Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Reports and financial statements for the financial period ended 31 December 2014

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Reports and financial statements for the financial period ended 31 December 2014 Contents Page(s) Directors' report

1 - 18

Statements of financial position

19

Income statements

20

Statements of comprehensive income

21

Statements of changes in equity

22 - 23

Statements of cash flows

24 - 26

Summary of significant accounting policies

27 - 44

Notes to the financial statements

45 - 142

Statement by directors

143

Statutory declaration

143

Independent auditors' report

144 - 145

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Directors' report for the financial period ended 31 December 2014 The Directors of Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) ("the Bank") hereby submit their report together with the audited financial statements of the Group and the Bank for the financial period from 1 August 2013 to 31 December 2014.

Principal activities The principal activities of the Bank are in investment banking, stockbroking activities and related financial services. The principal activities of the subsidiaries are asset management, management of unit trust funds and private retirement schemes, Islamic fund management, dealing in options and futures and provision of nominee services.

There were no significant changes in the nature of these activities during the financial period other than the inclusion of asset management, management of trust funds and private retirement schemes, Islamic fund management and dealing in options and futures, following completion of the acquisitions of subsidiaries and reorganisation as disclosed in Note 41 and Note 43. Change in name On 18 September 2014, the Bank changed its name from HwangDBS Investment Bank Berhad to Affin Hwang Investment Bank Berhad. Change in financial year end The Bank has changed its financial year end from 31 July to 31 December to be consistent with that of its holding company, AFFIN Holdings Berhad. Financial results The Group RM'000 149,424 (379) 149,045 (30,821) 118,224

Profit before zakat and taxation Zakat Profit before taxation Taxation Net profit for the financial period/year Dividends No dividend has been paid by the Bank since the end of the previous financial year.

The Directors do not recommend the payment of any final dividend for the financial period ended 31 December 2014.

1

The Bank RM'000 121,260 (274) 120,986 (20,566) 100,420

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Directors' report for the financial period ended 31 December 2014 (continued) Reserves and provisions All material transfers to or from reserves or provisions during the financial period are shown in the financial statements and notes to the financial statements. Increase in share capital and issue of shares During the financial period, the Bank increased its: (a)

authorised ordinary share capital from 600,000,000 to 1,500,000,000 through the creation of 900,000,000 ordinary shares of RM1.00 each; and

(b)

issued and fully-paid up ordinary share capital from RM500,000,000 to RM780,000,000 via the issuance of 280,000,000 new ordinary shares of RM1.00 each at an issue price of RM1.785 per share.

The new ordinary shares issued ranked parri passu in all respects with the existing issued ordinary shares of the Bank.

Statutory information on the financial statements Before the financial statements of the Group and the Bank were made out, the Directors took reasonable steps: (a)

to ascertain that proper action had been taken in relation to the writing off of bad debts and financing and the making of allowance for bad and doubtful debts and financing, and satisfied themselves that all known bad debts and financing had been written off and adequate allowance had been made for doubtful debts and financing; and

(b)

to ensure that any current assets, other than debts and financings, which were unlikely to be realised in the ordinary course of business and their values as shown in the accounting records of the Group and the Bank have been written down to an amount which they might be expected so to realise.

At the date of this report, the Directors are not aware of any circumstances: (a)

which would render the amount written off for bad debts and financing, or the amount of the allowance for doubtful debts and financing in the financial statements of the Group and of the Bank inadequate to any substantial extent; or

(b)

which would render the values attributed to the current assets in the financial statements of the Group and the Bank misleading; or

(c)

which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Group's and the Bank's financial statements misleading or inappropriate.

2

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Directors' report for the financial period ended 31 December 2014 (continued) Statutory information on the financial statements (continued) At the date of this report, there does not exist: (a)

any charge on the assets of the Group or the Bank which has arisen since the end of the financial period which secures the liabilities of any other person; or

(b)

any contingent liability in respect of the Group or the Bank that has arisen since the end of the financial period other than in the ordinary course of banking business or activities of the Group.

No contingent or other liability of the Group or the Bank has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial period which, in the opinion of the Directors, will or may substantially affect the ability of the Group or the Bank to meet their obligations when they fall due. 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 of the Group and the Bank that would render any amount stated in the financial statements misleading. In the opinion of the Directors: (a)

the results of the operations of the Group and the Bank for the financial period were not, substantially affected by any item, transaction or event of a material and unusual nature other than those disclosed in Note 43 to the financial statements; and

(b)

there has not arisen in the interval between the end of the financial period 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 the Bank for the current financial period in which this report is made.

Significant events during the financial period Significant events during the financial period are disclosed in Note 41 to the financial statements. Subsequent events Subsequent events after the financial period are disclosed in Note 42 to the financial statements.

3

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Directors' report for the financial period ended 31 December 2014 (continued) Directors The Directors of the Bank who have held office since the date of the last report and at the date of this report are as follows: Gen Tan Sri Yaacob bin Mohd Zain (R) (Chairman, Non-Independent Non-Executive Director)

(Appointed w.e.f. 15 April 2014)

Y.M. Raja Tan Sri Dato' Seri Aman bin Raja Haji Ahmad (Independent Non-Executive Director)

(Appointed w.e.f. 15 April 2014)

Ariffin bin Alias (Independent Non-Executive Director)

(Appointed w.e.f. 15 April 2014)

Tan Sri Dato' Seri Lodin bin Wok Kamaruddin (Non-Independent Non-Executive Director)

(Appointed w.e.f. 15 April 2014)

Stephen Charles Li Kwok Sze (Non-Independent Non-Executive Director)

(Appointed w.e.f. 15 April 2014)

Lee Chor Kee (Alternate Director to Stephen Charles Li Kwok Sze)

(Appointed w.e.f. 15 April 2014)

Abd Malik bin A Rahman (Independent Non-Executive Director)

(Appointed w.e.f. 15 April 2014)

Lim Hun Soon @ David Lim (Independent Non-Executive Director)

(Appointed w.e.f. 15 April 2014)

Y.A.M. Tengku Syed Badarudin Jamalullail Ibni Almarhum Tuanku Syed Putra Jamalullail (Independent Non-Executive Director)

(Resigned w.e.f. 15 April 2014)

Hwang Lip Teik (Non-Independent Non-Executive Director)

(Resigned w.e.f. 7 April 2014)

Y.A.M. Tunku Dato' Seri Nadzaruddin Ibni Almarhum Tuanku Ja'afar (Independent Non-Executive Director)

(Resigned w.e.f. 7 April 2014)

Ang Teik Siew (Ang Teik Lim Eric) (Non-Independent Non-Executive Director)

(Resigned w.e.f. 7 April 2014)

Ng Wai Hung Andrew (Non-Independent Non-Executive Director)

(Resigned w.e.f. 7 April 2014)

Choe Tse Wei (Non-Independent Non-Executive Director)

(Resigned w.e.f. 7 April 2014)

Mohamed Tamizi Tun Dr. Ismail (Independent Non-Executive Director)

(Resigned w.e.f. 15 April 2014)

Tham Kwok Meng (Independent Non-Executive Director)

(Resigned w.e.f. 15 April 2014)

Teoh Teik Kee (Non-Independent Non-Executive Director)

(Resigned w.e.f. 7 April 2014)

In accordance with Section 129(6) of the Companies Act 1965, Gen Tan Sri Yaacob bin Mohd Zain (R) retires and offers himself for re-appointment at the forthcoming Annual General Meeting.

4

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Directors' report for the financial period ended 31 December 2014 (continued) Responsibility statement by Board of Directors In the course of preparing the annual financial statements of the Group and of the Bank, the Directors are collectively responsible in ensuring that these financial statements are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. It is the responsibility of the Directors to ensure that the financial reporting of the Group and of the Bank present a true and fair view of the state of affairs of the Group and of the Bank as at 31 December 2014 and of the financial results and cash flows of the Group and of the Bank for the financial period then ended. The Directors have also taken the necessary steps to ensure that appropriate systems are in place for the assets of the Group and of the Bank to be properly safeguarded for the prevention and detection of fraud and other irregularities. The systems, by their nature, can only provide reasonable and not absolute assurance against material misstatements, whether due to fraud or error. The Statement by Directors pursuant to Section 169 of the Companies Act, 1965 is set out on page 143 of the financial statements.

Directors' interest According to the register of Directors’ shareholdings, the interests of Directors in office at the end of the financial period in shares, warrants, and options over shares in the related companies are as follows: Number of ordinary shares of RM1.00 each As at date of appointment

Bought

Sold

As at 31.12.2014

-

1,051,328

AFFIN Holdings Berhad Tan Sri Dato' Seri Lodin bin Wok Kamaruddin

* 808,714

^242,614

Number of ordinary shares of 50 sen each As at date of appointment

Bought

^^ 28,192,758 ** 1,000

-

-

^^ 28,192,758 ** 1,000

*2,000,000 3,000 ** 1,000

-

-

*2,000,000 3,000 ** 1,000

Sold

As at 31.12.2014

Boustead Holdings Berhad Tan Sri Dato' Seri Lodin bin Wok Kamaruddin Abd Malik bin A Rahman Boustead Heavy Industries Corporation Berhad Tan Sri Dato' Seri Lodin bin Wok Kamaruddin Abd Malik bin A Rahman Abd Malik bin A Rahman

* shares held in trust by nominees company ** indirect shares ^ Rights shares issued on 4 July 2014 ^^ share held in trust by nominees companies amounted by 25,992,758 shares

5

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Directors' report for the financial period ended 31 December 2014 (continued) Directors' interest (continued) Number of ordinary shares of RM1.00 each As at date of appointment

Bought

Sold

As at 31.12.2014

Al-Hadharah Boustead REIT Tan Sri Dato' Seri Lodin bin Wok Kamaruddin

250,000

-

^^250,000

-

** 5,916,465

-

-

** 5,916,465

*** 12,500,148

-

-

*** 12,500,148

Boustead Petroleum Sdn Bhd Tan Sri Dato' Seri Lodin bin Wok Kamaruddin Pharmaniaga Berhad Tan Sri Dato' Seri Lodin bin Wok Kamaruddin

Number of ordinary shares of RM0.50 each As at date of appointment Boustead Plantations Berhad**** Tan Sri Dato' Seri Lodin bin Wok Kamaruddin

-

Bought ^^^31,381,600

Sold -

As at 31.12.2014 ^^^31,381,600

* shares held in trust by nominees company *** shares held in trust by nominees companies amounted to 9,382,837 shares **** shares held in trust by nominees companies amounted to 30,941,600 shares ^^ subsequent to the privatisation of Al-Hadharabah Boustead REIT on 29 January 2014 ^^^ subsequent to IPO on 26 June 2014 Number of ordinary shares of RM1.60 each As at As at date of appointment Boustead Plantations Berhad Abd Malik bin A Rahman Abd Malik bin A Rahman **

-

Bought

2,000 2,000

Sold

-

31.12.2014

2,000 2,000

** indirect shares Other than the above, the Directors in office at the end of the financial period did not have any other interest in the shares, warrants and option over shares of the Bank and its related companies during the financial period. Directors' benefits During and at the end of the financial period, no other arrangements subsisted to which the Bank or any of its subsidiaries is a party with the object or objects of enabling Directors of the Bank or any of its subsidiaries to acquire benefits by means of the acquisition of shares in, or debenture of the Bank or any other body corporate. Since the end of the previous financial year, no Director of the Bank has received or become entitled to receive a benefit (other than Directors’ remuneration as disclosed in Note 31 to the financial statements) by reason of a contract made by the Bank or by a related corporation with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest.

6

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Directors' report for the financial period ended 31 December 2014 (continued) Corporate Governance The Board of Directors is committed to ensure the highest standards of corporate governance throughout the organisation with the objectives of safeguarding the interests of all stakeholders and enhancing the shareholders’ value and financial performance of the Bank. The Board considers that it has applied the Best Practices as set out in the Malaysian Code of Corporate Governance throughout the financial period. The Bank is also required to comply with Bank Negara Malaysia ("BNM")’s Guidelines on Corporate Governance for Licensed Institutions. (i)

Board of Directors Responsibility and Oversight The Board of Directors currently comprises seven (7) Non-Executive Directors four (4) of whom are Independent NonExecutive Directors and three (3) are Non-Independent Non-Executive Directors. The Board, with a wide range of experience and knowledge, has been instrumental in the formulation and crafting of the Bank’s vision and its strategic business direction. During the financial period, the Board met fifteen (15) times to review the Bank’s financial and business performance, to oversee the conduct of the Bank’s business as well as to ensure that adequate internal control systems are in place. Prior to the completion of the acquisition of HwangDBS Investment Bank Berhad by AFFIN Holdings Berhad ("the acquisition") on 7 April 2014, the Board had met four (4) times. Subsequent to the acquisition, the Board had met eleven (11) times. The composition of the Board and the number of meetings attended by each Director are as follows: Directors

Total meetings attended

Gen Tan Sri Yaacob bin Mohd Zain (R) (Chairman, Non-Independent Non-Executive Director)

(Appointed w.e.f. 15 April 2014)

11 out of 11

Y.M. Raja Tan Sri Dato' Seri Aman bin Raja Haji Ahmad (Independent Non-Executive Director)

(Appointed w.e.f. 15 April 2014)

11 out of 11

Ariffin bin Alias (Independent Non-Executive Director)

(Appointed w.e.f. 15 April 2014)

10 out of 11

Tan Sri Dato' Seri Lodin bin Wok Kamaruddin (Non-Independent Non-Executive Director)

(Appointed w.e.f. 15 April 2014)

9 out of 11

Stephen Charles Li Kwok Sze (Non-Independent Non-Executive Director)

(Appointed w.e.f. 15 April 2014)

11 out of 11

Abd Malik bin A Rahman (Independent Non-Executive Director)

(Appointed w.e.f. 15 April 2014)

11 out of 11

Lim Hun Soon @ David Lim (Independent Non-Executive Director)

(Appointed w.e.f. 15 April 2014)

11 out of 11

Y.A.M. Tengku Syed Badarudin Jamalullail Ibni Almarhum Tuanku Syed Putra Jamalullail (Independent Non-Executive Director)

(Resigned w.e.f. 15 April 2014)

4 out of 4

Hwang Lip Teik (Non-Independent Non-Executive Director)

(Resigned w.e.f. 7 April 2014)

4 out of 4

7

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Directors' report for the financial period ended 31 December 2014 (continued) Corporate Governance (i)

Board of Directors Responsibility and Oversight (continued) Directors

Total meetings attended

Y.A.M. Tunku Dato' Seri Nadzaruddin Ibni Almarhum Tuanku Ja'afar

(Resigned w.e.f. 7 April 2014)

4 out of 4

(Resigned w.e.f. 7 April 2014)

3 out of 4

(Resigned w.e.f. 7 April 2014)

2 out of 4

Choe Tse Wei (Non-Independent Non-Executive Director)

(Resigned w.e.f. 7 April 2014)

4 out of 4

Mohamed Tamizi Tun Dr. Ismail (Independent Non-Executive Director)

(Resigned w.e.f. 15 April 2014)

4 out of 4

Tham Kwok Meng (Independent Non-Executive Director)

(Resigned w.e.f. 15 April 2014)

4 out of 4

Teoh Teik Kee (Non-Independent Non-Executive Director)

(Resigned w.e.f. 7 April 2014)

4 out of 4

(Independent Non-Executive Director) Ang Teik Siew (Ang Teik Lim Eric) (Non-Independent Non-Executive Director) Ng Wai Hung Andrew (Non-Independent Non-Executive Director)

Group Risk management The Group Risk Management function, operating in an independent capacity is part of the Bank's senior management structure which works closely as a team in managing risks to enhance stakeholders' value. Affin Hwang Investment Bank Berhad has an established comprehensive and robust risk management framework and internal control system in tandem with the complexity and diversity of the investment banking activities undertaken by the Bank. On-going initiatives and periodic reviews are undertaken by the Risk Management Division (“RMD”) at the Bank and group level to enhance the risk management policies, infrastructure and framework to ensure that credit, market and operational risks associated with the investment banking activities are adequately identified and mitigated.

RMD is functionally independent of the business divisions and is primarily responsible in identifying, monitoring, evaluating and controlling credit, market and operational risks, whilst risks in respect of compliance, stockbroking, anti-money laundering and financing of terrorism are under the purview of Compliance, Legal and Corporate Services.

The Bank’s comprehensive risk management framework and internal control system are pivotal and instrumental towards achieving the corporate objective of maximising profitability and returns to shareholders whilst ensuring prudential management of the associated risks.

8

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Directors' report for the financial period ended 31 December 2014 (continued) Corporate Governance (continued) (ii)

Nominating and Remuneration Committee ("NRC") NRC is chaired by an Independent Non-Executive Director, with the following objectives: (a) To provide a formal and transparent procedure for the appointment of all new Directors and Chief Executive Officer ("CEO") as well as assessment of effectiveness of individual directors, Board as a whole and performance of CEO and key senior management officers; and (b) To provide a formal and transparent procedure for developing remuneration policy for Directors, CEO and key senior management officers and ensuring that compensation is competitive and consistent with the Bank’s culture, objectives and strategy. The NRC, which comprises of five (5) Board members and is scheduled to meet at least on a quarterly basis, met three (3) times during the financial year. The composition of the NRC and the number of meetings attended by each member are as follows: Members

Total meetings attended

Raja Tan Sri Dato' Seri Aman bin Raja Haji Ahmad (Chairman, Independent Non-Executive Director)

(Appointed w.e.f.16 April 2014)

3 out of 3

Gen Tan Sri Yaacob bin Mohd Zain (R) (Non-Independent Non-Executive Director)

(Appointed w.e.f.16 April 2014)

3 out of 3

Tan Sri Dato' Seri Lodin bin Wok Kamaruddin (Non-Independent Non-Executive Director)

(Appointed w.e.f.16 April 2014)

3 out of 3

Ariffin bin Alias (Independent Non-Executive Director)

(Appointed w.e.f.16 April 2014)

3 out of 3

Abd Malik bin A Rahman (Independent Non-Executive Director)

(Appointed w.e.f.16 April 2014)

3 out of 3

The NRC is responsible for: • Establishing minimum requirements and criteria for the Board i.e. required mix of skills, experience, qualification and other core competencies required of a director. The NRC is also responsible for establishing the minimum requirements for the CEO. The requirements and criteria should be approved by the Board of Directors. • Recommending and assessing the nominees for directorship (including assessing Directors for re-appointment, before an application for approval is submitted to BNM), Board committee members as well as nominees for the CEO. The actual decision as to who shall be nominated should be the responsibility of the Board of Directors. • Overseeing the overall composition of the Board, in terms of the appropriate size and skills, and the balance between Executive Directors, Non-Executive Directors and Independent Non-Executive Directors through annual review and make recommendations to the Board with regard to any changes.

9

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Directors' report for the financial period ended 31 December 2014 (continued) Corporate Governance (continued) (ii)

Nominating and Remuneration Committee ("NRC") (continued) The NRC is responsible for: (continued) • Identifying and nominating, for the approval of the Board, nominees to fill Board vacancies as and when they arise. • Recommending to the Board the removal of a Director or CEO from the Board/Management if the Director/CEO is ineffective, errant and negligent in discharging his responsibilities. • Establishing a mechanism for the formal assessment on the effectiveness of the Board as a whole and the contribution of the Board’s various committees and the performance of the CEO and other key senior management officers. Annual assessment should be based on an objective performance criteria. Such performance criteria should be approved by the Board of Directors. • Ensuring that all Directors receive an appropriate continuous training programme in order for the Directors to keep abreast with the latest developments in the industry. • Oversee the appointment, management succession planning and performance evaluation of key senior management officers. • Recommend to the Board the removal of key senior management officers if they are ineffective, errant and negligent in discharging their responsibilities. • Assess on an annual basis, that the Directors and key senior management officers are not disqualified under Section 59(1) of Financial Services Act 2013. • Recommending a framework of remuneration for Directors, CEO and key senior management officers for the full Board’s approval. The remuneration framework should support the Bank’s culture, objectives and strategy and should reflect the responsibility and commitment, which goes with Board membership and responsibilities of the CEO and senior management officers. There should be a balance in determining the remuneration package, which should be sufficient to attract and retain Directors of calibre, and yet not excessive to the extent the Bank’s funds are used to subsidise the excessive remuneration packages. The framework should cover all aspects of remuneration including Directors’ fees, salaries, allowances, bonuses, options and benefits-in-kind. • Recommending specific remuneration packages for Executive Directors and the CEO. The remuneration package should be structured such that it is competitive and consistent with the Bank’s culture, objectives and strategy. Salary scales drawn up should be within the scope of the general business policy and not be dependant on short-term performance to avoid incentives for excessive risk-taking. As for Non-Executive Directors and Independent Non-Executive Directors, the level of remuneration should be linked to their level of responsibilities undertaken and contribution to the effective functioning of the Board. • Determine and make recommendations to the Board the policy for and the scope of service agreement of key senior management officers, termination payments and compensation commitments, and ensure the legality of the foregoing. The NRC shall also ensure that the compensation is competitive and consistent with the Bank's culture, objectives and strategies. • Reviewing on an annual basis, the remuneration packages of the Directors, CEO and key senior management officers. • Disclosure in the Directors' Report of the Bank's Annual Report about its activities; the membership of the committee, number of committee meetings and attendance over the course of the year and statement on the committee's assessment on the mix of skills, experience and other qualities of directors.

The NRC is not delegated with decision-making powers but reports its recommendation to the full Board for decision.

10

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Directors' report for the financial period ended 31 December 2014 (continued) Corporate Governance (continued) (iii)

Board Risk Management Committee ("BRMC") The composition of the BRMC and the number of meetings attended by each member are as follows: Members

Total meetings attended

Ariffin bin Alias (Chairman, Independent Non-Executive Director)

(Appointed w.e.f. 16 April 2014)

4 out of 4

Gen Tan Sri Yaacob bin Mohd Zain (R) (Non-Independent Non-Executive Director)

(Appointed w.e.f. 16 April 2014)

4 out of 4

Raja Tan Sri Dato' Seri Aman bin Raja Haji Ahmad (Independent Non-Executive Director)

(Appointed w.e.f. 16 April 2014)

4 out of 4

Abd Malik bin A Rahman (Independent Non-Executive Director)

(Appointed w.e.f. 16 April 2014)

4 out of 4

Tham Kwok Meng (Independent Non-Executive Director) Hwang Lip Teik (Non-Independent Non-Executive Director) Ng Wai Hung Andrew (Non-Independent Non-Executive Director)

(Resigned w.e.f. 15 April 2014)

2 out of 2

(Resigned w.e.f. 7 April 2014)

2 out of 2

(Resigned w.e.f. 7 April 2014)

2 out of 2

BRMC is chaired by an Independent Non-Executive Director is established to ensure that the risk management policies and framework adequately protect the Bank against all relevant risks comprising credit risk, market risk, liquidity risk and operational risk which includes legal risk, regulatory risk, human resource risk and anti-money laundering and counter financing of terrorism ("AML/CFT") risk. The BRMC is responsible for: • Reviewing and recommending risk management strategies, policies and risk tolerance for the Board’s approval; • Reviewing and assessing adequacy of risk management policies and framework in identifying, measuring, monitoring and controlling risk and the extent to which these are operating effectively; • Ensuring infrastructure, resources and systems are in place for risk management i.e. ensuring that the staff responsible for implementing risk management systems perform those duties independently of the Bank’s risk taking activities; and • Reviewing Management’s periodic reports on risk exposure, risk portfolio composition and risk management activities.

The BRMC, which currently comprises of four (4) Board members and scheduled to meet at least on a quarterly basis, met six (6) times during the financial period. Prior to acquisition, the BRMC had met two (2) times and subsequent to the acquisition, the BRMC had met four (4) times.

11

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Directors' report for the financial period ended 31 December 2014 (continued) Corporate Governance (continued) (iv)

Internal audit and control activities In accordance with BNM’s Guidelines on Internal Audit Functions, the Group Internal Audit Division ("GIA") conducts continuous reviews on auditable areas within the Bank. The continuous reviews by GIA are focused on areas of significant risks and the effectiveness of internal control in accordance to the audit plan approved by the Audit and Examination Committee ("AEC"). The risks highlighted on the respective auditable areas as well as recommendations made by GIA are addressed at the AEC and Management meetings on a monthly basis. The AEC shall also conduct annual reviews on the adequacy of internal audit function, scope of work, resources and budget of IA. Other duties and responsibilities of the AEC include: •

Review Affin Hwang Investment Bank Berhad's financial statements and to ensure compliance with financial reporting standards, disclosure requirements and any adjustments as suggested by the External Auditors prior to submission to the Board.

•

Review the reports of the Internal Auditors, External Auditors, BNM examiners and any other relevant parties and decide on actions to be taken on relevant issues raised in the reports.

•

Make recommendation to the Board on the appointment of External Auditors.

•

Conduct audit on all auditable entities (Head Office, branches and subsidiaries), processes, services, products, systems and provide an independent assessment to the Board of Directors, AEC and Management that the appropriate control environment is maintained with clear authority and responsibility, and with sufficient staff and resources to carry out control responsibilities.

•

Perform risk assessments to identify risks and evaluate actions taken to provide reasonable assurance that procedures and controls exist to contain those risks.

•

Maintain strong control activities including documented processes and systems, incorporating adequate controls to produce accurate financial data and provide for the safeguarding of assets, and a documented review of reported results.

At present, GIA consists of Operational Audit, Information Systems Audit, Post Approval Credit Review, Investigation and Compliance. Audit activities include these key components: •

Conduct audit on all auditable entities (Head Office, branches and subsidiaries), processes, services, products, systems and provide an independent assessment to the Board of Directors, AEC and Management that the appropriate control environment is maintained with clear authority and responsibility, and with sufficient staff and resources to carry out control responsibilities.

•

Perform risk assessments to identify risks and evaluate actions taken to provide reasonable assurance that procedures and controls exist to contain those risks.

•

Maintain strong control activities including documented processes and systems, incorporating adequate controls to produce accurate financial data and provide for the safeguarding of assets, and a documented review of reported results.

•

Ensure effective information flows and communication, including: (i)

Training and the dissemination of standards and requirements;

(ii) An information system to produce and convey complete, accurate and timely data including financial data; and

•

(iii) The upward communication of trends, developments and emerging issues. Monitor controls, including procedures to verify that controls are in place and functioning, follow up on corrective actions on control findings until its full resolution.

Based on GIA's review, identification and assessment of risks, testing and evaluation of controls, GIA will provide an opinion on the effectiveness of internal controls maintained by each entity.

12

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Directors' report for the financial period ended 31 December 2014 (continued) (v)

Audit and Examination Committee ("AEC") The AEC currently comprises of four (4) members, of whom all four (4) are Independent Non-Executive Directors and is scheduled to meet at least four (4) times annually. The AEC met six (6) times during the financial period. Prior to acquisition, the AEC had met four (4) times and subsequent to the acquisition, the AEC had met two (2) times. The composition of the AEC and the number of meetings attended by each member are as follows: Members

Total meetings attended

Lim Hun Soon @ David Lim (Chairman, Independent Non-Executive Director)

(Appointed w.e.f. 16 April 2014)

2 out of 2

Raja Tan Sri Dato' Seri Aman bin Raja Haji Ahmad (Independent Non-Executive Director)

(Appointed w.e.f. 16 April 2014)

2 out of 2

Ariffin bin Alias (Independent Non-Executive Director)

(Appointed w.e.f. 16 April 2014)

2 out of 2

Abd Malik bin A Rahman (Independent Non-Executive Director)

(Appointed w.e.f. 16 April 2014)

2 out of 2

Tham Kwok Meng (Independent Non-Executive Director)

(Resigned w.e.f.15 April 2014)

4 out of 4

Hwang Lip Teik (Non-Independent Non-Executive Director)

(Resigned w.e.f. 7 April 2014)

4 out of 4

(Resigned w.e.f.15 April 2014)

4 out of 4

(Resigned w.e.f. 7 April 2014)

4 out of 4

(Resigned w.e.f.15 April 2014)

4 out of 4

Y.A.M. Tengku Syed Badarudin Jamalullail Ibni Almarhum Tuanku Syed Putra Jamalullail (Independent Non-Executive Director) Teoh Teik Kee (Non-Independent Non-Executive Director) Mohamed Tamizi Tun Dr. Ismail (Independent Non-Executive Director)

13

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Directors' report for the financial period ended 31 December 2014 (continued) Corporate Governance (continued) (v)

Audit and Examination Committee ("AEC") (continued) The primary responsibilities of the AEC are as follows: • Ensure that the accounts are prepared in a timely and accurate manner with frequent reviews of the adequacy of provisions against contingencies, and bad and doubtful debts. Review the financial statements for submission for the Board of Directors and ensure the prompt publication of annual accounts; • Ensure that prior to publication of the annual report, a complete review is done to comply with the regulatory listing requirements; • Review the effectiveness of internal controls, including the scope of the internal audit programme, functions and resources of the internal audit functions and that it has the necessary authority to carry out its work, the internal audit findings, and recommend action to be taken by management. The reports of internal auditors and the AEC should not be subject to the clearance of the Board of Directors; • The AEC should also evaluate the performance and provide appraisal and feedback for the annual performance appraisal of the Chief Internal Auditor; • Review with the external auditors, the scope of their plan, the system of internal accounting controls, the audit reports, the assistance given by management and its staff to the auditors and any findings and action to be taken. The AEC should also select and recommend external auditors for reappointment by the Board each year;

• To review the year end financial statements before submission to the Board, focusing on: (i) going concern assumption (ii) compliance with accounting standards and other legal requirements (iii) any changes in accounting policies and practices (iv) significant adjustments, issues and unusual events arising from the audit (v) major judgemental areas; • To discuss problems and reservation arising from the interim and final external audits and any matters the external auditors may wish to discuss (in the absence of management, where necessary); • To review the external auditors’ management letter and management’s response; • To monitor related party transactions and conflict of interest situation that may arise within the Bank including any transactions, procedure or course of conduct that raises questions on management’s integrity; • To review any letter of resignation from external auditors of the Bank; and • To select external auditors for appointment by the Board unless otherwise advised is not suitable for reappointment (supported by justification/grounds).

(vi)

Board Credit Review Committee ("BCRC") BCRC is established to assist the functions of the Board in respect of its inherent authority over the debt and underwriting proposals which are considered by the Compliance & Risk Oversight Committee ("CRC"). The BCRC shall operate in accordance with the powers and authority delegated to it by the Board as follows: • To consider whether to reject a debt or underwriting proposal or modify the terms of the debt or underwriting proposal which are under the CRC's term of reference;

14

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Directors' report for the financial period ended 31 December 2014 (continued) Corporate Governance (continued) (vi)

Board Credit Review Committee ("BCRC") (continued) The BCRC shall operate in accordance with the powers and authority delegated to it by the Board as follows: (continued) • To consider and if deemed fit, to approve any request to grant waivers and exemptions from complying with the Bank’s Risk Management Policies and Discretionary Authorities, related policies and operations manuals; • Generally to ensure that the CRC's has discharged its responsibilities in a proper manner; and • Non-veto proposals shall be submitted to the BCRC for notification. The BCRC scheduled to meet on a monthly basis, comprises three (3) members of the Board, met four (4) times during the financial period. The composition of the BCRC and the number of meetings attended by each member are as follows:

Members

(vii)

Total meetings attended

Gen Tan Sri Yaacob bin Mohd Zain (R) (Chairman, Non-Independent Non-Executive Director)

(Appointed w.e.f. 16 April 2014)

4 out of 4

Raja Tan Sri Dato' Seri Aman bin Raja Haji Ahmad (Independent Non-Executive Director)

(Appointed w.e.f. 16 April 2014)

4 out of 4

Ariffin bin Alias (Independent Non-Executive Director)

(Appointed w.e.f. 16 April 2014)

4 out of 4

Investment Committee ("IC") IC is established to oversee the Bank's investment in shares. IC shall be responsible for the formulation of the investment strategies and guidelines, evaluate and approve acquisitions or disposals of share investments. The roles and responsibilities of the IC are as follows: (i)

to monitor all investments of the Bank and make decisions in accordance with the authority limits;

(ii) to record all investment decisions made and inform the Board accordingly; (iii) to formulate and review share investment and proprietary trading strategies, policies and procedures; and (iv) to appoint one (1) or more dealer(s) to execute trades in accordance with the strategies, policies and decisions of the IC.

The IC is scheduled to meet on a bi-monthly basis, met once during the financial period. The composition of the IC member are as follows: Total meetings attended

Members Tan Sri Dato' Seri Lodin bin Wok Kamaruddin (Chairman, Non-Independent Non-Executive Director)

(Appointed w.e.f. 24 September 2014)

1 out of 1

Puan Maimoonah bt Mohamed Hussain (Group Managing Director)

(Appointed w.e.f. 24 September 2014)

1 out of 1

Dato' Zulkiflee Abbas bin Abdul Hamid (Managing Director/Chief Executive Officer of AFFIN Bank Berhad)

(Appointed w.e.f. 24 September 2014)

1 out of 1

Mr. Keong Si Hark (Managing Director, Securities)

(Appointed w.e.f. 24 September 2014)

1 out of 1

15

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Directors' report for the financial period ended 31 December 2014 (continued) Corporate Governance (continued) (viii) Board Integration Oversight Committee ("BIOC") The BIOC is a standing committee of the Board, mandated to ensure sufficient oversight over the integration plan, secure the consistency of strategic decisions and ensure that the integration plan is implemented effectively in a timely manner. The Board has delegated to the BIOC responsibility to make decisions on behalf of the Board on relevant integration and business transformation decisions. The BIOC scheduled to meet on a monthly basis, comprises three (3) members of the Board, met once during the financial period. The composition of the BIOC are as follows: Members

Total meetings attended

Gen Tan Sri Yaacob bin Mohd Zain (R) (Chairman, Non-Independent Non-Executive Director)

(Appointed w.e.f. 30 April 2014)

1 out of 1

Raja Tan Sri Dato' Seri Aman bin Raja Haji Ahmad (Independent Non-Executive Director)

(Appointed w.e.f. 30 April 2014)

1 out of 1

Abd Malik bin A Rahman (Independent Non-Executive Director)

(Appointed w.e.f. 30 April 2014)

1 out of 1

The primary responsibilities of the BIOC are as follows: • Oversee that Management prepares and implements in a timely manner an effective plan to integrate the businesses of Affin Investment Bank Group and Hwang Target Companies. The BIOC approves matters relating to the structure, function, development, monitoring, co-ordination and evaluation of the integration preparation process. Specific action items include: (i) Approve goals and principles of the integration process; (ii) Approve the TORs of the Integration Steering Committee ("ISC") and Integration Management Office ("IMO") ; (iii) Approve overall integration timelines and reporting milestones; and (iv) Review integration progress milestones & ensure consistency with overall objectives. (The BIOC will receive the minutes of meetings of the ISC and IMO); • To ensure that the integration plan complements and supports the business strategy as adopted by the Board; • To make decisions on behalf of the Board on matters related to the PMI of Affin Investment Bank and/or the Affin Hwang Investment Bank referred for decision by Management or the ISC. Specific decision items may include: (i) Implementation and execution of business strategy and transformation plans; (ii) Approve appointment of senior management positions; and (iii) Review other matters which, in the opinion of the ISC Chair, is of sufficient significance or where there has been a division of opinion in the ISC, to warrant BIOC involvement; • To ensure Management prepares ambitious but prudent forecasts for the cost synergies resulting from the integration plan and continue to monitor and report on the realization of these synergies throughout the integration process;

• To decide appropriate integration objectives to be set for Senior Management and any related compensation/retention plans; • To resolve any Management disputes over any major aspects or key elements of the integration process;

16

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Directors' report for the financial period ended 31 December 2014 (continued) Corporate Governance (continued) (viii) Board Integration Oversight Committee ("BIOC") (continued) The primary responsibilities of the BIOC are as follows (continued): • To monitor risks related to the integration and the development of mitigation measures. In consultation with the Bank’s Risk Committee, oversee that at all times the Affin Hwang Group has in place the necessary management structure and staffing resource across all functions to continue to effectively manage the risks attaching to the businesses relating to integration matters; • To ensure that any branding, cultural or employee morale issues arising from the merger are effectively addressed and resolved by Management; • To monitor the communication of progress with the integration process to employees, shareholders, regulators and any other stakeholders in compliance with the relevant laws and guidelines; • The BIOC Chair will report to the Board on the ("PMI") status and key issues at its meetings. (Minutes of meetings of the BIOC will be tabled to the Board at its meetings for the information of the rest of the Board members).

(x)

Executive Committee ("EC"), Remuneration Committee ("RC") and Nomination Committee ("NC") The above committees have ceased subsequent to the acquisition of HwangDBS Investment Bank Berhad by AFFIN Holdings Berhad.

17

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Statements of financial position as at 31 December 2014

Note Assets Cash and short-term funds Deposits and placements with banks and other financial institutions Financial assets held-for-trading Financial investments available-for-sale Financial investments held-to-maturity Loans, advances and financing Trade receivables Derivative financial assets Other assets Statutory deposits with Bank Negara Malaysia Amount due from subsidiaries Investment in subsidiaries Tax recoverable Deferred tax assets Property and equipment Investment properties Intangible assets Total assets

The Group 31.07.2013 31.12.2014 RM'000 RM'000

The Bank 31.07.2013 31.12.2014 RM'000 RM'000

2

654,869

1,029,178

416,625

1,024,434

3 4 5 6 7 8 9 10 11 12 13

245,573 32,876 3,577,748 176,346 1,035,844 427,498 82,127 61,982 135,000 14,625 10,836 14,016 320,806 6,790,146

43,637 1,402,745 370,268 464,850 225,613 36,877 25,529 65,750 8,282 463 5,234 47,840 162,502 3,888,768

245,573 23,893 3,536,702 176,346 1,035,844 378,722 82,127 58,019 135,000 5,126 132,120 14,569 5,990 8,799 314,772 6,570,227

43,637 1,402,745 370,268 464,850 225,613 36,877 25,157 65,750 438 8,235 463 5,124 47,840 162,502 3,883,933

18

3,604,160

2,248,796

3,644,373

2,248,796

19 20 21 22

861,615 582,166 89,079 203,377 4,349 5,344,746

459,737 179,960 45,883 84,702 33 3,019,111

861,615 363,283 89,079 143,411 5,101,761

459,737 179,960 45,883 83,094 3,017,470

23 24

Non-controlling interests Total equity

780,000 635,071 1,415,071 30,329 1,445,400

500,000 369,279 869,279 378 869,657

780,000 688,466 1,468,466 1,468,466

500,000 366,463 866,463 866,463

Total liabilities and equity

6,790,146

3,888,768

6,570,227

3,883,933

4,172,294

3,159,251

4,172,294

3,159,251

Liabilities and equity Deposits from customers Deposits and placements of banks and other financial institutions Trade payables Derivative financial liabilities Other liabilities Provision for taxation Total liabilities Share capital Reserves

Commitments and contingencies

14 15 16 17

36

The accounting policies on pages 27 to 44 and the notes to the financial statements on pages 45 to 142 form an integral part of these financial statements.

19

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Income statements for the financial period ended 31 December 2014

Note Interest income Interest expense Net interest income Other operating income Net income Other operating expenses Operating profit before allowances Write-back/(Allowances) for loans, advances and financing and receivables Write back of impairment loss on securities Share of results of associate, net of tax Profit before zakat and taxation Zakat Profit before taxation Taxation Net profit after zakat and taxation

The Group 17 months 12 months period ended period ended 31.12.2014 31.07.2013 RM'000 RM'000

25 26 27 28

29 30

33

Attributable to: Equity holders of the Bank Non-controlling interest

Earnings per share (sen) : Basic/fully diluted

34

The Bank 17 months 12 months period ended period ended 31.12.2014 31.07.2013 RM'000 RM'000

220,482 (136,034) 84,448 408,457 492,905 (345,109) 147,796

136,228 (86,900) 49,328 104,813 154,141 (114,904) 39,237

217,613 (136,129) 81,484 250,513 331,997 (211,448) 120,549

136,132 (86,900) 49,232 102,993 152,225 (112,909) 39,316

654 57 148,507 917 149,424 (379) 149,045 (30,821) 118,224

(879) 38,358 38,358 38,358 (8,890) 29,468

654 57 121,260 121,260 (274) 120,986 (20,566) 100,420

(879) 318 38,755 38,755 38,755 (8,711) 30,044

111,135 7,089 118,224

29,461 7 29,468

100,420 100,420

30,044 30,044

20.04

5.89

18.11

6.01

The accounting policies on pages 27 to 44 and the notes to the financial statements on pages 45 to 142 form an integral part of these financial statements.

20

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Statements of Comprehensive Income for the financial period ended 31 December 2014 The Group

Note

17 months period ended 31.12.2014 RM'000 118,224

Net profit after zakat and taxation Other comprehensive income: Items that may be reclassified subsequently to profit or loss Net fair value change in financial investments available-for-sale Net gain transferred to profit or loss on disposal of financial investments available-for-sale Deferred tax on financial investments available-for-sale Other comprehensive income/(expense) for the financial period/year, net of tax Total comprehensive income for the financial period/year

14

12 months period ended 31.07.2013 RM'000 29,468

17 months period ended 31.12.2014 RM'000 100,420

12 months period ended 31.07.2013 RM'000 30,044

4,696

(1,129)

4,564

(1,129)

(2,151)

(2,125)

(2,186)

(2,125)

(595) 1,950

Attributable to: Equity holders of the Bank Non-controlling interests

The Bank

813 (2,441)

(595) 1,783

813 (2,441)

120,174

27,027

102,203

27,603

113,050 7,124 120,174

27,020 7 27,027

102,203 102,203

27,603 27,603

The accounting policies on pages 27 to 44 and the notes to the financial statements on pages 45 to 142 form an integral part of these financial statements.

21

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Statement of changes in equity for the financial period ended 31 December 2014

Note

Number of shares '000

The Group At 1 August 2013 Comprehensive income: Net profit for the financial period Other comprehensive income (net of tax) -Financial investments available-for-sale Total comprehensive income Transfer to statutory reserves Transfer to regulatory reserves Issue of share capital Acquisition of subsidiaries Acquisition of equity interests Disposal of subsidiary

500,000 -

Share premium RM'000 -

Statutory reserves RM'000

Regulatory reserves RM'000

148,861

Available -for-sale revaluation reserves RM'000

Retained profits RM'000

Sub-total RM'000

Noncontrolling interests RM'000

Total equity RM'000

-

3,564

216,854

869,279

378

869,657

-

-

-

111,135

111,135

7,089

118,224

1,915 113,050 499,800 (67,058) -

35 7,124 23,209 (382)

1,950 120,174 499,800 (67,058) 23,209 (382)

280,000 -

219,800 -

50,210 -

3,556 -

1,915 1,915 -

111,135 (50,210) (3,556) (67,058) -

At 31 December 2014

780,000

219,800

199,071

3,556

5,479

207,165

1,415,071

30,329

1,445,400

At 1 August 2012

500,000

133,839

-

6,005

224,915

864,759

371

865,130

-

-

29,461

29,461

7

29,468

-

(2,441) (2,441) 3,564

29,461 (15,022) (22,500) 216,854

(2,441) 27,020 (22,500) 869,279

Comprehensive income: Net profit for the financial year Other comprehensive income, (net of tax) Financial investments available-for-sale Total comprehensive income Transfer to statutory reserve Dividends paid At 31 July 2013

23

-

35

500,000

-

-

15,022 148,861

The accounting policies on pages 27 to 44 and the notes to the financial statements on pages 45 to 142 form an integral part of these financial statements. 22

7 378

(2,441) 27,027 (22,500) 869,657

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Statement of changes in equity for the financial period ended 31 December 2014 (continued)



Note

Number of shares '000

The Bank At 1 August 2013 Comprehensive income: Net profit for the financial period Other comprehensive income (net of tax) Financial investments available-for-sale Total comprehensive income Transfer to statutory reserves Transfer to regulatory reserves Issue of share capital

500,000 -

23

At 31 December 2014

Share premium RM'000 -

Statutory reserves RM'000 148,861

-

Regulatory reserves RM'000

Available -for-sale revaluation reserves RM'000

Retained profits RM'000

Total RM'000

-

3,564

214,038

866,463

-

-

-

100,420

100,420 1,783 102,203 499,800

280,000

219,800

50,210 -

3,556 -

1,783 1,783 -

100,420 (50,210) (3,556) -

780,000

219,800

199,071

3,556

5,347

260,692

1,468,466

133,839

-

6,005

221,516

861,360

-

-

30,044

30,044

-

(2,441) (2,441) 3,564

30,044 (15,022) (22,500) 214,038

(2,441) 27,603 (22,500) 866,463

The Bank At 1 August 2012 Comprehensive income: Net profit for the financial year Other comprehensive income, (net of tax) Financial investments available-for-sale Total comprehensive income Transfer to statutory reserve Dividends paid At 31 July 2013

500,000 -

35

500,000

-

15,022 148,861

The accounting policies on pages 27 to 44 and the notes to the financial statements on pages 45 to 142 form an integral part of these financial statements.

23

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Statements of cash flows for the financial period ended 31 December 2014

Note

The Group 17 months 12 months period ended period ended 31.12.2014 31.07.2013 RM'000 RM'000

The Bank 17 months 12 months period ended period ended 31.12.2014 31.07.2013 RM'000 RM'000

CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Adjustments for items not involving the movement of cash and cash equivalents: Interest income: - financial assets held-for-trading - financial investments available-for-sale - financial investments held-to-maturity Net (accretion)/amortisation of discounts/premium Dividend income: - financial assets held-for-trading - financial investments available-for-sale Dividend income from subsidiaries Share of results of associate, net of tax Gain on disposal of property and equipment Gain on disposal of investment properties Loss on disposal of a subsidiary Loss on disposal of other investment Gain on disposal of an associate Gain arising from disposal/redemption of: - derivative instruments - financial assets held-for-trading - financial investments available-for-sale - financial investments held-to-maturity Property and equipment written off Depreciation of property and equipment Depreciation of investment properties Amortisation of intangible assets Unrealised (gain)/loss on: - derivative instruments - financial assets held-for-trading Write-back on allowance for impairment: - financial investments available-for-sale - investment in subsidiary Net of collective impairment Net of individual impairment Allowance for bad and doubtful debt on other debtors Zakat Bad debt written off Bad debt recovered Unrealised exchange gain Operating profit before changes in working capital

24

149,045

38,358

120,986

38,755

(3,281) (89,531) (29,332) (673)

(5,260) (49,318) (23,393) 1,045

(3,281) (89,531) (29,332) (673)

(5,260) (49,318) (23,393) 1,045

(3,105) (13,363) (917) (646) (38,674) 399 112 -

(717) (6,085) (185) -

(2,050) (13,363) (3,000) (646) (38,674) 380 112 (4,378)

(717) (6,085) (944) (185) -

(703) (52,523) (2,998) (3,220) 57 4,516 24 801

9,368 (18,399) (2,225) 14 2,411 143 -

(703) (52,523) (2,793) (3,220) 57 3,104 24 193

9,368 (18,399) (2,225) 14 2,365 143 -

(5,734) 227

(6,091) 2,671

(5,734) 216

(6,091) 2,671

(57) (3,981) 3,809 108 379 41 (631) (10,510) (100,361)

965 133 (219) (15,811) (72,595)

(57) (3,981) 3,809 108 274 41 (631) (10,101) (135,367)

(318) 965 133 (219) (15,811) (73,506)

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Statements of cash flows for the financial period ended 31 December 2014 (continued)

Note Decrease/(increase) in operating assets Loans, advances and financing Deposits and placements with banks and other financial institutions Statutory deposits with Bank Negara Malaysia Trade receivables Other assets Intercompany balances Derivative financial assets Financial assets held-for-trading (Decrease)/increase in operating liabilities Deposits from customers Deposits and placements of banks and other financial institutions Trade payables Derivative financials liabilities Other liabilities Cash (used in)/generated from operating activities Tax paid NET CASH (USED IN)/GENERATED FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of property and equipment Proceeds from disposals of investment properties Proceeds from disposal of other investments Purchase of property and equipment Purchase of intangible assets Interest received: - financial investments available-for-sale - financial investments held-to-maturity Net proceeds from disposal of financial investments available-for-sale Proceeds on redemption of financial investments held-to-maturity Amount received from Bursa Malaysia Derivatives arising from revamp of participantship structure Net cash outflow from disposal of subsidiary Issuance of shares Acquisition of subsidiaries Cash consideration for merger of businessess Proceeds from disposal of an equity interest in an associate Acquisition of an equity interest in an associate Acquisition of interest in an associate Capital distribution by subsidiary (in liquidation) Dividend income received from: - subsidiaries - financial investments available-for-sale NET CASH GENERATED FROM INVESTING ACTIVITIES

The Group 17 months 12 months period ended period ended 31.12.2014 31.07.2013 RM'000 RM'000

157,601

(94,409)

157,601

(94,409)

1,901 22,936 240,181 (30,772) (37,940) 97,764 451,671

(9,130) (46,588) (27,722) 21,815 135,947 (20,087)

901 22,936 182,697 (26,635) 74 (37,940) 92,421 392,055

(9,130) (46,588) (27,749) 21,815 135,947 (20,114)

(982,576)

108,870

(942,363)

108,870

(111,888) (146,351) 42,974 73,043 (1,124,798) (773,488)

177,288 48,231 (2,626) 15,058 346,821 254,139

(111,888) (138,818) 42,974 (2,734) (1,152,829) (896,141)

177,288 48,231 (2,626) 14,454 346,217 252,597

(30,131)

(9,102)

(17,907)

(8,794)

(803,619)

41(d)

25

The Bank 17 months 12 months period ended period ended 31.12.2014 31.07.2013 RM'000 RM'000

245,037

(914,048)

243,803

891 87,500 23 (2,939) (1,341)

1,041 436 (2,312) -

874 87,500 (1,306) (702)

1,041 436 (2,274) -

89,531 29,332

49,318 23,393

89,531 29,332

49,318 23,393

158,324

183,481

144,017

183,481

176,220

37,018

176,220

37,018

984 (240) 499,800 (2,062) (612,994)

-

499,800 (132,116) (613,140)

-

(10,624) (6,892) -

-

11,270 (6,892) 54

2,961

13,363

6,085

3,000 13,363

944 6,085

418,876

298,460

300,805

302,403

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Statements of cash flows for the financial period ended 31 December 2014 The Group

Note

17 months period ended 31.12.2014 RM'000

The Bank

12 months period ended 31.07.2013 RM'000

17 months period ended 31.12.2014 RM'000

12 months period ended 31.07.2013 RM'000

CASH FLOWS USED IN FINANCING ACTIVITIES Subordinated term loan to a subsidiary Dividends paid

-

(22,500)

(5,000) -

(22,500)

NET CASH USED IN FINANCING ACTIVITIES

-

(22,500)

(5,000)

(22,500)

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENT

(384,743)

520,997

(618,243)

523,706

CASH AND CASH EQUIVALENT AT BEGINNING OF THE PERIOD/YEAR

991,429

470,432

986,685

462,979

CASH AND CASH EQUIVALENT AS AT END OF THE PERIOD/YEAR

606,686

991,429

368,442

986,685

654,869

1,029,178

416,625

1,024,434

ANALYSIS OF CASH AND CASH EQUIVALENTS Cash and short-term funds Amount held on behalf of commissioned dealer's representatives Cash and cash equivalents

2

(48,183) 606,686

(37,749) 991,429

(48,183) 368,442

(37,749) 986,685

The accounting policies on pages 27 to 44 and the notes to the financial statements on pages 45 to 142 form an integral part of these financial statements. 26

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements. These policies have been consistently applied to all the financial years presented, unless otherwise stated. A Basis of preparation The financial statements of the Group and the Bank have been prepared in accordance with the Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards ("IFRS"), and the requirements of the Companies Act, 1965 in Malaysia. The financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The preparation of financial statements in conformity with MFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires Directors to exercise their judgment in the process of applying the Group and the Bank’s accounting policies. Although these estimates and judgments are based on the Directors’ best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 47. (a) Standards, amendments to published standards and interpretations to existing standards that are applicable and effective to the Group and the Bank The new accounting standards, amendments and improvements to published standards and interpretations that are applicable and effective for the Group and the Bank's financial period beginning on or after 1 August 2013 are as follows: • • • • • • • • • • • • • • • •

MFRS 10, 'Consolidated Financial Statements' MFRS 12, 'Disclosures of Interests in Other Entities' MFRS 13, 'Fair Value Measurement' The revised MFRS 127, 'Separate Financial Statements' The revised MFRS 128, 'Investments in Associates and Joint Ventures' MFRS 3, 'Business Combinations' Amendment to MFRS 7, 'Financial Instruments: Disclosures' Amendments to MFRS 119, 'Employee Benefits' Amendments to MFRS 10, MFRS 11 and MFRS 12, 'Consolidated Financial Statements, Joint Arrangements and Disclosures of Interest in Other Entities: Transition Guidance' Amendments to MFRS 132, 'Offsetting Financial Assets and Financial Liabilities' Annual improvements 2009 - 2011 cycle Amendments to MFRS 132, 'Offsetting Financial Assets and Financial Liabilities' Amendments to MFRS 136, 'Recoverable Amount Disclosures for Non-Financial Assets' Amendments to MFRS 10, MFRS 12 and MFRS 127 'Investment Entities' IC Interpretation 21, 'Levies'

The adoption of the above accounting standards, amendments and improvements to published standards and interpretations did not have any significant impact to the results of the Group and the Bank.

27

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 (continued) A Basis of preparation (continued) (b) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group and the Bank but not yet effective A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 August 2013 are as follows: • Amendment to MFRS 11 'Joint arrangements' (effective from 1 January 2016) requires an investor to apply the principles of MFRS 3 'Business Combination' when it acquires an interest in a joint operation that constitutes a business. The amendments are applicable to both the acquisition of the initial interest in a joint operation and the acquisition of additional interest in the same joint operation. However, a previously held interest is not re-measured when the acquisition of an additional interest in the same joint operation results in retaining joint control. • Amendments to MFRS 116 'Property, plant and equipment' and MFRS 138 'Intangible assets' (effective from 1 January 2016) clarify that the use of revenue-based methods to calculate the depreciation and amortisation of an item of property, plant and equipment and intangible are not appropriate. This is because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The amendments to MFRS 138 also clarify that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption can be overcome only in the limited circumstances where the intangible asset is expressed as a measure of revenue or where it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated. • Amendments to MFRS 10 and MFRS 128 regarding sale or contribution of assets between an investor and its associate or joint venture (effective from 1 January 2016) resolve a current inconsistency between MFRS 10 and MFRS 128. The accounting treatment depends on whether the non-monetary assets sold or contributed to an associate or joint venture constitute a 'business'. Full gain or loss shall be recognised by the investor where the nonmonetary assets constitute a 'business'. If the assets do not meet the definition of a business, the gain or loss is recognised by the investor to the extent of the other investors' interests. The amendments will only apply when an investor sells or contributes assets to its associate or joint venture. They are not intended to address accounting for the sale or contribution of assets by an investor in a joint operation. • MFRS 9 'Financial Instruments' (effective from 1 January 2018) will replace MFRS 139 Financial Instruments: 'Recognition and Measurement'. The complete version of MFRS 9 was issued in November 2014. MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income ("OCI"). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with a irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. There is now a new expected credit losses model on impairment for all financial assets that replaces the incurred loss impairment model used in MFRS 139. The expected credit losses model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. 28

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 (continued) A Basis of preparation (continued) (b) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group and the Bank but not yet effective (continued) A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 August 2013 are as follows: (continued): • MFRS 15 ‘Revenue from contracts with customers’ (effective from 1 January 2017) deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces MFRS 118 ‘Revenue’ and MFRS 111 ‘Construction contracts’ and related interpretations. The Group and the Bank will apply these standards when effective. The adoption of the above standards, amendments to published standards and interpretations to existing standards are not expected to have any significant impact on the financial statements of the Group and the Bank except for MFRS 9 and MFRS 15. The financial effect of adoption of MFRS 9 and MFRS 15 are still being assessed by the Group and the Bank. B

Consolidation (a) Subsidiaries Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, 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. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisitiondate fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recognised as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement. Refer to accounting policy Note D on goodwill. Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is re-measured at the acquisition date, any gain or losses arising from such re-measurement are recognised in profit or loss.

29

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 (continued) B

Consolidation (continued) (a) Subsidiaries (continued) Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with MFRS 139 either in profit or loss or change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity. The Group applies predecessor accounting to account for business combinations under common control. Under predecessor accounting, assets and liabilities acquired are not restated to their respective fair values. They are recognised at the carrying amounts from the consolidated financial statements of the ultimate holding company of the Group and adjusted to conform with the accounting policies adopted by the Group. The difference between any consideration given and the aggregate carrying amounts of the assets and liabilities (as of the date of the transaction) of the acquired entity is recognised as an adjustment to equity. No additional goodwill is recognised. The acquired entity’s results, assets and liabilities are consolidated from the date on which the business combination between entities under common control occurred. Consequently, the consolidated financial statements do not reflect the results of the acquired entity for the period before the transaction occurred. The corresponding amounts for the previous year are not restated. Inter-company transactions, balances and unrealised gains and loss on transactions between group companies are eliminated. Where necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting policies. (b) Changes in ownership interests in subsidiaries without change of control Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. (c) Disposal of subsidiaries When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as a financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. (d) Investment in subsidiaries In the Bank’s separate financial statements, investments in subsidiaries are carried at cost less accumulated impairment losses. On disposal of investments in subsidiaries, the difference between disposal proceeds and the carrying amounts of the investments are recognised in profit or loss. The amounts due from subsidiaries of which the Bank does not expect repayment in the foreseeable future are considered as part of the Bank’s investments in the subsidiaries.

30

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 (continued) C Property and equipment and depreciation Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes expenditures that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is de-recognised. All other repairs and maintenance are charged to the income statements during the financial period in which they are incurred. Property and equipment are depreciated on a straight line basis to write off the cost of the assets or their revalued amounts, to their residual values over their estimated useful lives, summarised as follows: Renovations Office equipment and furniture Motor vehicles Computer equipment

5 to 10 years 5 to 10 years 5 years 3 to 5 years

Depreciation of capital work in progress conmences when the assets are ready for their intended use. Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at each reporting date. At each reporting date, the Group assesses whether there is any indication of impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. A write down is made if the carrying amount exceeds the recoverable amount. Any subsequent increase in the recoverable amount is recognised in the income statements. Refer to accounting policy Note F on impairment of non-financial assets. Gains and losses on disposal are determined by comparing proceeds with carrying amount and are included in other operating income in income statement.

31

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 (continued) D

Intangible assets (a) Goodwill Goodwill arises on the acquisition of subsidiaries and represents the excess of the aggregate of the acquisition date fair value of consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the net of the acquisition date fair value of the identifiable assets acquired and liabilities assumed. If the fair value of consideration transferred, the amount of non-controlling interest and the fair value of previously held interest in the acquiree are less than the fair value of the net identifiable assets of the acquiree, the resulting gain is recognised in the profit or loss. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (“CGUs”), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed. (b) Computer software Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of five years. Computer software classified as intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses, if any.

(c) Merchant bank license The merchant bank license represents contribution by the investment banking subsidiary to the Government of Malaysia for a license to carry on merchant banking business and is considered to have an indefinite useful life, which is not amortised and is assessed for impairment annually.

E

Investment properties Investment properties, comprising principally land and office buildings, are held for long term rental yields or for capital appreciation or both, and are not occupied by the Group and the Bank. Investment property is measured initially at its cost, including related transaction costs and borrowing costs if the investment property meets the definition of qualifying asset. After initial recognition, investment property is stated at cost less any accumulated depreciation and impairment losses if any. Freehold land is not depreciated. Buildings are depreciated at a principal annual rate of 2% on the straight line basis to allocate the cost to their residual values over their estimated useful lives. Investment property is derecognised either when it has been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal.

32

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 (continued) F

Impairment of non-financial assets Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (“Cash-Generating Units”). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. The impairment loss is charged to the profit or loss unless it reverses a previous revaluation in which case it is charged to the revaluation surplus. Impairment losses on goodwill are not reversed. In respect of other assets, any subsequent increase in recoverable amount is recognised in the profit or loss unless it reverses an impairment loss on a revalued asset in which case it is taken to revaluation surplus reserve.

G Financial assets (a) Classification The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, available-for-sale and held-to-maturity. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification at initial recognition. (i) Financial assets at fair value through profit or loss (“FVTPL”) Financial assets held-for-trading are categorised as financial assets at fair value through profit or loss. Financial assets held-for-trading are assets that are acquired or incurred principally for the purpose of selling or repurchasing it in the near term. Derivatives are also categorised as held for trading unless they are designated as hedges. Refer to accounting policy Note J. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. (iii) Financial investments available-for-sale Financial investments available-for-sale are non-derivatives that are either designated in this category or not classified in any of the other categories. (iv) Financial investments held-to-maturity Financial investments held-to-maturity are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s and the Bank’s management has the positive intention and ability to hold to maturity. If the Group and the Bank were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as available-for-sale.

33

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 (continued) G Financial assets (continued) (b) Recognition and initial measurement Regular purchases and sales of financial assets are recognised on the settlement date, the date that an asset is delivered to or by the Group and the Bank. Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in profit or loss. (c) Subsequent measurement – gains and losses Financial investments available-for-sale and financial assets at FVTPL are subsequently carried at fair value. Loans and receivables and held-to-maturity financial assets are subsequently carried at amortised cost using the effective interest/profit method. Changes in the fair values of financial assets at FVTPL, including the effects of currency translation, interest and dividend income are recognised in income statement in the period in which the changes arise. Changes in the fair value financial investments available-for-sale are recognised in other comprehensive income, except for impairment losses (Note G Impairment of financial assets) and foreign exchange gains and losses on monetary assets (Note M). Interest and dividend income on financial investments available-for-sale are recognised separately in income statements. Interest on financial investments available-for-sale calculated using the effective interest/ profit method is recognised in income statements. Dividend income on available-for-sale equity instruments are recognised in income statements when the Group’s right to receive payments is established. (d) De-recognition Financial assets are de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables that are factored out to banks and other financial institutions with recourse to the Group are not derecognised until the recourse period has expired and the risks and rewards of the receivables have been fully transferred. The corresponding cash received from the financial institutions is recorded as borrowings. (e) Reclassification of financial assets The Group and the Bank may choose to reclassify and non-derivative financial assets held-for-trading out of the held-for• in rare circumstances, it is no longer held for the purpose of selling or repurchasing in the near term; or • it is no longer held for purpose of trading, it would have met the definition of a loan and receivable on initial classification and the Group and the Bank have the intention and ability to hold it for the foreseeable future or until maturity at the date of reclassification. Reclassifications are made at the fair value at the date of reclassification.

34

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 (continued) G Financial assets (continued) (f) Impairment of financial assets (i) Assets carried at amortised cost The Group assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Group and the Bank use to determine that there is objective evidence of an impairment loss include among others: • past due contractual payments; • significant financial difficulties of the borrower; • probability of bankruptcy or other financial re-organisation • default of related borrower. • measureble decrease in estimated future cash flow than was originally envisaged, and • significant deterioration in issue's credit rating The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The asset’s carrying amount of the asset is reduced and the amount of the loss is recognised in income statements. If ‘loans and receivables’ or a ‘held-to-maturity investment’ has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. 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 (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in income statements. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. For loans, advances and financing, the Group and the Bank first assess whether objective evidence of impairment exists individually for loans, advances and financing that are individually significant, and individually or collectively for loans, advances and financing that are not individually significant. If the Group and the Bank determine that no objective evidence of impairment exists for individually assessed loans, advances and financing, whether significant or not, it includes the asset in a group of loans, advances and financing with similar credit risk characteristics and collectively assesses them for impairment.

35

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 (continued) G Financial assets (continued) (f) Impairment of financial assets (continued) (i) Assets carried at amortised cost (continued) Individual impairment allowance Loans, advances and financing that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. Loans that are individually assessed for impairment and for which no impairment loss is required (over-collateralised loans) are collectively assessed as a separate segment. The amount of the loss is measured as the difference between the loan's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the loan's original effective interest rate. The carrying amount of the loan is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. The calculation of the present value of the estimated future cash flows of a collateralised loan reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.

Collective impairment allowance For the purposes of a collective evaluation of impairment, loans, advances and financing are grouped on the basis of similar credit risk characteristics. Those characteristics are relevant to the estimation of future cash flows for groups of such loans, advances and financing by being indicative of the borrowers' ability to pay all amounts due according to the contractual terms of the loans being evaluated. Future cash flows in a group of loans that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the loans in the Bank and historical loss experience for loans with credit risk characteristics similar to those in the Bank. Historical loss experience is adjusted on the basis of 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 to remove the effects of conditions in the historical period that do not currently exist. Estimates of changes in future cash flows for groups of loans should reflect and be directionally consistent with changes in related observable data from period to period (for example, changes in unemployment rates, property prices, payment status, or other factors indicative of changes in the probability of losses in the Group and the Bank and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group and the Bank to reduce any differences between loss estimates and actual loss experience. Pursuant to Paragraph 13 of the Guideline on Classification and Impairment Provisions for Loans/Financing, BNM had issued a letter on 4 February 2014, which require banking institutions to maintain, in aggregate collective impairment provisions and regulatory reserves of no less than 1.2% of total outstanding loans/financing (excluding loans, advances and financing with an explicit guarantee from the Federal Government of Malaysia), net of individual impairment provisions. Banking institutions are required to comply with the requirement by 31 December 2015.

As at reporting date, the Group and the Bank have maintained the collective impairment provisions and regulatory reserves of no less than 1.2% in the books by transferring RM 3.6 million from retained profits to regulatory reserves.

36

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 (continued) G Financial assets (continued) (f) Impairment of financial assets (continued) (ii) Assets classified as available-for-sale The Group and the Bank assess at the end of the reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. For debt securities, the Group and the Bank use criteria and measurement of impairment loss applicable for ‘assets carried at amortised cost’ above. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in income statements, the impairment loss is reversed through income statements. In the case of equity securities classified as available-for-sale, in addition to the criteria for ‘assets carried at amortised cost’ above, a significant or prolonged decline in the fair value of the security below its cost is also considered as an indicator that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss that had been recognised directly in equity is removed from equity and recognised in income statements. The amount of cumulative loss reclassified to profit or loss is the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in income statements. Impairment losses recognised in income statements on equity instruments classified as available-for-sale are not reversed through income statements.

H Financial liabilities All financial liabilities including derivative financial instruments have to be recognised in the statements of financial position and measured in accordance with their assigned category. The Group and the Bank's holding in financial liabilities are in financial liabilities at fair value through profit or loss (including financial liabilities held-for-trading and those that designated at fair value) and financial liabilities at amortised cost. Financial liabilities are initially recognised at fair value plus transaction costs for all financial liabilities not carried at fair value through profit or loss (''FVTPL''). (a) Financial liabilities at FVTPL This category comprises two sub-categories: financial liabilities classified as held-for-trading and financial liabilities designated by the Group and the Bank at fair value through profit or loss upon initial recognition. The Group and the Bank do not have any non-derivative financial liabilities designated at fair value through profit or loss. A financial liability is classified as held-for-trading if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term or if it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. Derivatives are also categorised as held-for-trading unless they are designated and effective as hedging instruments. Derivatives are recognised in the statements of financial position as 'Derivative financial liabilities' when their fair values are negative. Financial liabilities classified as held-for-trading are initially recognised at fair value, and transaction costs are expensed in profit or loss. Gains and losses arising from changes in fair value of financial liabilities classified as held-for-trading are included in the income statement.

37

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 (continued) H Financial liabilities (continued) (b) Other liabilities measured at amortised cost Financial liabilities that are not classified as fair value through profit or loss fall into this category and are measured at amortised cost. All the financial liabilities except for derivative financial liabilities of the Group and the Bank are measured at amortised cost. (c) De-recognition Financial liabilities are de-recognised when they have been redeemed or otherwise extinguished. I

Offsetting financial instruments Financial assets and liabilities are offset and the net amount presented in the statements of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the assets and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy.

J

Derivative financial instruments and hedge accounting Derivatives are initially recognised at fair values on the date on which derivative contracts are entered into and are subsequently remeasured at their fair values. Fair values are obtained from quoted market prices in active markets, including recent market transactions, and valuation techniques, including discounted cash flow models and option pricing models, as appropriate. All derivatives are carried as assets when fair values are positive and as liabilities when fair values are negative. The best evidence of fair value of a derivative at initial recognition is the transaction price (i.e the fair value of the consideration given or received) unless fair value of the instrument is evidenced by comparison with other observable current market transactions in the same instrument (i.e without modification or repackaging) or based on a valuation technique whose variables include only data from observable markets. The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. As at 31 December 2014, the Group and the Bank have not designated any derivatives as hedging intruments. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statements. Gains and losses on interest rate swaps, futures, forward and option contracts that do not qualify as hedges are recognised in the current financial period using the mark-to-market method and are included in the income statements.

38

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 (continued) K Trade receivables In accordance with the Rules of Bursa Malaysia Securities Berhad (“Bursa Securities”), clients’ accounts are classified as impaired accounts under the following circumstances: Types

Criteria for classification of accounts as impaired

Contra losses

When an account remains outstanding for 16 calendar days or more from the date of contra transaction

Overdue purchase contracts

When an account remains outstanding from T+5 market days onwards (non-margin purchase) and T+9 market days onwards (discretionary financing)

Bad debts are written off when identified. Impairment allowances are made for balances due from clients which are considered doubtful or which have been classified as impaired, after taking into consideration collateral held by the Group and deposits of and amounts due to dealer representative in accordance with the Rules of Bursa Securities. L

Current and deferred income taxes Current tax The tax expense for the financial period comprises current and deferred tax. Tax is recognised in income statements, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period where the Group’s subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. This liability is measured using the single best estimate of the most likely outcome. Deferred tax Deferred tax is recognised using the liability method, on temporary differences arising between the amounts attributed to assets and liabilities for tax purposes and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences or unused tax losses can be utilised. Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred tax assets is realised or the deferred tax liability is settled. Deferred tax is recognised on temporary differences arising on investment in subsidiaries, except where the timing of the reversal of the temporary difference can be controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred and income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

39

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 (continued) M Foreign currency translations (a) Functional and presentation currency Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The financial statements are presented in Ringgit Malaysia, which is the Bank’s functional and presentation currency. (b) Foreign currency transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statements, except when deferred in the statement of comprehensive income as qualifying cash flows hedges and qualifying net investment hedges. Changes in the fair value of monetary financial assets denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the financial asset and other changes in the carrying amount of the financial asset. Translation differences related to changes in the amortised cost are recognised in income, and other changes in the carrying amount are recognised in other comprehensive income. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available-for-sale are included in the fair value reserve in other comprehensive income.

N Provisions Provisions are recognised by the Group and the Bank when all of the following conditions have been met: • the Group and the Bank have a present legal or constructive obligation as a result of past events; • it is probable that an outflow of resources to settle the obligation will be required; and • a reliable estimate of the amount of obligation can be made. Where the Group and the Bank expect a provision to be reimbursed (for example, under an insurance contract), the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pretax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as finance cost expense.

40

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 (continued) O Employee benefits (a) Short-term employee benefits Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the financial period in which the associated services are rendered by employees of the Group. (b) Defined contribution plan The defined contribution plan is a pension plan under which the Group pays fixed contributions to the National Pension Scheme, the Employees’ Provident Fund (“EPF”) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior financial periods. The Group’s contribution to the defined contribution plan are charged to the income statements in the financial period to which they relate. Once contributions have been paid, the Group has no further payment obligations. P

Zakat This represents business zakat payable by the Group in compliance with the principles of Shariah. The Bank only pays zakat on its business and does not pay zakat on behalf of depositors. Zakat provision is calculated based on 2.5% of net operating profit from management of Islamic funds approved by the Shariah Supervisory Council.

Q Cash and cash equivalents Cash and cash equivalents consist of cash in hand, bank balances and deposits and placements maturing within one month which are held for the purpose of meeting short-term commitments and are readily convertible into cash without significant risk of changes in value. R Contingent liabilities and contingent assets The Group does not recognise contingent assets and liabilities other than those arising from business combination, but disclose its existence in the financial statements. A contingent liability is a possible obligation that arises from past events where existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group and the Bank or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably. However, contingent liabilities do not include financial guarantee contracts. A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or nonoccurrence of one or more uncertain future events beyond the control of the Group and the Bank. The Group and the Bank do not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually certain.

41

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 (continued) S

Operating lease Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to income statements on the straight line basis over the lease period. Initial direct cost incurred by the Group and the Bank in negotiating and arranging operating leases are capitalised as prepayments and recognised in income statements over the lease term on a straight line basis.

T

Recognition of interest and financing income and expense Interest and financing income and expense for all interest bearing financial instruments measured at amortised cost and interest bearing financial assets as held-for-trading and available-for-sale are recognised within “interest income” and “interest expense” respectively in the income statement using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest and financing income or expense over the relevant period. The effective interest rate is the rate that exactly 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 asset or financial liability. When calculating the effective interest rate, the Group and the Bank take into account all contractual terms of the financial instrument and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the effective interest rate, but not future credit losses. Interest or income on impaired financial assets is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. When a loan receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan and receivable are recognised using the original effective interest rate.

42

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 (continued) U Recognition of fees and other income Loan arrangement fees and commissions are recognised as income when all conditions precedent are fulfilled. Corporate advisory fees are recognised as income on completion of each stage of the engagement and issuance of invoice. Portfolio management fees, commitment fees, guarantee fees, agency fees and are recognised as income based on time apportionment. Dividends are recognised when the shareholders' right to receive payment is established. Brokerage income is recognised when contracts are executed. Rollover fee is recognise upon the rollover of specific contracts under share margin financing. Where debtors are classified as doubtful or bad, interest income is suspended until it is realised on cash basis. Initial service charge and management fee are recognised as income on an accrual basis at the rates stated in the prospectus of the respective unit trust funds. Distribution income from the unit trust funds is recognised on the ex-distribution date. Management fee for private mandates is recognised as income on an accrual basis at the rates stated in the Investment Mandate Agreement of the respective private mandates. Rental income and all other income are recognised on accrual basis. Net profit from financial assets held-for-trading and financial investments available-for-sale are recognised upon disposal of the securities, as the difference between net disposal proceeds and the carrying amount of the securities. V Finance guarantee contracts Financial guarantee contracts are contracts that require the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to financial institutions and other bodies on behalf of customers to secure loans, overdrafts and other banking facilities. Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The fair value of a financial guarantee at the time of signature is zero because all guarantees are agreed on arm’s length terms and the value of the premium agreed corresponds to the value of the guarantee obligation. No receivable for the future premiums is recognised. The liability is subsequently recognised at the higher of the amount determined in accordance with MFRS 137 "Provisions, contingent liabilities and contingent assets" and the amount initially recognised less cumulative amortisation, where appropriate. The fair value of financial guarantees is determined as the present value of the difference in net cash flows between the contractual payments under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations. Where financial guarantees in relation to loans or payables of subsidiaries are provided by the Group for no compensation, the fair values are accounted for as contributions and recognised as part of the cost of investment in subsidiaries.

43

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Summary of significant accounting policies for the financial period ended 31 December 2014 (continued) W Share capital (a) Classification Ordinary shares are classified as equity. Other shares are classified as equity and/or liability according to the economic substance of the particular instrument. (b) Share issue costs Incremental costs directly attributable to the issue of new shares or options are deducted against share premium account. (c) Dividend distribution Distributions to holders of an equity instrument is recognised directly in equity and the corresponding liability is recognised in the period in which the dividends are approved. X Trust activities The Group and the Bank act as trustees in other fiduciary capabilities that result in holding or placing of assets on behalf of individuals, trust and other institutions, These assets and income arising thereon are excluded from the financial statements, as they are not assets of the Group and the Bank.

44

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 1

General information The principal activities of the Bank are investment banking, stockbroking activities and related financial services. The principal activities of the subsidiaries are asset management, unit trust and private retirement schemes management, Islamic fund management activities, dealing in options and futures and provision of nominee services. There were no significant changes in the nature of these activities during the financial period other than the inclusion of asset management, unit trust funds and private retirement schemes management and dealing in options and futures, following the completion of the acquisitions of subsidiaries and reorganisation as disclosed in Note 4 and Note 43. The number of employees in the Group and the Bank for the financial period ended 31 December 2014 was 1,244 (2013: 870) and 940 (2013: 604) employees respectively. The holding company of the Bank is AFFIN Holdings Berhad, a public listed company incorporated in Malaysia and the ultimate holding corporate body is Lembaga Tabung Angkatan Tentera, a statutory body incorporated under the Tabung Angkatan Tentera Act, 1973. The Bank is a limited liability company, incorporated and domiciled in Malaysia. The address of the registered office of the Bank is 27th Floor, Menara Boustead, 69, Jalan Raja Chulan, 50200 Kuala Lumpur, Malaysia.

2

Cash and short-term funds The Group 31.07.2013 31.12.2014 RM'000 RM'000 Cash and balances with banks and other financial institutions Money at call and deposit placements maturing within one month

The Bank 31.07.2013 31.12.2014 RM'000 RM'000

486,317

247,222

332,939

244,488

168,552 654,869

781,956 1,029,178

83,686 416,625

779,946 1,024,434

Inclusive in cash and short-term funds of the Group and the Bank are trust accounts maintained for dealers representative amounting to RM48,183,000 (31.07.2013: RM37,749,000).

45

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 3

Deposits and placements with banks and other financial institutions The Group and the Bank 31.07.2013 31.12.2014 RM'000 RM'000 Licensed banks

4

245,573 245,573

-

Financial assets held-for-trading The Group 31.07.2013 31.12.2014 RM'000 RM'000

The Bank 31.07.2013 31.12.2014 RM'000 RM'000

At fair value Quoted securities Shares, warrants and REITs Unit trusts Unquoted securities Private debt securities Total financial assets held-for-trading

46

18,903 8,983 27,886

23,747 23,747

18,903 18,903

23,747 23,747

4,990 32,876

19,890 43,637

4,990 23,893

19,890 43,637

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 5

Financial investments available-for-sale The Group 31.07.2013 31.12.2014 RM'000 RM'000

The Bank 31.07.2013 31.12.2014 RM'000 RM'000

At fair value Money market instruments Malaysian Government Securities Malaysian Government Sukuk Malaysian Government Islamic Investment Issues Malaysian Government Treasury Bills Bank Negara Malaysia Islamic Negotiable Notes Cagamas bonds Sukuk Perumahan Kerajaan Negotiable Instruments of Deposit

Quoted securities In Malaysia: REITs Unit trusts Shares Outside Malaysia: REITs Unquoted securities Private debt securities in Malaysia Private debt securities outside Malaysia Shares in Malaysia

80,967 7,096 866,515 84,924 48,642 80,116 1,168,260

80,539 6,851 250,894 22,089 119,671 480,044

80,967 7,096 866,515 84,924 48,642 80,116 1,168,260

80,539 6,851 250,894 22,089 119,671 480,044

35,546 242,902 19,488

33,574 128,586 -

35,546 201,856 19,488

33,574 128,586 -

37,367

34,574

37,367

34,574

Allowance for impairment losses of securities

1,781,304 315,294 19,001 3,619,162 (41,414)

527,284 198,683 1,402,745 -

1,781,304 315,294 19,001 3,578,116 (41,414)

527,284 198,683 1,402,745 -

Total financial investments available-for-sale

3,577,748

1,402,745

3,536,702

1,402,745

Movements in allowance for imparment losses of financial investment available-for-sale At beginning of financial period/year Vested from AFFIN Investment Bank Berhad ("AIBB") Amount written-back At end of financial period/year

41,471 (57) 41,414

47

-

41,471 (57) 41,414

-

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 6

Financial investments held-to-maturity The Group and the Bank 31.07.2013 31.12.2014 RM'000 RM'000 At amortised cost Unquoted securities Private debt securities in Malaysia Private debt securities outside Malaysia Redeemable Convertible Secured Loan Stocks

277,266 93,002 370,268 370,268

176,346 1,554 177,900 (1,554) 176,346

Allowance for impairment losses of securities Total financial investments held-to-maturity Movements in allowance for impairment losses of financial investment held-to-maturity At beginning of financial period/year Vested from AFFIN Investment Bank Berhad ("AIBB") At end of financial period/year

-

1,554 1,554

During the financial period, the Bank has reclassified certain financial investments held-to-maturity into financial investments available-forsale. The significant deterioration in the creditworthiness as well as the need to comply with regulatory requirement necessitated the reclassification of the securities. The effects of the reclassification as of the date of reclassification were as follows: The Group and the Bank 31.12.2014 Carrying amount RM'000 Reclassification from financial investments held-to-maturity to financial investments available-for-sale

164,775

Fair value RM'000 178,136

The reclassification resulted in the recognition of RM13,361,000 in available-for-sale reserves as fair value change for the securities.

48

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 7

Loans, advances and financing The Group and the Bank 31.07.2013 31.12.2014 RM'000 RM'000 (i)

By type Term loans/financing: - Syndicated term loans/financing - Other term loans/financing Revolving credits Share margin financing Staff loans Gross loans, advances and financing Less: Allowances for impairment losses - Individual allowance - Collective allowance Total net loans, advances and financing

(ii)

(24,239) (8,982) (33,221) 1,035,844

(5,476) (5,476) 464,850

24,292 727,598 312,635 1,456 3,084 1,069,065

309,374 152,213 4,942 3,797 470,326

4,620 3,293 188 207,186

33,209 168,036

853,778 1,069,065

269,081 470,326

374,424

234,668

4,620 41,810 50,614 189 29,111 211,146 106,753 250,398 1,069,065

34,504 21,508 179,646 470,326

By interest rate sensitivity Fixed rate - Housing loans/financing - Hire purchase receivables - Other fixed rate loans/financing - Share margin financing Variable rate - Cost plus

(iv)

190,979 111,311 168,036 470,326

By type of customer Domestic business enterprises: - Small medium enterprises - Others Individuals Foreign entities Foreign individuals

(iii)

399,497 437,022 17,258 207,186 8,102 1,069,065

By economic purpose Purchase of securities Purchase of landed properties of which - Residential - Non-residential Purchase of transport vehicles Personal use Construction Working capital Merger and acquisition Others

49

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 7

Loans, advances and financing (continued) The Group and the Bank 31.07.2013 31.12.2014 RM'000 RM'000 (v)

By economic sectors Finance, insurance and business services Electricity, gas and water supply Wholesale & retail trade and restaurants & hotels Real estate Manufacturing Mining and quarrying Transport, storage and communication Education, health and others Household Construction Others

(vi)

91,242 123,169 65,618 55,499 22,500 44,159 69,519 152,073 315,719 121,831 7,736 1,069,065

113,409 66,237 56,012 40,204 23,035 171,429 470,326

585,095 344,153 15,075 1,978 7,047 108,671 887 1,344 276 4,539 1,069,065

307,772 94,887 8,171 3,997 10,224 1,248 34,018 1,044 227 8,738 470,326

419,690 169,974 304,944 174,457 1,069,065

252,325 34,504 54,536 128,961 470,326

By geographical distribution Wilayah Persekutuan Selangor Pulau Pinang Perak Sarawak Johor Sabah Negeri Sembilan Kedah Outside Malaysia

(vii) By maturity structure Maturing within one year One year to three years Three years to five years Over five years

(viii) Movements of impaired loans, advances and financing At beginning of financial period/year Vested from AIBB Amount written-off Amount recovered At end of financial period/year Ratio of gross impaired loans, advances and financing to gross loans, advances and financing

50

34,192 (64) 34,128

3,550 (3,550) -

3.19%

0.00%

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 7

Loans, advances and financing (continued) The Group and the Bank 31.07.2013 31.12.2014 RM'000 RM'000 (ix)

(x)

Movements in allowance for impaired loans, advances and financing Individual allowance At beginning of financial period/year Vested from AIBB Allowance made during the financial period/year Amount written off At end of financial period/year

20,269 3,970 24,239

3,550 (3,550) -

Collective allowance At beginning of financial period/year Vested from AIBB Allowance made during the financial period/year Amount written-back At end of financial period/year

5,476 7,388 (3,882) 8,982

4,511 1,779 (814) 5,476

Impaired loans, advances and financing by economic purpose Working capital Purchase of securities

(xi)

34,006 122 34,128

-

22,500 11,506 122 34,128

-

34,006 122 34,128

-

Impaired loans, advances and financing analysed by sector Manufacturing Wholesale retail trade and restaurant and hotels Household

(xii) Impaired loans, advances, and financing by geographical distribution Selangor Wilayah Persekutuan

51

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 8

Trade receivables The Group 31.07.2013 31.12.2014 RM'000 RM'000 Management fees receivable on fund management Amounts due from clients: - performing accounts - impaired accounts Amounts due from brokers Amount due from Bursa Securities Clearing Sdn. Bhd. Less: Allowance for bad and doubtful debts: - individual allowance - collective allowance

The Bank 31.07.2013 31.12.2014 RM'000 RM'000

48,776

-

-

-

317,430 4,420 34,125

122,561 692 18,205

317,430 4,420 34,125

122,561 692 18,205

26,849 431,600

84,694 226,152

26,849 382,824

84,694 226,152

(4,083) (19) 427,498

(539) 225,613

(4,083) (19) 378,722

(539) 225,613

Movement of impaired accounts due from clients: The Group 31.07.2013 31.12.2014 RM'000 RM'000 At beginning of financial period/year Vested from AIBB Allowance made during the financial period/year Amount recovered At end of financial period/year

692 3,727 140 (139) 4,420

52

762 (70) 692

The Bank 31.07.2013 31.12.2014 RM'000 RM'000 692 3,727 140 (139) 4,420

762 (70) 692

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 8

Trade receivables (continued) Movements in allowance for bad and doubtful debts: The Group and the Bank 31.07.2013 31.12.2014 RM'000 RM'000

9

Individual allowance At beginning of financial period/year Vested from AIBB Allowance made during the financial period/year Amount written back Amount written off At end of financial period/year

539 3,727 259 (420) (22) 4,083

Collective allowance At beginning of financial period/year Vested from AIBB Allowance made during the financial period/year Amount written-back At end of financial period/year

118 103 (202) 19

553 67 (81) 539

-

Derivative financial assets The Group and the Bank 31.07.2013 31.12.2014 Contract/ Contract/ notional notional amount Assets amount Assets RM'000 RM'000 RM'000 RM'000 At fair value Foreign exchange derivatives - Currency forwards - Currency swaps - Currency options - Cross currency interest rate swaps Interest rate derivatives - Interest rate swaps - Futures

53

712,511 620,251 367 198,687 1,531,816

46,656 14,467 1 18,431 79,555

684,778 140,482 339 372,274 1,197,873

22,932 3,442 1 8,117 34,492

250,000 1,781,816

2,572 82,127

164,000 105,000 1,466,873

2,087 298 36,877

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 10 Other assets The Group 31.07.2013 31.12.2014 RM'000 RM'000 Other debtors, deposits and prepayments Clearing Guarantee Fund (a) Clearing Fund (b) Transferable membership

68,035 2,731 1,000 110 71,876 (9,894) 61,982

Less: allowance for bad and doubtful debts (c)

23,780 2,114 145 26,039 (510) 25,529

The Bank 31.07.2013 31.12.2014 RM'000 RM'000 65,172 2,731 10 67,913 (9,894) 58,019

23,408 2,114 145 25,667 (510) 25,157

(a)

Interest-bearing contributions made by the Bank amounting to RM2.7 million as a trading clearing participant in accordance with the Rules of Bursa Malaysia Securities Clearing Sdn. Bhd. ("Bursa Clearing") to a fund maintained by Bursa Clearing.

(b)

Interest-bearing contributions made by the Futures broking subsidiary amounting to RM1.0 million in accordance with the Business Rules of Bursa Malaysia Derivatives Clearing Berhad.

(c)

Movements in the allowance for bad and doubtful debts are as follows: The Group and the Bank 31.07.2013 31.12.2014 RM'000 RM'000 363 510 9,616 147 278 (170) (340) 510 9,894

As at the beginning of financial period/year Vested from AIBB Allowance made during the financial period/year Amount written back Amount written off As at financial period/year end

54

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 11 Statutory deposits with Bank Negara Malaysia The non-interest bearing statutory deposits is maintained with Bank Negara Malaysia in compliance with Section 26(2)(c) of the Central Bank of Malaysia Act 2009, the amounts of which are determined as a set percentage of total eligible liabilities.

12 Amount due from subsidiaries The Bank 31.07.2013 31.12.2014 RM'000 RM'000 Amounts due from subsidiaries (a) Subordinated loan to a subsidiary (b)

126 5,000 5,126

-

(a)

The amount due from subsidiaries are unsecured, interest-free and repayment on demand.

(b)

The subordinated loan to Affin Hwang Futures Sdn. Bhd. (formerly known as HDM Futures Sdn. Bhd.)("AHF"), is unsecured and interest free. As disclosed in Notes 41 (d) and (e) to the financial statements, the Bank completed the Pre-Closing Reorganisation exercise involving the transfer of 100% equity interest of AHF to the Bank on 7 April 2014. As part of the pre-closing reorganisation, the subordinated loan granted by Hwang Capital (Malaysia) Berhad (formerly known as HwangDBS (Malaysia) Berhad) to AHF has been novated to the Bank.

55

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 13 Investment in subsidiaries The Bank 31.07.2013 31.12.2014 RM'000 RM'000 Unquoted shares at cost Less: Allowance for impairment loss*

438 438

132,120 132,120

* Impairment loss of RM4 was made in the financial period for two dormant nominee subsidiaries. The subsidiaries of the Bank, all of which are incorporated in Malaysia, are as follows: Percentage of equity held Group Non-controlling interests 31.07.2013 31.07.2013 31.12.2014 31.12.2014 % % % % 70 30

Name Direct Subsidiaries: Affin Hwang Asset Management Berhad (formerly known as Hwang Investment Management Berhad) ("AHAM")

Principal activities

AFFIN Fund Management Bhd ("AFFIN Fund") Asian Islamic Investment Management Sdn. Bhd. ("AIIMAN")

Dormant

70

-

30

-

Islamic fund management

70

-

30

-

Asset management, management of unit trust & private retirement

Affin Hwang Futures Sdn. Bhd. (formerly known as HDM Futures Sdn. Bhd.) ("AHF") Affin Hwang Nominees (Asing) Sdn.Bhd. (formerly known as HDM Nominees (Asing) Sdn. Bhd.) ("AHNA") Affin Hwang Nominees (Tempatan) Sdn. Bhd. (formerly known as HDM Nominees (Tempatan) Sdn. Bhd.) ("AHNT")

Licensed futures brokers dealing in options & futures

100

-

-

-

Nominee services

100

100

-

-

Nominee services

100

100

-

-

AFFIN Nominees (Asing) Sdn Bhd ("AFFIN NA")

Dormant

100

-

-

-

AFFIN Nominees (Tempatan) Sdn Bhd ("AFFIN NT") HwangDBS Vickers Research Sdn. Bhd. ("HDBSVR") ^ HwangDBS Custodian Services Sdn. Bhd.

Dormant

100

-

-

-

-

51

-

49

-

100

-

-

Research & stock stock analysis Dissolved on 22 February 2014

^ Disposed on 7 April 2014

56

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 13 Investment in subsidiaries (continued) Details of subsidiaries that have material non-controlling interests: Set out below are the Group's subsidiaries that have material non-controlling interest ("NCI"):

Name of subsidiaries

Affin Hwang Asset Management ("AHAM") Group

Proportion of ownership interests and voting rights held by non-controlling interest 31.07.2013 31.12.2014 % % -

30

Profit allocated to noncontrolling interest 31.07.2013 31.12.2014 RM'000 RM'000 7,089

-

Accumulated noncontrolling interests 31.07.2013 31.12.2014 RM'000 RM'000 30,329

-

Summarised financial information for each subsidiary that has non-controlling interest that are material to the Group is set out below. The summarised financial information below represents amounts before inter-company eliminations. AHAM Group 31.12.2014 RM'000 Summarised financial position Total assets Total liabilities Net assets

324,797 (223,699) 101,098

Equity attributable to: Equity holder of the Bank NCI

70,769 30,329

Summarised financial results Revenue Profit before taxation Taxation Other comprehensive income Total comprehensive income

163,292 33,600 (10,032) 151 23,719

Summarised cash flows Net cash (used in) investing activities Net cash generated from operating activities Net increase in cash and cash equivalents

(71,552) 115,862 44,310

Profit contributable to NCI of the Group

7,089

57

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 14 Deferred tax assets/(liabilities) Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax assets and current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determined after appropriate offsetting are shown in the statements of financial position: The Group 31.07.2013 31.12.2014 RM'000 RM'000 Deferred tax assets: - to be recovered after more than 12 months - to be recovered within 12 months

Deferred tax liabilities: - to be recovered after more than 12 months - to be recovered within 12 months

The Bank 31.07.2013 31.12.2014 RM'000 RM'000

21,434 21,434

6,522 6,522

16,588 16,588

6,522 6,522

(2,712) (7,886) (10,598)

(6,059) (6,059)

(2,712) (7,886) (10,598)

(6,059) (6,059)

The movement in deferred tax assets and liabilities during the financial period/year are as follows: The Group 31.07.2013 31.12.2014 RM'000 RM'000 At beginning of the financial period/year Merger of assets and liabilities Charged to income statements (Note 33) - property and equipment - intangible assets

463 3,875 5,461 24 45 8,307 (2,915)

- provision for other liabilities - uOthers (Charged)/credited to equity - financial investments available-for-sale At end of financial period/year end

1,037 10,836

58

2,846 (3,196) (126) 602 (3,672) 813 463

The Bank 31.07.2013 31.12.2014 RM'000 RM'000 463 2,148 2,342 432 48 5,759 (3,897) 1,037 5,990

2,846 (3,196) (126) 602 (3,672) 813 463

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 14 Deferred tax assets/(liabilities) (continued) The movement in deferred tax assets and liabilities during the financial period/year are as follows: (continued) The Group 31.07.2013 31.12.2014 RM'000 RM'000 Subject to income tax Deferred tax assets (before offsetting) Provision for other liabilities Intangible assets Other temporary differences Acquisition of subsidiaries and merger of business Offsetting Deferred tax assets (after offsetting) Deferred tax liabilities (before offsetting) Property and equipment AFS revaluation reserves Other temporary differences Offsetting Deferred tax liabilities (after offsetting)

The Bank 31.07.2013 31.12.2014 RM'000 RM'000

14,829 45 982 15,856 3,875 19,731 (8,895) 10,836

6,522 6,522 6,522 (6,059) 463

12,281 48 12,329 2,148 14,477 (8,487) 5,990

6,522 6,522 6,522 (6,059) 463

(855) (152) (7,888) (8,895) 8,895 -

(879) (1,189) (3,991) (6,059) 6,059 -

(447) (152) (7,888) (8,487) 8,487 -

(879) (1,189) (3,991) (6,059) 6,059 -

The amount of unused tax losses for which no deferred tax assets is recognised in the statements of financial position are as follows: The Group 31.07.2013 31.12.2014 RM'000 RM'000 Tax losses

-

59

49

The Bank 31.07.2013 31.12.2014 RM'000 RM'000 -

49

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 15 Property and equipment

Renovations

Office equipment & furniture

Motor vehicles

Computer equipment

Total

RM'000

RM'000

RM'000

RM'000

RM'000

Cost At 1.08.2013 Acquisition of subsidiaries Vested from AIBB Additions Disposal of subsidiary Disposals Write-offs At 31.12.2014

8,319 3,689 11,934 624 (114) (2,914) 21,538

17,785 3,456 4,993 1,491 (154) (195) (2,981) 24,395

5,043 2,657 2,100 245 (144) (2,919) 6,982

34,295 2,884 14,616 579 (108) (858) (10,452) 40,956

65,442 12,686 33,643 2,939 (520) (3,972) (16,347) 93,871

Accumulated depreciation At 1.08.2013 Acquisition of subsidiaries Vested from AIBB Charge for the financial period Disposal of subsidiary Disposals Write-offs At 31.12.2014

7,867 2,469 8,850 830 (114) (2,883) 17,019

16,589 1,798 4,680 952 (143) (181) (2,957) 20,738

4,444 1,551 1,475 673 (97) (2,727) 5,319

31,308 1,894 12,880 2,061 (82) (833) (10,449) 36,779

60,208 7,712 27,885 4,516 (436) (3,741) (16,289) 79,855

4,519

3,657

1,663

4,177

14,016

Cost At 1.08.2012 Additions Disposals Write-offs At 31.07.2013

8,579 43 (303) 8,319

18,209 132 (60) (496) 17,785

7,962 50 (2,969) 5,043

33,142 2,087 (320) (614) 34,295

67,892 2,312 (3,349) (1,413) 65,442

Accumulated depreciation At 1.08.2012 Charge for the financial year Disposals Write-offs At 31.07.2013

7,984 178 (295) 7,867

16,677 464 (60) (492) 16,589

6,150 531 (2,237) 4,444

30,878 1,238 (196) (612) 31,308

61,689 2,411 (2,493) (1,399) 60,208

452

1,196

2,987

5,234

The Group 31.12.2014

Net book value At 31.12.2014 The Group 31.07.2013

Net book value At 31.07.2013

60

599

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 15 Property and equipment (continued)

Renovations RM'000

Office equipment & furniture RM'000

Motor vehicles RM'000

Computer equipment RM'000

Total RM'000

Cost At 1.08.2013 Vested from AIBB Additions Disposals Write-offs At 31.12.2014

8,205 11,934 49 (2,914) 17,274

17,624 4,993 929 (195) (2,975) 20,376

4,899 2,100 (2,919) 4,080

34,183 14,616 328 (851) (10,420) 37,856

64,911 33,643 1,306 (3,965) (16,309) 79,586

Accumulated depreciation At 1.08.2013 Vested from AIBB Charge for the financial period Disposals Write-offs At 31.12.2014

7,753 8,850 470 (2,883) 14,190

16,443 4,680 575 (181) (2,951) 18,566

4,364 1,475 365 (2,727) 3,477

31,227 12,880 1,694 (829) (10,418) 34,554

59,787 27,885 3,104 (3,737) (16,252) 70,787

3,084

1,810

3,302

8,799

Cost At 1.08.2012 Additions Disposals Write-offs At 31.07.2013

8,465 43 (303) 8,205

18,048 132 (60) (496) 17,624

7,818 50 (2,969) 4,899

33,048 2,049 (320) (594) 34,183

67,379 2,274 (3,349) (1,393) 64,911

Accumulated depreciation At 1.08.2012 Charge for the financial year Disposals Write-offs At 31.07.2013

7,870 178 (295) 7,753

16,533 461 (60) (491) 16,443

6,100 502 (2,238) 4,364

30,791 1,224 (196) (592) 31,227

61,294 2,365 (2,494) (1,378) 59,787

452

1,181

2,956

5,124

The Bank 31.12.2014

Net book value At 31.12.2014

603

The Bank 31.07.2013

Net book value At 31.07.2013

61

535

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 16 Investment properties The Group and the Bank 31.12.2014 Cost At 1.08.2013 Disposals At 31.12.2014

Freehold land RM'000

Buildings RM'000

Total RM'000

41,113 (41,113) -

7,182 (7,182) -

48,295 (48,295) -

455 24 (479) -

455 24 (479) -

Accumulated depreciation At 1.08.2013 Charge for the financial period Disposals At 31.12.2014

-

Net book value At 31.12.2014

-

-

-

41,113

7,182

48,295

312 143 455

312 143 455

6,727

47,840

The Group and the Bank 31.07.2013 Cost At 1.08.2012/31.07.2013 Accumulated depreciation At 1.8.2012 Charge for the financial year At 31.07.2013

-

Net book value At 31.07.2013

41,113

62

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 17 Intangible assets The Group 31.07.2013 31.12.2014 RM'000 RM'000 Goodwill on consolidation (a) Intangible assets (b): - Merchant bank license - Computer software license

(a)

The Bank 31.07.2013 31.12.2014 RM'000 RM'000

264,011

110,002

260,409

110,002

52,500 4,295 320,806

52,500 162,502

52,500 1,863 314,772

52,500 162,502

Goodwill on consolidation The Group 31.07.2013 31.12.2014 RM'000 RM'000

The Bank 31.07.2013 31.12.2014 RM'000 RM'000

Cost At 1.08.2013

130,202

130,202

130,202

130,202

Amount arising from acquisition of subsidiary/assets and liabilities At 31.12.2014/31.7.2013

154,009 284,211

130,202

150,407 280,609

130,202

Impairment losses At 1.08.2013/31.12.2014

20,200

20,200

20,200

20,200

Net book value At 31.12.2014/31.7.2013

264,011

110,002

260,409

110,002

Goodwill of the Group and the Bank arose from the acquisition of 51% of the issued and paid-up share capital of Asian Islamic Investment Management Sdn Bhd (“AIIMAN”) (“the Acquisition”) and the additional fixed sum of RM97.3 million being goodwill attributable to the merger of businesses, assets and liabilities of AFFIN Investment Bank Berhad.

As disclosed in Note 43, the fair valuation exercise of the identifiable assets acquired, liabilities and contingent liabilities assumed arising from the Acquisition is currently in progress and has yet to be determined. Hence, the initial accounting for business combination is incomplete as at 31 December 2014. Based on the initial provisional fair values of identifiable assets acquired and liabilities assumed, the goodwill arising is approximately estimated to be RM3.6 million for the acquisition of 51% equity interest in AIIMAN (see Note 41). As allowed by MFRS 3 “Business Combination”, the Group will recognise any adjustments to the provisional goodwill amount recognised as a result of completing the initial accounting within the measurement period, which shall not exceed twelve months from the acquisition date. As such, goodwill impairment testing will be performed upon completion of the initial accounting for the business combination and allocation of the goodwill to the cash generating units.

The carrying amounts of goodwill allocated to the Group CGUs are as follows: The Group 31.07.2013 31.12.2014 RM'000 RM'000

CGU Investment banking

97,346

Stockbroking Asset Management

163,063 3,602 264,011

63

110,002 110,002

The Bank 31.07.2013 31.12.2014 RM'000 RM'000 97,346 163,063 260,409

110,002 110,002

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 17 Intangible assets (continued) (a)

Goodwill on consolidation (continued)

The recoverable amount of the CGUs are determined based on value-in-use calculations using the cash flow projections based on financial budgets or forecasts approved by Directors covering a five year (31.7.2013: five year) period. Cash flows beyond the fifth year period are assumed to grow at 3% (31.7.2013: 5.75%) on perpetual basis for all CGUs which is based on forecasted Gross Domestic Product ("GDP") growth rate of malaysia, adjusted for specific risk of the respective CGUs. The cash flow projections are derived based on a number of key factors including the past performance and the management's expectations of the market developments. The discount rates used are based on the pre-tax weighted average cost of capital plus an appropriate risk premium where applicable, at the date of assessment of the CGUs. Impairment was not required for goodwill arising from all the business segments. Management believes that any reasonable possible change to the assumptions applied is not likely to cause the recoverable amount of all the business segments to be lower than its carrying amount.

The estimated terminal growth rates and discount rates used for value in use calculation are as follows: Discount rate 31.07.2013 31.12.2014 % % 7.33 7.74 7.33 7.74 7.74

Investment Banking Stockbroking Asset Management (b)

Growth rate 31.07.2013 31.12.2014 % % 5.75 3.00 5.75 3.00 3.00

Intangible assets Merchant bank licence RM'000

The Group 31.12.2014 Cost At 1.08.2013 Acquisition of subsidiaries Vested from AIBB Additions Disposals At 31.12.2014 Accumulated amortisation At 1.08.2013 Acquisition of subsidiaries Vested from AIBB Amortised during the financial period Disposals At 31.12.2014 Net carrying value At 31.12.2014

64

Computer software RM'000

Total RM'000

52,500 52,500

5,874 11,943 1,341 19,158

52,500 5,874 11,943 1,341 71,658

-

3,473 10,589 801 14,863

3,473 10,589 801 14,863

52,500

4,295

56,795

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 17 Intangible assets (continued) Merchant bank licence RM'000

The Bank 31.12.2014 Cost At 1.08.2013 Vested from AIBB Additions Disposals At 31.12.2014

Total RM'000

52,500 52,500

11,943 702 12,645

52,500 11,943 702 65,145

-

10,589 193 10,782

10,589 193 10,782

52,500

1,863

54,363

52,500 52,500

-

52,500 52,500

-

-

-

52,500

-

52,500

Accumulated amortisation At 1.08.2013 Vested from AIBB Amortised during the financial period Disposals At 31.12.2014 Net carrying value Acquisition of subsidiaries

Computer software RM'000

The Group and the Bank 31.07.2013 Cost At 1.08.2012 Additions Disposals At 31.07.2013 Accumulated amortisation At 1.08.2012/31.07.2013 Net carrying value At 31.07.2013

The merchant bank license is assessed for impairment on an annual basis together with the goodwill impairment testing for the investment banking CGU as disclosed in Note 17(a).

65

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 18 Deposits from customers The Group 31.07.2013 31.12.2014 RM'000 RM'000 (i)

By type of deposit Fixed deposits Negotiable instrument of deposits Other deposits

(ii)

2,578,945 865,155 160,060 3,604,160

2,140,778 103,861 4,157 2,248,796

2,619,158 865,155 160,060 3,644,373

2,140,778 103,861 4,157 2,248,796

2,613,650 202,819 685,946 101,745 3,604,160

1,801,664 447,132 2,248,796

2,653,863 202,819 685,946 101,745 3,644,373

1,801,664 447,132 2,248,796

1,291,104 880,895 696,593 619,959 75,478 23,621 16,510 3,604,160

1,276,976 142,565 282,733 460,970 70,185 15,367 2,248,796

1,331,317 880,895 696,593 619,959 75,478 23,621 16,510 3,644,373

1,276,976 142,565 282,733 460,970 70,185 15,367 2,248,796

By maturity structure Due within six months Six months to one year One year to three years Three years to five years

(iii)

The Bank 31.07.2013 31.12.2014 RM'000 RM'000

By type of customer Domestic non-banking financial institutions Domestic banking institutions Business enterprises Government and statutory bodies Individuals Other entities Foreign entities

19 Deposits and placements of banks and other financial institutions The Group and the Bank 31.07.2013 31.12.2014 RM'000 RM'000 Licensed banks Licensed investment banks Bank Negara Malaysia

821,478 40,137 861,615

66

329,703 130,034 459,737

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 20 Trade payables The Group 31.07.2013 31.12.2014 RM'000 RM'000 Amount due to unit trust funds Amount due to unit holders Amount due to external fund managers Amount due to related party Amount due to clients Amount due to brokers

141,521 30,800 86 185 309,184 100,390 582,166

136,628 43,332 179,960

The Bank 31.07.2013 31.12.2014 RM'000 RM'000 309,184 54,099 363,283

136,628 43,332 179,960

Trade payables include amount payable under outstanding contracts from the stock and share broking activities and amounts due to unit trust finds and unit holders. The credit terms of amounts due to unit trust funds and unit holders range from 1 to 10 days (31.7.2013: 1 to 10 days). The credit terms of amount due to external fund managers range from 30 to 90 days (31.7.2013: 30 to 90 days).

21 Derivatives financial liabilities The Group and the Bank 31.07.2013 31.12.2014 Contract/ Contract/ notional notional amount Liabilities amount Liabilities RM'000 RM'000 RM'000 RM'000 At fair value Foreign exchange related contracts - Currency forwards - Currency swaps - Currency options - Cross currency interest rate swaps Interest rate related contracts - Interest rate swaps

67

67,399 1,070,744 367 430,821 1,569,331

1,351 56,236 1 31,491 89,079

67,744 769,679 339 329,756 1,167,518

1,618 28,817 1 14,878 45,314

1,569,331

89,079

84,000 1,251,518

569 45,883

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 22 Other liabilities The Group 31.07.2013 31.12.2014 RM'000 RM'000 48,183 5,727 2,605 146,862 203,377

Commissioned dealer's representative trust balances Amounts payable to dealer's representative Defined contribution plan Other creditors and accruals

37,749 7,942 1,332 37,679 84,702

The Bank 31.07.2013 31.12.2014 RM'000 RM'000 48,183 5,727 2,605 86,896 143,411

37,749 7,942 1,213 36,190 83,094

23 Share capital Number of ordinary shares of RM1.00 each

Authorised At beginning of the financial period/year Created during the financial period (a) At end of financial period/year Issued and fully paid At beginning of financial period/year Issued during the financial period (b) At end of financial period/year

The Group and the Bank

31.12.2014 '000

31.07.2013 '000

31.12.2014 RM'000

31.07.2013 RM'000

600,000 900,000 1,500,000

600,000 600,000

600,000 900,000 1,500,000

600,000 600,000

500,000 280,000 780,000

500,000 500,000

500,000 280,000 780,000

500,000 500,000

During the financial period, the Bank increased its: (a)

Authorised ordinary share capital from 600,000,000 to 1,500,000,000 via the creation of 900,000,000 ordinary shares of RM1.00 each; and

(b)

Issued and paid up capital from RM500,000,000 to RM780,000,000 via the issuance of 280,000,000 new ordinary shares of RM1.00 each at an issue price of RM1.785 per share.

The new ordinary shares issued during the ranked parri passu in all respects with the existing issued shares of the Bank.

68

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 24 Reserves The Group 31.07.2013 31.12.2014 RM'000 RM'000

The Bank 31.07.2013 31.12.2014 RM'000 RM'000

Share premium (a) Statutory reserve (b) Regulatory reserves (c) Available-for-sale revaluation reserves (d)

219,800 199,071 3,556 5,479 427,906

148,861 3,564 152,425

219,800 199,071 3,556 5,347 427,774

148,861 3,564 152,425

Retained profits (e)

207,165 635,071

216,854 369,279

260,692 688,466

214,038 366,463

(a)

Share premium arise from issuance of 280,000,000 new ordinary shares of RM1.00 each at an issue price RM1.785 per share.

(b)

The statutory reserve is maintained by the Bank in compliance with Section 47(2)(f) of the Financial Services Act, 2013 and is not distributable as cash dividends.

(c)

The Bank is required to maintain in aggregate collective impairment allowances and regulatory reserves of no less than 1.2% of total outstanding loans, advances and financing, net of impairment allowances.

(d)

The available-for-sale revaluation reserves represent the unrealised gains or losses arising from a change in the fair value of investments classified as financial investments available-for-sale. The gains or losses are transferred to the income statement upon disposal or when the securities becomes impaired.

(e)

Pursuant to the Finance Act, 2007 which was gazetted on 28 November 2007, dividends paid, credited or distributed to shareholders are not tax deductitable by the Bank but are exempted from tax in the hands of the shareholders ("single-tier dividends"). The unutilised Section 108 balance of the Bank has expired as at 31 December 2013. As at 31 December 2014, the Bank has sufficient tax exempt account balances to pay tax exempt dividends of RM7,718,000 under Section 12 of the Income Tax (Amended Act 1999).

69

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 25 Interest income The Bank

The Group 17 months period ended 31.12.2014 RM'000 Loans, advances and financing: Money at call and deposit placements with financial institutions Derivative instruments Financial assets held-for-trading Financial investments available-for-sale Financial investments held-to-maturity Others Net accretion of discounts less amortisation of premiums of which: Interest income earned on impaired loans, advances and financing

12 months period ended 31.07.2013 RM'000

17 months period ended 31.12.2014 RM'000

12 months period ended 31.07.2013 RM'000

51,872

30,830

51,872

30,830

37,057 8,204 3,281 89,531 29,332 532 219,809

20,734 6,784 5,260 49,318 23,393 954 137,273

34,188 8,204 3,281 89,531 29,332 532 216,940

20,638 6,784 5,260 49,318 23,393 954 137,177

673 220,482

(1,045) 136,228

673 217,613

(1,045) 136,132

-

-

-

-

26 Interest expense The Group

The Bank

17 months period ended 31.12.2014

12 months period ended 31.07.2013

17 months period ended 31.12.2014

12 months period ended 31.07.2013

RM'000

RM'000

RM'000

RM'000

123,550

78,374

123,862

78,374

8,860 2,781 843 136,034

1,626 6,464 436 86,900

8,860 2,781 626 136,129

1,626 6,464 436 86,900

Deposits from customers Deposits and placements of banks and other financial institutions Derivative instruments Others

70

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 27 Other operating income The Group 17 months 12 months period ended period ended 31.12.2014 31.07.2013 RM'000 RM'000 Fee income Fee on loans, advances and financing Corporate advisory fees Guarantee fees Underwriting commissions Gross brokerage income Portfolio management fees Initial service charge Agency fees Arrangement fees Others

2,842 4,587 588 1,528 101,229 109,583 49,073 807 10,967 4,759 285,963

Income from financial instruments Gains arising on financial assets held-for-trading: - net gain on disposal - unrealised loss - gross dividend income

1,669 3,318 46 158 55,451 90 50 1,816 62,598

The Bank 17 months 12 months period ended period ended 31.07.2013 31.12.2014 RM'000 RM'000 2,842 4,587 588 419 99,688 807 10,980 3,378 123,289

1,669 3,318 46 158 55,451 90 50 1,215 61,997

52,523 (227) 3,105

18,399 (2,671) 717

52,523 (216) 2,050

18,399 (2,671) 717

703 5,734

(9,368) 6,091

703 5,734

(9,368) 6,091

Gains arising on financial investments available-for-sale: - net gain on disposal - gross dividend income

2,998 13,363

2,225 6,085

2,793 13,363

2,225 6,085

Gains arising on financial investments held-to-maturity: - net gain on disposal

3,220

-

3,220

-

81,419

21,478

3,000 83,170

944 22,422

(1,518) 35 646 (399) (112) 38,674 3,749 41,075 408,457

16,383 78 185 4,091 20,737 104,813

(1,606) 35 646 (380) (112) 4,378 38,674 2,419 44,054 250,513

16,383 78 185 1,928 18,574 102,993

Gains on derivatives instruments: - net gain/(loss) on disposal - unrealised gain

Gross dividend income -subsidiaries Other income Foreign exchange (loss)/gain Rental income - investment properties Gain on disposal of property and equipment Loss on disposal of a subsidiary Loss on disposal of club memberships Gain on disposal of an associate Gain on disposal of investment properties Others

71

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 28 Other operating expenses The Group 17 months 12 months period ended period ended 31.12.2014 31.07.2013 RM'000 RM'000 Personnel costs Salaries, allowances and bonuses Defined contribution plan Other personnel costs Establishment cost Rental of premises Equipment rental Repair and maintenance Amortisation of intangible assets Depreciation of property and equipment Depreciation of investment properties Electricity, water and sewerage Insurance and indemnities Others Marketing expenses Business promotion and advertisement Entertainment Travelling and accommodation Dealers’ handling fees Others

72

The Bank 12 months 17 months period ended period ended 31.12.2014 31.07.2013 RM'000 RM'000

133,152 18,822 16,400 168,374

45,751 6,395 4,776 56,922

100,933 12,398 6,609 119,940

43,119 5,783 4,731 53,633

17,192 2,893 7,287 801 4,516 24 3,144 1,512 38 37,407

9,498 1,976 4,157 2,411 143 1,832 390 20,407

15,236 1,974 6,072 193 3,104 24 2,954 1,297 38 30,892

9,318 1,976 4,127 2,365 143 1,823 387 20,139

7,067 1,373 1,847 12,213 4,698 27,198

354 703 869 7,205 566 9,697

42 799 749 12,662 488 14,740

354 692 834 7,593 566 10,039

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 28 Other operating expenses (continued) The Group 17 months 12 months period ended period ended 31.12.2014 31.07.2013 RM'000 RM'000 Administration and general expenses Directors’ remuneration (Note 31) Telecommunication expenses Auditors' remuneration: Professional fees Dealers' representative performance incentive Property and equipment written off Transaction levy Subscription Subsidies Integration expenses Commission and referral fee expenses Others

The Bank 17 months 12 months period ended period ended 31.12.2014 31.07.2013 RM'000 RM'000

1,085 10,618 1,219 8,091

400 7,468 304 651

990 9,260 845 1,131

400 7,438 291 621

9,154 57 9,134 1,590 250 3,807 58,063 9,062 112,130 345,109

8,435 14 4,362 365 5,879 27,878 114,904

9,092 57 9,134 1,391 250 3,797 9,929 45,876 211,448

8,435 14 4,362 365 7,172 29,098 112,909

1,085

400

990

400

596 98 525

240 13 51

460 40 345

230 11 50

The expenditure includes the following statutory disclosure: Directors’ remuneration (Note 31) Auditors' remuneration: - statutory audit - audit related - non-audit related

73

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 29 Write-back/(Allowances) for losses on loan, advances and financing and receivables The Group and the Bank 12 months 17 months period ended period ended 31.12.2014 31.07.2013 RM'000 RM'000 Individual assessment allowance - Made during the financial period/year - Written back during the financialperiod/ year

(4,229) 420

(214) 81

Collective allowance - Made during the financial period/year - Written back during the financial period/year

(103) 4,084

(965) -

Bad debts and financing - Recovered - Written off Other debtors - Allowances for losses - Written back during the financialperiod/ year

631 (41)

219 -

(278) 170 654

(879)

30 Write-back for impairment losses on securities The Group 12 months 17 months period ended period ended 31.07.2013 31.12.2014 RM'000 RM'000 Write-back on allowances for impairment loss: - Financial investments available-for-sale - Investment in a subsidiary

57 57

74

-

The Bank 17 months 12 months period ended period ended 31.12.2014 31.07.2013 RM'000 RM'000 57 57

318 318

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 31 CEO and Directors’ remuneration The MD/CEO and Directors of the Bank who have held office during the financial period are as follows: Managing Director/ Chief Executive Officer (Appointed w.e.f. 3 November 2014) (Resigned w.e.f 6 April 2014)

Maimoonah bt Mohamed Hussain Mahesh s/o Shri Pranlal Rupawalla

Non-Executive Directors Gen Tan Sri Yaacob bin Mohd Zain (R) Raja Dato' Seri Aman bin Raja Haji Ahmad Ariffin bin Alias Tan Sri Dato' Seri Lodin bin Wok Kamaruddin Stephen Charles Li Kwok Sze Lee Chor Kee Abd Malik bin A Rahman Lim Hun Soon @ David Lim Y.A.M. Tengku Syed Badarudin Jamalullail Hwang Lip Teik Y.A.M. Tunku Dato' Seri Nadzaruddin Ibni Almarhum Tuanku Ja'afar Ang Teik Siew (Ang Teik Lim Eric) Ng Wai Hung Andrew Choe Tse Wei Mohamed Tamizi Tun Dr. Ismail Tham Kwok Meng Teoh Teik Kee

(Appointed w.e.f. 15 April 2014) (Appointed w.e.f. 15 April 2014) (Appointed w.e.f. 15 April 2014) (Appointed w.e.f. 15 April 2014) (Appointed w.e.f. 15 April 2014) (Appointed w.e.f. 15 April 2014) (Appointed w.e.f. 15 April 2014) (Appointed w.e.f. 15 April 2014) (Resigned w.e.f 15 April 2014) (Resigned w.e.f 7 April 2014) (Resigned w.e.f 7 April 2014) (Resigned w.e.f 7 April 2014) (Resigned w.e.f 7 April 2014) (Resigned w.e.f 7 April 2014) (Resigned w.e.f 15 April 2014) (Resigned w.e.f 15 April 2014) (Resigned w.e.f 15 April 2014)

The aggregate amount of remuneration for all Directors during the financial period are as follows: The Group 17 months 12 months period ended period ended 31.07.2013 31.12.2014 RM'000 RM'000 Managing Director/ Chief Executive Officer - Fees - Salary and other remuneration - Benefits-in-kind

Non-Executive Directors: - Fees - Salary and other remuneration - Benefits-in-kind Total Grand Total

75

The Bank 12 months 17 months period ended period ended 31.12.2014 31.07.2013 RM'000 RM'000

30 1,363 12 1,405

886 18 904

1,363 12 1,375

886 18 904

742 332 11 1,085 2,490

325 75 400 1,304

658 321 11 990 2,365

325 75 400 1,304

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 31 CEO and Directors’ remuneration (continued) Detailed of the Group are as follows: The Group 17 months period ended 31.12.2014

Managing Director/Chief Executive Officer Maimoonah bt Mohamed Hussain Mahesh s/o Shri Pranlal Rupawalla Total

Directors'

*Other Benefit-

Salaries

Bonuses

Fees

emoluments in-kind

RM'000

RM'000

RM'000

478 406 884

130 121 251

30 30

113 115 228

12 12

751 654 1,405

-

-

52 45 45 87 45 83 45 48 36

80 53 48 20 4 4 51 25 12 -

11 -

143 98 93 107 49 4 134 70 60 36

-

-

36 36 36 36 36 40 36 742

12 23 332

11

36 36 36 36 48 63 36 1,085

884

251

772

560

23

2,490

Non-Executive Directors Gen Tan Sri Yaacob bin Mohd Zain Raja Dato' Seri Aman bin Raja Haji Ahmad Ariffin bin Alias Tan Sri Dato' Seri Lodin bin Wok Kamaruddin Stephen Charles Li Kwok Sze Lee Chor Kee Abd Malik bin A Rahman Lim Hun Soon @ David Lim Y.A.M. Tengku Syed Badarudin Jamalullail Hwang Lip Teik Y.A.M. Tunku Dato' Seri Nadzaruddin Ibni Almarhum Tuanku Ja'afar Ang Teik Siew (Ang Teik Lim Eric) Ng Wai Hung Andrew Choe Tse Wei Mohamed Tamizi Tun Dr. Ismail Tham Kwok Meng Teoh Teik Kee Total Grand Total * Other emoluments include allowances and EPF.

76

Total

RM'000 RM'000 RM'000

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 31 CEO and Directors’ remuneration (continued) Detailed of the Bank are as follows: The Bank 17 months period ended 31.12.2014

Managing Director/Chief Executive Officer Maimoonah bt Mohamed Hussain Mahesh s/o Shri Pranlal Rupawalla Total

Directors'

*Other Benefit-

Salaries

Bonuses

Fees

emoluments in-kind

RM'000

RM'000

RM'000

478 406 884

130 121 251

-

113 115 228

12 12

721 654 1,375

-

-

52 45 45 45 45 45 45 48 36

80 53 48 20 4 4 43 25 12 -

11 -

143 98 93 65 49 4 88 70 60 36

-

-

36 36 36 36 36 36 36 658

12 20 321

11

36 36 36 36 48 56 36 990

884

251

658

549

23

2,365

Non-Executive Directors Gen Tan Sri Yaacob bin Mohd Zain Raja Dato' Seri Aman bin Raja Haji Ahmad Ariffin bin Alias Tan Sri Dato' Seri Lodin bin Wok Kamaruddin Stephen Charles Li Kwok Sze Lee Chor Kee Abd Malik bin A Rahman Lim Hun Soon @ David Lim Y.A.M. Tengku Syed Badarudin Jamalullail Hwang Lip Teik Y.A.M. Tunku Dato' Seri Nadzaruddin Ibni Almarhum Tuanku Ja'afar Ang Teik Siew (Ang Teik Lim Eric) Ng Wai Hung Andrew Choe Tse Wei Mohamed Tamizi Tun Dr. Ismail Tham Kwok Meng Teoh Teik Kee Total Grand Total * Other emoluments include allowances and EPF.

77

Total

RM'000 RM'000 RM'000

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 31 CEO and Directors’ remuneration (continued) The Group and the Bank 12 months period ended 31.07.2013 Directors'

Chief Executive Officer Mahesh s/o Shri Pranlal Rupawalla

Bonuses

Fees

RM'000

RM'000

RM'000

583

139

-

164

18

904

-

-

48 36

21 -

-

69 36

-

-

36 36 36 36 36 12 12 13 24 325

21 10 23 75

-

36 36 36 36 57 22 12 13 47 400

583

139

325

239

18

1,304

Non-Executive Directors Y.A.M. Tengku Syed Badarudin Jamalullail Hwang Lip Teik Y.A.M. Tunku Dato' Seri Nadzaruddin Ibni Almarhum Tuanku Ja'afar Ang Teik Siew (Ang Teik Lim Eric) Ng Wai Hung Andrew Choe Tse Wei Mohamed Tamizi Tun Dr. Ismail Tham Kwok Meng Teoh Teik Kee Dato' Seri Hwang Sing Lue Ong Eng Kooi Total Grand Total

*Other Benefit-

Salaries

* Other emoluments include allowances and EPF.

78

emoluments in-kind Total RM'000 RM'000 RM'000

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 32 Significant related party transactions and balances The identified related parties and their relationship with the Group and the Bank are as follows: Related parties

Relationship

Lembaga Tabung Angkatan Tentera ("LTAT")

Ultimate holding corporate body, which is GovernmentLinked Investment Company ("GLIC") of the Government of Malaysia.

AFFIN Holdings Berhad ("AHB")

Holding company with effect from 1 April 2014

Subsidiaries and associate of LTAT

Subsidiaries and associate companies of the ultimate holding corporate body with effect from 1 April 2014.

Subsidiaries and associate of AHB as disclosed in its financial statements

Subsidiaries and associate companies of the holding company with effect from 1 April 2014.

Subsidiaries of the Bank as disclosed in Note 13

Subsidiaries

Key management personnel

The key management personnel of the Group and the Bank consists of:

Related parties of key management personnel (deemed as related to the Bank)

-

All Directors of the Bank and its key subsidiaries

-

Non-Executive Directors, Managing Director, Chief Operationg Officer, Chief Financial Officer and certain Heads of Department

Close family members management personnel

and

dependents

of

key

Entities that are controlled or jointly controlled by, or for which significant voting power in such entity resides with, directly or indirectly by key management personnel or its close family members

79

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 32 Significant related party transactions and balances (continued) The identified related parties and their relationship with the Group and the Bank are as follows: (continued) Related parties

Relationship

Hwang Capital (Malaysia) Berhad (formerly known as HwangDBS (Malaysia) Berhad) ("HCM")

Former immediate and ultimate holding company prior to 31 March 2014

HwangDBS Vickers Research Sdn Bhd HwangDBS Custodian Services Sdn Bhd

Former subsidiaries prior to 31 March 2014

Subsidiaries of HCM: (a) HDM Properties Sdn. Bhd. (b) Affin Hwang Futures Sdn. Bhd.(formerly known as HDM Futures Sdn. Bhd.)

Former related companies prior to 31 March 2014

DBS Bank Ltd

Former deemed substantial shareholder of HCM prior to 31 March 2014

DBS Vickers Securities (Singapore) Pte. Ltd. DBS Vickers (Hong Kong) Limited

Former subsidiaries of deemed substantial shareholder of HCM prior to 31 March 2014

Key management personnel are those persons having the authority and responsibilty for planning, directing and controlling the activities of the Group and the Bank either directly or indirectly. Key management personnel includes the Managing Director/Chief Executive Officer of the Bank in office during the financial period and the remuneration for the financial period are disclosed in Note 31.

80

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 32 Significant related party transactions and balances (continued) The Group and the Bank do not have any individually or collectively significant transactions outside the ordinary course of business with the Government of Malaysia and government related entities. In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are the other significant related party transactions and balances. (a) Related parties transactions Ultimate Holding Corporate Body 17 months period ended 31.12.2014 The Group

RM'000

Other Related Companies

Holding Company

12 months 17 months period ended period ended 31.07.2013 31.12.2014 RM'000

RM'000

12 months 17 months period ended period ended 31.07.2013 31.12.2014 RM'000

RM'000

Former Other Related Companies

12 months 17 months period ended period ended 31.07.2013 31.12.2014 RM'000

RM'000

12 months period ended 31.07.2013 RM'000

Income Interest on fixed deposits & interbank placements Interest on financial investments available-for-sale Interest on loans, advances and financing Interest on derivatives Unrealised loss on derivative instruments Management fees income Corporate advisory fees Agency fees Underwriting commission Guarantee fees Other fee income Brokerage income Reimbursement of research expenses

165 100 3,203 3,468

-

-

-

3,774 1,736 116 (1,598) 1,146 475 70 110 150 313 712 7,004

-

1,057 1,512 119 445 1,482 4,615

1,644 1,969 471 680 2,158 6,922

209 209

-

-

-

1,884 12,256 301 820 139 15,400

-

3,100 859 3,959

4,563 405 4,968

Expenses Rental of premises Interest expense on deposits Travel services Advisory fee expense Other expenses

81

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 32 Significant related party transactions and balances (continued) (b) Related parties balances

The Group

Ultimate Holding Corporate Body 31.07.2013 31.12.2014 RM'000 RM'000

Holding Company 31.07.2013 31.12.2014 RM'000 RM'000

Other Related Companies 31.07.2013 31.12.2014 RM'000 RM'000

Former Other Related Companies 31.07.2013 31.12.2014 RM'000 RM'000

Amounts due to Deposit from customers Deposit and placements of banks and other financial instituions Other liabilities Derivative Liabilities Trade payable

-

-

-

-

91,033

-

-

2,993

1,835 1,835

-

-

-

843,699 734 200 935,666

-

-

43,832 46,825

2,453 2,453

-

-

-

140,197 68,272 222 14,170 1,256 475 132,979 357,571

-

-

2,388 2,501 6,014 34,504 45,407

-

-

-

-

100,000 150,000 250,000

-

-

460,381 460,381

Amounts due from Interbank placement Cash and short-term funds Amount due from brokers Collateral deposits for derivative transactions Derivative assets Loans, advances and financing Rental deposits Trade receivable Financial investments

Commitments and contingencies Notional Amount of: Direct credit substitutes Interest rate related contracts Foreign exchange related contracts

82

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 32 Significant related party transactions and balances (continued) (c) Related parties transactions Ultimate Holding Corporate Body

Holding Company

12 months 17 months period ended period ended 31.07.2013 31.12.2014 The Bank Income Interest on fixed deposits & interbank placements Interest on financial investments available-for-sale Interest on loans, advances and financing Interest on derivatives Unrealised loss on derivative instruments Management fee income Corporate advisory fees Agency fees Underwriting commission Guarantee fees Other fees income Brokerage income Reimbursement of research expenses Other income

Expenses Rental of premises Interest expense on deposits Travel services Other expenses

RM'000

RM'000

12 months 17 months period ended period ended 31.07.2013 31.12.2014 RM'000

Other Related Companies

Subsidiaries

RM'000

12 months 17 months period ended period ended 31.07.2013 31.12.2014 RM'000

RM'000

Former Other Related Companies

12 months 17 months period ended period ended 31.07.2013 31.12.2014 RM'000

RM'000

12 months 17 months period ended period ended 31.07.2013 31.12.2014 RM'000

RM'000

-

-

-

-

-

-

3,741

-

-

-

100 3,203 3,303

-

-

-

314 3,975 668 4,957

-

1,736 116 (1,598) 475 70 110 150 313 712 5,825

-

1,057 1,512 119 445 1,482 4,615

1,644 1,969 471 680 2,158 6,922

209 209

-

-

-

934 934

-

1,710 12,226 307 13 14,256

-

3,100 859 3,959

4,563 405 4,968

83

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 32 Significant related party transactions and balances (continued) (d) Related parties balances

The Bank Amounts due to Deposits from customers Deposits and placements of banks and other financial institutions Other liabilities Derivative liabilities Trade payable

Ultimate Holding Corporate Body 31.07.2013 31.12.2014 RM'000 RM'000

Holding Company 31.07.2013 31.12.2014 RM'000 RM'000

Subsidiaries 31.07.2013 31.12.2014 RM'000 RM'000

Other Related Companies 31.07.2013 31.12.2014 RM'000 RM'000

Former Other Related Companies 31.07.2013 31.12.2014 RM'000 RM'000

-

-

-

-

40,220

-

91,033

-

-

2,993

1,835 1,835

-

-

-

40,220

-

843,700 734 200 935,667

-

-

43,832 46,825

-

-

-

-

-

-

140,197 62,014 -

-

-

2,388 2,501

2,453 2,453

-

-

-

126 5,000 5,126

-

14,170 222 1,186 132,979 350,768

-

-

6,014 34,504 45,407

-

-

-

-

-

-

100,000 150,000 250,000

-

-

460,381 460,381

Amounts due from Interbank placement Cash and short-term funds Amount due from brokers Collateral deposits for derivative transactions Loans, advances and financing Derivative asset Rental deposits Expenses paid on behalf Trade receivable Subodinated loans Financial investments

Commitments and contingencies Direct credit substitutes Interest rate related contracts Foreign exchange related contracts

84

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 32 Significant related party transactions and balances (continued) (e) Key management personnel compensation Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group and the Bank either directly or indirectly. The remuneration of key management personnel of the Group and the Bank are as follows: The Group

The Bank

17 months 17 months 12 months 12 months period ended period ended period ended period ended 31.12.2014 31.12.2014 31.07.2013 31.07.2013 RM'000 RM'000 RM'000 RM'000 Short-term employee benefits: - Salaries, allowances and commissions - Bonuses - Defined contribution plan - Other employee benefits - Benefit-in-kind Other emoluments Directors' fees

4,242 1,552 920 1,102 15 332 742

3,552 1,096 499 67 26 75 325

4,242 1,552 920 1,094 15 321 658

3,552 1,096 499 67 26 75 325

8,905

5,640

8,802

5,640

Included in the table above is the Managing Director's/Chief Executive Officer's & Non-Executive Directors' remuneration as disclosed in Note 31. Loans to key management personnel: The Group and the Bank 31.07.2013 31.12.2014 RM'000 RM'000 As at end of financial period/year

135

-

33 Taxation The Bank The Group 17 months 17 months 12 months 12 months period ended period ended period ended period ended 31.12.2014 31.12.2014 31.07.2013 31.07.2013 RM'000 RM'000 RM'000 RM'000 Malaysian income tax: - Current financial year - RPGT - Deferred tax (Note 14)

35,132 3,439 (7,093) 31,478 (657) 30,821

Under/(over) provision in prior years

85

5,924 3,196 9,120 (230) 8,890

20,956 3,439 (3,974) 20,421 145 20,566

5,740 3,196 7,304 (225) 7,079

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 33 Taxation (continued) The numeric reconciliation between the applicable statutory income tax rate to the effective income tax rate of the Group and the Bank are as follows:

Statutory tax rate in Malaysia Tax effect in respect of: - Non-allowable expenses - Non-taxable income - Utilisation of unabsorbed business losses - Tax credit (bilateral) - Real property gains tax - Over provision in prior years Average effective tax rate

The Group The Bank 12 months 12 months 17 months 17 months period ended period ended period ended period ended 31.12.2014 31.12.2014 31.07.2013 31.07.2013 % % % % 25.00 25.00 25.00 25.00 3.60 (10.50) 0.10 (0.10) 2.20 0.20 20.50

2.00 (3.20) (0.60) 23.20

0.10 (11.60) (0.10) 2.80 0.80 17.00

1.80 (3.70) (0.60) 22.50

34 Earnings per share

The basic earnings per share for the Group and the Bank have been calculated based on the net profit attributable to equity holders of the Group and the Bank by the weighted average number of ordinary shares in issue during the financial period. The Group The Bank 12 months 12 months 17 months 17 months period ended period ended period ended period ended 31.12.2014 31.12.2014 31.07.2013 31.07.2013 Net profit attributable to equity holders (RM’000) Weighted average number of ordinary shares in issue (’000)

111,135

29,461

100,420

30,044

554,595

500,000

554,595

500,000

20.04

5.89

18.11

6.01

Basic earnings per share (sen)

86

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 35 Dividends Dividends recognised as distribution to ordinary equity holders of the Group and Bank and paid during the financial period/year: The Bank 31.07.2013

31.12.2014 Gross dividend per share sen

Amount of tax exempt dividend RM'000

Amount of Gross dividend dividend net of per share tax sen RM'000

Ordinary share: - Final dividend -for the financial year ended 31.7.2012

-

-

6.00 6.00

22,500 22,500

The Directors do not recommend the payment of a final dividend for the financial period ended 31 December 2014. 36 Commitments and contingencies

In the normal course of business, the Group and the Bank makes various commitments and incurs certain contingent liabilities with legal recourse to its customers. No material losses are anticipated as a result of these transactions. The principal amount of commitments and contingencies constitue the following: The Group and the Bank 31.07.2013 31.12.2014 Principal Principal amount amount RM'000 RM'000 133,850 17,122

Direct credit substitutes* Obligations under underwriting agreement Irrevocable commitments to extend credit: - maturity less than one year - maturity more than one year Interest rate related contracts**: - less than one year - one year to less than five years Foreign exchange related contracts**: - less than one year - one year to less than five years 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 * **

346,843 571

26,927 96,977

100,000 150,000

253,000 100,000

2,292,667 808,480

1,573,044 792,008

322,761 4,172,294

317,295 3,159,251

Included in direct credit substitutes of the Group and the Bank as above are financial guarantee contracts of RM53.85 million, of which fair value at the time of issuance is zero. The fair value of these derivatives have been recognised as "derivative financial assets" and "derivative financial liabilities" in the statement of financial position and disclosed in Note 9 and 21 respectively to the financial statements.

87

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 37 Capital commitments Capital expenditure approved by Directors are not provided for in the financial statements amounted to approximately: The Group 31.07.2013 31.12.2014 RM'000 RM'000 In respect of property and equipment: Authorised and contracted for Authorised but not contracted for

60,715 310 61,025

216 7,675 7,891

The Bank 31.07.2013 31.12.2014 RM'000 RM'000 57,481 310 57,791

216 7,638 7,854

38 Lease commitments The Group and the Bank have lease commitments in respect of rented premises and hired equipment, all of which are classified as operating lease. A summary of the future minimum lease payments under non-cancellable operating lease commitments are as follows: The Group 31.07.2013 31.12.2014 RM'000 RM'000 Year Within one year One to five years

11,336 6,391

2,753 1,017

The Bank 31.07.2013 31.12.2014 RM'000 RM'000 9,604 5,633

2,592 1,017

39 Capital management With effect from 1 January 2013, the total capital and capital adequacy ratios of the Group and the Bank are computed in accordance with Bank Negara Malaysia’s Capital Adequacy Framework (Capital Components) dated 28 November 2012. The Group and the Bank are currently adopting Standardised Approach for Credit Risk and Market Risk, the Basic Indicator Approach for Operational Risk. In line with the transitional arrangements under the Bank Negara Malaysia’s Capital Adequacy Framework (Capital Components), the minimum capital adequacy requirement for Common Equity Tier 1 Capital Ratio (‘CET 1’) and Tier 1 Capital Ratio are 4.0% and 5.5% respectively for financial period ended 2014. The minimum regulatory capital adequacy requirement remains at 8.0% (31.07.2013: 8.0%) for total capital ratio.

The Group and the Bank’s objectives when managing capital are: • To comply with the capital requirements set by the regulators of the banking markets where the entities within the Group and the Bank operates; • To safeguard the Group and the Bank’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; and • To maintain a strong capital base to support the development of its business. The Group and the Bank maintain a ratio of total regulatory capital to its risk-weighted assets (“RWA”) above a minimum level agreed with the management which takes into account the risk profile of the Group and the Bank.

88

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 40 Capital adequacy

The table below summarises the composition of regulatory capital and the ratios of the Group and the Bank for the financial period ended 31 December 2014.

The Group 31.07.2013 31.12.2014 RM'000 RM'000 Basel III Common Equity Tier (CET) 1 Capital : Paid-up share capital Share premium Statutory reserve Retained profits Unrealised gains on AFS instruments Less : Other regulatory adjustment Goodwill and other intangible assets Investment in subsidiaries Collective allowance reserve 55% of cumulative gains of AFS instruments Deferred tax assets CET 1 Capital Additional Tier 1 Capital Qualifying non-controlling interests Total Tier 1 Capital Tier 2 capital Non-controlling interests Collective impairment allowance # Less : Regulatory adjustment Investment in subsidiaries Total Tier 2 capital Total Capital

780,000 219,800 199,071 210,721 5,479 1,415,071

500,000 148,861 216,854 3,564 869,279

The Bank 31.07.2013 31.12.2014 RM'000 RM'000

780,000 219,800 199,071 264,248 5,347 1,468,466

500,000 148,861 214,038 3,564 866,463

(320,806) (3,556)

(162,502) -

(314,772) (124,563) (3,556)

(162,502) -

(3,013) (10,836) 1,076,860

(1,960) (463) 704,354

(2,941) (5,990) 1,016,644

(1,960) (463) 701,538

3,000 1,079,860

208 704,562

1,016,644

701,538

12,557

49 5,476

12,557

5,476

12,557

5,525

(12,557) -

(399) 5,077

1,092,417

710,087

1,016,644

706,615

Capital Ratios CET 1 capital ratio Tier 1 capital ratio Total capital ratio

30.224% 30.308% 30.660%

30.046% 30.055% 30.291%

30.721% 30.721% 30.721%

30.020% 30.020% 30.237%

CET 1 capital ratio (net of proposed dividends) Tier 1 capital ratio (net of proposed dividends) Total capital ratio (net of proposed dividends)

30.224% 30.308% 30.660%

30.046% 30.055% 30.291%

30.721% 30.721% 30.721%

30.020% 30.020% 30.237%

#

Qualifying collective impairment is restricted to allowances on the unimpaired portion of the loans, advances and financing.

89

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 40 Capital adequacy (continued) The breakdown of RWA by each major risk categories is as follows:

Credit risk Market risk Operational risk Total RWA

The Group 31.12.2014 31.07.2013 RM'000 RM'000 1,870,916 2,938,442 168,291 196,759 305,023 427,786 2,344,230 3,562,987

90

The Bank 31.07.2013 31.12.2014 RM'000 RM'000 1,869,728 2,791,978 168,291 191,477 298,889 325,813 2,336,908 3,309,268

Company No:14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 41 Significant Events (a) On 18 October 2013, the Bank entered into a Sale and Purchase Agreement ("SPA") with a third party for the disposal of a freehold investment property, free from encumbrances and subject to the terms and conditions as stipulated in the SPA, for a total cash consideration of RM82.5 million resulting in a net gain on disposal of RM34.9 million (before Real Property Gains Tax of RM3.4 million). The disposal was completed on 15 January 2014. (b) On 22 November 2013, a wholly-owned subsidiary of the Bank, HwangDBS Custodian Services Sdn. Bhd. (In Liquidation) ("HDBS Custodian") held its final shareholder's meeting, and the Return by Liquidator Relating to Final Meeting ("Return") had been lodged with the Companies Commission of Malaysia ("CCM") and the Official Receiver on the said date. HDBS Custodian had been dissolved at the expiry of 3 months from date of lodgement of the Return with CCM and the Official Receiver pursuant to Section 272(5) of the Companies Act, 1965. (c) On 18 December 2013, the Bank entered into a Sale and Purchase Agreement ("SPA") with HDM Properties Sdn Bhd for the disposal of a freehold land, free from encumbrances and subject to the terms and conditions as stipulated in the SPA, for a total cash consideration of RM5.0 million resulting in a net gain on disposal of RM3.8 million. The disposal was completed on 14 March 2014. (d) Merger of the Businesses, Assets and Liabilities of AFFIN Investment Bank Berhad ("AIBB") and its nominees subsidiaries with HwangDBS Investment Bank Berhad (now known as Affin Hwang Investment Bank Berhad or “the Bank”) and its nominees subsidiaries ("IB Merger") Prior to the holding company, AFFIN Holdings Berhad (“AHB”) completing the acquisition of the investment banking, asset management and futures businesses of Hwang-DBS (Malaysia) Bhd (“HDBS”) (“the acquisition”), HDBS undertook a pre-closing reorganisation which was an internal restructuring exercise of HDBS involving the following: (i) (ii) (iii) (iv)

transfer by HDBS of its 100% interest in HDM Futures Sdn. Bhd. to HwangDBS Investment Bank Berhad ("HIB"); transfer by HDBS of its 53% interest in Hwang Investment Management Berhad ("HIM") to HIB; transfer by HDBS of its 49% interest in AIIMAN to HIB; and transfer by HIB of its 51% interest in HwangDBS Vickers Research Sdn Bhd to HDBS (collectively referred to as the "Proposed Pre-Closing Reorganisation").

On 7 April 2014, AHB has completed the acquisition and on the same day, AHB also acquired an additional 17% equity interest in HIM, now known as Affin Hwang Asset Management Berhad ("AHAM"), from a director of AHAM, for cash consideration of RM62.6 million, and has in turn nominated the Bank as the transferee of the 17% stake. Consequently, the Bank's equity interests in AHAM was increased to 70%.

91

Company No:14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 41 Significant Events (continued) (d) Merger of the Businesses, Assets and Liabilities of AFFIN Investment Bank Berhad ("AIBB") and its nominees subsidiaries with HwangDBS Investment Bank Berhad (now known as Affin Hwang Investment Bank Berhad or “the Bank”) and its nominees subsidiaries ("IB Merger") (continued) On 3 June 2014, AIBB and the Bank had obtained the Vesting Order pursuant to Section 102 of the Financial Services Act 2013 and Section 139 of the Capital Markets and Services Act 2007 from the High Court of Malaya at Kuala Lumpur in respect of the following transfer of business, assets and liabilities, which shall take effect on 20 September 2014: (i) the transfer of the entire business, including all assets (excluding Merchant Nominees Tempatan Sdn. Bhd. and (ii) the transfer of the entire business, including all assets and liabilities of AFFIN Nominees (Tempatan) Sdn. Bhd. (iii) the transfer of the entire business, including all assets and liabilities of AFFIN Nominees (Asing) Sdn. Bhd. (“ANA”) to Affin Hwang Nominees (Asing) Sdn. Bhd. (“AHNA”). On 13 August 2014, AIBB announced that a Supplemental Court Order was obtained from the High Court of Malaya at Kuala Lumpur, to further exclude AFFIN Fund Management Berhad from the transfer. Pursuant thereto: the Vesting Order dated 3 June 2014 is supplemented by the Supplemental Court Order dated 13 August 2014; (ii) all references to “Excluded AFFIN Companies” in the Vesting Order dated 3 June 2014 shall mean Merchant (iii) all references to “Court Order” in the Vesting Order dated 3 June 2014 shall include the Supplemental Court Order dated 13 August 2014.

(i)

The transfer of the entire business, including all assets and liabilities of AIBB to the Bank, ANT to AHNT and ANA to The purchase consideration of RM762.7 million for the transfer of the entire business, including all assets and liabilities of AIBB was settled by cash based on the aggregate of the net asset value (“NAV”) of AIBB’s last management accounts as at 31 August 2014 and a fixed sum of RM97.3 million being the value attributable to goodwill of the business. The purchase consideration for the acquisitions of ANT and ANA were settled respectively by cash consideration of RM1.00 each. The transfer and acquisitions were accounted for using predecessor basis of accounting. On the same day, AIBB ceased its operation as an investment bank. Pursuant to the completion of the IB Merger, AIBB had also surrendered its banking licence to BNM and its Capital Markets Services Licence to the Securities Commission Malaysia accordingly.

92

Company No:14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 41 Significant Events (continued) (d) Merger of the Businesses, Assets and Liabilities of AFFIN Investment Bank Berhad ("AIBB") and its nominees subsidiaries with HwangDBS Investment Bank Berhad (now known as Affin Hwang Investment Bank Berhad or “the Bank”) and its nominees subsidiaries ("IB Merger") (continued) The assets and liabilities arising from the vesting are as follows : AIBB RM'000

ANT RM'000

ANA RM'000

Cash and short-term funds Deposits and placements with financial institutions Financial assets held-for-trading Financial investments held-to-maturity Financial investments available-for-sale Loans, advances and financing Trade receivables Other assets Deferred tax assets Tax recoverable Statutory deposits with Bank Negara Malaysia Amount owing from related companies Property and equipment Intangible assets Total Assets

149,590 246,474 15,036 154,307 2,096,844 728,683 335,025 8,153 2,148 9,526 92,186 199 5,758 54,415 3,898,344

44 44

102 102

Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Foreign currency borrowings Amount payable to AIBB Trade payables Other liabilities Taxation Total Liabilities

2,337,940 350,986 162,780 322,141 59,113 3,232,960

184 72 5 2 263

70 100 4 2 176

665,384 97,346 762,730 (149,590) 613,140

(219) 219 (44) (44)

(74) 74 (102) (102)

Assets

Net assets acquired /(Net liabilities) assumed Goodwill acquired/Deficit of acquisition cost over net liabilities assumed Total cost of merger Less: Cash and short term funds acquired Net cash flow arising from the mergers

93

Company No:14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 41 Significant Events (continued) (e)

HDBS had executed three Novation Agreements dated 25 March 2014 signed with the Bank, Bursa Malaysia Derivatives Berhad and AHF for the novations of the Subordinated Loan Agreements dated 25 June 1996, 26 February 2008 and 28 April 2008 together with their respective Supplemental Agreements (herein refered to as "the Subordinated Loan Agreements") in favour of the Bank. Consequently, the Bank had assumed the obligations, rights and entitlements under the Subordinated Loan Agreements. As at end of the financial period, the subordinated loan granted to AHF amounted to RM5.0 million.

(f) Acquisition of 12,000,000 Ordinary Shares of RM1.00 each in AFFIN Fund Management Berhad (“AFFIN Fund”), representing the entire equity interest in AFFIN Fund by Hwang Investment Management Berhad (“HIM'’), now known as Affin Hwang Asset Management Berhad, (AFFIN Fund Acquisition); and Transfer of the whole of the Assets, Liabilities and Business Undertakings of AFFIN Fund to HIM after the AFFIN Fund Acquisition (“IM Merger”) (Collectively referred to as the "Fund Merger") On 14 August 2014, HIM entered into a Shares Transfer Agreement with AIBB to acquire 100% equity interest in AFFIN Fund ("AFFIN Fund Acquisition"). On 25 August 2014, AFFIN Fund and HIM had obtained the Vesting Order pursuant to Section 139 of the Capital Markets and Services Act 2007 from the High Court of Malaya at Kuala Lumpur for the transfer of the entire business, including its assets and liabilities of AFFIN Fund to HIM with effect from 20 September 2014. The transfer of the entire business, including all assets and liabilities of AFFIN Fund to HIM was completed on 20 September 2014. The purchase consideration of RM55 million for the acquisition was settled by cash based on the aggregate NAV of AFFIN Fund’s last management accounts as at 31 August 2014. Subsequent to the completion of the business transfer, AFFIN Fund has surrendered its Capital Market Services License to Securities Commission on 24 September 2014 and ceased its operation as a fund management company and became dormant. The net assets of AFFIN Fund acquired based on its carrying values as at 31 August 2014 are as follows: AFFIN Fund RM'000

Assets Cash and short term funds Manager's stocks Trade debtors Other assets Deferred tax asset Property and equipment Intangible assets Total Assets

26,051 1,169 310 197 521 468 41 28,757

Liabilities Amount due to holding company Other liabilities Provision for taxation Total Liabilities

235 5,989 684 6,908

Net assets acquired/merged Excess of acquisition cost over net assets acquired Total cost of acquisition Less: Cash and short term funds acquired Net cash flow arising from the acquisition

21,849 33,151 55,000 (25,051) 29,949

94

Company No:14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 41 Significant Events (continued) (g) Transfer of business of Affin Hwang Futures Sdn Bhd (formerly known as HDM Futures Sdn. Bhd.) ("AHF") to the Bank The Board has approved the transfer of the futures broking business of Affin Hwang Futures Sdn Bhd (“AHF”) to the Bank, hereinafter referred to as the "Futures Transfer". On 19 November 2014, Bursa Malaysia Derivatives Berhad ("BMDB") and Bursa Malaysia Derivatives Clearing Berhad ("BMDCB") have granted their approval in principle to the Bank to be registered as a Trading Participant and General Clearing Participant for dealing in derivatives for the purpose of the Futures Transfer. On 18 December 2014, the Securities Commission has also granted its approval for the Futures Transfer. 42 Subsequent events As disclosed in Note 41(g), on 30 January 2015, AHF and the Bank entered into a Business Transfer Agreement to effect the transfer of the whole of the assets, liabilities and business undertakings of AHF as a going concern to AHIB for cash consideration. The purchase consideration is based on the net asset value of the AHF business (including all assets and liabilities other than excluded assets) based on the management accounts as at the month end immediately before the effective date. A Vesting Order pursuant to Section 139 of the Capital Markets and Services Act 2007 was obtained from the High Court of Malaya on 12 February 2015 and is effective on 28 February 2015. On 27 February 2015, BMDB and BMDCB granted their approval to register the Bank as a Trading Participant and General Clearing Participant for dealing in derivatives for the purpose of the Futures Transfer and for AHF to cease as a Trading Participant and General Clearing Participant with effect from 28 February 2015. The Futures Transfer was completed on 28 February 2015. AHF has ceased its provision of futures broking business and AHIB has assumed the same in place of AHF.

95

Company No:14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended 31 December 2014 (continued) 43 Business Combinations Acquisition of 10,000,000 Ordinary Shares of RM1.00 each in Asian Islamic Investment Management Sdn Bhd (“AIIMAN”), representing the entire equity interest in AIIMAN by Hwang Investment Management Berhad (now known as AFFIN Hwang Asset Management Berhad) ("AHAM") from Nikko Asset Management Asia Limited ("Nikko AM") and the Bank ("AIIMAN" Acquisitions") On 19 September 2014, AHAM had entered into the following Share Sale and Purchase Agreements: (i) share sale and purchase agreement with Nikko AM for the acquisition of 51% interest in AIIMAN held by Nikko AM for RM11,730,000 to be satisfied in cash; and (ii) share sale and purchase agreement with the Bank for the acquisition of 49% interest in AIIMAN held by the Bank for RM11,270,000 to be satisfied in cash. On 20 September 2014, the above AIIMAN Acquisitions had been completed in accordance with the terms and conditions set out in the Share Sale and Purchase Agreements and AIIMAN became a wholly-owned subsidiary of AHAM on the same day. The initial provisional fair value of the identiable assets and liabilities assumed arising from the acquisition of AIIMAN. AIIMAN's Fair Value RM'000

Assets

1,106 14,475 1,409 198 220 17,408

Cash and short-term funds Financial investments available-for-sale Trade receivables Other assets Property and equipment Total Assets Liabilities Other liabilities Total Liabilities

1,470 1,470

Provisional fair value of the identifiable assets and liabilities acquired

15,938

Less : Fair value of net assets attributable to 49% interest previously held by AFFIN Hwang Investment Bank Berhad Goodwill on acquisition of additional 51% interest in AIIMAN Total purchase consideration Less : Cash and short-term funds acquired Net cash outflow arising from the acquisition

(7,809) 3,601 11,730 (1,106) 10,624

The effect on the step-up acquisition of AIIMAN to a wholly owned subsidiary amounted to a gain of RM917,585 had been recognised in the Income Statements. Acquisition related costs Acquisition related costs amounting to RM194,000 had been incurred and are included in administration and general expenses in the consolidated income statement. Revenue and profit contribution The acquired business contributed a total revenue and net profit after tax of RM6.3 million and RM2.28 million respectively to the Group's financial results for the curent financial period. Had the acquired entity been consolidated from 1 August 2013, consolidated revenue and consolidated profit after tax for the period ended 31 December 2014 would have been RM17.7 million and RM8.2 million respectively.

96

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies

As a full-fledged investment bank, the Bank has established robust and comprehensive risk management policies and framework, based on best practices, to ensure that the salient risk elements in the operations of the Bank are adequately managed and mitigated. The Bank’s framework for the management of financial risks is congruent with the primary corporate objective of creating and enhancing shareholders’ value, guided by a prudent and robust framework of risk management methodologies and policies. The Bank’s risk management policies and framework are reviewed periodically to ensure that they are comprehensive in addressing the multi-faceted risks associated with the investment banking sector. The Group Risk Management (“GRM”) at the group level is primarily responsible for the development and maintenance of the risk management policies and framework of the Bank and supports the functions of Assets and Liabilities Committee (“ALCO”), the Board Risk Management Committee (“BRMC”) and the Board Credit Review Committee ("BCRC"). A. Credit risk Credit risk is the potential risk of financial loss arising from defaults by counter parties in meeting their obligations. The Bank's exposure to credit risks arises primarily from share trading, share margin financing, corporate/inter-bank lending activities, bonds investment, foreign exchange trading as well as equity and debt underwriting and from participation in securities settlements and payment transactions. The management of credit risk is governed by a set of approved credit policies, guidelines, circulars and procedures to ensure that the overall lending objectives achieved are in compliance with the internal and regulatory requirements. The risk management policies are subject to review by the BRMC, a subcommittee of the Board that reviews the adequacy of the Bank’s risk policies and framework. The Bank’s credit risk framework is further strengthened with an established framework for the approval and review of proposals that comprises the Group Management Loan Committee ("GMLC") and the Board Credit Review Committee (“BCRC”). The GMLC represents the approving authority for credit and underwriting proposals, whilst the BCRC is the committee that reviews proposals that exceed specified limits and criteria, as well as to consider whether to reject the proposal or modify the terms of the proposal. A number of relevant factors are taken into consideration in the identification and analysis of counterparty credit risk. Each counterparty is assigned a credit rating under the Credit Risk Grading Policy, which considers factors such as competitive position, operating performance, cash flow strength and management strength. The credit grading system is being revised to make it more robust and risk sensitive.

97

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued)

A. Credit risk (continued) Credit risk measurement Loans, advances and financing Credit evaluation is the process of analysing the creditworthiness of the prospective customer against the Bank’s underwriting criteria and the ability of the Bank to make a return commensurate to the level of risk undertaken. A critical element in the evaluation process is the assignment of a credit risk grade to the counterparty. This assists in the risk assessment and decision making process. The Bank has developed internal rating models to support the assessment and quantification of credit risk. All corporate lending, underwritings and share margin financing applications are evaluated by credit management and forwarded to the relevant approving authorities based on the Authority Matrix approved by Board. Risk limit control and mitigation policies The Bank employs various policies and practices to control and mitigate credit risk. Lending limits The Bank establishes internal limits and related lending guidelines to manage large exposures and avoid undue concentration of credit risk in its credit portfolio. The limits include single customer groupings, connected parties, geographical and industry segments. These risks are monitored regularly and the limits reviewed annually or sooner depending on changing market and economic conditions. The credit risk exposure for derivative and loan books are managed as part of the overall lending limits with customers together with potential exposure from market movements. Collateral Credits are established against borrower’s capacity to repay rather than relying solely on security. However, collateral may be taken to mitigate credit risk. The main collateral types accepted and given value by the Bank are: - Charges over business assets, debentures, personal guarantee and corporate guarantee, sinking fund account and shares; and - Charges over financial instruments such as marketable equities. Credit related commitments Commitment to extend credit represents unutilised portion of approved credit in the form of loans, guarantees or letters of credit. In terms of credit risk, the Bank is potentially exposed to loss in an amount equal to the total unutilised commitments. However, the potential amount of loss is less than the total unutilised commitments, as most commitments to extend credit are contingent upon customers maintaining specific minimum credit standards. The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have a greater degree of credit risk than short-term commitments.

98

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued)

A. Credit risk (continued) Credit risk monitoring Corporate credits and large individual accounts are reviewed by the Business Units at least once a year against updated information. This is to ensure that the credit grades remain appropriate and detect any signs of weaknesses or deterioration in the credit quality. Remedial action is taken where evidence of deterioration exists. Early Alert Process is in place as part of a means to pro-actively identify, report and manage deteriorating credit quality. Watchlist accounts are closely reviewed and monitored with corrective measures initiated to prevent them from turning non-performing. As a rule, Watchlist accounts are either worked up or worked out within a period of twelve months. Credit risk culture The Bank recognises that learning is a continuous journey and is committed to enhancing the knowledge and required skills set of its staff. It places strong emphasis on creating and enhancing risk awareness in the organisation. For effective and efficient staff learning, an E–Learning Program is implemented with an online Learning Management System ("LMS"). The LMS provides staff with a progressive self-learning alternative at their own pace. GRM implements an Internal Credit Certification ("ICC") Programme for Business Banking. The aim of the ICCs is to assist the core credit related group of personnel in the Bank achieve a minimum level of knowledge and analytical skills required to make sound corporate and commercial loans to customers. Maximum exposure to credit risk For financial assets recognised in the statements of financial position, the exposure to credit risk equals their carrying amount. For financial guarantees granted, the maximum exposures to credit risk is the maximum amount that the Group and the Bank would have to pay if the guarantees were to be called upon. For loan commitments and other credit related commitments, the maximum exposure to credit risk is the full amount of the undrawn credit facilities granted to customers. All financial assets of the Group and the Bank are subject to credit risk except for cash in hand, equity securities held as financial assets held-for-trading or financial investments available-for-sale, as well as non-financial assets.

99

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued)

A. Credit risk (continued) Maximum exposure to credit risk (continued) The exposure to credit risk of the Group and the Bank equals their carrying amount in the statements of financial position as at reporting date, except for the following: Credit risk exposures relating to on-balance sheet assets and off-balance sheet items are as follows: The Group 31.12.2014 31.7.2013 Maximum Maximum Carrying credit risk Carrying credit risk value exposure value exposure RM'000 RM'000 RM'000 RM'000 Credit risk exposures of on-balance sheet assets: Cash and short-term funds & Financial assets held-for-trading** Financial investments available-for-sale # Other assets*

654,869 32,876 3,577,748 61,982 4,327,475

Credit risk exposures of off-balance sheet items: Direct credit substitutes 133,850 Obligations under underwriting agreement 17,122 Irrevocable commitments to extend credit 347,414 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 322,761 821,147 Total maximum credit risk exposure

5,148,622

654,817 13,973 3,468,539 50,102 4,187,431

1,029,178 43,637 1,402,745 25,529 2,501,089

1,029,139 19,890 1,334,597 14,458 2,398,084

133,850 69,654

123,904

53,873

203,504

317,295 441,199

53,873

4,390,935

2,942,288

2,451,957

The following have been excluded for the purpose of maximum credit risk exposure calculation : &

Cash in hand ** Investments in shares, warrants and REITs # Investments in quoted and unquoted shares and REITs * Prepayment

100

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) A. Credit risk (continued) Maximum exposure to credit risk (continued)

The exposure to credit risk of the Group and the Bank equals their carrying amount in the statements of financial position as at reporting date, except for the following (continued): Credit risk exposures relating to on-balance sheet assets and off-balance sheet items are as follows (continued): The Bank 31.12.2014 31.7.2013 Maximum Maximum Carrying credit risk Carrying credit risk value exposure value exposure RM'000 RM'000 RM'000 RM'000 Credit risk exposures of on-balance sheet assets: 1,024,434 1,024,395 416,625 416,577 Cash and short-term funds & Financial assets held-for-trading** 43,637 19,890 23,893 4,990 # 1,402,745 1,334,597 3,536,702 3,427,492 Financial investments available-for-sale Other assets* 25,157 14,113 58,019 46,849 2,495,973 2,392,995 4,035,239 3,895,908 Credit risk exposures of off-balance sheet items: Direct credit substitutes 133,850 Obligations under underwriting agreement 17,122 Irrevocable commitments to extend credit 347,414 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 322,761 821,147 Total maximum credit risk exposure

4,856,386

133,850 69,654

123,904

53,873

203,504

317,295 441,199

53,873

4,099,412

2,937,172

2,446,868

The following have been excluded for the purpose of maximum credit risk exposure calculation : &

Cash in hand ** Investments in shares, warrants and REITs # Investments in quoted and unquoted shares and REITs * Prepayment

101

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) A. Credit risk (continued) Maximum exposure to credit risk (continued)

Whilst the Group and the Bank's maximum exposure to credit risk is the carrying value of the assets, or in the case of off-balance sheet items, the amount guaranteed, committed or accepted, in most cases the likely exposure is far less due to collateral, credit enhancements and other actions taken to mitigate the credit exposure. The financial effect of collateral held for loans, advances and financing is 42% as at 31 December 2014 (31.07.2013: 72%). The financial effects of collateral for the other financial assets are insignificant.

102

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) A. Credit risk (continued) Credit risk concentrations Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The following tables analyse the Group and the Bank’s financial assets and commitments and contingencies by industry concentration as at the reporting date:

The Group 31.12.2014 Agricultural Mining and quarrying Manufacturing Electricity, gas and water Construction Real estate Wholesale, retail trade, hotel & restaurant Transport, storage and communication Finance, insurance and business Government and government agencies Purchase of securities Others

& # ## *

Cash and short-term funds RM000

Deposit and placements with banks and other financial institutions RM000

654,772 45 654,817 &

245,573 245,573

Financial assets held-fortrading RM000 4,990 8,983 13,973 #

Financial investments availablefor-sale RM000

Financial investments held-tomaturity RM000

40,049 142,737 102,381 419,120 245,292 196,872 40,567 159,416 758,676 1,099,099 264,330 3,468,539 ##

15,013 104,949 56,368 16 176,346

Excludes cash in hand of RM53,000. Excludes investment in shares, warrants and REITS amounting to RM18.9 million. Excludes investments in quoted and unquoted shares net of impairment allowance amounting to RM109.2million. Excludes prepayment amounting to RM11.9 million.

Risk concentration for commitments and contingencies are based on the credit equivalent balances in Note 36.

103

Loans, advances and financing RM000 43,713 8,734 121,963 119,428 54,990 54,680 68,962 90,417 472,957 1,035,844

Trade receivables RM000 36,907 221 378,722 11,648 427,498

Derivative Financial assets RM000 2 3 81,032 1,090 82,127

Other assets RM000 43 689 89 1,149 672 3,768 26,568 3,938 13,186 50,102 *

Total onbalance sheet RM000 40,049 186,450 126,171 541,772 369,801 253,014 95,919 337,095 1,959,296 1,103,303 378,722 763,227 6,154,819

Commitments and contingencies RM000 3,000 8,000 720 51,850 5,164 1,884 115,000 17,886 203,504

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) A. Credit risk (continued) Credit risk concentrations (continued) Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The following tables analyse the Group and the Bank’s financial assets and commitments and contingencies by industry concentration as at the reporting date (continued):

The Group 31.7.2013 Agricultural Mining and quarrying Manufacturing Electricity, gas and water Construction Real estate Wholesale, retail trade, hotel & restaurant Transport, storage and communication Finance, insurance and business Government and government agencies Purchase of securities Others

& # ## *

Cash and short-term funds RM000 1,028,920 219 1,029,139 &

Financial assets held-fortrading RM000 19,890 19,890 #

Financial investments availablefor-sale RM000 9,992 67,914 51,661 12,658 71,497 57,174 96,826 62,062 299,465 557,815 47,533 1,334,597 ##

Excludes cash in hand of RM39,000 Excludes investment in shares, warrants and REITS amounting to RM23.75 million. Excludes investments in quoted and unquoted shares amounting to RM68.15 million Excludes prepayment amounting to RM11.07 million.

Risk concentration for commitments and contingencies are based on the credit equivalent balances in Note 36.

104

Financial investments held-tomaturity RM000 93,002 131,391 114,015 31,860 370,268

Loans, advances and financing RM000 22,758 39,721 112,048 55,340 65,443 166,188 3,352 464,850 ^

Trade receivables RM000 225,613 225,613

Derivative Financial assets RM000 35,964 913 36,877

Other assets RM000 478 290 7,385 2,114 3,732 459 14,458 *

Total onbalance sheet RM000 9,992 183,674 91,382 256,575 71,497 112,514 276,284 62,352 1,423,484 560,148 395,533 52,257 3,495,692

Commitments and contingencies RM000 40,000 13,873 53,873

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) A. Credit risk (continued) Credit risk concentrations (continued) Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The following tables analyse the Group and the Bank’s financial assets and commitments and contingencies by industry concentration as at the reporting date (continued):

The Bank 31.12.2014 Agricultural Mining and quarrying Manufacturing Electricity, gas and water Construction Real estate Wholesale, retail trade, hotel & restaurant Transport, storage and communication Finance, insurance and business Government and government agencies Purchase of securities Others

& # ## *

Cash and short-term funds RM000

Deposit and placements with banks and other financial institutions RM000

416,532 45 416,577 &

245,573 245,573

Financial assets held-fortrading RM000 4,990 4,990 #

Financial investments availablefor-sale RM000

Financial investments held-tomaturity RM000

40,048 142,737 102,381 419,120 245,292 196,872 40,567 159,416 717,630 1,099,099 264,330 3,427,492 ##

15,013 104,949 56,368 16 176,346

Excludes cash in hand of RM48,000. Excludes investment in shares, warrants and REITS amounting to RM18.9 million. Excludes investments in quoted and unquoted shares net of impairment allowance amounting to RM109.2 million. Excludes prepayment amounting to RM11.2 million.

Risk concentration for commitments and contingencies are based on the credit equivalent balances in Note 36.

105

Loans, advances and financing RM000 43,713 8,734 121,963 119,428 54,990 54,680 68,962 90,417 472,957 1,035,844

Trade receivables RM000 378,722 378,722

Derivative Financial assets RM000 2 3 81,032 1,090 82,127

Other assets RM000 43 591 89 1,082 672 3,726 25,851 2,838 11,957 46,849 *

Total onbalance sheet RM000 40,048 186,450 126,171 541,674 369,801 252,947 95,919 337,053 1,633,403 1,101,982 378,722 750,350 5,814,520

Commitments and contingencies RM000 3,000 8,000 720 51,850 5,164 1,884 115,000 17,886 203,504

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) A. Credit risk (continued) Credit risk concentrations (continued) Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The following tables analyse the Group and the Bank’s financial assets and commitments and contingencies by industry concentration as at the reporting date (continued):

The Bank 31.7.2013 Agricultural Mining and quarrying Manufacturing Electricity, gas and water Construction Real estate Wholesale, retail trade, hotel & restaurant Transport, storage and communication Finance, insurance and business Government and government agencies Purchase of securities Others

& # ## *

Cash and short-term funds RM000 1,024,176 219 1,024,395 &

Financial assets held-fortrading RM000 19,890 19,890 #

Financial investments availablefor-sale RM000 9,992 67,914 51,661 12,658 71,497 57,174 96,826 62,062 299,465 557,815 47,533 1,334,597 ##

Excludes cash in hand of RM39,000. Excludes investment in shares, warrants and REITS amounting to RM23.8 million. Excludes investments in quoted and unquoted shares amounting to RM68.2 million. Excludes prepayment amounting to RM11.0 million.

Risk concentration for commitments and contingencies are based on the credit equivalent balances in Note 36.

106

Financial investments held-tomaturity RM000 93,002 131,391 114,015 31,860 370,268

Loans, advances and financing RM000 22,758 39,721 112,048 55,340 65,443 166,188 3,352 464,850 ^

Trade receivables RM000 225,613 225,613

Derivative Financial assets RM000 35,964 913 36,877

Other assets RM000 473 290 7,064 2,114 3,732 440 14,113 *

Total onbalance sheet RM000 9,992 183,674 91,382 256,570 71,497 112,514 276,284 62,352 1,418,419 560,148 395,533 52,238 3,490,603

Commitments and contingencies RM000 40,000 13,873 53,873

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) A. Credit risk (continued) Description of collateral held as security and other credit enhancement for loans, advances and financing: The main types of collateral obtained by the Group and the Bank are as follows: -

For corporate loans, charges over the business assets such as premises, equipment and fixed deposits. For share margin financing charges over listed securities.

Total loans, advances and financing - credit quality All loans, advances and financing are categorised into “neither past due nor impaired”, “past due but not impaired” and “impaired”. Past due loans refer to loans that are overdue by one day or more. Impaired loans are loans with months-in-arrears more than 3 months (i.e. 90 days) or with impaired allowances. The Group and the Bank

Distribution of loans, advances and financing by credit quality: Carrying amount of loans, advances and financing by credit quality: - Neither past due nor impaired - Past due but not impaired - Impaired Gross loans, advances and financing Less: Allowances for impairment - Individual - Collective Net loans, advances and financing

31.12.2014 RM'000

31.7.2013 RM'000

1,015,285 19,652 34,128 1,069,065

470,326 470,326

(24,239) (8,982) (33,221) 1,035,844

(5,476) (5,476) 464,850

(a) Loans neither past due nor impaired

Analysis of loans and advances that are neither past due nor impaired analysed based on the Group and the Bank's internal grading system is as follows: The Group and the Bank

Quality classification Satisfactory

31.12.2014 RM'000

31.7.2013 RM'000

1,015,285

470,326

-

-

Special mention Quality classification definitions: i Satisfactory

- For corporate loans mean exposures demonstrate a strong capacity to meet financial commitments, with negligible or low probabili of default and/or levels of expected loss. - For share margin financing means accounts that are not impaired/due. ii)Special mention - Exposures require varying degrees of special attention and default risk is of greater concern.

107

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) A. Credit risk (continued) Total loans, advances and financing - credit quality (continued) (b) Loans past due but not impaired

Certain loans, advances and financing are past due but not impaired as the collateral values of these loans are in excess of the principal and profit outstanding. Allowances for these loans may have been set aside on a portfolio basis. The Bank’s loans, advances and financing which are past due but not impaired are as follows: The Group and the Bank

31.12.2014 RM'000 Past due up to 30 days Past due 30-60 days Past due 60-90 days

31.7.2013 RM'000 -

19,652 19,652

(c) Loans that are individually determined to be impaired as at reporting date are as follow: The Group and the Bank

31.12.2014 RM'000 Analyse of impaired loans: Gross individually assessed loans, advances and financing Less : allowance for impairment individual impaired Net individually assessed impaired loans

31.7.2013 RM'000

34,128

-

(24,239) 9,889

-

Collateral and other credit enhancements obtained During the financial period, the Bank has not obtained any assets by taking possession of collateral held as security or calling upon other credit enhancements. There is no repossessed collateral as at the reporting date.

108

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) A. Credit risk (continued) Other financial assets Other financial assets of the Group and the Bank are summarised as below: The Group 31.12.2014

Cash and short-term funds Trade receivables Other assets Deposits and placements with banks and other Fis Total Less: Impairment allowances Total net amount The Group 31.12.2013

Cash and short-term funds Trade receivables Other assets Total Less: Impairment allowances Total net amount The Bank 31.12.2014

Cash and short-term funds Trade receivables Other assets Deposits and placements with banks and other Fis Total Less: Impairment allowances Total net amount The Bank 31.12.2013

Cash and short-term funds Trade receivables Other assets Total Less: Impairment allowances Total net amount 109

Neither past due nor impaired RM'000

Impaired RM'000

Total Gross Amount RM'000

654,817 427,180 50,102 245,573 1,377,672 1,377,672

4,420 9,894 14,314 (13,996) 318

654,817 431,600 59,996 245,573 1,391,986 (13,996) 1,377,990

Neither past due nor impaired RM'000

Impaired RM'000

Total Gross Amount RM'000

1,029,139 225,460 14,458 1,269,057 1,269,057

692 510 1,202 (1,049) 153

1,029,139 226,152 14,968 1,270,259 (1,049) 1,269,210

Neither past due nor impaired RM'000

Impaired RM'000

Total Gross Amount RM'000

416,577 378,404 46,849 245,573 1,087,403 1,087,403

4,420 9,894 14,314 (13,996) 318

416,577 382,824 56,743 245,573 1,101,717 (13,996) 1,087,721

Neither past due nor impaired RM'000

Impaired RM'000

Total Gross Amount RM'000

1,024,395 225,460 14,113 1,263,968 1,263,968

692 510 1,202 (1,049) 153

1,024,395 226,152 14,623 1,265,170 (1,049) 1,264,121

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) A. Credit risk (continued) Private debts securities, treasury bills and derivatives Private debts securities, treasury bills and other eligible bills included in financial assets held-for-trading and financial investments available-for-sale are measured on a fair value basis. The fair value will reflect the credit risk of the issuer. Most listed and some unlisted financial investments are rated by external rating agencies. The Group and the Bank mainly uses external credit ratings provided by RAM, MARC or Moody's. The table below presents an analysis of debts securities, credit quality of cash & short funds, deposit and placements of bank and other financial institutions and derivative financial assets. Cash and short term funds exclude cash in hand, securities include financial assets held-for-trading, financial investment available-for-sale and financial investment held-to-maturity.

The Group 31.12.2014 Cash and short-term funds Deposits and placements with banks and other financial institutions Financial assets held-for-trading - Private debt securities - Unit trusts Financial investments available-for-sale: - Malaysian government securities - Negotiable instruments of deposits - Malaysian government islamic investment issue - Private debt securities - Sukuk Perumahan Kerajaan - Malaysian Government Sukuk - Cagamas bonds - Unit Trust Financial investments held-to-maturity - Private debt securities Derivative financial assets

Sovereign RM'000

AAA RM'000

AA- to AA+ RM'000

A- to A+ RM'000

Lower than ARM'000

Unrated RM'000

Impaired* RM'000

Total RM'000

45 -

60,101 65,381

499,972 180,192

30,798 -

29 -

63,872 -

-

654,817 245,573

-

4,990 -

-

-

-

8,983

-

4,990 8,983

80,967 866,515 95,879 48,642 7,096 -

712,257 84,924 -

693,011 -

80,116 98,737 -

211,888 -

245,596 242,902

9 -

80,967 80,116 866,515 2,057,377 48,642 7,096 84,924 242,902

1,099,144

8,002 935,655

7,150 1,380,325

25,940 20,293 255,884

31 211,948

150,406 46,651 758,410

9

176,346 82,127 4,641,375

* Net of allowance for impairment Collateral is not generally obtained directly from the issues of debt securities. Certain debt securities may be collaterised by specifically identified assets that would be obtainable in the event of default.

110

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) A. Credit risk (continued) Private debts securities, treasury bills and derivatives (continued) The table below presents an analysis of debts securities, credit quality of cash & short funds, deposit and placements of bank and other financial institutions and derivative financial assets. Cash and short term funds exclude cash in hand, securities include financial assets held-for-trading, financial investment available-for-sale and financial investment held-to-maturity. (continued)

The Group 31.7.2013 Cash and short-term funds Financial assets held for trading: - Private debt securities Financial investments available-for-sale: - Malaysian government securities - Malaysian government investment issuance - Malaysian government treasury bills - BNM Islamic negotiable Notes - Private debt securities - Malaysian Government Sukuk - Unit Trust Financial investments held-to-maturity - Private debt securities Derivative financial assets

Sovereign RM'000

AAA RM'000

AA- to AA+ RM'000

A- to A+ RM'000

Lower than ARM'000

Unrated RM'000

Impaired* RM'000

Total RM'000

219

328,712

163,966

358,156

40

178,046

-

1,029,139

-

19,890

-

-

-

-

-

19,890

80,539 250,894 22,089 119,671 77,772 6,851 -

172,169 -

208,611 -

18,331 -

102,455 -

146,629 128,586

-

80,539 250,894 22,089 119,671 725,967 6,851 128,586

558,035

528 521,299

131,391 5,434 509,402

31,860 7,478 415,825

207,017 1 309,513

23,436 476,697

-

370,268 36,877 2,790,771

* Net of allowance for impairment Collateral is not generally obtained directly from the issues of debt securities. Certain debt securities may be collaterised by specifically identified assets that would be obtainable in the event of default.

111

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) A. Credit risk (continued) Private debts securities, treasury bills and derivatives (continued) The table below presents an analysis of debts securities, credit quality of cash & short funds, deposit and placements of bank and other financial institutions and derivative financial assets. Cash and short term funds exclude cash in hand, securities include financial assets held-for-trading, financial investment available-for-sale and financial investment held-to-maturity. (continued)

The Bank 31.12.2014 Cash and short-term funds Deposits and placements with banks and other financial institutions Financial assets held-for-trading - Private debt securities Financial investments available-for-sale: - Malaysian government securities - Negotiable instruments of deposits - Malaysian government islamic investment issue - Private debt securities - Sukuk Perumahan Kerajaan - Malaysian Government Sukuk - Cagamas bonds - Unit Trust Financial investments held-to-maturity - Private debt securities Derivative financial assets

Sovereign RM'000

AAA RM'000

AA- to AA+ RM'000

A- to A+ RM'000

Lower than ARM'000

Unrated RM'000

Impaired* RM'000

Total RM'000

45 -

39,572 65,381

298,683 180,192

18,968 -

29 -

59,280 -

-

416,577 245,573

-

4,990

-

-

-

-

-

4,990

80,967 866,515 95,879 48,642 7,096 -

712,257 84,924 -

693,011 -

80,116 98,737 -

211,888 -

245,596 201,856

9 -

80,967 80,116 866,515 2,057,377 48,642 7,096 84,924 201,856

1,099,144

8,002 915,126

7,150 1,179,036

25,940 20,293 244,054

31 211,948

150,406 46,651 703,789

9

176,346 82,127 4,353,106

* Net of allowance for impairment Collateral is not generally obtained directly from the issues of debt securities. Certain debt securities may be collaterised by specifically identified assets that would be obtainable in the event of default.

112

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) A. Credit risk (continued) Private debts securities, treasury bills and derivatives (continued) The table below presents an analysis of debts securities, credit quality of cash & short funds, deposit and placements of bank and other financial institutions and derivative financial assets. Cash and short term funds exclude cash in hand, securities include financial assets held-for-trading, financial investment available-for-sale and financial investment held-to-maturity. (continued) The Bank 31.7.2013 Cash and short-term funds Financial assets held for trading: - Private debt securities Financial investments available-for-sale: - Malaysian government securities - Malaysian government investment issuance - Malaysian government treasury bills - BNM Islamic negotiable Notes - Private debt securities - Malaysian Government Sukuk - Unit Trust Financial investments held-to-maturity - Private debt securities Derivative financial assets

Sovereign RM'000

AAA RM'000

AA- to AA+ RM'000

A- to A+ RM'000

Lower than ARM'000

Unrated RM'000

Impaired* RM'000

Total RM'000

219

325,008

163,738

357,344

40

178,046

-

1,024,395

-

19,890

-

-

-

-

-

19,890

80,539 250,894 22,089 119,671 77,772 6,851 -

172,169 -

208,611 -

18,331 -

102,455 -

146,629 128,586

-

80,539 250,894 22,089 119,671 725,967 6,851 128,586

558,035

528 517,595

131,391 5,434 509,174

31,860 7,478 415,013

207,017 1 309,513

23,436 476,697

-

370,268 36,877 2,786,027

* Net of allowance for impairment Collateral is not generally obtained directly from the issues of debt securities. Certain debt securities may be collaterised by specifically identified assets that would be obtainable in the event of defaul

113

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) B. Market risk

Market risk is defined as the risk of losses to the Bank’s portfolio positions arising from movements in market factors such as interest rates, foreign exchange rates and changes in volatility. The Bank is exposed to market risks from its trading and investment activities. The Bank’s market risk management objective is to ensure that market risk is appropriately identified, measured, controlled, managed and reported. The Bank’s exposure to market risk stems primarily from interest rate risk. Interest rate risk arises mainly from differences in timing between the maturities or repricing of assets, liabilities and derivatives. The Bank is also exposed to basis risk when there is a mismatch between the change in price of a hedge and the change in price of the assets it hedges. The Bank's market risk management control strategy is established based on its risk appetite, market liquidity and business strategies as well as macroeconomic conditions. These limits are reviewed at least on an annual basis. Market risk arising from the Bank’s trading book is primarily controlled through the imposition of Cut-loss and Value-at-Risk ("VaR") Limits. The Bank quantifies interest rate risk by analysing the repricing mismatch between the rate sensitive assets and rate sensitive liabilities. It also conducts Net Interest Income simulations to assess the variation in earnings under various rates scenarios. The potential long term effects of the Bank’s overall exposure is also tracked by assessing the impact on economic value of equity ("EVE"). The Bank’s interest rate risk is managed through Earnings-at-Risk ("EaR") and Economic Value-at-Risk ("EVaR") limits. In addition, the Bank conducts periodic stress test of its respective business portfolios to ascertain market risk under abnormal market conditions. The Bank's Management, ALCO and BRMC are regularly kept informed of its risk profile and positions. Market Risk Measurement Value-at-risk ('VaR') VaR is used to compute the maximum potential loss amount over a specified holding period of a trading portfolio. It measures the risk of losses arising from potential adverse movements in interest rates and foreign exchange rates that could affect values of financial instruments. The Variance-Covariance Parametric methodology is adopted to compute the potential loss amount. This is a statistically defined, probability-based approach that uses volatilities and correlations to quantify price risks. Under this methodology, a matrix of historical volatilities and correlations is computed from the past 100 business days’ market data. VaR is then computed by applying these volatilities and correlations to the outstanding trading portfolio.

114

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) B. Market risk (continued) The table below sets out a summary of the Bank’s VaR profile by financial instrument types for the trading portfolio. Value-at-Risk (VaR) Average for the financial Balance period Minimum RM RM RM

The Group and the Bank 31.12.2014 Instruments FX Related Contracts Bonds

209

Balance RM

The Group and the Bank 31.07.2013 Instruments FX Related Contracts Bonds

51,547 1,704

31,061 8,508

-

Value-at-Risk (VaR) Average for the financial period Minimum RM RM

34,740 190,422

37 434

Maximum RM

262,399 370,284

Maximum RM

1,547,830 760,509

Other Risk Measures i)

Mark-to-market Mark-to-market valuation tracks the current market value of the outstanding financial instruments.

ii) Stress Testing Stress tests are conducted to attempt to quantify market risk arising from low probability abnormal market movements. Stress tests measure the changes in values arising from extreme movements in interest rates based on past experience and simulated stress scenarios. iii) Sensitivity/Dollar Duration Sensitivity/Dollar Duration measures the change in value of a portfolio resulting from a 0.01% increase in interest rates. This measure identifies interest rate exposures that are most vulnerable to interest rate changes and facilitates the implementation of hedging strategies.

115

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) B. Market risk (continued) Net interest income sensitivity The table below shows the net interest income sensitivity for the financial assets and financial liabilities held at reporting date. The sensitivity has been measured using the Repricing Gap Simulation methodology based on 100 basis points parallel shifts in the interest rate. The comparatives for the sensitivity analysis for the last financial year ended 31 July 2013 was based on trading portfolio only.

The Group and the Bank 31.07.2013 31.12.2014 -100 +100 +100 -100 basis point basis point basis point basis point RM million RM million RM million RM million 0.29 (0.29) (11.75) 11.75 18.80 (18.06) (86.01) 90.44

Impact on profit after taxation Impact on equity Foreign exchange risk sensitivity analysis

The following table sets out the analysis of the exposures to access the impact of a 1% change in the exchange rates to the profit. The Group 31.07.2013 31.12.2014 RM'000 RM'000 + 1% Australian Dollar New Zealand Dollar United States Dollar Singapore Dollar Others

13 7 297 29 (26)

2 382 35 79

The Group 31.07.2013 31.12.2014 RM'000 RM'000 - 1% Australian Dollar New Zealand Dollar United States Dollar Singapore Dollar Others

(13) (7) (297) (29) 26

116

(2) (382) (35) (79)

The Bank 31.07.2013 31.12.2014 RM'000 RM'000 4 7 294 18 (26)

2 382 35 79

The Bank 31.07.2013 31.12.2014 RM'000 RM'000 (4) (7) (294) (18) 26

(2) (382) (35) (79)

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) B. Market risk (continued) Foreign exchange risk The Bank is exposed to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. Limits are set on the level of exposure by currency and in aggregate for both overnight and intra-day positions, which are monitored daily. The table summarises the Bank's exposure to foreign currency exchange rate risk at reporting date. Included in the table are the Bank's financial instruments at carrying amounts, categorised by currency.

The Group 31.12.2014 Assets Cash and short-term funds Financial assets held-for-trading Financial investments available-for-sale Loans, advances and financing Trade receivables Other financial assets

Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Trade payables Other financial liabilities

Net on-balance sheet financial position Off balance sheet commitments

Australian New Zealand United States Dollar Dollar Dollar RM'000 RM'000 RM'000

4,781 3 30,183 1,316 36,283

718 27,414 28,132

39,832 5 224,887 47,321 1,261 10,844 324,150

2,395

-

47,183

1,583 1,353 5,331

1 1

399,946 6,015 187 453,331

30,952 (29,653)

28,131 (27,412)

(129,181) 158,865

2,786 30,183 149 33,118

718 27,414 28,132

2,395

Singapore Dollar RM'000

3,769 4 192,066 4,677 (7) 200,509

Other Currencies RM'000

Total RM'000

2,763 4,712 26 7,501

51,863 12 474,550 47,321 11,966 10,863 596,575

-

920

50,498

3,969 561 4,530

7,198 951 9,069

399,946 18,765 3,053 472,262

195,979 (193,122)

(1,568) (489)

124,313 (91,811)

35,130 224,887 47,321 394 10,597 318,329

2,313 192,066 3,129 197,508

2,464 4,246 6,710

43,411 474,550 47,321 7,918 10,597 583,797

-

47,183

-

920

50,498

9 688 3,092

1 1

399,946 497 163 447,789

2,338 209 2,547

7,054 859 8,833

399,946 9,898 1,920 462,262

30,026 (29,653)

28,131 (27,412)

(2,123) (489)

121,535 (91,811)

The Bank 31.12.2014 Assets Cash and short-term funds Financial investments available-for-sale Loans, advances and financing Trade receivables Other financial assets

Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Trade payables Other financial liabilities

Net on-balance sheet financial position Off balance sheet commitments

117

(129,460) 158,865

194,961 (193,122)

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) B. Market risk (continued) Foreign exchange risk (continued)

The Group and the Bank 31.7.2013 Assets Cash and short-term funds Financial investments available-for-sale Financial investments held-to-maturity Trade receivables Other financial assets

Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Trade payables Other financial liabilities

Net on-balance sheet financial position Off-balance sheets commitments

Australian New Zealand Dollar Dollar RM'000 RM'000

United States Dollar RM'000

Singapore Dollar RM'000

Other Currencies RM'000

Total RM'000

1,291 345 1,636

26 26

6,784 72,202 207,017 694 6,092 292,789

7,384 258,975 374 228 266,961

1,887 7,315 9,202

17,372 331,177 207,017 8,728 6,320 570,614

1,129

-

5,540

207

638

7,514

342 5 1,476

-

325,087 646 167 331,440

3,833 480

473 178 1,289

328,920 1,941 350 338,725

160 -

26 -

7,913 -

231,889 (182,048)

118

(38,651) 76,858

4,520 262,441 (258,906)

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44

Financial risk management objectives and policies (continued) C. Interest rate risk Sensitivity to interest rates arises from mismatches in the interest rate characteristics of the assets and their corresponding liability funding. One of the major causes of these mismatches is timing differences in the repricing of the assets and liabilities. These mismatches are actively managed as part of the overall interest rate risk management process which is conducted in accordance with the Group policy guidelines. The following table represents the Group's and the Bank's assets and liabilities of carrying amount, categorised by the earlier of contractual repricing or maturity date as at reporting date. Up to 1–3 3 – 12 1–5 Over Non-interest 1 month months months years 5 years sensitive RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

The Group 31.12.2014 Assets Cash and short-term funds Deposits and placements with financial institutions Securities: - Financial assets held-for-trading - Financial investments available-for-sale - Financial investments held-to-maturity Loans, advances and financing: - Performing - Impaired loans Derivative financial assets-trading (1)

Other assets Statutory deposits with Bank Negara Malaysia Total assets

654,566 145,000

100,000

-

-

-

5,003 -

54,505 79,743

496,771 14,114

1,893,251 60,576

743,533 19,891

680,800 -

343,914 -

283 -

3,095 -

4,556 -

30,766

-

-

-

-

1,516,135

578,162

511,168

1,956,922

767,980

+

Included in financial investments available-for-sale is impairment on securities of RM41.68 million. *Included in financial investments held-to-maturity is allowance for impairment on securities of RM1.55 million. ^The negative balance represents collective impairment allowance for loans, advances and financing. (1) Other assets include other assets and trade receivables. 119

303 573

Trading book RM’000

Total RM’000

-

654,869 245,573

384,685 + 2,022 *

32,876 -

32,876 3,577,748 176,346

(6,692) ^ 9,888 -

82,127

1,025,956 9,888 82,127

458,714

-

489,480

135,000 984,493

115,003

135,000 6,429,863

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44

Financial risk management objectives and policies (continued) C. Interest rate risk (continued)

The Group 31.12.2014 Liabilities Deposits from customers Deposits and placement of banks and other financial institution Trade payables Derivative financial liabilities-trading Other liabilities Total liabilities Net interest sensitivity gap

Up to 1–3 3 – 12 1–5 Over Non-interest 1 month months months years 5 years sensitive RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2,058,672

379,025

759,563 2,818,235

100,000 479,025

(1,302,100)

99,137

120

362,730

Trading book RM’000

Total RM’000

780,000

-

23,733

-

3,604,160

362,730

780,000

-

2,052 582,166 203,377 811,328

89,079 89,079

861,615 582,166 89,079 203,377 5,340,397

148,438

1,176,922

767,980

-

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44

Financial risk management objectives and policies (continued) C. Interest rate risk (continued)

The Group 31.07.2013 Assets Cash and short-term funds Securities: - Financial investments held-for-trading - Financial investments available-for-sale - Financial investments held-to-maturity Loans, advances and financing: - Performing Derivative financial assets-trading Other assets (1) Statutory deposits with Bank Negara Malaysia Total assets

Up to 1–3 3 – 12 1–5 Over Non-interest 1 month months months years 5 years sensitive RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Trading book RM’000

Total RM’000

1,002,084

-

-

-

-

27,094

-

1,029,178

54,977 -

90,058 -

159,205 -

808,622 370,268

93,149 -

196,734 -

43,637 -

43,637 1,402,745 370,268

373,879 -

63,238 -

-

-

33,209 -

36,877

464,850 36,877

7,177

-

-

-

-

243,965

-

251,142

1,438,117

153,296

159,205

1,178,890

126,358

65,750 528,067

80,514

65,750 3,664,447

^The negative balance represents collective impairment allowance for loans, advances and financing. (1) Other assets include other assets and trade receivables.

121

(5,476) ^ -

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44

Financial risk management objectives and policies (continued) C. Interest rate risk (continued)

The Group 31.07.2013 Liabilities Deposits from customers Deposits and placement of banks and other financial institution Trade payables Derivative financial liabilities -trading Other liabilities Total liabilities Net interest sensitivity gap

Up to 1–3 3 – 12 1–5 Over Non-interest 1 month months months years 5 years sensitive RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Trading book RM’000

Total RM’000

851,323

480,940

895,898

-

-

20,635

-

2,248,796

198,881 37,753 1,087,957

260,032 740,972

895,898

-

-

824 179,960 46,949 248,368

45,883 45,883

459,737 179,960 45,883 84,702 3,019,078

350,160

(587,676)

(736,693)

1,178,890

126,358

122

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44

Financial risk management objectives and policies (continued) C. Interest rate risk (continued) Up to 1–3 3 – 12 1–5 Over Non-interest 1 month months months years 5 years sensitive RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

The Bank 31.12.2014 Assets Cash and short-term funds Deposits and placements with financial institutions Securities: - Financial assets held-for-trading - Financial investments available-for-sale - Financial investments held-to-maturity Loans, advances and financing: - Performing - Impaired loans Derivative financial assets -trading (1)

Other assets Statutory deposits with Bank Negara Malaysia Total assets

416,326 145,000

100,000

-

-

-

5,003 -

54,505 79,743

496,771 14,114

1,893,251 60,576

743,532 19,891

680,800 -

343,914 -

283 -

3,095 -

4,556 -

29,766

-

-

-

-

1,276,895

578,162

511,168

1,956,922

767,979

+

Included in financial investments available-for-sale is impairment on securities of RM41.7 million. * Included in financial investments held-to-maturity is allowance for impairment on securities of RM1.6 million ^ The negative balance represents collective impairment allowance for loans, advances and financing. (1) Other assets include other assets and trade receivables.

123

299 573

Trading book RM’000

Total RM’000

-

416,625 245,573

343,640 + 2,022 *

23,893 -

23,893 3,536,702 176,346

(6,692) ^ 9,888 -

82,127

1,025,956 9,888 82,127

406,975

-

436,741

135,000 891,705

106,020

135,000 6,088,851

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44

Financial risk management objectives and policies (continued) C. Interest rate risk (continued)

The Bank 31.12.2014 Liabilities Deposits from customers Deposits and placement of banks and other financial institution Trade payables Derivative financial liabilities-trading Other liabilities Total liabilities Net interest sensitivity gap

Up to 1–3 3 – 12 1–5 Over Non-interest 1 month months months years 5 years sensitive RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2,098,844

379,025

759,563 2,858,407

100,000 479,025

(1,581,512)

99,137

124

Trading book RM’000

Total RM’000

780,000

-

23,774

-

3,644,373

362,730

780,000

-

2,052 363,283 143,411 532,520

89,079 89,079

861,615 363,283 89,079 143,411 5,101,761

148,438

1,176,922

767,979

362,730

-

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44

Financial risk management objectives and policies (continued) C. Interest rate risk (continued)

The Bank 31.07.2013 Assets Cash and short-term funds Securities: - Financial investments held-for-trading - Financial investments available-for-sale - Financial investments held-to-maturity Loans, advances and financing: - Performing Derivative financial assets-trading Other assets (1) Statutory deposits with Bank Negara Malaysia Total assets

Up to 1–3 3 – 12 1–5 Over Non-interest 1 month months months years 5 years sensitive RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Trading book RM’000

Total RM’000

1,000,074

-

-

-

-

24,360

-

1,024,434

-

-

-

-

-

-

43,637

54,977

90,058

159,205

808,622

93,149

196,734

-

43,637 1,402,745

-

-

-

370,268

-

-

373,879 -

63,238 -

-

-

33,209 -

8,375

-

-

-

-

1,437,305

153,296

159,205

1,178,890

126,358

^ The negative balance represents collective impairment allowance for loans, advances and financing. (1) Other assets include other assets and trade receivables.

125

(5,476) ^ -

370,268 36,877

464,850 36,877

242,395

-

250,770

65,750 523,763

80,514

65,750 3,659,331

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44

Financial risk management objectives and policies (continued) C. Interest rate risk (continued)

The Bank 31.07.2013 Liabilities Deposits from customers Deposits and placement of banks and other financial institution Trade payables Derivative financial liabilities -trading Other liabilities Total liabilities Net interest sensitivity gap

Up to 1–3 3 – 12 1–5 Over Non-interest 1 month months months years 5 years sensitive RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

851,323

480,940

895,898

198,881 37,748 1,087,952

260,032 740,972

-

349,353

(587,676)

126

Trading book RM’000

Total RM’000

-

-

20,635

-

2,248,796

895,898

-

-

824 179,960 45,346 246,765

45,883 45,883

459,737 179,960 45,883 83,094 3,017,470

(736,693)

1,178,890

126,358

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) D. Liquidity risk Basel III Liquidity Standards The Basel Committee developed the Liquidity Coverage Ratio ("LCR") and Net Stable Funding Ratio ("NSFR") with the goal of strengthening the resilience of the banking systems. The LCR and NSFR are tracked monthly to assess the short term and long term liquidity risk profile of the Bank. The BRMC is responsible for the Bank's liquidity policy although the strategic management of liquidity has been delegated to the ALCO. The BRMC is kept informed of the liquidity situation in the Bank. Liquidity risk disclosure table which is based on contractual undiscounted cash flow The table below provides analysis of cash flow payables for financial liabilities based on remaining contractual maturities on undiscounted basis. The balances in the table below do not agree directly to the balances reported in the statement of financial position as the table incorporates all contractual cash flows, on an undiscounted basis, relating to both principal and interest payments.

The Group 31.12.2014 Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Trade payable Other liabilities Provision for taxation

The Group 31.07.2013 Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Trade payable Other liabilities Provision for taxation

Up to 1 month RM'000

>1-3 months RM'000

>3-12 months RM'000

>1-5 years RM'000

2,068,706

396,520

390,515

899,079

-

3,754,820

761,512 582,166 122,263 3,534,647

100,962 5,653 503,135

70,821 4,349 465,685

4,640 903,719

-

862,474 582,166 203,377 4,349 5,407,186

Up to 1 month RM'000

>1-3 months RM'000

>3-12 months RM'000

>1-5 years RM'000

Over 5 years RM'000

Over 5 years RM'000

Total RM'000

Total RM'000

854,680

506,844

908,046

-

-

2,269,570

198,887 179,960 57,311 1,290,838

261,671

-

-

-

403 768,918

26,988 33 935,067

-

-

460,558 179,960 84,702 33 2,994,823

127

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) D. Liquidity risk (continued) Liquidity risk disclosure table which is based on contractual undiscounted cash flow (continued) The table below provides analysis of cash flow payables for financial liabilities based on remaining contractual maturities on undiscounted basis. The balances in the table below do not agree directly to the balances reported in the statement of financial position as the table incorporates all contractual cash flows, on an undiscounted basis, relating to both principal and interest payments.(continued)

The Bank 31.12.2014 Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Trade payable Other liabilities

The Bank 31.07.2013 Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Trade payable Other liabilities

Up to 1 month RM'000

>1-3 months RM'000

>3-12 months RM'000

>1-5 years RM'000

2,108,945

396,520

390,515

899,079

-

3,795,059

761,512 363,283 96,802 3,330,542

100,962 3,410 500,892

42,908 433,423

291 899,370

-

862,474 363,283 143,411 5,164,227

Up to 1 month RM'000

>1-3 months RM'000

>3-12 months RM'000

>1-5 years RM'000

Over 5 years RM'000

Over 5 years RM'000

Total RM'000

Total RM'000

854,680

506,844

908,046

-

-

2,269,570

198,887 179,960 56,668 1,290,195

261,671 402 768,917

26,024 934,070

-

-

460,558 179,960 83,094 2,993,182

128

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) D. Liquidity risk (continued) Derivative financial liabilities Derivative financial liabilities based on contractual undiscounted cash flow: Derivatives settled on a net basis

The Group and the Bank 31.12.2014

Up to 1 month RM'000

>1-3 months RM'000

>3-12 months RM'000

>1-5 years RM'000

Over 5 years RM'000

Total RM'000

(167)

(5,676)

(17,182)

-

(21,714)

>3-12 months RM'000

>1-5 years RM'000

Over 5 years RM'000

Total RM'000

-

-

-

Interest rate derivatives

1,311

The Group and the Bank 31.07.2013

Up to 1 month RM'000

>1-3 months RM'000

(88)

(483)

Up to 1 month RM'000

>1-3 months RM'000

>3-12 months RM'000

>1-5 years RM'000

Over 5 years RM'000

(370,454) 360,242 (10,212)

(178,600) 171,808 (6,792)

(437,863) 414,856 (23,007)

(192,090) 187,189 (4,901)

-

Up to 1 month RM'000

>1-3 months RM'000

>3-12 months RM'000

>1-5 years RM'000

(104,625) 103,177 (1,448)

(407,885) 395,668 (12,217)

(283,471) 275,322 (8,149)

(414,820) 402,210 (12,610)

Interest rate derivatives

(571)

Derivatives settled on a gross basis

The Group and the Bank 31.12.2014 Foreign exchange derivatives: Outflow Inflow

The Group and the Bank 31.07.2013 Foreign exchange derivatives: Outflow Inflow

129

Over 5 years RM'000 -

Total RM'000 (1,179,007) 1,134,095 (44,912)

Total RM'000 (1,210,801) 1,176,377 (34,424)

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) D. Liquidity risk (continued) Liquidity risk for assets and liabilities based on remaining contractual maturities

The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities, commitments and counterguarantees are important factors in assessing the liquidity of the Bank. The table below provides analysis of assets and liabilities into relevant maturity tenures based on remaining contractual maturities:

The Group 31.12.2014 Assets Cash and short-term funds Deposits and placements with banks and other financial institutions - Financial assets held-for-trading - Financial investments available-for-sale - Financial investments held-to-maturity Loans, advances and financing Trade receivables Derivative financial assets Other assets Statutory deposits with Bank Negara Malaysia Other non-financial assets (1) Total Assets Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Trade payables Derivative financial liabilities Other liabilities Other non-financial liabilities Total Liabilities Net liquidity gap

(2)

Up to 1 month RM'000

>1-3 months RM'000

>3-12 months RM'000

>1-5 years RM'000

Over 5 years RM'000

Total RM'000

654,869

-

-

-

-

654,869

32,876 366,728 16 207,231 426,353 7,075 6,067

100,103 68,595 80,072 44,148 963 11,451 22

135,000 -

-

505,628 14,317 163,777 182 32,231 14,054 -

125,279 1,893,251 61,223 435,992 31,370 41,337

20,191 743,546 20,718 184,696 502

245,573 32,876 3,577,748 176,346 1,035,844 427,498 82,127 61,982

22,893

337,390

135,000 360,283

1,307,043

6,790,146

1,836,215

305,354

730,189

2,611,345

2,065,599

383,610

367,260

787,691

-

3,604,160

761,224 582,166 9,207 135,569 3,553,765

100,391 7,227 5,641 496,869

37,195 61,876 466,331

35,450 291 4,349 827,781

-

861,615 582,166 89,079 203,377 4,349 5,344,746

(1,717,550)

(191,515)

263,858

1,783,564

(1) Other non-financial assets includes deferred tax assets, tax recoverable, property and equipment and intangible assets. (2) Other non-financial liabilities includes provision for taxation.

130

1,307,043

1,445,400

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) D. Liquidity risk (continued) Liquidity risk for assets and liabilities based on remaining contractual maturities (continued)

The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities, commitments and counterguarantees are important factors in assessing the liquidity of the Bank. The table below provides analysis of assets and liabilities into relevant maturity tenures based on remaining contractual maturities: (continued)

The Group 31.7.2013 Assets Cash and short-term funds - Financial assets held-for-trading - Financial investments available-for-sale - Financial investments held-to-maturity Loans, advances and financing Trade receivables Derivative financial assets Other assets Statutory deposits with Bank Negara Malaysia Other non-financial assets (1) Total Assets Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Trade payables Derivative financial liabilities Other liabilities Other non-financial liabilities (2) Total Liabilities Net liquidity gap

Up to 1 month RM'000

>1-3 months RM'000

>3-12 months RM'000

>1-5 years RM'000

Over 5 years RM'000

Total RM'000

1,029,178 23,747 251,711 166,188 225,613 2,178 12,398

19,890 90,058 -

159,205 83,277

808,622 370,268 87,972

93,149 127,413

12,223 -

10,728 1,799

11,748 9,275

2,057

1,029,178 43,637 1,402,745 370,268 464,850 225,613 36,877 25,529

65,750 -

-

-

8,282

216,039

65,750 224,321

1,776,763

122,171

255,009

1,296,167

438,658

3,888,768

853,791

504,039

890,966

-

-

2,248,796

198,886 179,960 1,685 57,312 -

260,851 14,634 402 -

11,778 26,988 33

-

-

17,786 -

-

459,737 179,960 45,883 84,702 33

1,291,634

779,926

929,765

17,786

-

3,019,111

(657,755)

(674,756)

1,278,381

438,658

869,657

485,129

(1) Other non-financial assets includes deferred tax assets, tax recoverable, property and equipment and intangible assets. (2) Other non-financial liabilities includes provision for taxation.

131

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) D. Liquidity risk (continued) Liquidity risk for assets and liabilities based on remaining contractual maturities (continued)

The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities, commitments and counterguarantees are important factors in assessing the liquidity of the Bank. The table below provides analysis of assets and liabilities into relevant maturity tenures based on remaining contractual maturities: (continued)

The Bank 31.12.2014 Assets Cash and short-term funds Deposits and placements with banks and other financial institutions - Financial assets held-for-trading - Financial investments available-for-sale - Financial investments held-to-maturity Loans, advances and financing Trade receivables Amount due from subsidiaries Other assets Derivative financial assets Statutory deposits with Bank Negara Malaysia Other non-financial assets (1) Total Assets Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Trade payables Derivative financial liabilities Other liabilities Total Liabilities Net liquidity gap

Up to 1 month RM'000

>1-3 months RM'000

>3-12 months RM'000

>1-5 years RM'000

Over 5 years RM'000

Total RM'000

416,625

-

-

-

-

416,625

23,893 325,682 16 207,231 378,722 2,104 7,075

100,103 68,595 80,072 44,148 22 11,451

505,628 14,317 163,777 14,054 32,231

125,279 1,893,251 61,223 435,992 5,126 41,337 31,370

20,191 743,546 20,718 184,696 502 -

245,573 23,893 3,536,702 176,346 1,035,844 378,722 5,126 58,019 82,127

135,000 -

-

-

152,679

323,571

135,000 476,250

1,496,348

304,391

730,007

2,746,257

1,293,224

6,570,227

2,105,812

383,610

367,260

787,691

-

3,644,373

761,224 363,283 9,207 96,802 3,336,328

100,391 7,227 3,410 494,638

37,195 42,908 447,363

35,450 291 823,432

-

861,615 363,283 89,079 143,411 5,101,761

(1,839,980)

(190,247)

282,644

1,922,825

1,293,224

1,468,466

(1) Other non-financial assets includes deferred tax assets, tax recoverable, property and equipment, intangible assets and investment in subsidiaries.

132

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) D. Liquidity risk (continued) Liquidity risk for assets and liabilities based on remaining contractual maturities (continued)

The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities, commitments and counterguarantees are important factors in assessing the liquidity of the Bank. The table below provides analysis of assets and liabilities into relevant maturity tenures based on remaining contractual maturities: (continued)

The Bank 31.07.2013 Assets Cash and short-term funds - Financial assets held-for-trading - Financial investments available-for-sale - Financial investments held-to-maturity Loans, advances and financing Trade receivables Derivative financial assets Other assets Statutory deposits with Bank Negara Malaysia Other non-financial assets (1) Total Assets Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Trade payables Derivative financial liabilities Other liabilities Total Liabilities Net liquidity gap

Up to 1

>1-3

>3-12

>1-5

Over 5

month RM'000

months RM'000

months RM'000

years RM'000

years RM'000

Total RM'000

1,024,434 23,747 251,711 166,188 225,613 2,178 12,107

19,890 90,058 12,223 -

159,205 83,277 10,728 1,769

808,622 370,268 87,972 11,748 9,275

93,149 127,413 2,006

1,024,434 43,637 1,402,745 370,268 464,850 225,613 36,877 25,157

65,750 -

-

-

8,235

216,367

65,750 224,602

1,771,728

122,171

254,979

1,296,120

438,935

3,883,933

853,791

504,039

890,966

-

-

2,248,796

198,886 179,960 1,685 56,668 1,290,990

260,851 14,634 402 779,926

11,778 26,024 928,768

-

-

17,786 17,786

-

459,737 179,960 45,883 83,094 3,017,470

480,738

(657,755)

(673,789)

1,278,334

438,935

866,463

(1) Other non-financial assets includes deferred tax assets, tax recoverable, property and equipment, intangible assets and investment in subsidiaries.

133

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 44 Financial risk management objectives and policies (continued) E. Operational risk management Operational risk is the risk of loss arising from inadequate or failed internal processes, action on or by people, infrastructure or technology or events which are beyond the Bank’s immediate control which have an operational impact, including natural disaster, fraudulent activities and money laundering/financing of terrorism. The Bank manages operational risk through a control based environment in which policies and procedures are formulated after taking into account individual unit’s business activities, the market in which it is operating and regulatory requirement in force. The Bank adopts the Basic Indicator Approach for the purpose of calculating the capital requirement for operational risk. The capital requirement is calculated by taking 15% of the Bank’s average annual gross income over the previous three years. Risk is identified through the use of assessment tools and measured using threshold/limits mapped against risk matrix. Monitoring and control procedures include the use of key control standards, independent tracking of risk, back-up procedures and contingency plans, including disaster recovery and business continuity plans. This is supported by periodic reviews undertaken by Group Internal Audit to ensure adequacy and effectiveness of the Group Operational Risk Management process. The Bank gathers, analyses and reports operational risk loss and 'near miss' events to Group Operational Risk Management Committee and Board Risk Management Committee. Appropriate preventive and remedial actions are reviewed for effectiveness and implemented to minimise the recurrence of such events. As a matter of requirement, all Operational Risk Coordinators must satisfy an Internal Operational Risk (including anti-money laundering/counter financing of terrorism and business continuity management) Certification Program. These coordinators will first go through an on-line self learning exercise before attempting on-line assessments to measure their skills and knowledge level. This will enable Group Risk Management to prescribe appropriate training and development activities for the coordinators.

F. Compliance risk Compliance risk refers to risk arising from breaches of applicable laws and regulatory requirements governing the operations of the Bank and also internal policies and procedures approved by the management and the Board of Directors. Legal risks are risks arising from noncompliance with legal obligations and risks of legal rights assumed to be not wholly enforceable, and includes the inherent risks from deficient drafting of contractual and public documents and/or inadequate management of litigation matters and financial covenants incumbent on the Bank. As a full-fledged investment bank, the Bank is subject to various legal/ regulatory requirements and statutory obligations at the entity level and also for the various business segments and services offered by the Bank and these legal/regulatory requirements include the Capital Markets & Services Act, 2007, the Rules of Bursa Malaysia Securities Berhad (“Bursa Rules”), the Anti-Money Laundering and the Anti-Terrorism Financing Act, 2001 (“AMLA”). The Compliance & Supervision Division which reports directly to the Board Risk Management Committee (“BRMC”), comprises of the Compliance Department and the Legal Department. The compliance and legal risk management policies of the Bank are subject to the review of BRMC. Periodic reports on the state of compliance and legal risks managed in the Bank are also submitted to BRMC to assist monitoring on the same. The general scope of work of the Compliance Department is to monitor compliance risks emanating from Bursa Rules, compliance risks associated with stockbroking and corporate advisory activities undertaken by the Bank and compliance risks associated with the Bank’s operations with regards to AMLA. The Legal Department’s role is to advise the Bank on all legal matters including, but not limited to, reviewing and/or drafting legal documents for the Bank, monitoring and advising on litigation matters and perusal of legal documents prior to draw-down of loans and private debt securities.

134

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 45 Fair value of financial instruments Fair value is defined 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 Group and the Bank measure fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Valuations derived from valuation techniques in which one or more significant inputs are not based on observable data. In addition, fair value information for non-financial assets and liabilities is excluded as they do not fall within the scope of MFRS 132 "Financial Instruments - Disclosure and Presentation" which requires the fair value information to be disclosed. These include property and equipment, investment in subsidiaries, deferred taxation assets, provision for taxation. Financial instruments are classified as Level 1 if their value is observable in an active market. Such instruments are valued by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted prices is readily available, and the price represents actual and regularly occurring market transactions. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an on-going basis. These would include actively traded listed equities and actively exchange-traded derivatives. Where fair value is determined using unquoted market prices in less active markets or quoted prices for similar assets and liabilities, such instruments are generally classified as Level 2. In cases where quoted prices are generally not available, the Group and the Bank then determine fair value based upon valuation techniques that use as inputs, market parameters including but not limited to yield curves, volatilities and foreign exchange rates. The majority of valuation techniques employ only observable market data and so reliability of the fair value measurement is high. Financial instruments are classified as Level 3 if their valuation incorporates significant inputs that are not based on observable market data (unobservable inputs). Such inputs are generally determined based on observable inputs of a similar nature, historical observations on the level of the input or other analytical techniques. This category includes unquoted shares held for socio economic reasons. Fair values for shares held for socio economic reasons are based on the net tangible assets of the affected companies. The Group's and the Bank's exposure to financial instruments classified as Level 3 comprised a small number of financial instruments which constitute an insignificant component of the Group’s and the Bank's portfolio of financial instruments. Hence, changing one or more of the inputs to reasonable alternative assumptions would not change the value significantly for the financial assets in Level 3 of the fair value hierarchy. The Group and the Bank recognise transfers between levels of the fair value hierarchy at the end of the reporting period during which the transfer has occurred. Transfers between fair value hierarchy primarily due to change in the leval of trading activity, change in observable market activity related to an input, reassessment of available pricing information and change in the significance of the unobservable input. There were no transfers between Level 1, 2 and 3 of the fair value hierarchy during the financial year (31.07.2013: Nil).

135

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 45 Fair value of financial instruments (continued) The following table presents assets and liabilities measured at fair value and classified by level of the following fair value (a) Financial instruments measured and the fair value hierarchy: The Group 31.12.2014 Assets Financial assets held-for-trading - Private debt securities - Other financial assets - Equity securities Financial investments available-for-sale * - Private debt securities - Other financial assets - Equity securities Derivative financial assets Total Liabilities Derivative financial liabilities Total

The Bank 31.12.2014 Assets Financial assets held-for-trading - Private debt securities - Other financial assets - Equity securities Financial investments available-for-sale * - Private debt securities - Other financial assets - Equity securities Derivative financial assets Total Liabilities Derivative financial liabilities Total

136

Level 1 RM'000

Level 2 RM'000

Level 3 (#) RM'000

Total RM'000

18,903

4,990 8,983 -

-

4,990 8,983 18,903

92,401 111,304

2,057,377 1,370,116 41,046 82,127 3,564,639

16,808 16,808

2,057,377 1,370,116 150,255 82,127 3,692,751

-

89,079 89,079

-

89,079 89,079

Level 1 RM'000

Level 2 RM'000

Level 3 (#) RM'000

18,903

4,990 -

-

4,990 18,903

92,401 111,304

2,057,377 1,370,116 82,127 3,514,610

16,808 16,808

2,057,377 1,370,116 109,209 82,127 3,642,722

-

89,079 89,079

-

89,079 89,079

Total RM'000

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 45 Fair value of financial instruments (continued) The Group and the Bank 31.07.2013 Assets Financial assets held-for-trading - Private debt securities - Equity securities Financial investments available-for-sale * - Private debt securities - Other financial assets - Equity securities Derivative financial assets Total Liabilities Derivative financial liabilities Total *

Level 1 RM'000

Level 2 RM'000

Level 3 (#) RM'000

Total RM'000

23,747

19,890 -

-

19,890 23,747

68,148 91,895

725,967 608,630 36,877 1,391,364

-

725,967 608,630 68,148 36,877 1,483,259

-

45,883 45,883

-

45,883 45,883

Net of allowance for impairment

The following table presents the changes in level 3 instruments for the financial period/year ended: The Group and the Bank 31.12.2014 31.07.2013 RM'000 RM'000 16,808 16,808 -

At beginning of financial period/year Total gains recognised in other comprehensive income Transfer in (vested from AIBB) At end of financial period/year Effect of changes in significant unobservable assumptions to reasonably possible alternatives

As at reporting date, financial instruments measured with valuation techniques using significant unobservable inputs (Level 3) mainly include unquoted shares held for socio economic purposes. Qualitative information about the fair value measurements using significant unobservable inputs (Level 3): The Group and the Bank

Description

Fair value assets 31.12.2014 31.07.2013 RM'000 RM'000

Valuations techniques

Unobservable inputs

Inter-relationship between significant unobservable inputs and fair value meansurement

Net intangible assets

Net intangible assets

Higher net intagible assets results in higher fair value

Financial investments available-for-sale Unquoted shares

16,808

-

In estimating its significance, the Group and the Bank used an approach that is currently based on methodologies used for fair value adjustments. These adjustments reflects the values that the Group and the Bank estimate are appropriate to adjust from the valuations produced to reflect for uncertainties in the inputs used. The methodologies used can be a statistical or other relevant approved techniques.

137

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 45 Fair value of financial instruments (continued) The following tables analyse within the fair value hierarchy of the Group's and the Bank's assets and liabilities not measured at fair value as at reporting date but for which fair value is disclosed:

The Group 31.12.2014

Carrying amount RM'000

Level 1 RM'000

Fair Value Level 2 Level 3 RM'000 RM'000

Total RM'000

Financial Assets Financial investment held-to-maturity Loans, advances and financing

176,346 1,035,844

-

176,822 1,034,657

-

176,822 1,034,657

Financial Liabilities Deposits from customers

3,604,160

-

3,600,301

-

3,600,301

Financial Assets Financial investment held-to-maturity Loans, advances and financing

176,346 1,035,844

-

176,822 1,034,657

-

176,822 1,034,657

Financial Liabilities Deposits from customers

3,644,373

-

3,640,521

-

3,640,521

370,268

-

399,827

-

399,827

2,248,796

-

2,249,031

-

2,249,031

The Bank 31.12.2014

The Group and the Bank 31.07.2013 Financial Assets Financial investment held-to-maturity Financial Liabilities Deposits from customers

Other than as disclosed above, the total fair value of each financial assets and liabilities presented on the statements of financial position as at reporting date of the Group and the Bank approximates the total carrying amount. The fair value estimates were determined by application of the methodologies and assumptions described below. Short-term funds and placements with banks and other financial institutions For short-term funds and placements with banks and other financial institutions with maturity of less than six months, the carrying amount is a reasonable estimate of fair value. For amounts with maturities of six months or more, fair values have been estimated by reference to current rates at which similar deposits and placements would be made to banks with similar credit ratings and maturities.

138

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 45 Fair value of financial instruments (continued) Financial investments held-to-maturity The fair values of financial investments held-to-maturity are reasonable estimates based on quoted market prices. In the absence of such quoted prices, the fair values are based on the expected cash flows of the instruments discounted by indicative market yields for the similar instruments as at reporting date or the audited net tangible asset of the invested company. Loans, advances and financing Loans, advances and financing of the Group comprise of floating rate loans and fixed rate loans. For performing floating rate loans, the carrying amount is a reasonable estimate of their fair values. The fair values of performing fixed rate loans are arrived at using the discounted cash flows based on the prevailing market rates of loans, advances and financing with similar credit ratings and maturities. The fair values of impaired loans, advances and financing, whether fixed or floating are represented by their carrying values, net of individual and collective allowances, being the reasonable estimate of recoverable amount. The fair values of impaired loans and advances are represented by their carrying values, net of individual allowance, being the expected recoverable amount. Other assets and liabilities The carrying value less any estimated allowance for financial assets and liabilities included in other assets and other liabilities are assumed to approximate their fair values. Deposits from customers, deposits and placements of banks and other financial institutions The carrying values of deposits and liabilities with maturities of six months or less are assumed to be reasonable estimates of their fair values. Where the remaining maturities of deposits and liabilities are above six months, their estimated fair values are arrived at using the discounted cash flows based on prevailing market rates currently offered for similar remaining maturities. The estimated fair value of deposits with no stated maturity, which include non-interest bearing deposits, approximates carrying amount which represents the amount repayable on demand. Offsetting financial assets and financial liabilities In accordance with MFRS 132 "Financial Instruments: Presentation", the Group and the Bank report financial assets and financial liabilities on a net basis on the statements of financial position only if there is a legally enforceable right to set off the recognised amounts and there is intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. The following table shows the impact of netting arrangement on: -

All financial assets and liabilities that are reported net on statements of financial position; and All derivative financial instruments and reverse repurchase and repurchased agreements and other similar secured lending and borrowing agreements that are subject to enforceable master netting arrangements or similar agreements, but do not qualify for statements of financial position netting.

The table identifies the amounts that have been offset in the statements of financial position and also those amounts that are covered by enforceable netting arrangements (offsetting arrangements and financial collateral) but do not qualify for netting under the requirements of MFRS 132 described above. The "Net amounts" presented below are not intended to represent the Group's and the Bank's actual exposure to credit risk, as a variety of credit mitigation strategies are employed in addition to netting and collateral arrangements. Derivative financial assets and liabilities The 'Financial instruments' column identifies financial assets and liabilities that are subject to set off under netting agreements, such as the ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby all outstanding transactions with the same counterparty can be offset and close-out netting applied across all outstanding transaction covered by the agreements if an event of default or other predetermined events occur. Financial collateral refers to cash and non-cash collateral obtained, typically daily or weekly, to cover the net exposure between counterparties by enabling the collateral to be realised in an event of default or if other predetermined events occur.

139

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 46 Offsetting financial assets and financial liabilities

The Group and the Bank 31.12.2014

Gross amounts of recognised financial assets RM'000

Gross amounts of recognised Net amounts financial of financial Related amount not set liabilities in the assets off in the balance sheet statement presented Financial of financial in the Financial collateral position balance sheet instruments received RM'000 RM'000 RM'000 RM'000

Net amount RM'000

Financial assets Trade receivables - Amount due from Bursa Securities Clearing Sdn Bhd Derivative financial assets Total

3,185,715 82,127 3,267,842

(3,158,866) (3,158,866)

26,849 82,127 108,976

(15,155) (15,155)

-

26,849 66,972 93,821

Financial liabilities Trade payables - Amount due to Bursa Securities Clearing Sdn Bhd Derivative financial liabilities Total

3,158,866 89,079 3,247,945

(3,158,866) (3,158,866)

89,079 89,079

(15,155) (15,155)

(25,697) (25,697)

48,227 48,227

Financial assets Trade receivables - Amount due from Bursa Securities Clearing Sdn Bhd Derivative financial assets Total

497,455 36,877 534,332

(412,761) (412,761)

84,694 36,877 121,571

(4,407) (4,407)

-

84,694 32,470 117,164

Financial liabilities Trade payables - Amount due to Bursa Securities Clearing Sdn Bhd Derivative financial liabilities Total

412,761 45,883 458,644

(412,761) (412,761)

45,883 45,883

(4,407) (4,407)

(6,014) (6,014)

84,694 35,462 120,156

The Group and the Bank 31.07.2013

140

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 47

Critical accounting estimates and judgments Allowance for impairment losses on loans, advances and financing The accounting estimates and judgments related to the impairment of loans and provision for off-balance sheet positions is a critical accounting estimate because the underlying assumptions used for both the individually and collectively assessed impairment can change from period to period and may significantly affect the Group’s and the Bank's results of operations. In assessing assets for impairment, management judgment is required. The determination of the impairment allowance required for loans which are deemed to be individually significant often requires the use of considerable management judgment concerning matters such as local economic conditions, the financial performance of the counterparty and the value of any collateral held, for which there may not be a readily accessible market. The actual amount of the future cash flows and their timing may differ from the estimates used by management and consequently may cause actual losses to differ from the reported allowances. The impairment allowance for portfolios of smaller-balance homogenous loans, such as margin and broking clients, and for those loans which are individually significant but for which no objective evidence of impairment exists, is determined on a collective basis. The collective impairment allowance is calculated on a portfolio basis using future cash flows on contractual basis and historical loss experience which incorporate numerous estimates and judgments, and therefore is subject to estimation uncertainty. The Group and the Bank's performs a regular review of the basis and underlying data and assumptions to best reflect the current economic circumstances.

Estimated impairment on goodwill The Group performs an impairment review on an annual basis to ensure that the carrying value of the goodwill does not exceed its recoverable amounts from cash-generating units to which the goodwill is allocated. The recoverable amount represents the present value of the estimated future cash flows expected to arise from continuing operations. Therefore, in arriving at the recoverable amount, management exercise judgment in estimating the future cash flows, growth rate and discount rate. The recoverable amounts of the stockbroking business investment banking and assets and fund management (the cashgenerating units to which goodwill are allocated) were determined based on discounted cash flow valuation model. The calculations require the use of estimates as set out in Note 17 to the financial statements.

48 Credit exposures arising from transactions with connected parties The following credit exposure are based on Bank Negara Malaysia's revised Guidelines on Credit Transaction and Exposures with Connected Parties, which are effective 1 January 2008: The Group and the Bank

i)

The aggregate value of outstanding credit exposures with connected parties (RM'000)

ii) The percentage of outstanding credit exposures to connected parties as a proportion of credit exposures iii) The percentage of outstanding credit exposures with connected which is nonperforming or in default.

141

31.12.2014

31.07.2013

502,343

274,822

8.68%

13.69%

-

-

Company No: 14389-U

Affin Hwang Investment Bank Berhad (formerly known as HwangDBS Investment Bank Berhad) (Incorporated in Malaysia)

Notes to the financial statements for the financial period ended to 31 December 2014 (continued) 49 Comparative The following comparatives were restated to conform with the current period's presentation: The Group & the Bank

Statements of financial position as at 31 July 2013 Financial liabilities Deposits from customers Deposits and placements of banks and other financial institutions

Income statement for the year ended 31 July 2013 Interest expense Deposits from customers Deposits and placements of banks and other financial institutions

As previously stated RM'000

Restatement RM'000

As restated RM'000

678,840

1,569,956

2,248,796

2,029,693

(1,569,956)

459,737

As previously stated RM'000

Restatement RM'000

As restated RM'000

22,691

55,683

78,374

57,309

(55,683)

1,626

The restatement is to harmonise the disclosures to be in line with that of the holding company. It is in relation to reclassification of deposits and placements of other financial institutions which was previously classified under deposits and placements of banks and other financial institutions. This does not have any impact on the financial results of the comparative financial year. 50 Client trust accounts As at 31 December 2014, cash held in trust for the clients by the Group and the Bank amounted to RM471,253,000 (31.07.2013: RM323,106,000). These amounts are not recognised in the financial statements as they are held by the Group and the Bank in its fiduciary capacity. 51 Approval of financial statements The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 6 March 2015.

142