Vision - Hong Leong Financial Group

1 ANNUAL REPORT 2016 VisionTo be an integrated Financial services Group that consistently meets our customers needsCorporateIntroduction02 Five Year Group Financial Highlights04 Simplified Group Statements of Financial Position06 Group Quarterly Financial Performance07 Segmental Information08 Hong Leong Financial Group Share Price09 Financial Calendar10 Significant Milestones12 Awards and Accolades14 Chairman s Statement16 President & CEO s Review22 Corporate Social Responsibility28 Corporate Information34 Board of Directors36 Key Senior Management39 Board Audit and Risk Management Committee Report41 Corporate Governance, Risk Management & Internal Control44 FINaNCIaLSDirectors Report57 Statements of Financial Position67 Statements of Income69 Statements of Comprehensive Income70 Statements of Changes in Equity71 Consolidated Statements of Cash Flows74 Company Statements of Cash Flows77 Summary of Significant Accounting Policies79 Notes to the Financial Statements104 Statement by Directors224 Statutory Declaration224 Independent Auditors Report225aDDItIoNaL INForMatIoNNotice of Annual General Meeting227 Statement Accompanying Notice of Annual General Meeting230 Other Information231 Form of ProxyContentsHONG Leong Financial Group BERHAD ANNUAL REPORT 20162 INtroDUCtIoNHong Leong Financial Group Berhad, the holding company for Hong Leong Group s banking and Financial services.

2 Has advanced through the years guided by focused business strategies supported by strong management and Financial Leong Financial Group Berhad s ( HLFG or the Group ) integrated suite of conventional and Islamic Financial products and services enables it to reach out and connect with its customers not only in Malaysia, but throughout the Hong Leong Bank Berhad ( HLB ), the Group provides comprehensive offerings in personal Financial services, business banking, treasury, transaction banking, and wealth management. With an extensive distribution network of approximately 300 branches and over 1,400 self-service terminals throughout Malaysia, HLB is well positioned to offer effective, sound and responsible Financial solutions to Malaysians from all walks of s regional footprint is marked by branches in Singapore and Hong Kong, wholly owned subsidiaries in Vietnam and Cambodia, as well as a representative office in Nanjing.

3 Additionally, HLB has a 20% shareholding in the Bank of Chengdu Co., Ltd., in China and is also a joint venture partner with the Bank of Chengdu in operating a licensed consumer finance company in central and Western China. Islamic banking and wealth management services are offered through Hong Leong Islamic Bank Berhad ( HLISB ), a full-fledged Islamic bank and wholly-owned subsidiary of HLB. By leveraging on HLB s extensive network, as well as its own dedicated branches, HLISB provides easy access to customers seeking Shariah compliant alternatives to conventional banking products and services. A full suite of products on offer include investment banking, business banking, personal Financial services and wealth management, the delivery of which encapsulates the tenets and principles of Shariah Bank Singapore ( HLBS ) transitioned from a pure private banking institution and has successfully extended its services to include consumer financing following its business transformation initiated two years ago.

4 HLBS has today become a preferred banker within the health banking and auto financing niches in the country with a significant market share. 3 Corporate / Financials / Additional InformationINtroDUCtIoNHLA Holdings Sdn Bhd ( HLAH ) is the insurance holding company of the Group . HLAH s subsidiary Hong Leong Assurance Berhad ( HLA ) is one of the country s fastest growing life insurers and is also a leading Malaysian insurance company backed by a strong and competent agency force nationwide. To expand its influence, HLA merged its general insurance business with that of MSIG Insurance (Malaysia) Bhd in a strategic partnership. Today, General and Family Takaful is provided through Hong Leong MSIG Takaful Berhad. HLAH is also present in Hong Kong and Singapore through its subsidiaries, Hong Leong Insurance (Asia) Limited and HL Assurance Pte Ltd.

5 In addition to banking and insurance, HLFG provides stock broking, investment banking, capital market and fund management services through Hong Leong Capital Berhad ( HLCB ) Group . Hong Leong Investment Bank Berhad, a subsidiary of HLCB, offers relevant and effective solutions to institutional clients seeking to generate value, access capital markets, as well as utilise innovative trading products and services across treasury, equities, derivatives and foreign exchange. Another key subsidiary, Hong Leong Asset Management Berhad ( HLAM ), was the result of a merger between HLG Unit Trust Berhad, a pioneer in the Malaysian unit trust industry, and HLG Asset Management Sdn Bhd. Today, HLAM offers a comprehensive range of managed solutions across equity and debt asset classes, along with efficient customer support and communications, to help its customers achieve superior long-term risk-adjusted Leong Financial Group BERHAD ANNUAL REPORT 20164 FIve Year Group Financial HIGHLIGHtS20122013201420152016the GrouprM MillionrM MillionrM MillionrM MillionrM MillionStatements of Financial positionTotal assets 170,286 180,473 190,177 202,441 210,475 Net loans 89,513 96,275 103,665 113,112 120,445 Total liabilities 157,004 165,468 173,172 182,976 187,297 Deposits from customers 123,217 123,959 130,632 140,955 149,491 Shareholders' funds 8,899 10,076 11,474 13,111 15,341 Commitments and contingencies 154,326 167,126 199,881 157,622 159,473 Statements of IncomeRevenue 4,158 4,379 4.

6 549 4,491 4,543 Profit before tax 2,394 2,630 3,009 3,023 2,565 Net profit 1,853 2,165 2,517 2,460 2,064 Profit attributable to owners of the parent 1,234 1,488 1,707 1,621 1,359 Key performance IndicatorsShare price (RM) Book value per share (RM) Basic earnings per share (sen) Net dividend per share (sen) Financial ratios (%)profitability ratiosReturn on on average *asset Quality/Loan ratiosGross loans to deposits impaired loans * Including HLB s MSS expense. Excluding HLB s MSS expense, cost/income ratio is / Financials / Additional InformationFIve Year Group Financial HIGHLIGHtSFive year performance chart (% growth) Group total assets (RM Million)YoY + = 12170,286 13180,473 14190,177 15202,441 16210,475 Group profit before tax (RM Million)YoY = 13 14 15 16 122,3943,0093,0232,6302,565 Group Book value per Share (RM) 13 14 15 16 + = % Group earnings per Share (Sen) 13 14 15 16 12 YoY profit attributable to owners of the parent (RM Million) 13 14 15 16 12 YoY = ,2341,4881,7071,6211,359 Group return on equity (%)

7 Leong Financial Group BERHAD ANNUAL REPORT 20166SI MpLIFIeD Group StateMeNtS oF Financial poSItIoNassetsa Loans, advances and financingb Cash and short-term fundsc Portfolio of securitiesd Securities purchased under resale agreementse Deposits and placements with banks and other FIf Statutory deposits with Central Banksg Other assets (including goodwill)Liabilities & equitya Deposits from customersb Deposits and placements of banks and other FIc Obligations on securities sold under repurchase agreementsd Borrowings and subordinated obligationse Innovative and Non-Innovative Tier 1 securitiesf Insurance fundsg Other liabilitiesh Share capitali Reserves (net of treasury shares for ESOS)j Non-controlling interests / Financials / Additional InformationGroUp QUarterLY Financial perForMaNCe2016rM MillionQ1Q2Q3Q4 YearStatements of IncomeRevenue 1,147 1,165 1,025 1,206 4,543 Profit before tax 697 487 592 789 2,565 Net profit 582 396 485 601 2,064 Profit attributable to owners of the parent 387 264 315 393 1,359 Key performance IndicatorsShare price (RM) Book value per share (RM) earnings per share (sen) Dividend per share (sen) 2015rM Million Q1 Q2 Q3 Q4 Year Statements of IncomeRevenue 1,083 1,143 1,046 1,219 4,491 Profit before tax 747 796 700 780 3,023 Net profit 591 630 549 690 2,460 Profit attributable to owners of the parent 392 425 363 441 1,621 Key performance IndicatorsShare price (RM)

8 Book value per share (RM) Basic earnings per share (sen) Dividend per share (sen) HONG Leong Financial Group BERHAD ANNUAL REPORT 20168 SeGMeNtaL INForMatIoNa C ommercial Bankingb Insurancec Investment Bankingd Other Operations/Consolidation Adja C ommercial Bankingb Insurancec Investment Bankingd Other Operations/Consolidation AdjoperatING reveNUeBy Business BeFore taXBy Business / Financials / Additional InformationDividend per senYoY SaMeShare bilYoY per senYoY tal Shareholder Leong Financial Group SHare prICeHong Leong Financial Group Share price vs Benchmark FBMKLCI%40200-20-40 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 HLFG FBMKLCI Share Price VolumeHong Leong Financial Group Share price & volumeShare Price (RM)

9 020101550 MJun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Dec 11 Dec 12 Dec 13 Dec 14 Dec Leong Financial Group BERHAD ANNUAL REPORT 201610 Financial CaLeNDarentitlement1 December 2015payment23 December 2015 Annual General Meeting27 October 2016 (Thursday)47th Annual General MeetingNotice17 November 2015 Notice24 May 2016entitlement13 June 2016payment28 June 20161st Interim Single-tier Dividend of 13 sen per share2nd Interim Single-tier Dividend of 25 sen per share17 NOVEMBER 2015 TUESDAY unaudited results for 1st quarter ended 30 September 201523 FEBRUARY 2016 TUESDAY unaudited results for 2nd quarter ended31 December 201524 MAY 2016 TUESDAY unaudited results for 3rd quarter ended 31 March 201629 AUGUST 2016 MONDAY unaudited results for 4th quarter and Financial year ended 30 June 2016 DIvIDeNDSaNNoUNCeMeNt oF CoNSoLIDateD reSULtS11 Corporate / Financials / Additional InformationHONG Leong Financial Group BERHAD ANNUAL REPORT 201612 SIGNIFICaNt MILeStoNeSHLISB incorporatedHong Leong Tokio Marine Takaful Bhd incorporatedJune 2006 Changed name to Hong Leong Financial Group

10 Bhd July 2006 HLCB 1:1 Rights Issue completedoctober 2009 HLAS obtained Singapore general insurance licenseJune 2013 Sichuan Jincheng consumer finance JV incorporatedFebruary 2010 HLB Cambodia commenced operationsJuly 2013 MSIG Strategic Partnership completedoctober 2010 HLB acquired EON Capital Bhd s assets and 2011 Merger of HLIB & MIMB Investment Bank completedSeptember 2012 March 2005 Journeying towards greater heights13 Corporate / Financials / Additional InformationSIGNIFICaNt MILeStoNeSHLIB proposed to acquire the identified assets and liabilities of Southern Investment Bank Bhdoctober 2007 HLB established a Representative Office in Nanjing, ChinaNovember 2013 HLA proposed to acquire PJ City premisesapril 2008 HLFG Group FY14 pretax profit surpassed the RM3b markJune 2014 HLFG and HLB completed Rights Issues raising billion and billion respectivelyDecember 2015 HLB acquired 20% equity interest in the Bank of ChengduJuly 2008 HLIB acquired SBB Securities Sdn Bhd october 20081.