Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Reports and financial statements
for the financial year ended 31 December 2016
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Reports and financial statements
for the financial year ended 31 December 2016
Contents
Page(s)
Directors' report 1 - 40
Statements of financial position 41
Income statements 42
Statements of comprehensive income 43
Statements of changes in equity 44 - 45
Statements of cash flows 46 - 48
Summary of significant accounting policies 49 - 68
Notes to the financial statements 69 - 171
Statement by Directors 172
Statutory declaration 172
Independent auditors' report 173 - 175
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016
Principal activities
Financial results
The Group The Bank
RM'000 RM'000
Profit before zakat and taxation 131,011 88,894
Zakat (1,224) (929)
Profit before taxation 129,787 87,965
Taxation (26,597) (15,107)
Net profit for the financial year 103,190 72,858
Dividends
RM'000
In respect of the financial year ended 31 December 2015:
Final dividend of 0.390 sen gross per share paid on 28 March 2016 3,042
In respect of the financial year ended 31 December 2016:
Interim dividend of 2.308 sen gross per share paid on 30 November 2016 18,000
The Directors of Affin Hwang Investment Bank Berhad ("the Bank") hereby submit their report together
with the audited financial statements of the Group and the Bank for the financial year ended 31 December
2016.
Dividends on ordinary shares paid or declared by the Company since 31 December 2015 are as follows:
The Directors now recommend the payment of a final dividend of 1.385 sen gross per share amounting to
RM10,800,000 for the financial year ended 31 December 2016, which is subject to approval of the
shareholder at the forthcoming Annual General Meeting of the Bank.
The principal activities of the Bank are in investment banking, stockbroking activities, dealing in options and
futures 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 and provision of nominee services.
There were no significant changes in the nature of these activities during the financial year.
1
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Reserves and provisions
Statutory information on the financial statements
(a)
(b)
At the date of this report, the Directors are not aware of any circumstances:
(a)
(b)
(c)
All material transfers to or from reserves or provisions during the financial year are shown in the
financial statements and notes to the financial statements.
Before the financial statements of the Group and the Bank were made out, the Directors took reasonable
steps:
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
to ensure that any current assets, other than debts and financings, which were likely 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 writtten down to an amount which they might be expected so to realise.
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
which would render the values attributed to the current assets in the financial statements of the
Group and the Bank misleading; or
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(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Statutory information on the financial statements (continued)
At the date of this report, there does not exist:
(a)
(b)
In the opinion of the Directors:
(a)
(b)
any charge on the assets of the Group or the Bank which has arisen since the end of the financial
year which secures the liabilities of any other person; or
any contingent liabilities in respect of the Group or the Bank that has arisen since the end of the
financial year 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 year which, in the opinion
of Directors, will or may substantially affect the ability of the Group and 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.
the results of the operations of the Group and the Bank for the financial year were not,
substantially affected by any item, transaction or event of a material and unusual nature.
there has not arisen in the interval between the end of the financial year and the date of this report
any item, transaction or event of a material and unusual nature likely to affect substantially the
results of the operations of the Group and the Bank for the current financial year in which this
report is made.
3
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Directors
Gen Tan Sri Yaacob bin Mohd Zain (R)
(Chairman, Non-Independent Non-Executive Director)
Raja Tan Sri Dato' Seri Aman bin Raja Haji Ahmad
(Non-Independent Non-Executive Director)
(Redesignated to Non-Independent Non-Executive Director w.e.f 1 May 2016)
Tan Sri Dato' Seri Lodin bin Wok Kamaruddin
(Non-Independent Non-Executive Director)
Stephen Charles Li
(Non-Independent Non-Executive Director)
Lee Chor Kee (Ceased Directorship w.e.f 30 November 2016)
(Alternate Director to Stephen Charles Li)
Abd Malik bin A Rahman
(Independent Non-Executive Director)
Lim Hun Soon @ David Lim
(Independent Non-Executive Director)
Maj. Gen. Dato' Zulkiflee bin Mazlan (R) (Appointed w.e.f 4 January 2016)
(Independent Non-Executive Director)
Datuk Noor Azian binti Shaari (Appointed w.e.f 4 October 2016)
(Independent Non-Executive Director)
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:
In accordance with Article 80 of the Bank’s Articles of Association, Maj. Gen. Dato' Zulkiflee bin
Mazlan (R) and Datuk Noor Azian binti Shaari retire at the forthcoming Annual General Meeting and being
eligible, offer themselves for re-election.
In accordance with Section 129(6) of the Companies Act, 1965, Gen Tan Sri Yaacob bin Mohd Zain (R) and
Raja Tan Sri Dato' Seri Aman bin Raja Haji Ahmad retire and offer themselves for re-appointment at the
forthcoming Annual General Meeting.
In accordance with Article 75 of the Bank’s Articles of Association, Mr Stephen Charles Li retires at the
forthcoming Annual General Meeting and being eligible, offers himself for re-election.
4
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Responsibility statement by Board of Directors
Directors' interest
As at As at
1.1.2016 Bought Sold 31.12.2016
AFFIN Holdings Berhad
Tan Sri Dato' Seri Lodin bin Wok
Kamaruddin 1,051,328 - - 1,051,328
Abd Malik bin A Rahman - 10,000 - 10,000
^ shares held in trust by nominees companies.
Number of ordinary shares of RM1.00 each
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 2016 and
of the financial results and cash flows of the Group and of the Bank for the financial year 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 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 172 of the
financial statements.
According to the Register of Directors’ shareholdings, the interests of Directors in office at the end of the
financial year in shares, warrants, and options over shares in the related companies are as follows:
^
5
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Directors' interest (continued)
As at As at
1.1.2016 Bought Sold 31.12.2016
Boustead Holdings Berhad
Tan Sri Dato' Seri Lodin bin Wok
Kamaruddin 28,192,758 27,065,047 3,000,000 52,257,805
Abd Malik bin A Rahman 1,000 12,850 - 13,850
Abd Malik bin A Rahman - 6,580 - 6,580
Boustead Heavy Industries
Corporation Berhad
Tan Sri Dato' Seri Lodin bin Wok
Kamaruddin 2,000,000 - - 2,000,000
Abd Malik bin A Rahman 3,000 - - 3,000
Abd Malik bin A Rahman 1,000 - - 1,000
As at As at
1.1.2016 Bought Sold 31.12.2016
Boustead Petroleum Sdn Bhd
Tan Sri Dato' Seri Lodin bin Wok
Kamaruddin 5,916,465 - - 5,916,465
Pharmaniaga Berhad
Tan Sri Dato' Seri Lodin bin Wok
Kamaruddin 12,500,148 - - 12,500,148
*
** indirect shares
***
^ shares held in trust by nominees companies.
Number of ordinary shares of 50 sen each
Number of ordinary shares of RM1.00 each
*
**
**
^
**
***
shares held in trust by nominees companies amounted to 39,385,805, shares held under own name
amounted to 12,872,000.
shares held in trust by nominees companies amounted to 6,334,883, shares held under own name
amounted to 6,165,265.
6
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Directors' interest (continued)
As at As at
1.1.2016 Bought Sold 31.12.2016
Boustead Plantations Berhad
Tan Sri Dato' Seri Lodin bin Wok
Kamaruddin 31,381,600 - 3,544,800 27,836,800
^^
As at As at
1.1.2016 Bought Sold 31.12.2016
Boustead Plantations Berhad
Abd Malik bin A Rahman 2,000 - - 2,000
Abd Malik bin A Rahman** 2,000 - - 2,000
** indirect shares
Number of ordinary shares of 50 sen each
Number of ordinary shares of RM1.60 each
Other than the above, the Directors in office at the end of the financial year did not have any other interest in
the shares, warrants and option over shares of the Bank and its related companies during the financial year.
^^
shares held in trust by nominees companies amounted to 27,396,800, shares held under own name
amounted to 440,000.
7
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Directors' benefits
Corporate Governance
1 Board of Directors Responsibility and Oversight
amend/replace with AHIB's
The profile of the Board of Directors has been published in the Bank's website.
During and at the end of the financial year, 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.
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 BNM’s Guidelines on Corporate Governance for Licensed Institutions.
The Board of Directors currently comprises eight (8) Non-Executive Directors four (4) of whom are
Independent Non-Executive Directors and four (4) 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 year, the Board met eleven (11) 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.
8
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1
Directors Total meetings attended
Gen Tan Sri Yaacob bin Mohd Zain (R) 11 out of 11
(Chairman, Non-Independent Non-Executive Director)
Raja Tan Sri Dato' Seri Aman bin Raja Haji Ahmad 9 out of 11
(Non-Independent Non-Executive Director)
Tan Sri Dato' Seri Lodin bin Wok Kamaruddin 11 out of 11
(Non-Independent Non-Executive Director)
Stephen Charles Li 9 out of 11
(Non-Independent Non-Executive Director)
Abd Malik bin A Rahman 11 out of 11
(Independent Non-Executive Director)
Lim Hun Soon @ David Lim 11 out of 11
(Independent Non-Executive Director)
Maj. Gen. Dato' Zulkiflee bin Mazlan (R) 11 out of 11
(Independent Non-Executive Director)
Datuk Noor Azian binti Shaari 4 out of 4
(Independent Non-Executive Director) (Appointed w.e.f 4 October 2016)
(Appointed w.e.f 4 January 2016)
Board of Directors Responsibility and Oversight (continued)
The composition of the Board and the number of meetings attended by each Director are as follows:
9
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(i) The Board's Role and Responsibilities
The Board is overall responsible over the Bank’s capital management as follows:-
a)
b)
c)
The Board assumes the following specific duties:
a)
b)
c)
d)
The Board is charged with leading and guiding the Bank in an effective and responsible manner.
Each Director has a legal duty to act in the best interest of the Bank. The Directors, collectively
and individually, are aware of their responsibilities to shareholder(s) and stakeholders for the
manner in which the affairs of the Bank are managed. The Board sets the Bank’s values and
standards and ensures that its obligations to its shareholder(s) and stakeholders are understood and
met.
The Board understands that the responsibility for good Corporate Governance rests with them and
therefore strives to follow the principles and best practices of Corporate Governance.
The Company complies with the various regulatory requirements and guidelines issued by Bank
Negara Malaysia, Securities Commission, Bursa Malaysia Securities Berhad and Companies
Commission of Malaysia.
The Board meets in person no less than once every two (2) months to facilitate the discharge of
their responsibilities. Members of Management who are not Directors may be invited to attend and
speak at meetings on matters relating to their sphere of responsibility. Directors must attend at
least 75% of the Board meetings held in each financial year.
Duties of the Board include establishing the corporate vision and mission, as well as the
philosophy of the Bank, setting aims of Management and monitoring the performance of
Management.
Approving the capital plan as part of budget;
Approving significant capital raising and repayment; and
Reviewing and note quarterly summarised monitoring reports on capital adequacy.
Establishing and reviewing the strategic direction of the Bank;
Overseeing and evaluating the conduct of the Bank’s business;
Ensuring that the Bank establishes comprehensive risk management policies, processes and
infrastructure, to manage the various types of risks;
Setting corporate values and clear lines of responsibility and accountability that are
communicated throughout the organisation;
10
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(i) The Board's Role and Responsibilities (continued)
e)
f)
g)
h)
i)
The Board reserves full decision-making powers on the following matters:
a) Conflict of interest issues relating to substantial shareholder or a Director;
b) Material acquisitions and disposition of assets not in the ordinary course of business;
c) Investment in capital projects;
d) Authority levels;
e) Treasury policies;
f) Risk management policies ; and
g) Key human resourse issues.
Ensuring that there is a managed and effective process to select and appoint key senior
management officers that are qualified, professional and competent to administer the affairs of
the Bank, approving succession planning policy and monitoring senior management’s
performance on an ongoing basis;
Reviewing the adequacy of the internal control policy;
The Board has established written procedures determining issues which require decision of the
Board and which issues can be delegated to Board Committees or Management.
The Board has established a procedure whereby the Directors, collectively or individually, may
seek independent professional advice in furtherance of their duties at the Bank’s expense.
Establishing procedure to avoid self-serving practices and conflicts of interest including
dealings of any form with related entities;
Establishing and ensuring the effective functioning of various board committees; and
Discharging and performing its duties and responsibilities pertaining to anti-money laundering
and counter terrorism financing as provided in guidelines, circulars or directives issued by Bank
Negara Malaysia and other regulators.
11
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(ii)
(a)
(b)
Members Total meetings attended
Abd Malik bin A Rahman 5 out of 5
(Independent Non-Executive Director)(appointed as Chaiman w.e.f
1 May 2016)
Raja Tan Sri Dato' Seri Aman bin Raja Haji Ahmad 5 out of 5
(Non-Independent Non-Executive Director)
Gen Tan Sri Yaacob bin Mohd Zain (R) 5 out of 5
(Non-Independent Non-Executive Director)
Tan Sri Dato' Seri Lodin bin Wok Kamaruddin 5 out of 5
(Non-Independent Non-Executive Director)
Maj. Gen. Dato' Zulkiflee Bin Mazlan (R) 4 out of 4
(Independent Non-Executive Director)
(Appointed as a member w.e.f 27 January 2016)
Nominating and Remuneration Committee ("NRC")
The NRC is chaired by an Independent Non-Executive Director, with the following objectives:
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
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 five (5) Board members and is scheduled to meet at least on a quarterly
basis, met five (5) times during the financial year. The composition of the NRC and the number of
meetings attended by each member are as follows:
12
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(ii)
The NRC is responsible for:
Nominating and Remuneration Committee ("NRC") (continued)
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.
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.
13
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(ii)
The NRC is responsible for: (continued)
Nominating and Remuneration Committee ("NRC") (continued)
Overseeing the appointment, management succession planning and performance evaluation of
key senior management officers.
Recommending to the Board the removal of key senior management officers if they are
ineffective, errant and negligent in discharging their responsibilities.
Assessing on an annual basis, that the Directors and key senior management officers are not
disqualified under Section 59(1) of Financial Services Act , 2013.
Make recommendations to the Board concerning the re-election by shareholders of any Directors
under the retirement by rotation provisions in the Articles of Association of the Bank.
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.
14
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(ii)
The NRC is responsible for: (continued)
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.
Determining and making 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 Board
of Directors for decision.
Nominating and Remuneration Committee ("NRC") (continued)
15
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(iii) Board Risk Management Committee ("BRMC")
Members Total meetings attended
Abd Malik bin A Rahman 8 out of 8
(Chairman, Independent Non-Executive Director)
Gen Tan Sri Yaacob bin Mohd Zain (R) 8 out of 8
(Non-Independent Non-Executive Director)
Raja Tan Sri Dato' Seri Aman bin Raja Haji Ahmad 8 out of 8
(Non-Independent Non-Executive Director)
BRMC is chaired by an Independent Non-Executive Director was 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:
Overseeing and evaluating risk management policies and guidelines in respect of credit,
ALCO/Treasury and operational risks, including anti-money laundering and counter financing of
terrorism ("AML/CFT") risks. The BRMC shall ensure that the risk management policies and
framework adequately protect the Bank against all risks, including operational risk, legal risk,
regulatory risk, human resource risk and AML/CFT risks.
Deliberating on proposals pertaining to risk policies and framework, and recommend to the full
Board for final approval. The BRMC shall not be an approving authority on matters other than risk
policies and framework.
Overseeing and reviewing reports in respect of the Bank’s exposure to credit, ALCO/Treasury and
operational risks respectively.
The BRMC, which currently comprises three (3) Board members and scheduled to meet at least on a
quarterly basis, met eight (8) times during the financial year. The composition of the BRMC and the
number of meetings attended by each member are as follows:
Ensuring that adequate and robust risk management policies and framework are in place to address
business and operational risks.
16
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(iii) Board Risk Management Committee ("BRMC") (continued)
The BRMC is responsible for: (continued)
a)
b)
(iv) Board Audit Committee ("BAC")
Members Total meetings attended
Lim Hun Soon @ David Lim 4 out of 4
(Chairman, Independent Non-Executive Director)
Raja Tan Sri Dato' Seri Aman bin Raja Haji Ahmad 4 out of 4
(Non-Independent Non-Executive Director)
Maj. Gen. Dato' Zulkiflee bin Mazlan (R) 3 out of 3
(Independent Non-Executive Director)
(Appointed as a member w.e.f 27 January 2016)
Oversee the Bank’s capital management to ensure its effectiveness which include:-
Ensure that adequate AML/CFT policies and framework are in place in the Bank to protect the
Bank against the risks of money laundering and terrorism financing.
Evaluate and make recommendations to the Board on risk management issues, the level of risk
exposure and appropriate risk mitigants in relation to credit transactions and exposures with
connected parties, on a quarterly basis.
Review capital management standards and policies, capital plan and summary capital adequacy
and allocation reports; and
Approve the mandate of ALCO to manage the Bank’s capital.
The BAC currently comprises three (3) members, of whom two (2) are Independent Non-Executive
Directors and is scheduled to meet at least four (4) times annually.
The BAC met four (4) times during the financial year.
The composition of the BAC and the number of meetings attended by each member are as follows:
17
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(iv) Board Audit Committee ("BAC") (continued)
The primary responsibilities of the BAC are as follows:
Oversee the effectiveness of Internal Audit Function:-
a)
b)
c)
d)
e)
f)
Review the effectiveness of internal audit function, the internal controls and risk management
processes including the scope of the internal audit, audit programme, functions and resources of
the internal audit 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 BAC should not be subject to the clearance of the Board of Directors. The effectiveness and
performance of internal audit function are assessed against its achievement, benchmarking against
best practices or other considerations.
Ensure that the accounts are prepared in a timely, fair, transparent and in an accurate
manner/reliable with frequent reviews of the adequacy of provisions against contingencies and
impaired loans. Review the balance sheet and income statement for submission to 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.
Appoint Chief Internal Auditor ("CIA"), evaluate performance including his transfer and
dismissal if warranted.
Ensure oversight on the adequacy of resources and remuneration of internal auditors.
Review and approve the audit scope, procedures and frequency.
Review key audit reports and ensure that senior management is taking necessary corrective
actions in a timely manner to address control weaknesses, non-compliance with laws,
regulatory requirements, policies and other problems identified by Internal Audit and other
control functions.
Noting significant disagreements between the Chief Internal Auditor and the rest of the senior
management team, irrespective of whether these have been resolved, in order to identify any
impact, the disagreements may have on the audit process or findings.
Establish a mechanism to assess the performance and effectiveness of Internal Audit function.
18
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(iv) Board Audit Committee ("BAC") (continued)
The primary responsibilities of the BAC are as follows: (continued)
External Auditors:
a)
b)
c)
d)
e)
f)
g)
Select and recommend external auditors for appointment by the Board each year. Review with
the external auditors, the scope of their plan, the system of internal accounting controls, the
audit reports, the assistance given by the management and its staff to the auditors and any
findings and action to be taken;
Assessment on the long relationship and risk of familiarity threats;
Review the audit fees of external auditors;
Recommend removal of external auditors;
Monitoring and assessing the independence of external auditor including approving the
provision of non-audit services by external auditor;
Maintain regular, timely, open and honest communication with the external auditor and
requiring the external auditor to report to BAC on significant matters.
Have direct communication channels with external auditor and meet them without the presence
of management at least annually; and
19
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(iv) Board Audit Committee ("BAC") (continued)
The primary responsibilities of the BAC are as follows: (continued)
Review the year-end financial statements before submission to the Board, focusing on:
a) going concern assumption;
b) compliance with accounting standards and other legal and regulatory requirements;
c) any changes in accounting policies and practices;
d) significant adjustments, issues and unusual events arising from the audit; and
e) major judgemental areas.
Ensure and senior management act upon findings and recommendations timely on the interim and
final external audit. In this regard, also discuss on any other matters in the absence of management,
where necessary.
Review the external auditors' management letter and management's response.
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
integrity. Escalate to the Board on such transactions.
Review the accuracy and adequacy of the Chairman's statement in the directors' report, corporate
governance disclosures, interim financial reports and preliminary announcements in relation to the
preparation of financial statements.
Appoint another independent party with knowledge of Internal Audit to conduct review on
effectiveness of IA's function, if necessary. It can either be peers from within the Bank or an
external party.
20
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(iv) Board Audit Committee ("BAC") (continued)
The primary responsibilities of the BAC are as follows: (continued)
a)
b)
c)
d)
e)
f)
Review and monitor compliance with the Board's conflicts of interest policy, focusing on:
a)
b)
c)
d)
Assignments, Roles and Responsibilities;
Bank or Financial Institution including regulators or external auditors has the right to audit/
access their records, audit plan, and working papers and etc;
Commitment from external experts that adequate resources will be assigned;
Authority to vary on changes of terms of engagement;
Assurance that independence and objectivity of the audit is not compromised if the Bank's
external auditors is engaged; and
The regulatory requirements on outsourcing are to be complied with.
Identification of circumstances which constitute or may give rise to conflicts of interest;
Clear processes for directors to keep the Board informed on changes in circumstances which
may give rise to a conflict of interest;
Maintenance of records on each Director's conflict of interest; and
Addressing any non-compliances with the policy.
Islamic Operations - sought advice from Shariah Advisory on Shariah related matters to ensure
compliance with Shariah principles.
Approve the engagement and appointment of external experts where Internal Audit lacks the
expertise and experiences.
BAC will review and ensure that such engagement includes these terms:
Review of third-party opinions on the design and effectiveness of the Bank's internal control
framework.
21
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(v) Board Credit Review Committee ("BCRC")
Members Total meetings attended
Raja Tan Sri Dato' Seri Aman bin Raja Haji Ahmad 10 out of 10
(Non-Independent Non-Executive Director)(Appointed as Chairman w.e.f
27 January 2016)
Gen Tan Sri Yaacob bin Mohd Zain (R) 10 out of 10
(Non-Independent Non-Executive Director)
Maj. Gen. Dato' Zulkiflee Bin Mazlan (R) 10 out of 10
(Independent Non-Executive Director)
(Appointed as a member w.e.f 27 January 2016)
The BCRC was 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 Group Managenent Loan Committee
("GMLC").
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 GMLC's term of reference;
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 GMLC'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 ten
(10) times during the financial year. The composition of the BCRC and the number of meetings attended
by each member are as follows:
22
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(vi) Investment Committee ("IC")
The roles and responsibilities of the IC are as follows:
(i)
(ii)
(iii)
(iv)
Members Total meetings attended
Tan Sri Dato' Seri Lodin bin Wok Kamaruddin 11 out of 11
(Chairman, Non-Independent Non-Executive
Director)
Datuk Maimoonah bt Mohamed Hussain 9 out of 11
(Group Managing Director)
Mr. Keong Si Hark 11 out of 11
(Managing Director, Securities)
En Kamarul Ariffin bin Mohd Jamil 11 out of 11
(Group Chief Executive Officer,
AFFIN Holdings Berhad)
The IC was dissolved on 26 January 2017.
The IC was 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.
to monitor all investments of the Bank and make decisions in accordance with the authority
limits;
to record all investment decisions made and inform the Board accordingly;
to formulate and review share investment and proprietary trading strategies, policies and
procedures; and
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, comprises four (4) members and met eleven (11)
times during the financial year. The composition of the IC and the number of meetings attended by
each member are as follows:-
23
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(vii) Directors’ Training
The Nominating & Remuneration Committee oversees the training needs of the Directors. The NRC
shall ensure that the Directors spend sufficient time to update their knowledge and enhance their skills
through appropriate continuing education programmes and life-long learning in order to keep the
Directors abreast with the dynamic and complex business environment as well as new statutory and
regulatory requirements.
All new Directors are required to attend the Directors Orientation Programme to familiarise themselves
with the Group’s organisation structure, business and the financial industry. A formalised orientation
programme has been developed and the relevant Heads of Departments/Divisions will brief the new
members of the Board on the functions and areas of responsibility of their respective
department/divisions. This serves to provide them with a platform in establishing effective channel of
communication and interaction with Senior Management as well as to ensure that the Director
understand:-
(a) their roles and responsibilities;
(b) the nature of the Group’s business;
(c) overview of risks on the Group’s business and the risk management strategy; and
(d) legal requirements and compliance controls.
All Directors appointed to the Board are required to complete the Financial Institutions Directors’
Education training (FIDE) organized by BNM within one year from the date of appointment. Whilst
The Securities Commission (SC) has on 1 April 2015 revised its Licensing Handbook which stipulated
the requirement for director to attend the CMDP and the timeline to complete the programme. All
existing directors appointed prior to 1 May 2015 must complete the programme by 31 October 2016,
which is 18 months from the commencement of the programme on 1 May 2015. New directors, on the
contrary, are required to complete the programme within six (6) months from the date of their
appointment.
24
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(vii) Directors’ Training (continued)
The development and training programmes attended by the Directors during the financial year ended
31 December 2016 are as follows:
25
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(vii) Directors’ Training (continued)
The development and training programmes attended by the Directors during the financial year ended
31 December 2016 are as follows:(continued)
26
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(vii) Directors’ Training (continued)
3.
(continued)
The development and training programmes attended by the Directors during the financial year ended
31 December 2016 are as follows:(continued)
27
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(vii) Directors’ Training (continued)
5.
(continued)
The development and training programmes attended by the Directors during the financial year ended
31 December 2016 are as follows:(continued)
28
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
1 Board of Directors Responsibility and Oversight (continued)
(vii) Directors’ Training (continued)
The development and training programmes attended by the Directors during the financial year ended
31 December 2016 are as follows:(continued)
29
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
2 Internal Control Framework
(i)
The Board recognises the importance of maintaining a sound system of internal controls and risk
management practices. The Board affirms its overall responsibility of the Bank's system of internal
controls, which includes the establishment of appropriate control environment and risk management
framework.
The Bank's system of internal controls involves all management and personnel from each business
and support unit. The Board is responsible for determining key strategies and policies for significant
risks and control issues, whilst functional managers of the Bank are responsible for the effective
implementation of the Board's policies by designing, operating, monitoring and managing risks and
control processes.
The Board meets regularly to review the Bank's financial and business performance, oversee the
conduct of the Banks' business as well as to ensure the effectiveness and adequacy of internal control
systems are in place.
The Bank's organisation structure sets out clearly defined lines of job responsibilities and delegation
of authority to ensure effective communciation of risk control objectives as well as establishment of
authority and accountability and control processes. The Bank's internal control framework
encompasses the following:
Internal audit and control activities
In accordance with Bank Negara Malaysia’s Guidelines on Internal Audit Functions, Internal Audit
("IA") conducts continuous reviews on auditable areas within the Bank. The reviews conducted by IA
are focused on areas of significant risks and the effectiveness of internal control in accordance to the
audit plan approved by the BAC. The risks highlighted on the respective auditable areas as well as
recommendations made by IA are addressed at the BAC. The BAC also conduct annual reviews on
the adequacy of internal audit function, scope of work, resources and budget of IA.
30
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
2 Internal Control Framework (continued)
(i) Internal audit and control activities (continued)
IA consists of Operational Audit, IS Audit, Credit Review, Compliance and Investigation. Audit
activities include these key components:
Conduct audit on all auditable entities covering the processes, services, products, systems and
provide an independent assessment to the Board of Directors, BAC and Management that
appropriate control environment is maintained with clear authority and responsibility 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.
Monitor controls, including procedues to verify that controls are in place and functioning, follow
up on corrective action on control finding until its full resolution.
Based on IA's review, identification and assessment of risk, testing and evaluation of controls, IA will
provide an opinion on the adequacy and effectiveness of internal controls maintained by each entity.
Ensure effective information flows and communication, including:
- training and the dissemination of standards and requirements;
- an information system to produce and convey complete, accurate and timely data including
financial data; and
- the upward communication of trends, developments and emerging issues.
31
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
2 Internal Control Framework (continued)
(ii) Risk Management
Board Risk Management Committee ("BRMC")
Risk Assessment
Risk Governance Structure
The 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.
The Bank 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 Department ("RMD") at the Bank to enhance the risk management policies,
infrastructure and framework to ensure that credit, market and operational risks associated with the
Bank's business activities are adequately identified and mitigated.
RMD is functionally independent of the business divisions and is primarily responsible in
identifying, measuring, monitoring, evaluating and controlling credit, market and operational risks
of the Bank.
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.
The risk management process is reviewed regularly by Board Risk Management Committee
("BRMC") to ensure the risk management policies and framework are adequate to protect the Bank
against all relevant risks comprising credit risk, market risk, liquidity risk and operational risk.
BRMC has been established and their responsibilities, amongst others, include overseeing the
effective implementation of the Bank's Risk Management framework.
Risk assessment is in place to provide the process for the identification of the Bank's material
risks, from the perspective of impact on the Bank's financial standing and reputation.
Consistent and well-accepted methodologies of risk measurement introduced to access Liquidity,
Asset and Liability Management and other relevant risk metrices.
32
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
2 Internal Control Framework (continued)
(ii) Risk Management (continued)
Risk Governance Policies and Procedures
Whistle Blowing Policy
Operational Risk Management
This policy provides avenue for employees to report actual and suspected malpractice, misconduct
and violations of the Bank's policies in a safe and confidential manner.
The process is facililtated by RMD and a Risk Control Self Assessment ("RCSA") has been
implemented to enable management to identify and assess the risks under their areas of
supervision and control on a continual basis.This serves as a trigger point to determine Key Risk
Indicators ("KRIs") to adopt and monitor opearational exposures.
The Operational Risk Management Unit ("ORMU") plays a centralised function for operational risk
management within the RMD and it is independent of any other functions within the Bank. Exception
reports are produced on a regular basis, highlighting material operational risk related issues to Compliance
and Risk Oversight Committee ("CROC") and BRMC as well as Group Operational Risk Management
Committee ("GORMC") for risk monitoring and appropriate level of management decision making.
Relevant trainings relating to Operational Risk such as Business Continuity Plan are being provided by
RMD.
Concerns and breaches, if any, will be escalated to the Group Managing Director and BRMC. The
same will then be escalated to the Board.
Risk Management policies and procedures are reviewed and updated regularly to ensure relevance
to the current business needs and current/applicable regulatory requirements.
The policies and procedures which were revised in 2016 are the Trading Book and Banking Book
Policy Statement, the Trading Book and Banking Book Administration Guidelines, Market Risk
Controls Policy, Stockbroking Risk Framework and the Annual Credit Plan.
33
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
2 Internal Control Framework (continued)
(iii) Compliance
Compliance Framework
Policies and Procedures
Training
Compliance Programme
Anti-Money Laundering /Counter Financing Terrorism (AML/CFT)
The Bank has in place an independent compliance function. The compliance main function is to
advice, monitor and educate the business and support units to comply and act in accordance with
laws, regulations and guidelines. In line with good governance, Compliance, Legal and Corporate
Services ("CLCS") Department reports independently to the Board Risk Management Committee
("BRMC").
The CLCS's departmental policy and operational manual sets out the guiding principles for the
sound management of compliance risk within the Bank. It also sets out, amongst others, the roles
and responsibilities of the Board and Senior Management and establishment of an independent
compliance function.
Policies and procedures are reviewed on a periodic basis or as and when required to reflect current
practices and the applicable legal/regulatory requirements. The policies and procedures which
were revised in 2016 are the CLCS Department Policy and Operational Manual, Disclosure of
Customer Information - Policy and Operational Procedures and Internal Guidelines On Conflict of
Interest and Chinese Wall.
Relevant trainings on identified focus areas are regularly conducted by CLCS to create
compliance awareness amongst the staff and to assist the business and support units to better
understand the effect and applications of the regulatory as well as internal requirements.
An Annual Compliance Programme is drawn up, tabled and approved by BRMC. Compliance
reviews are performed regularly by CLCS to assess adherence to the existing and new regulatory
requirements as well as internal policies and procedures. Any deviations or breaches are reported
to CROC and BRMC for deliberation.
The Bank has in place an AML/CFT Framework comprising policies, procedures and processes
which are duly approved by the Board (policy section) and by BRMC (operational and procedural
section).
34
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
2 Internal Control Framework (continued)
(iv) Escalation Process
(v) Policies/Procedures including Empowerment and Approving Authority Policies
Empowerment and Approving Authority Policies
(vi) Financial Performance Review
Policies and Procedures covering all functions have been developed throughout the Bank and
approvals have been obtained from the relevant committees and Board. The policies and
procedures are updated periodically to incorporate changes to systems, work environment and
guidelines issued by regulators.
There is a clearly defined framework and empowerment approved by the Board. Limits of
Approving Authority for key aspects of the businesses provides a sound framework of authority
and accountability within the Bank and facilitates proper corporate decision making at the
appropriate level in the Bank's hierarchy. The delegation of limits is subject to periodic reviews as
to its implementation and continuing suitability in meeting the business objectives and operational
needs.
The Group Finance Department ("GFD") regularly provides comprehensive information to the
Board and BAC on key financial reports, key variances and analysis of financial data of the Bank
and Group. The GFD ensures maintenance of proper accounting records and the reliability of the
financial information is in accordance with the approved standards and in compliance with the
regulatory and statutory requirements.
The channels of communication and procedures have been established for reporting immediately
to the Board and appropriate levels of management on any significant control failings or
weaknesses that are identified together with details of corrective action being undertaken.
Corrective Action Tracking on resolution of issues/findings highlighted by external audit, internal
audit, regulators, if any, have also been escalated to the relevant Management Committees, BAC
and Board.
35
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
2 Internal Control Framework (continued)
(vii) Business and Capital Plan Including Budget
The internal capital target is set on a yearly basis.
(viii) Human Resources
The annual business plan and financial budget of the Bank is tabled and approved by the Board.
The variances between the actual and targeted results are presented to the Board on a periodic
basis to allow for timely responses and corrective actions to be taken to mitigate risks.
A structured framework and processes with regard to capital expenditure and revenue is in place
and is reviewed annually.
The Bank acknowledges that people development is critical in ensuring that employees have the
right competencies, skills and knowledge to conduct the tasks they are entrusted with, and must able to
exercise sound judgment when fulfilling those responsibilities. This is line with the objective set under
the Bank’s COE and COC.
The HR Policies and Procedures are in place and provide clarity in all aspects of human resource
management in the Bank. Periodically, the policies and procedures are reviewed to ensure they remain
relevant and appropriate controls are in place to manage operational risks. Changes, if any, are
communicated to all employees via HR Avenue (“the HR System”).
Human Resource has in place various initiatives and training programs to address the human capital
requirement, including knowledge management and mandatory programmes. The Bank has in place
online performance-based appraisal system (ePMS) to evaluate and compensate/reward its employees
accordingly. Staff performance assessment is conducted annually which is based on KPIs.
The recruitment process including screening process, which include the fit and proper assessment is in
place.
The e-learning facilities provides staff the freedom of time and space to learn and update their
knowledge at their convenience while meeting the Bank’s needs for its employees, who are spread
across geographical areas, to be competent in key areas.
36
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
3 Remuneration System
The remuneration policy is structured in order to provide the Bank to retain, reward and motivate staff
which is required for sustainable success by ensuring a fair, transparent and equitable remuneration
based on:-
(i) Individual job requirements, responsibilities, qualifications and experience
(ii) The Bank’s performance
(iii) Performance/contribution of the individual staff based on the KPIs.
The Bank’s remuneration mix is aligned with the FSI remuneration mix of fixed and performance
linked variable pay. Individual performance pay is measured through a structured and transparent
performance appraisal process vide the ePMS.
It is the Bank’s basic compensation philosophy to provide a competitive level of total compensation to
attract and retain qualified and competent staff. The Bank’s variable remuneration policy will be
driven primarily by a performance-based culture that aligns staff interests with those of the
shareholders of the Bank. These elements support the achievement of our objectives through
balancing rewards for both short-term results and long-term sustainable performance. Our strategy is
designed to share our success, and to align employees’ incentives with our risk framework and risk
outcomes.
The quality and long-term commitment of all of our employees is fundamental to our success. We
therefore aim to attract, retain and motivate the very best people who are committed to maintaining a
career with the Bank, and who will perform their role in the long-term interests of our shareholders.
The Bank’s remuneration system comprises the following key elements:
(i) Fixed pay
(ii) Benefits
(iii) Variable pay (short term incentive plan and Long term incentive plan)
37
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
3 Remuneration System (continued)
(i)
(ii)
(iii)
(i)
(ii)
(iii)
(iv)
(v)
(a)
(b)
The remuneration of senior management and other material risk takers must be approved by the board
annually and the Bank will maintain and regularly review the list of officers who fall within the
definition of Senior Management and other material risk takers.
The Bank has 19 Senior Officers (who are also material risk takers) comprising Group Managing
Director, Group Chief Operating Officer, Managing Directors of Businesses, Group Chief's and
Chief's of Support Units and Head of Business Units. Other material risk takers primarily is the Chief
Credit Officer of the Bank.
The Bank will ensure transparency in accordance with the BNM CG, by the disclosure of
remuneration policies and information on paid remuneration to regulators, through the Annual
Financial Statement.
remuneration is adjusted to account for all types of risk, and determined by both quantitative
measures and qualitative judgement;
the size of the bonus pool is linked to the overall performance of the Bank;
incentive payments are linked to the contribution of the individual and business unit to the
overall performance of the Bank;
bonuses are not guaranteed, except in the context of sign-on bonuses; and
for members of senior management and other material risk takers:-
a portion of remuneration consists of variable remuneration to be paid on the basis of
individual, business-unit and Bank-wide measures that adequately assess performance; and
The Bank will ensure that overall remuneration system for the Bank (as per the BNM CG guidelines)
shall:-
be subject to board’s active oversight to ensure that the system operates as intended;
be in line with the business and risk strategies, corporate values and long-term interests of the
financial institution; and
promote prudent risk-taking behaviour and encourage individuals to act in
the interests of the financial institution as a whole, taking into account the interests of its
customers; and be designed and implemented with input from the control functions and the
board risk management committee to ensure that risk exposures and risk outcomes are
adequately considered.
the variable portion of remuneration increases along with the individual’s level of
accountability.
38
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Directors' report
for the financial year ended 31 December 2016 (continued)
Corporate Governance (continued)
3 Remuneration System (continued)
Business outlook for 2017
The Group remains cautiously optimistic of the business prospects for 2017. Malaysia's real GDP growth is
expected to improve to 4.0% - 5.0% in 2017 from an estimated growth of 4.2% in 2016. The business
environment will nevertheless continue to be clouded by uncertainties from the Brexit event, China growth
normalisation and tensions in the U.S. politics. Further growth in Stockbroking business is also expected
from the strategic alliances with leading securities houses in Japan, Thailand and Indonesia. The asset
management business will continue to capitalise on the growth potential in the retail and high net worth
business categories to further increase its assests under administration and clientele.
Analysis of the total remuneration awards for the Group Managing Director and each Director of the
Bank for the financial year are disclosed in Note 31 to the financial statements.
Analysis of remuneration for senior management and other material risk takers of the Bank for the
financial year are disclosed in Note 32 to the financial statements.
The Remuneration system is reviewed by the NRC and approved by the BOD. There are no findings
in relation to material changes made during the financial year.
The annual KPIs for officers in control functions is tabled to the NRC and the Board, as this will
determine the compensation payout. This is to ensure and safeguard the independence and authority
of individuals engaged in control functions of which remuneration shall be paid based on the
achievement of the control functions' KPIs (as set out in the Remuneration Policy and System).
Remuneration: Remunerations to be paid to senior management, other material risk takers and other
staff are compatible with the Bank’s ethical values, internal balance and strategic targets.
Remunerations of all staff are defined by taking into consideration the responsibilities they assume.
On an annual basis, the Management is required to table to the NRC and the Board, the performance
metrics (Financial, Business and Non Financial metrices) to determine the variable pay and
remuneration. In the event the performance metrics are weak, the NRC and the Board shall
deliberate and decide on the variable payout. Criteria for determination of weak performance is based
on the performance rating falling under "below expectation" as set out in the Bank's performance
rating scale.
Remunerations based on performance: Performance measurements related to the concerned periods
are taken into consideration when determining the variable pay. Payment amounts based on the
performance and principally the variable pay is not guaranteed in advance.
39
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Statements of financial position
as at 31 December 2016
31.12.2016 31.12.2015 31.12.2016 31.12.2015
(restated) (restated)
Note RM'000 RM'000 RM'000 RM'000
Assets
Cash and short-term funds 2 601,468 462,004 265,442 244,732
Deposits and placements with banks and
other financial institutions 3 20,637 145,474 20,637 145,474
Financial assets held-for-trading 4 326,302 273,302 299,982 264,657
Financial investments available-for-sale 5 4,847,957 4,008,065 4,825,864 3,958,666
Financial investments held-to-maturity 6 33,563 78,651 33,563 78,651
Loans, advances and financing 7 1,079,130 1,240,693 1,079,130 1,240,693
Trade receivables 8 527,905 550,093 434,801 481,617
Derivative financial assets 9 122,088 119,991 122,088 119,991
Other assets 10 107,559 112,541 104,533 106,957
Statutory deposits with Bank Negara
Malaysia 11 177,740 177,850 177,740 177,850
Amounts due from subsidiaries 12 - - 2,780 24,004
Investment in subsidiaries 13 - - 121,217 121,217
Tax recoverable 29,566 27,289 29,393 27,196
Deferred tax assets 14 10,727 12,741 6,291 7,770
Property and equipment 15 34,797 26,544 23,603 21,646
Intangible assets 16 323,090 326,240 316,645 320,046
Total assets 8,242,529 7,561,478 7,863,709 7,341,167
Liabilities and equity
Deposits from customers 17 5,002,565 4,314,040 5,002,565 4,314,040
Deposits and placements of banks
and other financial institutions 18 484,561 749,852 484,561 749,852
Obligations on securities sold under
repurchase agreements 19 145,878 - 145,878 -
Trade payables 20 724,497 642,321 419,197 470,090
Derivative financial liabilities 21 150,291 141,891 150,291 141,891
Amount due to a related company 396 689 - -
Other liabilities 22 212,433 235,765 153,029 185,249
Provision for taxation 60 1,747 - -
Total liabilities 6,720,681 6,086,305 6,355,521 5,861,122
Share capital 23 780,000 780,000 780,000 780,000
Reserves 24 700,476 659,346 728,188 700,045
1,480,476 1,439,346 1,508,188 1,480,045
Non-controlling interest 41,372 35,827 - -
Total equity 1,521,848 1,475,173 1,508,188 1,480,045
Total liabilities and equity 8,242,529 7,561,478 7,863,709 7,341,167
Commitments and contingencies 36 4,568,820 5,793,810 4,568,820 5,793,810
The Group The Bank
The accounting policies on pages 49 to 68 and the notes to the financial statements on pages 69 to 171 form an
integral part of these financial statements.
41
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Income statements
for the financial year ended 31 December 2016
31.12.2016 31.12.2015 31.12.2016 31.12.2015
(restated) (restated)
Note RM'000 RM'000 RM'000 RM'000
Interest income 25 274,015 262,390 272,751 258,524
Interest expense 26 (190,327) (184,476) (190,327) (184,500)
Net interest income 83,688 77,914 82,424 74,024
Other operating income 27 465,446 431,196 216,057 207,413
Net income 549,134 509,110 298,481 281,437
Other operating expenses 28 (417,505) (425,201) (208,969) (240,776)
Operating profit before allowances 131,629 83,909 89,512 40,661
Write-back/(allowances) for loans, advances
and financing and receivables 29 5,281 (1,391) 5,281 (1,391)
Allowances of impairment losses on securities 30 (5,899) (13,455) (5,899) (13,455)
Profit before zakat and taxation 131,011 69,063 88,894 25,815
Zakat (1,224) (1,074) (929) (929)
Profit before taxation 129,787 67,989 87,965 24,886
Taxation 33 (26,597) (20,354) (15,107) (4,732)
Net profit after zakat and taxation 103,190 47,635 72,858 20,154
Attributable to:
Equity holders of the Bank 85,705 33,051 72,858 20,154
Non-controlling interest 17,485 14,584 - -
103,190 47,635 72,858 20,154
Earnings per share (sen) :
Basic/Fully diluted 34 10.99 4.24 9.34 2.58
The Group The Bank
The accounting policies on pages 49 to 68 and the notes to the financial statements on pages 69 to 171 form an
integral part of these financial statements.
42
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Statements of comprehensive income
for the financial year ended 31 December 2016
31.12.2016 31.12.2015 31.12.2016 31.12.2015
(restated) (restated)
Note RM'000 RM'000 RM'000 RM'000
Net profit after zakat and taxation 103,190 47,635 72,858 20,154
Other comprehensive income:
Items that may be reclassified subsequently
to profit or loss
Net fair value change in financial investments
available-for-sale (874) (6,062) (1,074) (5,775)
Net gain transferred to profit or loss on disposal
of financial investments available-for-sale (30,076) (20,777) (30,076) (20,777)
Net transfer to profit or loss on impairment
of financial instruments available-for-sale - 15,176 - 15,176
Deferred tax on financial investments
available-for-sale 14 7,477 2,801 7,477 2,801
Other comprehensive expense
for the financial year, net of tax (23,473) (8,862) (23,673) (8,575)
Total comprehensive income for the
financial year 79,717 38,773 49,185 11,579
Attributable to:
Equity holders of the Bank 62,172 24,275 49,185 11,579
Non-controlling interests 17,545 14,498 - -
79,717 38,773 49,185 11,579
The Group The Bank
The accounting policies on pages 49 to 68 and the notes to the financial statements on pages 69 to 171 form an
integral part of these financial statements.
43
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Statement of changes in equity
for the financial year ended 31 December 2016
<-------------------- Attributable to equity holders of the Bank --------------------------->
Available-for-sale Non-
Share Share Statutory Regulatory revaluation Retained controlling Total
capital premium reserve reserves reserves profits Sub-total interests equity
The Group RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At 1 January 2016
As previously reported 780,000 219,800 214,915 5,594 (14,831) 233,868 1,439,346 35,827 1,475,173
Prior year adjustment (Note 47) - - - - 11,534 (11,534) - - -
As restated 780,000 219,800 214,915 5,594 (3,297) 222,334 1,439,346 35,827 1,475,173
Comprehensive income:
Net profit for the financial year - - - - - 85,705 85,705 17,485 103,190
Other comprehensive income (net of tax)
-Financial investments available-for-sale - - - - (23,533) - (23,533) 60 (23,473)
Total comprehensive income/(loss) - - - - (23,533) 85,705 62,172 17,545 79,717
Transfer to statutory reserve - - 36,428 - - (36,428) - - -
Transfer to regulatory reserves - - - 4,073 - (4,073) - - -
Dividends paid - - - - - (21,042) (21,042) (12,000) (33,042)
At 31 December 2016 780,000 219,800 251,343 9,667 (26,830) 246,496 1,480,476 41,372 1,521,848
At 1 January 2015 780,000 219,800 199,071 3,556 5,479 207,165 1,415,071 30,329 1,445,400
Comprehensive income:
Net profit for the financial year - - - - - 33,051 33,051 14,584 47,635
Other comprehensive income (net of tax)
-Financial investments available-for-sale - - - - (8,776) - (8,776) (86) (8,862)
Total comprehensive income/(loss) - - - - (8,776) 33,051 24,275 14,498 38,773
Transfer to statutory reserve - - 15,844 - - (15,844) - - -
Transfer to regulatory reserves - - - 2,038 - (2,038) - - -
Dividends paid - - - - - - - (9,000) (9,000)
At 31 December 2015, restated 780,000 219,800 214,915 5,594 (3,297) 222,334 1,439,346 35,827 1,475,173
The accounting policies on pages 49 to 68 and the notes to the financial statements on pages 69 to 171 form an integral part of these financial statements.
44
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Statement of changes in equity
for the financial year ended 31 December 2016 (continued)
Available-for-sale
Share Share Statutory Regulatory revaluation Retained Total
capital premium reserve reserves reserves profits equity
The Bank Note RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At 1 January 2016
As previously reported 780,000 219,800 214,915 5,594 (14,762) 274,498 1,480,045
Prior year adjustment (Note 47) - - - - 11,534 (11,534) -
As restated 780,000 219,800 214,915 5,594 (3,228) 262,964 1,480,045
Comprehensive income:
Net profit for the financial year - - - - - 72,858 72,858
Other comprehensive income (net of tax)
-Financial investments available-for-sale - - - - (23,673) - (23,673)
Total comprehensive income/(loss) - - - - (23,673) 72,858 49,185
Transfer to statutory reserve - - 36,428 - - (36,428) -
Transfer to regulatory reserves - - - 4,073 - (4,073) -
Dividends paid 35 - - - - - (21,042) (21,042)
At 31 December 2016 780,000 219,800 251,343 9,667 (26,901) 274,279 1,508,188
At 1 January 2015 780,000 219,800 199,071 3,556 5,347 260,692 1,468,466
Comprehensive income:
Net profit for the financial year - - - - - 20,154 20,154
Other comprehensive income (net of tax)
-Financial investments available-for-sale - - - - (8,575) - (8,575)
Total comprehensive income/(loss) - - - - (8,575) 20,154 11,579
Transfer to statutory reserve - - 15,844 - - (15,844) -
Transfer to regulatory reserves - - - 2,038 - (2,038) -
At 31 December 2015, restated 780,000 219,800 214,915 5,594 (3,228) 262,964 1,480,045
<--------------- Attributable to equity holders of the Bank ------------------>
The accounting policies on pages 49 to 68 and the notes to the financial statements on pages 69 to 171 form an integral part of these financial statements.
45
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Statements of cash flows
for the financial year ended 31 December 2016
31.12.2016 31.12.2015 31.12.2016 31.12.2015
(restated) (restated)
RM'000 RM'000 RM'000 RM'000
CASH FLOWS FROM OPERATING
ACTIVITIES
Profit before taxation 129,787 67,989 87,965 24,886
Adjustments for items not involving the movement of
cash and cash equivalents:
Interest income:
- financial assets held-for-trading (20,394) (11,629) (20,394) (11,629)
- financial investments available-for-sale (174,292) (152,854) (174,292) (152,854)
- financial investments held-to-maturity (2,800) (9,318) (2,800) (9,318)
Accretion of discounts less amortisation of premium 3,439 2,873 3,439 2,873
Dividend income:
- financial assets held-for-trading (614) (1,780) (614) (1,580)
- financial investments available-for-sale (15,517) (13,852) (14,830) (11,780)
Dividend income from subsidiaries - - (28,000) (21,000)
Gain on disposal of property and equipment (199) (385) (96) (263)
Gain arising from disposal/redemption of:
- derivative instruments - (20) - (20)
- financial assets held-for-trading (26,048) (27,739) (26,048) (28,549)
- financial investments available-for-sale (23,351) (23,851) (21,220) (21,914)
Property and equipment written off 1,057 98 157 73
Intangible assets written off 17 6 - -
Depreciation of property and equipment 8,262 5,763 5,949 3,544
Amortisation of intangible assets 2,065 1,463 1,134 675
Unrealised (gain)/loss on:
- derivative instruments 4,673 10,132 4,673 10,132
- financial assets held-for-trading (5,215) (195) (3,650) (106)
Write-back on allowance for impairment:
- financial investments held-to-maturity - (1,554) - (1,554)
- financial investments available-for-sale 5,899 15,009 5,899 15,009
Net of (write-back)/allowance for collective impairment (6,100) 422 (6,100) 422
Net allowance for individual impairment 915 927 915 927
Gain on winding up of a subsidiary - - - (21)
Net allowance for bad and doubtful debt on other debtors 373 365 373 365
Zakat 1,224 1,074 929 929
Bad debt written off 2 - 2 -
Unrealised exchange gain (3,843) (28,785) (3,859) (30,616)
Operating loss before changes in working capital (120,660) (165,841) (190,468) (231,369)
The Group The Bank
The accounting policies on pages 49 to 68 and the notes to the financial statements on pages 69 to 171 form an integral part of
these financial statements.
46
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Statements of cash flows
for the financial year ended 31 December 2016 (continued)
31.12.2016 31.12.2015 31.12.2016 31.12.2015
(restated) (restated)
RM'000 RM'000 RM'000 RM'000
(Increase)/Decrease in operating assets
Loan, advances and financing 167,651 (206,295) 167,651 (206,295)
Deposits & placements with banks & other financial
institutions 124,837 100,099 124,837 100,099
Statutory deposits with Bank Negara Malaysia 110 (42,850) 110 (42,850)
Trade receivables 21,290 (122,309) 45,917 (102,609)
Other assets 4,605 (51,293) 2,048 (47,841)
Intercompany balances - - 21,224 (7,954)
Derivative financial assets (2,911) (17,360) (2,911) (17,360)
Financial assets held-for-trading (857) (199,100) 15,253 (198,917)
314,725 (539,108) 374,129 (523,727)
Increase/(Decrease) in operating liabilities
Deposit from customers 688,525 709,880 688,525 669,667
Deposits and placements of banks and other financial
institutions (265,291) (111,763) (265,291) (111,763)
Obligations on securities sold under repurchase agreements 145,878 - 145,878 -
Trade payables 82,176 60,340 (50,893) 106,807
Amount due to related company (293) 504 - -
Derivative financial liabilities 8,399 52,812 8,399 52,812
Other liabilities (21,750) 26,771 (30,552) 36,230
637,644 738,544 496,066 753,753
Cash generated from operating activities 831,709 33,595 679,727 (1,343)
Tax paid (21,069) (34,709) (8,349) (16,337)
Zakat paid (1,286) (1,163) (1,060) (1,013)
NET CASH GENERATED FROM/(USED 809,354 (2,277) 670,318 (18,693)
IN) OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of property and equipment 209 502 105 270
Purchase of property and equipment (13,836) (18,385) (4,326) (16,350)
Purchase of intangible assets (2,678) (6,903) (1,479) (5,949)
Interest received:
- financial investments available-for-sale 174,292 152,854 174,292 152,854
- financial investments held-to-maturity 2,800 9,318 2,800 9,318
Net cash outflow from investment of
financial investments available-for-sale (856,441) (435,755) (886,077) (429,052)
Proceeds on redemption of
financial investments held-to-maturity 44,823 99,021 44,823 99,021
Cash consideration for merger of businessess - 3,467 - 3,467
Dividend income received from:
- subsidiary - - 28,000 21,000
- financial investments available-for-sale 15,517 13,852 14,830 11,780
NET CASH USED IN INVESTING
ACTIVITIES (635,314) (182,029) (627,032) (153,641)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (21,042) - (21,042) -
Dividends paid to non-controlling interest (12,000) (9,000) - -
NET CASH USED IN FINANCING ACTIVITIES (33,042) (9,000) (21,042) -
The BankThe Group
The accounting policies on pages 49 to 68 and the notes to the financial statements on pages 69 to 171 form an integral part of
these financial statements.
47
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Statements of cash flows
for the financial year ended 31 December 2016 (continued)
31.12.2016 31.12.2015 31.12.2016 31.12.2015
(restated) (restated)
RM'000 RM'000 RM'000 RM'000
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS 140,998 (193,306) 22,244 (172,334)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE FINANCIAL YEAR 413,380 606,686 196,108 368,442
CASH AND CASH EQUIVALENTS
AS AT END OF THE FINANCIAL YEAR 554,378 413,380 218,352 196,108
ANALYSIS OF CASH AND CASH EQUIVALENTS
Cash and short-term funds 601,468 462,004 265,442 244,732
Amount held on behalf of commissioned dealer's
representatives (47,090) (48,624) (47,090) (48,624)
Cash and cash equivalents 554,378 413,380 218,352 196,108
The accounting policies on pages 49 to 68 and the notes to the financial statements on pages 69 to 171 form an integral part of
these financial statements.
The BankThe Group
48
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016
A Basis of preparation
(a)
Amendments to MFRS 11 'Joint arrangements' - Accounting for acquisition of interests in joint operations
Amendments to MFRS 101 'Presentation of financial statements' - Disclosure initiative
Amendments to MFRS 127 'Equity method in separate financial statements'
Amendments to MFRS 10, 12 & 128 'Investment entities – Applying the consolidation exception'
Annual Improvements to MFRS 2012 – 2014 Cycle
Standards, amendments to published standards and interpretations that are effective and applicable to
the Group and the Bank
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.
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 financial year. 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 48.
The Group and the Bank have applied the following amendments for the first time for the financial year
beginning on 1 January 2016 :
The adoption of the above improvements and amendments did not have any impact on the current or any
prior financial year and are not likely to affect future periods.
Standards and amendments to published standards that are applicable to the Group and the Bank but
49
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
A Basis of preparation (continued)
(b)
Standards and amendments to published standards that are applicable to the Group and the Bank but
Standards and amendments to published standards that are applicable to the Group and the Bank but
not yet effective
MFRS 9 'Financial Instruments' (effective from 1 January 2018) will replace MFRS 139 "Financial
Instruments: Recognition and Measurement".
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 cash flow characteristics of the financial asset. Investments in equity
instruments are always measured at fair value through profit or loss with an 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 profit or
loss, unless this creates an accounting mismatch.
MFRS 9 introduces an expected credit loss model on impairment that replaces the incurred loss
impairment model used in MFRS 139. The expected credit loss model is forward-looking and
eliminates the need for a trigger event to have occurred before credit losses are recognised.
A number of new standards and amendments to standards and interpretations are effective for financial year
beginning after 1 January 2017. None of these is expected to have a significant effect on the consolidated
financial statements of the Group and the Bank, except the following:
Amendments to MFRS 107 'Statement of Cash Flows – Disclosure Initiative' (effective from 1 January
2017) introduce an additional disclosure on changes in liabilities arising from financing activities.
Amendments to MFRS 112 'Income Taxes - Recognition of Deferred Tax Assets for Unrealised
Losses' (effective from 1 January 2017) clarify the requirements for recognising deferred tax assets on
unrealised losses arising from deductible temporary difference on asset carried at fair value.
In addition, in evaluating whether an entity will have sufficient taxable profits in future periods against
which deductible temporary differences can be utilised, the amendments require an entity to compare
the deductible temporary differences with future taxable profits that excludes tax deductions resulting
from the reversal of those temporary differences.
The amendments shall be applied retrospectively.
50
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
A Basis of preparation (continued)
(b)
Identify contracts with customers;
Identify the separate performance obligations;
Determine the transaction price of the contract;
Allocate the transaction price to each of the separate performance obligations; and
Recognise the revenue as each performance obligation is satisfied.
MFRS 15 'Revenue from contracts with customers' (effective from 1 January 2018) replaces MFRS 118
'Revenue' and MFRS 111 'Construction contracts' and related interpretations. The core principle in
MFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to the
customer in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services.
Revenue is recognised when a customer obtains control of goods or services, i.e. when the customer has
the ability to direct the use of and obtain the benefits from the goods or services.
A new five-step process is applied before revenue can be recognised:
Standards and amendments to published 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 financial year
beginning after 1 January 2017. None of these is expected to have a significant effect on the consolidated
financial statements of the Group, except the following set out below: (continued)
Key provisions of the new standard are as follows:
Any bundled goods or services that are distinct must be separately recognised, and any discounts or
rebates on the contract price must generally be allocated to the separate elements;
If the consideration varies (such as for incentives, rebates, performance fees, royalties, success of an
outcome etc), minimum amounts of revenue must be recognised if they are not at significant risk of
reversal;
The point at which revenue is able to be recognised may shift: some revenue which is currently
recognised at a point in time at the end of a contract may have to be recognised over the contract term
and vice versa;
There are new specific rules on licenses, warranties, non-refundable upfront fees, and consignment
arrangements, to name a few; and
As with any new standard, there are also increased disclosures.
MFRS 16 'Leases' (effective from 1 January 2019) supersedes MFRS 117 'Leases' and the related
interpretations.
Under MFRS 16, a lease is a contract (or part of a contract) that conveys the right to control the use of an
identified asset for a period of time in exchange for consideration.
MFRS 16 eliminates the classification of leases by the lessee as either finance leases (on balance sheet)
or operating leases (off balance sheet). MFRS 16 requires a lessee to recognise a ''right-of-use'' of the
underlying asset and a lease liability reflecting future lease payments for most leases.
The right-of-use asset is depreciated in accordance with the principle in MFRS 116 'Property, Plant and
Equipment' and the lease liability is accreted over time with interest expense recognised in the income
statement.
For lessors, MFRS 16 retains most of the requirements in MFRS 117. Lessors continue to classify all
leases as either operating leases or finance leases and account for them differently.
51
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
A Basis of preparation (continued)
(b)
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 to direct the relevant activities of 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 and fair
value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are, with limited exceptions, 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
acquisition-date 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 profit or loss. Refer to
accounting policy Note D on goodwill.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the carrying value of the acquirer's previously held equity
interest in the acquiree is re-measured to fair value at the acquisition date, any gains or losses arising from
such re-measurement are recognised in the profit or loss.
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 in the profit or loss. 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.
Standards and amendments to published standards that are applicable to the Group and the Bank but
not yet effective (continued)
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. The financial
effect of the adoption of MFRS 9 is still being assessed by the Group and the Bank.
52
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
B Consolidation (continued)
(a) Subsidiaries (continued)
(b) Changes in ownership interests in subsidiaries without change of control
(c) Disposal of subsidiaries
(d) Investments in subsidiaries
Transactions with non-controlling interests that do not result in loss of control are accounted for as
transactions with equity owners of the Group. A change in ownership interest results in an adjustment
between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests
in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any
consideration paid or received is recognised in equity attributable to owners of the Group.
When the Group ceases to consolidate because of a loss of control, any retained interest in the entity is
remeasured to its fair value with the change in carrying amount recognised in the profit or loss. This fair value
becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an
associate, joint venture or 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 the profit or loss.
Gains or losses on the disposal of subsidiaries include the carrying amount of goodwill relating to the
subsidiaries sold.
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 the 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.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of
the transferred asset.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated
income statement, statement of comprehensive income, statement of changes in equity and statement of
financial position respectively.
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.
53
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
C Property and equipment
Renovations 5 to 10 years
Office equipment and furniture 5 years
Motor vehicles 5 years
Computer equipment 5 years
Depreciation of capital work in progress commences when the assets are ready for their intended use.
D Intangible assets
(a) Goodwill
Property and equipment are initially stated at cost, net of the amount of goods and services tax (GST), except
where the amount of GST incurred is not recoverable from the government. When the amount of GST incurred is
not recoverable from the government, the GST is recognised as part of the cost of acquisition of the property,
plant and equipment.
Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if
any. The cost of an item of property, plant and equipment initially recognised includes its purchase price and any
cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of
operating in the manner intended by management. Cost also includes borrowing costs that are directly attributable
to the acquisition, construction or production of a qualifying asset.
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 recognised as expenses in the profit or loss during the financial period in which they are
incurred.
Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at the end of each reporting
period.
At the end of the reporting period, the Group and the Bank assess 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. Refer to accounting policy Note
E on impairment of non-financial assets.
Goodwill arises from a business combination and represents the excess of the aggregate of fair value of
consideration transferred, the amount of any non-controlling interest in the acquiree and fair value of any
previous equity interest in the acquiree over the fair value of the net identifiable assets acquired and liabilities
assumed on the acquisition date. 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.
Goodwill is carried at cost less accumulated impairment loss. Goodwill is not amortised but it is tested for
impairment annually or more frequently if events or changes in circumstances indicates that it might be
impaired. 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.
54
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
D Intangible assets (continued)
(a) Goodwill (continued)
(b) Computer software
(c) Merchant bank license
E Impairment of non-financial assets
Costs associated with maintaining computer software programmes are recognised as an expense as incurred.
Development costs that are directly attributable to the design and testing of identifiable and unique software
controlled by the Group and the Bank are recognised as intangible assets when the following criteria are met:
(i) it is technically feasible to complete the software product so that it will be available for use;
(ii) management intends to complete the software product and use or sell it;
(iii) there is an ability to use or sell the software product;
(iv) it can be demonstrated how the software product will generate probable future economic benefits;
(v) adequate technical, financial and other resources to complete the development and to use or sell
the software product are available; and
(vi) the expenditure attributable to the software product during its development can be reliably
measured.
Directly attributable costs that are capitalised as part of the software product include the software
development employee costs and an appropriate portion of relevant overheads.
Other development expenditures that do not meet these criteria are recognised as an expense as incurred.
Development costs previously recognised as an expense are not recognised as an asset in a subsequent
period.
Computer software development costs recognised as assets are amortised from the point at which the asset is
ready for use over their estimated useful lives, which does not exceed 5 years.
The merchant bank license represents contribution by the Bank 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.
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 of disposal 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 which are largely independent of the cash inflows from other assets or group of assets
("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.
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.
55
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
F Financial assets
(a) Classification
(i) Financial assets at fair value through profit or loss ("FVTPL")
(ii) Loans and receivables
(iii) Financial investments available-for-sale
(iv) Financial investments held-to-maturity
(b) Recognition and initial measurement
The Group and the Bank classify 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,
and in the case of assets classified as held-to-maturity, re-evaluates this designation at the end of each
reporting period.
Financial assets held-for-trading are categorised as financial assets at FVTPL. Financial assets at fair
value through profit or loss are acquired principally for the purpose of selling in the short term.
Derivatives are also categorised as held for trading unless they are designated and effective as hedging
instruments. Refer to accounting policy Note J, on derivative financial instruments and hedging
accounting.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market.
Financial investments available-for-sale are non-derivatives that are either designated in this category or
not classified in any of the other categories.
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 have 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.
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 that are directly attributable to the
acquisition of the financial assets 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.
56
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
F Financial assets (continued)
(c) Subsequent measurement – gains and losses
(d) De-recognition
(e) Reclassification of financial assets
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 the profit or loss 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 the
profit or loss. Interest on financial investments available-for-sale debt securities are calculated using the
effective interest/ profit method is recognised in profit or loss. Dividend income on available-for-sale equity
instruments are recognised in the profit or loss when the Group's and the Bank’s right to receive payments is
established.
Financial assets are de-recognised when the rights to receive cash flows from the investments have expired or
have been transferred and the Group and the Bank have 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 and the Bank 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.
When financial invesment available-for-sale are sold, the accumulated fair value adjustments recognised in
other comprehensive income are reclassified to income statement.
The Group and the Bank may choose to reclassify a non-derivative trading financial asset out of the held-for-
trading category if the financial asset is no longer held for the purpose of selling it in the near term. Financial
assets other than loans and receivables are permitted to be reclassified out of the held for trading category
only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near
term. In addition, the Group and the Bank may choose to reclassify financial assets that would meet the
definition of loans and receivables out of the held-for-trading or available-for-sale categories if the Group and
the Bank have the intention and ability to hold these financial assets for the foreseeable future or until
maturity at the date of reclassification.
Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or
amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification
date are subsequently made. Effective interest / profit rates for financial assets reclassified to loans and
receivables and held-to-maturity categories are determined at the reclassification date. Further increases in
estimates of cash flows adjust the effective interest / profit rates prospectively.
57
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
G Impairment of financial assets
(a) Assets carried at amortised cost
measurable decrease in estimated future cash flow than was originally envisaged; and
significant deterioration in issuer's credit rating;
breach of trading accounts terms and conditions;
contract of dealer.
past due contractual payments;
significant financial difficulties of the borrower;
probability of bankruptcy or other financial re-organisation;
default of related borrower;
The Group and the Bank assess 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.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing
significant financial difficulty, default or delinquency in interest or principal payments, the probability that
they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a
measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions
that correlate with defaults.
The criteria that the Group and the Bank use to determine that there is objective evidence of an impairment
loss include among others:
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 / profit rate. The asset’s carrying amount of the asset is reduced
and the amount of the loss is recognised in the profit or loss. If ‘loans and receivables’ or a ‘held-to-maturity
investment’ has a variable interest / profit rate, the discount rate for measuring any impairment loss is the
current effective interest / profit 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 the profit or
loss.
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.
58
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
G Impairment of financial assets (continued)
(a) Assets carried at amortised cost (continued)
(i) Individual impairment allowance
(ii) Collective 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.
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.
Based on the Guideline on Classification and Impairment Provisions for Loans/Financing, banking
institutions are required 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.
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.
59
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
G Impairment of financial assets (continued)
(b) Assets classified as available-for-sale
H Financial liabilities
(a) Financial liabilities at FVTPL
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 the profit or loss, the impairment loss is reversed through the profit or loss.
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 the profit or loss. 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 the profit or loss. Impairment losses recognised in the profit or loss on equity
instruments classified as available-for-sale are not reversed through profit or loss in subsequent periods.
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 the profit
or loss, the impairment loss is reversed through profit or loss in subsequent periods.
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").
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 the profit or loss.
Gains and losses arising from changes in fair value of financial liabilities classified as held-for-trading are
included in the the profit or loss.
60
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
H Financial liabilities (continued)
(b) Other liabilities measured at amortised cost
(c) De-recognition
I Offsetting financial instruments
J Derivative financial instruments and hedge accounting
K Trade receivables
Types Criteria for classification of accounts as impaired
Contra losses
Overdue purchase
Financial liabilities are de-recognised when they have been redeemed or otherwise extinguished.
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.
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.
Derivatives are initially recognised at fair values on the date a derivative contract is entered into and are
subsequently remeasured at their fair values at the end of each reporting period. 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. Changes in the fair value of any derivative
instrument that does not qualify for hedge accounting are recognised immediately in the profit or loss.
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 accounting for subsequent changes in fair value 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 2016, the Group and the Bank have not designated any derivatives as hedging intruments.
In accordance with the Rules of Bursa Malaysia Securities Berhad ("Bursa Securities"), clients’ accounts are
classified as impaired accounts under the following circumstances:
When an account remains outstanding for 16 calendar days or more from the date of
contra transaction
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.
61
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
L Current and deferred income taxes
(a) Current tax
(b) Deferred tax
Tax expense for the period comprises current and deferred income tax. The income tax expense or credit for
the period is the tax payable on the current period’s taxable income based on the applicable income tax rate
for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary
differences and to unused tax losses. Tax is recognised in profit or loss, 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 in the countries 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 is provided in full 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 liabilities are not recognised if they arise from the initial recognition of
goodwill. 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 is determined using tax rates (and tax laws) that have been enacted or substantively enacted by
the reporting period and are expected to apply when the related deferred tax assets is realised or the deferred
tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences, unused tax losses or unutilised tax credits can be utilised.
Deferred tax liabilities are recognised for all taxable temporary differences associated with an 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.
62
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
M Foreign currency translations
(a) Functional and presentation currency
(b) Foreign currency transactions and balances
N Provisions
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.
Provisions are recognised by the Group and the Bank when all of the following conditions have been met:
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 ("RM"), which is the Bank’s functional and presentation
currency.
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 profit or loss, 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.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange
rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at
fair value are reported as part of the fair value gain or loss. Translation differences on non-monetary financial
assets and liabilities such as equities held at fair value through profit or loss are recognised in the profit or loss
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 other comprehensive income.
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 management's best estimate of the expenditures expected to be
required to settle the obligation using a pre-tax 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.
63
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
O Employee benefits
(a) Short-term employee benefits
(b) Defined contribution plan
(c) Share-based payments
P Zakat
Wages, salaries, paid annual leave and sick leave, bonuses, and non-monetary benefits that are expected to be
settled wholly within 12 months after the end of the period in which the employees render the related service
are recognised in respect of employees’ services up to the end of the reporting period and are measured at the
amounts expected to be paid when the liabilities are settled.
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 employees
benefits relating to employee service in the current and prior periods.
The Group’s contributions to defined contribution plans are charged to profit or loss in the period to which
they relate. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in
the future payments is available.
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.
The settlement method of the Bank’s stock option incentive scheme for key employees is dependent on an
uncertain future event which is outside the control of the Company or its employees. At each reporting date,
the Bank assesses the probability of the outcome of the uncertain future event in giving rise to a liability in
determining whether the stock option incentive scheme is treated as cash-settled or equity-settled. Only a
contingent liability exists if the contingency that triggers cash settlement is not probable. The stock option
incentive scheme should be treated as equity-settled unless cash settlement becomes probable.
An equity-settled share-based payment plan is where the Bank receives services from employees as
consideration for equity instruments (stock options) of the Bank. The fair value of the stock options granted in
exchange for services of the employees are recognised as an expense in the profit or loss over the vesting
periods of the grant with a corresponding increase in equity. The total amount to be expensed over the vesting
period is determined by reference to the fair value of the stock options granted, excluding the impact of any
nonmarket vesting conditions. Non-market vesting conditions are included in assumptions about the number
of options that are expected to vest. At each reporting date, the Bank revises its estimates of the number of
stock options that are expected to vest. It recognises the impact of the revision of original estimates, if any, in
the profit or loss, with a corresponding adjustment to stock option reserve in equity.
A cash-settled share-based payment plan is initially recognised at the fair value of the liability at reporting
date and is recognised as an expense in the profit or loss over the vesting periods of the grant with a
corresponding increase in liability. The total amount to be expensed over the vesting period is determined by
reference to the fair value of the stock options granted, excluding the impact of any non-market vesting
conditions. Non-market vesting conditions are included in assumptions about the number of options that are
expected to vest. The Bank re-measures the fair value of the liability at each reporting date and at the date of
settlement, with any changes in fair value recognised in profit or loss. The Bank revises its estimate of the
number of stock options that are expected to vest. It recognises the impact of the revision of original
estimates, if any, in the profit or loss, with a corresponding adjustment to liability.
64
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
Q Cash and cash equivalents
R Contingent liabilities and contingent assets
S Operating lease
T Recognition of interest and financing income and expense
For the purpose of the statement of cash flows, cash equivalents are held for the purpose of meeting short-term
cash commitments rather than for investment or other purposes. Cash and cash equivalents comprise cash on
hand, deposits held at call with financial institutions, other short term, highly liquid investments with original
maturities of 1 month or less that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
The Group and the Bank do 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 non-occurrence 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.
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 profit or loss 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
recognised in income statement when incurred.
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 and the Bank reduce 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.
65
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
U Recognition of fees and other income
V Finance guarantee contracts
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. This applies even if they
are paid out of acquisition profits. However, the investment may need to be tested for impairment as a
consequense.
Brokerage income is recognised when contracts are executed. Rollover fee is recognised 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 a 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.
Other income are recognised on an 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.
Financial guarantee contracts are contracts that require the Group or the Bank 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 liability is initially measured at fair value and 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 or the Bank
for no compensation, the fair values are accounted for as contributions and recognised as part of the cost of
investment in subsidiaries.
66
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
W Share capital
(a) Classification
(b) Share issue costs
(c) Dividend distribution
(d) Earnings Per Share
Ordinary shares are classified as equity. Other shares are classified as equity and/or liability according to the
economic substance of the particular instrument.
Incremental costs directly attributable to the issue of new shares or options are deducted against share
premium account.
Liability is recognised for the amount of any dividend declared, being appropriately authorised and no longer
at the discretion of the Group, on or before the end of the reporting period but not distributed at the end of the
reporting period.
Distributions to holders of an equity instrument is recognised directly in equity.
Basic earnings per share
Basic earnings per share is calculated by dividing:
i)
ii)
Diluted earnings per share
Diluted earnings per share adjusts the figures in the determination of basic earnings per share to take into
account:
i)
ii)
the profit attributable to owners of the Company, excluding any costs of servicing equity other than
ordinary shares; and
by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year and excluding treasury shares.
the after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares, and
the weighted average number of additional ordinary shares that would have been outstanding
assuming the conversion of all dilutive potential ordinary shares.
67
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Summary of significant accounting policies
for the financial year ended 31 December 2016 (continued)
X Trust activities
Y Repurchase agreements
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.
Securities purchased under resale agreements are securities within the Group and the Bank have purchased with a
commitment to resell at future dates. The commitment to resell the securities is reflected as an asset on the
statements of financial position.
Conversely, obligations on securities sold under repurchase agreements are securities which the Group and the
Bank have sold from its portfolio, with a commitment to repurchase at future dates. Such financing and the
obligation to repurchase the securities is reflected as a liability on the statements of financial position.
The difference between sale and repurchase price as well as purchase and resale price are amortised as interest
income and interest expense respectively on an effective interest rate method.
68
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016
1 General information
2 Cash and short-term funds
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
Cash and balances with banks
and other financial institutions 476,563 398,765 166,841 206,729
Money at call and deposit
placements maturing within one
month 124,905 63,239 98,601 38,003
601,468 462,004 265,442 244,732
3 Deposits and placements with banks and other financial institutions
31.12.2016 31.12.2015
RM'000 RM'000
Licensed banks 20,637 145,474
The Group The Bank
The Group and the Bank
The principal activities of the Bank are in investment banking, stockbroking activities, dealing in options and futures
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 and nominee services.
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.
Inclusive in cash and short-term funds of the Group and the Bank are trust accounts maintained for dealer's
representatives amounting to RM47,090,000 (2015: RM48,624,000).
69
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
4 Financial assets held-for-trading
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
At fair value
Quoted securities
Negotiable instruments of deposits 256,015 231,093 256,015 231,093
Shares, warrants and REITs (in Malaysia) 18,763 33,564 18,763 33,564
Unit trusts 4,864 8,645 - -
279,642 273,302 274,778 264,657
Unquoted securities
Corporate bonds and/or Sukuk in Malaysia 31,218 - 25,204 -
Corporate bonds and/or Sukuk outside Malaysia 15,442 - - -
46,660 - 25,204 -
Total financial assets held-for-trading 326,302 273,302 299,982 264,657
5 Financial investments available-for-sale
31.12.2016 31.12.2015 31.12.2016 31.12.2015
(restated) (restated)
RM'000 RM'000 RM'000 RM'000
At fair value
Money market instruments
Malaysian government securities 228,087 19,895 228,087 19,895
Malaysian government islamic investment issues 288,667 675,049 288,667 675,049
Cagamas bonds 66,597 20,102 66,597 20,102
Sukuk perumahan kerajaan 79,286 97,695 79,286 97,695
Negotiable instruments of deposit - 80,036 - 80,036
662,637 892,777 662,637 892,777
Quoted securities
In Malaysia:
REITs 50,266 42,999 50,266 42,999
Unit trusts 190,278 240,850 169,171 192,437
Shares 32,134 22,046 32,134 22,046
Outside Malaysia:
REITs 78,540 48,864 78,540 48,864
Unquoted securities
Corporate bonds and/or Sukuk in Malaysia 3,527,166 2,605,743 3,526,180 2,604,757
Corporate bonds and/or Sukuk outside Malaysia 308,454 151,831 308,454 151,831
Shares in Malaysia 21,720 20,323 21,720 20,323
4,871,195 4,025,433 4,849,102 3,976,034
Allowance for impairment losses of securities (23,238) (17,368) (23,238) (17,368)
Total financial investments available-for-sale 4,847,957 4,008,065 4,825,864 3,958,666
The Group The Bank
The Group The Bank
70
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
5 Financial investments available-for-sale (continued)
31.12.2016 31.12.2015
(restated)
RM'000 RM'000
Movements in allowance for impairment losses of
financial investments available-for-sale
At beginning of financial year 17,368 41,414
Amount made during the financial year 5,899 15,176
Amount disposal (29) -
Amount written off - (39,055)
Amount written-back - (167)
At end of financial year 23,238 17,368
Included in financial investments available-for-sale are asset sold under repurchase agreements as follows:-
31.12.2016 31.12.2015
RM'000 RM'000
Malaysian government islamic investment issues 79,888 -
Sukuk perumahan kerajaan 69,431 -
149,319 -
6 Financial investments held-to-maturity
31.12.2016 31.12.2015
RM'000 RM'000
At amortised cost
Unquoted securities
Corporate bonds and/or Sukuk in Malaysia 25,471 78,651
Redeemable Secured Loan Stocks 15,042 -
40,513 78,651
Transfer from loan and advances (6,950) -
Total financial investments held-to-maturity 33,563 78,651
Movements in allowance for impairment losses of
financial investments held-to-maturity
At beginning of financial year - 1,554
Provision converted from loans, advances and financing 6,950 -
Amount written-back - (1,554)
At end of financial year 6,950 -
The Group and the Bank
The Group and the Bank
The Group and the Bank
71
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
7 Loans, advances and financing
31.12.2016 31.12.2015
RM'000 RM'000
(i) By type
Term loans/financing:
- Syndicated term loans/financing 402,709 269,288
- Other term loans/financing 356,509 702,427
Revolving credits 53,589 46,573
Share margin financing 241,772 157,979
Receivables 40,490 91,377
Staff loans 5,560 7,582
Gross loans, advances and financing 1,100,629 1,275,226
Less: Allowances for impairment losses
- Individual allowance (18,176) (25,126)
- Collective allowance (3,323) (9,407)
(21,499) (34,533)
Total net loans, advances and financing 1,079,130 1,240,693
(ii) By type of customer
Domestic business enterprises:
- Small medium enterprises 49,307 66,375
- Others 773,207 937,887
Domestic non-bank financial institutions 20,148 -
Individuals 257,010 267,489
Foreign individuals 957 966
Foreign entities - 2,509
1,100,629 1,275,226
(iii) By interest rate sensitivity
Fixed rate
- Share margin financing 241,772 157,979
- Receivables 40,490 91,377
- Housing loans/financing 2,889 4,543
- Hire purchase receivables 2,655 2,968
- Other fixed rate loans/financing 71,764 66,486
Variable rate
- Cost plus 651,475 869,886
- BLR plus 25,026 13,127
- Other floating rate 64,558 68,860
1,100,629 1,275,226
The Group and the Bank
72
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
7 Loans, advances and financing (continued)
31.12.2016 31.12.2015
RM'000 RM'000
(iv) By economic purpose
Purchase of securities 535,732 605,790
Purchase of landed properties of which
- Residential 17,122 22,950
- Non-residential 21,287 22,732
Working capital 200,855 223,231
Construction 65,100 136,798
Purchase of transport vehicles 62,173 71,385
Personal use 16 72
Merger and acquisition - 51,379
Others 198,344 140,889
1,100,629 1,275,226
(v) By economic sectors
Household 256,268 260,118
Real estate 182,237 229,125
Transport, storage and communication 150,632 206,920
Manufacturing 122,251 86,400
Finance, insurance and business services 77,382 113,811
Wholesale & retail trade and restaurants & hotels 64,133 115,121
Construction 61,804 55,213
Education, health and others 59,956 60,158
Mining and quarrying 54,214 66,722
Electricity, gas and water supply 20,013 70,794
Others 51,739 10,844
1,100,629 1,275,226
(vi) By geographical distribution
Wilayah Persekutuan 529,224 595,874
Selangor 414,086 546,660
Johor 70,923 108,004
Sarawak 39,424 6,687
Perak 28,272 2,106
Pulau Pinang 17,154 14,283
Sabah 471 420
Kedah 221 167
Negeri Sembilan 760 1,025
Melaka 94 -
1,100,629 1,275,226
The Group and the Bank
73
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
7 Loans, advances and financing (continued)
31.12.2016 31.12.2015
RM'000 RM'000
(vii) By maturity structure
Maturing within one year 375,376 311,872
One year to three years 269,786 270,622
Three years to five years 260,001 236,969
Over five years 195,466 455,763
1,100,629 1,275,226
(viii) Movements of impaired loans, advances and financing
At beginning of financial year 66,375 34,128
Classified as impaired during the financial year - 32,655
Amount converted to financial intruments held-to-maturity (15,000) -
Amount written off - (122)
Amount recovered (2,068) (286)
At end of financial year 49,307 66,375
Ratio of gross impaired loans, advances and financing to gross loans,
advances and financing 4.48% 5.20%
(ix) Movements in allowance for impaired loans, advances and financing
Individual allowance
At beginning of financial year 25,126 24,239
Allowance made during the financial year - 1,009
Amount written off - (122)
Provision converted to held-to-maturity (6,950) -
At end of financial year 18,176 25,126
Collective allowance
At beginning of financial year 9,407 8,982
Allowance made during the financial year 1,750 3,863
Amount written-back (7,834) (3,438)
At end of financial year 3,323 9,407
The Group and the Bank
74
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
7 Loans, advances and financing (continued)
31.12.2016 31.12.2015
RM'000 RM'000
(x) Impaired loans, advances and financing by economic purpose
Purchase of landed properties (non-residential) 21,287 22,732
Working capital 28,020 43,643
49,307 66,375
(xi) Impaired loans, advances and financing analysed by sector
Finance, insurance and business services 16,715 18,160
Real estate 14,264 14,264
Wholesale retail trade and restaurant and hotels 10,828 11,451
Manufacturing 7,500 22,500
49,307 66,375
(xii) Impaired loans, advances, and financing by geographical
distribution
Selangor 49,307 66,375
8 Trade receivables
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
Management fees receivable on fund management 93,104 68,476 - -
Amounts due from clients:
- performing accounts 322,195 290,256 322,195 290,256
- impaired accounts 1,705 4,460 1,705 4,460
Amounts due from brokers 112,269 140,007 112,269 140,007
Amount due from Bursa Securities
Clearing Sdn. Bhd. - 51,033 - 51,033
529,273 554,232 436,169 485,756
Less: Allowance for bad and doubtful debts:
- individual allowance (1,368) (4,123) (1,368) (4,123)
- collective allowance - (16) - (16)
527,905 550,093 434,801 481,617
The Group and the Bank
The Group The Bank
75
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
8 Trade receivables (continued)
Movement of impaired amounts due from clients:
31.12.2016 31.12.2015
RM'000 RM'000
At beginning of financial year 4,460 4,420
Allowance made during the financial year 1,781 108
Amount recovered (866) (68)
Amount written off (3,670) -
At end of financial year 1,705 4,460
Movements in the allowance for bad and doubtful debts:
31.12.2016 31.12.2015
RM'000 RM'000
Individual allowance
At beginning of financial year 4,123 4,083
Allowance made during the financial year 1,781 108
Amount written-back (866) (68)
Amount written off (3,670) -
At end of financial year 1,368 4,123
Collective allowance
At beginning of financial year 16 19
Allowance made during the financial year - 31
Amount written-back (16) (34)
At end of financial year - 16
The Group and the Bank
The Group and the Bank
76
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
9 Derivative financial assets
Contract/ Contract/
notional notional
amount Assets amount Assets
RM'000 RM'000 RM'000 RM'000
At fair value
Foreign exchange derivatives
- Currency forwards 904,245 55,413 920,658 63,365
- Currency swaps 420,367 11,928 1,269,778 9,500
- Cross currency interest rate swaps 188,579 53,472 169,600 45,783
1,513,191 120,813 2,360,036 118,648
Interest rate derivatives
- Interest rate swaps 260,000 1,275 150,000 1,343
1,773,191 122,088 2,510,036 119,991
10 Other assets
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
Other debtors, deposits and prepayments 34,185 44,558 31,271 39,074
Collateral pledged for derivative transactions 76,561 75,771 76,561 75,771
Clearing guarantee fund (a) 1,725 1,139 1,725 1,139
Clearing fund (b) 1,000 1,000 1,000 1,000
Transferable membership 222 210 110 110
113,693 122,678 110,667 117,094
Less: allowance for bad and doubtful debts (c) (6,134) (10,137) (6,134) (10,137)
107,559 112,541 104,533 106,957
(a)
(b)
Interest-bearing contributions made by the Bank amounted to RM1,725,000 (2015: RM1,139,000) 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.
Interest-bearing contributions made by the Bank amounted to RM1,000,000 (2015: Futures broking subsidiary -
RM1,000,000) in accordance with the Business Rules of Bursa Malaysia Derivatives Clearing Berhad.
The Group The Bank
The Group and the Bank
31.12.2016 31.12.2015
77
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
10 Other assets (continued)
(c) Movements in the allowance for bad and doubtful debts are as follows:
31.12.2016 31.12.2015
RM'000 RM'000
At beginning of financial year 10,137 9,894
Allowance made during the financial year 898 365
Amount written-back (525) (122)
Amount written off (4,376) -
At end of financial year 6,134 10,137
11 Statutory deposits with Bank Negara Malaysia
12 Amounts due from subsidiaries
31.12.2016 31.12.2015
RM'000 RM'000
Amounts due from subsidiaries 2,780 24,004
The amount due from subsidiaries are unsecured, interest-free and repayable on demand.
13 Investment in subsidiaries
31.12.2016 31.12.2015
RM'000 RM'000
Unquoted shares at cost 121,217 132,120
Less: winding-up of subsidiaries - (10,903)
121,217 121,217
The Bank
The Bank
The Group and the Bank
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 amount of which are determined as a set percentage of total
eligible liabilities.
78
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
13 Investment in subsidiaries (continued)
Name Principal activities 31.12.2016 31.12.2015 31.12.2016 31.12.2015
Direct subsidiaries: % % % %
Affin Hwang Asset Asset management, 70 70 30 30
Management Berhad management of unit trust
("AHAM") & private retirement schemes
Affin Capital Services Investment holdings 70 70 30 30
Berhad*
AIIMAN Asset Islamic fund 70 70 30 30
Management Sdn. Bhd. management
(formerly known as
Asian Islamic Investment
Management Sdn. Bhd.)
(“AIIMAN”) *
Affin Hwang AIIMAN Islamic fund 71 - - -
Global Sukuk Fund ** management
Affin Hwang Nominees Nominee services 100 100 - -
(Asing) Sdn. Bhd.
Affin Hwang Nominees Nominee services 100 100 - -
(Tempatan) Sdn. Bhd.
AHC Global Sdn. Bhd.
(formerly known as Investment holdings 100 - - -
Classic Uptrend
Sdn. Bhd.)
AHC Associates Sdn. Bhd.
(formerly known as Investment holdings 100 - - -
Sole Delta Sdn. Bhd.)
* Direct subsidiaries of Affin Hwang Asset Management Berhad
** The Fund is a subsidiary consolidated in the Group as the Group controls the funds in accordance with
MFRS 10 'Consolidated Financial Statements'.
The subsidiaries of the Bank, all of which are incorporated in Malaysia, are as follows:
Percentage of equity held
Group Non-controlling interests
79
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
13 Investment in subsidiaries (continued)
Details of subsidiaries that have material non-controlling interests:
Proportion of ownership
interests and voting rights
held by non-controlling Profit allocated to non- Accummulated non-
Name of subsidiaries interest controlling interests controlling interests
31.12.2016 31.12.2015 31.12.2016 31.12.2015 31.12.2016 31.12.2015
% % RM'000 RM'000 RM'000 RM'000
Affin Hwang Asset
Management Berhad 30 30 17,485 14,584 41,372 35,826
31.12.2016 31.12.2015
RM'000 RM'000
Summarised financial position
Total assets 497,243 348,807
Total liabilities (359,335) (229,387)
Net assets 137,908 119,420
Equity attributable to owners of the Bank 96,536 83,593
NCI 41,372 35,826
Summarised financial results
Revenue 278,315 248,130
Profit before taxation 69,756 64,170
Taxation (11,471) (15,556)
Other comprehensive income 200 (288)
Total comprehensive income 58,485 48,326
Summarised cash flows
Net cash generated from operating activities 168,125 29,116
Net cash used in financing activities (40,000) (30,000)
Net cash generated from/(used in) investing activities 975 (5,620)
Net increase/(decrease) in cash & cash equivalents 129,100 (6,504)
Profit allocated to NCI of the Group 17,485 14,584
AHAM
On 20 September 2016, the Bank acquired the entire share capital of AHC Global Sdn. Bhd. (formerly known as
Classic Uptrend Sdn. Bhd.) and of AHC Associates Sdn. Bhd. (formerly known as Sole Delta Sdn. Bhd.), comprising 2
ordinary shares of RM1 each for cash consideration of RM2 respectively. The companies remain inactive as at end of
the financial year.
Set out below are the Group's subsidiaries that have material non-controlling interest ("NCI"):
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.
80
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
14 Deferred tax assets
31.12.2016 31.12.2015 31.12.2016 31.12.2015
(restated) (restated)
RM'000 RM'000 RM'000 RM'000
Deferred tax assets:
- to be recovered after more than 12 months 6,529 1,203 6,529 895
- to be recovered within 12 months 20,991 25,318 15,781 20,347
Deferred tax liabilities:
- to be recovered after more than 12 months (17,885) (13,112) (17,885) (12,804)
- to be recovered within 12 months 1,092 (668) 1,866 (668)
10,727 12,741 6,291 7,770
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 The Bank
81
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statementsfor the financial year ended 31 December 2016 (continued)
14 Deferred tax assets (continued)
The movement in deferred tax assets and liabilities during the financial year are as follows:
Unutilised business
Foreign tax losses and
The Group Property Intangible Provision for exchange unabsorbed capital Financial
2016 Note and equipment assets other liabilities translation gain allowances losses instrument AFS Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
At beginning of financial year (2,410) (35) 18,320 (11,335) 7,182 1,019 12,741
(Charged)/credited to income statements 33 (384) 227 512 (2,664) (7,182) - (9,491)
Credited to equity - - - - - 7,477 7,477
At end of financial year (2,794) 192 18,832 (13,999) - 8,496 10,727
The Group
2015
At beginning of financial year (1,099) (258) 21,863 (7,888) - (1,782) 10,836
(Charged)/credited to income statements 33 (1,311) 223 (3,543) (3,447) 7,182 - (896)
Credited to equity - - - - - 2,801 2,801
At end of financial year (2,410) (35) 18,320 (11,335) 7,182 1,019 12,741
The Bank
2016
At beginning of financial year (1,491) (835) 13,041 (11,146) 7,182 1,019 7,770
(Charged)/credited to income statements 33 (102) 219 773 (2,664) (7,182) - (8,956)
Credited to equity - - - - - 7,477 7,477
At end of financial year (1,593) (616) 13,814 (13,810) - 8,496 6,291
The Bank
2015
At beginning of financial year (674) (255) 16,589 (7,888) - (1,782) 5,990
(Charged)/credited to income statements 33 (817) (580) (3,548) (3,258) 7,182 - (1,021)
Credited to equity - - - - - 2,801 2,801
At end of financial year (1,491) (835) 13,041 (11,146) 7,182 1,019 7,770
*# #^ ^^ *̂
82
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
15 Property and equipment
Office
equipment Motor Computer
The Group Renovations &furniture vehicles equipment Total
31.12.2016 RM'000 RM'000 RM'000 RM'000 RM'000
Cost
At 1.01.2016 32,778 23,600 6,424 44,000 106,802
Additions 7,026 3,151 951 2,708 13,836
Disposals (1) (129) (930) (513) (1,573)
* Reclassification - - - 4,544 4,544
Write-offs (11,600) (7,114) - (4,747) (23,461)
At 31.12.2016 28,203 19,508 6,445 45,992 100,148
Accumulated depreciation
At 1.01.2016 18,383 20,077 4,819 36,979 80,258
Charge for the financial year 2,664 1,236 838 3,524 8,262
Disposals (1) (119) (930) (513) (1,563)
* Reclassification - - - 798 798
Write-offs (11,256) (6,451) - (4,697) (22,404)
At 31.12.2016 9,790 14,743 4,727 36,091 65,351
Net book value
At 31.12.2016 18,413 4,765 1,718 9,901 34,797
The Group
31.12.2015
Cost
At 1.01.2015 21,538 24,395 6,982 40,956 93,871
Additions 11,641 1,068 831 4,965 18,505
Disposals - (1,425) (1,389) (1,147) (3,961)
Write-offs (401) (438) - (774) (1,613)
At 31.12.2015 32,778 23,600 6,424 44,000 106,802
Accumulated depreciation
At 1.01.2015 17,019 20,738 5,319 36,779 79,855
Charge for the financial year 1,700 1,175 783 2,105 5,763
Disposals - (1,415) (1,283) (1,147) (3,845)
Write-offs (336) (421) - (758) (1,515)
At 31.12.2015 18,383 20,077 4,819 36,979 80,258
Net book value
At 31.12.2015 14,395 3,523 1,605 7,021 26,544
* Reclassification from Intangible assets
83
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
15 Property and equipment (continued)
Office
equipment Motor Computer
The Bank Renovations & furniture vehicles equipment Total
31.12.2016 RM'000 RM'000 RM'000 RM'000 RM'000
Cost
At 1.01.2016 28,544 19,532 3,276 41,094 92,446
Additions 2,297 629 - 1,400 4,326
Disposals (1) (127) (463) (513) (1,104)
* Reclassification - - - 4,544 4,544
Write-offs (9,225) (4,852) - (4,707) (18,784)
At 31.12.2016 21,615 15,182 2,813 41,818 81,428
Accumulated depreciation
At 1.01.2016 15,185 17,673 2,944 34,998 70,800
Charge for the financial year 2,108 675 220 2,946 5,949
Disposals (1) (118) (463) (513) (1,095)
* Reclassification - - - 798 798
Write-offs (9,153) (4,799) - (4,675) (18,627)
At 31.12.2016 8,139 13,431 2,701 33,554 57,825
Net book value
At 31.12.2016 13,476 1,751 112 8,264 23,603
The Bank
31.12.2015
Cost
At 1.01.2015 17,274 20,376 4,080 37,856 79,586
Vested from AFFIN Futures 197 374 114 660 1,345
Additions 11,474 624 - 4,259 16,357
Disposals - (1,421) (918) (1,147) (3,486)
Write-offs (401) (421) - (534) (1,356)
At 31.12.2015 28,544 19,532 3,276 41,094 92,446
Accumulated depreciation
At 1.01.2015 14,190 18,566 3,477 34,554 70,787
Vested from AFFIN Futures 162 347 114 608 1,231
Charge for the financial year 1,169 587 271 1,517 3,544
Disposals - (1,414) (918) (1,147) (3,479)
Write-offs (336) (413) - (534) (1,283)
At 31.12.2015 15,185 17,673 2,944 34,998 70,800
Net book value
At 31.12.2015 13,359 1,859 332 6,096 21,646
* Reclassification from Intangible assets
84
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
16 Intangible assets
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
Goodwill on consolidation (a) 264,011 264,011 260,409 260,409
Intangible assets (b):
- Merchant bank licence 52,500 52,500 52,500 52,500
- Computer software licence 6,579 9,729 3,736 7,137
323,090 326,240 316,645 320,046
(a) Goodwill on consolidation
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
Cost
At beginning and end of financial year 284,211 284,211 280,609 280,609
Impairment losses
At beginning and end of financial year 20,200 20,200 20,200 20,200
Net book value
At beginning and end of financial year 264,011 264,011 260,409 260,409
The carrying amounts of goodwill allocated to the Group CGUs are as follows:
31.12.2016 31.12.2015 31.12.2016 31.12.2015
CGU RM'000 RM'000 RM'000 RM'000
Investment Banking 97,346 97,346 97,346 97,346
Stockbroking 163,063 163,063 163,063 163,063
Asset Management 3,602 3,602 - -
264,011 264,011 260,409 260,409
The Bank
The Group The Bank
The Group The Bank
The Group
85
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
16 Intangible assets (continued)
(a) Goodwill on consolidation (continued)
31.12.2016 31.12.2015 31.12.2016 31.12.2015
% % % %
Investment Banking 10.45 10.65 4.50 3.00
Stockbroking 10.45 10.65 4.50 3.00
Asset Management 10.45 10.65 4.50 3.00
Investment
banking
Stock-
broking
% %
Discount rate 12.81 12.46
Cash flow 71.07 72.25
Terminal growth rate 2.14 2.38
Discount rate Growth rate
The estimated terminal growth rates and discount rates used for value in use calculation are as follows:
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 covering a five-year (2015: five-year) period. Cash
flows beyond the fifth-year period are assumed to grow at 4.50% (2015 : 3.00%) on perpetual basis for all
CGUs which is based on forecast Gross Domestic Product ("GDP") growth rate of Malaysia.
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. The impairment charge is
most sensitive to discount rate and management believes that any reasonable possible charge to the
assumptions applied is not likely to cause the recoverable amount of asset management segment to be lower
that its carrying amount.
For investment banking and stockbroking CGUs, the estimated recoverable amount will be equal to the
carrying value under the assumptions below :
86
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
16 Intangible assets (continued)
(b) Intangible assets
Merchant
The Group bank Computer
31.12.2016 licence software Total
RM'000 RM'000 RM'000
Cost
At 1.01.2016 52,500 25,934 78,434
Additions - 2,678 2,678
Reclassification * - (4,544) (4,544)
Write-offs - (143) (143)
At 31.12.2016 52,500 23,925 76,425
Accumulated amortisation
At 1.01.2016 - 16,205 16,205
Amortised during the financial year - 2,065 2,065
Reclassification * - (798) (798)
Write-offs - (126) (126)
At 31.12.2016 - 17,346 17,346
Net carrying value
At 31.12.2016 52,500 6,579 59,079
Merchant
The Group bank Computer
31.12.2015 licence software Total
RM'000 RM'000 RM'000
Cost
At 1.01.2015 52,500 19,158 71,658
Additions - 6,903 6,903
Write-offs - (127) (127)
At 31.12.2015 52,500 25,934 78,434
Accumulated amortisation
At 1.01.2015 - 14,863 14,863
Amortised during the financial year - 1,463 1,463
Write-offs - (121) (121)
At 31.12.2015 - 16,205 16,205
Net carrying value
At 31.12.2015 52,500 9,729 62,229
* Reclassification to computer equipment
87
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
16 (b) Intangible assets (continued)
Merchant
The Bank bank Computer
31.12.2016 licence software Total
RM'000 RM'000 RM'000
Cost
At 1.01.2016 52,500 18,594 71,094
Additions - 1,479 1,479
Reclassification * - (4,544) (4,544)
Disposals - (111) (111)
At 31.12.2016 52,500 15,418 67,918
Accumulated amortisation
At 1.01.2016 - 11,457 11,457
Amortised during the financial year - 1,134 1,134
Reclassification * - (798) (798)
Disposals - (111) (111)
At 31.12.2016 - 11,682 11,682
Net carrying value
At 31.12.2016 52,500 3,736 56,236
* Reclassification to computer equipment
88
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
16 (b) Intangible assets (continued)
Merchant
The Bank bank Computer
31.12.2015 licence software Total
RM'000 RM'000 RM'000
Cost
At 1.01.2015 52,500 12,645 65,145
Additions - 5,949 5,949
At 31.12.2015 52,500 18,594 71,094
Accumulated amortisation
At 1.01.2015 - 10,782 10,782
Amortised during the financial year - 675 675
At 31.12.2015 - 11,457 11,457
Net carrying value
At 31.12.2015 52,500 7,137 59,637
17 Deposits from customers
31.12.2016 31.12.2015
RM'000 RM'000
(i) By type of deposit
Fixed deposits 3,550,924 2,930,883
Negotiable instrument of deposits 1,209,644 1,191,217
Other deposits 241,997 191,940
5,002,565 4,314,040
The Group and the Bank
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 16(a).
89
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
17 Deposits from customers (continued)
(ii) By maturity structure
31.12.2016 31.12.2015
RM'000 RM'000
Due within six months 4,349,787 3,066,058
Six months to one year 551,035 238,849
One year to three years 101,743 1,009,133
5,002,565 4,314,040
(iii) By type of customer
Domestic non-banking financial institutions 2,043,552 1,278,851
Domestic banking institutions 1,209,258 1,190,461
Business enterprises 1,144,147 1,115,296
Government and statutory bodies 510,519 621,118
Individuals 69,333 74,779
Foreign entities 4,957 5,864
Other entities 20,799 27,671
5,002,565 4,314,040
18 Deposits and placements of banks and other financial institutions
31.12.2016 31.12.2015
RM'000 RM'000
Licensed banks 484,561 749,852
19 Obligations on securities sold under repurchase agreements
31.12.2016 31.12.2015
RM'000 RM'000
Financial investments available-for-sale 145,878 -
Maturity structure of deposits are as follows:
The Group and the Bank
The Group and the Bank
The Group and the Bank
Obligations on securities sold under repurchase agreements are securities which the Bank has sold from its
investment portfolio, with a commitment to repurchase at future dates. Such financing and the obligation to
repurchase the securities is reflected as a liability on the statements of financial position.
The financial assets sold under repurchase agreements as at end of the current financial year are from the financial
assets available-for-sale portfolio (2015: Nil).
90
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
20 Trade payables
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
Amount due to unit trust funds 264,371 154,948 - -
Amount due to unit holders 40,869 17,213 - -
Amount due to external fund managers 60 70 - -
Amount due to clients 224,683 342,714 224,683 342,714
Amount due to brokers 165,360 127,376 165,360 127,376
Amount due to Bursa Securities Clearing Sdn. Bhd. 29,154 - 29,154 -
724,497 642,321 419,197 470,090
21 Derivatives financial liabilities
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 170,697 2,409 1,169,815 4,478
- Currency swaps 1,228,794 75,681 1,060,532 73,912
- Cross currency interest rate swaps 309,089 71,354 333,356 63,501
1,708,580 149,444 2,563,703 141,891
Interest rate related contracts
- Interest rate swaps 410,000 847 - -
2,118,580 150,291 2,563,703 141,891
Trade payables include amount payable under outstanding contracts from the stock and share broking activities and
amounts due to unit trust funds and unit holders.
The credit terms of amounts due to unit trust funds and unit holders range from 1 to 10 days (2015: 1 to 10 days).
The credit terms of amount due to external fund managers range from 30 to 90 days (2015: 30 to 90 days).
The Group and the Bank
31.12.2016 31.12.2015
The Group The Bank
91
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
22 Other liabilities
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
Commissioned dealer's representatives trust balances 47,090 48,624 47,090 48,624
Collateral pledged for derivative transactions 8,761 12,109 8,761 12,109
Amounts payable to commissioned and salaried
dealer's representatives 22,174 22,457 22,174 22,457
Accrued employee benefit 50,726 49,063 25,415 25,440
Other creditors and accruals 83,682 103,512 49,589 76,619
212,433 235,765 153,029 185,249
23 Share capital
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000
Authorised
At beginning and end of the financial year 1,500,000 1,500,000 1,500,000 1,500,000
Issued and fully paid
At beginning and end of the financial year 780,000 780,000 780,000 780,000
The Group The Bank
Number of ordinary
shares of RM1.00 each The Bank
92
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
24 Reserves
31.12.2016 31.12.2015 31.12.2016 31.12.2015
(restated) (restated)
RM'000 RM'000 RM'000 RM'000
Share premium 219,800 219,800 219,800 219,800
Statutory reserve (a) 251,343 214,915 251,343 214,915
Regulatory reserves (b) 9,667 5,594 9,667 5,594
Available-for-sale revaluation reserves (c) (26,830) (3,297) (26,901) (3,228)
453,980 437,012 453,909 437,081
Retained profits (d) 246,496 222,334 274,279 262,964
700,476 659,346 728,188 700,045
(a)
(b)
(c)
(d)
The Group The Bank
Pursuant to the Finance Act, 2007 which was gazetted on 28 November 2007, dividends paid, credited or
distributed to shareholders are not tax deductible 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 2016, the Bank has sufficient tax exempt account balances to pay tax
exempt dividends of RM7,724,000 (2015: RM7,724,000) under Section 12 of the Income Tax (Amended Act
1999).
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.
The Group and the Bank are 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.
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.
93
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
25 Interest income
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
Loans, advances and financing 66,006 66,175 66,006 66,175
Money at call and deposit placements
with financial institutions 11,076 19,037 9,812 15,171
Derivative instruments 3,133 5,588 3,133 5,588
Financial assets held-for-trading 20,394 11,629 20,394 11,629
Financial investments available-for-sale 174,292 152,854 174,292 152,854
Financial investments held-to-maturity 2,800 9,318 2,800 9,318
Others (247) 662 (247) 662
277,454 265,263 276,190 261,397
Net accretion of discounts less
amortisation of premiums (3,439) (2,873) (3,439) (2,873)
274,015 262,390 272,751 258,524
of which:
Interest income earned on impaired
loans, advances and financing 1,505 319 1,505 319
26 Interest expense
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
Deposits from customers 171,143 167,295 171,143 167,295
Deposits and placements of banks and
other financial institutions 15,092 12,786 15,092 12,853
Derivative instruments 2,740 2,578 2,740 2,578
Others 1,352 1,817 1,352 1,774
190,327 184,476 190,327 184,500
The Group The Bank
The Group The Bank
94
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
27 Other operating income
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
Fee income
Fee on loans, advances and financing 4,328 3,851 4,328 3,851
Corporate advisory fees 9,310 4,426 9,310 4,426
Guarantee fees 682 658 682 658
Underwriting commissions 4,445 6,423 1,332 5,258
Gross brokerage income 80,099 89,508 80,099 89,137
Portfolio management fees 184,766 171,357 - -
Initial service charge 84,356 67,893 - -
Agency fees 2,107 2,184 2,107 2,184
Arrangement fees 7,899 3,657 7,899 3,657
Others 4,197 3,109 3,955 2,336
382,189 353,066 109,712 111,507
Income from financial instruments
Gains arising on financial assets held-for-trading:
- net gain on disposal 26,048 27,739 26,048 28,549
- unrealised gain 5,215 195 3,650 106
- gross dividend income 614 1,780 614 1,580
Gains on derivatives instruments:
- net gain on disposal - 20 - 20
- unrealised loss (4,673) (10,132) (4,673) (10,132)
Gains arising on financial investments
available-for-sale:
- net gain on disposal 23,351 23,851 21,220 21,914
- gross dividend income 15,517 13,852 14,830 11,780
66,072 57,305 61,689 53,817
Other income
Realised foreign exchange gain/(loss) 11,222 (10,056) 11,260 (12,058)
Unrealised foreign exchange gain 3,843 28,785 3,859 30,616
Gain on disposal of property and equipment 199 385 96 263
Gain on winding up of a subsidiary - - - 21
Gross dividend income - subsidiaries - - 28,000 21,000
Others 1,921 1,711 1,441 2,247
17,185 20,825 44,656 42,089
465,446 431,196 216,057 207,413
The Group The Bank
95
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
28 Other operating expenses
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
Personnel costs
Salaries, allowances and bonuses 151,930 172,166 101,903 126,403
Defined contribution plan 25,210 28,217 15,070 18,550
Other personnel costs 25,244 26,737 9,369 7,458
202,384 227,120 126,342 152,411
Establishment cost
Rental of premises 14,916 17,700 10,971 14,784
Equipment rental 1,610 1,896 192 294
Repair and maintenance 7,304 7,111 4,761 5,423
Amortisation of intangible assets 2,065 1,463 1,134 675
Depreciation of property and equipment 8,262 5,763 5,949 3,544
Electricity, water and sewerage 2,645 2,891 2,293 2,569
Insurance and indemnities 1,025 1,200 799 913
Others 256 267 256 267
38,083 38,291 26,355 28,469
Marketing expenses
Business promotion and advertisement 6,226 6,112 1,204 1,291
Entertainment 2,116 1,753 873 831
Travelling and accommodation 3,461 3,223 1,813 1,581
Dealers’ handling fees 8,108 11,444 8,108 11,444
Dealer’s representatives performance
incentive 5,434 6,137 5,434 6,126
Commission and referral fee expenses 98,736 77,903 595 321
Others 5,215 5,920 - -
129,296 112,492 18,027 21,594
The Group The Bank
96
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
28 Other operating expenses (continued)
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
Administration and general expenses
Directors' remuneration (Note 31) 1,932 1,596 1,787 1,453
Telecommunication expenses 9,641 9,931 8,146 8,055
Auditors' remuneration 705 732 483 559
Professional fees 4,232 9,400 (68) 3,731
Intangible assets written off 17 6 - -
Property and equipment written off 1,057 98 157 73
Transaction levy 7,662 7,722 7,662 7,722
Subscription 7,915 6,064 7,577 5,913
Subsidies 3,167 2,980 3,167 2,980
Others 11,414 8,769 9,334 7,816
47,742 47,298 38,245 38,302
417,505 425,201 208,969 240,776
The expenditure includes the following statutory disclosure:
Directors’ remuneration (Note 31) 1,932 1,596 1,787 1,453
Auditors' remuneration:
(i) Statutory audit fees 503 495 376 387
(ii) Regulatory related fees 99 98 60 60
(iii) Non audit fees 103 139 47 112
- Tax fees 103 51 47 25
- Non audit fees - 88 - 87
The Group The Bank
97
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
29 Write-back/(Allowances) for losses on loans, advances and financing and receivables
31.12.2016 31.12.2015
RM'000 RM'000
Individual assessment allowance
- Made during the financial year (1,781) (1,117)
- Written-back during the financial year 866 68
Collective allowance
- Made during the financial year (1,750) (3,894)
- Written-back during the financial year 7,850 3,472
Bad debts and financing
- Recovered 471 323
- Written off (2) -
Other debtors
- Written back during the financialperiod/ yearAllowances for losses (898) (365)
- Written-back during the financial year 525 122
5,281 (1,391)
30 Allowances for impairment losses on securities
31.12.2016 31.12.2015
(restated)
RM'000 RM'000
(Allowances)/Write-back for impairment losses :
- Financial investments available-for-sale (5,899) (15,009)
- Financial investments held-to-maturity - 1,554
(5,899) (13,455)
The Group and the Bank
The Group and the Bank
98
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
31 Managing Director's and Directors’ remuneration
The Managing Director and Directors of the Bank who have held office during the financial year are as follows:
Managing Director
Datuk Maimoonah bt Mohamed Hussain
Non-Executive Directors
Gen Tan Sri Yaacob bin Mohd Zain (R)
Raja Tan Sri Dato' Seri Aman bin Raja Haji Ahmad
Tan Sri Dato' Seri Lodin bin Wok Kamaruddin
Stephen Charles Li
Lee Chor Kee (Ceased Directorship w.e.f 30 November 2016)
Abd Malik bin A Rahman
Lim Hun Soon @ David Lim
Maj. Gen. Dato' Zulkiflee bin Mazlan (R) (Appointed w.e.f 4 January 2016)
Datuk Noor Azian binti Shaari (Appointed w.e.f 4 October 2016)
The aggregate amount of remuneration for all Directors during the financial year are as follows:
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
Managing Director
Fixed and non-deferred remuneration
- Salary and other remuneration 2,247 2,258 2,247 2,258
Variable and non-deferred remuneration
- Bonus 2,150 2,500 2,150 2,500
- Benefits-in-kind 58 58 58 58
4,455 4,816 4,455 4,816
Non-Executive Directors:
Fixed and non-deferred remuneration
- Fees 808 781 808 781
- Salary and other remuneration 1,093 783 948 640
- Benefits-in-kind 31 32 31 32
Total 1,932 1,596 1,787 1,453
Grand total 6,387 6,412 6,242 6,269
The Group The Bank
99
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
31 Managing Director's and Directors’ remuneration (continued)
Details of remuneration of the Group are as follows:
The Group
31.12.2016
Managing Director
Datuk Maimoonah bt Mohamed Hussain
Total
Non-Executive Directors
Gen Tan Sri Yaacob bin Mohd Zain (R)
Raja Tan Sri Dato' Seri Aman
bin Raja Haji Ahmad
Tan Sri Dato' Seri Lodin bin Wok Kamaruddin
Stephen Charles Li
Lee Chor Kee
Abd Malik bin A Rahman
Lim Hun Soon @ David Lim
Datuk Noor Azian binti Shaari
Maj. Gen. Dato' Zulkiflee Mazlan ( R )
Total
Grand Total
* Other emoluments include allowances and EPF.
100
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
31 Managing Director's and Directors’ remuneration (continued)
Details of remuneration of the Group are as follows:
The Group
31.12.2015
Managing Director
Datuk Maimoonah bt Mohamed Hussain
Total
Non-Executive Directors
Gen Tan Sri Yaacob bin Mohd Zain (R)
Raja Tan Sri Dato' Seri Aman
bin Raja Haji Ahmad
Ariffin bin Alias
Tan Sri Dato' Seri Lodin bin Wok Kamaruddin
Stephen Charles Li
Lee Chor Kee
Abd Malik bin A Rahman
Lim Hun Soon @ David Lim
Total
Grand Total
* Other emoluments include allowances and EPF.
101
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
31 Managing Director's and Directors’ remuneration (continued)
The Bank
31.12.2016
Managing Director
Datuk Maimoonah bt Mohamed Hussain
Total
Non-Executive Directors
Gen Tan Sri Yaacob bin Mohd Zain (R)
Raja Tan Sri Dato' Seri Aman
bin Raja Haji Ahmad
Tan Sri Dato' Seri Lodin bin Wok Kamaruddin
Stephen Charles Li
Lee Chor Kee
Abd Malik bin A Rahman
Lim Hun Soon @ David Lim
Datuk Noor Azian binti Shaari
Maj. Gen. Dato' Zulkiflee Mazlan ( R )
Total
Grand Total
* Other emoluments include allowances and EPF.
Details of remuneration of the Bank are as follows:
102
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
31 Managing Director's and Directors’ remuneration (continued)
The Bank
31.12.2015
Managing Director
Maimoonah bt Mohamed Hussain
Total
Non-Executive Directors
Gen Tan Sri Yaacob bin Mohd Zain (R)
Raja Tan Sri Dato' Seri Aman
bin Raja Haji Ahmad
Ariffin bin Alias
Tan Sri Dato' Seri Lodin bin Wok Kamaruddin
Stephen Charles Li
Lee Chor Kee
Abd Malik bin A Rahman
Lim Hun Soon @ David Lim
Total
Grand Total
* Other emoluments include allowances and EPF.
Details of remuneration of the Bank are as follows:
103
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (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")
AFFIN Holdings Berhad ("AHB") Holding company
Subsidiaries and associate of LTAT
Subsidiaries and associate of AHB as
disclosed in its financial statements
Subsidiaries of the Bank as disclosed in
Note 13 Subsidiaries
Key management personnel
- All Directors of the Bank and its key subsidiaries
-
Related parties of key management personnel
(deemed as related to the Bank)
Ultimate holding corporate body, which is Government-Linked
Investment Company ("GLIC") of the Government of Malaysia.
Subsidiaries and associate companies of the ultimate holding
corporate body
Subsidiaries and associate companies of the holding company
The key management personnel of the Group and the Bank consists
of:
Non-Executive Directors, Managing Director, Chief Operation
Officer, Chief Financial Officer and certain Heads of Department
Close family members and dependents of key management
personnel
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
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 of the Bank in office during the financial year and the remuneration for the
financial year are disclosed in Note 31.
104
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements for the financial year ended 31 December 2016 (continued)
32 Significant related party transactions and balances (continued)
(a) Related parties transactions
31.12.2016 31.12.2015 31.12.2016 31.12.2015
The Group RM'000 RM'000 RM'000 RM'000
Income
Interest on fixed deposits & interbank placements - - 9,775 14,663
Interest on financial investments available-for-sale - - 4,916 6,011
Interest on loans, advances and financing - - 4,820 6,285
Unrealised loss on derivative instruments - - (278) (198)
Brokerage income 1,084 523 - 10
Rebate of management fees - - 381 -
Management fees income 251 207 1,533 1,149
Corporate advisory fees - 193 2,916 440
Agency fees - - 360 415
Arrangement fees - - 150 1,047
Other fee income - - 100 -
Realised gain on foreign exchange for derivatives instruments - - 272 -
1,335 923 24,945 29,822
Expenses
Rental of premises - - 7,313 7,236
Interest expense on derivatives - - 55 (304)
Interest expense on deposits 490 387 43,874 29,023
Travel services - - 423 1,029
Advisory fee expense - - 807 2,042
Management fees expense - - 1,442 -
Other expenses - - 1,687 722
490 387 55,601 39,748
Ultimate Holding Other Related
Corporate Body Companies
The Group and the Bank do not have any individual or collective 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.
105
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements for the financial year ended 31 December 2016 (continued)
32 Significant related party transactions and balances (continued)
(b) Related parties balances
31.12.2016 31.12.2015 31.12.2016 31.12.2015
The Group RM'000 RM'000 RM'000 RM'000
Amounts due to
Deposit from customers - - 1,241,432 1,298,085
Deposit and placements of banks and
other financial instituions - - 58,310 -
Other liabilities - - 474 850
Derivative liabilities - - 121 (2)
Trade payable - 121,792 524 -
- 121,792 1,300,861 1,298,933
Amounts due from
Interbank placement - - 10,000 40,000
Cash and short-term funds - - 78,264 123,761
Derivative assets - - - -
Loans, advances and financing - - 45,238 132,065
Refundable deposits - - 2,015 1,331
Trade receivable 76,721 10,893 318 -
Other assets - 193 823 -
Financial investments - - 203,906 381,706
76,721 11,086 340,564 678,863
Commitments and contingencies
Notional Amount of:
Direct credit substitutes - - 65,000 65,000
Interest rate related contracts - - 50,000 50,000
Irrevocable commitments to extend credit - - - 5,319
- - 115,000 120,319
Ultimate Holding Other Related
Corporate Body Companies
106
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements for the financial year ended 31 December 2016 (continued)
32 Significant related party transactions and balances (continued)
(c) Related parties transactions
31.12.2016 31.12.2015 31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
The Bank
Income
Interest on fixed deposits & interbank placements - - - - 9,723 14,597
Interest on financial investments available-for-sale - - - - 4,916 6,011
Interest on loans, advances and financing - - - - 4,820 6,285
Unrealised loss on derivative instruments - - - - (278) (198)
Management fee income - - - - 10 -
Corporate advisory fees - 193 - - 2,916 440
Agency fees - - - - 360 415
Arrangement fees - - - - 150 1,047
Other fees income - - - - 12 -
Brokerage income 1,084 523 - - - 10
Realised gain on foreign exchange for derivatives instruments - - - - 272 -
Gross dividend income -subsidiaries - - 28,000 21,000 - -
Other income - - 269 - - -
1,084 716 28,269 21,000 22,901 28,607
Expenses
Rental of premises - - - - 5,310 7,192
Interest on derivatives - - - - 55 (304)
Interest expense on deposits 490 387 - 86 43,874 29,023
Travel services - - - - 423 524
Other expenses - - - - 174 242
490 387 - 86 49,836 36,677
Corporate Body Subsidiaries Companies
Ultimate Holding Other Related
107
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements for the financial year ended 31 December 2016 (continued)
32 Significant related party transactions and balances (continued)
(d) Related parties balances
31.12.2016 31.12.2015 31.12.2016 31.12.2015 31.12.2016 31.12.2015
The Bank RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Amounts due to
Deposits from customers - - - - 1,241,432 1,298,085
Deposits and placements of banks
and other financial institutions - - - - 58,310 -
Other liabilities - - - - 236 199
Derivative liabilities - - - - 121 (2)
Trade payable - 121,792 - - - -
- 121,792 - - 1,300,099 1,298,282
Amounts due from
Interbank placement - - - - 10,000 40,000
Cash and short-term funds - - - - 68,320 104,259
Loans, advances and financing - - - - 45,238 132,065
Refundable deposits - - - - 1,816 1,262
Intercompany balances - - 2,775 24,004 724 -
Trade receivable 76,653 10,893 - - - -
Financial investments - - - - 203,906 381,706
76,653 10,893 2,775 24,004 330,004 659,292
Commitments and contingencies
Direct credit substitutes - - - - 65,000 65,000
Interest rate related contracts - - - - 50,000 50,000
Irrevocable commitments to extend credit - - - - - 5,319
- - - - 115,000 120,319
Corporate Body Subsidiaries Companies
Ultimate Holding Other Related
108
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
32 Significant related party transactions and balances (continued)
(e) Key management personnel compensation
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
Short-term employee benefits:
- Salaries, allowances and commissions 11,283 6,010 10,284 4,445
- Bonuses 9,040 6,772 6,626 2,915
- Defined contribution plan 3,491 2,235 2,872 1,251
- Other employee benefits 1,063 636 1,039 535
- Benefit-in-kind 89 90 89 90
Other emoluments 1,093 783 948 640
Directors' fees 808 781 808 781
26,867 17,307 22,666 10,657
Loans to key management personnel:
31.12.2016 31.12.2015
RM'000 RM'000
As at end of financial year 588 155
Unrestricted Deferred
31.12.2016 RM'000 RM'000
Fixed Remuneration
- Cash-based 14,891 -
- Other 89 -
Variable Remuneration
- Cash-based 7,686 -
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
Included in the table above is the Managing Director's & Non-Executive Directors' remuneration as disclosed in
Note 31.
The total remuneration awards of key management personnel including other material risk takers of the Bank for
the financial year is as follows:
The Group and the Bank
The Bank
109
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
32 Significant related party transactions and balances (continued)
(e) Key management personnel compensation (continued)
Unrestricted Deferred
31.12.2015 RM'000 RM'000
Fixed Remuneration
- Cash-based 7,186 -
- Other 90 -
Variable Remuneration
- Cash-based 3,381 -
33 Taxation
The Group
31.12.2016 31.12.2015 31.12.2016 31.12.2015
(restated) (restated)
RM'000 RM'000 RM'000 RM'000
Malaysian income tax:
- Current financial year 18,535 14,255 6,151 -
- Deferred tax (Note 14) 9,491 896 8,956 1,021
28,026 15,151 15,107 1,021
(Over)/Under provision in prior years (1,429) 5,203 - 3,711
26,597 20,354 15,107 4,732
31.12.2016 31.12.2015 31.12.2016 31.12.2015
(restated) (restated)
% % % %
Statutory tax rate in Malaysia 24.00 25.00 24.00 25.00
Tax effect in respect of:
- Non-allowable expenses 1.96 13.25 1.88 4.83
- Non-taxable income (5.19) (16.42) (9.93) (26.98)
- Impact of change in tax rate on deferred tax - 0.44 - 1.25
- (Over)/Under provision in prior
financial year (1.10) 7.66 - 14.91
- Other temporary differences not recognised
in prior financial year 0.82 - 1.22 -
Average effective tax rate 20.49 29.93 17.17 19.01
The Group The Bank
The Bank
The total remuneration awards of key management personnel including other material risk takers of the Bank for
the financial year is as follows: (continued)
The Bank
The number of key management personnel receiving variable remuneration during the financial year for Bank is
20 (2015 : 12).
The numeric reconciliation between the applicable statutory income tax rate to the effective income tax rate of the
110
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
34 Earnings per share
31.12.2016 31.12.2015 31.12.2016 31.12.2015
(restated) (restated)
Net profit attributable to equity holders
(RM'000) 85,705 33,051 72,858 20,154
Weighted average number of ordinary shares
in issue ('000) 780,000 780,000 780,000 780,000
Basic earnings per share (sen) 10.99 4.24 9.34 2.58
35 Dividends
Amount of Amount of
Gross dividend tax exempt Gross dividend tax exempt
per share dividend per share dividend
sen RM'000 sen RM'000
Ordinary share:
- Final dividend for financial year ended
31.12.2015 0.390 3,042 - -
- Interim dividend 2.308 18,000 - -
2.698 21,042 - -
The Bank
The Group The Bank
31.12.2016 31.12.2015
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 year.
The Directors now recommend the payment of a final dividend of 1.385 sen (2015: 0.390 sen) gross per share
amounting to RM10,800,000 (2015: RM3,042,000) for the financial year ended 31 December 2016, which is subject
to approval of the shareholder at the forthcoming Annual General Meeting of the Bank.
Dividends recognised as distribution to ordinary equity holders of the Bank:
111
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
36 Commitments and contingencies
31.12.2016 31.12.2015
Principal Principal
amount amount
RM'000 RM'000
Direct credit substitutes* 110,050 98,850
Obligations under underwriting agreement 19,481 25,500
Irrevocable commitments to extend credit:
- maturity less than one year 179,115 192,609
- maturity more than one year 694 21
Interest rate related contracts**:
- less than one year 300,000 -
- one year to less than five years 370,000 150,000
Foreign exchange related contracts**:
- less than one year 3,001,759 4,087,984
- one year to less than five years 220,011 835,755
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 367,710 403,091
4,568,820 5,793,810
*
**
The Group and the Bank
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 constitute the following:
Included in direct credit substitutes of the Group and the Bank are financial guarantee contracts of RM65
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.
112
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
37 Capital commitments
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
In respect of property and equipment:
Authorised and contracted for 396 13,917 396 4,164
Authorised but not contracted for 10,269 - 8,760 -
10,665 13,917 9,156 4,164
38 Lease commitments
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
Year
Within one year 11,030 11,868 7,426 10,316
One to five years 3,429 9,074 1,044 8,026
39 Capital management
The Group The Bank
To maintain a strong capital base to support the development of its business.
The Group The Bank
Capital expenditure approved by Directors are not provided for in the financial statements amounted to approximately:
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:
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 5.125% (2015: 4.50%) and 6.625% (2015: 6.00%)
respectively for financial year ended 31 December 2016. The minimum regulatory capital adequacy requirement
remains at 8.625% (2015: 8.00%) 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
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.
113
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
40 Capital adequacy
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
(restated) (restated)
Basel III
Common Equity Tier (CET) 1 Capital :
Paid-up share capital 780,000 780,000 780,000 780,000
Share premium 219,800 219,800 219,800 219,800
Statutory reserve 251,343 214,915 251,343 214,915
Retained profits 256,163 227,928 283,946 268,558
Unrealised loss on AFS instruments (26,830) (3,297) (26,901) (3,228)
1,480,476 1,439,346 1,508,188 1,480,045
Less : Other regulatory adjustment
Goodwill and other intangible assets (323,090) (326,240) (316,645) (320,046)
Investment in subsidiaries - - (108,692) (106,686)
Collective allowance reserve (9,667) (5,594) (9,667) (5,594)
Deferred tax assets (10,727) (12,741) (6,291) (7,770)
CET 1 Capital 1,136,992 1,094,771 1,066,893 1,039,949
Additional Tier 1 Capital
Qualifying non-controlling interests 3,000 3,000 - -
Total Tier 1 Capital 1,139,992 1,097,771 1,066,893 1,039,949
Tier 2 Capital
Collective impairment allowance # 12,525 14,531 12,525 14,531
Less : Regulatory adjustment
Investment in subsidiaries - - (12,525) (14,531)
Total Tier 2 Capital 12,525 14,531 - -
Total Capital 1,152,517 1,112,302 1,066,893 1,039,949
Proposed dividends 10,800 3,042 10,800 3,042
Capital Ratios
CET 1 Capital ratio 32.532% 30.481% 35.662% 32.153%
Tier 1 Capital ratio 32.618% 30.565% 35.662% 32.153%
Total Capital ratio 32.976% 30.969% 35.662% 32.153%
#
The Group The Bank
minimum level agreed with the management which takes into account the risk profile of the Group and the Bank.
The table below summarises the composition of regulatory capital and the ratios of the Group and the Bank for the
financial year ended 31 December 2016.
Qualifying collective impairment is restricted to allowances on the unimpaired portion of the loans, advances and
financing.
114
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
40 Capital adequacy (continued)
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
(restated) (restated)
CET 1 Capital ratio (net of proposed dividends) 32.223% 30.397% 35.301% 32.059%
Tier 1 Capital ratio (net of proposed dividends) 32.309% 30.480% 35.301% 32.059%
Total Capital ratio (net of proposed dividends) 32.667% 30.885% 35.301% 32.059%
Credit risk 2,601,028 2,739,271 2,400,616 2,589,933
Market risk 188,107 298,820 196,766 279,305
Operational risk 705,881 553,536 394,323 365,105
Total RWA 3,495,016 3,591,627 2,991,705 3,234,343
41 Employee share option incentive scheme
1.
2.
3.
4.
5.
6.
The Group The Bank
financing.
A subsidiary of the Bank, Affin Hwang Asset Management Berhad, has established and implemented a stock option
incentive scheme for its key employees. The subsidiary granted 250 options on the date of stock option agreement
dated 16 July 2015. The shareholders of the subsidiary have approved, and the subsidiary has adopted the scheme
which provides for key employees to be vested with options to purchase ordinary shares of the subsidiary.
The share option incentive scheme would provide the key employees with an appropriate incentive to encourage
them to continue in the employment of the subsidiary and to improve the growth and profitability of the subsidiary.
The main features of the share option scheme are, inter alia, as follows:
Eligible persons are key employees as defined by the stock option agreement.
The grant of the option is deemed to be incorporated in the terms of employment of the key employees with the
subsidiary and the key employees are not required to make any payment to the subsidiary for the grant of the
Options.
The share options will vest and become exercisable by the grantees in accordance with the stock option agreement
in tranches.
The share option scheme shall be in force until 1 June 2024. All remaining vested options which have not been
exercised will expire on the expiration date.
The share options granted have performance and/or service based vesting conditions. Generally, the share options
granted can be classified into four categories which are based on joining; time linked; performance linked and
bonus kicker.
In the event of an initial public offering is taking place on or before 1 June 2019, the share option incentive
scheme will be settled in shares. Otherwise, the subsidiary is required to settle in cash.
115
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
41 Employee share option incentive scheme (continued)
As at 1 January
2016Granted Exercised Expired
As at
December
2016
250 250 - - 500
250 250 - - 500
42 Subsequent event
43 Material Litigation
Movements in the number of share options awarded are as follows:
Grant date
16-Jul-16
The estimated fair value of each share option granted is between RM22.18 to RM28.36 per option.
The exercise price of the options is RM40.30 per share and the weighted average remaining contractual life is 9
years.
Total share-based payment expenses recognised in profit or loss during the financial year is amounted RM4.672
million (2015: Nil).
There are no material events subsequent to the end of the financial year other than the acquisition of entire share
capital of ABB Trustee Berhad ("ABBT") comprising 100,000 ordinary shares of RM10 each (of which RM5 is
uncalled), from Affin Bank Berhad for a total cash consideration of approximately RM630,000, based on the audited
net asset value of ABBT as at 31 December 2015, subject to further adjustment if any. The entire share capital of
ABBT is acquired by five shareholders in equal proportion, namely the Bank, Affin Hwang Nominees (Tempatan)
Sdn Bhd, Affin Hwang Nominees (Asing) Sdn Bhd, AHC Global Sdn Bhd (formerly known as Classic Uptrend Sdn
Bhd) and AHC Associates Sdn Bhd (formerly known as Sole Delta Sdn Bhd), each holding 20% equity interest in
ABBT. The acquisition exercise was completed on 25 January 2017.
A chargor of a piece of land (“the Land”) charged to the Bank as part of the collaterals for a syndicated facility
granted to a borrower by a consortium financial institutions, had filed a claim against the Bank on 9 June 2016 for
the sum of RM5,185,683.19 or in the alternative damages to be assessed, interests and costs, alleging that the Bank
as Security Agent had failed to perform its contractual and/or statutory obligations in relation to the application of the
sales proceeds of the Land and had wrongfully deducted the recovery and enforcement expenses, which included
expenses for other properties/securities from the surplus of the sales proceed of the Land. As Security Agent, the
consortium financial institutions will indemnify the Bank for the claim instituted against the Bank. On 15 November
2016, the Judge granted an order allowing the Bank’s application to transfer the proceedings to Kuala Lumpur High
Court and the case is now fixed for case management on 15 March 2017.
116
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies
A. Credit risk
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 the Asset & Liability Committee ("ALCO"), the Board Risk
Management Committee ("BRMC") and the Board Credit Review Committee ("BCRC").
Credit risk is the potential risk of financial loss arising from defaults by counterparties 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 sub-committee 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.
117
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
A. Credit risk (continued)
Credit risk measurement
Loans, advances and financing
Risk limit control and mitigation policies
-
-
Credit Related Commitments
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
the Bank's credit management function and forwarded to the relevant approving authorities
based on the Authority Matrix approved by Board.
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 derivatives due to potential exposure arising from market
movements, and loan books are managed on an aggregated basis as part of the overall lending
limits with customers.
Collateral
Charges over business assets, debentures, personal guarantee and corporate guarantee, sinking
fund account and shares; and
Charges over financial instruments such as marketable securities.
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 long-term commitments
generally have a greater degree of credit risk than short-term commitments.
118
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
A. Credit risk (continued)
Credit risk monitoring
Credit risk culture
Maximum exposure to credit risk
generally have a greater degree of credit risk than short-term commitments.
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 to 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.
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.
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.
The Bank is supportive of credit officer in taking the Professional Credit Certification ("PCC")
programme offered by the Asian Institute Of Chartered Bankers ("AICB"). Upon attaining the
PCC certification, Credit officer is expected to demonstrate sound understanding of credit
process and competence to undertake credit roles and responsibility.
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.
119
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
A. Credit risk (continued)
Maximum exposure to credit risk (continued)
31.12.2016 31.12.2015
Maximum Maximum
credit risk credit risk
exposure exposure
RM'000 RM'000
Credit risk exposures of on-balance
sheet assets:
Cash and short-term funds&
601,417 461,960
Financial assets held-for-trading** 302,675 231,093
Financial investments available-for-sale#
4,498,257 3,650,351
Other assets* 101,283 101,158
5,503,632 4,444,562
Credit risk exposures of off-balance
sheet items:
Direct credit substitutes 110,050 98,850
Obligations under underwriting agreement 19,481 25,500
Irrevocable commitments to extend credit 179,809 192,630
Any commitments that are unconditionally
cancelled at any time by the Bank without prior
noticed or that effectively provide for automatic
cancellation due to deterioration in a borrower's
creditworthiness 367,710 403,091
677,050 720,071
Total maximum credit risk exposure 6,180,682 5,164,633
The following have been excluded for the purpose of maximum credit risk exposure calculation : &
Cash on hand
** Investments in shares, unit trust, warrants and REITs
# Investments in quoted and unquoted shares, unit trust and REITs
* Prepayment
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:
The Group
120
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
A. Credit risk (continued)
Maximum exposure to credit risk (continued)
31.12.2016 31.12.2015
Maximum Maximum
credit risk credit risk
exposure exposure
RM'000 RM'000
Credit risk exposures of on-balance
sheet assets:
Cash and short-term funds&
265,393 244,690
Financial assets held-for-trading** 281,219 231,093
Financial investments available-for-sale#
4,497,271 3,649,365
Other assets* 99,100 96,481
5,142,983 4,221,629
Credit risk exposures of off-balance
sheet items:
Direct credit substitutes 110,050 98,850
Obligations under underwriting agreement 19,481 25,500
Irrevocable commitments to extend credit 179,809 192,630
Any commitments that are unconditionally
cancelled at any time by the Bank without prior
noticed or that effectively provide for automatic
cancellation due to deterioration in a borrower's
creditworthiness 367,710 403,091
677,050 720,071
Total maximum credit risk exposure 5,820,033 4,941,700
The following have been excluded for the purpose of maximum credit risk exposure calculation : &
Cash on hand
** Investments in shares, unit trust, warrants and REITs
# Investments in quoted and unquoted shares and REITs
* Prepayment
The Bank
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):
121
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (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 reduced by collateral, credit enhancements and other actions
taken to mitigate the credit exposure.
The financial effect of collateral held for loans, advances and financing is 14.57% as at 31
December 2016 (2015: 26.80%). The financial effects of collateral for the other financial assets
are insignificant.
122
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
A. Credit risk (continued)
Credit risk concentrations
Deposit and
placements Financial Financial Financial
Cash and with banks and assets investments investments Loans, Derivative Total on- Commitments
short-term other financial held-for- available- held-to- advances and Trade financial Other balance and
The Group funds institutions trading for-sale maturity financing receivables assets assets sheet contingencies
31.12.2016 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Agricultural - - - 88,488 - - - - 108 88,596 -
Mining and quarrying - - - 13,555 - 54,049 - - - 67,604 19,481
Manufacturing - - - 37,667 8,092 114,500 - - 569 160,828 65,000
Electricity, gas and water - - - 694,614 - 19,952 - - 1,328 715,894 10,000
Construction - - - 694,730 - 61,383 - - - 756,113 67,305
Real estate - - - 244,958 - 181,055 - - 1,154 427,167 54,117
Wholesale, retail trade, hotel & restaurant - - - 138,168 - 53,384 - - 268 191,820 27,200
Transport, storage and communication - - - 332,526 25,455 150,338 - - 730 509,049 -
Finance, insurance and business 601,292 20,637 277,471 896,554 - 77,069 82,318 122,087 87,201 2,164,629 -
Government and government agencies 125 - - 596,040 - - - - 713 596,878 -
Education, Health and Others - - - 529,975 - 59,880 - - 100 589,955 -
Purchase of securities - - - - - - 434,802 - - 434,802 -
Others - - 25,204 230,982 16 307,520 10,785 1 9,112 583,620 433,947
601,417 & 20,637 302,675 # 4,498,257 ## 33,563 1,079,130 527,905 122,088 101,283 * 7,286,955 677,050
& Excludes cash in hand of RM51,000
# Excludes investments in unit trust, shares, warrants and REITS amounting to RM23.63 million
## Excludes investments in unit trust, quoted and unquoted shares net of impairment allowance amounting to RM349.70 million
* Excludes prepayment amounting to RM6.27 million.
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:
123
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
A. Credit risk (continued)
Credit risk concentrations (continued)
Deposit and
placements Financial Financial Financial
Cash and with banks and assets investments investments Loans, Derivative Total on- Commitments
short-term other financial held-for- available- held-to- advances and Trade financial Other balance and
The Group funds institutions trading for-sale maturity financing receivables assets assets sheet contingencies
31.12.2015 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Agricultural - - - 62,004 - - - - 1,269 63,273 -
Mining and quarrying - - - 22,869 - 66,181 - - - 89,050 -
Manufacturing - - - 31,373 10,950 37,500 - - 628 80,451 70,319
Electricity, gas and water - - - 427,599 - 70,305 - - 1,311 499,215 26,097
Construction - - - 381,317 - 192,266 - 8 1,503 575,094 67,305
Real estate - - - 239,706 - 88,426 - - 2,123 330,255 70,635
Wholesale, retail trade, hotel & restaurant - - - 60,255 - 103,640 - - 3,184 167,079 -
Transport, storage and communication - - - 357,198 26,922 170,314 - - 990 555,424 419
Finance, insurance and business 461,859 145,474 231,093 975,764 40,763 182,112 54,990 119,983 80,195 2,292,233 50,000
Government and government agencies 101 - - 792,639 - - - - - 792,740 -
Education, Health and Others - - - 187,518 - 59,822 - - 32 247,372 31,884
Purchase of securities - - - - - - 481,617 - - 481,617 -
Others - - - 112,109 16 270,127 13,486 - 9,923 405,661 403,412
461,960 & 145,474 231,093 # 3,650,351 ## 78,651 1,240,693 550,093 119,991 101,158 * 6,579,464 720,071
& Excludes cash in hand of RM44,000
# Excludes investments in unit trust, shares, warrants and REITS amounting to RM42.2 million
## Excludes investments in unit trust, quoted and unquoted shares net of impairment allowance amounting to RM357.7 million
* Excludes prepayment amounting to RM11.4 million.
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):
124
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
A. Credit risk (continued)
Credit risk concentrations (continued)
Deposit and
placements Financial Financial Financial
Cash and with banks and assets investments investments Loans, Derivative Total on- Commitments
short-term other financial held-for- available- held-to- advances and Trade financial Other balance and
The Bank funds institutions trading for-sale maturity financing receivables assets assets sheet contingencies
31.12.2016 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Agricultural - - - 88,488 - - - - 108 88,596 -
Mining and quarrying - - - 13,555 - 54,049 - - - 67,604 19,481
Manufacturing - - - 37,667 8,092 114,500 - - 569 160,828 65,000
Electricity, gas and water - - - 694,614 - 19,952 - - 1,197 715,763 10,000
Construction - - - 694,730 - 61,383 - - - 756,113 67,305
Real estate - - - 244,958 - 181,055 - - 1,154 427,167 54,117
Wholesale, retail trade, hotel & restaurant - - - 138,168 - 53,384 - - 268 191,820 27,200
Transport, storage and communication - - - 332,526 25,455 150,338 - - 702 509,021 -
Finance, insurance and business 265,268 20,637 256,015 895,568 - 77,069 - 122,087 86,823 1,723,467 -
Government and government agencies 125 - - 596,040 - - - - 713 596,878 -
Education, Health and Others - - - 529,975 - 59,880 - - 100 589,955 -
Purchase of securities - - - - - - 434,801 - - 434,801 -
Others - - 25,204 230,982 16 307,520 - 1 7,466 571,189 433,947
265,393 & 20,637 281,219 # 4,497,271 ## 33,563 1,079,130 434,801 122,088 99,100 * 6,833,202 677,050
& Excludes cash in hand of RM49,000
# Excludes investments in shares, warrants and REITS amounting to RM18.76 million
## Excludes investments in unit trust, quoted and unquoted shares net of impairment allowance amounting to RM328.59 million
* Excludes prepayment amounting to RM5.43 million.
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):
125
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
A. Credit risk (continued)
Credit risk concentrations (continued)
Deposit and
placements Financial Financial Financial
Cash and with banks and assets investments investments Loans, Derivative Total on- Commitments
short-term other financial held-for- available- held-to- advances and Trade financial Other balance and
The Bank funds institutions trading for-sale maturity financing receivables assets assets sheet contingencies
31.12.2015 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Agricultural - - - 62,004 - - - - 1,269 63,273 -
Mining and quarrying - - - 22,869 - 66,181 - - - 89,050 -
Manufacturing - - - 31,373 10,950 37,500 - - 628 80,451 70,319
Electricity, gas and water - - - 427,599 - 70,305 - - 1,198 499,102 26,097
Construction - - - 381,317 - 192,266 - 8 1,503 575,094 67,305
Real estate - - - 239,706 - 88,426 - - 2,123 330,255 70,635
Wholesale, retail trade, hotel & restaurant - - - 60,255 - 103,640 - - 3,184 167,079 -
Transport, storage and communication - - - 357,198 26,922 170,314 - - 961 555,395 419
Finance, insurance and business 244,589 145,474 231,093 974,778 40,763 182,112 - 119,983 80,045 2,018,837 50,000
Government and government agencies 101 - - 792,639 - - - - - 792,740 -
Education, Health and Others - - - 187,518 - 59,822 - - 32 247,372 31,884
Purchase of securities - - - - - - 481,617 - - 481,617 -
Others - - - 112,109 16 270,127 - - 5,538 387,790 403,412
244,690 & 145,474 231,093 # 3,649,365 ## 78,651 1,240,693 481,617 119,991 96,481 * 6,288,055 720,071
& Excludes cash in hand of RM42,000
# Excludes investments in shares, warrants and REITS amounting to RM33.6 million
## Excludes investments in unit trust, quoted and unquoted shares net of impairment allowance amounting to RM309.3 million
* Excludes prepayment amounting to RM10.5 million.
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):
126
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
A. Credit risk (continued)
-
-
Total loans, advances and financing - credit quality
31.12.2015
RM'000
Distribution of loans, advances and financing by credit quality:
Carrying amount of loans, advances and financing by credit quality:
- Neither past due nor impaired 1,051,115 1,170,262
- Past due but not impaired 207 38,589
- Impaired 49,307 66,375
Gross loans, advances and financing 1,100,629 1,275,226
Less: Allowances for impairment
- Individual (18,176) (25,126)
- Collective (3,323) (9,407)
(21,499) (34,533)
Net loans, advances and financing 1,079,130 1,240,693
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:
The Group and the Bank
For corporate loans, charges over the business assets such as premises, equipment and fixed deposits; and
For share margin financing charges over marketable securities.
31.12.2016
RM'000
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.
127
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
A. Credit risk (continued)
Total loans, advances and financing - credit quality (continued)
(a) Loans neither past due nor impaired
31.12.2015
RM'000
Quality classification
Satisfactory 1,170,262
Special mention - -
Quality classification definitions:
i) Satisfactory
-
-
ii)
(b) Loans past due but not impaired
31.12.2015
RM'000
Past due up to 30 days 207 38,589
Past due 30-60 days - -
Past due 60-90 days - -
207 38,589
The Group and the Bank
31.12.2016
RM'000
RM'000
The Group and the Bank
31.12.2016
1,051,115
Analysis of loans and advances that are neither past due nor impaired analysed based on the Group and the
Bank's internal grading system are as follows:
For corporate loans mean exposures demonstrate a strong capacity to meet financial commitments,
with negligible or low probability of default and/or levels of expected loss.
For share margin financing means accounts that are not impaired/due.
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:
Special mention - Exposures require varying degrees of special attention and default risk is of greater
concern.
128
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
A. Credit risk (continued)
Total loans, advances and financing - credit quality (continued)
(c) Loans that are individually determined to be impaired as at reporting date:
31.12.2015
RM'000
Analysis of impaired loans:
Gross individually assessed loans, advances and financing 49,307 66,375
Less: individual impairment (18,176) (25,126)
Net individually assessed impaired loans 31,131 41,249
Collateral and other credit enhancements obtained
The Group
31.12.2016
Neither past
due nor Total gross
impaired Impaired amount
RM'000 RM'000 RM'000
Cash and short-term funds 601,417 - 601,417
Trade receivables 527,568 1,705 529,273
Other assets 101,283 6,134 107,417
Deposits and placements with banks and other FIs 20,637 - 20,637
Total 1,250,905 7,839 1,258,744
Less: Impairment allowances - (7,502) (7,502)
Total net amount 1,250,905 337 1,251,242
Other financial assets of the Group and the Bank are summarised as follows:
31.12.2016
The Group and the Bank
RM'000
During the financial year, 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.
Other financial assets
129
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
A. Credit risk (continued)
The Group
31.12.2015
Neither past due nor Total gross
impaired Impaired amount
RM'000 RM'000 RM'000
Cash and short-term funds 461,960 - 461,960
Trade receivables 549,772 4,460 554,232
Other assets 101,158 10,137 111,295
Deposits and placements with banks and other FIs 145,474 - 145,474
Total 1,258,364 14,597 1,272,961
Less: Impairment allowances - (14,276) (14,276)
Total net amount 1,258,364 321 1,258,685
The Bank
31.12.2016
Neither past due nor Total gross
impaired Impaired amount
RM'000 RM'000 RM'000
Cash and short-term funds 265,393 - 265,393
Trade receivables 434,464 1,705 436,169
Other assets 99,100 6,134 105,234
Deposits and placements with banks and other FIs 20,637 - 20,637
Total 819,594 7,839 827,433
Less: Impairment allowances - (7,502) (7,502)
Total net amount 819,594 337 819,931
The Bank
31.12.2015
Cash and short-term funds 244,690 - 244,690
Trade receivables 481,296 4,460 485,756
Other assets 96,481 10,137 106,618
Deposits and placements with banks and other FIs 145,474 - 145,474
Total 967,941 14,597 982,538
Less: Impairment allowances - (14,276) (14,276)
Total net amount 967,941 321 968,262
Other financial assets (continued)
Other financial assets of the Group and the Bank are summarised as follows (continued):
130
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
A. Credit risk (continued)
Private debts securities, treasury bills and derivatives
The Group Sovereign AAA AA- to AA+ A- to A+ Lower than A- Unrated Impaired* Total
31.12.2016 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Cash and short-term funds 126 396,683 168,309 513 - 35,786 - 601,417
Deposits and placements with banks and other financial institutions - 10,000 10,637 - - - - 20,637
Financial assets held-for-trading
- Negotiable instruments of deposits - - 55,946 200,069 - - - 256,015
- Private debt securitiesCorporate bonds and/or sukuk in Malaysia - - 25,204 4,234 - 1,780 - 31,218
- Private debt securitiesCorporate bonds and/or sukuk outside Malaysia - - - 3,903 5,864 5,675 - 15,442
Financial investments available-for-sale:
- Malaysian government securities 228,087 - - - - - - 228,087
- Malaysian government islamic investment issue 288,667 - - - - - - 288,667
- Private debt securitiesCorporate bonds and/or sukuk in/outside Malaysia 1,882,426 824,890 802,466 117,392 68,479 139,967 3,835,620
- Sukuk Perumahan Kerajaan 79,286 - - - - - - 79,286
- Cagamas bonds - 66,597 - - - - - 66,597
Financial investments held-to-maturity
- Private debt securitiesCorporate bonds and/or sukuk in Malaysia - - - - - 25,471 8,092 33,563
Derivative financial assets - 6,785 12,628 47,257 - 55,418 - 122,088
2,478,592 1,304,955 1,075,190 373,368 74,343 264,097 8,092 5,578,637
* Net of allowance for impairment.
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.
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.
131
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
A. Credit risk (continued)
Private debts securities, treasury bills and derivatives (continued)
The Group Sovereign AAA AA- to AA+ A- to A+ Lower than A- Unrated Total
31.12.2015 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Cash and short-term funds 100 240,612 207,803 488 - 12,957 461,960
Deposits and placements with banks and other financial institutions - 65,474 40,000 - 40,000 - 145,474
Financial assets held-for-trading -
- Negotiable instruments of deposits - - 231,093 - - - 231,093
Financial investments available-for-sale:
- Malaysian government securities 19,895 - - - - - 19,895
- Negotiable instruments of deposits - - 80,036 - - - 80,036
- Malaysian government islamic investment issue 675,049 - - - - - 675,049
- Private debt securitiesCorporate bonds and/or sukuk in/outside Malaysia 486,284 788,809 745,640 142,736 - 594,105 2,757,574
- Sukuk Perumahan Kerajaan 97,695 - - - - - 97,695
- Cagamas bonds - 20,102 - - - - 20,102
Financial investments held-to-maturity
- Private debt securitiesCorporate bonds and/or sukuk in Malaysia - - - 10,330 - 68,321 78,651
Derivative financial assets - 2,629 10,690 43,392 - 63,280 119,991
1,279,023 1,117,626 1,315,262 196,946 40,000 738,663 4,687,520
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 on hand, securities include financial assets held-for-trading, financial investment available-for-sale and financial investment held-to-
maturity. (continued)
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.
132
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
A. Credit risk (continued)
Private debts securities, treasury bills and derivatives (continued)
The Bank Sovereign AAA AA- to AA+ A- to A+ Lower than A- Unrated Impaired* Total
31.12.2016 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Cash and short-term funds 125 76,757 161,071 513 - 26,927 - 265,393
Deposits and placements with banks and other financial institutions - 10,000 10,637 - - - - 20,637
Financial assets held-for-trading
- Negotiable instruments of deposits - - 55,946 200,069 - - - 256,015
- Private debt securitiesCorporate bonds and/or sukuk in Malaysia - - 25,204 - - - - 25,204
Financial investments available-for-sale:
- Malaysian government securities 228,087 - - - - - 228,087
- Malaysian government islamic investment issue 288,667 - - - - - 288,667
- Private debt securitiesCorporate bonds and/or sukuk in/outside Malaysia 1,882,426 823,904 802,466 117,392 68,479 139,967 3,834,634
- Sukuk Perumahan Kerajaan 79,286 - - - - - - 79,286
- Cagamas bonds - 66,597 - - - - - 66,597
Financial investments held-to-maturity
- Private debt securitiesCorporate bonds and/or sukuk in Malaysia - - - - - 25,471 8,092 33,563
Derivative financial assets - 6,785 12,628 47,257 - 55,418 - 122,088
2,478,591 984,043 1,067,952 365,231 68,479 247,783 8,092 5,220,171
* Net of allowance for impairment.
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 on hand, securities include financial assets held-for-trading, financial investment available-for-sale and financial investment held-to-maturity. (continued)
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.
133
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
A. Credit risk (continued)
Private debts securities, treasury bills and derivatives (continued)
The Bank Sovereign AAA AA- to AA+ A- to A+ Lower than A- Unrated Total
31.12.2015 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Cash and short-term funds 100 52,293 178,852 488 - 12,957 244,690
Deposits and placements with banks and other financial institutions - 65,474 40,000 - 40,000 - 145,474
Financial assets held-for-trading
- Negotiable instruments of deposits - - 231,093 - - - 231,093
Financial investments available-for-sale:
- Malaysian government securities 19,895 - - - - - 19,895
- Negotiable instruments of deposits - - 80,036 - - - 80,036
- Malaysian government islamic investment issue 675,049 - - - - - 675,049
- Private debt securitiesCorporate bonds and/or sukuk in/outside Malaysia 486,284 787,823 745,640 142,736 594,105 2,756,588
- Sukuk Perumahan Kerajaan 97,695 - - - - - 97,695
- Cagamas bonds - 20,102 - - - - 20,102
Financial investments held-to-maturity
- Private debt securitiesCorporate bonds and/or sukuk in Malaysia - - - 10,330 - 68,321 78,651
Derivative financial assets - 2,629 10,690 43,392 - 63,280 119,991
1,279,023 928,321 1,286,311 196,946 40,000 738,663 3,959,109
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.
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 on hand, securities include financial assets held-for-trading, financial investment available-for-sale and financial investment held-to-
maturity. (continued)
134
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
B. Market risk
Market Risk Measurement
Value-at-risk ("VaR")
VaR is a statistical measure of potential portfolio market value loss resulting from changes in market variables such
as foreign exchange rates and interest rates, over a given holding period, measured at a specific confidence level.
The Variance-Covariance Parametric methodology is adopted to compute the potential portfolio market value loss
amount. This is a statistically defined, probability-based approach that uses volatilities and correlations to quantify
market risks. Under this methodology, a matrix of historical volatilities and correlations is derived. VaR is then
computed by applying these volatilities and correlations to the outstanding trading portfolio.
Market risk is the risk of losses to the Bank’s positions in financial instruments that are adversely affected by
movements in market risk factors such as interest rates, foreign exchange rates, equity prices or commodity prices.
The Bank's primary market risk exposures are in the trading and investment portfolios. The Bank’s risk management
process involves the identification and measurement, mitigation and control, monitoring and testing as well as
reporting and review of risk.
The Bank manages market risk through a comprehensive set of market risk controls. Key risk governance
committees such as the Asset & Liability Committee ("ALCO") and the Board Risk Management Committee
("BRMC") establish and monitor controls with oversight by the Board of Directors. Market risk controls are
established to ensure that the Bank's market risk profile remains within the boundaries of the Bank's risk appetite.
The Bank employs several key risk metric for monitoring market risk such as Value-at-Risk ("VaR"), instrument
specific sensitivities, loss limiting thresholds and position size caps.
The Bank’s market risk is primarily concentrated in interest rate risk in the Banking Book ("IRRBB") arising from
differences in the repricing mismatch between rate sensitive assets and liabilities. The Bank monitors and assess the
IRRBB exposures through the short-term Net Interest Income ("NII") sensitivity and changes in the Economic Value
of Equity ("EVE").
In addition to assessing market risk under normal market scenarios, the Bank also conducts periodical stress testing
to anticipate potential losses under stressed scenarios.
135
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
B. Market risk (continued)
Average for
the financial
Balance year Minimum
The Bank RM RM RM
31.12.2016
Instruments
FX Related Contracts 69,962 93,207 525 440,431
Bonds 50,184 179,941 2,709 849,920
Average for
the financial
Balance year Minimum
The Bank RM RM RM
31.12.2015
Instruments
FX Related Contracts 84,438 70,246 - 307,580
Bonds 66,295 77,699 - 591,011
Other Risk Measures
i) Mark-to-Market
ii) Stress Testing
iii) Sensitivity
Value-at-Risk (VaR)
The table below sets out a summary of the Bank’s VaR profile by financial instrument types for the trading portfolio.
Maximum
RM
Value-at-Risk (VaR)
Maximum
RM
Mark-to-market valuation tracks the current market value of the outstanding financial instruments.
Stress tests are conducted to attempt to quantify potential market risk losses arising from low probability
abnormal market movements. Stress tests measure the changes in values arising from extreme movements in
relevant market risk factors based on past experience and simulated stress scenarios.
Sensitivities are measures that quantify the change in value of a portfolio of financial instruments resulting
from a unit change in the relevant market risk factors. Sensitivities are used as measures of vulnerability to
market risk factor movements and are also used to facilitate the implementation of risk controls and hedging
strategies.
136
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
B. Market risk (continued)
Net interest income sensitivity
+100 -100 +100
basis point basis point basis point
RM million RM million RM million
Impact on profit after taxation (35.37) 35.37 (21.10) 21.10
Impact on equity 196.66 (196.66) (126.72) 142.35
Foreign exchange risk sensitivity analysis
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
+ 1%
Australian Dollar 59 35 44 13
New Zealand Dollar 115 17 115 17
United States Dollar (3,081) (446) (3,267) (472)
Singapore Dollar 1,065 (16) 1,048 (28)
Others (228) 24 (228) (2)
31.12.2016 31.12.2015 31.12.2016 31.12.2015
RM'000 RM'000 RM'000 RM'000
- 1%
Australian Dollar (59) (35) (44) (13)
New Zealand Dollar (115) (17) (115) - (17)
United States Dollar 3,081 446 3,267 472
Singapore Dollar (1,065) 16 (1,048) 28
Others 228 (24) 228 2
The Bank
31.12.2016 31.12.2015
-100
basis point
RM million
The Group The Bank
The Group The Bank
The information 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 following table sets out the analysis of the exposures to access the impact of a 1% change in the exchange rates
to the profit.
137
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
B. Market risk (continued)
Foreign exchange risk
The Group
31.12.2016
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
The Group and the Bank is exposed to the effects of fluctuations in the prevailing foreign currency exchange rates on
its financial position and cash flows. Controls are imposed 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 Group and the Bank's
exposure to foreign currency exchange rate risk at reporting date. Included in the table are the Group and the Bank's
financial instruments at carrying amounts, categorised by currency.
138
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
B. Market risk (continued)
Foreign exchange risk (continued)
The Group
31.12.2015
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
139
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
B. Market risk (continued)
Foreign exchange risk (continued)
The Bank
31.12.2016
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
The Bank
31.12.2015
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
140
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
C. Interest rate risk
Up to 1 – 3 3 – 12 1 – 5 Over Non-interest Trading
The Group 1 month months months years 5 years sensitive book Total
31.12.2016 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Assets
Cash and short-term funds 291,695 - - - - 309,773 - 601,468
Deposits and placements with banks and
other financial institutions - - - 20,000 - 637 - 20,637
Securities:
- Financial assets held-for-trading - - - - - - 326,302 326,302
- Financial investments available-for-sale 17,007 37,040 246,086 1,434,625 2,710,850 402,349 + - 4,847,957
- Financial investments held-to-maturity - - 2,120 22,235 9,146 62 - 33,563
Loans, advances and financing:
- Performing 726,439 278,978 40,535 2,313 3,057 (3,323) ^ - 1,047,999
- Impaired loans - - - - - 31,131 - 31,131
Derivative financial assets 122,088 122,088
Other assets (1)
76,561 - - - - 558,903 - 635,464
Statutory deposits with Bank Negara
Malaysia - - - - - 177,740 - 177,740
Total assets 1,111,702 316,018 288,741 1,479,173 2,723,053 1,477,272 448,390 7,844,349
+ Included in financial investments available-for-sale is impairment on securities of RM23.2 million.
^ The negative balance represents collective impairment allowance for loans, advances and financing.
(1) Other assets include trade receivables and other assets.
<------------------------------------Non-trading book ----------------------------------->
Sensitivity to interest rates arises from repricing mismatch between interest rate sensitive assets and liabilities. 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
applicable policies.
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.
141
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (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 Trading
The Group 1 month months months years 5 years sensitive book Total
31.12.2016 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Liabilities
Deposits from customers 2,436,998 1,691,569 740,030 100,000 - 33,968 - 5,002,565
Deposits and placement of banks and
other financial institution 483,162 - - - - 1,399 - 484,561
Obligations on securities sold under repurchase agreements 95,981 49,000 - - - 897 - 145,878
Trade payables - - - - - 724,497 - 724,497
Derivative financial liabilities - - - - - - 150,291 150,291
Other liabilities (2)
8,762 - - - - 204,067 - 212,829
Total liabilities 3,024,903 1,740,569 740,030 100,000 - 964,828 150,291 6,720,621
Net interest sensitivity gap (1,913,201) (1,424,551) (451,289) 1,379,173 2,723,053
(2) Other liabilities include other liabilities and amount due to related company.
<------------------------------------Non-trading book ----------------------------------->
142
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (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 Trading
The Group 1 month months months years 5 years sensitive book Total
31.12.2015 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Assets
Cash and short-term funds 270,312 - - - - 191,692 - 462,004
Deposits and placements with banks and
other financial institutions - - - 145,000 - 474 - 145,474
Securities:
- Financial assets held-for-trading - - - - - - 273,302 273,302
- Financial investments available-for-sale 30,002 8,011 234,420 1,621,665 1,717,250 396,717 + - 4,008,065
- Financial investments held-to-maturity - - 22,525 41,430 14,021 675 - 78,651
Loans, advances and financing:
- Performing 727,448 335,411 135,131 2,616 4,510 (5,672) ^ - 1,199,444
- Impaired loans - - - - - 41,249 - 41,249
Derivative financial assets - - - - - - 119,991 119,991
Other assets (1)
75,772 - - - - 586,862 - 662,634
Statutory deposits with Bank Negara
Malaysia - - - - - 177,850 - 177,850
Total assets 1,103,534 343,422 392,076 1,810,711 1,735,781 1,389,847 393,293 7,168,664
+ Included in financial investments available-for-sale is impairment on securities of RM17.4 million.
^ The negative balance represents collective impairment allowance for loans, advances and financing.
(1) Other assets include trade receivables and other assets.
<------------------------------------Non-trading book ----------------------------------->
143
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (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 Trading
The Group 1 month months months years 5 years sensitive book Total
31.12.2015 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Liabilities
Deposits from customers 1,865,764 813,759 595,543 1,000,000 - 38,974 - 4,314,040
Deposits and placement of banks and
other financial institution 749,475 - - - - 377 - 749,852
Trade payables - - - - - 642,321 - 642,321
Derivative financial liabilities - - - - - - 141,891 141,891
Other liabilities (2)
12,109 - - - - 224,345 - 236,454
Total liabilities 2,627,348 813,759 595,543 1,000,000 - 906,017 141,891 6,084,558
Net interest sensitivity gap (1,523,814) (470,337) (203,467) 810,711 1,735,781
(2) Other liabilities include other liabilities and amount due to related company.
<------------------------------------Non-trading book ----------------------------------->
144
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (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 Trading
The Bank 1 month months months years 5 years sensitive book Total
31.12.2016 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Assets
Cash and short-term funds 265,391 - - - - 51 - 265,442
Deposits and placements with banks and
other financial institutions - - - 20,000 - 637 - 20,637
Securities:
- Financial assets held-for-trading - - - - - - 299,982 299,982
- Financial investments available-for-sale 17,006 37,040 246,086 1,434,625 2,709,859 381,248 + - 4,825,864
- Financial investments held-to-maturity - - 2,120 22,235 9,146 62 - 33,563
Loans, advances and financing:
- Performing 726,439 278,978 40,535 2,313 3,057 (3,323) ^ - 1,047,999
- Impaired loans - - - - - 31,131 - 31,131
Derivative financial assets - - - - - - 122,088 122,088
Other assets (1)
76,561 - - - - 465,553 - 542,114
Statutory deposits with Bank Negara
Malaysia - - - - - 177,740 - 177,740
Total assets 1,085,397 316,018 288,741 1,479,173 2,722,062 1,053,099 422,070 7,366,560
+ Included in financial investments available-for-sale is impairment on securities of RM23.2 million.
^ The negative balance represents collective impairment allowance for loans, advances and financing.
(1) Other assets include trade receivables, other assets and amount due from subsidiaries.
<------------------------------------Non-trading book ----------------------------------->
145
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (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 Trading
The Bank 1 month months months years 5 years sensitive book Total
31.12.2016 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Liabilities
Deposits from customers 2,436,998 1,691,569 740,030 100,000 - 33,968 - 5,002,565
Deposits and placement of banks and
other financial institution 483,162 - - - - 1,399 - 484,561
Obligations on securities sold under repurchase agreements 95,981 49,000 - - - 897 - 145,878
Trade payables - - - - - 419,197 - 419,197
Derivative financial liabilities - - - - - - 150,291 150,291
Other liabilities 8,762 - - - - 144,267 - 153,029
Total liabilities 3,024,903 1,740,569 740,030 100,000 - 599,728 150,291 6,355,521
Net interest sensitivity gap (1,939,506) (1,424,551) (451,289) 1,379,173 2,722,062
<------------------------------------Non-trading book ----------------------------------->
146
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (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 Trading
The Bank 1 month months months years 5 years sensitive book Total
31.12.2015 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Assets
Cash and short-term funds 244,690 - - - - 42 - 244,732
Deposits and placements with banks and
other financial institutions - - - 145,000 - 474 - 145,474
Securities:
- Financial assets held-for-trading - - - - - - 264,657 264,657
- Financial investments available-for-sale 30,002 8,011 234,420 1,621,665 1,717,250 347,318 + - 3,958,666
- Financial investments held-to-maturity - - 22,525 41,430 14,021 675 - 78,651
Loans, advances and financing:
- Performing 727,448 335,411 135,131 2,616 4,510 (5,672) ^ - 1,199,444
- Impaired loans - - - - - 41,249 - 41,249
Derivative financial assets - - - - - - 119,991 119,991
Other assets (1)
75,772 - - - - 536,806 - 612,578
Statutory deposits with Bank Negara
Malaysia - - - - - 177,850 - 177,850
Total assets 1,077,912 343,422 392,076 1,810,711 1,735,781 1,098,742 384,648 6,843,292
+ Included in financial investments available-for-sale is impairment on securities of RM17.4 million.
^ The negative balance represents collective impairment allowance for loans, advances and financing.
(1) Other assets include trade receivables, other assets and amount due from subsidiaries.
<------------------------------------Non-trading book ----------------------------------->
147
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended 31 December 2016 (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 Trading
The Bank 1 month months months years 5 years sensitive book Total
31.12.2015 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Liabilities
Deposits from customers 1,865,764 813,759 595,543 1,000,000 - 38,974 - 4,314,040
Deposits and placement of banks and
other financial institution 749,475 - - - - 377 - 749,852
Trade payables - - - - - 470,090 - 470,090
Derivative financial liabilities - - - - - - 141,891 141,891
Other liabilities 12,109 - - - - 173,140 - 185,249
Total liabilities 2,627,348 813,759 595,543 1,000,000 - 682,581 141,891 5,861,122
Net interest sensitivity gap (1,549,436) (470,337) (203,467) 810,711 1,735,781
<------------------------------------Non-trading book ----------------------------------->
148
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year to 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
D. Liquidity risk
Basel III Liquidity Standards
Up to 1 >1-3 >3-12 >1-5 Over 5
The Group month months months years years Total
31.12.2016 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Liabilities
Deposits from customers 2,449,183 1,718,511 766,572 107,584 - 5,041,850
Deposits and placements of banks
and other financial institutions 485,095 - - - - 485,095
Obligations on securities sold under
repurchase agreements 96,750 49,398 - - - 146,148
Trade payable 724,497 - - - - 724,497
Amount due to related company 396 - - - - 396
Other liabilities 97,781 17,336 95,372 1,944 - 212,433
3,853,702 1,785,245 861,944 109,528 - 6,610,419
Up to 1 >1-3 >3-12 >1-5 Over 5
The Group month months months years years Total
31.12.2015 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Liabilities
Deposits from customers 1,881,880 783,502 660,021 1,068,370 - 4,393,773
Deposits and placements of banks
and other financial institutions 750,216 - - - - 750,216
Trade payable 642,321 - - - - 642,321
Amount due to related company 689 - - - - 689
Other liabilities 91,114 38,428 105,457 766 - 235,765
3,366,220 821,930 765,478 1,069,136 - 6,022,764
Liquidity risk disclosure table which is based on contractual undiscounted cash flow
The information 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
information incorporates all contractual cash flows, on an undiscounted basis, relating to both principal and interest payments.
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.
ALCO is responsible for the day-today strategic management of the Bank's liquidity and reporting of the Bank's liquidity position to the
BRMC on a periodical basis.
149
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year to 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
D. Liquidity risk (continued)
Up to 1 >1-3 >3-12 >1-5 Over 5
The Bank month months months years years Total
31.12.2016 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Liabilities
Deposits from customers 2,449,183 1,718,511 766,572 107,584 - 5,041,850
Deposits and placements of banks
and other financial institutions 485,095 - - - - 485,095
Obligations on securities sold under
repurchase agreements 96,750 49,398 - - - 146,148
Trade payable 419,197 - - - - 419,197
Other liabilities 75,662 17,336 58,087 1,944 - 153,029
3,525,887 1,785,245 824,659 109,528 - 6,245,319
Up to 1 >1-3 >3-12 >1-5 Over 5
The Bank month months months years years Total
31.12.2015 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Liabilities
Deposits from customers 1,881,880 783,502 660,021 1,068,370 - 4,393,773
Deposits and placements of banks
and other financial institutions 750,216 - - - - 750,216
Trade payable 470,090 - - - - 470,090
Other liabilities 89,599 17,407 77,477 766 - 185,249
3,191,785 800,909 737,498 1,069,136 - 5,799,328
The information 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 information
incorporates all contractual cash flows, on an undiscounted basis, relating to both principal and interest payments. (continued)
Liquidity risk disclosure table which is based on contractual undiscounted cash flow (continued)
150
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial period ended to 31 December 2016 (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
Up to 1 >1-3 >3-12 >1-5 Over 5
month months months years years Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
The Group and the Bank
31.12.2016
Interest rate derivatives - (19) 213 622 - 816
The Group and the Bank
31.12.2015
Interest rate derivatives - - - - - -
Derivatives settled on a gross basis
Up to 1 >1-3 >3-12 >1-5 Over 5
month months months years years Total
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
The Group and the Bank
31.12.2016
Foreign exchange derivatives:
Outflow 582,275 412,316 726,230 116,013 - 1,836,834
Inflow (571,333) (403,282) (606,588) (110,585) - (1,691,788)
10,942 9,034 119,642 5,428 - 145,046
The Group and the Bank
31.12.2015
Foreign exchange derivatives:
Outflow 1,538,530 168,128 408,581 571,651 - 2,686,890
Inflow (1,532,842) (161,202) (377,485) (480,784) - (2,552,313)
5,688 6,926 31,096 90,867 - 134,577
151
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year to 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
D. Liquidity risk (continued)
Liquidity risk for assets and liabilities based on remaining contractual maturities
Up to 1 >1-3 >3-12 >1-5 Over 5 No specific
The Group month months months years years maturity Total
31.12.2016 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Assets
Cash and short-term funds 601,468 - - - - - 601,468
Deposits and placements with banks
and other financial institutions - - - 20,637 - - 20,637
- Financial assets held-for-trading - - 256,016 35,872 10,788 23,626 326,302
- Financial investments available
-for-sale 17,324 37,667 247,767 1,420,882 2,693,074 431,243 4,847,957
- Financial investments held-to
-maturity - - 2,122 22,288 9,153 - 33,563
Loans, advances and financing 244,755 20,169 64,260 520,044 229,902 - 1,079,130
Trade receivables 527,905 - - - - - 527,905
Derivative financial assets 13,595 14,732 85,642 8,119 - - 122,088
Other assets 7,936 2,552 34,922 42,201 3,573 16,375 107,559
Statutory deposits with Bank
Negara Malaysia 177,740 - - - - - 177,740
Other non-financial assets (1) - - - - - 398,180 398,180
Total Assets 1,590,723 75,120 690,729 2,070,043 2,946,490 869,424 8,242,529
Liabilities
Deposits from customers 2,446,711 1,707,983 746,128 101,743 - - 5,002,565
Deposits and placements of banks
and other financial institutions 484,561 - - - - - 484,561
Obligations on securities sold
under repurchase agreements 96,640 49,238 - - - - 145,878
Trade payables 724,497 - - - - - 724,497
Derivative financial liabilities 11,249 9,711 121,387 7,944 - - 150,291
Other liabilities 97,781 17,336 95,372 1,944 - - 212,433
Other non-financial liabilities (2) - - - - - 456 456
Total Liabilities 3,861,439 1,784,268 962,887 111,631 - 456 6,720,681
Net liquidity gap (2,270,716) (1,709,148) (272,158) 1,958,412 2,946,490 868,968 1,521,848
(1)
(2)
Other non-financial assets includes deferred tax assets, tax recoverable, property and equipment and intangible assets.
Other non-financial liabilities includes provision for taxation and amount due to related party.
The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities, commitments and counter-
guarantees 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:
152
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year to 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
D. Liquidity risk (continued)
Liquidity risk for assets and liabilities based on remaining contractual maturities
Up to 1 >1-3 >3-12 >1-5 Over 5 No specific
The Group month months months years years maturity Total
31.12.2015 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Assets
Cash and short-term funds 462,004 - - - - - 462,004
Deposits and placements with banks
and other financial institutions - - - 145,474 - - 145,474
- Financial assets held-for-trading 8,645 5,114 225,979 - - 33,564 273,302
- Financial investments available
-for-sale 79,945 8,113 235,247 1,639,778 1,735,681 309,301 4,008,065
- Financial investments held-to
-maturity - - 22,748 41,855 14,032 16 78,651
Loans, advances and financing 158,314 12,729 105,949 645,489 318,212 - 1,240,693
Trade receivables 544,099 5,994 - - - - 550,093
Derivative financial assets 6,742 9,789 23,173 80,287 - - 119,991
Other assets 7,332 - 13,845 91,264 100 - 112,541
Statutory deposits with Bank
Negara Malaysia 177,850 - - - - - 177,850
Other non-financial assets (1) - - - - - 392,814 392,814
Total Assets 1,444,931 41,739 626,941 2,644,147 2,068,025 735,695 7,561,478
Liabilities
Deposits from customers 1,879,876 778,704 646,326 1,009,134 - - 4,314,040
Deposits and placements of banks
and other financial institutions 749,852 - - - - - 749,852
Trade payables 642,321 - - - - - 642,321
Derivative financial liabilities 5,936 6,786 32,636 96,533 - - 141,891
Other liabilities 91,114 38,428 105,457 766 - - 235,765
Other non-financial liabilities (2) - - 2,436 - - - 2,436
Total Liabilities 3,369,099 823,918 786,855 1,106,433 - - 6,086,305
Net liquidity gap (1,924,168) (782,179) (159,914) 1,537,714 2,068,025 735,695 1,475,173
(1)
(2)
Other non-financial assets includes deferred tax assets, tax recoverable, property and equipment and intangible assets.
Other non-financial liabilities includes amount due to related company and provision for taxation.
The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities, commitments and counter-
guarantees 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)
153
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year to 31 December 2016 (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)
Up to 1 >1-3 >3-12 >1-5 Over 5 No specific
The Bank month months months years years maturity Total
31.12.2016 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Assets
Cash and short-term funds 265,442 - - - - - 265,442
Deposits and placements with banks
and other financial institutions - - - 20,637 - - 20,637
Securities:
- Financial assets held-for-trading - - 256,016 25,204 - 18,762 299,982
- Financial investments available
-for-sale 17,324 37,667 247,767 1,420,882 2,692,084 410,140 4,825,864
- Financial investments held-to
-maturity - - 2,122 22,288 9,153 - 33,563
Loans, advances and financing 244,755 20,169 64,260 520,044 229,902 - 1,079,130
Trade receivables 434,801 - - - - 434,801
Amount due from subsidiaries - - - - - 2,780 2,780
Other assets 7,686 2,552 34,922 41,600 3,461 14,312 104,533
Derivative financial assets 13,595 14,732 85,642 8,119 - - 122,088
Statutory deposits with Bank
Negara Malaysia 177,740 - - - - - 177,740
Other non-financial assets (1) - - - - - 497,149 497,149
Total Assets 1,161,343 75,120 690,729 2,058,774 2,934,600 943,143 7,863,709
Liabilities
Deposits from customers 2,446,711 1,707,983 746,128 101,743 - - 5,002,565
Deposits and placements of banks
and other financial institutions 484,561 - - - - - 484,561
Obligations on securities sold
under repurchase agreements 96,640 49,238 145,878
Trade payables 419,197 - - - - - 419,197
Derivative financial liabilities 11,249 9,711 121,387 7,944 - - 150,291
Other liabilities 75,662 17,336 58,087 1,944 - - 153,029
Total Liabilities 3,534,020 1,784,268 925,602 111,631 - - 6,355,521
Net liquidity gap (2,372,677) (1,709,148) (234,873) 1,947,143 2,934,600 943,143 1,508,188
(1)
The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities, commitments and counter-
guarantees 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)
Other non-financial assets includes deferred tax assets, tax recoverable, property and equipment, intangible assets and investment in
subsidiaries.
154
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year to 31 December 2016 (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)
Up to 1 >1-3 >3-12 >1-5 Over 5 No specific
The Bank month months months years years maturity Total
31.12.2015 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Assets
Cash and short-term funds 244,732 - - - - - 244,732
Deposits and placements with banks
and other financial institutions - - - 145,474 - - 145,474
Securities:
- Financial assets held-for-trading - 5,114 225,979 - - 33,564 264,657
- Financial investments available
-for-sale 30,546 8,113 235,247 1,639,778 1,735,681 309,301 3,958,666
- Financial investments held-to
-maturity - - 22,748 41,855 14,032 16 78,651
Loans, advances and financing 158,314 12,729 105,949 645,489 318,212 - 1,240,693
Trade receivables 481,617 - - - - - 481,617
Amount due from subsidiaries - - - 24,004 - - 24,004
Other assets 6,481 - 12,939 87,537 - - 106,957
Derivative financial assets 6,742 9,789 23,173 80,287 - - 119,991
Statutory deposits with Bank
Negara Malaysia 177,850 - - - - - 177,850
Other non-financial assets (1) - - - - - 497,875 497,875
Total Assets 1,106,282 35,745 626,035 2,664,424 2,067,925 840,756 7,341,167
Liabilities
Deposits from customers 1,879,876 778,704 646,326 1,009,134 - - 4,314,040
Deposits and placements of banks
and other financial institutions 749,852 - - - - - 749,852
Trade payables 470,090 - - - - - 470,090
Derivative financial liabilities 5,936 6,786 32,636 96,533 - - 141,891
Other liabilities 89,599 17,407 77,477 766 - - 185,249
Total Liabilities 3,195,353 802,897 756,439 1,106,433 - - 5,861,122
Net liquidity gap (2,089,071) (767,152) (130,404) 1,557,991 2,067,925 840,756 1,480,045
(1) Other non-financial assets includes deferred tax assets, tax recoverable, property and equipment, intangible assets and investment in
subsidiaries.
The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities, commitments and counter-
guarantees 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)
155
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year to 31 December 2016 (continued)
44 Financial risk management objectives and policies (continued)
E. Operational risk management
F. Compliance and legal risk
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 disasters, 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 they are operating and the regulatory requirements 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 a 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 the Group Operational Risk Management Committee and
the 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.
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 non-compliance
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.
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 and these legal/regulatory requirements include the Financial Services Act, 2013,
Capital Markets & Services Act 2007, Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001, Rules
of Bursa Malaysia Securities Berhad, Rules of Bursa Malaysia Derivatives Berhad, as well as circulars and guidelines issued by the regulators
from time to time.
The Compliance, Legal and Corporate Services ("CLCS") Department reports directly to the Board Risk Management Committee ("BRMC").
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 in the Bank are also submitted to BRMC to assist BRMC in monitoring of the same.
The general scope of work of the CLCS Department is to monitor compliance risks emanating from such statutory requirements, rules, circulars
and guidelines as well as 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 rendering of legal advice to the Bank.
156
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended to 31 December 2016 (continued)
45 Fair value of financial instruments
Level 2:
Level 3:
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.
Quoted prices for identical or similar instruments in markets that are not active; and model-derived
valuations in which inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly.
Valuations derived from valuation techniques in which one or more significant inputs are not based on
observable market 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 (2015: Nil).
157
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended to 31 December 2016 (continued)
45 Fair value of financial instruments (continued)
The Group Level 1 Level 2 Level 3 Total
31.12.2016 RM'000 RM'000 RM'000 RM'000
Assets
Financial assets held-for-trading
- Corporate bonds or sukuk - 46,660 - 46,660
- Other financial assets - 256,015 - 256,015
- Equity securities 23,627 - - 23,627
Financial investments available-for-sale *
- Corporate bonds or sukuk - 3,835,620 - 3,835,620
- Other financial assets - 662,637 - 662,637
- Equity securities 330,172 - 19,528 349,700
Derivative financial assets - 122,088 - 122,088
Total 353,799 4,923,020 19,528 5,296,347
Liabilities
Derivative financial liabilities - 150,291 - 150,291
Total - 150,291 - 150,291
The Bank
31.12.2016
Assets
Financial assets held-for-trading
- Corporate bonds or sukuk - 25,204 - 25,204
- Other financial assets - 256,015 - 256,015
- Equity securities 18,763 - - 18,763
Financial investments available-for-sale *
- Corporate bonds or sukuk - 3,834,634 - 3,834,634
- Other financial assets - 662,637 - 662,637
- Equity securities 309,065 - 19,528 328,593
Derivative financial assets - 122,088 - 122,088
Total 327,828 4,900,578 19,528 5,247,934
Liabilities
Derivative financial liabilities - 150,291 - 150,291
Total - 150,291 - 150,291
* Net of allowance for impairment
The following table presents assets and liabilities measured at fair value and classified by level of the
following fair value measurement hierarchy:
158
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended to 31 December 2016 (continued)
45 Fair value of financial instruments (continued)
The Group Level 1 Level 2 Level 3 Total
31.12.2015 RM'000 RM'000 RM'000 RM'000
Assets
Financial assets held-for-trading
- Other financial assets - 231,093 - 231,093
- Equity securities 42,209 - - 42,209
Financial investments available-for-sale *
- Corporate bonds or sukuk - 2,757,574 - 2,757,574
- Other financial assets - 892,777 - 892,777
- Equity securities 339,583 - 18,131 357,714
Derivative financial assets - 119,991 - 119,991
Total 381,792 4,001,435 18,131 4,401,358
Liabilities
Derivative financial liabilities - 141,891 - 141,891
Total - 141,891 - 141,891
The Bank
31.12.2015
Assets
Financial assets held-for-trading
- Other financial assets - 231,093 - 231,093
- Equity securities 33,564 - - 33,564
Financial investments available-for-sale *
- Corporate bonds or sukuk - 2,756,588 - 2,756,588
- Other financial assets - 892,777 - 892,777
- Equity securities 291,170 - 18,131 309,301
Derivative financial assets - 119,991 - 119,991
Total 324,734 4,000,449 18,131 4,343,314
Liabilities
Derivative financial liabilities - 141,891 - 141,891
Total - 141,891 - 141,891
* Net of allowance for impairment
The following table presents assets and liabilities measured at fair value and classified by level of the
following fair value measurement hierarchy (continued):
159
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended to 31 December 2016 (continued)
45 Fair value of financial instruments (continued)
The Group and the Bank
31.12.2016 31.12.2015
RM'000 RM'000
At beginning of financial year 18,131 16,808
Total gains recognised in other
comprehensive income 1,397 1,323
At end of financial year 19,528 18,131
Effect of changes in significant unobservable assumptions to reasonably possible alternatives
The Group and the Bank
Inter-relationship
between significant
unobservable inputs and
Description fair value measurement
Financial investments
available-for-sale
Higher net tangible assets
Unquoted shares results in higher fair value
The following table presents the changes in Level 3 instruments for the financial year ended:
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):
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.
160
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended to 31 December 2016 (continued)
45 Fair value of financial instruments (continued)
Carrying
The Group and the Bank amount Level 1 Level 2 Level 3 Total
31.12.2016 RM'000 RM'000 RM'000 RM'000 RM'000
Financial Assets
Financial investment held-to-
maturity 33,563 - 32,619 - 32,619
Loans, advances and financing 1,079,130 - 1,080,228 - 1,080,228
Financial Liabilities
Deposits from customers 5,002,565 - 5,005,345 - 5,005,345
The Group and the Bank
31.12.2015
Financial Assets
Financial investment held-to-
maturity 78,651 - 78,651 - 78,651
Loans, advances and financing 1,240,693 - 1,238,068 - 1,238,068
Financial Liabilities
Deposits from customers 4,314,040 - 4,315,364 - 4,315,364
Fair Value
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:
161
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended to 31 December 2016 (continued)
45 Fair value of financial instruments (continued)
Short-term funds and placements with banks and other financial institutions
Financial investments held-to-maturity
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.
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.
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.
162
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended to 31 December 2016 (continued)
45 Fair value of financial instruments (continued)
Loans, advances and financing
Other assets and liabilities
Deposits from customers, deposits and placements of banks and other financial institutions
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.
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.
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.
163
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended to 31 December 2016 (continued)
45 Fair value of financial instruments (continued)
-
-
Derivative financial assets and liabilities
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.
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.
164
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended to 31 December 2016 (continued)
46 Offsetting financial assets and financial liabilities
Gross amounts
of recognised Net amounts
financial of financial
Gross liabilities in the assets
amounts of statement presented Financial
recognised of financial in the Financial collateral Net
financial assets position balance sheet instruments received amount
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
The Group and the Bank
31.12.2016
Financial assets
Trade receivables
- Amount due from Bursa Securities Clearing Sdn Bhd 582,294 (582,294) - - - -
Derivative financial assets 122,088 - 122,088 (73,906) - 48,182
Total 704,382 (582,294) 122,088 (73,906) - 48,182
Financial liabilities
Trade payables
- Amount due to Bursa Securities Clearing Sdn Bhd 611,448 (582,294) 29,154 - - 29,154
Derivative financial liabilities 150,291 - 150,291 (73,906) (76,385) -
Total 761,739 (582,294) 179,445 (73,906) (76,385) 29,154
Related amount not set off
in the balance sheet
165
Company No: 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended to 31 December 2016 (continued)
46 Offsetting financial assets and financial liabilities (continued)
Gross amounts
of recognised Net amounts
financial of financial
Gross liabilities in the assets
amounts of statement presented Financial
recognised of financial in the Financial collateral Net
financial assets position balance sheet instruments received amount
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
The Group and the Bank
31.12.2015
Financial assets
Trade receivables
- Amount due from Bursa Securities Clearing Sdn Bhd 593,363 (542,330) 51,033 - - 51,033
Derivative financial assets 119,991 - 119,991 (80,050) - 39,941
Total 713,354 (542,330) 171,024 (80,050) - 90,974
Financial liabilities
Trade payables
- Amount due to Bursa Securities Clearing Sdn Bhd 542,330 (542,330) - - - -
Derivative financial liabilities 141,891 - 141,891 (80,050) (61,841) -
Total 684,221 (542,330) 141,891 (80,050) (61,841) -
Related amount not set off
in the balance sheet
166
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended to 31 December 2016 (continued)
47 Prior year adjustment
The Group
Income statement for the financial year ended 31 December 2015
As previously Prior year
reported adjustment As restated
RM'000 RM'000 RM'000
Write-back/(allowances) of impairment
losses on securities 1,721 (15,176) (13,455)
Profit before zakat and taxation 84,239 (15,176) 69,063
Profit before taxation 83,165 (15,176) 67,989
Taxation (23,996) 3,642 (20,354)
Net profit after zakat and taxation 59,169 (11,534) 47,635
Profit attributable to:
Equity holder of the Bank 44,585 (11,534) 33,051
Earnings per share (sen):
Basic/fully diluted 5.72 (1.48) 4.24
Statement of comprehensive income for the financial year ended 31 December 2015
As previously Prior year
reported adjustment As restatedRM'000 RM'000 RM'000
Net profit after zakat and taxation 59,169 (11,534) 47,635
Impairment loss transferred to profit or loss
on financial investments available-for-sale - 15,176 15,176
Deferred tax on financial investments
available-for-sale 6,443 (3,642) 2,801
Other comprehensive expense for the
financial year, net of tax (20,396) 11,534 (8,862)
During the financial year, the Group and the Bank have effected a prior year adjustment to the 31 December
2015 financial statements to account for the impairment of available-for-sale ("AFS") financial investments
arising from significant or prolonged decline in the fair value of the equity securities below its cost based on the
technical guidance provided under FRSIC Consensus 14 Impairment of Investment in Equity Instruments
Categorised as Available-for-Sale Financial Asset due to ‘Significant or Prolonged’ Decline in Fair Value. The
adjustment resulted in a debit of RM11,534,000 to retained profits.
The impact of the prior year adjustments on the financial statements of the Group and Bank are as follows:
167
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended to 31 December 2016 (continued)
47 Prior year adjustment (continued)
The Group
Statement of changes in equity for the financial year ended 31 December 2015
As previously Prior year
reported adjustment As restatedRM'000 RM'000 RM'000
Available-for-sale revaluation reserves (14,831) 11,534 (3,297)
Retained profits 233,868 (11,534) 222,334
Statement of cash flows for the financial year ended 31 December 2015
As previously Prior year
reported adjustment As restated
RM'000 RM'000 RM'000
Profit before taxation 83,165 (15,176) 67,989
Adjustments for items not involving the movement of cash and cash equivalents:
Allowance/(Write-back) on allowance for impairment:
- financial investments available-for-sale (167) 15,176 15,009
The Bank
Income statement for the financial year ended 31 December 2015
As previously Prior year
reported adjustment As restated
RM'000 RM'000 RM'000
Write-back/(allowances) of impairment
losses on securities 1,721 (15,176) (13,455)
Profit before zakat and taxation 40,991 (15,176) 25,815
Profit before taxation 40,062 (15,176) 24,886
Taxation (8,374) 3,642 (4,732)
Net profit after zakat and taxation 31,688 (11,534) 20,154
Profit attributable to:
Equity holder of the Bank 31,688 (11,534) 20,154
Earnings per share (sen):
Basic/fully diluted 4.06 (1.48) 2.58
The impact of the prior year adjustments on the financial statements of the Group and Bank are as follows
(continued):
168
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended to 31 December 2016 (continued)
47 Prior year adjustment (continued)
The Bank
Statement of comprehensive income for the financial year ended 31 December 2015
As previously Prior yearreported adjustment As restatedRM'000 RM'000 RM'000
Net profit after zakat and taxation 31,688 (11,534) 20,154
Impairment loss transferred to profit or loss
on financial investments available-for-sale - 15,176 15,176
Deferred tax on financial investments
available-for-sale 6,443 (3,642) 2,801
Other comprehensive expense for the
financial year, net of tax (20,109) 11,534 (8,575)
Statement of changes in equity for the financial year ended 31 December 2015
As previously Prior year
reported adjustment As restatedRM'000 RM'000 RM'000
Available-for-sale revaluation reserves (14,762) 11,534 (3,228)
Retained profits 274,498 (11,534) 262,964
Statement of cash flows for the financial year ended 31 December 2015
As previously Prior year
reported adjustment As restated
RM'000 RM'000 RM'000
Profit before taxation 40,062 (15,176) 24,886
Adjustments for items not involving the movement of cash and cash equivalents:
Allowance/(write-back) on allowance for impairment:
- financial investments available-for-sale (167) 15,176 15,009
The impact of the prior year adjustments on the financial statements of the Group and Bank are as follows
(continued):
169
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended to 31 December 2016 (continued)
48 Critical accounting estimates and judgments
Allowance for impairment losses on loans, advances and financing
Estimated impairment on goodwill
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 perform
regular review of the basis and underlying data and assumptions to best reflect the current economic
circumstances.
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 cash-generating 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 16 to the financial statements.
170
Company No : 14389-U
Affin Hwang Investment Bank Berhad(Incorporated in Malaysia)
Notes to the financial statements
for the financial year ended to 31 December 2016 (continued)
49 Credit exposures arising from transactions with connected parties
31.12.2016 31.12.2015
i)
485,038 697,775
ii)
11.01% 13.67%
iii)
- -
50
51 Approval of financial statements
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
The financial statements have been approved for issue in accordance with a resolution of the Board of
Directors on 8 March 2017.
The aggregate value of outstanding credit exposures with connected
parties (RM'000)
The percentage of outstanding credit exposures to connected parties
as a proportion of credit exposures
The percentage of outstanding credit exposures with connected
which is non-performing or in default.
Client trust accounts
As at 31 December 2016, cash held in trust for the clients by the Group and the Bank amounted to
RM431,445,000 (2015: RM463,616,000). These amounts are not recognised in the financial statements as they
are held by the Group and the Bank in its fiduciary capacity.
171