): Net movement 461, ,046 New placement 212, ,315 83,998 Redemption/Principal repayment (2,118) Income from investment 13,861 2,932 16,793 1,087 Bank Islam s share of profit: Profit distributed to Mudharib (13,595) (13,595) Wakalah performance incentive fee (454) (454) (400) As at 31 December 2015/1 January , , ,105 82,567 Funding inflows/(outflows): Net movement 1,054,331 1,054,331 New placement 12,316,909 12,316,909 75,412 Redemption/Principal repayment (10,500,249) (10,500,249) (20,256) Income from investment 61,379 34,620 95,999 8,948 Bank Islam s share of profit: Profit distributed to Mudharib (60,178) (60,178) Wakalah performance incentive fee (9,046) (9,046) (5,328) As at 31 December ,516,844 2,057,027 3,573, ,343 Investment portfolio: 2016 House financing 1,516,844 1,051,279 2,568,123 Personal financing 1,005,748 1,005,748 Other term financing 141,343 1,516,844 2,057,027 3,573, , House financing 461, , ,105 Personal financing Other term financing 82, , , ,105 82,567

68 ANNUAL REPORT Overview 19. INVESTMENT ACCOUNTS OF CUSTOMERS (CONTINUED) (d) By maturity structures, profit sharing ratio and rate of return INVESTMENT ACCOUNT HOLDERS BANK ISLAM S WAKALAH AVERAGE PERFOR- PROFIT AVERAGE MANCE TOTAL SHARING RATE OF INCENTIVE AMOUNT RATIO RETURN FEE RM 000 (%) (%) (%) Leadership Perspectives Highlights Accountability Financial Statements 20 th AGM Shareholders 2016 Unrestricted investment accounts: Less than 3 months Mudharabah 1,516, Wakalah 1,863, ,379,884 Between 3 to 12 months Wakalah 193, ,573,871 Restricted investment accounts: Between 2 to 5 years 141, Unrestricted investment accounts: Less than 3 months Mudharabah 461, Wakalah 214, ,105 Restricted investment accounts: Between 2 to 5 years 82,

69 196 BIMB HOLDINGS BERHAD 20. DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS RM 000 RM 000 Non-Mudharabah fund Licensed Islamic banks 30, OTHER LIABILITIES RM 000 RM 000 Group Accruals and other payables 836, ,785 Clients and dealers credit balances 63, ,578 Dividend payable 206, ,150 1,105,942 1,148,513 Company Accruals and other payables 3,607 3,684 Amount due to subsidiaries Dividend payable 206, ,150 The amount due to subsidiaries is non-trade, unsecured, not subject to financing charge and repayable on demand. 22. TAKAFUL LIABILITIES 210, ,108 GROUP NOTE RM 000 RM 000 Takaful contract liabilities 22(a) 6,396,375 6,350,983 Expense reserves 22(b) 159, ,258 Takaful payables 22(c), 45.5(b) 83,411 95,647 6,639,096 6,588,888

70 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview 22. TAKAFUL LIABILITIES (CONTINUED) (a) Takaful contract liabilities The takaful contract liabilities comprise the following: GROUP NOTE RM 000 RM 000 Provision for outstanding claims 22(a)(i) 582, ,069 Provision for unearned contributions 22(a)(ii) 316, ,773 Participants fund 22(a)(iii) 5,497,622 5,312,141 6,396,375 6,350,983 (i) Provision for outstanding claims The provision for outstanding claims and its movements are further analysed as follows: 2016 GROSS RETAKAFUL NET NOTE RM 000 RM 000 RM 000 Family Takaful Provision for claims reported by participants 24,435 (2,292) 22,143 Provision for IBNR* 150,654 (21,178) 129,476 Provision for outstanding claims 175,089 (23,470) 151,619 General Takaful Provision for claims reported by participants 234,840 (148,013) 86,827 Provision for IBNR* 172,255 (89,943) 82,312 Provision for outstanding claims 407,095 (237,956) 169,139 Note 46(b) Group Provision for claims reported by participants 45.5(b) 259,275 (150,305) 108,970 Provision for IBNR* 322,909 (111,121) 211,788 Provision for outstanding claims 582,184 (261,426) 320,758 Note 11

71 198 BIMB HOLDINGS BERHAD 22. TAKAFUL LIABILITIES (CONTINUED) (a) Takaful contract liabilities (continued) (i) Provision for outstanding claims (continued) 2015 GROSS RETAKAFUL NET NOTE RM 000 RM 000 RM 000 Family Takaful Provision for claims reported by participants 25,268 (4,104) 21,164 Provision for IBNR* 157,702 (33,224) 124,478 Provision for outstanding claims 182,970 (37,328) 145,642 General Takaful Provision for claims reported by participants 368,437 (273,667) 94,770 Provision for IBNR* 189,662 (93,210) 96,452 Provision for outstanding claims 558,099 (366,877) 191,222 Group Provision for claims reported by participants 45.5(b) 393,705 (277,771) 115,934 Provision for IBNR* 347,364 (126,434) 220,930 Provision for outstanding claims 741,069 (404,205) 336,864 * Incurred-but-not-reported ( IBNR ) Movement of provision for outstanding claims: Note 11 GROUP GROSS RETAKAFUL NET RM 000 RM 000 RM 000 At 1 January ,491 (405,867) 402,624 Claims incurred during the year 961,213 (194,906) 766,307 Adjustment to claims incurred in prior accident years (69,483) 25,192 (44,291) Claims paid during the year (910,336) 155,586 (754,750) Increase/(decrease) in IBNR (53,636) 16,531 (37,105) Effect of movement in exchange rates 4,820 (741) 4,079 At 31 December 2015/1 January ,069 (404,205) 336,864 Claims incurred during the year 1,053,099 (161,586) 891,513 Adjustment to claims incurred in prior accident years (60,464) 44,530 (15,934) Claims paid during the year (1,127,519) 244,762 (882,757) (Decrease)/Increase in IBNR (24,576) 15,275 (9,301) Effect of movement in exchange rates 575 (202) 373 At 31 December ,184 (261,426) 320,758

72 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements 20 th AGM Shareholders Overview 22. TAKAFUL LIABILITIES (CONTINUED) (a) Takaful contract liabilities (continued) (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 ,569 (62,969) 253,600 Note ,773 (55,893) 241,880 Movement of provision for unearned contributions: Note 11 GROUP GROSS RETAKAFUL NET RM 000 RM 000 RM 000 At 1 January ,899 (69,949) 220,950 Contributions written during the year 476,051 (186,996) 289,055 Contributions earned during the year (470,462) 201,266 (269,196) Effect of movement in exchange rates 1,285 (214) 1,071 At 31 December 2015/1 January ,773 (55,893) 241,880 Contributions written during the year 516,651 (201,122) 315,529 Contributions earned during the year (498,631) 194,207 (304,424) Effect of movement in exchange rates 776 (161) 615 At 31 December ,569 (62,969) 253,600

73 200 BIMB HOLDINGS BERHAD 22. TAKAFUL LIABILITIES (CONTINUED) (a) Takaful contract liabilities (continued) (iii) Participants fund Participants fund balance at end of the reporting period comprises the following: GROUP GROSS RETAKAFUL NET RM 000 RM 000 RM Actuarial liabilities 4,389,596 (144,096) 4,245,500 Unallocated surplus/accumulated surplus 954, ,378 AFS reserve (54,684) (54,684) Translation reserve (872) (872) Net assets value attributable to unitholders 209, ,204 5,497,622 (144,096) 5,353,526 Note Actuarial liabilities 4,222,570 (242,477) 3,980,093 Unallocated surplus/accumulated surplus 1,001,257 1,001,257 AFS reserve (81,639) (81,639) Translation reserve (162) (162) Net assets value attributable to unitholders 170, ,115 5,312,141 (242,477) 5,069,664 Note 11

74 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview 22. TAKAFUL LIABILITIES (CONTINUED) (a) Takaful contract liabilities (continued) (iii) Participants fund (continued) GROUP GROSS RETAKAFUL NET GROSS RETAKAFUL NET GROUP RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 1 January 5,312,141 (242,477) 5,069,664 5,020,743 (206,644) 4,814,099 Net earned contributions 1,533,870 (47,965) 1,485,905 1,317,440 (61,312) 1,256,128 Investment income 254, , , ,307 Realised gains (2,319) (2,319) 18,374 18,374 Fair value gains 15,578 15,578 (2,004) (2,004) Other operating income 1,868 1,868 11,102 11,102 Net benefits and claims (934,982) 62,679 (872,303) (742,181) 52,183 (689,998) Fees deducted (net) (502,332) (502,332) (379,151) (379,151) Other operating expenses (17,388) (17,388) (57,351) (57,351) Profit paid to participants (13,654) (13,654) (23,921) (23,921) Increase in actuarial liabilities (113,233) 99,420 (13,813) 31,079 (34,959) (3,880) Profit attributable to the Takaful Operator (73,364) (14,715) (88,079) (138,200) 9,129 (129,071) Excess payment transferred to participants (3,857) (3,857) (11,993) (11,993) Change in AFS reserve 16,994 16,994 (3,444) (3,444) Withholding tax (8,941) (8,941) (9,636) (9,636) Effect of movement in exchange rates 32,291 (1,038) 31,253 36,977 (874) 36,103 At 31 December 5,497,622 (144,096) 5,353,526 5,312,141 (242,477) 5,069,664 (b) Expense reserves GROUP RM 000 RM 000 At 1 January 142, ,127 Provision for the year, net 16,676 (333) Effect of movement in exchange rates At 31 December 159, ,258

75 202 BIMB HOLDINGS BERHAD 22. TAKAFUL LIABILITIES (CONTINUED) (c) Takaful payables GROUP RM 000 RM 000 Due to retakaful companies 65,610 73,197 Due to Intermediaries/Participants 17,801 22, SUKUK LIABILITIES 83,411 95,647 GROUP COMPANY RM 000 RM 000 RM 000 RM 000 Sukuk liabilities 1,227,494 1,178,585 1,227,494 1,178,585 Subordinated Sukuk Murabahah 654, ,380 The Sukuk liabilities comprise the following: 1,881,751 1,882,965 1,227,494 1,178,585 (1) The 10-year Islamic securities of RM1.66 billion (2015: RM1.66 billion) in nominal value issued by the Company on 12 December 2013; and (2) Two (2) Tranches of the Subordinated Sukuk Murabahah amounting to RM700 million (2015: RM700 million) issued by Bank Islam Malaysia Berhad which is as follows: (a) On 22 April 2015, the Bank issued the 10-year first tranche of RM300 million in nominal value of Subordinated Sukuk Murabahah which are due on 22 April 2025, with optional redemption on 22 April 2020 or any periodic payment date thereafter. The Sukuk bears a profit rate of 5.75% per annum payable semi-annually in arrears. (b) On 15 December 2015, the Bank issued the 10-year second tranche of RM400 million which are due on 15 December 2025, with optional redemption on 15 December 2020 or any periodic payment date thereafter. The Sukuk bears a profit rate of 5.50% per annum payable semi-annually in arrears. The Subordinated Sukuk Murabahah qualifies as Tier II capital for the computation of the regulatory capital of the Bank in accordance with the Capital Adequacy Framework (Capital Components) for Islamic Banks issued by BNM.

76 ANNUAL REPORT Overview 24. SHARE CAPITAL NUMBER OF SHARES AMOUNT GROUP AND COMPANY RM 000 RM 000 Leadership Authorised: Ordinary shares of RM1.00 each 2,000,000 2,000,000 2,000,000 2,000,000 Issued and fully paid: Ordinary shares of RM1.00 each at 1 January 1,542,210 1,493,506 1,542,210 1,493,506 Issuance of shares under conversion of warrants 1 1 Issuance of shares pursuant to Dividend Reinvestment Plan 46,469 48,704 46,469 48,704 At 31 December 1,588,680 1,542,210 1,588,680 1,542,210 (a) Ordinary shares On 22 January 2016, the Company increased its issued and paid-up share capital from RM1,542,209,734 to RM1,588,679,214 via the issuance of 46,469,480 new ordinary shares of RM1.00 each at a consideration of RM each arising from the Dividend Reinvestment Plan. Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM (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. During the financial year, 800 warrants were converted resulting in 800 (2015: Nil) new ordinary shares of RM1.00 each being issued. As at 31 December 2016, 426,715,078 (2015: 426,715,878) warrants remained unexercised. 25. RESERVES 25.1 Breakdown of reserves are as follows: GROUP NOTE RM 000 RM 000 Share premium 2,102,611 1,991,615 Other reserves ,083, ,798 Retained earnings 307,352 86,782 3,493,919 3,071,195 Acquisition reserve 25.3 (1,199,747) (1,199,747) 2,294,172 1,871,448

77 204 BIMB HOLDINGS BERHAD 25. RESERVES (CONTINUED) 25.1 Breakdown of reserves are as follows: (continued) COMPANY RM 000 RM 000 Share premium 2,102,611 1,991,615 Warrant reserves 129, ,300 Fair value reserves Retained earnings 51,259 38, Other reserves 2,283,251 2,159,396 CAPITAL STATUTORY WARRANT FAIR VALUE TRANSLATION LTIP* RESERVE RESERVE RESERVE RESERVE RESERVE RESERVE TOTAL GROUP RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 1 January , , ,300 (24,669) (40,283) 3, ,916 Foreign exchange translation differences (83,361) (83,361) Fair value reserve: Net change in fair value 17,143 17,143 Net amount reclassified to profit or loss (16,110) (16,110) Income tax credit relating to components of other comprehensive income 7,280 7,280 Transfer from current year profit 253, ,416 Share-based payment transactions 2,326 2,326 LTIP* exercised (812) (812) At 31 December 2015/ 1 January , , ,300 (16,356) (123,644) 4, ,798 Foreign exchange translation differences (15,347) (15,347) Fair value reserve: Net change in fair value 15,769 15,769 Net amount reclassified to profit or loss (50,659) (50,659) Income tax credit relating to components of other comprehensive income 8,645 8,645 Transfer from current year profit 132, ,752 Share-based payment transactions 3,927 3,927 LTIP* exercised (3,929) (3,929) Issue of shares pursuant to conversion of warrants ^ At 31 December ,863 1,124, ,300 (42,601) (138,991) 4,611 1,083,956 * Long Term Incentive Plan of Takaful Malaysia as disclosed in Note 26 ^ Conversion of warrants amounted to RM242.41

78 ANNUAL REPORT Overview 25. RESERVES (CONTINUED) 25.2 Other reserves (continued) Warrant reserve Leadership The warrant reserve arose from the Company s issuance of 426,715,958 free detachable warrants on 11 December 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 and offshore banking operations Federal Territory of Labuan. 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. Perspectives Highlights Accountability 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 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 EMPLOYEE BENEFITS Share-based payments arrangement of Takaful Malaysia At the Extraordinary General Meeting of Takaful Malaysia, 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 25 July 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. Financial Statements Shareholders 20 th AGM

79 206 BIMB HOLDINGS BERHAD 26. EMPLOYEE BENEFITS (CONTINUED) Share-based payments arrangement of Takaful Malaysia (continued) During the year, the number of the shares in Takaful Malaysia granted are as follows: NUMBER OF ORDINARY SHARES OF RM0.20 # EACH RESTRICTED PERFORMANCE SHARES SHARES TOTAL ( 000) ( 000) ( 000) Outstanding at 1 January ,073 1,452 Effect of share split 1,514 4,291 5,805 Granted during the year 1,860 1,860 Exercised during the year (804) (804) Forfeited during the year (263) (735) (998) Outstanding at 31 December 2015/1 January ,489 7,315 Granted during the year 4,592 4,592 Exercised during the year (767) (4,340) (5,107) Forfeited during the year (59) (565) (624) Outstanding at 31 December ,176 6,176 # The ordinary shares of RM1.00 each were sub-divided into RM0.20 per ordinary share each in prior year. During the financial year, 5,107,355 shares of RM0.20 each (2015: 804,000 shares of RM0.20 each) in Takaful Malaysia were exercised. The weighted average share price at the date of exercise for the year was RM1.79 (2015: RM1.79). 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 Fair value at grant date (RM) Weighted average share price (RM) Share price at grant date (RM) Expected volatility 34.30% 34.30% 25.21% to 26.74% to (weighted average volatility) 34.30% 34.30% Option life (expected weighted average life) Expected dividends (RM) to to Risk-free profit rate 3.30% to 3.30% to 2.88% to 3.43% to (based on Malaysian government bonds) 3.52% 3.52% 3.52% 3.52%

80 ANNUAL REPORT Overview 26. EMPLOYEE BENEFITS (CONTINUED) Value of employee services received for issue of Takaful Malaysia shares GROUP RM 000 RM 000 Leadership Expense recognised as share-based payments Restricted shares Shares granted in Performance shares Shares granted in ,219 1,191 Shares granted in ,333 1,609 Shares granted in , Shares granted in ,365 Perspectives Highlights Accountability 20 th AGM Shareholders Financial Statements Retirement benefit 6,370 3,207 6,558 3,856 The Group also makes contribution to a define benefit plans that provides pension for eligible permanent employees of its Indonesia subsidiaries. The amounts are determined based on years of service and salaries of the employees at the time of pension. The benefits will be paid upon retirement, permanent disability or termination.

81 208 BIMB HOLDINGS BERHAD 27. SOURCES AND USES OF CHARITY FUNDS SHARIAH NON- CHARITY COMPLIANCE FUNDS INCOME TOTAL GROUP RM 000 RM 000 RM 000 Undistributed funds as at 1 January Funds collected/received during the year Uses of funds during the year (261) (261) Contribution to Non-profit Organisation (23) (23) Contribution for poor/needy family (117) (117) Contribution for Education Fund (120) (120) Contribution to school (1) (1) Undistributed funds as at 31 December 2015/1 January Funds collected/received during the year Uses of funds during the year (3) (13) (16) Contribution to Non-profit Organisation (5) (5) Contribution for Da wah activities (1) (3) (4) Contribution for poor/needy family (2) (2) Contribution to school (5) (5) Undistributed funds as at 31 December INCOME DERIVED FROM INVESTMENT OF DEPOSITORS FUNDS GROUP RM 000 RM 000 Income derived from investment of: (i) General investment deposits 55,715 74,986 (ii) Term deposit-i 1,339,854 1,209,301 (iii) Saving and demand deposits 793, ,132 (iv) Other deposits 152, ,264 2,342,204 2,203,683

82 ANNUAL REPORT Overview 28. INCOME DERIVED FROM INVESTMENT OF DEPOSITORS FUNDS (CONTINUED) (i) Income derived from investment of general investment deposits GROUP RM 000 RM 000 Leadership Finance income and hibah Financing, advances and others 46,815 60,344 Financial assets: Held-for-trading 497 1,025 Available-for-sale 6,207 10,326 Held-to-maturity Money at call and deposit with financial institutions 697 2,576 54,344 74,445 Other dealing income Net gain from sale of financial assets held-for-trading Net loss on revaluation of financial assets held-for-trading (70) (20) Other operating income Net gain from sale of financial assets available-for-sale 1, ,715 74,986 of which Financing income earned on impaired financing 827 1,212 Perspectives Highlights Accountability (ii) Income derived from investment of term deposit-i GROUP RM 000 RM 000 Finance income and hibah Financing, advances and others 1,137,396 1,014,402 Financial assets: Held-for-trading 11,313 13,613 Available-for-sale 142, ,074 Held-to-maturity 2,861 2,603 Money at call and deposits with financial institutions 16,007 33,529 1,310,080 1,203,221 Other dealing income Net gain from sale of financial assets held-for-trading 2, Net loss on revaluation of financial assets held-for-trading (2,247) (603) Financial Statements Shareholders 20 th AGM

83 210 BIMB HOLDINGS BERHAD 28. INCOME DERIVED FROM INVESTMENT OF DEPOSITORS FUNDS (CONTINUED) (ii) Income derived from investment of term deposit-i (continued) GROUP RM 000 RM 000 Other operating income Net gain from sale of financial assets available-for-sale 29,026 5,988 1,339,854 1,209,301 of which Financing income earned on impaired financing 18,818 16,543 (iii) Income derived from investment of saving and demand deposits GROUP RM 000 RM 000 Finance income and hibah Financing, advances and others 673, ,463 Financial assets: Held-for-trading 6,703 8,568 Available-for-sale 84,433 87,533 Held-to-maturity 1,695 1,638 Money at call and deposits with financial institutions 9,484 21, , ,305 Other dealing income Net gain from sale of financial assets held-for-trading 1, Net loss on revaluation of financial assets held-for-trading (1,331) (380) Other operating income Net gain from sale of financial assets available-for-sale 17,198 3, , ,132 of which Financing income earned on impaired financing 11,150 10,413

84 ANNUAL REPORT Overview 28. INCOME DERIVED FROM INVESTMENT OF DEPOSITORS FUNDS (CONTINUED) (iv) Income derived from investment of other deposits GROUP RM 000 RM 000 Leadership Financing income and hibah Financing, advances and others 129, ,757 Financial assets: Held-for-trading 1,290 1,782 Available-for-sale 16,248 18,201 Held-to-maturity Money at call and deposits with financial institutions 1,825 4, , ,469 Other dealing income Net gain from sale of financial assets held-for-trading Net loss on revaluation of financial assets held-for-trading (256) (79) Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Other operating income Net gain from sale of financial assets available-for-sale 3, , ,264 of which Financing income earned on impaired financing 2,145 2, INCOME DERIVED FROM INVESTMENT ACCOUNT FUNDS GROUP RM 000 RM 000 Finance income Unrestricted investment accounts Mudharabah 61,379 13,861 Wakalah 40,902 2, ,281 16,793

85 212 BIMB HOLDINGS BERHAD 30. INCOME DERIVED FROM INVESTMENT OF SHAREHOLDERS FUNDS GROUP COMPANY RM 000 RM 000 RM 000 RM 000 Finance income and hibah Financing, advances and others 6,355 6,033 Financial assets available-for-sale 125, ,473 Money at call and deposits with financial institutions 5,814 3,504 10,394 5, , ,010 10,394 5,649 Other dealing income Net gain from foreign exchange transactions 73,114 81,668 Net gain from sale of financial assets held-for-trading (213) 474 Net gain on revaluation of financial assets held-for-trading Net derivatives loss (4,515) (1,152) 68,748 81,170 Other operating income Net gain from sale of financial assets available-for-sale 424 Gain on liquidation of securities 3,737 Reversal of allowance for doubtful debts 4 48 Gross dividend income from securities: Quoted in Malaysia Unquoted in Malaysia 1,612 1,612 Unit trust in Malaysia 4,190 1, Unit trust outside Malaysia 82 Gross dividend income from subsidiary companies 298, ,264 Fees and commission 179, ,815 Net gain on disposal of property and equipment Gain on disposal of shares in associated company Rental income 1,439 1,981 Others 173 8, , , , , , , , ,824

86 ANNUAL REPORT Overview 31. NET INCOME FROM TAKAFUL BUSINESS GROUP NOTE RM 000 RM 000 Leadership Net earned contributions Gross earned contributions 1,725,099 1,518,984 Contribution ceded to retakaful (242,172) (262,578) 31(a) 1,482,927 1,256,406 Other income Administration income 56,583 40,267 Investment income 275, ,962 Realised gains and losses (2,997) 21,404 Fair value gains and losses 15,562 (7,784) Other operating income 6,002 14, , ,888 Net benefits and claims Gross benefits and claims paid (1,127,519) (910,336) Claims receded to retakaful 244, ,586 Gross change to contract liabilities 159,460 72,242 Change to contract liabilities ceded to retakaful (142,981) (2,403) Expense reserves 31(b) (866,278) (684,911) (16,676) 333 Income from takaful business 950, ,716 Profits attributable to participants/takaful operator (266,547) (261,279) Net income from takaful business 683, ,437 (a) Net earned contributions GROUP RM 000 RM 000 Gross contributions 1,729,178 1,521,021 Change in actuarial reserves/unearned contributions reserves (4,079) (2,037) Gross earned contributions 1,725,099 1,518,984 Retakaful (249,087) (248,308) Change in actuarial reserves/unearned contributions reserve 6,915 (14,270) Contributions ceded to retakaful (242,172) (262,578) Net earned contributions 1,482,927 1,256,406 Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM

87 214 BIMB HOLDINGS BERHAD 31. NET INCOME FROM TAKAFUL BUSINESS (CONTINUED) (b) Net benefits and claims GROUP RM 000 RM 000 Gross benefits/claims paid (1,127,519) (910,336) Retakaful recoveries 244, ,586 Net benefits/claims paid (882,757) (754,750) Gross change in contract liabilities: At 31 December (582,184) (741,069) Less: At 1 January (741,069) (808,491) Effect of movement in exchange rates 575 4, ,460 72,242 Change in contract liabilities ceded to retakaful companies: At 31 December 261, ,205 Less: At 1 January 404, ,867 Effect of movement in exchange rates (202) (741) 32. ALLOWANCE FOR IMPAIRMENT ON FINANCING AND ADVANCES (142,981) (2,403) (866,278) (684,911) GROUP RM 000 RM 000 Allowance for impaired financing, advances and others collective assessment allowance 161, ,391 individual assessment allowance 30,662 14,148 Bad debts and financing recovered (100,224) (134,208) 92,105 69,331

88 ANNUAL REPORT Overview 33. ALLOWANCE FOR IMPAIRMENT ON INVESTMENTS GROUP RM 000 RM 000 Leadership Financial assets: available-for-sale 255 4,620 held-to-maturity (132) 34. INCOME ATTRIBUTABLE TO DEPOSITORS 255 4,488 GROUP RM 000 RM 000 Deposits from customers Mudharabah Fund 18,467 62,413 Non-Mudharabah Fund 1,012, ,434 Deposits and placements of banks and other financial institutions Mudharabah Fund 2,261 Non-Mudharabah Fund 30,640 4, INCOME ATTRIBUTABLE TO INVESTMENT ACCOUNT HOLDERS 1,061,413 1,018,145 GROUP RM 000 RM 000 Unrestricted investment accounts Mudharabah 1, Wakalah 25,574 2,477 26,775 2,743 Perspectives Highlights Accountability Financial Statements 36. PERSONNEL EXPENSES GROUP COMPANY RM 000 RM 000 RM 000 RM 000 Salaries and wages 518, ,091 5,790 6,513 Directors remuneration 23,743 23,419 1,762 1,399 Employees Provident Fund 66,522 61, Others 64,836 57, , ,869 8,736 8,942 Shareholders 20 th AGM

89 216 BIMB HOLDINGS BERHAD 37. OTHER OVERHEAD EXPENSES GROUP COMPANY RM 000 RM 000 RM 000 RM 000 Promotion Advertisement and publicity 47,374 30, ,423 Credit and debit card expenses 25,513 21,029 Commission 122, , , , ,423 Establishment Office rental 57,061 55,758 1,014 1,002 Depreciation of property and equipment 72,580 77, Depreciation of investment property technology expenses 49,978 32, Rental equipment 5,055 6, Office maintenance 22,504 23, Utilities 22,659 20, Security services 18,138 14,094 Takaful and insurance 10,353 8, Others 1,190 1, , ,040 1,711 2,037 General expenses Auditors remuneration statutory audit fees 1,599 1, others Professional fees 45,080 36,333 1, Office supplies 11,250 10, Travelling & transport 11,890 11, Subscription fees 4,150 3, Outsourcing fees 20,891 16,861 Processing charges 852 1,933 Others 122, ,631 1,624 2, , ,220 3,124 2, , ,289 5,342 6,180

90 ANNUAL REPORT Overview 38. DIRECTORS REMUNERATION Aggregate remuneration of Directors of the Group and the Company categorised into appropriate components are as follows: GROUP COMPANY RM 000 RM 000 RM 000 RM 000 Directors of the Company Non-Executive Directors: Fees and other emoluments 2,305 2,963 1, Benefits-in-kind Total 3,119 3,690 1,762 1,399 Directors of the subsidiary companies Executive Directors: Fees and other emoluments 4,102 1,646 Salaries, bonuses and EPF contributions 13,694 14,768 Benefits-in-kind Leadership Perspectives Highlights Accountability Financial Statements 20 th AGM Shareholders 18,077 16,960 Non-Executive Directors: Fees and other emoluments 2,362 2,541 Benefits-in-kind Total 20,624 19,729 Grand Total 23,743 23,419 1,762 1,399 Total (excluding benefits-in-kind) 22,463 21,918 1, Shariah Supervisory Council

91 218 BIMB HOLDINGS BERHAD 38. DIRECTORS REMUNERATION (CONTINUED) The total remuneration (including benefits-in-kind) of the Directors of the Company is as follows: REMUNERATION RECEIVED REMUNERATION RECEIVED FROM THE COMPANY FROM SUBSIDIARY COMPANIES SALARY FEES & SALARY FEES & AND OTHER BENEFIT- COMPANY AND OTHER BENEFIT- GROUP BONUS EMOLUMENTS IN-KIND TOTAL BONUS EMOLUMENTS IN-KIND TOTAL 31 DECEMBER 2016 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Non-Executive Director: Tan Sri Samsudin bin Osman Tan Sri Ismail bin Adam Datuk Zaiton binti Mohd Hassan Datuk Rozaida binti Omar Rifina binti Md Ariff Mohd Zin bin Idris Mohd Tarmidzi bin Ahmad Nordin Noraini binti Che Dan Dato Johan bin Abdullah Salih Amaran bin Jamiaan Tan Sri Ismee bin Ismail , ,762 1, ,119

92 ANNUAL REPORT DIRECTORS REMUNERATION (CONTINUED) The total remuneration (including benefits-in-kind) of the Directors of the Company is as follows: (continued) REMUNERATION RECEIVED REMUNERATION RECEIVED FROM THE COMPANY FROM SUBSIDIARY COMPANIES 20 th AGM Shareholders Financial Statements Highlights Accountability Perspectives Leadership Overview SALARY FEES & SALARY FEES & AND OTHER BENEFIT- COMPANY AND OTHER BENEFIT- GROUP BONUS EMOLUMENTS IN-KIND TOTAL BONUS EMOLUMENTS IN-KIND TOTAL 31 DECEMBER 2015 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Non-Executive Director: Tan Sri Samsudin bin Osman Tan Sri Ismail bin Adam Datuk Zaiton binti Mohd Hassan Datuk Rozaida binti Omar Rifina binti Md Ariff Mohd Zin bin Idris Dato Johan bin Abdullah Mohd Tarmidzi bin Ahmad Nordin Tan Sri Ismee bin Ismail Salih Amaran bin Jamiaan ,399 2, ,690 Included in other emoluments of non-executive Directors is a motor vehicle given to a Director, who retired during the financial year, as a token of appreciation for his contributions during his tenure of service, which has a market value of RM270,000. The net book value of the motor vehicle is RM501,000.

93 220 BIMB HOLDINGS BERHAD 39. 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 RM 000 RM 000 RM 000 RM 000 Other key management personnel: Short-term employee benefits 52,861 48,396 3,178 1,802 Benefits-in-kind ,337 49,099 3,204 1, TAX EXPENSE Major components of tax expense GROUP COMPANY RM 000 RM 000 RM 000 RM 000 Malaysian income tax: Current year 232, ,273 2,401 1,314 (Over)/Under provision in prior years (8,313) (11,370) , ,903 2,455 1,368 Deferred tax expense: Origination and reversal of temporary differences 906 7,902 Effect of changes in tax rate 1,196 Under provision in prior years 475 1,318 1,381 10, , ,319 2,455 1,368

94 ANNUAL REPORT Overview 40. TAX EXPENSE (CONTINUED) A reconciliation of effective tax expense for the Group and Company are as follows: GROUP COMPANY RM 000 RM 000 RM 000 RM 000 Leadership Profit before tax 869, , , ,336 Perspectives Highlights Accountability Financial Statements 20 th AGM Shareholders Income tax calculated using Malaysian tax rate of 24% (2015: 25%) 208, ,609 53,238 53,084 Non-deductible expenses 48,956 35,273 3,285 3,454 Non-deductible Sukuk s finance cost 17,714 17,592 17,714 17,592 Effect of changes in tax rate 1,196 Effect of tax rates in foreign jurisdictions (1,154) Non-taxable income (41,420) (40,537) (71,836) (72,816) Deferred tax assets not recognised 127 Utilisation of previously unrecognised unabsorbed capital allowances 1, , ,371 2,401 1,314 (Over)/Under provision in prior years (8,313) (11,370) Under provision of deferred tax 475 1,318 Tax expense 226, ,319 2,455 1,368 Recognised in other comprehensive income: Deferred tax expense Other investment (702) Provisions (320) 1,091 Available-for-sale 8,645 7,280 7,623 8,371 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.

95 222 BIMB HOLDINGS BERHAD 41. EARNINGS PER SHARE Basic earnings per ordinary share The calculation of basic earnings per ordinary share at 31 December 2016 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 RM 000 RM 000 Profit attributable to owners of the Company 559, ,275 GROUP Weighted average number of ordinary shares 1,586,013 1,540,609 GROUP SEN SEN Basic earnings per ordinary share DIVIDENDS Dividends recognised by the Company: SEN PER SHARE TOTAL AMOUNT RM 000 DATE OF PAYMENT 2016 Interim 2016 ordinary , January Interim 2015 ordinary , January 2016 The Directors do not recommend any final dividend to be paid for the year under review. 43. RELATED PARTY TRANSACTIONS For the purposes of these financial statements, parties are considered to be related to the Group if the Group or the Company has the ability, directly or indirectly, to control or jointly control the party or exercise significant influence over the other party in making financial and operating decisions, or vice versa, or where the Group or the Company and the party are subject to common control. Related parties may be individuals or other entities.

96 ANNUAL REPORT Overview 43. RELATED PARTY TRANSACTIONS (CONTINUED) The Group or the Company has a related party relationship with its subsidiaries (see Note 14) and holding corporation of the Company. (a) The significant related party transactions of the Group and the Company which are not disclosed elsewhere, other than key management personnel compensation, are as follows: GROUP COMPANY TRANSACTIONS FOR TRANSACTIONS FOR RM 000 RM 000 RM 000 RM 000 Holding Company Gain/(Loss) on forex transaction Profit attributable on deposits placed 27,196 94,232 Rental of premises paid 22,942 22,610 Profit paid on Sukuk Liabilities 79,681 73,249 73,809 70,366 Brokerage income 1,404 1,403 Contribution income for Family Takaful 576 Contribution income for General Takaful 33 3,622 Claims paid for Family Takaful 962 Claims paid for General Takaful Other rental Wakalah incentive fee 5, Office rental received Fees and commission received 1 Commission paid for Takaful 31 Subsidiaries Income receivable on deposits placed 10,397 6,175 Office rental paid Others Contribution paid for General Takaful 7 9 Contribution paid for Family Takaful 10 Claims receivable for General Takaful 5 Other related companies Income received from financing, advances and others Net gain/(loss) on forex transaction 407 (306) Profit attributable on deposits placed 3,404 7,505 Fees and commission received Office rental received 9 Office rental paid Takaful contribution received 5,761 1,383 Takaful claims paid 1, Takaful commission paid 22 Takaful contribution refund 411 Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM

97 224 BIMB HOLDINGS BERHAD 43. 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 RM 000 RM 000 RM 000 RM 000 Holding company Amount due from Others 30 6 Amount due to Demand and investment deposits 2,309, ,712 Profit payable to investment deposit 1,437 5,201 Commitment and contingencies Sukuk liabilities 1,328,597 1,279,703 1,227,494 1,178,585 Others 27 Subsidiaries Amount due from Current account and investment deposits 205, ,351 Profit payable to investment deposit 1, Others Amount due to Others Other related companies Amount due from Financing, advances and others 3, Amount due to Demand and investment deposits 259, ,982 Commitment and contingencies 2,846 3,485 Profit payable to investment deposit CAPITAL ADEQUACY The Company is not required to maintain any capital adequacy ratios Bank Islam The Total Capital Ratio computation consists of the capital adequacy ratios of Bank Islam and its subsidiaries ( Bank Islam ). Capital Adequacy Ratios Total capital and capital adequacy ratios of Bank Islam have been computed based on BNM s Capital Adequacy Framework for Islamic Banks (Capital Components and Risk-Weighted Assets) issued on 13 October 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 5.125%, 6.625% and 8.625% (2015: 4.5%, 6.0% and 8.0%) respectively for year Bank Islam has adopted the Standardised Approach for Credit Risk and Market Risk and the Basic Indicator Approach for Operational Risk.

98 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview 44. CAPITAL ADEQUACY (CONTINUED) 44.1 Bank Islam (continued) Capital Adequacy Ratios (continued) The capital adequacy ratios of Bank Islam are set out below: % % Common Equity Tier I ( CET I ) Capital Ratio Total Capital Ratio The components of CET I, Tier I and Tier II capital of Bank Islam: RM 000 RM 000 Tier I capital Paid-up share capital 2,404,384 2,363,283 Share premium 264, ,452 Retained earnings 523, ,913 Other reserves 1,193,045 1,107,920 Less: Deferred tax assets (48,378) (35,182) Total CET I and Tier I Capital 4,337,088 3,997,386 Sukuk Murabahah 700, ,000 Collective assessment allowance^ 391, ,414 Total Tier II Capital 1,091,782 1,069,414 Total Capital 5,428,870 5,066,800 ^ Collective assessment allowance on non-impaired financing subject to maximum of 1.25% of total credit risk-weighted assets less credit risk absorbed by unrestricted investment accounts. The breakdown of risk-weighted assets by each major risk category is as follows: RM 000 RM 000 Credit risk 33,908,778 29,841,140 Less: Credit risk absorbed by unrestricted investment accounts (2,566,180) (288,030) Market risk 609, ,158 Operational risk 3,031,801 2,851,129 34,984,330 33,072,397

99 226 BIMB HOLDINGS BERHAD 44. CAPITAL ADEQUACY (CONTINUED) 44.2 Takaful Malaysia Takaful Malaysia s capital management policy is to optimise the efficient and effective use of resources to maximise the return on equity and provide an appropriate level of capital to protect participants and meet regulatory requirements. Takaful Malaysia is required to comply with the regulatory capital requirement prescribed in the Risk Based Capital for Takaful ( RBCT ) Framework issued by BNM where Takaful operators are required to satisfy a minimum capital adequacy ratio of 130%. As at period end, Takaful Malaysia has a capital adequacy ratio in excess of the minimum requirement. The capital structure of Takaful Malaysia as at 31 December 2016, as prescribed under the RBCT Framework is provided below: RM 000 RM 000 Tier 1 capital 1,212,934 1,167,906 Tier 2 capital (16,620) (30,374) Amount deducted from capital (122,376) (143,163) 1,073, , FINANCIAL RISK MANAGEMENT POLICIES 45.1 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 )

100 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements 20 th AGM Shareholders Overview 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.1 Categories of financial instruments (continued) GROUP 31 DECEMBER 2016 CARRYING RM 000 AMOUNT F&R/(FL) FVTPL AFS HTM DERIVATIVES Financial assets Cash, balances and placements with banks 5,655,408 5,655,408 Financial assets held-for-trading 777, ,610 Derivative financial assets 124, ,572 Financial assets available-for-sale 13,755,389 13,755,389 Financial assets held-to-maturity 631, ,086 Financing, advances and others 39,189,274 39,189,274 Takaful assets 638, ,199 Statutory deposits with Bank Negara Malaysia 1,374,876 1,374,876 Other assets 398, ,524 62,544,938 47,256, ,610 13,755, , ,572 Financial liabilities Deposits from customers (45,491,753) (45,491,753) Investment accounts of customers (3,573,871) (3,573,871) Deposits and placements of banks and other financial institutions (30,000) (30,000) Derivative financial liabilities (111,089) (111,089) Bills and acceptance payable (46,278) (46,278) Other liabilities (1,105,942) (1,105,942) Takaful liabilities (83,411) (83,411) Sukuk liabilities (1,881,751) (1,881,751) Provision for outstanding claims (259,275) (259,275) (52,583,370) (52,472,281) (111,089)

101 228 BIMB HOLDINGS BERHAD 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.1 Categories of financial instruments (continued) GROUP 31 DECEMBER 2015 CARRYING RM 000 AMOUNT F&R/(FL) FVTPL AFS HTM DERIVATIVES Financial assets Cash, balances and placements with banks 4,280,835 4,280,835 Financial assets held-for-trading 670, ,006 Derivative financial assets 119, ,259 Financial assets available-for-sale 13,797,205 13,797,205 Financial assets held-to-maturity 643, ,164 Financing, advances and others 34,294,690 34,294,690 Takaful assets 850, ,848 Statutory deposits with Bank Negara Malaysia 1,591,460 1,591,460 Other assets 439, ,255 56,686,722 41,457, ,006 13,797, , ,259 Financial liabilities Deposits from customers (43,118,529) (43,118,529) Investment accounts of customers (676,105) (676,105) Derivative financial liabilities (101,913) (101,913) Bills and acceptance payable (122,577) (122,577) Other liabilities (1,148,513) (1,148,513) Takaful liabilities (95,647) (95,647) Sukuk liabilities (1,882,965) (1,882,965) Provision for outstanding claims (393,705) (393,705) (47,539,954) (47,438,041) (101,913)

102 ANNUAL REPORT Overview 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.1 Categories of financial instruments (continued) COMPANY 31 DECEMBER 2016 CARRYING RM 000 AMOUNT F&R/(FL) FVTPL AFS HTM DERIVATIVES Financial assets Cash, balances and placements with banks 205, ,318 Financial assets available-for-sale 135, ,406 Other assets 1,924 1, , , ,406 Financial liabilities Other liabilities (210,137) (210,137) Sukuk liabilities (1,227,494) (1,227,494) (1,437,631) (1,437,631) COMPANY 31 DECEMBER 2015 CARRYING RM 000 AMOUNT F&R/(FL) FVTPL AFS HTM DERIVATIVES Financial assets Cash, balances and placements with banks 214, ,354 Financial assets available-for-sale 19,215 19,215 Other assets 1,912 1,912 Leadership Perspectives Highlights Accountability Financial Statements 20 th AGM Shareholders 235, ,266 19,215 Financial liabilities Other liabilities (192,108) (192,108) Sukuk liabilities (1,178,585) (1,178,585) (1,370,693) (1,370,693)

103 230 BIMB HOLDINGS BERHAD 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.2 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 Credit risk Credit risk is the risk of a financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group s exposure to credit risk arises principally from its financing, advances and others and investment securities. The Company s exposure to credit risk arises principally from investment securities. (a) Banking Bank Islam s credit risk arises from all transactions that could lead to actual, contingent or potential claims against any party, borrower or obligor. The types of credit risks that the Bank considers to be material includes: Default Risk, Pre-Settlement Risk, Counterparty Risk, Credit Concentration Risk, Residual/Credit Mitigation Risk and Migration Risk. Credit risk governance The management of credit risk is principally carried out by using sets of policies and guidelines approved by Bank Islam s Board Risk Committee ( BRC ), guided by the Risk Appetite Statement approved by Bank Islam s Board of Directors. The Bank s Management Risk Control Committee ( MRCC ) is responsible under the authority delegated by the Bank s BRC for managing credit risk at strategic level. The Bank s MRCC reviews the Bank s credit risk frameworks and guidelines, aligns credit risk management with business strategies and planning, reviews credit profile of the credit portfolios and recommends necessary actions to ensure that the credit risk remains within established risk tolerance level. The Bank s credit risk management governance includes the establishment of comprehensive credit risk policies, guidelines and procedures which documents the Bank s financing standards, discretionary powers for financing approval, credit risk ratings methodologies and models, acceptable collaterals and valuation, and the review, rehabilitation and restructuring of problematic and delinquent financing. Management of Credit Risk The management of credit risk is being performed by Credit Management Division ( CMD ) and Risk Management Division ( RMD ), and two other units outside of the CMD and RMD domain, namely, Credit Administration Department 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.

104 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.3 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 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 counterparties limits and permissible acquisition of private debt securities, 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. 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.

105 232 BIMB HOLDINGS BERHAD 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.3 Credit risk (continued) 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 RM 000 RM 000 Cash and short-term funds 4,502,270 3,304,005 Deposits and placements with banks and other financial institutions 1,153, ,830 Financial assets held-for-trading (excluding shares, unit trusts and investment funds) 636, ,709 Derivative financial assets 124, ,259 Financial assets available-for-sale (excluding shares, unit trusts and investment funds) 13,021,606 12,827,161 Financial assets held-to-maturity 631, ,164 Financing, advances and others 39,189,274 34,294,690 Other assets (net of prepayments) 398, ,255 Takaful assets 638, ,848 Statutory deposits with Bank Negara Malaysia 1,374,876 1,591,460 Sub-total 61,670,007 55,576,381 Credit related obligation: Credit commitments 9,750,962 9,506,449 Sub-total 9,750,962 9,506,449 Total credit exposures 71,420,969 65,082,830 (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, or when the financing is classified as rescheduled and restructured in Central Credit Reference System ( CCRIS ).

106 ANNUAL REPORT Overview 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.3 Credit risk (continued) (i) Credit quality of gross financing and advances (continued) Leadership The table below summarises the credit quality of the Group s gross financing according to the above classifications. GROUP RM 000 RM 000 Financing, advances and others Neither past due nor impaired Excellent to good 31,981,235 27,422,414 Satisfactory 6,352,707 5,968,683 Fair 454, ,236 38,788,825 33,797,333 Past due but not impaired 694, ,623 Impaired 389, ,270 Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM 39,872,443 34,960,226 Allowance for impaired financing, advances and others collective assessment allowance (554,971) (541,065) individual assessment allowance (128,198) (124,471) 39,189,274 34,294,690 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 ageing analysis of financing and advance past-due but not impaired as at the end of the reporting period was as follows: GROUP RM 000 RM 000 By ageing Month-in-arrears 1 439, ,525 Month-in-arrears 2 254, , , ,623

107 234 BIMB HOLDINGS BERHAD 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.3 Credit risk (continued) (i) Credit quality of gross financing and advances (continued) Impaired financing GROUP RM 000 RM 000 Individually assessed 203, ,198 of which: Month-in-arrears 0 15,614 38,490 Month-in-arrears ,259 Month-in-arrears 2 7,623 13,235 Month-in-arrears 3 and above 179, ,214 Collectively assessed 186, ,072 Impaired financing of which rescheduled and restructured financing 389, ,270 GROUP RM 000 RM 000 Consumer 25,950 38,592 Business 73,093 72,030 99, ,622 Rescheduled and restructured financings are financings that have been rescheduled or restructured due to deterioration in the customers financial positions and the Bank has made concessions that it would not otherwise consider. Once the financing is rescheduled or restructured, its satisfactory performance is monitored for a period of six months before it can be reclassified to performing.

108 ANNUAL REPORT Overview 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.3 Credit risk (continued) (ii) Credit quality of takaful receivables Leadership The table below summarises the credit quality of the Group s Takaful receivable: GROUP RM 000 RM 000 Takaful receivables Neither past due nor impaired 135,768 94,015 Past due but not impaired 33,940 54,258 Impaired 9,375 7, , ,790 Allowance for impairment (9,375) (7,517) 169, ,273 The ageing 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 RM 000 RM 000 Days past-due 1-30 days 2,749 3, days 3,430 6, days 2,292 2, days 20,951 32,259 > 180 days 4,518 10,261 Impairment loss of takaful receivables A reconciliation of the allowance for impairment losses for takaful receivables was as follows: 33,940 54,258 Perspectives Highlights Accountability Financial Statements RM 000 At 1 January ,487 Writeback of impairment loss Allowance for impaired debts 2,983 Effect of movement in exchange rates 47 At 31 December 2015/1 January ,517 Writeback of impairment loss (421) Allowance for impaired debts 2,123 Effect of movement in exchange rates 156 At 31 December ,375 Shareholders 20 th AGM

109 236 BIMB HOLDINGS BERHAD 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.3 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 2016 AAA 235,344 2,700, ,320 3,114,234 AA 7,011 2,971,615 12,335 2,990,961 A 15, ,754 17, ,427 Below A 71,320 71,320 Unrated 33, , , ,041 Sovereign 324,500 6,548, ,037 6,978,461 Unit-linked 20,598 20,598 Financial institution 118, , ,346 Corporate 6,338 6, , ,572 13,021, ,086 14,413,726 As at 31 December 2015 AAA 109,890 3,220, ,421 3,499,506 AA 6,345 2,554,755 12,048 2,573,148 A 13, ,554 10, ,829 Below A 21,123 21,123 Unrated 106, , , ,123 Sovereign 241,717 6,341, ,157 6,728,709 Unit-linked 51,955 51,955 Financial institution 116, , ,506 Corporate 2,394 2, , ,259 12,827, ,164 14,119,293

110 ANNUAL REPORT Overview 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.4 Market risk Overview Leadership 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; Liquidity Risk: the potential inability of the Group to meet its funding requirements at a reasonable cost (funding liquidity risk) or its inability to liquidate positions quickly at a reasonable price (market liquidity risk). 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. Perspectives Highlights Accountability Financial Statements 20 th AGM Shareholders 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.

111 238 BIMB HOLDINGS BERHAD 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.4 Market risk (continued) (a) Banking (continued) Management of market risk Bank Islam s market risk exposures are managed by its Treasury as it has the necessary skills, tools, management and governance to manage such risks. 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 the 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 to the Senior Management. Escalation procedures are documented and approved by the Bank s BRC. In addition, the market risk exposures and limits are 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. 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.

112 ANNUAL REPORT FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) Overview 45.4 Market risk (continued) (a) Banking (continued) (i) Profit rate risk (continued) 20 th AGM Shareholders Financial Statements Highlights Accountability Perspectives Leadership NON TRADING BOOK NON EFFECTIVE UP TO >1-3 > OVER PROFIT TRADING PROFIT BANK ISLAM 1 MONTH MONTHS MONTHS YEARS 5 YEARS SENSITIVE BOOK TOTAL RATE AS AT 31 DECEMBER 2016 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 % Assets Cash, balances and placements with banks 3,030, , ,674 4,063, Financial assets held-for-trading 574, , Derivative financial assets 124, , Financial assets available-for-sale 35, ,317 1,475,514 4,775,032 3,456,704 9,957, Financial assets held-to-maturity 57,703 57, Financing, advances and others non-impaired 1,879,099 1,628, ,215 3,428,018 31,842,570 39,482, impaired net of allowances* (293,724) (293,724) Other assets 1,709,610 1,709,610 Total assets 4,945,561 1,942,413 2,180,729 8,203,050 35,356,977 2,348, ,407 55,676,697 Note 51 * This is arrived at after deducting collective assessment allowance and individual assessment allowance from the outstanding gross impaired financing.

113 240 BIMB HOLDINGS BERHAD 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.4 Market risk (continued) (a) Banking (continued) (i) Profit rate risk (continued) NON TRADING BOOK NON EFFECTIVE UP TO >1-3 > OVER PROFIT TRADING PROFIT BANK ISLAM 1 MONTH MONTHS MONTHS YEARS 5 YEARS SENSITIVE BOOK TOTAL RATE AS AT 31 DECEMBER 2016 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 % Liabilities Deposits from customers 16,904,998 9,948,300 4,436, ,072 14,240,104 45,940, Investment accounts of customers 923,998 1,177, ,987 1,516,844 3,812, Deposits and placements of banks and other financial institutions 30,000 30, Derivative financial liabilities 111, , Bills and acceptance payable 46,278 46,278 Subordinated Sukuk Murabahah 700,000 4, , Other liabilities 646, ,796 Total liabilities 17,858,996 11,125,732 4,630,927 1,110,072 16,454, ,089 51,291,231 Note 51 Equity Equity attributable to equity holders of the Bank 4,385,466 4,385,466 Total equity 4,385,466 4,385,466 Total liabilities and shareholders equity of the Bank 17,858,996 11,125,732 4,630,927 1,110,072 20,839, ,089 55,676,697 On-balance sheet profit sensitivity gap (12,913,435) (9,183,319) (2,450,198) 7,092,978 35,356,977 (18,491,321) 588,318 Off-balance sheet profit sensitivity gap (profit rate swaps) 300, ,000 (200,000) (400,000) Total profit sensitivity gap (12,613,435) (8,883,319) (2,650,198) 6,692,978 35,356,977 (18,491,321) 588,318

114 ANNUAL REPORT FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) Overview 45.4 Market risk (continued) (a) Banking (continued) (i) Profit rate risk (continued) 20 th AGM Shareholders Financial Statements Highlights Accountability Perspectives Leadership NON TRADING BOOK NON EFFECTIVE UP TO >1-3 > OVER PROFIT TRADING PROFIT BANK ISLAM 1 MONTH MONTHS MONTHS YEARS 5 YEARS SENSITIVE BOOK TOTAL RATE AS AT 31 DECEMBER 2015 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 % Assets Cash, balances and placements with banks 2,189, ,593 2,982, Financial assets held-for-trading 423, , Derivative financial assets 119, , Financial assets available-for-sale 464, ,507 1,225,106 5,787,501 2,300,909 9,937, Financial assets held-to-maturity 59,352 59, Financing, advances and others non-impaired 27,020, , ,167 1,448,247 4,884,436 34,578, impaired net of allowances* (284,266) (284,266) Other assets 1,946,483 1,946,483 Total assets 29,674, ,168 1,624,273 7,235,748 7,244,697 2,454, ,232 49,763,719 Note 51 * This is arrived at after deducting collective assessment allowance and individual assessment allowance from the outstanding gross impaired financing.

115 242 BIMB HOLDINGS BERHAD 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.4 Market risk (continued) (a) Banking (continued) (i) Profit rate risk (continued) NON TRADING BOOK NON EFFECTIVE UP TO >1-3 > OVER PROFIT TRADING PROFIT BANK ISLAM 1 MONTH MONTHS MONTHS YEARS 5 YEARS SENSITIVE BOOK TOTAL RATE AS AT 31 DECEMBER 2015 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 % Liabilities Deposits from customers 17,705,682 5,322,685 5,097,995 79,254 15,350,734 43,556, Investment accounts of customers 175,916 38, , , Deposits and placements of banks and other financial institutions Derivative financial liabilities 101, , Bills and acceptance payable 122, ,577 Subordinated Sukuk Murabahah 700,000 4, , Other liabilities 569, ,826 Total liabilities 17,881,598 5,361,562 5,097,995 79, ,000 16,508, ,913 45,731,151 Note 51 Equity Equity attributable to equity holders of the Bank 4,032,568 4,032,568 Total equity 4,032,568 4,032,568 Total liabilities and shareholders equity of the Bank 17,881,598 5,361,562 5,097,995 79, ,000 20,541, ,913 49,763,719 On-balance sheet profit sensitivity gap 11,793,193 (4,375,394) (3,473,722) 7,156,494 6,544,697 (18,086,587) 441,319 Off-balance sheet profit sensitivity gap (profit rate swaps) 300, ,000 (600,000) Total profit sensitivity gap 12,093,193 (4,075,394) (3,473,722) 6,556,494 6,544,697 (18,086,587) 441,319

116 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.4 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 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 bps +100bps -100bps +100bps INCREASE/(DECREASE) RM MILLION Bank Islam Impact on EaR (28.46) (10.38) Impact on EVE (266.25) (326.12) 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 discussed and reported to the Bank s ALCO and BRC.

117 244 BIMB HOLDINGS BERHAD 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.4 Market risk (continued) (a) Banking (continued) (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 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 TO AVERAGE MAXIMUM MINIMUM BANK ISLAM RM MILLION RM MILLION RM MILLION RM MILLION Profit rate risk Foreign exchange risk Overall AS AT TO AVERAGE MAXIMUM MINIMUM BANK ISLAM RM MILLION RM MILLION RM MILLION RM MILLION Profit rate risk Foreign exchange risk Overall 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.

118 ANNUAL REPORT Overview 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.4 Market risk (continued) (a) Banking (continued) Leadership (iii) Market risk in the trading portfolio (continued) Value-at-Risk (continued) 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. 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 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. Perspectives Highlights Accountability Financial Statements (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 discussed and reported to the Bank s ALCO and BRC. Shareholders 20 th AGM

119 246 BIMB HOLDINGS BERHAD 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.4 Market risk (continued) (a) Banking (continued) (iv) Foreign exchange risk (continued) (b) Takaful 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: % +1% -1% +1% DEPRECIATION APPRECIATION DEPRECIATION APPRECIATION BANK ISLAM RM 000 RM 000 RM 000 RM 000 US Dollar 11,503 (11,503) 14,349 (14,349) Euro 8,098 (8,098) 4,973 (4,973) Others (96) (827) 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.

120 ANNUAL REPORT Overview 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.4 Market risk (continued) (b) Takaful (continued) Leadership (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 AFS financial assets 312,491 2,363, ,484 2,990,062 FVTPL financial assets 3,554 63,158 66,712 HTM financial assets 11, ,677 42, ,383 Financing and receivables 429,533 1,243, ,236 1,880, ,416 4,188, ,588 5,510, AFS financial assets 275,159 2,193, ,032 2,785,266 FVTPL financial assets 3, , ,991 HTM financial assets 2, ,773 42, ,812 Financing and receivables 241,006 1,018, ,733 1,455, ,839 3,857, ,628 4,935,093 Perspectives Highlights Accountability 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 increase/(decrease) other comprehensive income/equity, Family and General Takaful participants fund by the amounts shown below. This analysis assumes that all other variables remain constant. TAKAFUL MALAYSIA GROUP 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 AFS financial assets +50bps (9,690) (172,567) FVTPL financial assets +50bps 16 (536) (536) (9,674) (536) (173,103) AFS financial assets -50bps 12, ,628 FVTPL financial assets -50bps (16) , ,448 Financial Statements Shareholders 20 th AGM

121 248 BIMB HOLDINGS BERHAD 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.4 Market risk (continued) (b) Takaful (continued) (i) Profit yield risk (continued) TAKAFUL MALAYSIA GROUP 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 AFS financial assets +50bps (9,998) (149,382) FVTPL financial assets +50bps (234) (234) 17 (9,981) (234) (149,616) AFS financial assets -50bps 14, ,575 FVTPL financial assets -50bps (17) (17) * Impact on equity reflects adjustments for tax, when applicable. (ii) Other price risk (17) 14, ,034 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.

122 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.4 Market risk (continued) (b) Takaful (continued) (ii) Other price risk (continued) Equity price risk sensitivity analysis (continued) IMPACT IMPACT ON IMPACT ON ON PROFIT IMPACT ON OPERATING PARTICIPANTS CHANGE IN BEFORE TAX EQUITY* SURPLUS FUND VARIABLES RM 000 RM 000 RM 000 RM Market price +15% 7 10,736 9,487 76,670 Market price -15% (7) (10,736) (9,487) (76,670) 2015 Market price +15% 5 13,484 8, ,218 Market price -15% (5) (13,484) (8,125) (124,218) * 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.

123 250 BIMB HOLDINGS BERHAD 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.5 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. 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.

124 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements 20 th AGM Shareholders Overview 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.5 Liquidity risk (continued) (a) Banking (continued) Management of liquidity and funding risk All liquidity risk exposures are managed by the Bank s Treasury as it has the necessary skills, tools, management and governance to manage such risks. 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. The Bank s MRMD is the independent risk control function and is responsible for the 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 to the Bank s Senior Management. 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 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.

125 252 BIMB HOLDINGS BERHAD 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.5 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 AS AT DEMAND 1 MONTH MONTHS MONTHS MONTHS 1 YEAR TOTAL 31 DECEMBER 2016 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Assets Cash, balances and placements with banks 932,674 3,030, ,000 4,063,417 Securities portfolio 45, , , ,266 8,633,953 10,589,824 Derivatives financial assets 2,210 36,151 55,080 25,401 5, ,572 Financing and advances 1,879,099 1,628, , ,024 34,976,864 39,189,274 Other assets 1,709,610 1,709,610 Total assets 932,674 4,957,948 2,198, ,519 1,297,691 45,326,157 55,676,697 Note 51 Liabilities Deposits from customers 14,240,104 16,904,998 9,948,300 2,890,179 1,546, ,072 45,940,414 Investment accounts of customers 1,516, ,998 1,177, ,268 1,719 3,812,261 Deposits and placements of banks and other financial institutions 30,000 30,000 Derivative financial liabilities 2,448 16,618 66,606 23,334 2, ,089 Subordinated Sukuk Murabahah 4, , ,393 Other liabilities 693, ,074 Total liabilities 15,756,948 17,861,444 11,142,350 3,149,053 1,576,207 1,805,229 51,291,231 Note 51 Equity Equity attributable to equity holders of the Bank 4,385,466 4,385,466 On Balance Sheet Net liquidity gap (14,824,274) (12,903,496) (8,943,642) (2,185,534) (278,516) 39,135,462 Commitments and contingencies 3,614 2,075,726 2,969,757 2,415,705 1,870,769 4,368,988 13,704,559 Net liquidity gap (14,827,888) (14,979,222) (11,913,399) (4,601,239) (2,149,285) 34,766,474 (13,704,559)

126 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.5 Liquidity risk (continued) (a) Banking (continued) Maturity analysis (continued) ON UP TO >1 TO 3 >3 TO 6 >6 TO 12 OVER AS AT DEMAND 1 MONTH MONTHS MONTHS MONTHS 1 YEAR TOTAL 31 DECEMBER 2015 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Assets Cash, balances and placements with banks 792,593 2,189,653 2,982,246 Securities portfolio 536, , , ,331 8,489,560 10,421,041 Derivatives financial assets 2,648 8,618 94, , ,259 Financing and advances 774,128 1,548, , ,472 30,843,310 34,294,690 Other assets 1,946,483 1,946,483 Total assets 795,241 3,509,068 1,802,523 1,074,874 1,289,803 41,292,210 49,763,719 Note 51 Liabilities Deposits from customers 15,350,734 17,705,682 5,322,685 2,846,530 2,251,465 79,254 43,556,350 Investment accounts of customers 461, ,916 38, ,105 Deposits and placements of banks and other financial institutions Derivative financial liabilities 2,746 20,500 74, , ,913 Subordinated Sukuk Murabahah 4, , ,380 Other liabilities 692, ,403 Total liabilities 15,814,792 17,902,098 5,436,494 2,846,945 2,255,845 1,474,977 45,731,151 Note 51 Equity Equity attributable to equity holders of the Bank 4,032,568 4,032,568 On Balance Sheet Net liquidity gap (15,019,551) (14,393,030) (3,633,971) (1,772,071) (966,042) 35,784,665 Commitments and contingencies 2,469,997 1,340,825 2,652,505 1,795,806 1,606,570 2,826,600 12,692,303 Net liquidity gap (17,489,548) (15,733,855) (6,286,476) (3,567,877) (2,572,612) 32,958,065 (12,692,303)

127 254 BIMB HOLDINGS BERHAD 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.5 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 AS AT 1 MONTH MONTHS MONTHS MONTHS 1 YEAR TOTAL 31 DECEMBER 2016 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Financial Liabilities Deposit from customers 31,213,148 10,035,417 2,934,954 1,577, ,389 46,236,198 Investment accounts of customers 2,243,331 1,442, ,963 1,710 3,878,877 Deposit from placements of banks and other financial institutions 30,005 30,005 Derivatives financial liabilities 5,528 17,158 65,069 23, ,089 Forward contract 2,448 16,618 65,069 23, ,469 Islamic Profit Rate Swap 3, ,620 Bills and acceptance payable 46,278 46,278 Subordinated Sukuk Murabahah 19,571 19,632 1,005,519 1,044,722 Other liabilities 643, ,610 34,181,900 11,495,448 3,210,557 1,621,966 1,480,908 51,990,779 Commitments and Contingencies Direct credit substitutes 26,791 61,781 22,339 82,479 94, ,961 Transaction related contingent items 116,380 57,291 61, , , ,187 Short term self liquidating trade related contingencies 190,681 83,402 16,076 10,330 11, , , , , , ,376 1,552,400

128 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements 20 th AGM Shareholders Overview 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.5 Liquidity risk (continued) (a) Banking (continued) Maturity analysis (continued) Contractual maturity of financial liabilities on an undiscounted basis UP TO >1 TO 3 >3 TO 6 >6 TO 12 OVER AS AT 1 MONTH MONTHS MONTHS MONTHS 1 YEAR TOTAL 31 DECEMBER 2015 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Financial Liabilities Deposit from customers 33,039,670 5,995,394 2,632,430 1,965,003 83,882 43,716,379 Investment accounts of customers 637,570 39, ,612 Deposit from placements of banks and other financial institutions Derivatives financial liabilities 5,555 21,007 74, ,913 Forward contract 2,746 20,496 74, ,593 Islamic Profit Rate Swap 2, ,320 Bills and acceptance payable 122, ,577 Subordinated Sukuk Murabahah 8,649 1,084,174 1,092,823 Other liabilities 534, ,092 34,339,464 6,055,443 2,707,366 1,974,067 1,168,056 46,244,396 Commitments and Contingencies Direct credit substitutes 53,897 13,690 30, , , ,013 Transaction related contingent items 59, , , , , ,821 Short term self liquidating trade related contingencies 185, ,685 16,702 12,553 25, , , , , , ,865 1,642,275

129 256 BIMB HOLDINGS BERHAD 45. FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 45.5 Liquidity risk (continued) (b) Takaful The following policies and procedures are in place to mitigate exposure to liquidity risk at Takaful Malaysia level: Wide liquidity risk policy setting out the evaluation and determination of the components of liquidity risk. Compliance with the policy is monitored and reported monthly and exposures and breaches are reported to the Risk Management Committee as soon as practicable. The policy is regularly reviewed for pertinence and for changes in the risk environment. Setting up guidelines on asset allocations, portfolio limit structures and maturity profiles of assets, in order to ensure sufficient funding is available to meet takaful contracts obligations. Setting up contingency funding plans which specify minimum proportions of funds to meet emergency calls as well as specifying events that would trigger such plans. The Takaful s catastrophe excess-of-loss retakaful contract contains clauses permitting the immediate drawdown of funds to meet claims payments should claims events exceed certain amount. Maturity analysis The table below summarises the maturity profile of the financial liabilities of the Takaful Malaysia Group based on remaining undiscounted contractual obligations, including profit payable. For takaful contract liabilities, maturity profiles are determined based on estimated timing of net cash outflows from the recognised takaful liabilities. Investment-linked liabilities are repayable or transferable on demand and are included in the up to a year column. CARRYING UP TO >1 TO 3 >3 TO 5 MORE THAN NO VALUE A YEAR* YEARS YEARS 5 YEARS MATURITY TOTAL NOTE RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM Provision for outstanding claims 22(a)(i) 259, ,104 79,424 25,032 10, ,275 Takaful payables 22(c) 83,411 83,411 83,411 Other payables 333, ,766 2, , , ,281 81,866 25,032 10, , Provision for outstanding claims 22(a)(i) 393, , ,660 71,761 18, ,705 Takaful payables 22(c) 95,647 95,647 95,647 Other payables 193, ,249 2, , , , ,283 71,761 18, ,224 * Expected utilisation or settlement is within 12 months from the reporting date.

130 ANNUAL REPORT Overview 46. TAKAFUL RISK MANAGEMENT (a) Family Takaful Fund The Family Takaful contracts consist of: Leadership (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 Perspectives 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 Term 1,107,821 1,107,821 Endowment 1,088,556 1,088,556 Mortgage 1,873,489 (144,096) 1,729,393 Annuity 319, ,730 Highlights Accountability Financial Statements Shareholders 20 th AGM Total Family actuarial liabilities 22(a)(iii) 4,389,596 (144,096) 4,245, Term 1,100,893 (103,122) 997,771 Endowment 1,155,152 1,155,152 Mortgage 1,647,864 (139,355) 1,508,509 Annuity 318, ,661 Total Family actuarial liabilities 22(a)(iii) 4,222,570 (242,477) 3,980,093

131 258 BIMB HOLDINGS BERHAD 46. TAKAFUL RISK MANAGEMENT (CONTINUED) (a) Family Takaful Fund (continued) 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 ) 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. Sensitivities A summary of key assumptions used for sensitivity analysis is as below: GROUP MORTALITY AND MORBIDITY DISCOUNT SURRENDER RATES RATE RATE 2016 Endowment +10% (i) -1% -20% Mortgage +10% (i) -1% -20% Investment-linked +10% (i) -1% -20% 2015 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

132 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview 46. TAKAFUL RISK MANAGEMENT (CONTINUED) (a) Family Takaful Fund (continued) Sensitivities (continued) 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 IMPACT IMPACT ON CHANGE IN ON GROSS ON NET UNALLOCATED ASSUMPTIONS LIABILITIES LIABILITIES SURPLUS RM 000 RM 000 RM Mortality/morbidity rate 10% 245, ,556 (181,556) Discount rate -1% 202, ,157 (164,157) Surrender rate -20% 69,457 34,312 (34,312) 2015 Mortality/morbidity rate +10% 214, ,994 (144,994) Discount rate -1% 197, ,864 (163,864) Surrender rate -20% 60,193 41,472 (41,472) (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 Fire 192,899 (91,416) 101,483 Motor 219,995 (68,899) 151,096 Marine 10,888 (8,253) 2,635 Miscellaneous 92,869 (32,554) 60,315 Gross contribution 22(a)(ii) 516,651 (201,122) 315,529

133 260 BIMB HOLDINGS BERHAD 46. TAKAFUL RISK MANAGEMENT (CONTINUED) (b) General Takaful Fund (continued) Concentration of General Takaful risk (continued) GROUP GROSS RETAKAFUL NET NOTE RM 000 RM 000 RM Fire 182,318 (90,802) 91,516 Motor 212,541 (66,407) 146,134 Marine 4,909 (2,010) 2,899 Miscellaneous 76,283 (27,777) 48,506 Gross contribution 22(a)(ii) 476,051 (186,996) 289,055 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 ) 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. 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.

134 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview 46. TAKAFUL RISK MANAGEMENT (CONTINUED) (b) General Takaful Fund (continued) Sensitivities (continued) 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. 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 IMPACT IMPACT ON CHANGE IN ON GROSS ON NET UNALLOCATED ASSUMPTIONS LIABILITIES LIABILITIES SURPLUS RM 000 RM 000 RM Fire loss ratio for AY % 15,301 4,826 (4,826) Motor Act loss ratio for AY % 3,424 2,550 (2,550) Average unpaid claims +10% 35,015 14,921 (14,921) Average claim frequency +10% 11,632 6,268 (6,268) Average claim settlement period Increase by 6 months 33,986 22,601 (22,601)

135 262 BIMB HOLDINGS BERHAD 46. TAKAFUL RISK MANAGEMENT (CONTINUED) (b) General Takaful Fund (continued) Sensitivities (continued) GROUP IMPACT IMPACT IMPACT ON CHANGE IN ON GROSS ON NET UNALLOCATED ASSUMPTIONS LIABILITIES LIABILITIES SURPLUS RM 000 RM 000 RM Fire loss ratio for AY % 17,525 6,480 (6,480) Motor Act loss ratio for AY % 3,284 2,289 (2,289) Average unpaid claims +10% 55,310 18,814 (18,814) Average claim frequency +10% 13,893 8,815 (8,815) Average claim settlement period Increase by 6 months 29,011 24,295 (24,295) 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 setting provisions for claims, Takaful Malaysia Group gives consideration to the probability and magnitude of future experience being more adverse than assumed and exercises a degree of caution in setting aside reserves when there is considerable uncertainty. 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 necessary to provide the necessary confidence in adequacy of provision is relatively at its highest. As claims develop and the ultimate cost of claims becomes more certain, the relative level of margin maintained should decrease.

136 ANNUAL REPORT TAKAFUL RISK MANAGEMENT (CONTINUED) (b) General Takaful Fund (continued) Gross General Takaful contract liabilities for 2016 (Group): BEFORE 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 151, , , , , , , ,000 One year later 159, , , , , , ,810 Two years later 202, , , , , ,560 Three years later 186, , , , ,686 Four years later 172, , , ,848 Five years later 159, , ,587 Six years later 156, ,847 Seven years later 157, th AGM Shareholders Financial Statements Highlights Accountability Perspectives Leadership Overview Current estimate of cumulative claims incurred 157, , , , , , , ,000 1,761,653 At end of accident year (71,393) (101,724) (58,326) (51,497) (56,640) (64,682) (64,629) (80,972) One year later (132,370) (174,690) (132,258) (113,394) (130,366) (147,549) (133,480) Two years later (146,646) (205,770) (164,490) (147,379) (172,203) (190,618) Three years later (153,005) (221,959) (179,202) (161,275) (253,500) Four years later (155,143) (230,198) (182,455) (167,656) Five years later (155,984) (234,687) (189,253) Six years later (156,160) (235,794) Seven years later (156,627) Cumulative payments to-date (156,627) (235,794) (189,253) (167,656) (253,500) (190,618) (133,480) (80,972) (1,407,900) Gross General Takaful contract liabilities ,053 3,334 7,192 25,186 69,942 84, , ,753 Additional risk margin 56,737 Effect of movement in exchange rates (3,395) Gross General Takaful contract liabilities per Takaful Malaysia financial position (Note 22(a)(i)) 407,095

137 264 BIMB HOLDINGS BERHAD 46. TAKAFUL RISK MANAGEMENT (CONTINUED) (b) General Takaful Fund (continued) Net General Takaful contract liabilities for 2016 (Group): BEFORE 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 107, , , , , , , ,861 One year later 109, , , , , , ,040 Two years later 115, , , , , ,752 Three years later 107, , , , ,377 Four years later 104, , , ,114 Five years later 100, , ,513 Six years later 99, ,828 Seven years later 95,650 Current estimate of cumulative claims incurred 95, , , , , , , ,861 1,094,135 At end of accident year (44,099) (84,167) (53,570) (47,769) (48,340) (47,835) (47,288) (59,380) One year later (79,458) (143,180) (119,794) (101,619) (94,643) (95,415) (91,130) Two years later (92,171) (158,560) (144,833) (122,291) (111,525) (110,971) Three years later (97,214) (171,555) (152,714) (130,146) (116,007) Four years later (98,469) (175,176) (151,276) (133,275) Five years later (98,930) (188,487) (152,729) Six years later (99,639) (185,837) Seven years later (95,125) Cumulative payments to-date (95,125) (185,837) (152,729) (133,275) (116,007) (110,971) (91,130) (59,380) (944,454) Net General Takaful contract liabilities ,784 4,839 9,370 16,781 36,910 78, ,681 Additional risk margin 20,243 Effect of movement in exchange rates (785) Net General Takaful contract liabilities per Takaful Malaysia financial position (Note 22(a)(i)) 169,139

138 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview 47. 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 institutions 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, financial assets available-for-sale and held-to-maturity 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 incomein-suspense, being the recoverable amount. Deposits from customers and investment accounts of 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.

139 266 BIMB HOLDINGS BERHAD 47. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) 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.

140 ANNUAL REPORT 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. FAIR VALUE OF FINANCIAL FAIR VALUE OF FINANCIAL INSTRUMENTS CARRIED INSTRUMENTS NOT CARRIED TOTAL 2016 AT FAIR VALUE AT FAIR VALUE FAIR CARRYING RM 000 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL LEVEL 1 LEVEL 2 LEVEL 3 TOTAL VALUE AMOUNT Group Financial assets Financial assets held-for-trading 169, , , , ,610 Derivative financial assets 124, , , ,572 Financial assets available-for-sale 669,072 12,920, ,112 13,749,665 5,300 5,300 13,754,965 13,755,389 Financial assets held-to-maturity 93, ,378 57, , , ,086 Financing, advances and others 39,233,082 39,233,082 39,233,082 39,189, th AGM Shareholders Financial Statements Highlights Accountability Perspectives Leadership Overview Total assets 838,433 13,653, ,112 14,651,847 93, ,378 39,296,085 39,872,453 54,524,300 54,477,931 Financial liabilities Derivative financial liabilities 111, , , ,089 Sukuk liabilities 1,917,468 1,917,468 1,917,468 1,881,751 Total liabilities 111, ,089 1,917,468 1,917,468 2,028,557 1,992,840 Company Financial assets Financial assets available-for-sale 135, , , ,406 Total assets 135, , , ,406 Financial liabilities Sukuk liabilities 1,227,494 1,227,494 1,227,494 1,227,494 Total liabilities 1,227,494 1,227,494 1,227,494 1,227,494

141 268 BIMB HOLDINGS BERHAD 47. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) Fair value information (continued) FAIR VALUE OF FINANCIAL FAIR VALUE OF FINANCIAL INSTRUMENTS CARRIED INSTRUMENTS NOT CARRIED TOTAL 2015 AT FAIR VALUE AT FAIR VALUE FAIR CARRYING RM 000 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL LEVEL 1 LEVEL 2 LEVEL 3 TOTAL VALUE AMOUNT Group Financial assets Financial assets held-for-trading 220, , , , ,006 Derivative financial assets 119, , , ,259 Financial assets available-for-sale 879,013 12,759, ,641 13,791,463 5,320 5,320 13,796,783 13,797,205 Financial assets held-to-maturity 61, ,051 59, , , ,164 Financing, advances and others 34,334,821 34,334,821 34,334,821 34,294,690 Total assets 1,099,190 13,328, ,641 14,580,728 61, ,051 34,399,493 34,983,314 49,564,042 49,524,324 Financial liabilities Derivative financial liabilities 101, , , ,913 Sukuk liabilities 1,891,568 1,891,568 1,891,568 1,882,965 Total liabilities 101, ,913 1,891,568 1,891,568 1,993,481 1,984,878 Company Financial assets Financial assets available-for-sale 19,215 19,215 19,215 19,215 Total assets 19,215 19,215 19,215 19,215 Financial liabilities Sukuk liabilities 1,178,585 1,178,585 1,178,585 1,178,585 Total liabilities 1,178,585 1,178,585 1,178,585 1,178,585

142 ANNUAL REPORT Overview 47. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) The following table presents the changes in Level 3 instruments for the financial year ended 31 December 2016 for the Group: RM 000 RM 000 Financial assets available-for-sale At 1 January 152, ,933 Purchases 48,545 69,313 Maturity (48,545) (73,115) Gains 7,471 7,130 Allowance for impairment (4,620) At 31 December 160, ,641 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 Financial assets available-for-sale Institutional trust account VALUATION TECHNIQUE Valued at cost less impairment Discounted cash flows using market profit rate for a similar instrument at the measurement date SIGNIFICANT UNOBSERVABLE INPUTS Leadership Perspectives Highlights Accountability Financial Statements 20 th AGM Shareholders Not applicable Valuation processes applied by the Group for Level 3 fair value INTER-RELATIONSHIP BETWEEN SIGNIFICANT UNOBSERVABLE INPUTS AND FAIR VALUE MEASUREMENT Not applicable 4.58% (2015: 4.58%) The estimated fair value would increase (decrease) if the discount rate were (lower) higher The Group has an established control framework in respect of 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 Investment Officer/Chief Financial Officer/General Manager, Finance. The valuation team regularly reviews significant unobservable inputs and valuation adjustments.

143 270 BIMB HOLDINGS BERHAD 47. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) (a) Financial instruments carried at fair value (continued) Sensitivity analysis for Level 3 IMPACT IMPACT ON IMPACT ON CHANGE IN ON PROFIT IMPACT ON OPERATING PARTICIPANTS VARIABLES BEFORE TAX EQUITY SURPLUS FUND RM 000 RM 000 RM 000 RM Market price +1% (699) (5,819) Market price -1% 839 2, Market price +1% (220) (3,648) Market price -1% 227 3,825 (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. (iii) Subordinated Sukuk Murabahah The fair values of subordinated obligations are estimated by discounting the expected future cash flows using the applicable prevailing profit rates of borrowings with similar risk profiles. 48. CAPITAL COMMITMENTS GROUP RM 000 RM 000 Property and equipment Contracted but not provided for in the financial statements 98,127 75,110 Approved but not contracted for and not provided 24,346 18, ,473 94,048

144 ANNUAL REPORT Overview 49. LEASE COMMITMENTS Leases as lessee Non-cancellable operating lease rentals are payable as follows: Leadership GROUP RM 000 RM 000 Within one year 47,593 45,618 Between one and five years 129, ,232 More than five years 264, , , ,327 Perspectives Leases as lessor The Group leases out its investment properties (see Note 16). The future minimum lease receivables under non-cancellable leases are as follows: GROUP RM 000 RM 000 Highlights Accountability Financial Statements Shareholders 20 th AGM Within one year 706 7,928 Between one and five years 600 3, CAPITAL MANAGEMENT 1,306 11,725 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 either from Bank Negara Malaysia or Bursa Malaysia Berhad.

145 272 BIMB HOLDINGS BERHAD 51. 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 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 Takaful Others Islamic banking and provision of related services. Underwriting of family and general Islamic insurance ( Takaful ). Investment holding, currency trading, ijarah financing, stockbroking and unit trust. CONSOLI- BANKING TAKAFUL OTHERS ELIMINATION DATED 2016 RM 000 RM 000 RM 000 RM 000 RM 000 Business segments Segment result Revenue from external customers 2,838, ,188 12,356 3,528,198 Inter-segment revenue 30,128 15, ,441 (358,032) Total revenue 2,868, , ,797 (358,032) 3,528,198 Net income from operations (before allowances for Impairment on financing and other assets) 1,760, , ,797 (338,196) 2,440,010 Operating overheads (909,129) (468,713) (27,122) 36,416 (1,368,548) Operating results 851, , ,675 (301,780) 1,071,462 Allowances for impairment (91,752) (91,752) Finance cost (39,465) (73,809) 2,765 (110,509) Profit before zakat and taxation 720, , ,866 (299,015) 869,201 Segment assets 55,676,697 7,693,806 5,540,532 (5,765,908) 63,145,127 Segment liabilities 51,291,231 6,974,410 1,502,934 (840,585) 58,927,990 Note 45.4 (a)(i), 45.5(a)

146 ANNUAL REPORT Leadership Perspectives Highlights Accountability 20 th AGM Shareholders Financial Statements Overview 51. OPERATING SEGMENT INFORMATION (CONTINUED) CONSOLI- BANKING TAKAFUL OTHERS ELIMINATION DATED 2015 RM 000 RM 000 RM 000 RM 000 RM 000 Business segments Segment result Revenue from external customers 2,648, ,015 22,263 3,310,607 Inter-segment revenue 1,067 6, ,741 (297,821) Total revenue 2,649, , ,004 (297,821) 3,310,607 Net income from operations (before allowances for Impairment on financing and other assets) 1,617, , ,004 (287,016) 2,289,719 Operating overheads (845,194) (439,491) (29,221) 15,837 (1,298,069) Operating results 772, , ,783 (271,179) 991,650 Allowances for impairment (73,819) (73,819) Finance cost (13,029) (70,366) (83,395) Profit before zakat and taxation 685, , ,417 (271,179) 834,436 Segment assets 49,763,719 7,474,108 5,459,902 (5,333,901) 57,363,828 Segment liabilities 45,731,151 6,785,048 1,592,406 (440,503) 53,668,102 Note 45.4 (a)(i), 45.5(a)

147 274 BIMB HOLDINGS BERHAD 52. 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. The off-balance sheet and counterparties credit risk for Bank Islam is as follows: POSITIVE FAIR VALUE OF CREDIT RISK PRINCIPAL DERIVATIVE EQUIVALENT WEIGHTED 31 DECEMBER 2016 AMOUNT CONTRACTS AMOUNT ASSET NATURE OF ITEM RM 000 RM 000 RM 000 RM 000 Credit related exposures Direct credit substitutes 294, , ,848 Assets sold with recourse Transaction related contingent items 952, , ,165 Short term self-liquidating trade related contingencies 341,524 68,305 67,309 Other commitments, such as formal standby facilities and credit lines, with an original maturity of: not exceeding one year 591, ,206 88,979 exceeding one year 1,792, , ,873 Unutilised credit card lines 1,140, , ,563 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 4,639,610 9,750,962 2,081,097 1,780,737 Derivative Financial Instruments Foreign exchange related contracts less than one year 3,117, , ,823 79,734 Profit rate related contracts less than one year 200,000 1, one year to less than five years 400,000 2,729 9,497 1,899 five years and above 236,027 3,001 18,971 11,606 3,953, , ,491 93,279 Total 13,704, ,572 2,273,588 1,874,016

148 ANNUAL REPORT Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview 52. COMMITMENTS AND CONTINGENCIES (CONTINUED) The off-balance sheet and counterparties credit risk for Bank Islam is as follows: (continued) POSITIVE FAIR VALUE OF CREDIT RISK PRINCIPAL DERIVATIVE EQUIVALENT WEIGHTED 31 DECEMBER 2015 AMOUNT CONTRACTS AMOUNT ASSET NATURE OF ITEM RM 000 RM 000 RM 000 RM 000 Credit related exposures Direct credit substitutes 343, , ,001 Assets sold with recourse Transaction related contingent items 956, , ,964 Short term self-liquidating trade related contingencies 374,892 74,978 72,446 Other commitments, such as formal standby facilities and credit lines, with an original maturity of: not exceeding one year 2, exceeding one year 837, , ,700 Unutilised credit card lines 1,169, , ,494 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 5,822,088 9,506,449 1,550,142 1,298,010 Derivative Financial Instruments Foreign exchange related contracts less than one year 2,323, , ,771 67,272 Profit rate related contracts less than one year one year to less than five years 600,000 9,200 20,504 4,101 five years and above 262,568 3,657 24,048 13,688 3,185, , ,323 85,061 Total 12,692, ,259 1,734,465 1,383, SUBSEQUENT EVENTS DURING THE FINANCIAL YEAR (i) On 02 December 2016, the Board of Directors of BIMB Holdings Berhad ( BHB ) ( Board ) had declared an interim single tier dividend of 13.0% per ordinary share of RM1.00 each in BHB ( BHB Share ) for the financial year ended 31 December 2016 ( Interim Dividend ) and paid on 27 January From the total dividend amount declared of RM206.5 million, approximately 10.9% or RM22.5 million was distributed as cash dividend whilst the remaining 89.1% amounting to RM184.0 million was reinvested to subscribe for 49,061,000 new ordinary shares of RM1.00 at RM3.75 each via the Dividend Reinvestment Plan.

149 276 BIMB HOLDINGS BERHAD 54. 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 2016, 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 RM 000 RM 000 RM 000 RM 000 Total retained earnings of the Company and its subsidiaries realised 1,020, ,636 51,249 38,407 unrealised 82,223 74, ,102, ,250 51,259 38,417 Less: Consolidation adjustments (795,643) (846,468) Total retained earnings 307,352 86,782 51,259 38,417 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.

150 ANNUAL REPORT STATEMENT BY DIRECTORS PURSUANT TO SECTION 251(2) OF THE COMPANIES ACT, 2016 Overview In the opinion of the Directors, the financial statements set out on pages 137 to 275 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 2016 and their financial performance and cash flows for the financial year then ended. In the opinion of the Directors, the information set out in Note 54 on page 276 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: Leadership Perspectives Highlights Accountability 20 th AGM Shareholders Financial Statements Tan Sri Samsudin bin Osman Datuk Zaiton binti Mohd Hassan Kuala Lumpur, Date: 23 March 2017

151 278 BIMB HOLDINGS BERHAD STATUTORY DECLARATION PURSUANT TO SECTION 251(1)(b) OF THE COMPANIES ACT, 2016 I, Malkiat Malkit Singh Maan a/l Delbara Singh, 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 137 to 276 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, Subscribed and solemnly declared by the above named Malkiat Malkit Singh Maan a/l Delbara Singh, in Kuala Lumpur on 23 March Malkiat Malkit Singh Maan a/l Delbara Singh Before me:

152 ANNUAL REPORT INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF BIMB HOLDINGS BERHAD (Company No X) (Incorporated in Malaysia) REPORT ON THE AUDIT OF THE Opinion We have audited the financial statements of BIMB Holdings Berhad which comprise the statements of financial position as at 31 December 2016 of the Group and Company, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows of the Group and Company for the year then ended, and notes to the financial statements, as set out on pages 137 to 275. 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 2016 and of their financial performance and their 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. 20 th AGM Overview Leadership Perspectives Highlights Accountability Financial Statements Shareholders Basis for Opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our auditors report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and Other Ethical Responsibilities We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By-Laws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

153 280 BIMB HOLDINGS BERHAD INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF BIMB HOLDINGS BERHAD (Company No X) (Incorporated in Malaysia) The key audit matter identified are: How the matter was addressed in our audit Allowance for impaired Financing and advances and others The risk is that the carrying value of Financing and advances to customers held at amortised costs may be misstated. Impairment is a subjective area due to the level of judgement and assumptions applied by management in determining both collective impairment and individual impairment allowances. Refer to the significant accounting policy in Note 2.5 and 2.11, the disclosure of financing and advances in Note 9 and the disclosure of credit risk in Note The Group and Company s impairment assessment of financing and advances are collective impairment allowances and individual impairment allowances. Our procedures in addressing this key audit matters are as follows: Collective Impairment Allowances Our procedures to assess management s provision for collective impairment allowances included, amongst others: assessed the design and operating effectiveness of controls implemented in identifying potentially impaired financing, classifying financing and adequacy of impairment allowances; checked the impairment allowance computation for consistency of methodology and compliance with MFRS 139, Financial Instruments: Recognition and Measurement and Bank Negara Malaysia Guidelines; reviewed management s reassessments of the appropriateness of key assumptions used in the collective impairment allowance methodology. Individual Impairment Allowances Our procedures to assess management s provision for individual assessment allowances, in response to the risks specific to the business units included, amongst others: Consumer Banking We obtained an understanding of management s basis for determining whether a financing and advances is impaired and assessed the reasonableness of the impairment allowance using our understanding of the Group and Bank s financing portfolios and our broader industry knowledge. The impairment is calculated using a methodology. We therefore tested the completeness and accuracy of data from underlying systems that is used in the methodology. We obtained an understanding and critically assessed the impairment methodology used. The impairment is computed based on historical data. We discussed with senior management and challenged the appropriateness of the assumptions used to determine whether it was representative of current circumstances and the recent losses incurred in the portfolio.

154 ANNUAL REPORT INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF BIMB HOLDINGS BERHAD (Company No X) (Incorporated in Malaysia) Overview The key audit matter identified are: Allowance for impaired Financing and advances and others (continued) How the matter was addressed in our audit Corporate and Commercial Banking We obtained an understanding and tested the process for identifying impairment indicators within the financing portfolio and consequently, the grading of financing and advances. All customers in relation to financing and advances of the Group and the Bank are graded. Individual customers will be downgraded upon identification of events leading to impairment. We assessed the Group and the Bank s credit review process on the credit worthiness of selected customers. We selected a sample of financing customers, taking into consideration of industry trends/macroeconomic factors, e.g. commodity crisis, lackluster property market, etc. In particular, we focused on the plantation, real estate, and oil and gas portfolios which are higher risk due to the current economic conditions. For a sample of individually impaired customers we obtained an understanding of the latest developments and the basis of measuring the impairment allowances and considered whether key judgements were appropriate given the customer s circumstances. In addition, we also tested the key inputs to the impairment computation including the expected future cash flows, discount rates and valuation of collateral held. Additionally, we selected samples of performing financings and assessed that the borrowers did not exhibit any definable weaknesses that may jeopardise the repayment abilities. Leadership Perspectives Highlights Accountability Valuation of financial instruments Sukuk The valuation of the Group and Bank s financial instruments is a key area of focus in our audit due to the complexity involved in valuing the instruments and the application of valuation techniques which often involve the exercise of judgement and the use of assumptions and estimates. Refer to the significant accounting policy in Note 2.5, the disclosure of type of debt securities in Note 7 and the disclosure of fair value hierarchy in Note 47. Our audit procedures in addressing this key audit matter included, amongst others: tested the Group s control over the valuation and methodology validation process. Our testing of the design and operation of the controls provided a basis for us to continue with the planned nature, timing and extent of our audit procedures. tested a selection of pricing inputs used, that they were externally sourced and were correctly input into the pricing methodology. performed test of details by comparing the value of debt securities determined by management with an independent external source. ascertained the appropriateness of carrying value of investments and determine if management s impairment assessment is appropriate. Financial Statements Shareholders 20 th AGM

155 282 BIMB HOLDINGS BERHAD INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF BIMB HOLDINGS BERHAD (Company No X) (Incorporated in Malaysia) The key audit matter identified are: How the matter was addressed in our audit Valuation of takaful contract liabilities The takaful contract liabilities comprise of provision for outstanding claims, provision for unearned contributions and participants funds for both the family and general businesses. The main risks associated with the takaful contract liabilities are in respect of actuarial liabilities for the family takaful business and the provision for outstanding claims for both family and general takaful businesses. Actuarial Liabilities Family takaful contract liabilities The actuarial liabilities made up 82% of participants funds within the family takaful contract liabilities. This is an area requiring significant judgment over the estimation of future expected benefits payable to participants of long-term certificates. Economic and operating assumptions such as discount, mortality, and morbidity and surrender rates are the key inputs used in the estimation of these actuarial liabilities. In addressing this key audit matter, we used our own actuarial specialists to assist us in performing procedures in this area, which included amongst others: assessed the appropriateness of the Group s methodology for calculating the actuarial liabilities and outstanding claims against the requirements of both the Risk- Based Capital Framework for Takaful Operators (RBC-T Framework) and the Guidelines on Valuation Basis for Liabilities of Family and General Takaful Businesses (Valuation Guidelines) as issued by Bank Negara Malaysia (BNM). assessed and challenged the appropriateness of discount, mortality, morbidity and surrender rate assumptions used in the calculation of actuarial liabilities by reference to the Group and industry historical data and the requirements of RBC-T Framework and Valuation Guidelines as issued by BNM. assessed and challenged the appropriateness of past claims trends assumptions used in the projection of unreported claims as at the balance sheet date by reference to the Group and industry historical data. tested the underlying data used in the Group estimation process to source documentation. Provision for outstanding claims Family and general takaful contract liabilities The provision for outstanding claims comprises the estimated cost of settling all claims incurred but unpaid at the year end, whether reported or not. The estimation of outstanding claims with respect to unreported claims requires significant judgment as it involves the projection of unreported claims at the year end. Judgment is required to assess the extent to which past claims trends may not represent the current situation and its impact on the assumptions over claims projection. Refer to significant accounting policy in Note 2.14 and Note 2.15, the disclosure of takaful contract liabilities in Note 22 and the disclosure of liquidity risk in Note 45.5.

156 ANNUAL REPORT INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF BIMB HOLDINGS BERHAD (Company No X) (Incorporated in Malaysia) Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM Overview Other than the Financial Statements and Auditors Report Thereon The Directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements of the Group and of the Company and our auditor s report thereon. Our opinion on the financial statements of the Group and of the Company does not cover the annual report and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the annual report and, in doing so, consider whether the annual report is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of the annual report, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the ability of the Group and of the Company to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Auditors Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit 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 internal control of the Group and of the Company.

157 284 BIMB HOLDINGS BERHAD INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF BIMB HOLDINGS BERHAD (Company No X) (Incorporated in Malaysia) Auditors Responsibilities for the Audit of the Financial Statements (continued) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. Conclude on the appropriateness of Director s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Group or of the Company to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Group and Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that gives a true and fair view. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide Directors with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current year and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditors report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements In accordance with the requirements of the Companies Act, 2016 in Malaysia, we report that the subsidiaries that we have not acted as auditors are disclosed in Note 14 to the financial statements.

158 ANNUAL REPORT INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF BIMB HOLDINGS BERHAD (Company No X) (Incorporated in Malaysia) Leadership Perspectives Highlights Accountability 20 th AGM Overview Shareholders Financial Statements Other Reporting Responsibilities The supplementary information set out in Note 54 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on 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, as issued by the Malaysian Institute of Accountants ( MIA Guidance ) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. Other Matter This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act, 2016 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 PLT (LLP LCA & AF 0759) Chartered Accountants 23 March 2017 Kuala Lumpur Ow Peng Li Approval Number: 2666/09/17(J) Chartered Accountant

159 286 BIMB HOLDINGS BERHAD PROPERTIES OWNED BY BHB GROUP PROPERTY LISTING FOR BANK ISLAM MALAYSIA BERHAD NO. LOCATION DESCRIPTION OF EXISTING USE TENURE AGE OF BUILDING (YEARS) LAND, BUILT-UP AREA (SQUARE FEET) NET BOOK VALUE AS AT (RM) DATE OF ACQUISITION 1 HS (D) PT 45 Lot No. 37, Seksyen 87 Jalan Tun Razak Kuala Lumpur Building site Leasehold for 99 years expiring on NA 6,597 12,503, No. PT 1708 & 1709 HS (M) 2660 & 2661 Lot No. 1 & 2, Batu 5½ Jalan Cheras Kuala Lumpur Vacant land Leasehold for 99 years expiring on NA 4,443 61, Lot No. PT 805-HSD 1323 Mukim Bagan Nakhoda Omar Sabak Bernam, Selangor Vacant land Leasehold for 99 years expiring on NA 405, ,

160 ANNUAL REPORT PROPERTIES OWNED BY BHB GROUP Overview PROPERTY LISTING FOR SYARIKAT TAKAFUL MALAYSIA BERHAD NO. LOCATION DESCRIPTION OF EXISTING USE TENURE AGE OF BUILDING (YEARS) LAND, BUILT-UP AREA (SQUARE FEET) NET BOOK VALUE AS AT (RM) DATE OF ACQUISITION Leadership 1 No. 325A & 325B, Blok 41 Kompleks Perniagaan Fajar Tawau Sabah 2 No. 64 & 65 Kompleks Jitra Jalan Sungai Korok Jitra Kedah Darul Aman 3 No. 23 Medan Istana 3 Bandar Ipoh Raya Ipoh Perak Darul Ridzuan 4 Lot 54 & 55 Bandar Wilayah Jasa Jalan Bunga Raya Lahad Datu Sabah Three units of 4 storey Commercial Complex/Office Two units of 2 storey Shophouse/Office One unit of 3 storey Shophouse/Office Two units of 3 storey Shophouse/Office 999 years town lease expiring on ,025/ 6,037 Freehold 30 3,095/ 6, years lease expiring on years town lease expiring on ,539/ 4, ,400/ 7,200 2,219, , , ,181, Perspectives Highlights Accountability 5 No. 15 & 17 Jalan Kelibang Langkawi Mall Kuah, Langkawi Kedah Darul Aman 6 No. 26 & 28 Jalan Perda Barat Bukit Mertajam Seberang Prai Penang 7 No. 433 & 434 Jalan Kulas Kuching Sarawak Two units of 2 storey Shophouse/Office Two units of 3 storey Shophouse/Office Two units of 4 storey Shophouse/Office Freehold 23 1,440/ 7,720 Freehold 18 3,293/ 8,840 Freehold 21 3,589/ 12, , , ,555, Financial Statements Shareholders 8 No. 20, Fasa 1A Jalan Haji Manan Kluang Johor Darul Takzim One unit of 4 storey Shophouse/Office 99 years lease expiring on ,658/ 9,930 1,673, th AGM

161 288 BIMB HOLDINGS BERHAD PROPERTIES OWNED BY BHB GROUP PROPERTY LISTING FOR SYARIKAT TAKAFUL MALAYSIA BERHAD (CONTINUED) NO. LOCATION DESCRIPTION OF EXISTING USE TENURE AGE OF BUILDING (YEARS) LAND, BUILT-UP AREA (SQUARE FEET) NET BOOK VALUE AS AT (RM) DATE OF ACQUISITION 9 Lot 13 & 14 Lazenda Commercial Centre Jalan Okk Abdullah Wilayah Persekutuan Labuan Two units of 3 storey Office building 999 years lease expiring on ,504/ 7,200 1,536, No. 1 & 2 Jalan Kelicap Taman Pekan Baru Parit Buntar Perak Darul Ridzuan Two units of 2 storey Shophouse/Office 99 years lease expiring on ,956/ 7, , No. 46 & 47 Jalan Rahmat Batu Pahat Johor Darul Takzim Two units of 4 storey Shophouse/Office Freehold 27 3,220/ 12,092 1,360, No. 180 & 181 Jalan Tuan Hitam Jerteh Terengganu Darul Iman Two units of 4 Storey Shophouse/Office Freehold 26 3,200/ 12,250 1,419, Lot 82, 84 & 86 Jalan Rugbi 13/30 Seksyen Shah Alam Selangor Darul Ehsan Three units of 2 storey Shophouse/Office 99 years lease expiring on ,339/ 11,309 2,148, No. 229, Jalan Shahab 2 Shahab Perdana Jalan Sultanah Sambungan Alor Setar Kedah Darul Aman One unit of 2½ storey Shophouse/Office Freehold 20 1,400/ 3, , Lot No Jalan Dato Ulu Muar Kuala Pilah Negeri Sembilan Darul Khusus One unit of 3 storey Shophouse/Office 99 years lease expiring on ,001/ 3, , No. 45 Jalan Teluk Sisek Kuantan Pahang Darul Makmur One unit of 4 storey Shophouse/Office 99 years lease expiring on ,200/ 8,019 1,791,

162 ANNUAL REPORT PROPERTIES OWNED BY BHB GROUP Overview PROPERTY LISTING FOR SYARIKAT TAKAFUL MALAYSIA BERHAD (CONTINUED) NO. LOCATION DESCRIPTION OF EXISTING USE TENURE AGE OF BUILDING (YEARS) LAND, BUILT-UP AREA (SQUARE FEET) NET BOOK VALUE AS AT (RM) DATE OF ACQUISITION Leadership 17 No. 27 Pusat Komersil Temerloh Temerloh Pahang Darul Makmur 18 No. 2 & 4 Jalan 6C/ Bandar Baru Bangi Selangor Darul Ehsan 19 Lot 14 Seremban City Centre Jalan Tuanku Munawir Seremban Negeri Sembilan Darul Khusus 20 No. 29, Jalan Delima Pusat Perdagangan Pontian Pontian Johor Darul Takzim 21 Lot 1129 & 1130 Bangunan Darul Takaful Jalan Sultan Ismail Kuala Terengganu Terengganu Darul Iman One unit of 2½ storey Shophouse/Office Two units of 2 storey Shophouse/Office One unit of 6 storey Shophouse/Office One unit of 3 storey Shophouse/Office One unit of 12 storey Office building 99 years lease expiring on years lease expiring on ,398/ 5, ,383/ 8,032 Freehold 20 1,500/ 14, years lease expiring on years sub lease expiring on ,899/ 10, ,600/ 23, , ,380, ,984, ,256, ,586, Perspectives Highlights Accountability 22 No. 616 & 617 Jalan Besar Tampin Negeri Sembilan Darul Khusus Two units of 2 storey Office building 99 years lease expiring on ,498/ 8, , Financial Statements 23 No. 6 Jalan 6C/ Bandar Baru Bangi Selangor Darul Ehsan 24 Suite 3B/G Blok 3B, Plaza Sentral Jalan Stesen Sentral Kuala Lumpur One unit of 2 storey Shophouse/Office One floor of 22 storey Office building 99 years lease expiring on ,905/ 3, , Freehold 15 6,409* 6,204, Shareholders 25 No. 26 & 27 Jalan Tanjung Pasar Baru Machang Kelantan Darul Naim Two units of 2 storey Office building 66 years lease expiring on ,600/ 4, , th AGM * Built-up area

163 290 BIMB HOLDINGS BERHAD PROPERTIES OWNED BY BHB GROUP PROPERTY LISTING FOR SYARIKAT TAKAFUL MALAYSIA BERHAD (CONTINUED) NO. LOCATION DESCRIPTION OF EXISTING USE TENURE AGE OF BUILDING (YEARS) LAND, BUILT-UP AREA (SQUARE FEET) NET BOOK VALUE AS AT (RM) DATE OF ACQUISITION 26 No. 330 & 331 Jalan Sultan Yahya Petra Kota Bharu Kelantan Darul Naim Two units of 4½ storey Office building 99 years lease expiring on ,200/ 15,200 1,526, Menara Takaful Malaysia No. 4, Jalan Sultan Sulaiman Kuala Lumpur Two units of Office building Main Block 26 storey Annexe Block 29 storey Freehold Main Block 43 Annexe Block 36 90,427/ 393, ,453, No Taman Samudera Sri Manjung Perak Darul Ridzuan One unit of 2 storey Shophouse/Office 99 years lease expiring on ,800/ 5, , No. 76A & 76 Pusat Perniagaan Jalan Tupai Taiping Perak Darul Ridzuan Two units of 3 storey Office building Freehold 13 3,134/ 18,304 1,454, No. 10 & 11 Jalan Sultan Yahya Petra Kota Bharu Kelantan Darul Naim Two units of 3 storey Office building Freehold 14 3,852/ 9,120 1,720, No Jalan Teluk Wanjah Alor Setar Kedah Darul Aman One unit of 4 storey Office building Freehold 14 8,716/ 18,440 3,366, No. 8 & 10 Jalan Padi Emas 5/2 Bandar Baru UDA Johor Bahru Johor Darul Takzim Two units of 3 storey Office building 99 years lease expiring on ,080/ 8,024 1,267, No. 4 Kompleks Seri Temin Jalan Ibrahim Sungai Petani Kedah Darul Aman One unit of 4 storey Office building 99 years lease expiring on ,400/ 5, ,

164 ANNUAL REPORT PROPERTIES OWNED BY BHB GROUP Leadership Perspectives Highlights Accountability 20 th AGM Shareholders Financial Statements Overview PROPERTY LISTING FOR SYARIKAT TAKAFUL MALAYSIA BERHAD (CONTINUED) NO. LOCATION DESCRIPTION OF EXISTING USE TENURE AGE OF BUILDING (YEARS) LAND, BUILT-UP AREA (SQUARE FEET) NET BOOK VALUE AS AT (RM) DATE OF ACQUISITION 34 Lot 1340 Miri Waterfront Commercial Centre Miri Sarawak One unit of 4 storey Office building 60 years lease expiring on ,400/ 5, , No. 6 Jalan Padi Emas 5/2 Bandar Baru UDA Johor Bahru Johor Darul Takzim 36 No. 148 Kompleks Munshi Abdullah Melaka 37 No & Pusat Perniagaan Inderapura Jalan Tras Raub Pahang Darul Makmur One unit of 3 storey Office building One unit of 4½ storey Office building Two units of 3 storey Office building 99 years lease expiring on years lease expiring on years lease expiring on ,540/ 4, ,470/ 6, ,218/ 9, , , ,203, No. 435 Jalan Kulas Kuching Sarawak One unit of 4 storey Shophouse/Office Freehold 21 1,214/ 4,262 1,229,

165 292 BIMB HOLDINGS BERHAD PROPERTIES OWNED BY BHB GROUP PROPERTY LISTING FOR SYARIKAT AL-IJARAH SENDIRIAN BERHAD NO. LOCATION DESCRIPTION OF EXISTING USE TENURE AGE OF BUILDING (YEARS) LAND, BUILT-UP AREA (SQUARE FEET) NET BOOK VALUE AS AT (RM) DATE OF ACQUISITION 1 No. PT Lot & No. HS (D) 815 & 816 No. 71 & 73 Jalan Taman Selat Off Jalan Bagan Luar Butterworth Pulau Pinang 4 storey Shophouse/Office for Bank Islam Operation Freehold 31 Lot Lot (square meter) 786,

166 ANNUAL REPORT SHARE & WARRANT HOLDINGS STATISTICS AS AT 31 MARCH 2017 Overview ANALYSIS OF SHAREHOLDINGS NO. OF % OF NO. OF % OF ISSUED SIZE OF SHAREHOLDINGS SHAREHOLDERS SHAREHOLDERS SHARES SHARE CAPITAL Less than , ,000 1, , ,001 10,000 2, ,574, , , ,678, ,001 to 81,887,049 (*) ,514, ,887,050 and above (**) ,329,164, TOTAL 5, ,637,741, Leadership Perspectives Notes: * Less than 5% of issued holdings ** 5% and above of issued holdings DIRECTORS SHAREHOLDINGS NO. OF SHARES DIRECT NO. NAME OF DIRECTORS INTEREST % 1 Tan Sri Samsudin bin Osman 2 Tan Sri Ismail bin Adam 3 Mohd Zin bin Idris 4 Datuk Zaiton binti Mohd Hassan 5 Datuk Rozaida binti Omar 6 Rifina binti Md Ariff 7 Mohd Tarmidzi bin Ahmad Nordin 8 Noraini binti Che Dan Highlights Accountability Financial Statements Shareholders 20 th AGM SUBSTANTIAL SHAREHOLDERS NO. OF NO. NAME OF SUBSTANTIAL SHAREHOLDERS SHARES % 1 Lembaga Tabung Haji 870,039, Employees Provident Fund Board 198,757, Permodalan Nasional Berhad 93,767, Kumpulan Wang Persaraan (Diperbadankan) 89,426, AmanahRaya Trustees Berhad 89,269, Amanah Saham Bumiputera

167 294 BIMB HOLDINGS BERHAD SHARE & WARRANT HOLDINGS STATISTICS AS AT 31 MARCH 2017 LIST OF TOP 30 SHAREHOLDERS AS AT 31 MARCH 2017 NO. NAME SHAREHOLDINGS % 1 Lembaga Tabung Haji 870,039, Citigroup Nominees (Tempatan) Sdn Bhd 192,376, Employees Provident Fund Board 3 Permodalan Nasional Berhad 92,228, Amanahraya Trustees Berhad 89,269, Amanah Saham Bumiputera 5 Kumpulan Wang Persaraan (Diperbadankan) 85,250, Amsec Nominees (Tempatan) Sdn Bhd 21,608, Mtrustee Berhad for CIMB Islamic Dali Equity Growth Fund (UT-CIMB-DALI) 7 Amanahraya Trustees Berhad 12,223, Amanah Saham Malaysia 8 Majlis Ugama Islam Sabah 10,318, Majlis Ugama Islam Sabah 9,178, Amin Baitulmal Johor 8,316, Amanahraya Trustees Berhad 8,104, as 1Malaysia 12 Valuecap Sdn Bhd 7,788, HSBC Nominees (Tempatan) Sdn Bhd 7,469, HSBC (M) Trustee Bhd for CIMB Islamic Dali Equity Theme Fund 14 Amanahraya Trustees Berhad 6,231, Amanah Saham Didik 15 Amanahraya Trustees Berhad 6,119, Amanah Saham Bumiputera 2 16 Affin Hwang Nominees (Tempatan) Sdn Bhd 5,743, Affin Hwang Asset Management Berhad for Majlis Ugama Islam dan Adat Resam Melayu Pahang 17 Majlis Agama Islam Negeri Pulau Pinang 5,544, Majlis Amanah Rakyat 5,544, Amanahraya Trustees Berhad 4,987, Public Islamic Dividend Fund 20 Cartaban Nominees (Tempatan) Sdn Bhd 4,981, PAMB for Prulink Dana Unggul

168 ANNUAL REPORT SHARE & WARRANT HOLDINGS STATISTICS AS AT 31 MARCH 2017 Leadership Perspectives Highlights Accountability 20 th AGM Shareholders Financial Statements Overview LIST OF TOP 30 SHAREHOLDERS AS AT 31 MARCH 2016 (CONTINUED) NO. NAME SHAREHOLDINGS % 21 Cartaban Nominees (Tempatan) Sdn Bhd 4,636, PBTB for Takafulink Dana Ekuiti 22 Majlis Agama Islam dan Adat Istiadat Melayu Kelantan 4,532, Maybank Nominees (Tempatan) Sdn Bhd 4,511, National Trust Fund (IFM CIMBPRIN) 24 Citigroup Nominees (Tempatan) Sdn Bhd 4,470, Universal Trustee (Malaysia) Berhad for CIMB Islamic Dali Equity Fund 25 Citigroup Nominees (Tempatan) Sdn Bhd 4,176, Kumpulan Wang Persaraan (Diperbadankan) (I-VCAP) 26 Majlis Agama Islam Selangor 4,073, Citigroup Nominees (Asing) Sdn Bhd 3,869, CBNY for Emerging Market Core Equity Portfolio DFA Investment Dimensions Group Inc 28 Tokio Marine Life Insurance Malaysia Bhd 3,274, as Beneficial Owner (PF) 29 Harakah Islamiah (Hikmah) 3,131, Maybank Nominees (Tempatan) Sdn Bhd 3,064, Etiqa Takaful Berhad (Family PRF EQ) TOTAL 1,493,064,

169 296 BIMB HOLDINGS BERHAD SHARE & WARRANT HOLDINGS STATISTICS AS AT 31 MARCH 2017 ANALYSIS OF WARRANT HOLDINGS NO. OF % OF WARRANT WARRANT NO. OF % OF ISSUED SIZE OF WARRANT HOLDINGS HOLDINGS HOLDINGS SHARES SHARE CAPITAL Less than , , , ,001 10,000 1, ,924, , ,000 1, ,800, ,001 to 21,335,752 (*) ,681, ,335,753 and above (**) ,943, TOTAL 3, ,715, Notes: * Less than 5% of issued holdings ** 5% and above of issued holdings DIRECTORS WARRANT HOLDINGS NO. OF WARRANT HOLDINGS DIRECT NO. NAME OF DIRECTORS INTEREST % 1 Tan Sri Samsudin bin Osman 2 Tan Sri Ismail bin Adam 3 Mohd Zin bin Idris 4 Datuk Zaiton binti Mohd Hassan 5 Datuk Rozaida binti Omar 6 Rifina binti Md Ariff 7 Mohd Tarmidzi bin Ahmad Nordin 8 Noraini binti Che Dan SUBSTANTIAL WARRANT HOLDERS NO. OF WARRANT NO. NAME OF SUBSTANTIAL WARRANT HOLDERS HOLDINGS % 1 Lembaga Tabung Haji 143,310, Public Nominees (Tempatan) Sdn Bhd 49,393, Pledged Securities Account For Kong Goon Khing (E-BTR) 3 AmanahRaya Trustees Berhad 30,000, Amanah Saham Bumiputera

170 ANNUAL REPORT SHARE & WARRANT HOLDINGS STATISTICS AS AT 31 MARCH 2017 Overview LIST OF TOP 30 WARRANT HOLDERS AS AT 31 MARCH 2017 NO. NAME WARRANT HOLDINGS % 1 Lembaga Tabung Haji 138,550, Leadership 2 Public Nominees (Tempatan) Sdn Bhd 49,393, Pledged Securities Account for Kong Goon Khing (E-BTR) 3 Amanahraya Trustees Berhad 30,000, Amanah Saham Bumiputera 4 Amsec Nominees (Tempatan) Sdn Bhd 8,299, Mtrustee Berhad for CIMB Islamic Dali Equity Growth Fund (UT-CIMB-DALI) Perspectives 5 Siao Choon Ping 5,169, BIMB Securities Sdn Bhd 4,760, CLR for Lembaga Tabung Haji 7 HSBC Nominees (Asing) Sdn Bhd 4,640, Exempt An for Credit Suisse Securities (USA) LLC (PB CLIENT) 8 Bailey Plaster Sdn Bhd 4,505, Maybank Securities Nominees (Asing) Sdn Bhd 3,000, Maybank Kim Eng Securities Pte Ltd for Lim Chuan Seng 10 RHB Capital Nominees (Tempatan) Sdn Bhd 2,400, Pledged Securities Account for Su Ming Yaw 11 Kenanga Nominees (Tempatan) Sdn Bhd 2,296, Pledged Securities Account for Lai Eng Hui (ET) Highlights Accountability 12 HSBC Nominees (Asing) Sdn Bhd 2,107, Morgan Stanley & Co. International Plc (FIRM A/C) 13 Public Nominees (Tempatan) Sdn Bhd 2,072, Pledged Securities Account for Kong Goon Siong (E-BTR) 14 CIMSEC Nominees (Tempatan) Sdn Bhd 2,020, CIMB Bank for Chong Yoke Pin (MY2430) 15 Lim Gaik Lim Chiew Ah 1,968, Teoh Cheng Chuan 1,800, Pembangunan Sumber Manusia Berhad 1,762, Maybank Nominees (Tempatan) Sdn Bhd 1,741, Pledged Securities Account for Mohamed Adzman bin Mohamed Sura Financial Statements Shareholders 19 Lim Kong Beng 1,736, HSBC Nominees (Tempatan) Sdn Bhd 1,529, HSBC (M) Trustee Bhd for CIMB Islamic Dali Equity Theme Fund 20 th AGM

171 298 BIMB HOLDINGS BERHAD SHARE & WARRANT HOLDINGS STATISTICS AS AT 31 MARCH 2017 LIST OF TOP 30 WARRANT HOLDERS AS AT 31 MARCH 2017 (CONTINUED) NO. NAME WARRANT HOLDINGS % 21 Hing Chin Hool 1,500, Er Soon Puay 1,482, Su Ming Keat 1,393, CIMSEC Nominees (Tempatan) Sdn Bhd 1,240, CIMB Bank for Lee Teck Hwa (MY2450) 25 Harakah Islamiah (HIKMAH) 1,222, Yap Piew Thong 1,045, Ng Choon Chuy 1,030, Lim Poh Hock 1,026, Tan Ah Seng 1,000, Kenanga Nominees (Tempatan )Sdn Bhd 919, Pledged Securities Account for Ling Thin King (ET) TOTAL 281,611,

172 ANNUAL REPORT REGIONAL GROUP NETWORK Overview BIMB HOLDINGS BERHAD 31 st Floor, Menara Bank Islam No. 22, Jalan Perak Kuala Lumpur Tel : Fax : Website : BANK ISLAM MALAYSIA BERHAD Level 32, Menara Bank Islam No. 22, Jalan Perak Kuala Lumpur Tel : Fax : Website : BIMB INVESTMENT MANAGEMENT BERHAD Level 19, Menara Bank Islam No. 22, Jalan Perak Kuala Lumpur Tel : /2924 Toll free : Fax : BANK ISLAM TRUST COMPANY (LABUAN) LTD Level 5 (1), Main Office Tower Jalan Merdeka, Financial Park Complex Wilayah Persekutuan F.T Labuan Tel : Fax : FARIHAN CORPORATION SDN BHD Level 19, Menara Bank Islam No. 22, Jalan Perak Kuala Lumpur Tel : Fax : SYARIKAT TAKAFUL MALAYSIA BERHAD 26 th Floor, Annexe Block Menara Takaful Malaysia No. 4, Jalan Sultan Sulaiman Kuala Lumpur P.O. Box Kuala Lumpur Tel : Fax : Website : takaful-malaysia.com.my csu@takaful-malaysia.com.my PT SYARIKAT TAKAFUL INDONESIA Graha Takaful Indonesia Jalan Mampang Prapatan Raya No. 100, Jakarta Indonesia Tel : Fax : Website : PT ASURANSI TAKAFUL KELUARGA Graha Takaful Indonesia Jalan Mampang Prapatan Raya No. 100, Jakarta Indonesia Tel : Fax : Website : PT ASURANSI TAKAFUL UMUM Graha Takaful Indonesia Jalan Mampang Prapatan Raya No. 100, Jakarta Indonesia Tel : Fax : Website : BIMB SECURITIES (HOLDINGS) SDN BHD 31 st Floor, Menara Bank Islam No. 22, Jalan Perak Kuala Lumpur Tel : Fax : BIMB SECURITIES SDN BHD Level 32, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah Kuala Lumpur Tel : Fax : Website : Online trading : BIMSEC NOMINEES (TEMPATAN) SDN BHD Level 32, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah Kuala Lumpur Tel : Fax : BIMSEC NOMINEES (ASING) SDN BHD Level 32, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah Kuala Lumpur Tel : Fax : SYARIKAT AL-IJARAH SDN BHD 31 st Floor, Menara Bank Islam No. 22, Jalan Perak Kuala Lumpur Tel : Fax : Leadership Perspectives Highlights Accountability Financial Statements Shareholders AL-WAKALAH NOMINEES (TEMPATAN) SDN BHD 21 st Floor, Menara Bank Islam No. 22, Jalan Perak Kuala Lumpur Tel : Fax : th AGM

173 300 BIMB HOLDINGS BERHAD NOTICE OF THE 20 TH ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the 20 th Annual General Meeting of BIMB Holdings Berhad ( BHB or the Company ) will be held at Ballroom 1, Sime Darby Convention Centre,1A, Jalan Bukit Kiara 1, Kuala Lumpur on Wednesday, 17 May 2017 at a.m. for the following purposes: ORDINARY BUSINESS 1. To receive the Audited Financial Statements for the financial year ended 31 December 2016 together with the Reports of the Directors and Auditors thereon. (Please refer to Note 1) 2. To re-elect Tan Sri Samsudin Osman who is retiring by rotation in accordance with Article 61 of the Company s Articles of Association and being eligible, has offered himself for re-election. (Ordinary Resolution 1) 3. To re-elect Datuk Rozaida Omar who is retiring by rotation in accordance with Article 61 of the Company s Articles of Association and being eligible, has offered herself for re-election. (Ordinary Resolution 2) 4. To re-elect Datuk Zaiton Mohd Hassan who is retiring by rotation in accordance with Article 61 of the Company s Articles of Association and being eligible, has offered herself for re-election. (Ordinary Resolution 3) 5. To approve the payment of Directors fees and benefits amounting to RM1,762,000 to Non-Executive Directors of the Company for the financial year ended 31 December (Ordinary Resolution 4) 6. To approve the Directors fees and benefits of up to RM2,429,000 payable to the Non-Executive Directors from 1 January 2017 until the next Annual General Meeting of the Company. (Ordinary Resolution 5) 7. To re-appoint Messrs. KPMG Desa Megat PLT as the External Auditors of the Company for the financial year ending 31 December 2017 and to authorise the Directors to fix their remuneration. (Ordinary Resolution 6) SPECIAL BUSINESS 8. Retention of Independent Director To retain Datuk Zaiton Mohd Hassan as an Independent Non-Executive Director of the Company in accordance with Recommendation 3.3 of the Malaysian Code of Corporate Governance (Ordinary Resolution 7)

174 ANNUAL REPORT NOTICE OF THE 20 TH ANNUAL GENERAL MEETING Overview 9. Proposed Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature. That subject to the Companies Act 2016, Memorandum and Articles of Association of the Company and the Listing Requirements of Bursa Malaysia Securities Berhad approval be and is hereby given to BIMB Holdings Berhad and its subsidiaries to enter into the category of recurrent related party transactions of a revenue or trading nature with those related parties as specified in Section of the Circular to Shareholders dated 25 April 2017 which are necessary for the Group s day to day operations subject to the following: (a) The transactions carried out are in the ordinary course of business and are on normal commercial terms that do not favour the related parties more than the general public; (b) Are not detrimental to the minority shareholders of the Company; and (c) Will be disclosed in the annual report with the breakdown of the aggregate value of transaction conducted during the financial year pursuant to the shareholders mandate during the financial year ( Mandate ). And that the Mandate conferred by this resolution shall commence immediately upon the passing of this Resolution; And that such Mandate shall continue to be in force until: (i) Leadership Perspectives Highlights Accountability Financial Statements 20 th AGM Shareholders the conclusion of the next Annual General Meeting of the Company, at which time it will lapse, unless by a resolution passed at the meeting, the authority is renewed; (ii) the expiration of the period within which the next Annual General Meeting after the date is required to be held pursuant to Section 340(2) of the Companies Act, 2016 (but shall not extend to such extension as may be allowed pursuant to Section 340(4) of Companies Act 2016); or (iii) it is revoked or varied by a resolution passed by the shareholders in a general meeting. whichever is the earlier. (Ordinary Resolution 8)

175 302 BIMB HOLDINGS BERHAD NOTICE OF THE 20 TH ANNUAL GENERAL MEETING 10. Proposed renewal of the authority for Directors to allot and issue new ordinary shares of BHB, for the purpose of the Company s Dividend Reinvestment Plan ( DRP ) that provides the shareholders of BHB the option to elect to reinvest their cash dividend in new BHB Shares. The Company hereby seek the renewal of the shareholders approval as follows: THAT pursuant to the DRP as approved by the Shareholders at the Extraordinary General Meeting held on 27 October 2014 and subject to the approval of the relevant regulatory authority (if any), approval be and is hereby given to the Company to allot and issue such number of new BHB Shares from time to time as may be required to be allotted and issued pursuant to the DRP until the conclusion of the next Annual General Meeting upon such terms and conditions and to such persons as the Directors of the Company at their sole and absolute discretion, deem fit and in the interest of the Company PROVIDED THAT the issue price of the said new BHB Shares shall be fixed by the Directors based on the adjusted five (5) market days volume weighted average market price ( VWAP ) of BHB Shares immediately prior to the price-fixing date after applying a discount of not more than 10%, of which the VWAP shall be adjusted ex-dividend before applying the aforementioned discount in fixing the issue price; AND THAT the Directors and the Secretary of the Company be and are hereby authorised to do all such acts and enter into all such transactions, arrangements, deeds, undertakings and documents as may be necessary or expedient in order to give full effect to the DRP with full power to assent to any conditions, modifications, variations and/or amendments as may be imposed or agreed to by any relevant authorities (if any) or consequent upon the implementation of the said conditions, modifications, variations and/ or amendments, by the Directors as they, in their absolute discretion, deem fit and in the best interest of the Company. (Ordinary Resolution 9) 11. To transact any other ordinary business of which due notice shall have been given in accordance with the Companies Act By Order of the Board MARIA MAT SAID (LS ) Company Secretary Kuala Lumpur 25 April 2017

176 ANNUAL REPORT NOTICE OF THE 20 TH ANNUAL GENERAL MEETING Overview Notes: 1. Audited Financial Statements The Audited Financial Statements laid at this meeting pursuant to Section 340(1)(a) of the Companies Act 2016 are meant for the shareholders information and discussion only. It does not require the shareholders approval, and therefore, the Audited Financial Statements are not put forward for voting. 2. Ordinary Resolution 4 & 5 Details of the Directors fees and benefits paid to the Non-Executive Directors for the financial year ended 31 December 2015 and 31 December 2016 are enumerated in Note 38 on pages 217 to 219 of the Annual Report. The proposed Resolution 5 is for payment of the Directors fees and benefits for the period of 1 January 2017 until the conclusion of the next Annual General Meeting. The Directors fees and benefits proposed for the said period are calculated based on the revised remuneration of the Non-Executive Directors which took effect on 1 January 2017 and the number of Board and Board Committees meetings to be held during the period. 3. Explanatory Notes to Special Business (a) Ordinary Resolution 3 & 7 Datuk Zaiton Mohd Hassan ( Datuk Zaiton ) was appointed as an Independent Non-Executive Director of BHB on 2 February As at the date of the 20 th Annual General Meeting of BHB, she has served as an Independent Non-Executive Director of the Company for over 10 years. Based on the Directors Assessment for 2016, the Board has formed a collective view and agreed that it would be crucial to retain Datuk Zaiton as an Independent Non-Executive Director of the Company. During the 10 years period in the Company, Datuk Zaiton has demonstrated her commitment to the Company and has a good attendance record, in line with the attendance requirements for Board meetings pursuant to the Bursa Securities Listing Requirements and BNM s CG Policy. This testifies her dedication in discharging the responsibilities expected of an independent director. Apart from being well prepared for the Board and Board Committees meetings, Datuk Zaiton participates actively in the deliberation of the matters at the Board and Board Committees meetings. She was acknowledged to be meticulous and analytical in her views. Coupled with her vast experience in banking, risk management and other experiences gained through the various senior positions that she held in the financial industry, Datuk Zaiton s independent views, input and contributions are highly valued and respected. The skills, experience and knowledge possessed by Datuk Zaiton are useful for the future development of BHB and its subsidiaries. Apart from the above, Datuk Zaiton has complied with the criteria/requirement of independent director and other requirements set out in Paragraph 1.01 of Bursa Securities Listing Requirements. Based on the aforesaid, the Board strongly recommends the shareholders of BHB to retain Datuk Zaiton as an Independent Non-Executive Director at the 20 th Annual General Meeting of the Company. In relation to Resolutions 3 & 7, the Company wishes to bring to the attention of the shareholders of Paragraph of BNM s CG Policy which stipulates that any removal of an Independent Non-Executive Director would require Bank Negara Malaysia s approval. (b) Ordinary Resolution 8 Ordinary Resolution 8, if passed, will enable the Company and/or its Subsidiaries to enter into recurrent transactions involving the interest of Related Parties, which are of a revenue or trading nature and necessary for the Group s day-to-day operations, subject to the transactions being carried out in the ordinary course of business and on terms not to the detriment of the minority shareholders of the Company. The authority, unless revoked or varied by the Company at a general meeting, will expire at the next Annual General Meeting of the Company. For further details on Ordinary Resolution 8, please refer to Circular to Shareholders dated 25 April (c) Ordinary Resolution 9 Ordinary Resolution 9, if passed, will give authority to the Directors to allot and issue share for the Dividend Reinvestment Plan in respect of dividends to be declared until the next Annual General Meeting. A renewal of this authority will be sought at the next Annual General Meeting. 4. Appointment of Proxy (i) Only members whose names appear in the Record of Depositors on 9 May 2017 shall be eligible to attend, speak and vote at the Annual General Meeting or appoint proxy(ies) to attend, speak and/or vote on their behalf. (ii) A member of the Company entitled to attend and vote at this meeting is entitled to appoint not more than two (2) proxies to attend and to vote instead of him at the same meeting and a proxy need not be a member of the Company. (iii) Where a member of the Company appoints two (2) proxies, the appointments shall be invalid unless he specifies the holdings to be represented by each proxy. (iv) Where a member of the Company is an exempt authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991 which holds ordinary shares in the Company for multiple beneficial owners in one securities account ( omnibus account ), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. (v) The instruments appointing a proxy in the case of an individual shall be signed by the appointer or his attorney and in the case of a corporation, must be under seal or under the hand of an officer or attorney duly authorised. (vi) The instrument appointing a proxy must be deposited with the Share Registrar; Symphony Share Registrars Sdn Bhd, Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, Petaling Jaya, Selangor Darul Ehsan not less than twenty-four (24) hours before the time of the meeting or adjourned meeting at which the person named in such instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid. (vii) Pursuant to Paragraph 8.29A of the Bursa Securities Listing Requirements, all resolutions set out in the Notice will be put to vote by poll. Leadership Perspectives Highlights Accountability Financial Statements Shareholders 20 th AGM

177 304 BIMB HOLDINGS BERHAD STATEMENT ACCOMPANYING NOTICE OF 20 TH ANNUAL GENERAL MEETING DIRECTORS WHO ARE STANDING FOR RE-ELECTION AND RE-APPOINTMENT AT THE ANNUAL GENERAL MEETING Pursuant to Paragraph 8.27(2) of the Bursa Securities Listing Requirements, BHB wishes to highlight the Directors who are standing for re-election and re-appointment at the 20th Annual General Meeting of the Company are as follows: (1) Article 61 of the Company s Articles of Association Tan Sri Samsudin Osman Datuk Rozaida Omar Datuk Zaiton Mohd Hassan (2) Recommendation 3.3 of the Malaysian Code of Corporate Governance 2012 Datuk Zaiton Mohd Hassan Profiles of the above Directors are set out on pages 18 to 22 of this Annual Report. DATE, TIME AND PLACE OF THE ANNUAL GENERAL MEETING The 20 th Annual General Meeting of BIMB Holdings Berhad will be held as follows: Date : Wednesday, 17 May 2017 Time : a.m. Place : Ballroom 1, Sime Darby Convention Centre 1A, Jalan Bukit Kiara Kuala Lumpur

178 (Company No X) (Incorporated in Malaysia) PROXY FORM I/We (Full Name of Shareholder) NRIC No./Passport No./Company No. of (Address) Telephone No. being a member/members of BIMB Holdings Berhad ( BHB or the Company ), hereby appoint; (Full Name & NRIC No.) of (Address) and/or failing him/her: (Full Name & NRIC No.) of (Address) or failing him, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the TWENTIETH ANNUAL GENERAL MEETING of BIMB HOLDINGS BERHAD, to be held at Ballroom 1, Sime Darby Convention Centre, 1A, Jalan Bukit Kiara 1, Kuala Lumpur on Wednesday, 17 May 2017 at a.m. and any adjournment thereof. Please indicate an X in the space provided below, how you wish your vote to be cast in respect of the following resolutions. In the absence of specific directions, your proxy may vote or abstain at his/her discretion. If you appoint two proxies, please specify the proportions of holdings to be represented by each proxy. My/Our proxy is to vote as indicated hereunder: NO. RESOLUTION FOR AGAINST Ordinary Resolution 1 To re-elect YBhg. Tan Sri Samsudin Osman as Director. Ordinary Resolution 2 To re-elect YBhg. Datuk Rozaida Omar as Director. Ordinary Resolution 3 To re-elect YBhg. Datuk Zaiton Mohd Hassan as Director. Ordinary Resolution 4 To approve the payment of Directors fees and benefits amounting to RM1,762,000 to Non-Executive Directors of the Company for the financial year ended 31 December Ordinary Resolution 5 Ordinary Resolution 6 Ordinary Resolution 7 Ordinary Resolution 8 Ordinary Resolution 9 To approve the Directors fees and benefits of up to RM2,429,000 payable to the Non-Executive Directors from 1 January 2017 until the next Annual General Meeting of the Company. To re-appoint Messrs. KPMG Desa Megat PLT as the External Auditors of the Company for the financial year ending 31 December 2017 and to authorise the Directors to fix their remuneration. To retain YBhg. Datuk Zaiton Mohd Hassan as an Independent Non-Executive Director. Proposed Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature. Proposed renewal of the authority for Directors to allot and issue new ordinary of BHB for the purpose of the Company s Dividend Reinvestment Plan that provides the Shareholders of BHB option to elect to reinvest their cash dividend in new BHB Shares. NO. OF SHARES Dated this day of 2017 Signature/Common Seal of Shareholders For appointment of two proxies, the number of shares and percentage of shareholdings to be represented by the proxies are as follows: NO. OF SHARES PERCENTAGE Proxy 1 Proxy 2 TOTAL 100%

179 Notes: (i) Only members whose names appear in the Record of Depositors on 9 May 2017 shall be eligible to attend, speak and vote at the Annual General Meeting or appoint proxy(ies) to attend, speak and/or vote on their behalf. (ii) A member of the Company entitled to attend and vote at this meeting is entitled to appoint not more than two (2) proxies to attend and to vote instead of him at the same meeting and a proxy need not be a member of the Company. (iii) Where a member of the Company appoints two (2) proxies, the appointments shall be invalid unless he specifies the holdings to be represented by each proxy. (iv) Where a member of the Company is an exempt authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991 which holds ordinary shares in the Company for multiple beneficial owners in one securities account ( omnibus account ), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. (v) The instruments appointing a proxy in the case of an individual shall be signed by the appointer or his attorney and in the case of a corporation, must be under seal or under the hand of an officer or attorney duly authorised. (vi) The instrument appointing a proxy must be deposited at the Share Registrar, Symphony Share Registrars Sdn Bhd, Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, Petaling Jaya, Selangor Darul Ehsan not less than twenty-four (24) hours before the time for holding the meeting or any adjournment thereof. (vii) Pursuant to Paragraph 8.29A of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, all resolutions set out in the Notice of 20 th Annual General Meeting will be put to vote by poll. Fold Here STAMP SYMPHONY SHARE REGISTRARS SDN BHD ( D) Level 6, Symphony House Pusat Dagangan Dana 1 Jalan PJU 1A/ Petaling Jaya Selangor Fold Here

180 BIMB HOLDINGS BERHAD ( X) 31 st Floor Menara Bank Islam No. 22, Jalan Perak Kuala Lumpur Tel : Fax :

181 UPHOLDING VALUES 2016 SUSTAINABILITY REPORT

182 Our inaugural Sustainability Report carries the theme Upholding Values to reflect our organisation s longstanding core principles and commitment towards sustainable and good business practices that ensure the balanced wellbeing of our organisation, society and the environment. Creating and preserving value for our stakeholders are of the utmost importance and this report strives to represent this, in line with international standards. Our focus on economic, environmental, social and governance components is aligned with our full adherence to Shariah principles. The three colours of the triangle represent the complementary yet distinct nature of the businesses of our three entities.

183 Overview This section provides information on who we are, a summary of our report and message from our CEO. Message from Our Group CEO About Our Sustainability Report 06 BHB At a Glance CONTENTS Our Commitment to Sustainability This section describes how our sustainability efforts are governed, including details on stakeholders identification and affirmation of our commitments. Our Governance Structure 08 Our Material Matters Our Stakeholder Engagement Our Sustainability Journey This section provides details of our sustainability process and framework. Strategy Overview Methodology & Process What Matters to Us This section describes our organisation s material matters, including details on our commitment and efforts to realise our sustainability goals. Ethical Products Ethical Projects Growing Our Own Timber Sharing of Wealth Living by Values Transparency Beyond Compliance Good Business Practices Caring for Our Environment Responsible Finance Talent Development Ethical Practice & Reporting Inclusive Growth 34 Islamic Finance & Knowledge- Sharing Facilitating Micro-Credit Increasing Banking Access Optimising Waqf Benefits Building Industry Capability Source of Reference Growing Together With Our Community This section provides details on our efforts in contributing to the community. Acknowledgement & Recognition Highlights 60 In the News Sustainability Performance Data FTSE4Good Bursa Malaysia ( F4GBM ) Global Reporting Initiative ( GRI ) G4

184 ABOUT OUR SUSTAINabILITY REPORT BIMB Holdings Berhad ( BHB ) has earmarked 2016 as the pioneer year for embarking on a focused sustainability journey across the group, culminating in the publication of this Sustainability Report. This report is to be read alongside our Annual Report 2016 for the full representation of BHB as an organisation. The basic principles of sustainability have always been ingrained in our organisational practice, guided by the principles of Shariah. As a result, our approach to sustainability is to align ourselves with our goal of becoming a Responsible Financial Entity as we run all our business operations. The information and data in this report has been derived from a series of workshops conducted with participants from all business units across all subsidiaries, and interviews with Heads of Divisions/Departments across the Group. The information provided in this report is in compliance with Bursa Malaysia Securities Berhad s Main Market Listing Requirements. SCOPE All of BHB s business operations and its subsidiaries, namely Bank Islam Malaysia Berhad, Syarikat Takaful Malaysia Berhad and BIMB Securities Sdn. Bhd. LOCATION All entity operations across Malaysia (regional locations included for Islamic finance industry development and knowledge-sharing) REPORTING PERIOD Covers the period from 1 January 2016 to 31 December 2016 DISTRIBUTION Will be made available to our shareholders and key stakeholders including business partners, regulators, industry groups, media, and the community. It will also be available via our website GUIDANCE Bursa Malaysia s Sustainability Reporting Guide FTSE4Good Bursa Malaysia ( F4GBM ) Global Reporting Initiative ( GRI ) G4 (unless otherwise specified) 2

185 HOW TO GET THE MOST OUT OF OUR REPORT Tells you where you can find more information within the Report Tells you where you can find more information online at To contact us please refer to the back cover of this Sustainability Report Our Sustainability Report 2016 comes together with our Annual Report 2016, which paint a complete picture of the Group s business and operational performance, as well as our efforts to implement sustainable practices. REPORT GUIDING FRAMEWORK Assurance Annual Report As our primary Report, our Annual Report provides information on the Group s ability to create value over time. Annual Financial Statements ( AFS ) Malaysian Financial Reporting Standards Malaysia Companies Act 2016 The annual financial statements were audited by KPMG Malaysia for the financial year ended 31 December Sustainability Report (this report) This inaugural supplementary report presents a balanced and comprehensive analysis of the Group s sustainability performance in relation to issues material to the Group and its Stakeholders. Bursa Malaysia s Sustainability Reporting Guide FTSE4Good Bursa Malaysia ( F4GBM ) Global Reporting Initiative ( GRI ) G4 Assurance of the information and data provided within the Sustainability Report is provided by the representatives of relevant business and operational functions of BHB Group, that are part of the Sustainability Working Group Scan the QR Code by following these simple steps Feedback We need your feedback to make sure we are covering the things that matter to you. Scan the QR Code with your smartphone. You can also to feedback@bimbholdings.com Get it Download the QR Code Reader app from the Google Play (Android Market), BlackBerry AppWorld, App Store (ios/ iphone) or Windows Phone Store Run it Run the QR Code Reader app and point your camera at the QR Code Access it Get access to the feedback form BIMB HOLDINGS BERHAD SUSTAINABILITY REPORT

186 message from our GROUP ceo BUILDING A SUSTAINABLE FUTURE FOR INCLUSIVE ECONOMIC & SOCIAL PROGRESS Our Islamic finance infrastructure has long ensured that we continuously strive to achieve long-term financial and social sustainability. Driven by established Shariah principles, BIMB Holdings Berhad ( BHB ) places economic progress and community wellbeing as priorities, alongside company performance. As the first Islamic Financial Holding Company in Malaysia with each subsidiary renowned for its widest standalone dedicated Islamic banking network, a pioneer in Islamic insurance and a first full-fledged Shariah-compliant stockbroking firm BHB will continue to seek progress of our society through sustainable economic activities. Aim: When we published our Statement of Intent in the Annual Report 2015 as our commitment to our Sustainability Journey, we had identified five items as core responsibilities of our business. These commitments still hold true today and have lent themselves to the material matters identified in To ensure BHB upholds its Shariah principles and place importance on sustainability through continuous engagement with our stakeholders. In our pursuit of sustainable growth, we commit: 1. To uphold the organisation as a responsible entity by ensuring ethical business decisions based on Shariah principles at every level; 2. To grow together with the communities we serve by providing products and services that will contribute to the enrichment of society; 3. To develop our employees by providing opportunities for them to be the best that they can be; 4. To build greater awareness and knowledge of Islamic Finance and its role in achieving sustainability for the industry and its consumers; and 5. To ensure governance, compliance and transparency in reporting our progress towards these commitments. Given the magnitude of the Sustainable Development Goals and the important role that can be played by Islamic finance in supporting their implementation and ensuring more robust and inclusive growth, the opportunity to more closely link Islamic finance with sustainable development cannot be missed. World Bank ¹ Islamic markets thus can provide a model for socially responsible, sustainable changes in the financial system ¹ Habib Ahmed et. al. (May 2015): On the Sustainable Development Goals and the Role of Islamic Finance, World Bank Policy Research Working Paper 7266 ² Thomas A. Myers et. al. (July 2013): The Interconnections Between Islamic Finance and Sustainable Finance International Institute for Sustainable Development ² We have collectively identified the five material matters that represent the core responsibilities of our business as a whole, namely: RESPONSIBLE FINANCE INCLUSIVE GROWTH TALENT DEVELOPMENT ISLAMIC FINANCE & KNOWLEDGE- SHARING ETHICAL PRACTICE & REPORTING Our focus on ethical products and projects that bring positive economic, social and environmental benefits Our focus on ensuring that all layers of community grow along with us through inclusive financial offerings Our focus on growing our employees to become valuable assets and be the best they can be Our focus on propagating knowledge and continuing to be the global source of reference for Islamic banking and finance Our focus on ensuring that our practices are governed by our core values, and that social and environmental considerations are consistently our top priorities 4 BIMB HOLDINGS BERHAD SUSTAINABILITY REPORT 2016

187 On behalf of BIMB Holdings Berhad, I pledge that we will work hard to inspire the financial services industry through emulating Islamic principles, and as a result continue to build a sustainable and responsible Islamic Finance Institution. Dato Sri Zukri Samat Group Chief Executive Officer Our stakeholders are at the centre of everything we do and we will continue to engage them closely to ensure that our outlook remains inclusive, and that our decisions serve the development of the greater community and for the greater good. I would like to take this opportunity to express my gratitude to our stakeholders for their continued support and participation towards our sustainability journey thus far. Their guidance, contribution and constant assistance are what make BHB the company it is today, a well-established Islamic Financial institution and the acknowledged leader of the industry. In 2017, we will be continuing our sustainability discussions with our internal and external stakeholders, specifically around the material matters identified. This will provide us good input on innovative ways of bringing greater financial access, products and services to the communities within which we operate. BIMB HOLDINGS BERHAD SUSTAINABILITY REPORT

188 BHB at a glance Profile BIMB Holdings Berhad is the only, and by extension, the first Islamic Financial Holding Company in Malaysia. A true pioneer of the industry, the company offers a comprehensive spectrum of Islamic Financial & Banking services and products, through its three main subsidiaries. More than 5,000 employees More than 8 Mil customers served RM Total Assets 63.1 Bil First & Leading Islamic Banking Institution in Malaysia First Full-Fledged Shariah-compliant Stockbroking Firm in Malaysia BIMB HOLDINGS BERHAD SUSTAINABILITY REPORT 2016

189 Total Net Income Total Profit (before Zakat & Tax) Total Zakat Paid Out Amount Contributed for CSR RM 2.3 Bil RM Mil RM 9 Mil More than RM 5 Mil First & Leading Takaful Operator in Malaysia 1 7 Oversea subsidiaries - P.T. Syarikat Takaful Indonesia - P.T. Asuransi Takaful Keluarga - P.T. Asuransi Takaful Umum 2 6 INDONESIA Bank Islam Malaysia Berhad Branches Syarikat Takaful Malaysia Berhad Service Centres BIMB Securities Sdn. Bhd. BIMB HOLDINGS BERHAD SUSTAINABILITY REPORT

190 SUSTAINABILITY SOUNDBITES First in the country to offer tax payment via mobile banking First multi-currency Shariah and ESG compliant global equity fund Enviromental impact through ethical project screening Over 300,000 micro-finance customers on mobile banking Rural Malaysia gets increased access to cash withdrawal Underserved merchant segments grow businesses with cashless payments Sharing of our wealth with our employees Globally recognised expertise in Islamic Finance Living by the values we represent

191 Our focus on Islamic finance principles and sustainability of the business has borne fruit in the last few years. Our results have shown: Sustainable Profit Growth through the decade Net Income Margin of 2.74% was among the highest in the industry in 2016 Highest Return on Equity in the last 3 years Price to Book Value was the best among Islamic Banking Groups in 2016 Find out more details about our financial performance in BHB Annual Report 2016, Bank Islam Annual Report 2016 and Takaful Malaysia Annual Report 2016.

192 OUR GOVERNANCE Structure BIMB Holdings Berhad s ( BHB ) Sustainability Governance Structure is committed to ensuring that the right executive leadership, strategies and internal controls are in place to instil sustainability principles across the organisation. The Terms of Reference for the governance of our sustainability structure states that sustainability matter reporting is to be made to our Group Management Committee, which in turn reports to BHB Board of Directors, to ensure the highest level of visibility and priority. The overarching governance bodies of the organisation and its members are described in BHB s Annual Report Read our Terms of Reference at SUSTAINABILITY GOVERNANCE STRUCTURE GROUP MANAGEMENT COMMITTEE Oversees the Group s Sustainability Performance SUSTAINABILITY STEERING COMMITTEE Provides Guidance, Strategy and Direction Alignment PROJECT MANAGEMENT OFFICE Formulates Sustainability Goals and Framework, Facilitates Implementation of Sustainability Initiatives and Provides Sustainability Reporting Represented by Group Corporate Communications Division SUSTAINABILITY WORKING GROUP Manages Day-to-Day Sustainability Matters and Executes Sustainability-Related Actions Made up of representatives of relevant and key business and operational functions of BHB and its subsidiaries 8 BIMB HOLDINGS BERHAD SUSTAINABILITY REPORT 2016

193 Sustainability Steering Committee The committee is made up of BHB s Chief Financial Officer, Chief Strategy Officer and Chief Operations Officer, as well as the senior management members that represent the organisation s three main subsidiaries, which include Bank Islam Malaysia Berhad, Syarikat Takaful Malaysia Berhad and BIMB Securities Sdn. Bhd. Making key decisions that correlate with our sustainability direction, the committee provides guidance and insights into the organisation s sustainability strategy in ensuring that it is aligned with BHB Group s operational policy and business direction. The committee maintains a line of communication with the Board of Directors on sustainability matters. Hizamuddin Jamalluddin Group Chief Strategy Officer & Head, Managing Director s Office BIMB Holdings Berhad Bank Islam Malaysia Berhad Malkit Singh Maan Group Chief Financial Officer BIMB Holdings Berhad Mohamad Azlan Mohamad Alam Chief Operations Officer BIMB Holdings Berhad Maria Mat Said Group Company Secretary & Regulatory Compliance BIMB Holdings Berhad Bank Islam Malaysia Berhad Ustaz Mohd Nazri Chik Group Chief Shariah Officer BIMB Holdings Berhad Bank Islam Malaysia Berhad Razman Ismail Head, Group Human Capital BIMB Holdings Berhad Bank Islam Malaysia Berhad Haryati Yahya Head, Investor Relations BIMB Holdings Berhad Wan Norkhairi Wan Samad Head, Group Corporate Communications BIMB Holdings Berhad Bank Islam Malaysia Berhad Mohamad Jamali Haron Assistant General Manager, Finance Bank Islam Malaysia Berhad Mala Patmarajah Head, Corporate Communications Syarikat Takaful Malaysia Berhad Aida Sharini Company Secretary & Head, Finance & Human Resource BIMB Securities Sdn. Bhd. Azizzi Mohammed Deputy Manager, Group Corporate Communications BIMB Holdings Berhad Bank Islam Malaysia Berhad BIMB HOLDINGS BERHAD SUSTAINABILITY REPORT

194 BIMB Holdings Berhad ( BHB ) has a variety of touch points with stakeholders through all our business entities. We identified and mapped our key stakeholders in a structured process guided by Bursa Malaysia s Sustainability Reporting Guidelines and the Global Reporting Initiative ( GRI ) G4 standard. The process involved representatives across the group and represents all the entities and business units. Investors Investor Relations Channels Annual General Meetings Ongoing Meetings and Interactions Financial Performance and Corporate Strategy Governance and Compliance Corporate Leadership Government And Regulators Ongoing Industry Meetings and Interactions Government-led Initiatives and Programmes Participation Products and Services Rollout Financial Regulations Update Supporting National Agenda especially on the Propagation and Advancement of Islamic Banking and Finance Industry In 2016, we engaged with our stakeholders through various engagement platforms as listed below. This gave us the opportunity to understand their issues and concerns for continuous internal improvements. Moving forward, in 2017 we look forward to engaging with our stakeholders more specifically regarding our Material Matters. This will entail discussions on the creation of value for each stakeholder group and matters that are to them. OUR STAKEHOLDER ENGAGE Media Engagement Platforms Topics Addressed Media Releases and Media Conferences Interviews Media-specific Events Formal and Informal Briefings Products and Services Corporate Strategy and Business Direction Understanding of Islamic Banking and Financial Industry Awareness on Key Corporate and Industry Issues Awareness on Key Social Issues Close to the Organisation s Heart 10 BIMB HOLDINGS BERHAD SUSTAINABILITY REPORT 2016

195 Employees Customers Internal Communication Channels including Bank Islam Online Portal Internal Activities including Bank Islam s Sports Carnival Public Engagement Activities including CSR-related Initiatives Staff Training and Development Programmes Career Planning and Advancement Employees Personal Development for Fulfilling Life and Spiritual Needs Essential Knowledge on the Organisation including Company s Policies and Guidelines Customers Service and Feedback Channels Branch Networks Customers Survey and Focus Groups Products and Services Viability Service Delivery Effectiveness Customer Service Quality Local Communities MENT Engagements with NGOs and Charity Organisations Engagements with the Underserved Communities CSR-related Events and Activities Financial Education and Knowledge Leveraging Organisation s Capacity and Facility in Addressing Economic and Social Issues Suppliers & Vendors Analysts & Fund Manager Industry Peers Engagements with Suppliers & Vendors Analysts Briefings Ongoing Meetings Seminars Ongoing Industry Discussions and Interactions Business Integrity Organisation s Key Details including Performance, Strategy & Business Direction Key Prospects & Perspectives of the Islamic Financial Industry Industry Trends Business Collaborations BIMB HOLDINGS BERHAD SUSTAINABILITY REPORT

196 OUR MATERIAL MATTERS When we analysed and made the decision to embark on our sustainability journey, we knew that it was truly a concept that we had long embraced in the culture and practice of our organisation. Many of the components and indicators of globally accepted sustainability standards reflect our business priorities as an Islamic financial institution. As we took this journey, we wanted to ensure that these important principles guided our way and elevated our organisation s financial and social performance in a responsible manner. We desire our growth to be collective together with our employees, the industry and society to grow true value in every community we operate. We desire our growth to shine a light on the responsible principles ingrained in Islamic finance whilst increasing the awareness and education of these principles. We desire our growth to pave the way in the industry for transparent ethical practices and reporting. We ensure our employee s development and growth through a number of training programmes. Talent Development Find out more about the programmes at the Talent Development section, page 28 of this report. Bank Islam s main branch at Menara Bank Islam, where a number of Shariah-compliant banking products and services are on offer. Responsible Finance Find out more about our products and services, and their benefits to the society at large at the Responsible Finance section, page 16 of this report. Surau Wakaf Ahmad Dawjee Dadabhoy s unique structure within Menara Bank Islam, where a number of educational activities and charity-led initiatives are being held. Islamic Finance & Knowledge-Sharing Find out more about our commitment to propagate knowledge at the Islamic Finance & Knowledge-Sharing section, page 34 of this report. Completion of Bank Islam s partnership with a property developer on Waqf land development in Selangor. Inclusive Growth Find out more about our Waqf projects and other financial inclusion initiatives at the Inclusive Growth section, page 22 of this report. Ensuring all our daily business activities and operations are in compliance with good governance. Ethical Practice & Reporting Find out more on how we are committed to good practice at the Ethical Practice & Reporting section, page 40 of this report. 12 BIMB HOLDINGS BERHAD SUSTAINABILITY REPORT 2016

197 METHODOLOGY & PROCESS BIMB Holdings Berhad ( BHB ) embarked on a methodology and process that enabled us to strategically determine what mattered most to us, and what we were going to put in place to address these material areas of business Sustainability Project Management Office Formed Sustainability Journey 2016 Action Plan Confirmed Baseline and Business Strategies Determined Sustainability Strategy and Framework Designed Sustainability Working Group Identified Sustainability Steering Committee Identified Sustainability Training Conducted Materiality and Stakeholder Workshops Conducted Sustainability Standards and Indicators Identified Inaugural Sustainability Report Initiated Sustainability Report Published Sustainability Journey 2017 Action Plan Confirmed The process kicked off at the end of 2015 with the forming of the Project Management Office and the determination of a high-level 2016 action plan. Following that, we kicked off 2016 with a baseline of our activities and subsequently determined our related strategy and framework. The Sustainability Steering Committee members were then determined along with the members of the Sustainability Working Group consisting of representatives from across all three main BHB subsidiaries as well as the relevant business and operational units. With this group, we then proceeded to run three workshops which delved into the subject matters as indicated below: Introduction to Sustainability - Global definitions, views and trends, and local developments and regulations Stakeholder Identification and Prioritisation - Guided process of determining the initial plan for BHB s stakeholder engagement Material Matter Identification and Prioritisation - Guided process of determining the most important issues relevant to BHB. The outcome of these workshops, together with the interview sessions conducted with the relevant heads representing the various business and operational functions of BHB, guided this inaugural reporting process for BHB s Sustainability Report BIMB HOLDINGS BERHAD SUSTAINABILITY REPORT

198 STRATEGY OVERVIEW BIMB Holdings Berhad s sustainability strategy is focused on determining its pathways towards the organisation s objective to be a Responsible Financial Entity. Our actions and decisions will be guided by this strategy alongside the organisation s established business plans. Our Sustainability Framework (depicted below) is a representation of our growth priorities and actions, and our strategy moving forward. OUR GOAL RESPONSIBLE FINANCIAL ENTITY Striving to be a RESPONSIBLE FINANCIAL ENTITY reflects our commitment to fulfil our purpose of meeting society s financial needs in the most sustainable and ethical manner possible. COLLECTIVE GROWTH represents our belief that a rising tide lifts all boats. We look to ensure that value is jointly created and shared. Our DRIVERS represent the priorities in our business. KNOWLEDGE SHARING represents our commitment to build learned communities that are able to make informed choices towards betterment of lives. ISLAMIC PRINCIPLES represent the basis of all our practices, decisions and teachings. These guiding principles have laid the foundation of BHB s role in society and will continue to guide us in achieving our sustainability goal and commitments. All actions are based on these PILLARS that allow for a balanced approach, aligned towards the drivers and goal. Philanthropy Sustainability Shared Values Employees The STAKEHOLDERS represented will continue to ensure our focus on the importance of inclusivity at every point of our organisation s progress and growth. Community Industry 14 BIMB HOLDINGS BERHAD SUSTAINABILITY REPORT 2016

199 What matters to you matters to us as well.