Malaysia Building Society : Audited Financial Statements for Financial Year Ended 31 December 2023

MALAYSIA BUILDING SOCIETY BERHAD (197001000172 / 9417-K)

(Incorporated in Malaysia)

FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

MALAYSIA BUILDING SOCIETY BERHAD (197001000172 / 9417-K)

(Incorporated in Malaysia)

Contents	Page
Directors' Report	1	- 8
Statement by Directors		9
Statutory Declaration	10
Independent auditors' report	11	- 18
Statements of financial position	19	- 20
Statements of profit or loss and other comprehensive income	21	- 22
Statements of changes in equity	23	- 24
Statements of cash flows	25	- 29
Notes to the financial statements	30 - 220

MALAYSIA BUILDING SOCIETY BERHAD (197001000172 / 9417-K)

(Incorporated in Malaysia)

Directors' Report

for the financial year ended 31 December 2023

The Directors have pleasure in presenting their report together with the audited financial statements of the Malaysia Building Society Berhad ("the Company") and its subsidiaries (together referred to as "the Group") for the financial year ended 31 December 2023.

Principal activities

The Company is principally engaged in investment holding. The Company had ceased providing new financing, but continues to manage its remaining conventional loans and advances until 31 January 2024 following disposal of the loans to Emerald Unity Sdn. Bhd. as disclosed in Note 52 of the financial statements.

Financial results

Group Company

RM'000 RM'000

Net profit for the financial year

491,809

427,590

Dividends

The dividends on ordinary shares paid or declared by the Company since 31 December 2022 were as follows:

	RM'000
In respect of the financial year ended 31 December 2022:
- single-tier interim dividend of 8.50 sen per ordinary share on 7,171,483,803
ordinary shares declared on 20 March 2023 and paid on
17 April 2023	609,576

On 18 April 2024, the Company announced a single-tier final dividend of 3.5 sen per ordinary share in respect of the financial year ended 31 December 2023. Based on the number of shares in issue of 8,222,312,432 ordinary shares as at 31 December 2023, the dividend payable would be RM287,780,935.

The financial statements for the current financial year do not reflect the proposed final dividend. Such dividend, if approved by the shareholders in the forthcoming Annual General Meeting, will be accounted for in equity as an appropriation of retained profits in the financial year ending 31 December 2024.

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MALAYSIA BUILDING SOCIETY BERHAD (197001000172 / 9417-K)

(Incorporated in Malaysia)

Reserves, provisions and allowances

There were no material transfers to or from reserves or provisions or allowances during the financial year other than those disclosed in the financial statements and notes to the financial statements.

Issue of shares and debentures

During the financial year, the Company increased its issued and paid up ordinary share capital by RM772,359,042 from RM7,198,068,070 to RM7,970,427,112 as follows:

			Issue/
	Number of new		exercise
	ordinary shares		price
	Units'000	RM'000	(sen)
Issued on 2 October 2023 pursuant to the
acquisition of the entire equity interest
in Malaysia Industrial
Development Finance Berhad ("MIDF")	1,050,829	772,359	0.74

Save as disclosed above, there were no other new shares or debentures issued during the financial year.

Bad and doubtful debts and financing

Before the financial statements of the Group and of the Company were prepared, the Directors took reasonable steps to ascertain that proper actions had been taken in relation to the writing off of bad debts and financing and the making of allowance for doubtful debts and financing and satisfied themselves that all known bad debts and financing had been written off and that adequate allowance had been made for doubtful debts and financing.

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

Current assets

Before the financial statements of the Group and of the Company were prepared, the Directors took reasonable steps to ascertain that any current assets, other than debts and financing, which were unlikely to realise in the ordinary course of business, including the values of current assets as shown in the accounting records of the Group and of the Company had been written down to an amount which the current assets might be expected so to realise.

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

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MALAYSIA BUILDING SOCIETY BERHAD (197001000172 / 9417-K)

(Incorporated in Malaysia)

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:

1. any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or
2. any contingent liability of the Group or of the Company which has arisen since the end of the financial year other than those arising from the normal course of business of the Group and of the Company.

No contingent or other liability in the Group or 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 affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

Change of circumstances

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

Items of an unusual nature

In the opinion of the Directors, the results of the operations of the Group and of the Company for the financial year ended 31 December 2023, 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.

Directors

The Directors of the Company who have held office during the financial year and during the period from the end of the financial year to the date of this report are:

Encik Mohamad Abdul Halim bin Ahmad

Puan Lynette Yeow Su-Yin

Encik Sazaliza bin Zainuddin

Dr. Loh Leong Hua

Tan Sri Abdul Rahman bin Mamat (appointed on 5 December 2023)

Datuk (Dr.) Yasmin binti Mahmood (appointed on 5 December 2023)

Dato' Wan Kamaruzaman bin Wan Ahmad (appointed 24 January 2024)

Datin Hoi Lai Ping (resigned on 24 January 2024)

Ir. Moslim bin Othman (resigned on 6 February 2024)

Tan Sri Azlan bin Mohd Zainol (deceased on 12 January 2023)

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MALAYSIA BUILDING SOCIETY BERHAD (197001000172 / 9417-K)

(Incorporated in Malaysia)

Directors (cont'd.)

The Directors of the Company's subsidiaries who have held office during the financial year and during the period from the end of the financial year to the date of this report (not including those Directors listed above) are:

Datuk Azrulnizam bin Abdul Aziz

Datuk Johar bin Che Mat

Encik Kamarulzaman bin Ahmad

Encik Arul Sothy Mylvaganam

Encik Ho Kwong Hoong

Cik Hasnah binti Omar

Dato' Kaziah binti Abd Kadir

Encik Ahmad Lutfi bin Abdul Mutalip @ Talib

Datuk Mohd Nasir bin Ali

Encik Ahlan Nasri bin Mohd Nazir @ Nasir

Encik Azlan bin Abdullah

Mr. Tai Keat Chai

Encik Hasman Yusri bin Yusoff

Encik Shan Kamahl bin Mohammad

Encik Ahmad Farouk bin Mohamed

Mr. Johnson Rudd a/l Sunny Rudd

Encik Azizi bin Mustafa

Encik Sheikh Shahruddin bin Sheikh Salim

Mr. Chia Ku Tang

Ms. Rupavathy a/p A.V. Govindasamy

Encik Asrul Hazli Salleh

Ms. Ng Jui Shan

Encik Jesleigh bin Johari

Encik Hazim bin Yahya

Dato' Azlan bin Shahrim (appointed on 30 March 2023)

Encik Kheirul Anwar bin Mohamed (apppointed on 9 November 2023)

Dato' Seri Diraja Nur Julie Gwee Ariff (appointed on 15 November 2023)

Lim Choon Seng (resigned on 6 April 2023)

Encik Ramanathan Rajoo (resigned on 6 April 2023)

Encik Wan Ahmad Satria bin Wan Hussein (resigned on 9 November 2023)

Datuk Joseph Dominic Silva (resigned on 15 November 2023)

Dato' Charon Wardini bin Mokhzani (resigned on 15 December 2023)

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MALAYSIA BUILDING SOCIETY BERHAD (197001000172 / 9417-K)

(Incorporated in Malaysia)

Directors' interests in shares and share options

According to the Register of Directors' shareholdings, the interests of the Directors in office at the end of the financial year in the shares and options over shares of the Company and its related corporations during the financial year were as follows:

		Number of ordinary shares
		Granted/	Disposed
Name of Directors	05.12.2023	acquired	31.12.2023
Indirect interest:
Ordinary shares of MBSB
Tan Sri Abdul Rahman bin Mamat #	148,400	-	-	148,400

• Indirect interest via shareholding held by his son. Tan Sri Abdul Rahman bin Mahat, by virtue of his total indirect interest of 148,400 shares in MBSB, is deemed to have an interest in the shares of all of MBSB's subsidiaries to the extent that MBSB has interest.

Other than as disclosed above, the Directors in office at the end of the financial year did not hold any interest in shares and options over shares in the Company and its related corporations during the financial year.

There were no options granted to any person to take up unissued shares of the Company during the financial year.

Directors' benefits

Since the end of the previous financial year, no Director of the Company has received, nor become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the Directors as shown in Note 36 to the financial statements) by reason of a contract made by the Company or a related corporation with any 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.

There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Company to acquire benefits by mean of the acquisition of shares in or debentures of the Company or its related corporations during the financial year.

Indemnity and Takaful cost

The Directors and Officers of the Group and of the Company are covered by Directors' and Officers' Liability Takaful. The annual takaful cost that is payable by the Group and the Company amount to RM217,410 and RM135,000 respectively.

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MALAYSIA BUILDING SOCIETY BERHAD (197001000172 / 9417-K)

(Incorporated in Malaysia)

Ultimate holding body

The ultimate holding body is Employee Provident Fund ("EPF"), a statutory body established under the Employee Provident Fund Act 1991 (Act 452).

Subsidiaries

The principal activities of the subsidiaries are described in Note 12. There have been no significant changes in the nature of the principal activities of the subsidiaries during the financial year.

Directors' remuneration

The remuneration in aggregate for Directors of the Group and the Company for the financial year are as follows:

	Group	Company
	RM'000	RM'000
Directors' fees	2,247	939
Directors' other emoluments	1,759	777

Auditors' remuneration

Auditors' remuneration of the Group and the Company are RM2,921,000 (2022: RM4,993,000) and

RM702,000 (2022: RM2,914,000) respectively. Details of remuneration are as set out in Note 35 to the financial statements.

Other auditors' remuneration of the Group is RM1,008,000 (2022: nil). Details of remuneration are as set out in Note 35 to the financial statements.

Business review for 2023

The Group registered a profit before taxation and zakat of RM560 million for 2023 as compared to a profit before taxation and zakat of RM691 million in prior year. As at 31 December 2023, the Group had assets of RM66,663 million (2022: RM54,948 million), gross loans, financing and advances of RM42,044 million (2022: RM38,600 million), total deposits of RM47,624 million (2022: RM36,468 million) and shareholders' equity of RM9,838 million (2022: RM8,959 million).

The Group completed the acquisition of Malaysian Industrial Development Finance Berhad ("MIDF") on 2 October 2023. With this, MIDF is now a wholly-owned subsidiary of the Company and Permodalan Nasional Berhad ("PNB") emerged as a substantial shareholder of MBSB with an equity stake of 12.78%.

gross financing grew by 9.0% for the year to RM42 billion, mainly supported by its consumer and commercial financing as well as from the acquisition of MIDF. Consumer Banking, which accounts for 69.34% of the total gross financing portfolio, grew by 5.27%, led by property financing and followed by personal financing ("PF-i"). The increase in PF-i was mainly driven by Ihsan-i financing amounting to RM1 billion. In Commercial Banking gross financing grew by 18.63% contributed by the wholesale & retail trade, manufacturing, and primary agriculture sectors.

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MALAYSIA BUILDING SOCIETY BERHAD (197001000172 / 9417-K)

(Incorporated in Malaysia)

Outlook for 2024

The global economy is projected to grow moderately in 2024 for both advanced and emerging economies. The International Monetary Fund forecasts global gross domestic product growth to be 2.9%, a slight decrease from 3.0% in 2023, with inflation subsiding and labour markets showing resilience. According to

the Ministry of Finance, economy is expected to grow by approximately 4.0% in 2024, driven by sustained domestic consumption and improved export activities. Meanwhile, Bank Negara Malaysia

raised the Overnight Policy Rate once in 2023 by 25 basis points to 3.0%. At the current OPR level, the monetary policy stance is supportive of the economy and aligns with the current assessment of inflation and growth prospects.

The Group's key strategy for 2024 is to continue raising Current Accounts and Savings Accounts ("CASA") level and improve its funding costs. The Group will also aim to realise synergies with MIDF to provide customers with better service, innovative products, and personalised solutions, especially for small medium enterprises ("SMEs") and retail customers in the mass affluent segment. This strategy will be anchored in our continuous improvement in digitalisation, making it easier for our customers to conduct banking and manage their operations.

Statement of Corporate Governance

The Board of Directors ("the Board") of the Company is pleased to report the application by the Company of the principles contained in the Malaysia Code on Corporate Governance ("the Code") and the extent of compliance with the best practices of the Code. The Board has endeavoured to apply the principles and comply with the relevant best practices of corporate governance as set out in the Code. The Company is also required to comply with BNM's policy document on Corporate Governance ("BNM/RH/PD 029-9") issued on 3 August 2016.

Statement of Shariah Governance

MBSB Bank Berhad ("MBSB Bank")

The MBSB Bank Board members have maintained regular engagement with members of the Shariah Advisory Committee ("SAC MBSB Bank") via their attendance to observe the SAC MBSB Bank meetings as well as their standing invitation for the Chairman or Deputy Chairman of SAC MBSB Bank to attend the Board meetings.

The MBSB Bank Board equally understands its role to be ultimately accountable and responsible for the Shariah governance and overall Shariah compliance of MBSB Bank and has put in place a robust Shariah governance arrangement and has performed an effective oversight over the implementation of Ruling of the BNM SAC, SAC MBSB Bank resolutions, internal control framework as well as the performance of MBSB Bank in relation to the Shariah governance implementation.

Towards achieving this goal, the MBSB Bank Board has evaluated and is of the view that the planned resources to be put in place in 2024-2025 for the Shariah support and control functions which have been reviewed by the SAC MBSB Bank are in line to achieve this goal and to accommodate MBSB Bank's current and strategic initiatives.

Sound Shariah compliance culture within MBSB Bank is outlined in the existing policies and procedures which are also reviewed and approved by SAC MBSB Bank or its delegates to ensure that its overall operations, business, affairs and activities are conducted, at all times, in conformity with Shariah.

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