BIMB Holdings Berhad and its subsidiaries Directors' report for

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BIMB Holdings Berhad
(Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries
Directors’ report for the year ended 30 June 2006

The Directors hereby submit their report and the audited financial statements of the Group
and of the Company for the year ended 30 June 2006.

Principal activities
The Company is principally engaged as an investment holding company with business
transacted in accordance with Islamic principles, whilst the principal activities of the
subsidiaries are as stated in Note 11 to the financial statements. There has been no
significant change in the nature of these activities during the financial year.

Results
                                                 Group              Company
                                                 RM’000             RM’000

Net loss for the year                            1,230,009          148,646
                                                 =======            ======

Reserves and provisions
There were no material movements to or from reserves and provisions during the year under
review other than as disclosed in the financial statements.

Dividends
During the financial year, the Company paid a final dividend of 2.5% less 28% tax, in
respect of the previous financial year totalling RM10,133,370, which has been dealt with in
the Directors’ report for that financial year end and paid on 30 December 2005.

There was no interim dividend payment during the year, and the Directors do not
recommend a final dividend for the financial year.
                                                                                             2
 Company No. 423858-X


Bad and doubtful financing
Before the financial statements of the Group and of the Company were made out, the
Directors took reasonable steps to ascertain that action had been taken in relation to the
writing off of bad financing and the making of provisions for doubtful financing, and have
satisfied themselves that all known bad financing have been written off and adequate
provisions had been made for bad and doubtful financing.

At the date of this report, the Directors are not aware of any circumstances that would render
the amount written off for bad financing, or the amount of the allowance for doubtful
financing, in the Group and in the Company inadequate to any substantial extent.

Current assets
In preparing the financial statements of the Group and of the Company, the Directors have
taken all necessary steps to ascertain that all current assets have been stated at the lower of
cost and net realisable value.

At the date of this report, the Directors are not aware of any circumstances that would render
the value attributed to the current assets in the Group and in the Company financial
statements misleading.

Valuation methods
At the date of this report, the Directors are not aware of any circumstances which have
arisen which render adherence to the existing method of valuation of assets or liabilities of
the Group and of the Company misleading or inappropriate.

Contingent and other liabilities
At the date of this report, there does not exist:

(a)   any charge on the assets of the Group and of the Company which has arisen since the
      end of the financial year and which secures the liabilities of any other person, or

(b)   any contingent liabilities in respect of the Group and of the Company that has arisen
      since the end of the financial year other than those incurred in the ordinary course of
      the business.

No contingent or other liability of the Group and of the Company has become enforceable,
or is likely to become enforceable within the period of twelve months after the end of the
financial year which, in the opinion of the Directors, will or may substantially affect the
ability of the Group and of the Company to meet its obligations as and when they fall due.
                                                                                             3
 Company No. 423858-X



Change of circumstances
At the date of this report, the Directors are not aware of any circumstances, not otherwise
dealt with in this report or the financial statements, which would render any amount stated in
the financial statements of the Group and of the Company misleading.

Items of an unusual nature
In the opinion of the Directors, other than the effect of allowance for financing losses and
impairment losses as recorded in the financial statements, the results of the operations of the
Group and of the Company for the financial year ended 30 June 2006 have not been
substantially affected by any item, transaction or event of a material and unusual nature nor
has any such item, transaction or event occurred in the interval between the end of that
financial year and the date of this report.

Employee Share Option Scheme
The Company’s Employee Share Option Scheme (“ESOS”) is governed by the by-laws
which were approved by the shareholders of the Court-convened Extraordinary General
Meeting held on 31 May 1997 and became effective on 21 August 1997 for a period of five
years. At an Extraordinary General Meeting held on 20 August 2002, the shareholders of the
Company approved the extension of the ESOS for a further period of five years to 21
August 2007.

The main features of the ESOS are:
(a)   Eligible person are employees of the Group who have been confirmed in writing and
      are in the employment of the Group including full-time Executive Directors.

(b)   The total number of shares to be offered shall not exceed 10% of the issued and paid
      up share capital of the Company at any point of time during the tenure of ESOS.

(c)   The option price for each share shall be the average of the mean market quotation of
      the shares of the Company in the daily official list issued by Bursa Malaysia for the
      five trading days preceding the date of the offer, or the par value of the share of the
      Company of RM1, whichever is higher.

(d)   The number of shares under the option, the option price and the method of exercise of
      the options may be adjusted as a result of any alteration of the capital structure of the
      Company by way of capitalisation of profits or reserve, right issues or reduction of
      capital, if any, made by the Company while an option remains unexercised.

(e)   The movement in the options to take up unissued new ordinary shares of RM1 each
      and the option price are as follows:

             Option                At                                         At
              price             1.7.2005     Granted       Exercised       30.6.2006
              RM
              2.13            45,868,500         -              -         45,868,500
              2.43             5,044,000         -              -          5,044,000
                                                                                               4
 Company No. 423858-X


Directors of the Company
Directors who served since the date of the last report are:

  Dato’ Mohd Bakke Salleh
  Dato’ Dr. Abdul Halim Ismail
  Zahari @ Mohd Zin Idris
  Datuk Burhanuddin Ahmad Tajudin
  Salih Amaran Jamiaan
  Dato’ Noorazman A. Aziz
  Zaiton Mohd Hassan (appointed on 2.2.2006)
  Dato’ Hairuddin Mohamed (appointed on 9.10.2006)
  Ismee Ismail (appointed on 9.10.2006)
  Professor Dr. Muhamad Muda (resigned on 30.11.2005)
  Datuk Dr. Elias Md. Kadir Baba (resigned on 30.3.2006)
  Datuk Siti Maslamah Osman (resigned on 30.3.2006)

The holdings and deemed holdings in the ordinary shares of the Company and of its related
corporations (other than wholly-owned subsidiaries) of those who were Directors at year
end as recorded in the Register of Directors’ Shareholdings are as follows:-

                                                         Number of ordinary shares
                                                 At                                  At
                                              1.7.2005        Acquired   Sold     30.6.2006
Company
  Dato’ Dr. Abdul Halim Ismail                   1,400           -        -            1,400

None of the other Directors holding office at 30 June 2006 had any interest in the ordinary
shares of the Company and of its related corporations during the financial year.

Directors’ benefits
During the financial year, none of the Directors of the Company has received nor become
entitled to receive any benefit (other than a benefit included in the aggregate amount of
emoluments received or due and receivable by Directors as shown in the financial
statements or the fixed salary of a full time employee of the Company) by reason of a
contract made by the Company or a related corporation with the Director or with a firm of
which the Director is a member, or with a company in which the Director has a substantial
financial interest except for those transactions arising in the ordinary course of business as
disclosed in the financial statements and the share options mentioned below.

There were no arrangements during and at the end of the financial year which enable the
Directors of the Company and its subsidiaries to acquire benefits by means of the
acquisition of shares in or debentures of the Company or any other body corporate, other
than share options granted pursuant to the ESOS.
                                                                                           5
 Company No. 423858-X


Directors’ benefits (continued)
The following Director holding office at the end of the financial year was offered and had
accepted options to subscribe for the shares of the Company under the ESOS. The
Director’s interests in the options during the financial year were as follows:

                                             Number of options over ordinary shares
                                                        of RM1.00 each
                                    Exercise     At                             At
                                     price    1.7.2005 Granted Exercised 30.6.2006
                                      RM

Dato’ Dr. Abdul Halim Ismail          2.13       250,000    -           -        250,000

Issue of shares
There were no changes in the issued and paid up capital of the Company during the
financial year.

Auditors
The auditors, Messrs. KPMG Desa Megat & Co., have indicated their willingness to accept
re-appointment.


Signed in accordance with a resolution of the Directors:




…………………………………………………………
Dato’ Mohd Bakke Salleh




…………………………………………………………
Dato’ Noorazman A. Aziz




Kuala Lumpur,

Date: 26 October 2006
                                                                                               6

BIMB Holdings Berhad
(Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries
Statement by Directors pursuant to
Section 169(15) of the Companies Act, 1965

In the opinion of the Directors, the financial statements set out on pages 12 to 86 are
drawn up in accordance with the provision of the Companies Act, 1965 with such

modifications and exceptions as have been determined by Bank Negara Malaysia
pursuant to subsection 19 of Section 169 of the said Act and applicable approved
accounting standards in Malaysia, so as to give a true and fair view of the state of affairs

of the Group and of the Company at 30 June 2006 and of the results of their operations
and cash flows for the year ended on that date.




Signed in accordance with a resolution of the Directors:




…………………………………………………………
Dato’ Mohd Bakke Salleh




…………………………………………………………
Dato’ Noorazman A. Aziz



Kuala Lumpur,

Date: 26 October 2006
                                                                                          7


BIMB Holdings Berhad
(Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries
Report of the Shariah Supervisory Council


The Shariah Supervisory Council (“SSC”) was established under the provision of Section
3(5)(b) of the Islamic Banking Act 1983 to advise the Group particularly on the operation of
its banking business in order to ensure that they do not involve any element which is not
approved by Islam.

The SSC takes the views of Shariah Committees of relevant authorities such as Bank Negara
Malaysia and Securities Commission from time to time on issues relating to the industry.

The duties and responsibilities of SSC are to review, appraise and advise the Directors on
the operations of the Group and of the Company’s business in order to ensure that they do
not involve any element which is not approved by Islam.

The roles of SSC in monitoring the Group’s activities are as follows: -

a)   Review the products and services to ensure conformity with the Shariah requirements.

b)   Deliberate on Shariah issues pertaining to the day to day operations of the Group and
     of the Company and provide advice accordingly.

c)   Form opinions on the operations of the Group and of the Company on whether they are
     Shariah compliant.

d)   Educate on muamalat or Islamic transactions based on Shariah principles.

The roles of SSC with respect to zakat are as follows: -

a)   Review and approve the computation of zakat payable for the year.

b)   Advise on the distribution of zakat to the appropriate ‘asnaf’.
                                                                                       8

BIMB Holdings Berhad
(Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries

We, Dr. Yusof Ramli and Mohd Bakir Mansor, being two of the members of the Shariah
Supervisory Council of BIMB Holdings Berhad, do hereby confirm on behalf of the

Council, that in our opinion, the operations of the Group and of the Company for the year
ended 30 June 2006 have been conducted in conformity with Shariah principles.




On behalf of the Council:




…………………………………………………………
Dr. Yusof Ramli




…………………………………………………………
Mohd Bakir Mansor




Kuala Lumpur,

Date: 26 October 2006
                                                                                        9

BIMB Holdings Berhad
(Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries
Statutory declaration pursuant to
Section 169(16) of the Companies Act, 1965

I, Nor Haimee Zakaria, the officer primarily responsible for the financial management of
BIMB Holdings Berhad, do solemnly and sincerely declare that the financial statements set

out on pages 12 to 86 are, to the best of my knowledge and belief, correct and I make this
solemn declaration conscientiously believing the same to be true, and by virtue of the
provisions of the Statutory Declarations Act, 1960.




Subscribed and solemnly declared by the above named in Kuala Lumpur on 26 October
2006.




                                                      ………………………..…………....
                                                         Nor Haimee Zakaria




Before me:
                                                                                          10




Report of the auditors to the members of
BIMB Holdings Berhad
(Company No. 423858-X)
(Incorporated in Malaysia)


We have audited the financial statements set out on pages 12 to 86. The preparation of the
financial statements is the responsibility of the Company’s Directors.

It is our responsibility to form an independent opinion, based on our audit, on the financial
statements and to report our opinion to you, as a body, in accordance with Section 174 of the
Companies Act, 1965 and for no other purpose. We do not assume responsibility to any
other person for the content of this report.

We conducted our audit in accordance with approved Standards on Auditing in Malaysia.
These standards require that we plan and perform the audit to obtain all the information and
explanations which we consider necessary to provide us with evidence to give reasonable
assurance that the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence relevant to the amounts and disclosures in the financial
statements. An audit also includes an assessment of the accounting principles used and
significant estimates made by the Directors as well as evaluating the overall adequacy of the
presentation of information in the financial statements. We believe our audit provides a
reasonable basis for our opinion.

In our opinion:

(a)   the financial statements are properly drawn up in accordance with the provisions of the
      Companies Act, 1965 with such modifications and exceptions as have been determined
      by Bank Negara Malaysia pursuant to subsection 19 of Section 169 of the said Act and
      applicable approved accounting standards in Malaysia so as to give a true and fair view
      of:

       i)   the state of affairs of the Group and of the Company at 30 June 2006 and the
            results of their operations and cash flows for the year ended on that date; and

      ii)   the matters required by Section 169 of the Companies Act, 1965 to be dealt with
            in the financial statements of the Group and of the Company; and

(b)   the accounting and other records and the registers required by the Companies Act,
      1965 to be kept by the Company have been properly kept in accordance with the
      provisions of the said Act.
                                                                                           11




 Company No. 423858-X


Without qualifying our opinion, we draw attention to Note 2(a) of the financial statements.
The Group incurred a net loss of RM1,230.01 million for the year ended 30 June 2006 and
as of that date, the Group has a deficit in shareholders’ funds of RM145.89 million. The
financial statements for the year ended 30 June 2006 have been prepared on a going concern
basis after taking into account the additional capital injection of RM1,014.59 million
received by a subsidiary, Bank Islam Malaysia Berhad, subsequent to the balance sheet date
as described in Note 51 of the financial statements. Accordingly, the financial statements do
not include any adjustments relating to the recoverability and classification of recorded
assets and liabilities that may be necessary had the Group been unable to continue as a
going concern.

The subsidiaries in respect of which we have not acted as auditors are identified in Note 11
to the financial statements and we have considered their financial statements and the
auditors’ reports thereon.

We are satisfied that the financial statements of the subsidiaries that have been consolidated
with the Company’s financial statements are in form and content appropriate and proper for
the purposes of the preparation of the consolidated financial statements and we have
received satisfactory information and explanations required by us for those purposes.




KPMG Desa Megat & Co.                        Mohamed Raslan Abdul Rahman
Firm Number: AF 0759                         Partner
Chartered Accountants                        Approval Number: 1825/05/07(J/PH)




Kuala Lumpur,

Date: 26 October 2006
                                                                                                   12

BIMB Holdings Berhad
(Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries
Balance sheets as at 30 June 2006
                                                    Group                         Company
                                      Note       2006      2005                 2006      2005
                                                RM’000    RM’000               RM’000   RM’000
Assets

Cash and short term funds              3      2,884,387       2,877,390         12,605           4,423
Deposits and placements with
   financial institutions              4         796,548        633,799              -              -
Securities:
   Held-for-trading                    5        303,219       1,149,759         15,527         15,749
   Held-to-maturity                    6      1,534,374       1,343,506            -              -
   Available-for-sale                  7      2,424,115       2,249,648         12,319         25,182
Financing, advances and others         8      8,467,274       9,096,791        100,000        100,000
Deferred tax assets                   21         10,798          19,320            -              -
Trade and other receivables           10        436,382         302,374              37             16
Tax recoverable                                  18,254           6,384            563            -
Investments in subsidiary companies   11          -               -          1,247,233      1,123,260
Investments in associated companies   12            149           4,107            149          5,019
Statutory deposit with Bank Negara
   Malaysia                           13       459,856         428,468            -              -
Statutory deposit with LOFSA                        97             100            -              -
Property, plant and equipment         14       409,323         396,326            666            666
                                             _________       _________       ________       ________
Total assets                                  17,744,776 18,507,972          1,389,099      1,274,315
                                             -------------- --------------   ------------   ------------
Liabilities, shareholders’
  funds and Takaful funds

Liabilities
Deposits from customers               15     14,148,593      13,238,227              -              -
Deposits and placements of banks
   and other financial institutions   16          63,028      1,352,919            -              -
Bills and acceptances payable                    100,919         86,471            -              -
Trade and other payables              17         672,202        389,240         13,528         19,696
Amount due to a corporate
   shareholder                        19         280,000            -          280,000              -
Provision for zakat and taxation      20            3,564         10,251             -              559
Deferred tax liabilities              21            2,778          6,947             -              -
                                              _________ _________            ________       ________
                                              15,271,084 15,084,055            293,528          20,255
                                             -------------- --------------   ------------   ------------
                                                                                                13
Company No. 423858-X



Balance sheets as at 30 June 2006 (continued)
                                                  Group                        Company
                                     Note     2006       2005               2006     2005
                                             RM’000     RM’000             RM’000   RM’000

Shareholders’ funds
  Share capital                      22        562,965  562,965            562,965         562,965
  Reserves                                    (708,856) 523,572            532,606        691,095
                                            _________ _________           ________       ________
(Deficit)/Surplus in shareholders’
  funds                                      (145,891) 1,086,537          1,095,571      1,254,060
                                          -------------- --------------   ------------   ------------
Takaful funds
  Family Takaful Fund                24      2,157,054     1,940,993           -              -
  General Takaful Fund               25        288,497       231,431           -              -
                                            _________     _________       ________       ________
                                            2,445,551      2,172,424             -              -
                                          -------------- --------------   ------------   ------------
Minority interests                            174,032        164,956              -             -
                                          -------------- --------------   ------------   ------------
Total liabilities, shareholders’
  funds, Takaful funds and
  minority interests                        17,744,776    18,507,972 1,389,099           1,274,315
                                            ========      ======== ========              =======
Commitments and contingencies        40      4,026,381     4,594,983       -                   -
                                            ========      ======== ========              =======



The financial statements were approved and authorised for issue by the Board of Directors
on 26 October 2006.


The notes set out on pages 21 to 86 form an integral part of, and should be read in
conjunction with these financial statements.
                                                                                          14
BIMB Holdings Berhad
(Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries
Income statements for the year ended 30 June 2006
                                                    Group         Company
                                      Note     2006       2005  2006   2005
                                              RM’000    RM’000 RM’000 RM’000
Income derived from investment
   of depositors’ funds                26      788,656     764,551         -          -
Income derived from investment
   of shareholders’ funds              27       346,346     322,881      29,126    76,875
Allowance for losses on financing      28    (1,300,478)   (700,850)       -           -
Impairment losses                      29      (183,511)    (11,400)   (160,897)       -
Profit equalisation reserve                      (9,308)     (7,148)       -           -
                                              ________     _______     _______     ______
                                               (358,295)    368,034    (131,771)    76,875
Income attributable to depositors      30      (364,105)   (282,426)       -           -
                                              ________     _______     _______     ______
Total net (loss)/income                        (722,400)     85,608    (131,771)   76,875
Personnel expenses                     31      (233,507)   (203,617)       -           -
Depreciation                                    (37,286)    (29,547)       -           -
Other overhead expenses                32      (178,129)   (253,187)     (2,381)    (1,496)
                                              ________     _______     _______     ______
Operating (loss)/profit                      (1,171,322)   (400,743)   (134,152)   75,379
Finance cost                            33       (6,000)       -         (6,000)       -
Share of (losses)/profits in associated
   companies                                       (618)        254        -           -
                                              ________     _______     _______     ______
(Loss)/Profit before zakat and taxation      (1,177,940)   (400,489)   (140,152)    75,379
Zakat                                            (7,065)     (7,295)         398      (574)
Tax expense                           34        (30,454)    (36,795)     (8,892)   (17,412)
                                              ________     _______     _______     ______
(Loss)/Profit after zakat and taxation       (1,215,459)   (444,579)   (148,646)    57,393
Minority interests                              (14,550)    (12,272)       -           -
                                              ________     _______     _______     ______
Net (loss)/profit for the year             (1,230,009) (456,851) (148,646) 57,393
                                            =======      ====== ======      =====
Loss per share (sen)                    35     (218.49)    (81.15)
                                            =======      ======
Dividend per ordinary share - net (sen) 36        1.8        6.1
                                            =======      ======
No separate disclosure of fully diluted earnings per share has been made for reasons
described in Note 35.

The notes set out on pages 21 to 86 form an integral part of, and should be read in
conjunction with these financial statements.
                                                                                                                                15
BIMB Holdings Berhad
(Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries
Statements of changes in equity for the year ended 30 June 2006
                                                  ____________ Non-distributable ______________
                                                                                                      Retained
                                                                                                       profits/
                                        Share     Share       Reserve    Translation    Capital     (Accumulated
                                       capital   premium       fund        reserve      reserve        losses)      Total
Group                         Note     RM’000    RM’000       RM’000      RM’000        RM’000        RM’000       RM’000

At 1 July 2004                         562,965   595,505      200,533        2,943        9,712       210,264      1,581,922
Currency translation differences*          -         -            -         (1,232)         -             -           (1,232)
Net (loss) for the year                    -         -            -            -            -        (456,851)      (456,851)
Dividend – 2004 final             36       -         -            -            -            -         (34,453)       (34,453)
Dilution arising from issuance
 of shares by a subsidiary                 -          -           -            -          (2,849)          -          (2,849)
                                       _______   _______     _______      _______        ______       _______      ________
At 30 June 2005                        562,965    595,505     200,533        1,711         6,863      (281,040)    1,086,537
                                       ======    ======      ======       ======        ======       =======       =======
                                                                                                                                                16
Company No. 423858-X



Statements of changes in equity for the year ended 30 June 2006 (continued)
                                                          ________________ Non-distributable _________________

                                            Share       Share        Reserve     Translation    Fair value     Capital          Accumulated
                                           capital     premium        fund         reserve       reserve       reserve             losses    Total
Group                             Note     RM’000      RM’000        RM’000       RM’000        RM ‘000        RM’000             RM’000    RM’000

At 1 July 2005                             562,965      595,505        200,533         1,711          -          6,863           (281,040)    1,086,537
Effect of adopting BNM GP8-i                   -            -              -             -         59,062          -                  -          59,062
                                          _______      _______        _______       _______      _______      _______            _______      ________
                                           562,965      595,505        200,533         1,711       59,062        6,863           (281,040)    1,145,599
Currency translation differences*              -            -              -         13,824           -            -                  -          13,824
Fair value (losses) on
 available-for-sale investment*                -            -              -             -        (65,172)         -                   -         (65,172)
Net (loss) for the year                        -            -              -             -            -            -            (1,230,009)   (1,230,009)
Dividend – 2005 final             36           -            -              -             -            -            -               (10,133)      (10,133)
                                          _______      _______        _______       _______       ______      _______            ________      ________
At 30 June 2006                            562,965      595,505        200,533        15,535       (6,110)       6,863          (1,521,182)     (145,891)
                                          ======       ======         ======        ======       ======       ======             =======       =======


* Net gains/(losses) not recognised in the income statements.
The Reserve Fund is maintained in compliance with the provisions of the Islamic Banking Act, 1983 and is not distributable as cash dividends.
The Capital Reserve Fund arose out of the issuance of bonus issue in a subsidiary and is not distributable as cash dividends.
The notes set out on pages 21 to 86 form an integral part of, and should be read in conjunction with these financial statements.
                                                                                                                                   17
BIMB Holdings Berhad
(Company No. 423858-X)
(Incorporated in Malaysia)
Statement of changes in equity for the year ended 30 June 2006 (continued)
                                                       ___ Non-distributable ___
                                                                                          Retained
                                                                                           profits/
                                          Share         Share           Fair value      (Accumulated
                                          capital      premium           reserve            losses)    Total
Company                          Note    RM’000        RM’000            RM’000           RM’000      RM’000
At 1 July 2004                           562,965       596,157                -            71,998    1,231,120

Net profit for the year                      -              -                 -            57,393          57,393

Dividend - 2004 final            36         -               -               -             (34,453)        (34,453)
                                        _______        _______          _______          _______       _________
At 30 June 2005                         562,965         596,157             -              94,938       1,254,060

Effect of adopting BNM GP8-i                -              -                (83)              -               (83)
                                        _______        _______          _______          _______       _________
                                        562,965        596,157              (83)           94,938       1,253,977
Fair value gains on available-
  for-sale investment*                       -              -                373               -               373

Net loss for the year                        -              -                 -          (148,646)       (148,646)

Dividend - 2005 final            36         -               -               -             (10,133)        (10,133)
                                        _______        _______          _______          _______       _________
At 30 June 2006                         562,965         596,157             290           (63,841)      1,095,571
                                        ======         ======           ======           ======        ========

The notes set out on pages 21 to 86 form an integral part of, and should be read in conjunction with these financial statements.
                                                                                    18

BIMB Holdings Berhad
(Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries
Cash flow statements for the year ended 30 June 2006
                                                  Group                 Company
                                              2006      2005          2006    2005
                                             RM’000    RM’000        RM’000 RM’000
Cash flows from operating activities
  (Loss)/Profit before zakat and taxation   (1,177,940) (400,489) (140,152)     75,379
  Adjustments for:
    Depreciation                                  37,286   29,547        -          -
    Impairment losses of property, plant
       and equipment                                  -       918        -          -
    Impairment loss on securities
       available-for-sale                        117,912   11,400        -          -
    Impairment loss on securities
       held-to-maturity                           61,279      -          -          -
    Impairment loss on investment
       in a subsidiary                                 -      -      156,027        -
    Impairment loss on investment
       in associates                               3,340      -        4,870        -
    Allowance for doubtful debts                   7,313   84,500        -          -
    Allowance for losses on financing          1,300,478  700,850        -          -
    Dividend income                               (5,333)  (5,489)   (20,126)   (57,663)
    Net (gain)/loss on disposal of investments        -   (80,665)     1,344    (12,117)
    Net (gain) on sale of securities
       held-for-trading                           (7,709)     -          -          -
    Net (gain) on sale of securities
       available-for-sale                         (4,183)     -          -          -
    Fair value (gain) on securities held-
        for-trading                                 (334)     -          -          -
    Accretion of discount less amortisation
        of premium                                    -   (26,974)       -          -
    Dividend received from securities
        available-for-sale                      (101,518)     -          -          -
    Dividend received from securities held-
        for-trading                              (22,703)     -          -          -
    Property, plant and equipment
       written off                                    -       844        -          -
    Share of losses/(profits) in
       associated companies                          618     (254)       -       -
    Reversal of impairment losses                     -      (746)       -      (746)
                                                _______ ________      ______ _______
  Operating profit before working capital
      changes                                    208,506  313,442      1,963     4,853
                                                                                            19
 Company No. 423858-X



Cash flow statements for the year ended 30 June 2006
(continued)
                                                      Group           Company
                                               2006          2005   2006    2005
                                              RM’000        RM’000 RM’000 RM’000
  Operating profit before working capital
      changes                                  208,506     313,442           1,963       4,853
  Changes in working capital:
    Deposits and placements of banks
      and other financial institutions      (1,452,640) 557,727                 -           -
    Financing of customers                    (670,961) (1,135,572)             -           -
    Statutory deposits with Bank
      Negara Malaysia                          (31,388) (55,789)                -          -
    Statutory deposit with LOFSA                     3        (100)             -          -
    Bills receivable                            (3,532)      2,995              -          -
    Other receivables                         (137,789)      3,352             (21)    (97,961)
    Deposits from customers                    910,366 1,428,385                -           -
    Other payables (excluding tax and zakat) 282,962        32,302          (6,168)     19,606
    Obligations on securities sold under
      repurchase agreement                         -      (191,900)            -      -
    Bills payable                               14,448       6,949             -      -
    Family Takaful Fund                        216,061     193,115             -      -
    General Takaful Fund                        57,066      37,745             -      -
                                             ________ ________            _______ _______
  Cash (used in)/generated from operations     (606,898) 1,192,651          (4,226) (73,502)
  Zakat paid                                    (11,228)    (2,258)             -      (574)
  Income taxes paid                             (40,495) (37,183)           (9,616) (16,840)
                                              ________ ________           _______ _______
  Net cash (used in)/generated from
    operating activities                       (658,621) 1,153,210         (13,842) (90,916)
                                              ------------ ------------   ---------- ----------
Cash flows from investing activities
  Acquisition of shares in a subsidiary
    company                                          -         -   (280,000) (100,000)
  Purchase of property, plant and equipment     (50,964) (183,970)      -         -
  Proceeds from disposal of property, plant
    and equipment                                   878         8,642          -           -
  Dividend received                               5,333         3,952       20,126      57,663
  Dividend received from securities
    available-for-sale                          101,518            -            -           -
  Dividend received from securities held-
    for-trading                                 22,703           -            -            -
  Proceeds from sale of investment (net)       470,153       244,710       12,031      157,928
                                               _______       _______      _______       ______
  Net cash generated from/(used in)
    investing activities                       549,621         73,334     (247,843) 115,591
                                              -----------   -----------    ---------- ----------
                                                                                         20
 Company No. 423858-X



Cash flow statements for the year ended 30 June 2006
(continued)
                                                  Group                  Company
                                              2006      2005            2006   2005
                                             RM’000 RM’000             RM’000 RM’000
Cash flows from financing activities
  Dividend paid                              (10,133)     (34,453)     (10,133)     (34,453)
  Issuance of shares of a subsidiary to
      minority shareholders                   9,076   10,918               -        -
  Advance from a corporate shareholder      280,000      -             280,000      -
                                           ________ ________           _______ _______
  Net cash generated from/(used in)
    financing activities                     278,943       (23,535)    269,867       (34,453)
                                           ------------ ------------   ----------   ----------
Net increase/(decrease) in cash and
  cash equivalents                           169,943 1,203,009            8,182       (9,778)

Cash and cash equivalents at the
  beginning of year                        3,511,189 2,309,184            4,423      14,201

Foreign exchange differences                   (197)   (1,004)             -        -
                                           ________ ________           _______ _______
Cash and cash equivalents at the end
  of year                                  3,680,935 3,511,189          12,605        4,423
                                           ======= =======             ======       ======

Cash and cash equivalents comprise:

  Cash and short term funds                2,884,387 2,877,390          12,605        4,423
  Deposits and placements with financial
    institutions                            796,548  633,799               -        -
                                           ________ ________           _______ _______
                                           3,680,935 3,511,189          12,605        4,423
                                           ======= =======             ======       ======




The notes set out on pages 21 to 86 form an integral part of, and should be read in
conjunction with these financial statements.
                                                                                           21

BIMB Holdings Berhad
(Company No. 423858-X)
(Incorporated in Malaysia)
and its subsidiaries
Notes to the financial statements

1. Basis of preparation of the financial statements
     The accounting policies adopted by the Group and the Company are consistent with
     those adopted in the previous years except for:

     (a)   the adoption of the revised guidelines on Financial Reporting for Licensed
           Islamic Banks (BNM/GP8-i) issued by Bank Negara Malaysia in June 2005,
           which became effective for the current financial year. The adoption of the
           revised GP8-i has resulted in the adoption of the following accounting policies:

           i)    the recognition and measurement of the holdings of the investment and
                 dealing securities portfolio of the Group as securities held-for-trading,
                 securities held-to-maturity and securities available-for-sale, which has been
                 adopted prospectively as it is impracticable to apply retrospectively due to
                 factors explained in Note 49;

           ii)   where a financing account becomes non-performing, profit accrued and
                 recognised as income prior to the date the account is classified as non-
                 performing is not reversed out of income but an allowance is made against
                 that income in conformity with Bank Negara Malaysia guidelines.
                 Thereafter, profit on the non-performing financing shall only be recognised
                 as income on a cash basis. The policy has been adopted retrospectively.

     (b)   the adoption of Guidelines on Financial Statements for Takaful Operators
           (JPIT/GPT6) issued by Bank Negara Malaysia. Prior to 2 February 2006, the
           Group recognised revenue from Takaful operations on cash basis. Effective from
           2 February 2006, the Group started to recognise revenue on accrual basis. The
           adoption of accrual basis has been applied prospectively as it is impracticable to
           apply retrospectively due to factors explained in Note 49.

2. Summary of significant accounting policies
     The following accounting policies are adopted by the Group and the Company and are
     consistent with those adopted in previous years.

     (a) Basis of accounting
           The financial statements of the Group and of the Company are prepared on the
           historical cost basis except as disclosed in the notes to the financial statements
           and in compliance with the provisions of the Companies Act, 1965, Bank Negara
           Malaysia Guidelines, applicable approved accounting standards in Malaysia and
           Shariah requirements.
                                                                                           22
Company No. 423858-X


2. Summary of significant accounting policies (continued)
   (a) Basis of accounting (continued)
        The Group incurred a net loss of RM1,230.01 million for the year ended 30 June
        2006 and as of that date, the Group has a deficit in shareholders’ funds of
        RM145.89 million.

        A subsidiary of the Group, Bank Islam Malaysia Berhad (“BIMB”) had received
        capital injection amounting to RM1,014.59 million from Dubai Financial LLC
        and Lembaga Tabung Haji subsequent to balance sheet date on 16 October 2006
        pursuant to its restricted issue, as detailed in Note 51.

        With this capital injection, the subsidiary has improved its financial position to a
        positive shareholders’ funds. The gain for the Group arising from the Company’s
        dilution of interest in BIMB has improved the Group’s shareholders’ fund to a
        positive balance after the balance sheet date.

        The financial statements for the year ended 30 June 2006, has been prepared on a
        going concern basis after taking into account the said capital injection.

        Accordingly, the financial statements of the Group do not include any
        adjustments relating to the recoverability and classification of recorded assets and
        liabilities that might be necessary had the Group been unable to continue as a
        going concern.

   (b) Basis of consolidation
        Subsidiaries are those enterprises controlled by the Company. Control exists
        when the Company has the power, directly or indirectly, to govern the financial
        and operating policies of an enterprise so as to obtain benefits from its activities.
        The financial statements of subsidiaries are included in the consolidated financial
        statements from the date that control effectively commences until the date that
        control effectively ceases. Subsidiaries are consolidated using the acquisition
        method of accounting.

        A subsidiary is excluded from consolidation when either control is intended to be
        temporary if the subsidiary is acquired and held exclusively with a view of its
        subsequent disposal in the near future and it has not previously been consolidated
        or it operates under severe long term restrictions which significantly impair its
        ability to transfer funds to the Company. Subsidiaries excluded on these grounds
        are accounted for as investments.

        Under the acquisition method of accounting, the results of subsidiaries acquired
        or disposed during the year are included from the date of acquisition or up to the
        date of disposal. At the date of acquisition, the fair values of the subsidiaries’ net
        assets are determined and these values are reflected in the Group financial
        statements. The difference between the acquisition cost and the fair values of the
        subsidiaries’ net assets is reflected as goodwill or negative goodwill as
        appropriate.
                                                                                        23
Company No. 423858-X


2. Summary of significant accounting policies (continued)
   (b) Basis of consolidation (continued)
        Intragroup transactions and balances and the resulting unrealised profits are
        eliminated on consolidation. Unrealised losses resulting from intragroup
        transactions are also eliminated unless cost cannot be recovered.

        Minority interest is measured at the minority shareholders’ share of the post-
        acquisition fair values of the identifiable assets and liabilities of the acquiree.

   (c) Associates
        Associates are those enterprises in which the Group has significant influence, but
        not control, over the financial and operating policies.

        The consolidated financial statements include the total recognised gains and
        losses of associates on an equity accounted basis from the date that significant
        influence effectively commences until the date that significant influence
        effectively ceases.

        Unrealised profits arising on transactions between the Group and its associates
        which are included in the carrying amount of the related assets and liabilities are
        eliminated partially to the extent of the Group’s interests in the associates.
        Unrealised losses on such transactions are also eliminated partially unless cost
        cannot be recovered.

        Goodwill on acquisition is calculated based on the fair value of net assets
        acquired. Negative goodwill is not amortised.

   (d) Financing, advances and others

        Financing

        Financing is stated after deducting the allowance for possible losses.

        Allowance for bad and doubtful financing

        Specific allowances are made for doubtful financing, which have been
        individually reviewed and specifically identified as bad and doubtful.

        A general allowance based on a percentage of the financing portfolio is also
        made. These percentages are reviewed annually in the light of past experiences
        and prevailing circumstances and an adjustment is made to the overall general
        allowance, if necessary.
                                                                                         24
Company No. 423858-X


2. Summary of significant accounting policies (continued)
   (d) Financing, advances and others (continued)
        Allowance for bad and doubtful financing (continued)

        An uncollectible financing or portion of a financing classified as bad is written
        off after taking into consideration the realisable value of collateral, if any, when
        in the judgement of the management, there is no prospect of recovery.

        Specific allowance for bad and doubtful financing has been made in full
        compliance with the revised BNM GP3 (September 1998). Any allowance
        during the year is charged to the income statement.

        During the financial year, the provisioning policy has been made more stringent:

        (a)   Full allowance for doubtful financing is provided on the shortfall of
              carrying value against the collateral value where repayment is in arrears for
              more than three months from the first date of default. In prior years,
              allowances of 20% on such shortfall was provided where repayment was in
              arrears for six to nine months from the first date of default; allowances of
              50% for repayment in arrears for nine to twelve months; whilst full
              allowance was provided for arrears exceeding twelve months.

        (b)   Where values assigned to collateral held for non-performing financing
              secured by properties (determined based on the net realisable values of the
              properties, being the forced sale value provided by independent
              party/valuers), the following basis have been adopted:

              (i)    assigning only fifty percent (50%) of the net realisable value of the
                     properties held as collateral for non-performing financing which are
                     in arrears for more than five (5) years but less than seven (7) years;
                     and

              (ii)   for non-performing financing which are in arrears for more than
                     seven (7) years, no value will be assigned to the realisable value of
                     the properties held as collateral.

                     In prior years, no discounting of collateral value was assigned on
                     those financing that are in arrears exceeding five (5) years.

        (c)   In addition, for non-performing vehicle financing, collateral value is not
              assigned until the vehicles are repossessed. In prior years, collateral values
              were assigned on non-performing vehicle financing though the vehicles
              were not yet repossessed by the Bank.
                                                                                           25
Company No. 423858-X

2. Summary of significant accounting policies (continued)
   (e) Securities
        The holdings of the securities portfolio of the Group are recognised based on the
        following categories and consequently their valuation methods:

        (a)   Held-for-trading

              Securities are 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 it
              is part of a portfolio of identified securities that are managed together and
              for which there is evidence of a recent actual pattern of short-term profit-
              taking. Securities classified as held-for-trading will be stated at fair value
              and any gain or loss arising from a change in the fair value will be
              recognised in the income statement.

        (b)   Held-to-maturity investments

              Held-to-maturity investments are securities with fixed or determinable
              payments and fixed maturity that the Group has the positive intention and
              ability to hold to maturity. These investments are measured at amortised
              cost using the effective profit method. A gain or loss is recognised in the
              income statement when the securities is derecognised or impaired, as well
              as amortisation of premium and accretion of discounts.

        (c)   Available-for-sale securities

              Available-for-sale securities are securities that are not classified as held-
              for-trading or held-to-maturity investments and are measured at fair value.
              Investments in equity instruments that do not have a quoted market price in
              an active market and whose fair value cannot be reliably measured are
              stated at cost. Any gain or loss arising from a change in the fair value is
              recognised directly in equity through the statement of changes in equity
              until the securities are sold, disposed of or impaired, at which time the
              cumulative gains or losses previously recognised in equity will be
              transferred to the income statement. Profit from the available-for-sale
              securities is recognised in the income statement.

    (f) Other investments
        Long term investments in subsidiaries and associates are stated at cost in the
        Company, less impairment loss where applicable.

        For a subsidiary, Syarikat Takaful Malaysia Berhad (“STMB”), allowance for
        diminution value of investments is charged directly to the revenue account of the
        Takaful funds, in accordance with the Bank Negara Malaysia (“BNM”)
        Guidelines. A charge, based on 8% of the Takaful Funds’ surplus attributable to
        the participants and STMB, after allocating management expenses, is made
        directly to the respective Takaful Funds revenue accounts, in accordance with
        BNM Guidelines.
                                                                                         26
Company No. 423858-X


2. Summary of significant accounting policies (continued)
    (f) Other investments (continued)
        Allowance for diminution value of investments arising from the Shareholders’
        Funds is charged to the income statement immediately.

   (g) Property, plant and equipment
        Building in progress, renovation work-in-progress and management information
        system development costs are stated at cost.

        All other property, plant and equipment are stated at cost less accumulated
        depreciation and impairment losses, if any.

        Property, plant and equipment retired from active use and held for disposal are
        stated at the carrying amount at the date when the asset is retired from active use,
        less impairment losses, if any.

        Depreciation

        Leasehold land is amortised in equal instalments over the period of the
        respective leases. Management Information System costs under development and
        all work-in-progress are not depreciated. The straight line method is used to
        write off the cost of the other assets over the term of their estimated useful lives
        at the following principal annual rates:

           Building improvements and renovations          16.7%
           Furniture, fixtures, fittings and equipment    16.7% - 50%
           Motor vehicles                                 25%

   (h) Impairment
        The carrying amount of the Group’s assets, excluding deferred tax assets and
        financial assets (other than investments in subsidiaries and associates), are
        reviewed at each balance sheet date to determine whether there is any indication
        of impairment. If any such indication exists, the asset’s recoverable amount is
        estimated. An impairment loss is recognised whenever the carrying amount of an
        asset or the cash-generating unit to which it belongs exceeds its recoverable
        amount. Impairment losses are recognised in the income statement.

        The recoverable amount is the greater of the asset’s net selling price and its value
        in use. In assessing value in use, estimated future cash flows are discounted to
        their present value using a pre-tax discount rate that reflects current market
        assessments of the time value of money and the risks specific to the asset. For an
        asset that does not generate largely independent cash inflows, the recoverable
        amount is determined for the cash-generating unit to which the asset belongs.
                                                                                            27
Company No. 423858-X


2. Summary of significant accounting policies (continued)
   (h) Impairment (continued)
        An impairment loss is reversed only to the extent that the asset’s carrying
        amount does not exceed the carrying amount that would have been determined,
        net of depreciation or amortisation, if no impairment loss had been recognised.
        The reversal is recognised in the income statement.

   (i) Bills and other receivables
        Bills and other receivables are stated at cost less allowance for doubtful debts.

   (j) Cash and cash equivalents
        Cash and cash equivalents consist of cash on hand, demand deposits and short-
        term highly liquid investments that are readily convertible to known amounts of
        cash and which have an insignificant risk of changes in value.

   (k) Bills and acceptances payable
        Bills and acceptances payable represent the Group’s own bills and acceptances
        rediscounted and outstanding in the market.

   (l) Liabilities
        Deposits from customers and deposits and placements of banks and financial
        institutions are stated at placement values.

   (m) Leases
        The Group accounts for its Ijarah leasing contracts as operating leases and Ijarah
        Muntahia Bittamlik as finance leases.

   (n) Family Takaful Fund
        Included in Family Takaful Fund is fund arising from:-

        i) Family Takaful;
        ii) Group Family Takaful; and
        iii) Family Retakaful Funds.

        The profit attributable to cedants represents the cedants’ share in the family
        retakaful surpluses and is distributable in accordance with the terms and
        conditions prescribed by the Group.
                                                                                        28
Company No. 423858-X


2. Summary of significant accounting policies (continued)
   (n) Family Takaful Fund (continued)
        The Family Takaful Fund is maintained in accordance with the requirements of
        the Takaful Act, 1984 and includes the amounts attributable to participants
        which represents the participants’ share of the return on the investments that are
        distributable in accordance with the terms and conditions prescribed by the
        Group.

        The surplus transferable from the Family Takaful Fund to the income statement
        is based on the surplus determined by an annual actuarial valuation of the long
        term liabilities to the participants.

        Contributions income

        Contributions from participants are recognised as soon as the amount can be
        reliably measured. Initial contribution is recognised from inception date and
        subsequent contribution is recognised when it is due.

        At the end of the financial period, all due contributions are accounted for to the
        extent that they can be reliably measured.

        Investment-linked business

        Investments of investment-linked business are stated at closing market prices.
        Any increase or decrease in value of these investments is taken into the
        investment-linked business revenue account.

        Unearned contribution reserve (“UCR”)

        The UCR of Group Family Fund and Family Retakaful Fund represents the
        portion of the net contributions of Takaful certificates written that relate to the
        unexpired periods of the certificates at the end of the financial period.

        In determining the UCR at balance sheet date, the method that most accurately
        reflects the actual unearned contributions is used, as follows:

           (i) 1/365th method for all group family business within Malaysia; and

           (ii) a pro-rata basis based on a time apportionment method for family
                retakaful business.
                                                                                       29
Company No. 423858-X


2. Summary of significant accounting policies (continued)
   (n) Family Takaful Fund (continued)
        Provision for outstanding claims

        Claims and settlement costs that are incurred during the financial period are
        recognised when a claimable event occurs and/or the Takaful operator is
        notified.

        Claims and provisions for claims arising on family and group family Takaful
        certificates, including settlement costs, are accounted for using the case basis
        method and for this purpose; the benefits payable under a family Takaful
        certificates are recognised as follows:

           (i) maturity or other policy benefit payments due on specified dates are
               treated as claims payable on the due dates; and

           (ii) death, surrender and other benefits without due dates are treated as
                claims payable, on the date of receipt of intimation of death of the
                participant or occurrence of contingency covered.

   (o) General Takaful Fund
        Included in General Takaful fund is fund arising from:

        i) General Takaful;
        ii) Asean Takaful Group (“ATG”) retakaful pool; and
        iii) General retakaful funds.

        The general Takaful underwriting results are determined for each class of
        Takaful business after taking into account retakaful, commissions, unearned
        contributions, claims incurred and management expenses.

        The net surplus for general retakaful is determined after deducting retakaful,
        reserve for unearned retakaful contributions, net claims incurred and acquisition
        costs.

        The profit attributable to cedants represents the cedants’ share in the general
        retakaful surpluses and is distributable in accordance with the terms and
        conditions prescribed by the Group.

        Contributions income

        Contributions from participants are recognised in a financial period in respect of
        risk assumed during that particular financial period. Inward treaty retakaful
        contributions are recognised on the basis of periodic advices received from
        ceding takaful operators.
                                                                                        30
Company No. 423858-X


2. Summary of significant accounting policies (continued)
   (o) General Takaful Fund (continued)
        Unearned contributions reserve (“UCR”)

        The UCR represents the portion of the net contributions of Takaful certificates
        written that relate to the unexpired periods of the certificates at the end of the
        financial period.

        In determining the UCR at balance sheet date, the method that most accurately
        reflects the actual unearned contributions is used, as follows:

        (i)    1/365th method for all general Takaful business within Malaysia.

        (ii)   1/8th method for all classes of General Inward Takaful business.

        (iii) a pro-rata basis based on a time apportionment method for General
              Retakaful business.

        Provision for outstanding claims

        A liability for outstanding claims is recognised by the Group in respect of both
        direct Takaful and inward retakaful business. The amount of outstanding claims
        is the best estimate of the expenditure required together with related expenses
        less recoveries to settle the present obligation at the balance sheet date.

        Any difference between the current estimated cost and subsequent settlement is
        dealt with in the Takaful revenue account for the Group in the year in which the
        settlement takes place. A provision is also made by the Group for the cost of
        claims, together with related expenses incurred but not reported at balance sheet
        date, using a mathematical method of estimation.

   (p) Foreign currency
        (i)    Foreign currency transactions

        Transactions in foreign currencies are translated to Ringgit Malaysia at rates of
        exchange ruling at the date of the transactions. Monetary assets and liabilities
        denominated in foreign currencies at the balance sheet date are translated to
        Ringgit Malaysia at the foreign exchange rates ruling at that date. Foreign
        exchange differences arising on translation are recognised in the income
        statement.     Non-monetary assets and liabilities denominated in foreign
        currencies, which are stated at historical cost, are translated to Ringgit Malaysia
        at the foreign exchange rates ruling at the date of the transactions.
                                                                                         31
Company No. 423858-X


2. Summary of significant accounting policies (continued)
   (p) Foreign currency (continued)
        (ii)   Financial statements of foreign operations

               The Group’s foreign operations are not considered an integral part of the
               Company’s operations. Accordingly, the assets and liabilities of foreign
               operations are translated to Ringgit Malaysia at exchange rates ruling at the
               balance sheet date. The revenues and expenses of foreign operations are
               translated to Ringgit Malaysia at average exchange rates applicable
               throughout the year. Foreign exchange differences arising on translation
               are recognised directly in equity.

               The closing rates used in the translation of foreign currency monetary
               assets and liabilities and the financial statements of foreign operations are
               as follows:

               1USD             RM3.7070       (2005:   1USD        RM3.8000)
               1Rupiah          RM0.0004       (2005:   1Rupiah     RM0.0004)
               1JPY             RM0.0322       (2005:   1JPY        RM0.0345)
               1SGD             RM2.3315       (2005:   1SGD        RM2.2570)
               1GBP             RM6.7840       (2005:   1GBP        RM6.8725)
               1AUD             RM2.7540       (2005:   1AUD        RM2.9050)
               1EURO            RM4.7010       (2005:   1EURO       RM4.5975)
               1SAR             RM0.9993       (2005:   1SAR        RM1.0133)

   (q) Income recognition
        Income is recognised on an accrual basis in accordance with the principles of
        Shariah as advised by the Group’s Shariah Supervisory Council and as permitted
        by Bank Negara Malaysia. Unrealised profit and receipts in advance relating to
        Takaful business are respectively deferred and treated as liabilities in the balance
        sheet.

        Income from financing is recognised on an accrual basis. Income on cash line,
        house and term financing is accounted for on an accrual basis by reference to the
        rest periods as stipulated in the financing agreement.

        Where a financing account becomes non-performing, profit accrued and
        recognised as income prior to the date the account is classified as non-
        performing is not reversed out of income but an allowance is made against that
        income in conformity with Bank Negara Malaysia guidelines. Thereafter, profit
        on the non-performing financing shall only be recognised as income on a cash
        basis. Income is not recognised on customers' accounts where repayments are in
        arrears for more than six months from the first day of default for financing, cash
        line and advances; and three months from the first day of default for trade bills,
        credit cards, bankers acceptances, trust receipts and other instruments of similar
        nature.
                                                                                          32
Company No. 423858-X


2. Summary of significant accounting policies (continued)
   (q) Income recognition (continued)
        Fee and other income recognition

        Financing arrangement, management and participation fees, underwriting
        commissions and brokerage fees are recognised as income based on contractual
        arrangements. Guarantee fee is recognised as income upon issuance of the
        guarantee. Fees from advisory and corporate finance activities are recognised net
        of service taxes and discounts on completion of each stage of the assignment.

        Dividend income from subsidiary and associated companies and other
        investments are recognised when the rights to receive payment is established.

   (r) Income tax
        Tax on the profit or loss for the year comprises current and deferred tax. Income
        tax is recognised in the income statement except to the extent that it relates to
        items recognised directly in equity, in which case it is recognised in equity.

        Current tax expense is the expected tax payable on the taxable income for the
        year, using tax rates enacted or substantially enacted at the balance sheet date,
        and any adjustment to tax payable in respect of previous years.

        Deferred tax is provided, using the liability method, on temporary differences
        arising between the tax bases of assets and liabilities and their carrying amounts
        in the financial statements. Temporary differences are not recognised for
        goodwill and the initial recognition of assets or liabilities that at the time of the
        transaction affects neither accounting nor taxable profit.

        The amount of deferred tax provided is based on the expected manner of
        realisation or settlement of the carrying amount of assets and liabilities, using tax
        rates enacted or substantially enacted at the balance sheet date.

        A deferred tax asset is recognised only to the extent that it is probable that future
        taxable profits will be available against which the asset can be utilised.

   (s) Zakat
        This represents business zakat. It is an obligatory amount payable by the Group
        to comply with the principles of Shariah.
                                                                                       33
Company No. 423858-X

2. Summary of significant accounting policies (continued)
    (t) Profit Equalisation Reserve (“PER”)
        PER is a mechanism to reduce the fluctuations in the profit rates payable to the
        depositors. It is provided based on the Framework of the Rate of Return issued
        by Bank Negara Malaysia. The amount of PER is appropriated from and written
        back to the total gross income. PER is reflected under other liabilities of the
        Group.

   (u) Employee benefits
        (i)    Short term employee benefits
               Wages, salaries and bonuses are recognised as expenses in the year in
               which the associated services are rendered by employees of the Group.
               Short term accumulating compensated absences such as paid annual leave
               are recognised when services are rendered by employees that increase their
               entitlement to future compensated absences, and short term non-
               accumulating compensated absences such as sick leave are recognised
               when absences occur. Where payment or settlement is deferred and the
               effect would be material, these amounts are stated at their present values.

        (ii)   Defined contribution plans
               Obligations for contributions to defined contribution plans are recognised
               as an expense in the income statement as incurred.

3. Cash and short term funds
                                               Group                    Company
                                           2006      2005             2006    2005
                                          RM’000    RM’000           RM’000 RM’000

   Cash and balances with banks and
      other financial institutions        408,160       462,848       12,605       4,423
   Money at call and interbank
      placements with remaining
      maturity not exceeding one
      month                             2,476,227      2,414,542    -               -
                                        ________       ________ _______         _______
                                        2,884,387      2,877,390     12,605       4,423
                                        =======        =======      ======      ======

4. Deposits and placements with financial institutions
                                                                         Group
                                                                    2006       2005
                                                                   RM’000     RM’000

   Licensed banks                                                  796,548      633,799
                                                                   ======       ======
                                                                                            34
Company No. 423858-X


5. Securities held-for-trading
                                            Group                     Company
                                        2006      2005              2006    2005
                                       RM’000    RM’000            RM’000 RM’000

   At fair value:
   Quoted securities:
     In Malaysia
     Shares                             40,347         41,959       15,527        15,749

   Unquoted securities:
     In Malaysia
     Bank Negara Negotiable Notes            -         50,845            -              -
     Islamic Commercial Papers            4,356       149,719            -              -
     Short term Negotiable Islamic Debt
         Certificate                     49,950       485,322            -              -
     Malaysian Government Investment
         Issue                            4,971         -        -                  -
     Bankers acceptance                 203,595      421,914     -                  -
                                     ________       ________ _______            _______
                                      303,219       1,149,759       15,527       15,749
                                     =======        =======        ======       ======
   Market value
   Quoted shares                       40,347         41,959        15,527       15,749
                                     =======        =======        ======       ======

6. Securities held-to-maturity
                                            Group                     Company
                                        2006      2005              2006    2005
                                       RM’000    RM’000            RM’000 RM’000
   At amortised cost:
   Unquoted securities
    in Malaysia
      Malaysian Government
      Investment Issues                442,469        485,570           -           -
      Islamic Debt Securities        1,167,899        872,651           -           -
      Less:
      Accumulated impairment loss      (75,994)       (14,715)   -                 -
                                     ________       ________ _______            _______
                                     1,534,374      1,343,506           -            -
                                     ------------   ------------   ----------   -----------
                                                                               35
 Company No. 423858-X



7. Securities available-for-sale
                                            Group                Company
                                        2006       2005        2006      2005
                                       RM’000     RM’000      RM’000   RM’000
    At fair value:
    Quoted securities in Malaysia
      Amanah Saham Bank Islam           70,438        65,898 12,319     25,182
      Shares                           350,206      288,734      -          -
                                      ________     ________ _______    _______
                                       420,644       354,632  12,319     25,182

    Unquoted securities in Malaysia
      Malaysian Government
        Investment Issues              254,600      579,272     -          -
      Unquoted shares/investment        38,846       52,188     -          -
      Promissory notes                   6,022        6,022     -          -
      Negotiable Islamic Debt
        Certificates                    333,763       34,189    -          -
      Islamic Debt Securities         1,459,977    1,220,777    -          -
                                      ________     ________ _______    _______
                                      2,093,208    1,892,448    -          -

    Outside Malaysia
      Islamic Development Bank
        Unit Trust                       2,039         1,350    -          -
      Unquoted shares                   53,027       28,109     -          -
                                      ________     ________ _______    _______
                                        55,066        29,459    -          -
      Less:
      Accumulated impairment losses    (144,803)     (26,891)    -          -
                                      ________     ________ _______    _______
                                      2,424,115    2,249,648  12,319     25,182
                                      =======      ======= ======      ======

    Market value
    Amanah Saham Bank Islam             70,438        65,898 12,319     25,182
    Quoted Shares                      350,206      288,734      -          -
                                      ________     ________ _______    _______
                                       420,644       354,632  12,319     25,182
                                      =======      ======= ======      ======
                                                                                    36
Company No. 423858-X



8. Financing, advances and others
                                                                        Group
                                                             2006             2005
                                                            RM’000           RM’000

   i)   By type
        Cash line                                            16,535             27,295
        Term financing
           House financing                                 5,686,068        5,624,068
           Syndicated financing                              267,040          367,642
           Leasing receivables                               358,714           81,247
           Bridging financing                                474,453        1,176,190
           Personal financing                              1,791,079        1,273,386
           Other term financing                            4,868,025        4,297,867
        Staff financing                                      279,311          260,904
        Credit cards                                         175,406          142,512
        Revolving credit                                   1,259,281        1,499,045
                                                          _________        _________
                                                          15,175,912       14,750,156
        Less: Unearned income                             (5,004,732)      (4,763,650)
                                                          _________        _________
                                                          10,171,180        9,986,506
        Less: Allowance for bad and doubtful financing:
         - General                                          (168,462)        (160,533)
         - Specific                                       (1,535,444)        (896,680)
         Add: Deferred allowance for bad and
              doubtful financing *                            -              167,498
                                                          _________         ________
        Total net financing, advances and others           8,467,274        9,096,791
                                                          ========          =======

        * During the financial year, the Group has fully expensed off the deferred
          allowance for bad and doubtful financing to the income statement.
                                                                                  37
Company No. 423858-X



8. Financing, advances and others (continued)
   ii)    By contract
                                                                2006        2005
                                                               RM’000      RM’000

          Bai’ Bithaman Ajil (deferred payment sale)          6,464,428    6,487,474
          Ijarah (operating lease)                               98,984       39,763
          Ijarah Muntahia Bittamlik/AITAB (finance lease)      216,602       309,439
          Mudharabah (profit sharing)                            21,316       21,994
          Murabahah(cost-plus)                                1,411,259    1,909,127
          Bai’-Al-Inah Cash Note                              1,061,477      813,672
          Bai Al-Inah                                           182,882      140,304
          Istisna’                                              633,553      190,241
          Others                                                 80,679       74,492
                                                            __________    _________
                                                             10,171,180    9,986,506
                                                            =========     ========

   iii)   By type of customer

          Domestic non-bank financial institutions              114,437      308,805
          Domestic business enterprise                        1,501,526    1,756,092
          Small medium industries                             1,090,533    1,238,297
          Government                                             74,049       80,526
          Individuals                                         6,560,014    5,472,153
          Other domestic entities                                37,331       50,438
          Foreign entities                                      793,290    1,080,195
                                                             _________     ________
                                                             10,171,180    9,986,506
                                                             ========      =======

   iv)    By profit rate sensitivity

          Fixed rate
             House financing                                  2,600,168    2,648,670
             Others                                           7,571,012    7,337,836
                                                             _________     ________
                                                             10,171,180    9,986,506
                                                             ========      =======
                                                                                     38
Company No. 423858-X


8. Financing, advances and others (continued)
                                                               2006            2005
                                                              RM’000          RM’000
   v)   By economic purposes

        Agriculture, hunting, forestry and fishing            140,123          259,613
        Mining and quarrying                                    5,459           13,527
        Manufacturing                                       1,198,577        1,417,235
        Electricity, gas and water                             93,584          300,303
        Construction                                          777,488          983,729
        Real estate                                           123,757           49,844
        Purchase of landed property:
           - Residential                                    2,757,048        2,674,078
           - Non-residential                                  529,783          626,832
        Wholesale, retail trade, restaurants and hotels       468,286          392,010
        Transport, storage and communication                   82,775          170,619
        Finance, insurance and business services              115,080          185,209
        Purchase of securities                                486,005          572,266
        Purchase of transport vehicles                      1,952,166        1,301,701
        Consumption credit                                  1,235,712          908,054
        Others                                                205,337          131,486
                                                           _________        _________
                                                           10,171,180        9,986,506
                                                           ========         ========

   Company
                                                                 2006           2005
                                                                RM’000         RM’000

   Subordinated Mudharabah financing                            100,000       100,000
                                                                ======        ======

   The amount refers to a subordinated Mudharabah financing facility granted to a
   subsidiary, Bank Islam Malaysia Berhad which is subordinated to all other liabilities
   and matures in year 2010.
                                                                                  39
Company No. 423858-X



9. Non-performing financing
   i)    Movements in the non-performing financing
                                                              2006          2005
                                                             RM’000        RM’000

         At 1 July                                           2,036,236     1,454,280
         Classified as non-performing during the year        1,147,756     1,114,670
         Reclassified as performing during the year           (189,763)     (136,724)
         Amount recovered                                     (127,873)      (90,193)
         Amount written off                                   (502,861)     (112,726)
         Other adjustments                                      (11,011)    (193,071)
         Exchange differences                                   (25,337)        -
                                                             ________      ________
         At 30 June                                          2,327,147     2,036,236
         Less: Specific allowance                           (1,535,444)     (896,680)
                                                             ________      ________
         Net non-performing financing, advances and
           others                                            791,703       1,139,556
                                                            =======        =======
         Ratio of net non-performing financing and others
           to total net financing and others                  9.35%          12.53%
                                                            =======        =======

   ii)   Movements in the allowance for bad and doubtful financing
                                                             2006           2005
                                                           RM’000          RM’000
         General allowance
         At 1 July                                         160,533          141,217
         Allowance made during the year                     29,437           19,316
         Amount transferred from specific allowance        (11,342)             -
         Amount transferred to PER/PPTD                     (3,150)             -
         Write-back made during the year                    (6,298)             -
         Exchange differences                                 (718)             -
                                                         ________          ________
         At 30 June                                          168,462        160,533
                                                            =======        =======
         As % of total financing less SA                      1.95%          1.77%
                                                            =======        =======
         Specific allowance
         At 1 July                                            896,680       396,699
         Allowance made during the year                     1,211,576       629,837
         Transferred from allowance for doubtful debts          11,809           -
         Amount recovered                                      (83,273)      (36,362)
         Amount written off                                  (488,347)       (93,494)
         Exchange differences                                 (13,001)           -
                                                            ________       ________
         At 30 June                                         1,535,444       896,680
                                                            =======        =======
                                                                                          40
Company No. 423858-X



9. Non-performing financing (continued)
   During the financial year, the provisioning policy has been made more stringent where
   values assigned to collaterals held for non-performing financing secured by properties
   (determined based on the net realisable values of the properties, being the forced sale
   value provided by independent party/valuers), have been made on the following basis:

   (a)    Assigning only fifty percent (50%) of the net realisable value of the properties
          held as collaterals for non-performing financing which are in arrears for more
          than five (5) years but less than seven (7) years. This has resulted in additional
          allowance of RM33.98 million

   (b)    For non-performing financing which are in arrears for more than seven (7) years,
          no value has been assigned to the realisable value of the properties held as
          collaterals. This has resulted in additional allowance of RM70.35 million

   (c)    Full allowance for doubtful financing is provided on the shortfall of carrying
          value against the collateral value where repayment is in arrears exceeding three
          months from the first date of default. This has resulted in additional allowance of
          RM116.86 million.

   (d)    For non-performing vehicle financing, no collateral value is assigned until the
          vehicles are repossessed. This has resulted in additional allowance of RM30.95
          million.

   iii)   Movements in deferred allowance for bad and doubtful financing

                                                                   2006            2005
                                                                  RM’000          RM’000

          At 1 July                                               167,498          258,710
          Amount amortised in previous year, now fully
             expensed                                            (167,498)         (72,498)
          Transfer to PER                                             -            (12,114)
          Sharing of amount recovered from Danaharta                  -             (6,600)
                                                                ________         ________
          At 30 June                                                  -           167,498
                                                                =======          =======

          In prior years, the Group amortised the deferred allowance for bad and doubtful
          financing at an amount of not less than RM3 million per month as permitted by
          Bank Negara Malaysia. During the current financial year, the Group has expensed
          off the remaining unamortised balance into the income statement.
                                                                                   41
Company No. 423858-X



9. Non-performing financing (continued)
                                                               2006        2005
                                                              RM’000      RM’000
   (iv) Non-performing financing by sector

        Agriculture, hunting, forestry and fishing             71,833       88,592
        Mining and quarrying                                    4,926        4,907
        Manufacturing                                         393,907      224,989
        Electricity, gas and water                             88,200      279,787
        Construction                                          503,813      274,409
        Real estate                                             4,487          105
        Purchase of landed property:
          - residential                                       317,471       244,792
          - non-residential                                   150,453       161,405
        Wholesales, retail trades, restaurants and hotels     243,613        65,263
        Transport, storage and communication                   19,468        94,268
        Finance, insurance and business services                5,007        10,111
        Purchase of securities                                297,506       292,722
        Purchase of transport vehicles                         40,067        52,251
        Community social and personal services                 17,054        19,280
        Consumption credit                                    110,173       121,609
        Others                                                 59,169       101,746
                                                            ________      ________
                                                            2,327,147     2,036,236
                                                            =======       =======
10. Trade and other receivables
                                               Group                Company
                                           2006       2005        2006    2005
                                          RM’000     RM’000      RM’000 RM’000

   Retakaful of outstanding contribution 3,703            25,954     -         -
   Income receivables                   152,175          116,105     -         -
   Bill receivables                       12,601           9,069
   Inventories of foreign currencies      10,566          47,170     -         -
   Sundry receivables                   322,835          134,193     -         -
   Clients’ and dealers’ debit balances    1,218          16,916     -         -
   Trade receivables                       5,202             -       -         -
   Amount due from retakaful companies       -            42,947     -         -
   Associates                                138               69    -         -
   Deposits, prepayments and advances 14,085              10,207     37         16
                                         _______        _______ _______    _______
                                         522,523         402,630     37         16
   Less: Allowance for doubtful debts (86,141)          (100,256)    -         -
                                        _______         _______ _______    _______
                                         436,382         302,374     37         16
                                        ======           ====== ======     ======
                                                                                        42
Company No. 423858-X

11. Investments in subsidiary companies
                                                                    Company
                                                               2006         2005
                                                              RM’000      RM’000
   Quoted shares, at cost
     - in Malaysia                                             106,986             106,986
   Unquoted shares, at cost
     - in Malaysia                                            1,296,784       1,016,784
                                                              ________        ________
                                                              1,403,770       1,123,770
   Less: Accumulated impairment loss*                          (156,537)           (510)
                                                              ________        ________
                                                              1,247,233       1,123,260
                                                              =======         =======
   Market value of quoted shares
     - in Malaysia                                              129,453          119,824
                                                              =======          =======
   *     This relates to the impairment of the Company’s investment in Bank Islam
         Malaysia Berhad (“BIMB”) which arose due to the negative net asset of BIMB
         as at 30 June 2006. For impairment purposes, the Directors have valued the
         investment in BIMB at RM1.20 per share which is the subscription price paid by
         Dubai Financial LLC and Lembaga Tabung Haji subsequent to balance sheet
         date on 16 October 2006 pursuant to the restricted issue as disclosed in Note 51
         of the financial statements. The shortfall between the carrying value and the
         share price of BIMB at RM1.20 per share resulted in RM156.54 million being
         charged as impairment loss in the income statement.

   The principal activities of the companies in the Group, all incorporated in Malaysia
   (unless otherwise stated) and the interest of BIMB Holdings Berhad are shown below:
                                                                             Effective
   Name of Company                     Principal activities                   interest
                                                                           2006     2005
                                                                            %         %
   Bank Islam Malaysia Berhad @        Islamic banking                     100       100
   Subsidiary of Bank Islam Malaysia Berhad
       Bank Islam (L) Ltd              Dormant                             100        100

       BIMB Unit Trust                 Manager of Amanah Saham             100        100
         Management Berhad             Bank Islam
       BIMB Foreign Currency           Foreign currency clearing house     75.50     75.50
         Clearing Agency Sdn. Bhd.

       Al-Wakalah Nominees             Provides nominee services           100        100
         (Tempatan) Sdn. Bhd.
       BIMB Trust Ltd.                 Provides trust and related services 100        100
                                                                                   43
Company No. 423858-X


11. Investments in subsidiary companies (continued)
                                                                          Effective
   Name of Company                     Principal activities                interest
                                                                        2006     2005
                                                                         %        %
   Subsidiary of BIMB Trust Ltd.
     BIMB Offshore Company             Dormant                          100      100
       Management Services
       Sdn. Bhd.
   Syarikat Takaful Malaysia           Family and general Takaful       69.56   69.56
     Berhad                            business

   Subsidiary of Syarikat Takaful Malaysia Berhad

     ASEAN Retakaful                   Offshore retakaful business      43.89   44.20
       International (L) Ltd^

     P.T. Syarikat Takaful            Holding company                   38.95   38.95
        Indonesia* #

   Subsidiary of P.T. Syarikat Takaful Indonesia

     P.T. Asuransi Takaful Umum* # General Takaful business             38.95   38.95

     P.T. Asuransi Takaful             Family Takaful business          38.95   38.95
        Keluarga* #

   BIMB Securities (Holdings)          Investment holding company       100      100
     Sdn. Bhd.

   Subsidiary of BIMB Securities (Holdings) Sdn. Bhd.

     BIMB Securities Sdn. Bhd.         Stockbroking company              51      51

   Subsidiary of BIMB Securities Sdn. Bhd

     BIMSEC Asset Management           Provides investment management    51      51
       Sdn. Bhd.                       services

     BIMSEC Nominees                   Provides nominee services         51      51
       (Tempatan) Sdn. Bhd

     BIMSEC Nominees                   Provides nominee services         51      51
       (Asing) Sdn. Bhd.

   Syarikat Al-Ijarah Sdn. Bhd.        Leasing of assets                100      100

   Pembiayaan Perumahan                Dormant                           51      51
     Nasional Sdn. Bhd.
                                                                                       44
 Company No. 423858-X


11. Investments in subsidiary companies (continued)
                                                                              Effective
   Name of Company                     Principal activities                    interest
                                                                            2006     2005
                                                                             %         %
   BIMB Venture Capital                Provides advisory, consultancy       100       100
     Sdn. Bhd.                         and related services in investment

   BIMB Musyarakah Satu                Venture capital company and          100      100
     Sdn. Bhd.                         investment company

   BIMB Musyarakah Dua                 Venture capital company and          100      100
     Sdn. Bhd.                         investment company

   *   Incorporated in Indonesia.
   ^   Audited by a firm of auditors affiliated with KPMG Desa Megat & Co.
   #   Audited by a firm of auditors other than KPMG Desa Megat & Co.
   @   The auditor’s report on the financial statements of BIMB contains an emphasis of
       matter on the preparation of financial statements on a going concern basis.

12. Investments in associated companies
                                              Group                   Company
                                          2006      2005            2006    2005
                                         RM’000    RM’000          RM’000 RM’000
   Unquoted shares, at cost
   In Malaysia                              5,962       5,962         5,019        5,019
   Less : Share of post-acquisition losses (2,473)     (1,855)          -            -
        : Accumulated impairment losses (3,340)            -         (4,870)         -
                                           ______     ______        ______        ______
                                            149         4,107          149         5,019
                                          =====        =====         =====        =====

                                              Group
                                          2006      2005
                                         RM’000    RM’000
   Represented by:
   Share of net tangible assets             607        4,427
   Foreign exchange losses                   -            138
                                         ______       ______
                                            607         4,565
   Negative goodwill                       (458)         (458)
                                         ______       ______
                                            149         4,107
                                         =====        =====
                                                                                          45
 Company No. 423858-X


12. Investments in associated companies (continued)

   The principal activities of the associates, all incorporated in Malaysia (unless
   otherwise stated) and the interest of the Group are as follows:

                                                                Effective    Paid up
                                                               ownership     capital
   Name                            Principal activities         interest  30 June 2006
                                                              2006 2005     RM’000
                                                               %        %
   MySPEED.com Sdn. Bhd.           e-business activities      20.54   20.54      9,250

   Islamic Banking and Finance Provides training and
      Institute Malaysia Sdn. Bhd. consultancy services       48.00   48.00      10,000

   Arabian Malaysian Takaful       Health and family
     Company #                     Takaful business           17.04   34.08      5,067

   *   The Group’s share of associated companies’ results has been equity accounted for
       up to the date of their latest available unaudited financial statements as at 30 June
       2006.

   #   Incorporated in Bahrain

13. Statutory deposit with Bank Negara Malaysia
   The non-profit bearing statutory deposits are maintained with Bank Negara Malaysia
   in compliance with Section 37(1)(c) of the Central Bank of Malaysia Act, 1958
   (revised 1994), the amount of which are determined as set percentages of total eligible
   liabilities.
                                                                             46
 Company No. 423858-X


14. Property, plant and equipment
                                                                 Computer
                                                                Information
                               Furniture,                         System
                    **Land and fixtures      Office     Motor development
  Group               building and fitting equipment   vehicles     cost    Total
                      RM’000    RM’000      RM’000     RM’000     RM’000    RM’000
  Cost

  At 1 July 2005        321,501     69,709    99,533     6,092   153,303     650,138
  Additions               6,248     29,904     7,375       967      6,470     50,964
  Disposal                  -         (656)     (150)   (2,758)       -        (3,564)
  Reclassifications       2,759    (17,909)   10,576        -       4,574         -
  Translation differences     (53)     -        (135)       (9)       -          (197)
                       __________________________________________________    _______
  At 30 June 2006       330,455     81,048   117,199     4,292     164,347   697,341
                      =============================================          ======
  Accumulated depreciation
  At 1 July 2005         27,117    31,171    88,556      4,746   102,222     253,812
  Charge for the year     5,476    10,738    13,813        553      6,706      37,286
  Disposal                  -        (110)     (128)    (2,784)       -        (3,022)
  Translation differences     (46)     38       (50)        -         -           (58)
                       __________________________________________________    _______
  At 30 June 2006        32,547    41,837   102,191      2,515   108,928      288,018
                      =============================================          ======
  Net book value
  At 30 June 2006     297,908   39,211   15,008    1,777    55,419           409,323
                     =============================================           ======
  At 30 June 2005     294,384   38,538    10,977    1,346   51,081           396,326
                     =============================================           ======
  Depreciation charge
  for the year ended
  30 June 2005          3,829    7,304    15,990      907    1,517            29,547
                     =============================================           ======
                                                                                                              47

Company No. 423858-X

14. Property, plant and equipment (continued)
   ** Land and building
                                                                                       Buildings
                                                                           Building improvements
                                 Freehold  Leasehold Freehold Leasehold        in         and
                                   land       land    building   building  progress   renovations    Total
   Cost                          RM’000     RM’000     RM’000    RM’000    RM’000       RM’000      RM’000
   At 1 July 2005                  62,357    19,478     211,470     3,773    13,938      10,485      321,501
   Additions                          490        -          435     4,834        266        223        6,248
   Reclassifications                  -          -          (30)      -       (1,410)     4,199        2,759
   Translation differences            -          -          -         -           -         (53)         (53)
                                  _____________________________________________________________     _______
   At 30 June 2006                 62,847    19,478     211,875     8,607    12,794      14,854      330,455
                                   ======================================================           ======
   Accumulated depreciation
   At 1 July 2005                    -          -       15,846      1,324       918       9,029       27,117
   Charge for the year               -          -        3,687        581       -        1,208         5,476
   Reclassifications                 -          -            (6)        6       -           -            -
   Translation differences           -          -          -          -         -           (46)         (46)
                                  _____________________________________________________________     _______
   At 30 June 2006                   -          -       19,527      1,911       918     10,191        32,547
                                  ======================================================            ======
   Net book value
   At 30 June 2006                62,847   19,478    192,348    6,696   11,876     4,663            297,908
                                  ======================================================            ======
   At 30 June 2005                62,357   19,478   195,624     2,449   13,020     1,456            294,384
                                  ======================================================            ======
   Depreciation charge for the
   year ended 30 June 2005           -        -       2,533      590      -         706               3,829
                                  ======================================================            ======
                                                                                         48

 Company No. 423858-X


14. Property, plant and equipment (continued)
                                                                       Long term
                                                                     leasehold land
    Company                                                       2006          2005
    Cost                                                         RM’000       RM’000

    At 1 July 2005/ 30 June 2006                                     666             666
                                                                    ====            ====

    The land is registered under the name of a subsidiary, Bank Islam Malaysia Berhad.

15. Deposits from customers
    (i)    By type of deposit
                                                                      Group
                                                                  2006      2005
                                                                 RM’000    RM’000
           Non-mudharabah fund
           Demand deposits                                     3,555,146       2,709,216
           Savings deposits                                    1,422,174       1,385,432
           Negotiable Islamic Debt Certificates (NIDC)         2,480,933         747,951
           Others                                                 24,897          18,999
                                                              _________       _________
                                                               7,483,150       4,861,598
           Mudharabah fund
           Savings deposits                                      454,387         433,229
           General investment deposits                         2,417,239       3,110,483
           Specific investment deposits                        3,784,717       4,823,817
           Others                                                  9,100           9,100
                                                              _________       _________
                                                               6,665,443       8,376,629
                                                              -------------   -------------
                                                              14,148,593      13,238,227
                                                              ========        ========
    (ii)   By type of customer

           Government and statutory bodies                     2,876,855       2,405,840
           Business enterprises                                5,433,895       4,832,010
           Individuals                                         2,292,431       2,144,688
           Others                                              3,545,412       3,855,689
                                                              _________       _________
                                                              14,148,593      13,238,227
                                                              ========        ========
                                                                                         49
Company No. 423858-X

16. Deposits and placements of banks and other financial
    institutions
                                                                       Group
                                                                   2006       2005
                                                                  RM’000     RM’000
   Mudharabah Fund:
   Licensed banks                                                  63,028      1,094,040
   Licensed merchant bank                                            -            75,045
   Bank Negara Malaysia                                              -           183,834
                                                                  _______      ________
                                                                   63,028      1,352,919
                                                                  ======       =======
17. Trade and other payables
                                                 Group                 Company
                                            2006        2005         2006    2005
                                          RM’000      RM’000        RM’000 RM’000
   Clients’ and dealers’ credit balances    3,987        16,762         -        -
   Unclaimed monies, withholding
      and service tax                         232        31,234            -         -
   Claims admitted or intimated
      but not paid                       158,265       133,073             -        -
   Profit payable to depositors and
      Takaful participants                 10,596        23,250          -           -
   Advance Takaful contributions           38,212         9,948          -           -
   Due to retakaful                        60,171        66,127          -           -
   Trust accounts                           1,360         1,204          -           -
   Sundry payables                       389,538       106,886        6,359          172
   Security deposit - Director                142           296          -           -
                     - Remisiers              209           460          -           -
   Profit equalisation reserve (Note 18)    9,490           -            -           -
   Amount due to subsidiaries                  -            -         7,169      19,524
                                         _______       _______      ______       ______
                                          672,202       389,240      13,528       19,696
                                         ======        ======       =====        =====

18. Profit equalisation reserve (“PER”)
                                                                      Group
                                                                2006          2005
                                                              RM’000        RM’000
   At 1 July                                                      -           32,710
   Recognised in the income statement                           9,684         25,939
   Written back in the financial year                            (376)       (18,791)
   Transferred to general allowance                             3,150            -
   Transferred to deferred allowance                               -         (12,114)
   Transferred to profit payable to depositor                  (2,968)       (27,744)
                                                              ______        _______
   At 30 June                                                      9,490            -
                                                                  =====         ======
                                                                                         50
Company No. 423858-X



19. Amount due to a corporate shareholder
   The Company entered into an agreement dated 2 December 2005 with its major
   shareholder Lembaga Tabung Haji (“LTH”), for LTH to advance RM280 million as
   Shareholder’s Advance (“SA”) under a Qardul Hasan agreement. The SA was fully
   drawn down in December 2005 and the Company has utilised to subscribe for new
   ordinary shares of RM1.00 each in Bank Islam Malaysia Berhad. The advance is to be
   repaid no later than one year from the date of draw-down through allotment and
   issuance of the Company’s shares to LTH in accordance with the Proposed Rights
   Issue exercise to be undertaken (refer to Note 50).


20. Provision for zakat and taxation
                                               Group                    Company
                                           2006      2005             2006    2005
                                          RM’000    RM’000           RM’000 RM’000

   Zakat                                    2,567           6,730         -             398
   Taxation                                   997           3,521         -             161
                                           ______         ______       _____          _____
                                            3,564          10,251         -             559
                                           =====          =====        ====           ====

21. Deferred tax
   The amounts, after appropriate offsetting, are as follows:
                                                                              Group
                                                                  2006             2005
                                                                 RM’000           RM’000

   Deferred tax liabilities                                          2,778          6,947
   Deferred tax asset                                              (10,798)       (19,320)
                                                                   ______         ______
                                                                    (8,020)       (12,373)
                                                                    =====          =====
   The recognised deferred tax assets and liabilities are as follows:

   Property, plant and equipment
     - capital allowances                                           8,909          17,697
   Temporary difference on Al-Ijarah assets                            -           (4,539)
   Unutilised tax losses                                             (730)         (1,007)
   Unabsorbed capital allowances                                  (15,764)        (21,552)
   Provisions                                                        (435)         (2,972)
                                                                  ______          ______
                                                                   (8,020)        (12,373)
                                                                   =====           =====
                                                                                         51
Company No. 423858-X



21. Deferred tax (continued)
   No deferred tax asset has been recognised in respect of the following:
                                                                            Group
                                                                  2006             2005
                                                                 RM’000           RM’000
   Property, plant and equipment
     - capital allowances                                           (29)               (7)
   Provisions                                                   315,605               519
   Unabsorbed capital allowances                                    162                32
   Unutilised tax losses                                        490,987            1,543
                                                                _______          _______
                                                                806,725             2,087
                                                                ======           ======

   The deferred tax assets have not been recognised in respect of these items due to the
   losses incurred by the Group during the financial year. The unutilised tax losses will be
   available to be offset against future profits.

   The Group has tax losses carried forward RM493,594,000 (2005 - RM5,139,000)
   which give rise to the recognised and unrecognised deferred tax assets in respect of
   unutilised tax losses above.

22. Share capital
                                                                 Group and Company
                                                                 2006         2005
                                                                RM’000       RM’000
   Authorised:
     Ordinary shares of RM1.00 each                            2,000,000        2,000,000
                                                               =======          =======
   Issued and fully paid:
      Ordinary shares of RM1.00 each                            562,965          562,965
                                                               =======          =======

23. Reserve Fund
    Reserve Fund is statutory reserves maintained in compliance with Section 15 of the
    Islamic Banking Act 1983 and is not distributable as cash dividends.
                                                                                   52
Company No. 423858-X


24. Family Takaful Fund
                                                                    Group
                                                       2006                  2005
                                                      RM’000                RM’000
   Participants’ Account (“PA”)
   As at 1 July                                       1,344,838         1,213,990
   Add: Increase in PA                                   87,155           120,654
                                                      ________          ________
                                                      1,431,993         1,334,644
   Profit attributable to participants                   42,382            30,358
   Allowance for diminution in value of investments       7,244             6,955
   Consolidation adjustment                              (5,756)          (27,119)
                                                      ________          ________
   As at 30 June                                      1,475,863         1,344,838
                                                      =======           =======
   Participants’ Special Account (“PSA”)
   As at 1 July                                        473,765           432,308
   Add: Increase in PSA                                  29,627            30,716
                                                       _______          ________
                                                        503,392           463,024
   Profit attributable to participants                   18,350            13,198
   Allowance for diminution in value of investments       5,591               993
   Consolidation adjustment                              (3,414)           (3,450)
                                                      ________          ________
   As at 30 June                                       523,919           473,765
                                                      =======           =======
   Group Family Takaful Fund (“GFTA”)
   As at 1 July                                        122,390              101,580
   Profit attributable to participants                   11,917              11,328
                                                       _______               ______
                                                        134,307             112,908
                                                       ----------           ---------
   Movement in unearned reserves:
   - As at 1 July                                       (65,653)            (57,514)
   - As at 30 June                                       88,670              65,653
                                                       _______              ______
                                                         23,017               8,139
                                                       ----------           ---------
                                                                                     53
Company No. 423858-X


24. Family Takaful Fund (continued)
                                                                      Group
                                                            2006               2005
                                                           RM’000             RM’000

   Movement in allowance for diminution in value
       of investments
   - As at 1 July                                             (5,758)         (4,112)
   - As at 30 June                                             9,145           5,758
                                                            _______         _______
                                                               3,387           1,646
                                                            ----------     -----------
   Consolidation adjustment                                   (3,439)            (303)
                                                           -----------     -----------
   At 30 June                                                157,272         122,390
                                                          =======         =======
   Family Takaful fund as at 30 June                      2,157,054       1,940,993
                                                          =======         =======

25. General Takaful fund
                                                                      Group
                                                            2006               2005
                                                           RM’000             RM’000

   Revenue account accumulated surplus *                     78,780             65,444
   Unearned contribution reserves                          192,193            149,319
   Allowance for diminution in value of investments          23,760             19,016
   Elimination of intragroup investment                      (6,236)            (2,348)
                                                           _______            _______
   General Takaful fund as at 30 June                       288,497            231,431
                                                           ======             ======
   * Revenue account accumulated surplus

     As at 1 July                                            64,474            50,925
     Net surplus attributable to participants for the
       financial year                                        56,717             45,119
     Profits paid to participants during financial year     (42,411)           (30,600)
                                                           _______            _______
     Balance as at 30 June                                  78,780             65,444
                                                           ======             ======
                                                                                         54
Company No. 423858-X


26. Income derived from investment of depositors’ funds
                                                                          Group
                                                                2006               2005
                                                               RM’000             RM’000
   Income derived from investment of:
   (i) general investment deposits                             193,116            237,775
   (ii) other deposits                                         595,540            526,776
                                                               _______            _______
                                                               788,656             764,551
                                                               ======             ======

   (i) Income derived from investment of general investment deposits

                                                                          Group
                                                                2006               2005
                                                               RM’000             RM’000
      Financing income and hibah
      Financing, advances and others                           147,656            195,207
      Securities:
      - Held-for-trading                                          3,726              6,484
      - Available-for-sale                                       18,055             10,794
      Money at call and deposit with financial institutions      13,255              9,206
                                                               _______            _______
                                                                182,692            221,691
      Amortisation of premium less accretion of discounts         2,371              4,995
                                                               _______            _______
                                                               185,063             226,686
      Other dealing income
      Net gain from foreign exchange transactions                3,116                141
      Net gain from sale of securities held-for-trading          3,507              9,356
      Net gain / (loss) on revaluation of trading securities
       held-for-trading                                             82                (357)
                                                               _______            _______
                                                               191,768             235,826
      Other operating income
      Net gain from sale of securities available-for-sale        1,348              1,529
      Gross dividend income from securities:
       quoted in Malaysia                                           -                   98
       unquoted in Malaysia                                         -                  322
                                                               _______            _______
                                                                193,116            237,775
                                                               ======             ======
                                                                                55
Company No. 423858-X



26. Income derived from investment of depositors’ funds
    (continued)
   (ii) Income derived from investment of other deposits
                                                                    Group
                                                               2006        2005
                                                              RM’000      RM’000
      Financing income and hibah
      Financing, advances and others                          479,998     421,283
      Securities:
      - Held-for-trading                                        15,592     18,388
      - Available-for-sale                                      16,368     17,028
      Money at call and deposit with financial institutions     53,890     27,898
                                                              _______    _______
                                                               565,848    484,597
      Amortisation of premium less accretion of discounts       11,917     13,499
                                                              _______    _______
                                                               577,765    498,096
      Other dealing income
      Net gain from foreign exchange transactions               7,598         394
      Net gain from sale of securities held-for-trading         4,202      24,667
      Net gain/(loss) on revaluation of securities
       held-for-trading                                           252      (1,491)
                                                              _______    _______
                                                              589,817    521,666
      Gross dividend income from securities:
      - Available-for-sale                                      5,723      4,243
      Other income                                                -          867
                                                              _______    _______
                                                              595,540    526,776
                                                              ======     ======
                                                                                  56
Company No. 423858-X

27. Income derived from investment of shareholders’ funds
                                                  Group             Company
                                             2006       2005      2006   2005
                                            RM’000    RM’000     RM’000 RM’000
   Financing income and hibah
   Financing, advances and others             3,632      4,316      -         -
   Securities:
   - Held-for-trading                         3,385         -       -         -
   - Held-to-maturity                           -           -       38        -
   - Available-for-sale                      67,095     42,647      -       5,265
   Money at call and deposit with
      financial institutions                24,435      17,334     288    1,639
                                           _______     _______ _______ _______
                                             98,547     64,297     326      6,904
   Amortisation of premium less
    accretion of discounts                   7,530       8,480      -       -
                                           _______     _______ _______ _______
                                           106,077      72,777     326    6,904
   Other dealing income
   Net gain from foreign exchange
     transactions                             5,931       231       -         -
   Net gain from sale of securities
     held-for-trading                        10,925      1,495      -         -
   Net gain on revaluation of securities
     held-for-trading                          -         1,425      -      -
   Subordinated debt financing                 -           -     9,462     -
                                           _______     _______ _______ _______
                                            122,933     75,928    9,788     6,904
   Other operating income
   Net gain/(loss) from sale of securities
     available-for-sale                       2,835        -     (1,344)   12,117
   Unrealised foreign exchange gain on
     foreign currency cash balances              751     4,378      -         -
   Reversal of allowance for diminution
     in value                                 1,318      2,687      -         -
   Takaful contributions less retakaful and
     reserve for unearned Takaful
     contributions                          152,072    129,386      -         -
   Gross dividend income from securities:
     Quoted in Malaysia                          809     1,509      809       515
     Quoted outside Malaysia                     -          82       -        -
     Unit trust                               1,981      1,277    1,690     1,277
     Unquoted in Malaysia                     2,543      1,334       -        -
   Gain on disposal of unquoted investments
     in Malaysia                              1,690     39,474       -        -
   Gross dividend income
     - subsidiary companies                    -            -   17,589  55,871
                                            _______    _______ _______ _______
                                            286,932     256,055  28,532  76,684
                                                                                         57
Company No. 423858-X


27. Income derived from investment of shareholders’ funds
    (continued)
                                                   Group                Company
                                            2006           2005       2006   2005
                                           RM’000         RM’000     RM’000 RM’000
   Fees and commission
   Processing fees                           1,151           5,328        -             -
   Commitment fees                             566             177        -             -
   Corporate advisory fees                   1,035           2,661        -             -
   Management fees                           6,808             -          -             -
   Others                                   39,081           8,073        -             -
                                           _______        _______    ______        ______
                                           335,573         272,294    28,532        76,684
   Other income
   Others                                   10,773          50,587       594           191
                                           _______        _______    ______        ______
                                           346,346         322,881    29,126        76,875
                                           ======         ======     =====         =====

28. Allowance for losses on financing
                                                                          Group
                                                               2006                2005
                                                              RM’000              RM’000
   Allowance for bad and doubtful financing:
    - Specific allowance
        - Made in the financial year                         1,212,296            619,666
        - Written back                                         (83,273)               -
    - General allowance
        - Made in the financial year                             29,437            29,196
        - Written back                                           (6,298)              -
        - Transferred from allowance for doubtful debts         (11,342)              -
    - Deferred allowance for bad and doubtful financing
        now expensed *                                         167,498             72,498
    Bad debts and financing:
    Recovered                                                   (18,799)           (16,278)
    Exchange difference                                          10,959                -
                                                               _______            _______
                                                              1,300,478            705,082
     Allowance for amounts recoverable from Danaharta
     reversed in the financial year                                 -               (4,232)
                                                              ________            _______
                                                              1,300,478            700,850
                                                              =======             ======

   * In prior years, the Group amortised the deferred allowance for bad and doubtful
     financing at an amount of not less than RM3 million per month as permitted by Bank
     Negara Malaysia. During the current financial year, the Group has expensed off the
     remaining unamortised balance into the income statement.
                                                                                         58
Company No. 423858-X



29. Impairment losses
                                                    Group                Company
                                              2006         2005        2006   2005
                                             RM’000       RM’000      RM’000 RM’000
   Securities:
    Held-to-maturity                         61,279           -       -       -
    Available-for-sale                      117,912        11,400             -
    Exchange difference                         980           -       -       -
                                            _______       _______ _______ _______
                                             180,171       11,400          -         -
   Investment in associated companies          3,340          -          4,870       -
   Investment in a subsidiary (“BIMB”)          -             -   156,027     -
                                            _______       _______ _______ _______
                                            183,511        11,400    160,897         -
                                            ======        ======     ======      ======

30. Income attributable to depositors
                                                                         Group
                                                                2006              2005
                                                               RM’000            RM’000
   Deposits from customers
    - Mudharabah Fund                                          209,361           203,796
    - Non-Mudharabah Fund                                      132,116            54,133
   Deposits and placements of banks and other financial
    institutions
    - Mudharabah Fund                                           22,628             24,497
                                                               _______           _______
                                                               364,105            282,426
                                                               ======            ======

31. Personnel expenses
                                                                     Group
                                                                2006        2005
                                                               RM’000      RM’000

   Salaries and wages                                          159,914           147,611
   Allowances and bonuses                                       27,112            20,940
   Others                                                       46,481            35,066
                                                               _______           _______
                                                               233,507           203,617
                                                               ======            ======

   The number of employees of the Group (including Executive Director) at the end of
   the year was 5,324 (2005 - 5,004). Staff costs include contributions to the Employees’
   Provident Fund of RM21 million (2005 - RM19 million).
                                                                                        59
Company No. 423858-X


31. Personnel expenses (continued)
   Share option plan

   The Company offers vested share options over ordinary shares to Executive Directors
   and all employees of the Group who have been confirmed in writing and are in the
   employment of the Group. The balance in the number of share options held by
   employees are as follows:
                                                                   Company
                                                              2006           2005
                                                              ‘000           ‘000

   Outstanding at 30 June                                    50,913            50,913
                                                             =====             =====

   Terms of the options outstanding at 30 June 2006:

   Expiry date              Exercise price                                    Number

   21 August 2007           RM2.13                                        45,868,500
   21 August 2007           RM2.43                                         5,044,000
                                                                          _________
                                                                          50,912,500
                                                                          ========

   No share options were granted by the Company or exercised by the option holders
   during the financial year.

32. Other overhead expenses
                                                   Group              Company
                                              2006       2005       2006   2005
                                             RM’000    RM’000      RM’000 RM’000
   Included in other overhead expenses
       are the following:
      Allowance for doubtful debts            7,313     84,500        -            -
      Auditors’ remuneration
         - audit fee                            319        323            6             6
         - others                                11         27            7             7
      Directors’
         - other remuneration                 1,654        825        162          160
      Rental of premises                     23,296     17,492        -             -
      Property, plant and equipment
         written off                            -         844        -             -
                                             =====     ======    ======        ======
                                                                                       60
Company No. 423858-X



33. Finance cost
   This relates to Hibah payable on shareholder’s advance as referred to in Note 19 of the
   financial statements.

34. Tax expense
                                                   Group                 Company
                                               2006      2005          2006   2005
                                              RM’000    RM’000        RM’000 RM’000

   Current tax expense                           4,036     32,156       6,500     17,823
   Under/(over) provision
     in respect of prior years                 22,065        3,482     2,392        (411)
                                               ______      ______     ______     ______
                                                26,101      35,638      8,892     17,412
   Deferred tax expense:
     Origination and reversal of
        temporary difference                     4,353       1,157          -          -
                                               ______      ______      ______     ______
                                                30,454      36,795       8,892     17,412
                                               =====      ======      ======     ======

    Reconciliation of effective tax expense

    (Loss)/Profit before taxation          (1,177,940)    (400,489) (140,152)     75,379
                                            =======        ======     =====       =====

   Income tax using Malaysian tax rates       (329,823)   (112,137)   (39,243)   21,106
   Non taxable income                           (1,613)     (5,999)       (60)    (3,428)
   Non-deductible expenses                     123,563     153,940     45,797          57
   Effect of different tax rates                (4,770)     (5,279)        -         -
   Deferred tax assets not recognised          220,947       2,080         -         -
   Other items                                      85         708           6         88
                                              _______     _______     ______     ______
                                                 8,389     33,313       6,500     17,823
   Under/(Over) provision in prior years       22,065       3,482      2,392        (411)
                                              _______     _______     ______     ______
   Tax expense                                 30,454      36,795       8,892     17,412
                                              ======      ======       =====      =====

   Subject to agreement by the Inland Revenue Board, the Company has sufficient
   Section 108 tax credit and tax exempt income to frank approximately RM66,790,000
   if paid out as dividends.
                                                                                       61
Company No. 423858-X



35. Loss per share - Group
   Basic loss per share
   Basic loss per share of the Company is calculated by dividing the net loss for the year
   by the number of ordinary shares in issue during the year.

                                                                2006            2005
                                                               RM’000          RM’000

   Net loss for the year                                     (1,230,009)        (456,851)
                                                              =======            ======
   Number of ordinary shares                                    562,965          562,965
                                                              =======            ======
   Basic loss per share (sen)                                  (218.49)           (81.15)
                                                              =======            ======

   Diluted earnings per share

   The assumed conversion of ESOS in the current year has an anti-dilutive effect on the
   loss per share of the Group and is therefore not disclosed.


36. Dividends
                                                                 Group and Company
                                                                 2006         2005
   Ordinary                                                     RM’000       RM’000
     Final paid:
       2005 - 2.5% per share less tax (2004 - 8.5%
            per share less tax)                                  10,133          34,453
                                                                 =====           =====

   There was no interim dividend payment during the year, and the Directors do not
   recommend a final dividend for the financial year.
                                                                                        62
Company No. 423858-X


37. Related parties
   Controlling related party relationships are as follows:
   i)   Its subsidiary companies as disclosed in Note 11.
   ii) Significant shareholders of the Company.
                                                                           Group
                                                                  2006           2005
                                                                 RM’000         RM’000
   Rental of premises paid to institutional shareholders:
     - Kumpulan Wang Simpanan Pekerja                                756              218
     - Lembaga Tabung Haji                                         3,064            1,307
     - Majlis Ugama Islam Sabah                                      169              143
   Brokerage fees paid by institutional shareholders:
     - Amanah Saham Bumiputra                                      845               914
     - Kumpulan Wang Simpanan Pekerja                              125               145
     - Lembaga Tabung Haji                                         287               314
     - Permodalan Nasional Berhad                                  564               274
                                                                 =====             =====

   A Director is authorised to trade, under his own discretion, though a trading account
   co-owned by the Director and a subsidiary. Under the arrangement, any trading loss is
   borne by the Director, whereas any gain is equally shared by the Director and the
   subsidiary. Transactions entered into through this trading account are as follows:-

                                                                           Group
                                                                  2006           2005
                                                                 RM’000         RM’000

     Sales of securities                                           1,510             243
     Purchase of securities                                        3,719             339
                                                                   ====             ====

   The Directors are of the opinion that all the transactions have been entered into in the
   normal course of business and have been established under negotiated terms.
                                                                                            63
Company No. 423858-X


38. Directors’ and Shariah Supervisory Council members’
    remuneration
   (a) (i) Aggregate remuneration of all Directors for the group and the
           Companycategorised into appropriate components are as follows:
                                                    Group                 Company
                                             2006        2005        2006      2005
                                           RM’000      RM’000 RM’000 RM’000
         Executive Director:
         Allowances                             284        120           14      -
         Salaries, bonuses and EPF
           contributions*                     1,087        499           51      -
         Other remuneration – Gratuity           70         -          -         -
         Benefits-in-kind*                      198           52       -         -
                                            ______     _______ _______ _______
                                                1,639           671           65          -
                                              ---------   ----------   ----------   ----------
         Non-Executive Directors:
         Fees and allowances                      349         315          162            160
                                              ---------   ---------    ---------     ---------
         Total                                  1,988          986          227           160
                                               =====       =====        =====         =====
         Total (excluding benefits-in-kind)     1,790          934          227           160
                                               =====       =====        =====         =====

         *   The salaries, other emoluments and benefits-in-kind amounted to
             RM1,722,000 (2005 - RM576,000) are received in their capacity as the
             Executive Directors of certain subsidiaries.

         (ii) Shariah Supervisory Council       130          110           -            -
                                              =====        =====        =====        =====
   (b)   (i) The number of Directors of the Company, whose remuneration are
              paid/payable for their services rendered at subsidiaries, fall within the
              following bands:
                                                                        Group
                                                                 2006          2005
         Number of Executive Directors
         RM300,001 to RM400,000                                      1             1
         More than RM400,000                                         1             1
         Number of Non-Executive Directors
         Below RM50,000                                            10              9
                                                                  ___         ____
         Total                                                     12            11
                                                                 ===          ====
         (ii) Number of Shariah Supervisory
              Council Members                                        6             5
                                                                 ===          ====
                                                                                           64
Company No. 423858-X

38. Directors’ and Shariah Supervisory Council members’
    Remuneration (continued)
                                                                          Company
                                                                      2006      2005
        Number of Executive Directors
        Below RM100,000                                                 1*           -
                                                                      ___          ____
                                                                        1            -
                                                                      ===          ====

   * Re-designated as an Executive Director of the Company on 9 June 2006.

39. Segmental information
   The inter-segment transactions have been entered into in the normal course of business
   and have been established under negotiated terms.

   Segment results, assets and liabilities include items directly attributable to a segment as
   well as those that can be allocated on a reasonable basis. Unallocated items mainly
   comprise corporate assets and expenses.

   The Group operates predominantly in Malaysia and accordingly, information by
   geographical location on the Group’s operation is not presented.

   Segment information is presented in respect of the Group’s business segments.

   Business segments

   The Group comprises of the following main business segments:

   Banking            Islamic banking and provision of related services.

   Takaful            Underwriting of family and general Islamic insurance (“Takaful”).


   Others             Investment holding, currency trading, ijarah financing,
                      stockbroking.
                                                                                 65
Company No. 423858-X



39. Segmental information (continued)
  2006                        Banking
                         Offshore Domestic Takaful Others Elimination Consolidated
                         RM’000 RM’000 RM’000 RM’000       RM’000       RM’000
  Business segments

  Revenue from external
    customers           316,111  637,446 117,140     64,305         -   1,135,002
  Inter-segment revenue     -      7,076   59,352    11,587    (78,015)       -
                     ___________________________________________________________
  Total revenue          316,111  644,522 176,492  75,892   (78,015) 1,135,002
                         ===================================================
  Segment result

  Operating loss         (93,307) (1,173,697)   45,739   (104,652)   154,595 (1,171,322)
  Finance costs              -          -          -      (26,983)    20,983     (6,000)
  Share of profit of
    associates               -         -        (618)      -         -        (618)
  Zakat                      -       (4,000)  (3,282)     217        -      (7,065)
  Tax expense                -      (15,629)  (4,355) (16,395)     5,925   (30,454)
  Minority interests         -          -     (3,124)     -      (11,426)  (14,550)
                       ___________________________________________________________
  Net loss for the year (93,307) (1,193,326) 34,360 (147,813) 170,077 (1,230,009)
                      =====================================================
  Business segments

  Segment assets       6,702,830 7,902,485 3,200,531 1,678,746 (1,739,965) 17,744,627
  Investment in
    associates               -         -         -         149        -           149
                      ___________________________________________________________
  Total assets         6,702,830 7,902,485 3,200,531 1,678,895 (1,739,965) 17,744,776
                      =====================================================
  Segment liabilities 2,571,193 12,311,963 438,852     324,313   (375,237) 15,271,084
                      =====================================================
  Capital expenditure       -       20,604    30,303          57        -      50,964
  Depreciation              -       17,713    12,526     7,047          -      37,286
  Expensed off deferred
   allowance for bad
   and doubtful financing
   that was previously
   amortised over 7 years -        167,498       -          -           -     167,498
                                                                                 66
Company No. 423858-X



39. Segmental information (continued)
                              Banking
                        Offshore Domestic Takaful       Others Elimination Consolidated
  2005                  RM’000 RM’000 RM’000            RM’000    RM’000     RM’000

  Revenue from external
    customers            59,956 846,031 117,140       64,305       -     1,087,432
  Inter-segment revenue      -     8,340   33,967     61,780   (104,087)      -
                        _________________________________________________________
  Total revenue           59,956 854,371 151,107     126,085   (104,087) 1,087,432
                        ===================================================
  Segment result

  Operating loss        (496,133)   (30,552)   32,285    106,629     (12,972)   (400,743)
  Finance costs              -          -         -       (8,083)      8,083         -
  Share of profit of
    associates               -        -        312       -          (58)      254
  Zakat                      -     (2,349)  (3,542)   (1,404)       -      (7,295)
  Tax expense                -    (25,509)  (3,442)  (23,540)    15,696   (36,795)
  Minority interests         -         -     2,000       -      (14,272)  (12,272)
                        _________________________________________________________
  Net loss for the year (496,133) (58,410) 27,613     73,602     (3,523) (456,851)
                         ===================================================
  Business segments

  Segment assets       1,496,531 14,352,479 2,772,999   1,604,127 (1,722,271) 18,503,865
  Investment in
    associates            -          1,900       479     5,158     (3,430)      4,107
                        _________________________________________________________
  Total assets        1,496,531 14,354,379 2,773,478 1,609,285 (1,725,701) 18,507,972
                        ===================================================
  Segment liabilities 1,893,909 13,226,489 317,256     134,688 (488,287) 15,084,055
                        ===================================================
  Capital expenditure       -       19,946 142,993      21,031        -       183,970
  Depreciation              -       18,266    10,820       461        -        29,547
  Amortisation of
   deferred allowance       -       72,498       -         -          -        72,498
                                                                                      67
Company No. 423858-X


40. Commitments and contingencies - Group
   In the normal course of business, a subsidiary, Bank Islam Malaysia Berhad make
   various commitments and incur certain contingent liabilities with legal recourse to
   their customers. No material losses are anticipated as a result of these transactions.
   Risk Weighted Exposure arising from the commitments and contingencies of this
   subsidiary as at 30 June are as follows:
                                                         Credit         Risk
                                             Principal equivalent     weighted
                                              amount     amount        amount
   2006                                      RM'000     RM'000        RM'000

   Direct credit substitutes                    251,029     251,029    238,060
   Transaction-related contingent items         323,360     161,680    160,078
   Short term self-liquidating trade related
     contingencies                              851,528     170,306      14,389
   Assets sold with recourse and commitments
     with certain drawdown                       60,925      60,925      60,925
   Obligation under underwriting agreement       89,000      44,500      44,500
   Foreign exchange related contracts         1,361,105         -           -
   Miscellaneous                              1,089,434     468,037         -
                                             __________________________________
                                              4,026,381   1,156,477     517,952
                                             ==============================

   2005

   Direct credit substitutes                    380,548     380,548    372,814
   Transaction-related contingent items         396,004     198,002    195,815
   Short term self-liquidating trade related
     contingencies                            1,390,308     278,062      13,987
   Assets sold with recourse and commitments
     with certain drawdown                          121         121         121
   Obligation under underwriting agreement       70,000      35,000      35,000
   Foreign exchange related contracts           720,034      14,401       2,880
   Miscellaneous                              1,637,968     483,707         -
                                             __________________________________
                                              4,594,983   1,389,841     620,617
                                             ==============================
                                                                                            68
Company No. 423858-X


40. Commitments and contingencies – Group (continued)
    * The credit equivalent amount is arrived at using the credit conversion factor as per
      Bank Negara Malaysia guidelines.

                                                   2006                        2005
                                                         Credit                      Credit
                                         Principal     equivalent     Principal    equivalent
                                          amount        amount*        amount       amount*
                                         RM’000         RM’000        RM’000        RM’000
    Foreign exchange contracts
      - Forward contracts                1,155,980          -         400,299            8,006
      - Others                             205,125          -         319,735           6,395
                                         ________      ________      ________         _______
    Total                                1,361,105          -         720,034          14,401
                                         =======       =======       =======          ======

    Foreign exchange related contracts are subject to market risk and credit risk.

    Market risk

    Market risk is the potential change in value caused by movement in market rates or
    prices. The contractual amounts stated above provide only a measure of involvement
    in these types of transactions and do not represent the amounts subject to market risk.
    Exposure to market risk may be reduced through offsetting on and off-balance sheet
    positions.

    Credit risk

    Credit risk is a risk that a counterparty will be unable to meet the terms of a contract in
    which the Group has a gain position.

41. Profit rate risk
    The Group is exposed to various risks associated with the effects of fluctuations in the
    prevailing levels of market profit rates on its financial position and cash flows. The
    assets and liabilities at carrying amount are categorised by the earlier contractual
    repricing or maturity dates.
                                                                                                                                  69
Company No. 423858-X



41. Profit rate risk (continued)
                                            Up to 1      > 1-3     > 3-12  1-5         Over 5 Non profit Trading             Effective
    As at 30 June 2006                       month      months    months  years         years  sensitive  book        Total profit rate
                                            RM’000      RM’000    RM’000 RM’000        RM’000 RM’000 RM’000          RM’000     %
    Assets
      Cash and short-term funds             2,591,326   170,070      601       -          -         -      122,390   2,884,387   3.87
      Deposits and placements with banks
         and other financial institutions        -         -      796,548      -          -         -         -       796,548    4.84
      Securities
      Held-for-trading                           -          -         -         -         -         -      303,219     303,219   5.64
      Held-to-maturity                           -          -         -      37,364 1,497,010       -          -     1,534,374   4.78
      Available-for-sale                     253,161    726,212   515,627   929,115       -         -          -     2,424,115   6.70
      Financing, advances and others
      Performing                            1,061,615   167,822   981,101 1,193,358   4,271,675     -         -    7,675,571     8.17
      Non-performing                              -         -         -         -           -    791,703      -      791,703      -
      Other assets                                -         -         -         -     1,334,859     -         -    1,334,859     4.59
                                            ________ ________ ________ ________       ________ _________ ________ _________
                                            3,906,102 1,064,104 2,293,877 2,159,837   7,103,544  791,703  425,609 17,744,776
                                            ======= ======= ======= =======           ======= ======== ======= ========
                                                                                                                                   70
Company No. 423858-X



41. Profit rate risk (continued)
                                               Up to 1      > 1-3     > 3-12  1-5        Over 5 Non profit Trading            Effective
    As at 30 June 2006 (continued)              month      months    months  years        years  sensitive  book       Total profit rate
                                               RM’000      RM’000    RM’000 RM’000       RM’000 RM’000 RM’000         RM’000     %

    Liabilities
      Deposits from customers                  1,537,957 1,255,897 2,335,899   952,334 8,066,506    -          -     14,148,593   2.49
      Deposits and placements of banks
         and other financial institutions         63,028       -        -       -         -       -        -       63,028         2.67
      Bills and acceptance payable               100,919       -        -       -         -       -        -      100,919          -
      Other liabilities                              -         -        -       -         -      958,544   -      958,544          -
                                               ________ ________ ________ ________ ________ _________ ________ _________
    Total liabilities                          1,701,904 1,255,897 2,335,899 952,334 8,066,506   958,544   -   15,271,084
      Equity                                         -         -        -       -         -     (145,891)  -     (145,891)
      Takaful funds                                  -         -        -       -         -    2,445,551   -    2,445,551
      Minority interests                             -         -        -       -         -      174,032   -      174,032
                                               ________ ________ ________ ________ ________ _________ ________ _________
    Total liabilities, equity, Takaful
      funds and minority interests             1,701,904   1,255,897 2,335,899    952,334 8,066,506 3,432,236 - 17,744,776
                                               =======     ======= ======= ======= ======= ======== ======= ========
    On-balance sheet profit sensitivity gap    2,204,198    (191,793)  (42,022) 1,207,503 (962,962)
    Off-balance sheet profit sensitivity gap   1,111,893   1,513,100   311,954 1,089,434          -
                                               ________    ________ ________ ________ ________
    Net maturity mismatch                      3,316,091 1,321,307 269,932 2,296,937 (962,962)
                                               ======= ======= ======= ======= =======
                                                                                                                                    71
Company No. 423858-X



41. Profit rate risk (continued)
                                             Up to 1      > 1-3      > 3-12  1-5        Over 5 Non profit Trading             Effective
    As at 30 June 2005                        month      months     months  years        years  sensitive  book        Total profit rate
                                             RM’000      RM’000     RM’000 RM’000       RM’000 RM’000 RM’000          RM’000     %
    Assets
      Cash and short-term funds              2,258,555    170,070   260,059      -         -        -       188,706   2,877,390    2.44
      Deposits and placements with banks
          and other financial institutions        -        43,775   484,778   104,025     1,221     -         -        633,799     5.86
      Securities
      Held-for-trading                            -           -        -          -         -      -      1,149,759 1,149,759      4.56
      Held-to-maturity                            -           -        -       33,372 1,310,134    -          -      1,343,506     4.80
      Available-for-sale                          -           -        -    1,117,276       -      -      1,132,372 2,249,648     12.01
      Financing, advances and others                          -
      Performing                             1,459,373    561,336   743,159 1,381,934 3,811,433    -          -      7,957,235     7.17
      Non-performing                               -          -        -          -         -   1,139,556     -      1,139,556      -
      Other assets                                 -          -        -          -         -   1,157,079     -      1,157,079      -
                                             ________    ________ ________ ________ ________ _________ _________ _________
                                             3,717,928    775,181 1,487,996 2,636,607 5,122,788 2,296,635 2,470,837 18,507,972
                                             =======     ======= ======= ======= ======= ======== ======= ========
                                                                                                                                   72
Company No. 423858-X


41. Profit rate risk (continued)
                                               Up to 1      > 1-3     > 3-12  1-5        Over 5 Non profit Trading            Effective
    As at 30 June 2005 (continued)              month      months    months  years        years  sensitive  book       Total profit rate
                                               RM’000      RM’000    RM’000 RM’000       RM’000 RM’000 RM’000         RM’000     %
    Liabilities
      Deposits from customers                  5,520,545   561,336   743,159   331,440 1,308,926   4,772,821   -     13,238,227   1.98
      Deposits and placements of banks
          and other financial institutions     1,112,727     -         -        -         -         -   240,192 1,352,919         2.87
      Bills and acceptance payable                86,471     -         -        -         -         -       -       86,471         -
      Other liabilities                              -       -         -        -         -     406,438     -      406,438         -
                                               ________ ________ ________ ________ ________ _________ _________ _________
    Total liabilities                          6,719,743 561,336   743,159  331,440 1,308,926 5,179,259 240,192 15,084,055
      Equity                                         -       -         -        -         -   1,086,537     -    1,086,537
      Takaful funds                                  -       -         -        -         -   2,172,424     -    2,172,424
      Minority interests                             -       -         -        -         -     164,956     -      164,956
                                               ________ ________ ________ ________ ________ _________ ________ _________
    Total liabilities, equity, Takaful
      funds and minority interests              6,719,743  561,336   743,159   331,440 1,308,926 8,603,176 240,192 18,507,972
                                                ======= ======= ======= ======= ======= ======== ======= ========
    On-balance sheet profit sensitivity gap    (3,001,815) 213,845   744,837 2,305,167 3,813,862
    Off-balance sheet profit sensitivity gap    1,390,308  360,017   360,017 2,484,641       -
                                                ________ ________ ________ ________ ________
    Net maturity mismatch                      (1,611,507) 573,862 1,104,854 4,789,808 3,813,862
                                                ======= ======= ======= ======= =======
                                                                                                                                                  73
Company No. 423858-X



42. Liquidity risk
    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 liquidity of the reporting institution. The table below provides analysis of assets and liabilities
    into relevant maturity tenures based on their behavioral profile:

    As at 30 June 2006                                      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
    Assets
    Cash and short-term funds                              2,884,387             -             -              -           -        2,884,387
    Deposits and placements with banks and other
       financial institutions                                     -              -         796,548            -           -          796,548
    Securities
    Held-for-trading                                         303,219             -            -              -        -              303,219
    Held-to-maturity                                             -               -            -           37,364 1,497,010         1,534,374
    Available-for-sale                                       253,161         726,212       515,627       929,115      -            2,424,115
    Financing, advances and others                         1,690,731         845,365     1,268,048           -    4,663,130        8,467,274
    Other assets                                                 -               -            -              -    1,334,859        1,334,859
                                                          _________        ________      ________       ________ _________        _________
    Total assets                                           5,131,498       1,571,577     2,580,223       966,479 7,494,999        17,744,776
                                                          ========         =======       =======        ======= ========          ========
                                                                                                                               74
Company No. 423858-X



42. Liquidity risk (continued)
    As at 30 June 2006 (continued)                  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
    Liabilities
    Deposits from customers                         1,537,957   1,255,897     2,335,899    952,334   8,066,506   14,148,593
    Deposits and placements of banks and other
       financial institutions                          63,028       -              -           -        -         63,028
    Bills and acceptance payable                      100,919       -              -           -        -        100,919
    Other liabilities                                 958,544       -              -           -        -        958,544
                                                   _________    ________      ________    ________ _________ _________
    Total liabilities                               2,660,448   1,255,897     2,335,899    952,334 8,066,506 15,271,084
    Equity                                              -           -              -           -     (145,891)  (145,891)
    Takaful funds                                       -           -              -           -    2,445,551  2,445,551
    Minority interests                                  -           -              -           -      174,032    174,032
                                                   _________    ________      ________    ________ _________ _________
    Total liabilities, equity, Takaful funds and
      minority interests                            2,660,448   1,255,897     2,335,899    952,334 10,540,198    17,744,776
                                                   ========     =======       =======     ======= ========       ========
    Off-balance sheet liabilities
      Commitments &
      contingencies                                 1,111,893   1,513,100      311,954    1,089,434    -          4,026,381
                                                   _________    ________      ________    ________ _________     _________
    Net maturity mismatch                           1,359,157   (1,197,420)     (67,630) (1,075,289) (3,045,199) (4,026,381)
                                                   ========      =======      =======     ======= ======== ========
                                                                                                                          75
Company No. 423858-X



42. Liquidity risk (continued)
                                                   Up to 1     >1–3        > 3 – 12    >1–5       Over 5
   As at 30 June 2005                               month      months      months       years      years       Total
                                                   RM’000      RM’000      RM’000      RM’000     RM’000      RM’000
   Assets
   Cash and short-term funds                       2,877,390        -           -          -          -       2,877,390
   Deposits and placements with banks and other
      financial institutions                            -        43,775     484,778     104,025      1,221     633,799
   Securities
   Held-for-trading                                1,149,759         -           -           -        -       1,149,759
   Held-to-maturity                                      -           -           -        33,372 1,310,134    1,343,506
   Available-for-sale                                    -     1,132,372         -     1,117,276      -       2,249,648
   Financing, advances and others                  2,598,929     561,336     743,159   1,381,934 3,811,433    9,096,791
   Other assets                                    1,157,079         -           -           -        -       1,157,079
                                                  _________    ________    ________    ________ _________    _________
   Total assets                                    7,783,157   1,737,483   1,227,937   2,636,607 5,122,788   18,507,972
                                                  ========     =======     =======     ======= ========      ========
                                                                                                                            76
Company No. 423858-X



42. Liquidity risk (continued)
                                                    Up to 1     >1–3        > 3 – 12    >1–5       Over 5
   As at 30 June 2005 (continued)                   month       months      months       years      years       Total
                                                    RM’000      RM’000      RM’000      RM’000     RM’000      RM’000
   Liabilities
   Deposits from customers                        11,291,498     306,363     331,440        -     1,308,926   13,238,227
   Deposits and placements of banks and other
      financial institutions                       1,352,919         -           -           -        -        1,352,919
   Bills and acceptance payable                       86,471         -           -           -        -           86,471
   Other liabilities                                 406,438         -           -           -        -          406,438
                                                  _________     ________    ________    ________ _________    _________
   Total liabilities                              13,137,326      306,363     331,440        -    1,308,926   15,084,055
   Equity                                                -            -           -          -    1,086,537    1,086,537
   Takaful funds                                         -            -           -          -    2,172,424    2,172,424
   Minority interests                                    -            -           -          -      164,956      164,956
                                                  _________     ________    ________    ________ _________    _________
   Total liabilities, equity, Takaful funds and
     minority interests                           13,137,326     306,363     331,440        -    4,732,843    18,507,972
                                                  ========      =======     =======     ======= ========      ========
   Off-balance sheet liabilities
     Commitments &
     contingencies                                 1,390,308      360,017    360,017    2,484,641      -       4,594,983
                                                  _________     ________    ________    ________ _________    _________
   Net maturity mismatch                          (6,744,477)   1,071,103    536,480      151,966   389,945   (4,594,983)
                                                  ========      =======     =======     ======= ========      ========
                                                                                          77
Company No. 423858-X


43. Lease commitments
                                                                           Group
                                                                2006               2005
                                                               RM’000             RM’000
   As lessee:
      Within one year                                           28,338             20,816
      Between one and five years                                54,729             61,789
                                                               _______            _______
                                                                 83,067             82,605
                                                               ======             ======
44. Capital commitments
                                                                           Group
                                                                2006               2005
                                                               RM’000             RM’000
   Property, plant and equipment
      Contracted but not provided for in
      the financial statements                                  16,335             11,933
      Approved but not contracted for                              -               14,781
   Investments
      Contracted but not provided for in
      the financial statements                                     -                1,657
                                                                =====              =====
45. Capital adequacy
   The capital adequacy ratio of the Group’s banking operations is analysed as follows:

                                                                          Group
                                                               2006                2005
                                                              RM’000              RM’000
   Tier-I capital
   Paid-up share capital                                        880,000          600,000
   Share premium                                                331,375          331,375
   (Accumulated losses)                                      (1,698,516)        (401,727)
   Other reserves                                               215,951          200,533
                                                              ________         ________
   Total Tier-1 capital                                       (271,190)         730,181
                                                             =======           =======
   Tier-II capital
   Redeemable Subordinated Mudharabah financing                100,000           100,000
   General allowance for bad and doubtful financing            168,462           160,533
                                                             ________          ________
   Total tier-II capital                                       268,462           260,533
                                                             =======           =======
   Total capital                                              (271,190)          990,714
   Less: Investment in Subsidiaries                             (5,947)         (13,075)
                                                             ________          ________
   Capital base                                               (277,137)         977,639
                                                             =======           =======
                                                                                            78
Company No. 423858-X


45. Capital adequacy (continued)
                                                                           Group
                                                                    2006           2005

   Core capital ratio                                               -2.78%          6.77%
   Risk-weighted capital ratio                                      -2.84%          9.06%
   Core capital ratio after proposed dividends                      -2.78%          6.77%
   Risk-weighted capital ratio after proposed dividends             -2.84%          9.06%

   Pursuant to the additional capital injection of RM1,014.59 million received by a
   subsidiary, Bank Islam Malaysia Berhad subsequent to the balance sheet date on 16
   October 2006 (as described in Note 51), the core capital ratio and risk-weighted capital
   ratio have improved to exceed the minimum regulatory requirement.

   Breakdown of risk weighted assets in the various categories of risk weights:

                                                 2006                        2005
                                                         Risk                       Risk
                                       Principal        weighted    Principal      weighted
                                       RM’000           RM’000      RM’000         RM’000

   0%                                 3,545,424       -             3,844,975          -
   10%                                   13,640     1,364              33,640         3,364
   20%                                  726,679   145,336           1,841,988       368,398
   50%                                2,435,386 1,217,693           2,446,854     1,223,427
   100%                               7,909,296 7,909,296           9,195,799     9,195,799
                                     _________ _________           _________      ________
   Total risk-weighted assets for
     credit risk                     14,630,425     9,273,689      17,363,256 10,790,988
   Total risk-weighted assets for
     market risk                         -       471,239               -              -
                                     _________ _________           _________      ________
   Total risk-weighted assets for
     credit and market risk          14,630,425 9,744,928          17,363,256 10,790,988
                                     ======== ========             ======== =======

46. Currency
   All amounts are stated in Ringgit Malaysia.
                                                                                       79
Company No. 423858-X



47. Financial risk management policies
   The guidelines and policies adopted by the Group to manage the following risks that
   arise in the conduct of the business activities are as follows:

   Operational risk

   This risk is defined as the risk of loss arising from inadequate or failed internal
   processes, people and systems and external events. In managing this risk a dedicated
   team has been established. The team is responsible for identification, assessment and
   measurement, control framework, monitoring and reporting of operational risks.

   Credit risk

   Credit risk is the potential loss of revenue and principal in the form of specific
   allowances as a result of defaults by the customers or counter parties through the
   financing, dealing and investing activities.

   The primary exposure to credit risk arises from financing activities. Credit policy to
   govern the activities is rigorously being enhanced with the objectives of improving the
   quality of assets originated and preserved. This is in line with the on-going
   organisation transformation.

   Under the credit process flow, credit administration, credit control, review and
   analysis are performed independently of individuals involved in business origination.
   In addition, an independent evaluation of credit proposal before approval has been
   established for all proposal involving corporate and commercial. This function is
   performed by risk management division.

   Credit risk arising from dealing and investing activities are managed by the
   establishment of limits which includes, counter parties limits, permissible acquisition
   of not less than A-rated private entities’ instruments. Furthermore, the dealing and
   investing activities are monitored by an independent middle office unit.

   Underwriting risk

   Underwriting risk includes the risk of incurring higher claims costs than expected
   owing to the random nature of claims and their frequency and severity and the risk of
   change in legal or economic conditions or behavioural patterns affecting Takaful
   pricing and conditions of Takaful or retakaful cover. This may result in the Takaful
   companies having either received too little contribution for the risk it has agreed to
   underwrite and hence has not enough funds to invest and pay claims, or claims that are
   in excess of those expected. The Group seeks to minimise underwriting risks with a
   balance mix and spread of business between classes of business and by observing
   underwriting guidelines and limits, conservative estimation of the claims provisions
   and high standards applied to security at retakaful.
                                                                                         80
Company No. 423858-X



47. Financial risk management policies (continued)
   Market risk

   Market risk is the risk of loss arising from the adverse movement in the level of market
   prices or rates. The market risk components are foreign exchange risk, profit rate risk
   and equity risk.

   i) Foreign exchange risk

      This risk refers to the adverse exchange rate movements on foreign currency
      positions taken by the Group. Foreign currency open position is monitored against
      predetermined position limits and cut-loss limits.

   ii) Profit rate risk

      This risk refers to volatility in the net profit income as a result of changes in the
      levels of profit rate and shift in the composition of the assets and liabilities. The
      profit rate risk, however, is self-mitigated when most of the financing assets are
      based on fixed rate while profits paid to depositors are not contractual. Profits paid
      to depositors/investors depend on the profit generated from the Group’s activities
      and the profit sharing distribution.

      The Group is not exposed directly to interest rate risk because interest is prohibited
      under Islamic banking. The indirect interest rate risk exists arising from
      competition with other banks. This is managed by regularly reviewing the profit
      rates.

   iii) Equity risk

      Equity risk refers to the adverse movements in the price of equities on equity
      positions. Equity position is marked to market and monitored by the Risk
      Management Division and reported to the Risk Management Committee.

   Liquidity risk

   Liquidity risk relates to the risk arising mainly from withdrawals of deposits. In
   managing this, the Group is adopting the liquidity framework introduced by Bank
   Negara Malaysia which prescribes liquidity level based on the contractual and
   behavioural cash flow of assets, liabilities and off-balance sheet commitments.
                                                                                           81
Company No. 423858-X



48. Fair value of financial assets and liabilities
    Financial instruments comprise financial assets, financial liabilities and off-balance
    sheet instruments. Fair value is the amount at which the financial assets could be
    exchanged or a financial liability settled, between knowledgeable and willing parties in
    an arm’s length transaction. The information presented herein represents the estimates
    of fair values as at the balance sheet date.

    Where available, quoted and observable market prices are used as the measure of fair
    values. Where such quoted and observable market prices are not available, fair values
    are estimated based on a range of methodologies and assumptions regarding risk
    characteristics of various financial instruments, discount rates, estimates of future cash
    flows and other factors. Changes in assumptions could materially affect these
    estimates and resulting fair value estimates.

    Fair value information for non-financial assets and liabilities are excluded as they do
    not fall within the scope of FRS 1322004, Financial Instruments: Disclosure and
    Presentation which requires the fair value information to be disclosed.

    The following table summarises the carrying and fair values of the financial assets and
    liabilities on the balance sheet date:
                                             Carrying value                Fair value
                                           2006          2005         2006          2005
                                        RM’000         RM’000       RM’000        RM’000
    Financial assets
    Cash and short-term funds          2,884,387     2,887,390    2,884,387      2,887,390
    Deposits and placements with
         banks and other financial
         institutions                    796,548       633,799      796,548        633,799
    Securities
    Held-for-trading                     303,219     1,149,759      303,219      1,149,759
    Held-to-maturity                   1,534,374     1,343,506    1,534,374      1,343,506
    Available-for-sale                 2,424,115     2,249,648    2,424,115      2,249,648
    Financing, advances and
         others                        8,467,274     9,096,791    8,708,157      9,234,063
                                      ======== ======== ======== ========

    Financial liabilities
    Deposits from customers         14,148,593      13,238,227     14,148,593     13,238,227
    Deposits and placements of
        banks and other financial
        institutions                   63,028        1,352,919        63,028       1,352,919
    Bills and acceptance payable      100,919           86,471       100,919          86,471
                                    ========        ========       ========       ========
                                                                                            82
Company No. 423858-X



48. Fair value of financial assets and liabilities (continued)
    The fair value of the Group’s financial instruments which include cash and short-term
    funds, deposits and placements with banks and other financial institutions and short-
    term borrowings are not materially sensitive to shifts in market interest rate because of
    the limited term to maturity of these instruments.

    As such, the carrying value of these financial assets and liabilities at balance sheet date
    approximate their fair values.

    The fair values are based on the following methodologies and assumptions:

    Deposits and placements with banks and other financial institutions

    For deposits and placements with financial instruments with maturities of less than six
    months, the carrying value is a reasonable estimate of fair values. For deposits and
    placements with maturities six months and above, the estimated fair values are based
    on discounted cash flows using prevailing money market profit rates at which similar
    deposits and placements would be made with financial instruments of similar credit
    risk and remaining period to maturity.

    Securities held-for-trading and securities available-for-sale

    The estimated fair values are generally based on quoted and observable market prices.
    Where there is no ready market in certain securities, fair values have been estimated by
    reference to market indicative yields or net tangible asset backing of the investee.

    Financing, advances and others

    Their fair value is estimated by discounting the estimated future cash flows using the
    prevailing market rates of financings with similar credit risks and maturities. The fair
    values are represented by their carrying value, net of specific allowance and income-
    in-suspense, being the recoverable amount.

    Deposits from customers

    For deposits from customers with maturities of less than six months, the carrying
    amounts are a reasonable estimate for their fair values. For deposits with maturities of
    six months or more, the fair values are estimated using discounted cash flows based on
    prevailing market rates for similar deposits from customers.

    Deposits and placements of banks and other financial institutions

    The estimated fair values of deposits and placements of banks and other financial
    institutions with maturities of less than six months approximate the carrying values.
    For deposits and placements with maturities of six months or more, the fair values are
    estimated based on discounted cash flows using prevailing money market profit rates
    for deposits and placements with similar remaining period to maturities.
                                                                                           83
Company No. 423858-X



48. Fair value of financial assets and liabilities (continued)
    Bills and acceptance payable

    The estimated fair values of bills and acceptance payables with maturity of less than
    six months approximate their carrying values. For bills and acceptance payable with
    maturities of six months or more, the fair values are estimated based on discounted
    cash flows using prevailing market rates for borrowings with similar risks profile.

49. Changes in accounting policy
    (a)   During the financial year ended 30 June 2006, a subsidiary, Bank Islam Malaysia
          Berhad, adopted revised Bank Negara Malaysia/GP8-i which resulted in the
          following new accounting policies:

    1)    Securities

          The holdings of the securities portfolio of the Group are recognised     based on
          the following categories and valuation methods:

          (i)    Securities held-for-trading

                 Securities are classified as held-for-trading if these financial assets are
                 acquired principally for the purpose of benefiting from actual or expected
                 short-term price movement. The securities held-for-trading are stated at fair
                 value and any gain or loss arising from a change in their fair values and the
                 derecognition of securities held-for-trading are recognised in the income
                 statement.

          (ii)   Securities held-to-maturity

                 Securities held-to-maturity are financial assets with fixed or determinable
                 payments and fixed maturity that Bank has the positive intent and ability to
                 hold to maturity.

                 The securities held-to-maturity are measured at accreted/amortised cost
                 based on effective yield method. Amortisation of premium, accretion of
                 discount and impairment as well as gain or loss arising from derecognition
                 of securities held-to-maturity are recognised in the income statement.
                                                                                            84
Company No. 423858-X



49. Changes in accounting policy (continued)
   1)    Securities (continued)

         (iii) Securities available-for-sale

              Securities available-for-sale are financial assets that are not classified as
              held-for-trading or held-to-maturity. The securities available-for-sale are
              measured at fair value or at cost (less impairment losses) if the fair value
              cannot be reliably measured. Any gain or loss arising from a change in fair
              value are recognised directly in equity through the statement of changes in
              equity, until the financial asset is sold, collected, disposed of or impaired, at
              which time the cumulative gain or loss previously recognised in equity will
              be transferred to the income statement.

         The change in the measurement and recognition of these investments has been
         effected prospectively as it is impracticable to obtain relevant information
         regarding investment portfolio retrospectively. This arises from the constraint
         faced by the Group due to the change in its treasury system. The Group changed
         its treasury system from Matrix System to Quantum System effective March
         2006.

   2)    Financing

         Where a financing account becomes non-performing, profit accrued and
         recognised as income prior to the date the account is classified as non-
         performing is not reversed out of income but an allowance is made against that
         income in conformity with Bank Negara Malaysia guidelines. Thereafter, profit
         on the non-performing financing shall only be recognised as income on a cash
         basis instead of being accrued and suspended at the same time as practised
         previously.

   (b)   During the financial year ended 30 June 2006, a subsidiary, Syarikat Takaful
         Malaysia Berhad (“STMB”), started to recognise revenue on accrual basis in line
         with JPIT/GPT 6 – Guidelines on Financial Statements for Takaful Operators
         issued by Bank Negara Malaysia. Prior to 2 February 2006, the Group
         recognised revenue from Takaful operations on cash basis. Effective from 2
         February 2006, the Group started to recognise revenue on accrual basis in line
         with the above guildeline. The adoption of accrual basis has been applied
         prospectively due to the limitation of the previous systems (i.e. FTS and GTS)
         which had been developed to cater for cash basis only and were unable to
         reproduce comparative figures on accrual basis. Hence, comparative information
         has not been presented.
                                                                                        85
Company No. 423858-X



49. Changes in accounting policy (continued)
     As such, the following comparatives have been reclassified to reflect the changes in
     accounting policy.
                                                                           As previously
                                                          As restated           stated
                                                            RM ‘000            RM’000
     Balance sheet
     Securities held-for-trading                            1,149,759              -
     Securities held-to-maturity                            1,343,506              -
     Securities available-for-sale                          2,249,648              -
     Dealing securities                                            -           1,151,789
     Investment securities                                         -           3,591,034
     Financing, advances and others                         9,096,791          9,212,896
     Other assets
        Income receivable                                     302,374            186,269
                                                             =======           =======
     Income statement
     Income derived from investment of depositors’ funds      764,551            752,695
     Income attributable to depositors                        282,426            270,570
                                                             =======           =======

     Changes in accounting policy have been adopted prospectively hence cash flow
     statement was not restated due to impracticable to retrieve retrospective information.

50. Significant events during the year
   On 20 October 2005, the Company announced the following proposals:

   Stage 1
   A proposed renounceable rights issue of 281,482,500 new ordinary shares of RM1.00
   each (“Rights Shares”) at par, on the basis of one Rights Share for every two existing
   ordinary shares of RM1.00 each held (“BHB Shares”); and

   Stage II
   After completion of Stage I and upon proposed acquisition of 49 million ordinary
   shares of RM1.00 each in BIMB Securities Sdn Bhd (“BIMBSec”) representing 49%
   equity interest in BIMBSec for a purchase consideration of RM54.45 million to be
   satisfied via the issuance of 46,942,416 new BHB Shares at RM1.16 per BHB Share.

   The proposals are inter-conditional with one another.

   The Company has obtained the approval of the Securities Commission vide its letters
   dated 16 February 2006 and 13 March 2006 under the SC Guidelines. The Company
   convened on Extraordinary General Meeting on 14 June 2006 and obtained
   shareholders’ approval for the proposals. The proposals are expected to be completed
   by February 2007.
                                                                                        86
Company No. 423858-X



51. Significant events subsequent to the year end
   On 30 June 2006 the Company announced that the Company and its wholly-owned
   subsidiary, BIMB, have entered into the following:

   (i)    a subscription agreement for subscription by Dubai Financial LLC (“DF”, a
          subsidiary of Dubai Investment Group LLC, “DIG”) of 690,196,000 new BIMB
          Shares representing 40% of the enlarged share capital of BIMB at an issue price
          of RM1.20 per new BIMB Share; and

   (ii)   a subscription agreement for subscription by Lembaga Tabung Haji (“LTH”) of
          155,294,000 new BIMB Shares representing approximately 9% of the enlarged
          share capital of BIMB at an issue price of RM1.20 per new BIMB Share.

   The Company, BIMB, DF and LTH have also on 30 June 2006 entered into the
   Shareholders Agreement for purposes of regulating the relationship with each other as
   shareholders of BIMB and certain aspects of the affairs of and their shareholdings in
   BIMB following the completion of the Proposed Restricted Issue to DF and the
   Proposed Restricted Issue to LTH.

   The Company has obtained the approval of the Securities Commission vide its letter
   dated 5 September 2006 under the SC Guidelines and FIC Guidelines; and approval
   from the Ministry of Finance on 9 October 2006.

   Upon completion of the Proposed Restricted Issue, the Company’s shareholdings in
   BIMB has been reduced from 100% to approximately 51%.

   The Company convened an Extraordinary General Meeting on 13 October 2006 and
   obtained shareholders’ approval for the issuance of new BIMB shares to DF and LTH
   pursuant to the above subscription agreements.

   Upon subscription of the above issuance of new BIMB shares to DF and LTH, BIMB
   has received RM1,014.59 million cash on 16 October 2006.

   With this capital injection, the Group improved into a positive shareholder’s funds due
   to the gain arising from the Company’s dilution of interest in BIMB from 100% to
   51%. This justifies the basis of preparation of the financial statements of the Group on
   a going concern for the year ended 30 June 2006.
    BIMB Holdings Berhad
        (Company No. 423858-X)
        (Incorporated in Malaysia)
      and its subsidiaries
Financial statements for the year
      ended 30 June 2006




                             Domiciled in Malaysia
                             Registered office
                             14th Floor, Darul Takaful
                             Jalan Sultan Ismail
                             50754 Kuala Lumpur

				
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