Offering Circular dated 20 January 2006

AMBB Capital (L) Ltd(Company Number LL05017; incorporated with limited liability in the Federal Territory

of Labuan, Malaysia)

U.S.$200,000,000 Fixed-to-Floating Rate Step-up Non-cumulative

Non-voting Guaranteed Preference Shares

having the benefit of a subordinated guarantee of

AmBank (M) Berhad(formerly known as AmFinance Berhad)

(Company Number 8515-D incorporated with limited liability in Malaysia)

Issue price: U.S.$100,000 per Preference Share

The U.S.$200,000,000 Fixed-to-Floating Rate Step-up Non-cumulative Non-voting Guaranteed Preference Shares (the ‘‘Preference Shares’’), eachwith a par value and a liquidation preference of U.S.$100,000 (the ‘‘Liquidation Preference’’), are proposed to be issued by AMBB Capital (L) Ltd (the‘‘Issuer’’) on 27 January 2006 (the ‘‘Issue Date’’). Subject to certain limitations (as described herein), all payment obligations of the Issuer in respect of thePreference Shares are guaranteed on a subordinated basis (the ‘‘Subordinated Guarantee’’) by AmBank (M) Berhad (the ‘‘Bank’’) pursuant to a deed ofguarantee dated 27 January 2006 (the ‘‘Deed of Guarantee’’) executed by the Bank for the benefit of the holders of the Preference Shares. See ‘‘Descriptionof the Subordinated Guarantee’’ for further details.

Non-cumulative dividends on the Preference Shares (‘‘Preferred Dividends’’) will accrue on the Preference Shares, calculated in respect of eachPreference Share by reference to the Liquidation Preference thereof, from (and including) the Issue Date to (but excluding) 27 January 2016 (the ‘‘FirstCall Date’’), at a fixed rate per annum equal to 6.77% in respect of each Preferred Dividend Period (as defined herein) and from (and including) the FirstCall Date at a floating rate per annum equal to 3 month U.S. dollar LIBOR (as defined herein) plus 2.90% (the ‘‘Margin’’) in respect of each PreferredDividend Period. Subject to certain provisions (as further described herein) relating to Compulsory Payments (as defined herein), Preferred Dividends willbe payable when, as and if declared by the board of directors of the Issuer, at its sole discretion, semi-annually in arrear on 27 January and 27 July in eachyear up to and including the First Call Date and thereafter quarterly in arrear on 27 January, 27 April, 27 July and 27 October in each year. Neither theIssuer nor the Bank will be obligated to pay Preferred Dividends with respect to the Preference Shares or make any payment in respect thereof under theSubordinated Guarantee in certain circumstances. See ‘‘Description of the Preference Shares — Preferred Dividends’’.

The Preference Shares are perpetual securities and are not subject to any mandatory redemption provisions. The Preference Shares may beredeemed, subject to satisfaction of certain conditions (as further described herein) and applicable laws, at the option of the Issuer, on the First Call Dateor on any Preferred Dividend Payment Date (as defined herein) thereafter (the ‘‘Optional Redemption Date’’), in whole but not in part, in an amount equalto the Liquidation Preference with respect to such Preference Share, together with an amount equal to any accrued but unpaid Preferred Dividends (whetheror not declared) in respect of the most recent Preferred Dividend Period commencing prior to the Optional Redemption Date. The Preference Shares arealso redeemable at the option of the Issuer at any time prior to the First Call Date, subject to satisfaction of certain conditions and applicable laws, inwhole but not in part, upon the occurrence of a Capital Disqualification Event or a Tax Event (each as defined herein). See ‘‘Description of the PreferenceShares — Redemption and Purchase’’.

Payments in respect of the Preference Shares will be made without deduction for or on account of Malaysian taxes to the extent described under‘‘Description of the Preference Shares — Withholding Taxes’’.

In the event of the dissolution, winding-up or liquidation of the Issuer, holders of Preference Shares (‘‘Holders’’) will be entitled, subject tosatisfaction of certain conditions and applicable laws, to receive a Liquidation Distribution (as defined herein) in respect of each Preference Share held. See‘‘Description of the Preference Shares — Liquidation Distributions’’.

Upon the occurrence of a Substitution Event (as defined herein), subject to certain conditions, the Preference Shares may be substituted by fully-paid preference shares issued directly by the Bank (the ‘‘Substitute Preference Shares’’) and having, in all material respects, economic terms equivalent tothose of the Preference Shares and the Subordinated Guarantee taken together. See ‘‘Description of the Preference Shares — Substitution by SubstitutePreference Shares’’.

Approval-in-principle has been received to list the Preference Shares on the Labuan International Financial Exchange Inc. (the ‘‘LFX’’) and theSingapore Exchange Securities Trading Limited (the ‘‘SGX-ST’’). The LFX takes no responsibility for the contents of this document, makes norepresentations as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance uponany part of the contents of this document. The SGX-ST takes no responsibility for the correctness of any statements made or opinions expressed herein.Admission to the Official List of the LFX is not to be taken as an indication of the merits of the Issuer, the Bank and their associated companies or thePreference Shares. Admission of the Preference Shares to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Issuer, theBank, the Bank and its subsidiaries taken as a whole (the ‘‘AmBank Group’’) or the Preference Shares.

Approval from the Labuan Offshore Financial Services Authority (‘‘LOFSA’’) has been obtained in respect of the offering of the Preference Shares.LOFSA takes no responsibility for the contents of this document, makes no representations as to its accuracy or completeness and expressly disclaims anyliability whatsoever for any loss howsoever arising from or in reliance upon any part of the contents of this document.

Investing in the Preference Shares involves certain risks. See ‘‘Risk Factors’’ beginning on page 34 to read about factors prospective investorsshould consider before buying the Preference Shares.

The Preference Shares are rated ‘‘Ba2’’ by Moody’s Investors Service (‘‘Moody’s’’), ‘‘BB’’ by Standard & Poor’s Ratings Group, a division of theMcGraw-Hill Companies, Inc. (‘‘Standard & Poor’s’’) and ‘‘BB’’ by Fitch Ratings Ltd. (‘‘Fitch’’). A rating is not a recommendation to buy, sell or holdsecurities and may be subject to revision, supervision or withdrawal at any time by the assigning organisation.

The Preference Shares have not been, and will not be, registered, under the United States Securities Act of 1933 (as amended) (the ‘‘SecuritiesAct’’) and the Preference Shares are subject to US tax law requirements. Subject to certain exceptions, the Preference Shares may not be offered, sold ordelivered within the United States or to US persons (as defined in Regulation S). For a further description of certain restrictions on the offering and ondistribution of this Offering Circular, see ‘‘Subscription and Sale’’.

The Preference Shares will be represented on issue by a single global preference share certificate in registered form (the ‘‘Global Certificate’’). Onor about the Issue Date, the Global Certificate will be deposited with a common depositary for Euroclear Bank S.A./N.V. as operator of the Euroclearsystem (‘‘Euroclear’’) and Clearstream Banking, societe anonyme (‘‘Clearstream, Luxembourg’’). Such Global Certificate will be issued and registered inthe name of a nominee of such common depositary.

Joint Lead Managers, Structuring Advisers and Bookrunners

BNP PARIBAS Credit Suisse AmMERCHANT BANKBERHAD

This Offering Circular contains information regarding the Issuer, the Bank, the Principal

Paying Agent (as defined herein) the AmBank Group, AMMB and the AMMB Group and the

offering of the Preference Shares. The Issuer and the Bank accept responsibility for the information

contained in this Offering Circular. To the best of the knowledge and belief of the Issuer and the

Bank (each having taken all reasonable care to ensure that such is the case), the information

contained in this Offering Circular is in accordance with the facts and does not omit anything likely

to affect the import of such information. Each of the Issuer and the Bank, having made all

reasonable enquiries, confirms that this Offering Circular contains all information which is material

in the context of the offering of the Preference Shares, that the information contained in this

Offering Circular is true and accurate in all material respects and is not misleading, that the opinions

and intentions expressed in this Offering Circular are honestly held and that there are no other facts

the omission of which would make this Offering Circular or any of such information or the

expression of any such opinions or intentions misleading.

No person has been authorised to give any information or to make any representation other

than those contained in this document in connection with the offering of the Preference Shares and,

if given or made, such information or representations must not be relied upon as having been

authorised by the Issuer, the Bank, the Principal Paying Agent, BNP Paribas, acting through its

Labuan Branch (‘‘BNP Paribas’’), Credit Suisse, acting through its Labuan Branch (‘‘Credit Suisse’’)

or AmMerchant Bank Berhad, acting through its Labuan Branch (‘‘AmMerchant Bank’’ and, together

with Credit Suisse and BNP Paribas, the ‘‘Joint Lead Managers’’). Neither the delivery of this

document nor any sale made hereunder shall, under any circumstances, constitute a representation or

create any implication that there has been no change in the affairs of the Issuer, the Bank, the

Principal Paying Agent the AmBank Group, AMMB or the AMMB Group since the date hereof. This

document does not constitute an offer of, or an invitation by, or on behalf of, the Issuer, the Bank or

the Joint Lead Managers to subscribe for, or purchase, any of the Preference Shares. Furthermore,

this document does not constitute an offer, and may not be used for the purpose of an offer to, or a

solicitation by, anyone in any jurisdiction or in any circumstances in which such an offer or

solicitation is not authorised or is unlawful.

The Joint Lead Managers and the Principal Paying Agent have not separately verified the

information contained herein. Accordingly, no representation, warranty or undertaking, express or

implied, is made and no responsibility or liability is accepted by the Joint Lead Managers, the

Principal Paying Agent or their respective affiliates as to the accuracy or completeness of the

information contained in this Offering Circular or any other information provided by the Issuer or

the Bank in connection with the Preference Shares or their distribution.

This Offering Circular is not intended to provide the basis of any credit or other evaluation and

should not be considered as a recommendation by the Issuer, the Bank or the Joint Lead Managers

that any recipient of this Offering Circular should purchase any of the Preference Shares. Each

investor contemplating purchasing Preference Shares should make its own independent investigation

of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and

the Bank.

Any purchase or acquisition of the Preference Shares is in all respects conditional on the

satisfaction of certain conditions set out in the Subscription Agreement (as defined herein) and the

issue of the Preference Shares by the Issuer pursuant to the Subscription Agreement. Any offer,

invitation to offer or agreement made in connection with the purchase or acquisition of the

Preference Shares or pursuant to this Offering Circular shall (without any liability or responsibility

on the part of the Issuer, the Bank, the Principal Paying Agent or the Joint Lead Managers) lapse

and cease to have any effect if (for any other reason whatsoever) the Preference Shares are not

issued by the Issuer pursuant to the Subscription Agreement.

An investment in the Preference Shares is only suitable for financially sophisticated investors

who are capable of evaluating the merits and risks of such investment and who have sufficient

resources to be able to bear any losses which may result therefrom. Prospective purchasers should

consult their stockbroker, bank manager, legal adviser, professional accountant or other professional

advisor concerning an investment in the Preference Shares.

i

CONTENTS

Page

FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

CERTAIN DEFINED TERMS AND CONVENTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

THE OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

SUMMARY RESTATED CONSOLIDATED FINANCIAL AND OTHER DATARELATING TO THE BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA RELATINGTO AmFINANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

SUMMARY FINANCIAL AND OTHER DATA RELATING TO ABB . . . . . . . . . . . . . . . . . 29

CHANGES IN ACCOUNTING POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

EXCHANGE RATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

CAPITALISATION AND INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

CAPITAL ADEQUACY RATIOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

DESCRIPTION OF THE ISSUER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

DESCRIPTION OF THE BUSINESS OF THE BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

FUNDING, LIQUIDITY AND CAPITAL ADEQUACY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

ASSET QUALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

RISK MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

MANAGEMENT AND EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

DESCRIPTION OF THE PREFERENCE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

DESCRIPTION OF THE SUBORDINATED GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

SUPERVISION AND REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154

TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158

SUBSCRIPTION AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEENMALAYSIAN GAAP AND IFRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN REVISED GP8AND THE RELEVANT IFRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170

GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1

ii

FORWARD-LOOKING STATEMENTS

This Offering Circular includes ‘‘forward-looking statements’’, including statements regarding

the Bank’s expectations and projections for future operating performance and business prospects.

The words ‘‘believe’’, ‘‘expect’’, ‘‘anticipate’’, ‘‘estimate’’, ‘‘project’’ and similar words identify

forward-looking statements. In addition, all statements other than statements of historical facts

included in this Offering Circular are forward-looking statements. Although the Issuer and the Bank

believe that the expectations reflected in the forward-looking statements are reasonable, they can

give no assurance that such expectations will prove to be correct. This Offering Circular discloses,

under the section ‘‘Risk Factors’’ and elsewhere, important factors that could cause actual results to

differ materially from the Issuer’s and the Bank’s expectations (‘‘Cautionary Statements’’). All

subsequent written and oral forward-looking statements attributable to the Issuer, the Bank or

persons acting on behalf of the Issuer and the Bank are expressly qualified in their entirety by the

Cautionary Statements.

iii

CERTAIN DEFINED TERMS AND CONVENTIONS

Unless otherwise indicated, all references in this Offering Circular to (i) the ‘‘Issuer’’ are to

AMBB Capital (L) Ltd, (ii) the ‘‘Bank’’ are to AmBank (M) Berhad (formerly known as AmFinance

Berhad), (iii) ‘‘ABB’’ are to AMBB Capital Berhad (formerly known as AmBank Berhad), (iv)

‘‘AmFinance’’ are to AmFinance Berhad, (v) ‘‘AmBank Group’’ are to the Bank and its subsidiaries,

taken as a whole, (vi) ‘‘AMMB’’ are to AMMB Holdings Berhad, and (vii) the ‘‘AMMB Group’’ are

to AMMB and its subsidiaries, taken as a whole. All references in this Offering Circular to

‘‘Malaysia’’ are to Malaysia, to ‘‘Labuan’’ are to the Federal Territory of Labuan, Malaysia, to the

‘‘Malaysian Government’’ are to the Government of Malaysia and to ‘‘BNM’’ are to Bank Negara

Malaysia, respectively. Unless otherwise indicated, references to Malaysia include Labuan.

The Bank is the legal entity previously known as AmFinance. It changed its name following its

merger with ABB, which was completed on 1 June 2005. For more information, see ‘‘Description ofthe Business of the Bank — History’’. References in this Offering Circular to AmFinance are

references to the Bank prior to the merger.

All references in this Offering Circular to ‘‘Malaysian Ringgit’’, ‘‘RM’’ and ‘‘sen’’ refer to the

lawful currency of Malaysia and to ‘‘US dollars’’, ‘‘U.S.$’’, ‘‘USD’’ and ‘‘US cent’’ refer to the

lawful currency of the United States of America. Unless otherwise specified, all conversions of

Malaysian Ringgit into US dollars are made at the prevailing rate of RM3.769 = U.S.$1.00, the

buying rate of the Malaysian Ringgit as published by BNM on 30 September 2005. This translation

was made for the sole purpose of convenience for the reader and has not been audited. On 20

January 2006, the buying rate of the Malaysian Ringgit as published by BNM was RM3.7480 =

U.S.$1.00. No representation is made that the Malaysian Ringgit amounts referred to herein could

have been or could be converted into US dollars at any particular rate or at all.

Certain figures included in this Offering Circular have been subject to rounding adjustments.

Accordingly, figures shown for the same category presented in different tables may vary and figures

shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede

them.

The Bank maintains, ABB maintained, and the Issuer will maintain its financial books and

records and prepares its financial statements in Malaysian Ringgit in accordance with the provisions

of the Malaysian Companies Act 1965, the applicable approved accounting standards in Malaysia

and BNM guidelines (‘‘BNM Guidelines’’). By receiving this Offering Circular, investors

acknowledge that the financial statements it includes have been prepared in accordance with

Malaysian generally accepted accounting principles (‘‘Malaysian GAAP’’) and BNM Guidelines.

Malaysian GAAP and BNM Guidelines differ in certain respects from the International Financial

Reporting Standards (‘‘IFRS’’). See ‘‘Summary of Significant Differences Between Malaysian GAAPand IFRS’’ and ‘‘Summary of Significant Differences Between Revised GP8 and Relevant IFRS’’.

Unless otherwise stated, all financial information relating to the Bank or AmFinance is stated

on a consolidated basis in accordance with Malaysian GAAP. The summary restated consolidated

financial information of the Bank for the year ended 31 March 2005 (the ‘‘Restated Financial

Information’’) has been derived from (i) the audited consolidated financial statements of AmFinance

for the year ended 31 March 2005 as adjusted for the adoption of Revised GP8 (as defined herein),

(ii) the audited financial statements of ABB for the year ended 31 March 2005 as adjusted for the

adoption of Revised GP8, and (iii) the consolidation of (i) and (ii) above in accordance with merger

accounting method under Malaysian GAAP (which deems both AmFinance and ABB to be operating

as a single entity from the earliest financial period presented herein). The actual merger between

AmFinance and ABB was completed on 1 June, 2005. See ‘‘Risk Factors — Risks Relating to theAmBank Group — The summary restated consolidated financial information of the Bank may not be,and is not presented nor to be relied upon as being, representative of the financial statements of theBank as they would have been if the Merger had occurred in and been in effect for the year ended31 March 2005’’ and ‘‘Business — History’’.

iv

SUMMARY

This summary highlights information contained elsewhere in this Offering Circular. Thissummary does not contain all of the information that you should consider before deciding to investin the Preference Shares. We recommend that you read this entire Offering Circular carefully,including the ‘‘Risk Factors’’ section and the financial statements and related notes appearingelsewhere in this Offering Circular.

Overview

As a result of the merger of ABB and AmFinance in June 2005, the Bank was the sixth largest

domestic commercial bank in Malaysia in terms of total assets (based on the published financial

results of the 10 domestic banks in Malaysia) as at 30 September 2005. The Bank is engaged in a

wide range of retail and business banking activities. It is a market leader in the retail banking sector

and had the third largest retail assets by value in Malaysia (based on the published financial results

of the 10 domestic banks in Malaysia) as at 30 September 2005. The Bank’s principal retail banking

activities are the provision of consumer loans (such as vehicle hire purchase, mortgages and personal

financing) and credit cards. The focus of the Bank’s business banking activity is commercial

lending, and, in particular, is on small and medium-sized enterprises (‘‘SMEs’’) in Malaysia.

AMFB Holdings Berhad was privatised, becoming a wholly-owned subsidiary of AMMB, and

delisted from Bursa Malaysia in March 2005. AmFinance acquired all of the shares of its affiliate,

ABB, on 31 May 2005. Subsequently, as part of an internal reorganisation, substantially all of the

commercial banking business and assets and liabilities of ABB were merged into AmFinance

pursuant to a High Court Vesting Order made under section 50 of the Banking and Financial

Institutions Act 1989 with effect from 1 June 2005 and AmFinance adopted its present name,

AmBank (M) Berhad (the ‘‘Merger’’).

As a result of the Merger, the Bank is licensed as a composite commercial banking and finance

company under the Banking and Financial Institutions Act.

The AMMB Group was the fifth largest financial services group in Malaysia in terms of total

assets (based on the published financial results of both domestic and foreign financial services

groups in Malaysia) as at 30 September 2005. The AMMB Group’s business operations include

investment banking, commercial banking, retail banking, Islamic banking, insurance and other

related financial services. AMMB controls 100.0% of the share capital of the Bank, through its

wholly-owned subsidiary, AMFB Holdings Berhad.

As at 30 September 2005, the Bank had unaudited consolidated total assets of RM51,614.4

million, loans, advances and financing of RM39,438.6 million, customer deposits of RM31,646.9

million and shareholders’ funds of RM3,317.6 million. Currently, the Bank’s distribution network

comprises 170 branches, 226 automated teller machines (‘‘ATMs’’) and 47 self-service electronic

banking centres (‘‘EBCs’’) in Malaysia.

The Bank had the fourth largest gross loan portfolio of domestic banks (based on the published

financial results of the 10 domestic banks in Malaysia).

Recent Developments

On 9 December 2005, the Bank announced it has entered into a sale and purchase agreement to

sell its 14.1% stake in AmAssurance Berhad, 10% to IAG International Pty. Limited, a subsidiary of

Insurance Australia Group Limited, and 4.1% to AMMB Holdings.

In 2005, the Bank announced its intention to rename its subsidiary AMBB Capital Berhad as

AmIslamic Bank Berhad by 1 April 2006. AmIslamic Bank Berhad will offer Islamic banking

products and services.

On 21 December 2005, the Bank incorporated a wholly-owned subsidiary in Hong Kong,

AmTrade Services Limited (‘‘AmTrade Services’’). AmTrade Services was established to provide

trade finance services to the Bank.

1

On 17 January 2006, the Board of Directors of Amcorp (which owns 32.9% of the issued

capital of AMMB as of 30 September 2005) announced that they would recommend a proposal for

the privatisation of Amcorp by Tan Sri Dato’ Azman Hashim by way of an Amcorp members’

scheme of arrangement under Section 176 of the Companies Act, 1965. Under the proposed

privatisation, Tan Sri Dato’ Azman Hashim (or persons to be nominated by him) will acquire all of

the ordinary shares of RM1.00 each in Amcorp (the ‘‘Amcorp Shares’’) that are not currently held by

Tan Sri Dato’ Azman Hashim or his investment holding companies, for a cash consideration of

RM1.40 for each Amcorp Share. This scheme of arrangement proposal may result in Tan Sri Dato’

Azman Hashim significantly increasing his stake in Amcorp. In light of this development, under

BAFIA, if Tan Sri Dato’ Azman Hashim owns more than 75.0% of Amcorp, current regulations may

require that Amcorp would need to reduce its interest, direct or indirect, in the shares of the Bank to

10.0% or below. The requirement to sell shares may increase the likelihood that there might be a

change in control. This may result in Amcorp having less influence over the affairs of the AMMB

Group. Tan Sri Dato’ Azman Hashim is currently a Director of Amcorp and the Chairman of the

Bank and, as at 31 December 2005, he had a total direct and indirect interest of 38.1% of the issued

and paid-up share capital of Amcorp. Subject to obtaining all the required approvals, the proposed

privatisation is expected to be completed by the third quarter of 2006. See ‘‘Risk Factors — Risksrelating to the Ambank Group — Major shareholders may influence policies of the Bank’’.

Competitive Strengths

The Bank considers the following to be its principal competitive strengths:

. Extensive and diversified retail banking business

The Bank offers a diversified range of retail banking products and services covering six

principal areas: (i) vehicle hire purchase; (ii) mortgages and other consumer loans; (iii) credit

cards and line of credit; (iv) personal financing; (v) consumer sales (including bancassurance)

and deposits; and (vi) asset financing and small business. This range provides the Bank with an

extensive retail loan base. As at 30 September 2005, the Bank’s retail assets (after deduction of

interest-in-suspense and Islamic financing sold to Cagamas Berhad) were RM30,302.6 million,

comprising of loans for the purchase of transport vehicles, loans for the purchase of residential

properties and loans for consumption credit. The Bank’s retail assets as at 30 September 2005

were the third largest by value in Malaysia. For further details on interest-in-suspension, see

‘‘Changes in Accounting Policies’’. The Bank was also the leading provider of vehicle hire

purchase in Malaysia, with a market share of approximately 23.0% as at 30 September 2005,

and currently has relationships with over 3,200 hire purchase vehicle dealers in Malaysia.

These relationships provide an extensive distribution network for the Bank’s vehicle financing

products.

. Extensive and diversified distribution network

The Bank had the sixth largest distribution network in Malaysia as at 30 September 2005.

The Bank currently operates 170 branches, 226 ATMs and 47 EBCs in Malaysia. In early 2004,

the Bank commenced remodelling its branches into sales and service centres to enhance

customer service and increase sales activities and expects to substantially complete such

remodelling within 2006. In addition to its branch network, the Bank has recently upgraded its

call centre into a 24-hour customer contact centre aimed at providing its customers with a

convenient point of contact. The Bank is exploring the possibility of expanding its branches to

200 by the end of 2007.

. Ability to provide a wide range of products and services

As part of the AMMB Group, the Bank is able to leverage a groupwide sales force to

assist it in offering a wide range of products and services provided by other members of the

AMMB Group, making it a ‘‘one-stop’’ financial centre for customers. At the Bank’s branches,

customers can purchase, for example, trust services, insurance products and stock-broking

services offered by other members of the AMMB Group.

2

. Established and reputable brand name

The Bank believes it has established a reputable and recognised brand name in Malaysia.

The Bank was voted the most innovative bank in responding to customer needs by the Far

Eastern Economic Review for Malaysia in the category of innovation in 2003. In 2004, the

Bank was awarded the Superbrand status by Superbrands Malaysia. The Bank continues to

focus on enhancing its brand name through advertising and promotional campaigns.

. Important strategic alliances

The Bank has entered into a number of strategic alliances including an arrangement with

MBf Cards (M) Sdn. Bhd. (‘‘MBf Cards’’), currently the largest non-bank credit card issuer in

Malaysia, for the provision of credit card financing to credit card holders of MBf Cards. In

addition, the Bank has mortgage alliances with certain state governments and housing

developers. The Bank also has relationships with government co-operatives to expand its

personal financing services throughout Malaysia.

Strategy

The Bank’s focus is on sustainable and profitable growth within its risk management

framework. In order to achieve this objective, the Bank aims to meet the needs of its customers and

develop innovative and competitive products and services.

The Bank’s principal strategies are as follows:

. Continue to deliver profitable growth by focusing on its core business areas

. Increase cross-selling initiatives with other AmBank Group companies

. Leverage on the Bank’s expanded and diversified distribution network

. Leverage on the synergies of the Bank’s Business Banking and Retail Banking divisions

. Expand distribution of banking products and services to all branches

. Focus on risk management and recovery

For more detailed discussions of the strategies specific to the different business divisions

of the Bank, see ‘‘Description of the Business of the Bank — The Bank’s Businesses — RetailBanking’’ and ‘‘Description of the Business of the Bank — The Bank’s Businesses — BusinessBanking’’.

The registered office of the Bank is 22nd Floor, Bangunan Ambank Group, 55 Jalan Raja

Chulan, 50200 Kuala Lumpur, Malaysia.

3

THE OFFERING

The following is a summary of the principal features of the Offering and is qualified in itsentirety, including defined terms, by the more detailed information included elsewhere in thisOffering Circular. See ‘‘Description of the Preference Shares’’ and ‘‘Description of the SubordinatedGuarantee’’.

Preference Shares

Issuer . . . . . . . . . . . . AMBB Capital (L) Ltd, a company incorporated under the Offshore

Companies Act, 1990 of Labuan (as amended) (the ‘‘Offshore

Companies Act’’). The Issuer is a wholly-owned subsidiary of the

Bank.

Guarantor . . . . . . . . . AmBank (M) Berhad, a company incorporated with limited liability in

Malaysia (the ‘‘Bank’’).

The Offering . . . . . . . U.S.$200,000,000 Fixed-to-Floating Rate Step-up Non-cumulative Non-

voting Guaranteed Preference Shares (the ‘‘Preference Shares’’), each

with a par value and a liquidation preference of U.S.$100,000 (the

‘‘Liquidation Preference’’).

The Preference Shares are being offered outside the United States (the

‘‘Offering’’) in reliance on Regulation S under the United States

Securities Act, 1933 (as amended) (the ‘‘Securities Act’’).

The Bank will guarantee, on a subordinated basis and subject to the

limitations described herein, all payments in respect of the Preference

Shares (the ‘‘Subordinated Guarantee’’). See ‘‘Description of theSubordinated Guarantee — Subordinated Guarantee’’.

The Issuer will lend the total net proceeds from the issue of the

Preference Shares to the Bank. Such loan will be in the form of a

Fixed-to-Floating Rate Step-up Cumulative Subordinated Loan due

2056 (the ‘‘Subordinated Loan’’), to be granted by the Issuer to the

Bank.

Issue Date . . . . . . . . . 27 January 2006.

Preferred Dividends . . Subject to applicable law and as provided herein, non-cumulative

dividends (‘‘Preferred Dividends’’) will accrue from the Issue Date on

the Preference Shares:

(1) for each Preferred Dividend Period (as defined herein) from (and

including) the Issue Date to (but excluding) 27 January 2016, at

6.77 per cent. of the Liquidation Preference per Preference Share

per annum; and

(2) for each Preferred Dividend Period thereafter, at a floating rate

per annum equal to 3 month U.S. dollar LIBOR (as defined

herein) plus 2.90 per cent. (the ‘‘Margin’’),

and shall be payable on the relevant Preferred Dividend Payment Date

(as defined herein) related to such Preferred Dividend Periods.

Where appropriate, the term ‘‘Preferred Dividend’’ shall also include

any Additional Amounts (as defined herein) due and payable with

respect thereto.

4

Preferred Dividend

Payment Dates . . . . . Subject to applicable law, Preferred Dividends on the Preference Shares

will be payable when, as and if declared by the board of directors of

the Issuer (the ‘‘Issuer Board’’) in arrear on:

(1) 27 January and 27 July in each year commencing 27 July 2006,

up to (and including) the First Call Date; and

(2) thereafter on 27 January, 27 April, 27 July and 27 October in each

year commencing 27 April 2016.

Compulsory Payments . In the event that the Issuer, the Bank or any other Subsidiary (as

defined herein) (a) pays any distribution or makes any other payment

on or in respect of any class of Preferred Dividend Parity Obligations

(as defined herein) or Junior Obligations (as defined herein) (other than

in the form of Junior Obligations) or (b) redeems, repurchases or

otherwise acquires any class of Junior Obligations (other than any

Junior Obligations in existence on 20 January 2006 which contain a

mandatory obligation to redeem, repurchase or otherwise acquire such

Junior Obligations), then, in each case, the Issuer will be required,

subject to the Bank having sufficient Distributable Funds (as defined

herein) available at the relevant time to make such payment, to declare

and pay Preferred Dividends on the Preference Shares on one or more

Preferred Dividend Payment Dates contemporaneous with, or following,

such distribution or other payment or redemption, repurchase or other

acquisition (each such payment of Preferred Dividends, a ‘‘Compulsory

Payment’’), as follows:

(1) in the case of (a) above:

(i) payment of the full amount of the Preferred Dividend

payable on the Preference Shares on each of the next two

Preferred Dividend Payment Dates (in the case of Preferred

Dividend Payment Dates falling on or prior to the First Call

Date) or the next four Preferred Dividend Payment Dates (in

the case of Preferred Dividend Payment Dates falling after

the First Call Date) if the distribution or other payment on

the Preferred Dividend Parity Obligation or Junior

Obligation, as the case may be, is made in respect of an

annual period; and

(ii) payment of the full amount of the Preferred Dividend

payable on the Preference Shares on the next Preferred

Dividend Payment Date (in the case of Preferred Dividend

Payment Dates falling on or prior to the First Call Date) or

each of the next two Preferred Dividend Payment Dates (in

the case of Preferred Dividend Payment Dates falling after

the First Call Date) if the distribution or other payment on

the Preferred Dividend Parity Obligation or Junior

Obligation, as the case may be, is made in respect of a

semi-annual period or shorter periods; and

(2) in the case of (b) above, payment of the full amount of the

Preferred Dividend payable on the Preference Shares on each of

the next two Preferred Dividend Payment Dates (in the case of

Preferred Dividend Payment Dates falling on or prior to the First

Call Date) or the next four Preferred Dividend Payment Dates (in

the case of Preferred Dividend Payment Dates falling after the

First Call Date),

5

provided that, for the avoidance of doubt, the amount of any

Compulsory Payments payable pursuant to paragraph (1)(i) or

paragraph (2) above shall not exceed the amount of Preferred

Dividends payable in respect of a period of 12 calendar months.

Limitations on Payments Subject to applicable law and the following paragraph, the Issuer will

pay Preferred Dividends out of, and to the extent of, its legally

available resources on a Preferred Dividend Payment Date.

Notwithstanding the foregoing, neither the Issuer nor the Bank will,

save to the extent of any Compulsory Payments, be obligated to pay

any Preferred Dividend or make any payment in respect of any

Preferred Dividend or make any payment under the Subordinated

Guarantee:

(i) to the extent that such payment of Preferred Dividends (if paid in

full), together with the sum of any other dividends and other

distributions paid or scheduled to be paid (whether or not paid in

whole or part) to holders of Preferred Dividend Parity Obligations

on the relevant Preferred Dividend Payment Date, would exceed

Distributable Funds (as defined herein) as at the date which is 20

business days in Malaysia immediately preceding such Preferred

Dividend Payment Date (the ‘‘Preferred Dividend Determination

Date’’); or

(ii) even if Distributable Funds are sufficient, (a) to the extent that

such payment of Preferred Dividends and/or dividends or other

distributions on Preferred Dividend Parity Obligations or under

the Subordinated Guarantee would breach or cause or continue a

breach of BNM published capital adequacy requirements from

time to time applicable to the Bank or (b) the Bank Board (or an

authorised committee thereof) in its sole discretion has notified

BNM and the Issuer that it has determined that (a) above is

expected to occur in the near term.

Principal Paying Agent

and Transfer Agent .

Citibank, N.A., London Branch (the ‘‘Principal Paying Agent’’ and

‘‘Transfer Agent’’).

Registrar. . . . . . . . . . Citigroup Global Markets Deutschland AG & Co. KGaA (the

‘‘Registrar’’ and together with the Principal Paying Agent and

Transfer Agent, the ‘‘Agents’’).

Redemption . . . . . . . . The Preference Shares are perpetual securities and have no fixed final

Redemption Date.

The Preference Shares may be redeemed in whole but not in part at the

option of the Issuer (but not the holders) in certain circumstances. See

‘‘Description of the Preference Shares — Redemption and Purchase’’.

In each case, not less than 30 nor more than 60 days’ notice (which

notice shall be irrevocable) must be given.

Optional Redemption . . The Preference Shares may be redeemed at the Redemption Price, in

whole but not in part, at the option of the Issuer, subject to the

satisfaction of the Redemption and Purchase Conditions and to the

Offshore Companies Act (as defined herein), on any of the First Call

Date or and each Preferred Dividend Payment Date thereafter (the

‘‘Optional Redemption Date’’), upon not less than 30 nor more than 60

days’ notice to the Holders (which notice shall be irrevocable,

specifying the relevant Optional Redemption Date).

6

For the purposes herein:

‘‘Redemption Price’’ means an amount equal to the Liquidation

Preference, together with an amount equal to any accrued but unpaid

Preferred Dividends (whether or not declared) from (and including) the

commencement of the Preferred Dividend Period in which the relevant

Redemption Date falls to (but excluding) the relevant Redemption Date

and, for the avoidance of any doubt, any Additional Amounts.

Tax Event Call . . . . . . If at any time a Tax Event (as defined below) has occurred and is

continuing, then either (i) the Issuer may elect to substitute the

Substitute Preference Shares for the Preference Shares as if such event

were a Substitution Event (as defined below); or (ii) the Preference

Shares may be redeemed, in whole but not in part, at the option of the

Issuer, subject to the satisfaction of the Redemption and Purchase

Conditions and to the Offshore Companies Act, at any time prior to the

First Call Date upon not less than 30 nor more than 60 days’ notice to

the Holders (which notice shall be irrevocable), specifying the Tax

Event Redemption Date at:

(x) in the case of redemption pursuant to clause (i) of the definition

of ‘‘Tax Event’’, the Redemption Price; and

(y) in the case of redemption pursuant to clause (ii) or (iii) of the

definition of ‘‘Tax Event’’, the Special Redemption Price (unless

such event in (ii) or (iii) is caused by any change in, or

amendment to, any law or regulation of Malaysia or any political

subdivision or any authority thereof or therein having power to

tax, or any change in the general application or official

interpretation of any law or regulation by any relevant body in

Malaysia occurring after 20 January 2006, in which case, the

Redemption Price).

For the purposes herein, ‘‘Tax Event’’ means:

(i) as a result of any change in, or amendment to, any law or

regulation of Malaysia or any political subdivision or any

authority thereof or therein having power to tax, or any change

in the general application or official interpretation of any law or

regulation by any relevant body in Malaysia occurring after 20

January 2006 :

(a) payments to Holders would be subject to deduction or

withholding for or on account of tax or would give rise to

any obligation of the Issuer to account for any tax in

Malaysia; or

(b) payments by the Bank or any Malaysian tax resident member

of the Bank Group in respect of the Subordinated Loan or

any Replacement Instrument (as defined herein) and/or the

Subordinated Guarantee would be subject to deduction or

withholding for or on account of tax in Malaysia; or

(ii) the Issuer or the Bank, in relation to the Preference Shares or the

Subordinated Guarantee, or the Bank or any Malaysian tax

resident member of the Bank Group in respect of the

Subordinated Loan or any Replacement Instrument, is or would

be required to pay more than a de minimis amount of Malaysian

tax; or

7

(iii) the Bank or any such Malaysian tax resident member of the Bank

Group would not obtain relief for the purposes of Malaysian

corporate tax for the payment of interest in respect of the

Subordinated Loan or any Replacement Instrument,

and in each case such obligation cannot be avoided by the Bank or the

Issuer, as the case may be, taking reasonable measures available to it

(which may include, in the case of the Bank, the substitution as the

branch of account in respect of such Subordinated Loan of another

branch of the Bank, or the head office of the Bank, or the

establishment of a new branch to be the branch of account in respect

of such Subordinated Loan).

‘‘Special Redemption Price’’ means the higher of the Redemption Price

and the Make Whole Amount.

‘‘Make Whole Amount’’ means, in respect of a Preference Share, an

amount equal to the sum of:

(i) the present value of its Liquidation Preference; and

(ii) the present value of each remaining scheduled Preferred Dividend

(assuming the same to have been declared) to (and including) the

First Call Date, discounted from (a) in relation to the Liquidation

Preference, the First Call Date and (b) in relation to each such

remaining scheduled Preference Dividend, the relevant Preferred

Dividend Payment Date, in each case, to the Capital

Disqualification Event Redemption Date or Tax Event

Redemption Date, as the case may be, at a rate equal to the

sum of (x) 0.50 per cent. and (y) the U.S. Treasury Yield on a

semi-annual compounding basis (rounded to four decimal places)

at 3.00 p.m. (London time) on the fifth Business Day prior to the

relevant Capital Disqualification Event Redemption Date or Tax

Event Redemption Date, as the case may be.

Capital Disqualification

Event Call . . . . . . . If at any time a Capital Disqualification Event (as defined below) has

occurred and is continuing, either (i) the Issuer may elect to substitute

the Substitute Preference Shares for the Preference Shares as if such

event were a Substitution Event (as defined below) or (ii) the

Preference Shares may be redeemed, in whole but not in part, at the

option of the Issuer, subject to satisfaction of the Redemption and

Purchase Conditions and to the Offshore Companies Act, at any time

prior to the First Call Date upon not less than 30 nor more than 60

days’ notice to the Holders (which notice shall be irrevocable)

specifying the Relevant Capital Disqualification Event Redemption

Date, at the Special Redemption Price.

For the purposes herein:

‘‘Capital Disqualification Event’’ means a change in BNM regulations

or the application or official interpretation thereof occurring after 20

January 2006 as a result of which, for the purposes of capital adequacy

requirements applicable to banks in Malaysia at that time, the

Preference Shares will not by their terms be eligible for inclusion in

the Tier 1 Capital of the Bank.

8

Substitution of

Preference Shares. . . As soon as reasonably practicable following the occurrence of a

Substitution Event or following an election by the Issuer upon the

occurrence of a Tax Event or a Capital Disqualification Event and,

providing that no notice of redemption has been given by the Issuer,

the Issuer undertakes and the Bank has undertaken in the Subordinated

Guarantee to take all reasonable steps to cause the substitution for, and

in satisfaction of, the rights of the holders with respect to the

Preference Shares of fully-paid non-cumulative redeemable perpetual

preference shares issued directly by the Bank having economic terms

which are in all material respects equivalent to those of the Preference

Shares and the Subordinated Guarantee taken together (the ‘‘Substitute

Preference Shares’’) as at the date of the issuance of the Substitute

Preference Shares.

For the purposes herein:

‘‘Substitution Event’’ means that:

(i) the Bank’s total capital adequacy ratio or Tier 1 Capital ratio

calculated on a consolidated basis or the Bank’s total capital

adequacy ratio or Tier 1 Capital ratio calculated on an

unconsolidated basis, in each case calculated in accordance with

BNM’s published capital adequacy requirements from time to time

applicable to the Bank, has fallen below the then applicable

minimum ratio applicable to the Bank;

(ii) the Bank Board in its sole discretion has notified BNM and the

Issuer that it has determined, in view of the Bank’s deteriorating

financial condition, that any of the events described in (i) above

is expected to occur in the near term;

(iii) proceedings have been commenced for a winding-up of the Bank;

(iv) BNM has assumed control of the Bank under Section 73(2) of the

Banking and Financial Institutions Act 1989 of Malaysia (or any

successor statute); or

(v) an administrator of the Bank has been appointed.

As soon as practicable following the issuance of the Substitute

Preference Shares, the Bank will use best endeavours to:

(i) procure that the Substitute Preference Shares will, at the relevant

time, be listed on the same stock exchange as the Preference

Shares are then listed on, or if the rules of such stock exchange at

the relevant time do not allow such listing, on any Alternative

Stock Exchange (as defined herein) or such other exchange as the

holders of not less than 50% in Liquidation Preference of the

outstanding Preference Shares may agree; and

(ii) obtain all necessary regulatory approvals in relation to the listing

of and payment under or in relation to the Substitute Preference

Shares,

and, upon issuance, the Bank will use best endeavours to procure the

clearing of such Substitute Preference Shares through the same

depositary(ies) or clearing system(s).

9

Although the Bank will undertake to use best endeavours to create and

authorise, and procure a listing for, the Substitute Preference Shares,

there can be no assurance that, in the event that a Substitution Event

occurs, shareholders of the Bank and any relevant regulatory authorities

will approve the issue of, or that a recognised stock exchange will

agree to list, the Substitute Preference Shares. See ‘‘Description of thePreference Shares — Substitution by Substitute Preference Shares’’.

Rights upon Liquidation In the event of the commencement of any bankruptcy, liquidation,

dissolution or winding-up of the Issuer before any redemption in full of

the Preference Shares or any substitution of the Preference Shares with

Substitute Preference Shares, each holder of the Preference Shares will,

subject to certain limitations and applicable law, be entitled to receive

the Liquidation Distribution in respect of each Preference Share held

out of the assets of the Issuer available for distribution to such holders.

Such entitlement will arise after the claims (if any) of all other

creditors of the Issuer which are not pari passu or junior to the

Preference Shares but before any distribution is made to holders of the

Ordinary Shares (as defined herein).

‘‘Liquidation Distribution’’ means, upon a dissolution or winding-up of

the Issuer:

(1) the Liquidation Preference, together with an amount equal to any

accrued but unpaid Preferred Dividend (whether or not declared)

from (and including) the commencement of the Preferred

Dividend Period in which the date of the dissolution or

winding-up falls to (but excluding) the date of actual payment,

and

(2) for the avoidance of doubt, any Additional Amounts.

Notwithstanding the availability of sufficient assets of the Issuer to pay

any Liquidation Distribution to holders of the Preference Shares as

aforesaid, if, at the time such Liquidation Distribution is to be paid,

proceedings are pending or have been commenced for the voluntary or

involuntary liquidation, dissolution or winding-up of the Bank other

than pursuant to a Permitted Reorganisation (as defined herein), the

Liquidation Distribution payable per Preference Share shall not exceed

the amount per Preference Share that would have been paid as a

liquidation distribution out of the assets of the Bank had the Preference

Shares been issued by the Bank (whether or not the Bank could in fact

have issued such securities at such time) and ranked:

(a) junior to all Senior Obligations of the Bank;

(b) pari passu with Liquidation Parity Obligations of the Bank; and

(c) senior to all Junior Obligations of the Bank.

Voting Rights . . . . . . . Except as described below and provided by the Offshore Companies

Act, holders of the Preference Shares will not be entitled to receive

notice of or attend or vote at any meeting of shareholders of the Issuer

or participate in the management of the Issuer.

10

Withholding Taxes . . . All payments on the Preference Shares will be made free and clear by

the Issuer without deduction or withholding for or on account of any

present or future taxes, duties, assessments or government charges of

whatever nature (‘‘Taxes’’) imposed or levied by or on behalf of

Malaysia or any authority thereof or therein having power to tax,

unless deduction or withholding of such Taxes is required by law. In

the event that any such withholding or deduction in respect of any

payment on the Preference Shares is required, the Issuer will pay such

additional amounts (‘‘Additional Amounts’’) as will result in the receipt

by the holders of the Preference Shares of the amounts which would

otherwise have been receivable in respect of such payment on the

Preference Shares in the absence of such withholding or deduction,

subject to the exceptions described under ‘‘Description of thePreference Shares — Withholding Taxes’’.

Book Entry; Delivery

and Form of the

Preference Shares. . . The Preference Shares will be issued in registered form.

The Preference Shares will, on issue, be represented by a Global

Certificate (as defined herein). The Global Certificate will be deposited

with a common depository for Euroclear Bank S.A./N.V., as operator of

the Euroclear System (‘‘Euroclear’’) and Clearstream Banking, societe

anonyme (‘‘Clearstream, Luxembourg’’). For so long as the Global

Certificate is deposited and registered as described herein, book-entry

interests in the Preference Shares will be shown on, and transfers

thereof will be effected only through, records maintained by Euroclear

or Clearstream, Luxembourg. The Preference Shares will be issued in

definitive certificated form only in limited circumstances.

Listing . . . . . . . . . . . Approval in-principle has been received for each of the LFX and SGX-

ST for permission to deal in and quotation of the Preference Shares on

the respective exchanges. Such permission will be granted by each of

such exchange after the Preference Shares have been admitted to the

Official List of each of them, respectively.

Rating . . . . . . . . . . . Rating of ‘‘Ba2’’ from Moody’s Investors Services, ‘‘BB’’ from

Standard & Poor’s Ratings Group, a division of the McGraw-Hill

Companies, Inc., and ‘‘BB’’ from Fitch Ratings Limited.

Use of Proceeds . . . . . The gross proceeds of the issue of the Preference Shares is

US$200,000,000. The net proceeds (following the deduction of

commissions from the gross proceeds) will be on-lent by the Issuer

to the Bank pursuant to the terms of the Subordinated Loan. The Bank

is responsible for certain expenses related to the issue and offer of the

Preference Shares. The Bank intends to use the proceeds received under

the Subordinated Loan for general working capital purposes. The

principal reason for the issuance is to provide additional Tier 1 capital

to strengthen the capital base of the Bank.

Selling Restrictions . . . The Preference Shares have not been and will not be registered under

the United States Securities Act of 1933, as amended (the ‘‘Securities

Act’’), and the Preference Shares are subject to US tax law

requirements. Subject to certain exceptions, the Preference Shares

may not be offered, sold or delivered within the United States or to US

persons (as defined in Regulation S under the Securities Act

(‘‘Regulation S’’). For a further description of certain restrictions on

the offering and sale of the Preference Shares and on distribution of

this document, see ‘‘Subscription and Sale’’.

11

Governing Law. . . . . . The Preference Shares will be governed by, and construed in

accordance with, Malaysian law.

Subordinated Guarantee

Guarantor . . . . . . . . . The Bank

Subordinated Guarantee Subject to the exceptions and limitations described in the Subordinated

Guarantee, the Bank will guarantee, on a subordinated basis, the

payment of all Guaranteed Payments (as defined herein).

The Subordinated Guarantee constitutes unsecured obligations of the

Bank which will, in the event of the winding-up of the Bank:

1 rank (i) junior to the Senior Obligations of the Bank, (ii) paripassu with the Liquidation Parity Obligations of the Bank, and

(iii) senior only to all Junior Obligations of the Bank; and

2 rank pari passu with claims of the Issuer under the Subordinated

Loan and any Replacement Instrument.

Guaranteed Payments . ‘‘Guaranteed Payments’’ means collectively:

1 any declared but unpaid Preferred Dividends for the most recent

Preferred Dividend Period;

2 any Compulsory Payments;

3 any cash amounts to which the holders of the Preference Shares

are entitled pursuant to the terms of the Preference Shares in

respect of redemption of the Preference Shares;

4 any Liquidation Distribution to which the holders of the

Preference Shares are entitled pursuant to the terms of the

Preference Shares; and

5 for the avoidance of doubt, any Additional Amounts.

12

Limitations on Payments The Bank will not be obliged, except under certain circumstances, to

make payment under the Subordinated Guarantee of any Guaranteed

Payments.

Guaranteed Payments will not be paid in respect of Preferred Dividends

with respect to the Preference Shares:

(i) to the extent that such payment in respect of Preferred Dividends

(if paid in full), together with the sum of any other dividends and

other distributions paid or scheduled to be paid (whether or not

paid in whole or part) to holders of Preferred Dividend Parity

Obligations on the relevant Preferred Dividend Payment Date,

would exceed the Distributable Funds as of the Preferred

Dividend Determination Date immediately preceding such

Preferred Dividend Payment Date; or

(ii) even if Distributable Funds are sufficient, (a) to the extent that

such payment of Preferred Dividends and/or dividends or other

distributions on Preferred Dividend Parity Obligations would

breach or cause or continue a breach of BNM published capital

adequacy requirements from time to time applicable to the Bank

or (b) the Bank Board (or an authorised committee thereof) in its

sole discretion has notified BNM and the Issuer that it has

determined that (a) above is expected to occur in the near term.

If, at the time that a Guaranteed Payment in respect of the Liquidation

Distribution is to be paid by the Bank under the Subordinated

Guarantee, proceedings are pending or have been commenced for the

voluntary or involuntary liquidation, dissolution or winding-up of the

Bank other than pursuant to a Permitted Reorganisation, payment under

the Subordinated Guarantee of such Guaranteed Payment in respect of

such Liquidation Distribution shall not exceed the amount per

Preference Share that would have been paid as a liquidation

distribution out of the assets of the Bank had the Preference Shares

been issued by the Bank (whether or not the Bank could in fact have

issued such securities at such time) and ranked:

(a) junior to all Senior Obligations of the Bank;

(b) pari passu with Liquidation Parity Obligations of the Bank; and

(c) senior to all Junior Obligations of the Bank.

Direct Enforcement

Rights . . . . . . . . . . Following a failure by the Bank to make a Guaranteed Payment on the

due date therefor which failure continues for more than 5 days, a

Holder may commence legal proceedings against the Bank to enforce

its payment obligations under the Deed of Guarantee. Upon obtaining

judgment against the Bank, the Holder may petition for the winding-up

of the Bank based on such judgment and may claim in the liquidation

of the Bank in accordance with the terms of such judgment, but no

other remedy shall be available to such Holder.

13

Certain Other

Undertakings . . . . . .

The Bank undertakes that, so long as any of the Preference Shares are

outstanding, unless the Bank itself is being wound up, the Bank will

not permit, or take any action that would or might cause, the

liquidation, dissolution or winding-up of the Issuer otherwise than (i)

with the prior approval of BNM (if then required) and (ii) if the Bank

has sufficient Distributable Reserves in an amount at least equal to the

aggregate Liquidation Distribution.

Termination . . . . . . . . The Subordinated Guarantee shall terminate and be of no further force

and effect upon:

(i) payment of the Redemption Price or the Special Redemption

Price, as the case may be, on all the Preference Shares;

(ii) purchase and cancellation of all the Preference Shares;

(iii) payment of the Liquidation Distribution, or the Relevant

Proportion thereof with respect to all Preference Shares; or

(iv) substitution in full of the Preference Shares with the Substitute

Preference Shares,

provided, however, that the Subordinated Guarantee will continue to be

effective or will be reinstated, as the case may be, if at any time

payment of any sums paid in respect of the Preference Shares or under

the Subordinated Guarantee must be restored by a holder with respect

to Preference Shares or the Substitute Preference Shares returned for

any reason whatsoever.

Governing Law. . . . . . The Deed of Guarantee will be governed by English law, save that the

subordination provisions therein shall be governed by Malaysian law.

14

SUMMARY RESTATED CONSOLIDATED FINANCIAL AND

OTHER DATA RELATING TO THE BANK

The Bank is the legal entity previously known as AmFinance. It changed its name following itsmerger with ABB, which was completed on 1 June 2005. For more information, see ‘‘Description ofthe Business of the Bank — History.’’ References in this Offering Circular to AmFinance arereferences to the Bank prior to the Merger.

The summary restated consolidated financial information of the Bank for the year ended 31March 2005 (the ‘‘Restated Financial Information’’) has been derived from (i) the auditedconsolidated financial statements of AmFinance for the year ended 31 March 2005 as adjusted forthe adoption of Revised GP8, (ii) the audited financial statements of ABB for the year ended 31March 2005 as adjusted for the adoption of the Revised GP8 and (iii) the consolidation of (i) and(ii) above in accordance with the merger accounting method under Malaysian GAAP (which deemsboth AmFinance and ABB to be operating as a single entity from the earliest financial periodpresented herein).

The Bank has provided the Restated Financial Information because it believes that suchinformation allows investors to better understand the Merger and the context in which it occurred.However, the Restated Financial Information should not be relied upon as a confirmation of thefinancial condition or operating results that would have been achieved had the Merger beencompleted as at 1 April 2004. In addition, the Restated Financial Information may not necessarily beindicative of the future financial condition or future results of operations of the Bank.

The summary consolidated financial information of the Bank for the six months ended 30September 2005 (the ‘‘Interim Financial Statements’’) is derived from the Bank’s unauditedconsolidated interim financial statements for the six months ended 30 September 2005 includedelsewhere in this Offering Circular. The unaudited results of operations for the six months ended 30September 2005 are not necessarily indicative of the results to be expected for any other interimperiod or for the year ending 31 March 2006.

The summary restated consolidated financial information of the Bank for the six months ended30 September 2004 are derived from (i) the unaudited interim consolidated financial statements ofAmFinance for the six-month period ended 30 September 2004 as adjusted for the adoption ofRevised GP8 and three-month NPL classification and full charge out of handling fees; (ii) theunaudited interim financial statements of ABB for the six-month period ended 30 September 2004 asadjusted for the adoption of Revised GP8 and three-month NPL classification and (iii) theconsolidation of (i) and (ii) above in accordance with the merger accounting method underMalaysian GAAP (which deems both AmFinance and ABB to be operating as a single entity from theearliest financial period presented herein). See ‘‘Changes in Accounting Policies’’. The unauditedresults of operations for the six months ended 30 September 2004 are not necessarily indicative ofthe results to be expected for any other interim period or for the year ending 31 March 2006.

The Bank’s financial statements are prepared and presented in accordance with MalaysianGAAP and BNM Guidelines. Malaysian GAAP differs in certain material respects from IFRS. See‘‘Risk Factors — Risks Relating to Malaysia — Malaysian corporate and other disclosure andaccounting standards differ from those in other jurisdictions’’ and ‘‘Summary of SignificantDifferences Between Malaysian GAAP and IFRS’’.

On 5 October 2004, BNM issued the Revised Guidelines on Financial Reporting for LicensedInstitutions (BNM/GP8) (‘‘Revised GP8’’). The Bank implemented Revised GP8 with effect from 1April 2005. The Restated Financial Information and the Interim Financial Statements in this sectionhave been prepared in accordance with Revised GP8. The Bank is exempted by BNM from RevisedGP8 requirement for a certain test on impaired loans for the year ending 31 March 2006. Forfurther information, see ‘‘Summary of Significant Differences Between Revised GP8 and the RelevantIFRS — Test on Impaired Loans’’.

Investors should read the following summary consolidated financial and other data relating tothe Bank in conjunction with the financial statements and the related notes included elsewhere inthis Offering Circular. See ‘‘Index to Financial Statements’’.

15

Summary Consolidated Income Statement

For the year ended

31 March

For the six months ended

30 September

2005 2004 2005

Bank Bank

(unaudited)

(restated) (restated)

(in millions)

RM U.S.$ RM U.S.$ RM U.S.$

Interest income . . . . . . . . 2,406.8 638.6 1,188.1 315.2 1,251.3 332.0

Interest expense . . . . . . . . (1,188.0) (315.2) (580.8) (154.1) (626.8) (166.3)

Net interest income . . . . . 1,218.8 323.4 607.3 161.1 624.5 165.7

Net income from Islamic

Banking business. . . . . . 387.9 102.9 189.9 50.4 229.7 60.9

Other operating income . . . 161.4 42.8 39.3 10.4 78.5 20.8

Net income . . . . . . . . . . 1,768.1 469.1 836.5 221.9 932.7 247.4

Other operating expenses . . (774.2) (205.4) (388.9) (103.2) (456.9) (121.2)

Operating profit . . . . . . . . 993.9 263.7 447.6 118.7 475.8 126.2

Allowance for losses on

loans and financing . . . . (715.8) (189.9) (234.5) (62.2) (300.1) (79.6)

Transfer to profit

equalisation reserve . . . . (55.8) (14.8) (36.2) (9.6) (9.0) (2.3)

Impairment of property and

equipment . . . . . . . . . . (29.8) (7.9) (28.4) (7.5) — —

Impairment writeback on

securities held-to-maturity 4.8 1.3 6.5 1.7 27.7 7.3

Held-for-trading securities

market-to-market . . . . . . 1.3 0.3 — — — —

Profit before share in results

of associated companies

and taxation . . . . . . . . . 198.6 52.7 154.9 41.1 194.4 51.6

Share in results of associated

companies . . . . . . . . . . 0.3 0.1 0.1 — 0.1 —

Profit before taxation . . . . 198.9 52.8 155.0 41.1 194.5 51.6

Taxation . . . . . . . . . . . . (95.6) (25.4) (55.8) (14.8) (55.9) (14.8)

Profit before minority

interests . . . . . . . . . . . 103.3 27.4 99.2 26.3 138.6 36.8

Minority interests . . . . . . . — — — — — —

Net profit attributable to

shareholder of the Bank . 103.3 27.4 99.2 26.3 138.6 36.8

Basic earnings per share

(sen) . . . . . . . . . . . . . 16.93 4.48 16.26 4.31 22.72 6.03

16

Summary Consolidated Balance Sheet

As at 31 March 2005 As at 30 September 2005

Bank Bank

(restated) (unaudited)

(in millions)

RM U.S.$ RM U.S.$

AssetsCash and short-term funds . . . . . . 5,398.8 1,432.4 5,317.6 1,410.9Deposits and placements with banks

and other financial institutions . . 381.0 101.1 793.2 210.5Securities held-for-trading . . . . . . 1,492.5 396.0 1,282.7 340.3Securities available-for-sale. . . . . . 96.3 25.6 94.5 25.1Securities held-to-maturity . . . . . . 1,544.3 409.7 1,455.0 386.0Loans, advances and financing. . . . 35,636.2 9,455.1 39,438.6 10,463.9Other assets . . . . . . . . . . . . . . . 502.9 133.4 541.4 143.7Deferred tax asset . . . . . . . . . . . 907.9 240.9 852.2 226.1Statutory deposit with Bank Negara

Malaysia . . . . . . . . . . . . . . . . 1,301.6 345.3 1,430.1 379.4Investment in associated companies. 0.5 0.1 0.5 0.1Property and equipment . . . . . . . . 416.5 110.5 408.6 108.4

Total assets . . . . . . . . . . . . . . . 47,678.5 12,650.1 51,614.4 13,694.4

Liabilities and Shareholder’sFunds

Deposits from customers . . . . . . . 29,161.8 7,737.3 31,646.9 8,396.6Deposits and placements of banks

and other financial institutions . . 9,526.4 2,527.6 11,048.3 2,931.4Securities sold under repurchase

agreements . . . . . . . . . . . . . . 103.8 27.5 227.3 60.3Bills and acceptances payable . . . . 515.8 136.8 678.4 180.0Amount due to Cagamas Berhad . . 2,653.6 704.1 2,020.7 536.1Other liabilities . . . . . . . . . . . . . 1,196.4 317.4 1,335.2 354.2Subordinated term loans. . . . . . . . 1,140.0 302.5 1,140.0 302.5Subordinated bonds. . . . . . . . . . . 200.0 53.1 200.0 53.1

Total liabilities . . . . . . . . . . . . . 44,497.8 11,806.3 48,296.8 12,814.2

Minority interests . . . . . . . . . . . . — — — —

Share capital. . . . . . . . . . . . . . . 610.4 161.9 610.4 161.9Reserves . . . . . . . . . . . . . . . . . 2,570.3 681.9 2,707.2 718.3

Shareholder’s Funds . . . . . . . . . . 3,180.7 843.8 3,317.6 880.2

Total Liabilities and Shareholder’sFunds . . . . . . . . . . . . . . . . . 47,678.5 12,650.1 51,614.4 13,694.4

Commitments and contingencies . . 13,416.6 3,559.7 15,406.3 4,087.6

Net Tangible Assets per share (RM) 5.21 1.38 5.44 1.44

Reserves comprise:Share premium . . . . . . . . . . . . . 380.0 100.8 380.0 100.8Statutory reserve . . . . . . . . . . . . 624.0 165.5 624.0 165.5Capital reserve . . . . . . . . . . . . . 377.5 100.2 377.5 100.2Merger reserve . . . . . . . . . . . . . 679.7 180.3 679.7 180.3Available-for-sale securities

revaluation reserve. . . . . . . . . . — — (1.8) (0.4)Unappropriated profits . . . . . . . . . 509.1 135.1 647.8 171.9

2,570.3 681.9 2,707.2 718.3

17

Financial Ratios(1)

As at and for

the year ended

31 March

As at and for the

six months ended

30 September

2005 2004 2005

(restated) (restated)

% % %

(unaudited)

Net interest margin. . . . . . . . . . . . . . . . . . . . . . . . . . 3.5 3.6(2) 3.5(2)

Non-interest income/total operating income . . . . . . . . . . . 9.1 4.7(2) 8.4(2)

Return on average assets . . . . . . . . . . . . . . . . . . . . . . 0.2 0.4(2) 0.6(2)

Return on average equity . . . . . . . . . . . . . . . . . . . . . . 3.4 6.4(2) 8.5(2)

Operating expense/total operating income . . . . . . . . . . . . 43.8 46.5(2) 49.0(2)

Net non-performing loan ratio . . . . . . . . . . . . . . . . . . . 13.5 n/a 10.0

Gross non-performing loan ratio . . . . . . . . . . . . . . . . . . 16.6 n/a 13.6

Loans and advances/total deposits . . . . . . . . . . . . . . . . . 99.5 n/a 99.7

Core capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(3) n/a 6.0

Risk weighted capital ratio . . . . . . . . . . . . . . . . . . . . . 11.6(3) n/a 10.6

Notes:

(1) Financial ratios definitions:

— Net interest margin means net interest income, including net financing income from Islamic banking operations,

as a percentage of the average of the beginning and year end/period end interest-earning assets including Islamic

banking assets.

— Return on average assets means net profit for the year/period as a percentage of the average of the opening and

closing balances of total assets.

— Return on average equity means net profit for the year/period as a percentage of the average of the opening and

closing balances of total equity.

— Net non-performing loan ratio means net non-performing loans as a percentage of gross loans, advances and

financing less specific provisions for doubtful debts and interest-in-suspense.

— Gross non-performing loan ratio means gross non-performing loans as a percentage of gross loans, advances

and financing.

— Loans and advances/total deposits means gross loans, advances and financing as a percentage of total deposits.

Total deposits comprises deposits from customers and deposits and placements with banks and other financial

institutions.

— Core capital ratio means the ratio of Tier 1 capital to risk-weighted assets calculated in accordance with BNM

Guidelines. However, if the total of investment in subsidiaries and holdings of other banking institutions’ capital

is greater than the Tier 2 capital of the banking institution, then the core capital is equivalent to the capital base.

— Risk-weighted capital ratio means the ratio of capital base to risk-weighted assets calculated in accordance with

BNM Guidelines.

(2) The ratios for the six months ended 30 September 2004 and 2005 have been annualised.

(3) Core capital ratio and risk-weighted capital ratio of the Bank as at 31 March 2005 are not restated.

18

Consolidated Income Statement

For the year ended 31 March 2005

AmFinance

(audited)(1)

PYA on

Investments(2)

AmFinance

(adjusted)(3)

ABB

(audited)(4)

Bank(5)

(restated)

(in millions)

RM RM RM RM RM U.S.$

Interest income . . . . . . . . . 1,918.4 — 1,918.4 488.4 2,406.8 638.6Interest expense . . . . . . . . . (908.4) — (908.4) (279.6) (1,188.0) (315.2)

Net interest income . . . . . . 1,010.0 — 1,010.0 208.8 1,218.8 323.4Net income from Islamic

Banking business . . . . . . 363.0 — 363.0 24.9 387.9 102.9Other operating income . . . . 83.4 — 83.4 77.9 161.4 42.8

Net income . . . . . . . . . . . 1,456.4 — 1,456.4 311.6 1,768.1 469.1Other operating expenses . . . (554.3) — (554.3) (219.9) (774.2) (205.4)

Operating profit . . . . . . . . . 902.1 — 902.1 91.7 993.9 263.7Allowance for losses on loans

and financing . . . . . . . . . (448.5) — (448.5) (267.3) (715.8) (189.9)Transfer to profit equalisation

reserve . . . . . . . . . . . . . (45.4) — (45.4) (10.4) (55.8) (14.8)Impairment of property and

equipment . . . . . . . . . . . (29.8) — (29.8) — (29.8) (7.9)Impairment writeback on

securities held-to-maturity . (4.6) — (4.6) 9.5 4.8 1.3Held-for-trading securities

marked-to-market . . . . . . — 1.3 1.3 — 1.3 0.3

Profit/(loss) before share inresults of associatedcompanies and taxation. . . 373.8 1.3 375.1 (176.5) 198.6 52.7

Share in results of associatedcompanies . . . . . . . . . . . 0.3 — 0.3 — 0.3 0.1

Profit/(loss) before taxation. . 374.1 1.3 375.4 (176.5) 198.9 52.8Taxation . . . . . . . . . . . . . (134.1) (0.3) (134.4) 38.8 (95.6) (25.4)

Profit/(loss) before minorityinterests . . . . . . . . . . . . 240.0 1.0 241.0 (137.7) 103.3 27.4

Minority interests . . . . . . . . — — — — — —

Net profit/(loss) attributableto shareholder . . . . . . . . 240.0 1.0 241.0 (137.7) 103.3 27.4

Basic earnings/(loss) pershare (sen) . . . . . . . . . . 45.43 — 45.60 (18.86) 16.93 4.48

Notes:

(1) As per the signed audited financial statements of AmFinance for the year ended 31 March 2005.

(2) Prior year adjustments (‘‘PYA’’) arising from the impact of marking-to-market the securities held-for-trading pursuant

to Revised GP8. See ‘‘Changes in Accounting Policies — BNM — Revised GP8’’.

(3) The figures in column (1) above after adjusting for the figures in column (2) above.

(4) As per the signed audited financial statements of ABB for the year ended 31 March 2005.

(5) Derived from (i) the audited consolidated financial statements of AmFinance for the year ended 31 March 2005 as

adjusted for the adoption of Revised GP8, (ii) the audited financial statements of ABB for the year ended 31 March

2005 as adjusted for the adoption of Revised GP8 and (iii) the consolidation of (i) and (ii) above in accordance with the

merger accounting method under Malaysian GAAP (which deems both AmFinance and ABB to be operating as a single

entity from the earliest financial period presented herein).

19

Consolidated

BalanceSheet

Asat31March

2005

AmFinance

(audited)(1)

Reclassification

ofIn

vestments

(2)

PYA

on

Investments

(3)

AmFinance

(adjusted)(4)

ABB

(audited)(5)

Reclassification

ofIn

vestments

(6)

ABB

(adjusted)(7)

Aggregate

of

AmFinance

&ABB(8)

Adjustments

for

Merger

Accounting(9)

Bank

(restated)(10)

(in

millions)

RM

RM

RM

RM

RM

RM

RM

RM

RM

RM

U.S.$

Assets

Cash

andshort-term

funds......................

3,175.0

——

3,175.0

2,223.8

—2,223.8

5,398.8

—5,398.8

1,432.4

Deposits

andplacements

withbanksandotherfinancial

institutions..............................

358.9

——

358.9

22.1

—22.1

381.0

—381.0

101.1

Dealingsecurities............................

75.8

(75.8)

——

196.6

(196.6)

——

——

—Investmentsecurities..........................

1,874.9

(1,874.9)

——

984.0

(984.0)

——

——

—Securitiesheld-for-trading

......................

—954.4

1.8

956.2

—536.3

536.3

1,492.5

—1,492.5

396.0

Securitiesavailable-for-sale......................

——

——

—96.3

96.3

96.3

—96.3

25.6

Securitiesheld-to-m

aturity

......................

—996.3

—996.3

—548.0

548.0

1,544.3

—1,544.3

409.7

Loans,

advancesandfinancing....................

27,278.5

——

27,278.5

8,357.7

—8,357.7

35,636.2

—35,636.2

9,455.1

Otherassets

...............................

344.5

——

344.5

158.4

—158.4

502.9

—502.9

133.4

Deferredtaxasset...........................

616.8

—(0.5)

616.3

291.6

—291.6

907.9

—907.9

240.9

Statutory

depositwithBankNegara

Malaysia

..........

988.9

——

988.9

312.7

—312.7

1,301.6

—1,301.6

345.3

Investmentin

associatedcompanies.

................

0.5

——

0.5

——

—0.5

—0.5

0.1

Propertyandequipment........................

384.1

——

384.1

32.4

—32.4

416.5

—416.5

110.5

Totalassets

...............................

35,097.9

—1.3

35,099.2

12,579.3

—12,579.3

47,678.5

—47,678.5

12,650.1

Liabilitiesand

Shareholder’s

Funds

Deposits

from

customers

.......................

22,271.8

——

22,271.8

6,890.0

—6,890.0

29,161.8

—29,161.8

7,737.3

Deposits

andplacements

ofbanksandotherfinancial

institutions..............................

5,877.5

——

5,877.5

3,648.9

—3,648.9

9,526.4

—9,526.4

2,527.6

Securitiessold

underrepurchase

agreements

...........

33.1

——

33.1

70.7

—70.7

103.8

—103.8

27.5

Bills

andacceptancespayable

....................

——

——

515.8

—515.8

515.8

—515.8

136.8

Amountdueto

CagamasBerhad

..................

2,455.7

——

2,455.7

197.9

—197.9

2,653.6

—2,653.6

704.1

Otherliabilities.............................

957.3

——

957.3

239.1

—239.1

1,196.4

—1,196.4

317.4

Subordinatedterm

loans........................

680.0

——

680.0

460.0

—460.0

1,140.0

—1,140.0

302.5

Subordinatedbonds.

..........................

200.0

——

200.0

——

—200.0

—200.0

53.1

Totalliabilities.............................

32,475.4

——

32,475.4

12,022.4

—12,022.4

44,497.8

—44,497.8

11,806.3

Minority

interests............................

——

——

——

——

——

—

Share

capital.

..............................

528.4

——

528.4

761.7

—761.7

1,290.1

(679.7)

610.4

161.9

Reserves.................................

2,094.1

—1.3

2,095.4

(204.8)

—(204.8)

1,890.6

679.7

2,570.3

681.9

Shareholder’sFunds..........................

2,622.5

—1.3

2,623.8

556.9

—556.9

3,180.7

—3,180.7

843.8

TotalLiabilitiesand

Shareholder’s

Funds

...........

35,097.9

—1.3

35,099.2

12,579.3

—12,579.3

47,678.5

—47,678.5

12,650.1

Commitments

and

contingencies..................

6,646.6

——

6,646.6

6,770.0

—6,770.0

13,416.6

—13,416.6

3,559.7

Reservescomprise:

Share

premium

.............................

380.0

——

380.0

377.0

—377.0

757.0

(377.0)

380.0

100.8

Statutory

reserve............................

528.4

——

528.4

95.6

—95.6

624.0

—624.0

165.5

Capitalreserve

.............................

——

——

0.5

—0.5

0.5

377.0

377.5

100.2

Mergerreserve

.............................

——

——

——

——

679.7

679.7

180.3

Unappropriatedprofits/(Accumulatedlosses)

...........

1,185.7

—1.3

1,187.0

(677.9)

—(677.9)

509.1

—509.1

135.1

2,094.1

—1.3

2,095.4

(204.8)

—(204.8)

1,890.6

679.7

2,570.3

681.9

20

Notes:

(1)

Asperthesignedauditedfinancialstatements

ofAmFinancefortheyearended31March2005.

(2)

Reclassificationofsecuritiespursuantto

RevisedGP8.See‘‘Changes

inAccountingPolicies

—BNM

—Revised

GP8’’.

(3)

PYA

arisingfrom

theim

pactofmarking-to-m

arketthesecuritiesheld-for-tradingpursuantto

RevisedGP8.See‘‘Changes

inAccountingPolicies

—Revised

GP8’’.

(4)

Thefiguresin

column(1)aboveafteradjustingforthefiguresin

column(2)and(3).

(5)

Asperthesignedauditedfinancialstatements

ofABB

fortheyearended31March2005.

(6)

Reclassificationofsecuritiespursuantto

RevisedGP8.See‘‘Changes

inAccountingPolicies

—BNM

—Revised

GP8’’.

(7)

Thefiguresin

column(5)aboveafteradjustingforthefiguresin

column(6).

(8)

Aggregate

ofthefiguresin

columns(4)and(7)above.

(9)

Adjustments

inaccordancewiththemergeraccountingmethodunderMalaysianGAAP.See‘‘Changes

inAccountingPolicies

—AdoptionofMerger

Accounting’’.

(10)

Derivedfrom

(i)theauditedconsolidatedfinancialstatements

ofAmFinancefortheyearended31March2005asadjustedfortheadoptionofRevisedGP8,(ii)

theauditedfinancialstatements

ofABB

fortheyearended31March2005asadjustedfortheadoptionofRevisedGP8and(iii)theconsolidationof(i)and(ii)

abovein

accordancewiththemergeraccountingmethodunder

MalaysianGAAP

(whichdeemsboth

AmFinanceandABB

tobeoperatingasasingle

entity

from

theearliest

financialperiodpresentedherein).

21

Consolidated

IncomeStatement

Forthesixmonthsended

30September

2004

2005

AmFinance

(unaudited)(1)

Reclassification

in

resp

ectof

HandlingFeesand

Investments

(2)

PYA

on

Investments

(3)

Reclassification

ofNPL(4)

AmFinance

(restated)(5)

ABB

(unaudited)(6)

Reclassification

of

Investments

(2)

PYA

on

IIS(4)

ABB

(restated)(7)

Bank

(unaudited)(8)

Bank

(unaudited)

(in

millions)

RM

RM

RM

RM

RM

RM

RM

RM

RM

RM

RM

U.S.$

Interest

income..................

960.4

——

(6.1)

954.3

230.8

—2.9

233.7

1,188.1

1,251.3

332.0

Interest

expense

..................

(479.6)

35.3

——

(444.3)

(136.5)

——

(136.5)

(580.8)

(626.8)

(166.3)

Netinterest

income

...............

480.8

35.3

—(6.1)

510.0

94.3

—2.9

97.2

607.3

624.5

165.7

Netincomefrom

Islamic

Bankingbusiness

.164.8

15.4

1.4

(1.7)

179.9

10.5

(0.4)

(0.1)

10.0

189.9

229.7

60.9

Otheroperatingincome.............

18.8

(11.7)

——

7.1

37.5

(5.3)

—32.2

39.3

78.5

20.8

Netincome

....................

664.4

39.0

1.4

(7.8)

697.0

142.3

(5.7)

2.8

139.4

836.5

932.7

247.4

Otheroperatingexpenses............

(235.5)

(50.7)

——

(286.2)

(102.7)

——

(102.7)

(388.9)

(456.9)

(121.2)

Operatingprofit.

.................

428.9

(11.7)

1.4

(7.8)

410.8

39.6

(5.7)

2.8

36.7

447.6

475.8

126.2

Allowanceforlossesonloansandfinancing

(159.7)

——

—(159.7)

(74.9)

——

(74.9)

(234.5)

(300.1)

(79.6)

Impairmentwrite

back/(loss)onsecurities

held-to-m

aturity

...............

(10.0)

11.7

0.1

—1.8

(0.9)

5.7

—4.8

6.5

27.7

7.3

Impairmentofpropertyandequipment.

...

(28.4)

——

—(28.4)

——

——

(28.4)

——

Transferto

profitequalisationreserve....

(29.4)

——

—(29.4)

(6.8)

——

(6.8)

(36.2)

(9.0)

(2.3)

Profit/(loss)before

share

inresultsof

associatedcompaniesandtaxation....

201.4

—1.5

(7.8)

195.1

(43.0)

—2.8

(40.2)

154.9

194.4

51.6

Share

ofprofits

inassociatedcompanies

..

0.1

——

—0.1

——

——

0.1

0.1

—

Profit/(loss)beforetaxation..........

201.5

—1.5

(7.8)

195.2

(43.0)

—2.8

(40.2)

155.0

194.5

51.6

Taxation

......................

(68.2)

—(0.4)

2.2

(66.4)

11.4

—(0.8)

10.6

(55.8)

(55.9)

(14.8)

Profit/(loss)before

minority

interests.....

133.3

—1.1

(5.6)

128.8

(31.6)

—2.0

(29.6)

99.2

138.6

36.8

Minority

interests.................

——

——

——

——

——

——

Netprofit/(loss)attributable

toshareholderof

theBank....................

133.3

—1.1

(5.6)

128.8

(31.6)

—2.0

(29.6)

99.2

138.6

36.8

Basicearnings/(loss)pershare

(sen).....

25.23

——

——

(4.39)

——

—16.26

22.72

6.03

22

Notes:

(1)

Aspertheunauditedinterim

consolidatedfinancialstatements

ofAmFinanceforthesixmonthsended30September2004.

(2)

Reclassificationin

respectofhandlingfeespaid

tomotorvehicle

dealers

andreclassificationin

respectofsecuritiespursuantto

RevisedGP8.See‘‘Changes

inAccountingPolicies’’.

(3)

PYA

arisingfrom

theim

pactofmarking-to-m

arketthesecuritiesheld-for-tradingpursuantto

RevisedGP8.See‘‘Changes

inAccountingPolicies

—BNM

—Revised

GP8’’.

(4)

PYA

inrespectofinterest-in-suspense

(‘‘IIS’’)in

accordancewiththethree-m

onth

NPL

classification.See‘‘Changes

inAccountingPolicies’’.

(5)

Thefiguresin

column(1)aboveafteradjustingforthefiguresin

columns(2),

(3)and(4).

(6)

Aspertheunauditedinterim

financialstatements

ofABB

forthesixmonthsended30September2004.

(7)

Thefiguresin

column(6)aboveafteradjustingforthefiguresin

columns(7)and(8).

(8)

Derivedfrom

(i)theunauditedinterim

consolidatedfinancialstatements

ofAmFinanceforthesix-m

onth

periodended30September2004asadjustedfortheadoptionofRevisedGP8and

three-m

onth

NPL

classificationandfull

chargeoutofhandlingfees;

(ii)

theunauditedinterim

financialstatements

ofABB

forthesix-m

onth

periodended30September2004asadjustedfor

theadoptionofRevisedGP8andthree-m

onth

NPL

classificationsand(iii)theconsolidationof(i)and(ii)

abovein

accordancewiththemergeraccountingmethodunderMalaysianGAAP

(whichdeemsboth

AmFinanceandABB

tobeoperatingasasingle

entity

from

theearliest

financialperiodpresentedherein).

See‘‘Changes

inAccountingPolicies’’.

23

Consolidated Balance Sheet

As at 30 September 2005

(unaudited)

(in millions)

RM U.S.$

Assets

Cash and short-term funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,317.6 1,410.9

Deposits and placements with banks and other financial institutions. . 793.2 210.5

Securities held-for-trading . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,282.7 340.3

Securities available-for-sale. . . . . . . . . . . . . . . . . . . . . . . . . . . 94.5 25.1

Securities held-to-maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,455.0 386.0

Loans, advances and financing. . . . . . . . . . . . . . . . . . . . . . . . . 39,438.6 10,463.9

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 852.2 226.1

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541.4 143.7

Statutory deposit with Bank Negara Malaysia . . . . . . . . . . . . . . . 1,430.1 379.4

Investment in associated companies. . . . . . . . . . . . . . . . . . . . . . 0.5 0.1

Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 408.6 108.4

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,614.4 13,694.4

Liabilities and Shareholder’s Funds

Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,646.9 8,396.6

Deposits and placements of banks and other financial institutions . . . 11,048.3 2,931.4

Securities sold under repurchase agreements . . . . . . . . . . . . . . . . 227.3 60.3

Bills and acceptances payable . . . . . . . . . . . . . . . . . . . . . . . . . 678.4 180.0

Amount due to Cagamas Berhad . . . . . . . . . . . . . . . . . . . . . . . 2,020.7 536.1

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,335.2 354.2

Subordinated term loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,140.0 302.5

Subordinated bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200.0 53.1

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,296.8 12,814.2

Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

Share capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610.4 161.9

Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,707.2 718.3

Shareholder’s Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,317.6 880.2

Total Liabilities and Shareholder’s Funds . . . . . . . . . . . . . . . . 51,614.4 13,694.4

Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . . 15,406.3 4,087.6

Net Tangible Assets per share (RM) . . . . . . . . . . . . . . . . . . . . . 5.44 1.44

24

SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA RELATING TO

AmFINANCE

The following tables present summary audited consolidated financial information of AmFinancefor each of the years ended 31 March 2003, 2004 and 2005. The financial information for the yearsended 31 March 2003 and 2004 have been derived from AmFinance’s audited consolidated financialstatements for the year ended 31 March 2004, which are included elsewhere in this OfferingCircular. The financial information for the year ended 31 March 2005 has been derived fromAmFinance’s audited consolidated financial statements for the year ended 31 March 2005, which areincluded elsewhere in this Offering Circular. See ‘‘Index to Financial Statements’’. DeloitteKassimChan audited AmFinance’s consolidated financial statements as of and for the years ended 31March 2003 and 2004. Ernst & Young audited AmFinance’s consolidated financial statements as ofand for the year ended 31 March 2005.

AmFinance’s financial statements were prepared and presented in accordance with MalaysianGAAP and BNM Guidelines. The financial information of AmFinance is not restated in the followingsection to reflect Revised GP8, other adjustments and merger accounting as described in ‘‘Changesin Accounting Policies’’ in the financial years preceding such change or adoption of accountingpolicies except as otherwise indicated in footnotes below. Malaysian GAAP and Revised GP8 differin certain material respects from IFRS. See ‘‘Risk Factors — Risks Relating to Malaysia —Malaysian corporate and other disclosure and accounting standards differ from those in otherjurisdictions’’, ‘‘Summary of Significant Differences Between Malaysian GAAP and IFRS’’ and‘‘Summary of Certain Differences Between Revised GP8 and the Relevant IFRS’’.

Investors should read the following summary consolidated financial data in conjunction withthe consolidated financial statements and the related notes included elsewhere in this OfferingCircular. See ‘‘Index to Financial Statements’’.

25

Consolidated Income Statement

For the year ended 31 March

2003(1)

2004 2005

(audited)

(in millions)

RM RM RM U.S.$

Interest income . . . . . . . . . . . . . . . . . . 1,896.9 2,048.4 1,918.4 509.0

Interest expense . . . . . . . . . . . . . . . . . . (900.3) (959.0) (908.4) (241.0)

Net interest income . . . . . . . . . . . . . . . 996.6 1,089.4 1,010.0 268.0

Income from Islamic banking operations . . 74.4 264.7 363.0 96.3

Other operating income . . . . . . . . . . . . . 32.2 40.6 83.4 22.1

Net income . . . . . . . . . . . . . . . . . . . . 1,103.2 1,394.7 1,456.4 386.4

Other operating expenses . . . . . . . . . . . . (424.4) (525.8) (554.3) (147.1)

Operating profit . . . . . . . . . . . . . . . . . . 678.8 868.9 902.1 239.3

Allowance for losses on loans and financing (368.7) (297.7) (448.5) (119.0)

Transfer to profit equalisation reserve . . . . (3.7) (47.0) (45.4) (12.0)

Impairment of property and equipment . . . . — — (29.8) (7.9)

(Allowance)/Write back of allowance for

diminution in value of investments-net . . 34.6 20.0 (4.6) (1.2)

Provision for contingencies . . . . . . . . . . . — (37.0) — —

Profit before share in results of associated

company and taxation . . . . . . . . . . . . . 341.0 507.2 373.8 99.2

Share of profits in associated company . . . 0.1 0.2 0.3 0.1

Profit before taxation . . . . . . . . . . . . . 341.1 507.4 374.1 99.3

Taxation . . . . . . . . . . . . . . . . . . . . . . 23.0 33.6 (134.1) (35.6)

Profit before minority interest . . . . . . . . . 364.1 541.0 240.0 63.7

Minority interests . . . . . . . . . . . . . . . . . — — — —

Net profit attributable to shareholder of the

company . . . . . . . . . . . . . . . . . . . . . 364.1 541.0 240.0 63.7

Basic earnings per ordinary share (sen) . . . 46.80 102.38 45.43 12.1

Note:

(1) As appear in the audited consolidated financial statements for the year ended 31 March 2004. Restated to reflect MASB

25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards Board — MASB

25, Income Taxes’’.

26

Consolidated Balance Sheet

As at 31 March

2003(1)

2004 2005

(audited)

(in millions)

RM RM RM U.S.$

Assets

Cash and short-term funds . . . . . . . . . . 2,665.6 3,054.8 3,175.0 842.4Deposits and placements with financial

institutions . . . . . . . . . . . . . . . . . . 18.6 19.2 358.9 95.2Dealing securities. . . . . . . . . . . . . . . . 72.9 256.0 75.8 20.1Investment securities . . . . . . . . . . . . . . 2,310.6 1,918.6 1,874.9 497.5Loans, advances and financing. . . . . . . . 25,160.4 26,048.9 27,278.5 7,237.6Other assets . . . . . . . . . . . . . . . . . . . 315.4 271.0 344.5 91.4Deferred tax asset . . . . . . . . . . . . . . . 645.9 701.2 616.8 163.6Statutory deposit with Bank Negara

Malaysia . . . . . . . . . . . . . . . . . . . . 900.7 923.7 988.9 262.4Investment in associated companies. . . . . 0.1 0.3 0.5 0.1Property and equipment . . . . . . . . . . . . 439.3 424.6 384.1 101.9

Total assets . . . . . . . . . . . . . . . . . . . 32,529.5 33,618.3 35,097.9 9,312.2

Liabilities and Shareholder’s Funds

Deposits from customers . . . . . . . . . . . 19,609.2 20,411.8 22,271.8 5,909.2Deposits and placements of banks and other

financial institutions . . . . . . . . . . . . . 5,109.1 5,063.4 5,877.5 1,559.4Securities sold under repurchase agreements 305.5 275.0 33.1 8.8Amount due to Cagamas Berhad . . . . . . 4,018.9 3,675.6 2,455.7 651.5Other liabilities . . . . . . . . . . . . . . . . . 611.2 825.9 957.3 254.0Subordinated term loans. . . . . . . . . . . . 680.0 680.0 680.0 180.4Subordinated notes/bonds . . . . . . . . . . . 250.0 200.0 200.0 53.1

Total Liabilities . . . . . . . . . . . . . . . . 30,583.9 31,131.7 32,475.4 8,616.4

Minority interests . . . . . . . . . . . . . . . . 0.1 0.1 — —

Share capital. . . . . . . . . . . . . . . . . . . 528.4 528.4 528.4 140.2Reserves . . . . . . . . . . . . . . . . . . . . . 1,417.1 1,958.1 2,094.1 555.6

Shareholder’s Funds . . . . . . . . . . . . . 1,945.5 2,486.5 2,622.5 695.8

Total Liabilities and Shareholder’s Funds 32,529.5 33,618.3 35,097.9 9,312.2

Commitments and contingencies . . . . . . 4,411.2 4,361.0 6,646.6 1,763.5

Reserves comprise:Share premium . . . . . . . . . . . . . . . . . 380.0 380.0 380.0 100.8Statutory reserve . . . . . . . . . . . . . . . . 214.4 483.1 528.4 140.2Capital reserve . . . . . . . . . . . . . . . . . 392.0 237.8 — —Unappropriate profits . . . . . . . . . . . . . 430.7 857.2 1,185.7 314.6

Total Reserves . . . . . . . . . . . . . . . . . 1,417.1 1,958.1 2,094.1 555.6

Note:

(1) As appear in the financial statements for the year ended 31 March 2004. Restated to reflect MASB 25 relating to

deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards Board — MASB 25, IncomeTaxes’’.

27

Financial Ratios(1)

As at and for the year ended 31 March

2003(2)

2004 2005

(%) (%) (%)

Net interest margin. . . . . . . . . . . . . . . . . . . . . . . . . 4.9 4.2 4.1

Non-interest income/total operating income . . . . . . . . . . 2.9 2.9 5.7

Return on average assets . . . . . . . . . . . . . . . . . . . . . 1.7 1.6 0.7

Return on average equity . . . . . . . . . . . . . . . . . . . . . 36.2 25.0 9.4

Operating expense/total operating income . . . . . . . . . . . 38.5 37.7 38.1

Net non-performing loan ratio . . . . . . . . . . . . . . . . . . 8.5 9.2 11.9

Gross non-performing loan ratio . . . . . . . . . . . . . . . . . 15.7 14.4 17.3

Loans and advances/customer deposits . . . . . . . . . . . . . 112.2 110.2 108.3

Core capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7 6.9 7.1

Risk-weighted capital . . . . . . . . . . . . . . . . . . . . . . . 10.9 11.4 11.7

Notes:

(1) Financial ratios definitions:

— Net interest margin means net interest income, including net financing income from Islamic banking operations,

as a percentage of the average of the beginning and year end interest-earning assets including Islamic banking

assets.

— Return on average assets means net profit for the year as a percentage of the average of the opening and

closing balances of total assets.

— Return on average equity means net profit for the year as a percentage of the average of the opening and

closing balances of total equity.

— Net non-performing loan ratio means net non-performing loans as a percentage of gross loans, advances and

financing less specific provisions for doubtful debts and interest-in-suspense.

— Gross non-performing loan ratio means gross non-performing loans as a percentage of gross loans, advances

and financing.

— Loans and advances/total deposits means gross loans, advances and financing as a percentage of total deposits.

Total deposits comprises deposits from customers and deposits and placements with banks and other financial

institutions.

— Core capital ratio means the ratio of Tier 1 capital to risk-weighted assets calculated in accordance with BNM

guidelines. However, if the total of investment in subsidiaries and holdings of other banking institutions’ capital

is greater than the Tier 2 capital of the banking institution, then the core capital is equivalent to the capital base.

— Risk-weighted capital ratio means the ratio of capital base to risk-weighted assets calculated in accordance with

BNM guidelines.

(2) Based on figures which appear in the financial statements for the year ended 31 March 2004. Such figures are restated

to reflect MASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards

Board — MASB 25, Income Taxes’’.

28

SUMMARY FINANCIAL AND OTHER DATA RELATING TO ABB

The following tables present summary audited financial information of ABB for each of theyears ended 31 March 2003, 2004 and 2005. The financial information for the years ended 31 March2003 and 2004 have been derived from ABB’s audited financial statements for the year ended 31March 2004, which are included elsewhere in this Offering Circular. The financial information forthe year ended 31 March 2005 has been derived from ABB’s audited financial statements for theyear ended 31 March 2005, which are included elsewhere in this Offering Circular. See ‘‘Index toFinancial Statements’’. Deloitte KassimChan audited ABB’s financial statements as of and for theyears ended 31 March 2003 and 2004. Ernst & Young audited ABB’s financial statements as of andfor the year ended 31 March 2005.

ABB’s financial statements were prepared and presented in accordance with Malaysian GAAPand BNM Guidelines. ABB’s financial information is not restated in the following section to reflectRevised GP8 and other adjustments as described in ‘‘Changes in Accounting Policies’’ in thefinancial years preceding such change or adoption of accounting policies, except as otherwiseindicated in footnotes below. Malaysian GAAP and Revised GP8 differ in certain material respectsfrom IFRS. See ‘‘Risk Factors — Risks Relating to Malaysia — Malaysian corporate and otherdisclosure and accounting standards differ from those in other jurisdictions’’, ‘‘Summary ofSignificant Differences Between Malaysian GAAP and IFRS’’ and ‘‘Summary of SignificantDifferences Between Revised GP8 and the Relevant IFRS’’.

Investors should read the following summary financial data in conjunction with the financialstatements and the related notes included elsewhere in this Offering Circular. See ‘‘Index toFinancial Statements’’.

Income Statement

For the year ended 31 March

2003(1)

2004 2005

(audited)

(in millions)

RM RM RM U.S.$

Interest income . . . . . . . . . . . . . . . . . . 456.0 467.5 488.4 129.6Interest expense . . . . . . . . . . . . . . . . . . (274.7) (298.2) (279.6) (74.2)

Net interest income . . . . . . . . . . . . . . . 181.3 169.3 208.8 55.4Income from Islamic Banking operations . . 14.9 20.3 24.9 6.6Other operating income . . . . . . . . . . . . . 35.2 44.4 77.9 20.7

Net income . . . . . . . . . . . . . . . . . . . . 231.4 234.0 311.6 82.7Other operating expenses . . . . . . . . . . . . (142.9) (170.8) (219.9) (58.3)

Operating profit . . . . . . . . . . . . . . . . . . 88.5 63.2 91.7 24.4Allowance for losses on loans and financing (132.2) (346.6) (267.3) (70.9)Transfer to profit equalisation reserve . . . . (0.4) (1.8) (10.4) (2.8)Write-back of allowance for diminution in

value of investment securities . . . . . . . . 10.3 30.7 9.5 2.5

(Loss) before taxation . . . . . . . . . . . . . . (33.8) (254.5) (176.5) (46.8)Taxation . . . . . . . . . . . . . . . . . . . . . . 13.7 82.3 38.8 10.3

Net (loss) attributable to the shareholder ofthe company . . . . . . . . . . . . . . . . . . (20.1) (172.2) (137.7) (36.5)

Basic (loss) per ordinary share (sen) . . . . . (4.81) (31.13) (18.86) (5.00)

Note:

(1) As appear in the audited financial statements for the year ended 31 March 2004. Restated to reflect MASB 25 relating

to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards Board — MASB 25, Income

Taxes’’.

29

Balance Sheet

As at 31 March

2003(1)

2004 2005

(audited)

(in millions)

RM RM RM U.S.$

Assets

Cash and short-term funds . . . . . . . . . . . 1,669.0 1,710.3 2,223.8 590.0

Deposits and placements with financial

institutions . . . . . . . . . . . . . . . . . . . 230.0 22.0 22.1 5.9

Dealing securities. . . . . . . . . . . . . . . . . 218.8 233.2 196.6 52.1

Investment securities . . . . . . . . . . . . . . . 807.7 1,135.4 984.0 261.1

Loans, advances and financing. . . . . . . . . 7,227.4 7,221.3 8,357.7 2,217.5

Other assets . . . . . . . . . . . . . . . . . . . . 38.0 59.5 158.4 42.0

Deferred tax asset . . . . . . . . . . . . . . . . 167.5 249.8 291.6 77.3

Statutory deposit with Bank Negara Malaysia 293.9 291.7 312.7 83.0

Property and equipment . . . . . . . . . . . . . 33.5 32.2 32.4 8.6

Total assets . . . . . . . . . . . . . . . . . . . . 10,685.8 10,955.4 12,579.3 3,337.5

Liabilities and Shareholder’s Funds

Deposits from customers . . . . . . . . . . . . 6,495.4 6,680.3 6,890.0 1,828.1

Deposits and placements of banks and other

financial institutions . . . . . . . . . . . . . . 2,528.3 2,508.7 3,648.9 968.1

Securities sold under repurchase agreements 12.6 4.7 70.7 18.8

Bills and acceptances payable . . . . . . . . . 189.5 264.6 515.8 136.9

Amount due to Cagamas Berhad . . . . . . . 348.1 238.1 197.9 52.5

Other liabilities . . . . . . . . . . . . . . . . . . 112.4 181.7 239.1 63.4

Subordinated term loans. . . . . . . . . . . . . 75.0 460.0 460.0 122.0

Exchangeable subordinated capital loan . . . 460.0 — — —

Total Liabilities . . . . . . . . . . . . . . . . . 10,221.3 10,338.1 12,022.4 3,189.8

Share capital. . . . . . . . . . . . . . . . . . . . 505.5 708.6 761.7 202.1

Reserves . . . . . . . . . . . . . . . . . . . . . . (41.0) (91.3) (204.8) (54.4)

Shareholder’s Funds . . . . . . . . . . . . . . . 464.5 617.3 556.9 147.7

Total Liabilities and Shareholder’s Funds 10,685.8 10,955.4 12,579.3 3,337.5

Commitments and contingencies . . . . . . . 4,403.5 4,858.5 6,770.0 1,796.2

Reserves comprise:

Share premium . . . . . . . . . . . . . . . . . . 223.3 345.2 377.0 100.0

Statutory reserve . . . . . . . . . . . . . . . . . 95.6 95.6 95.6 25.4

Capital reserve . . . . . . . . . . . . . . . . . . 0.5 0.5 0.5 0.1

Accumulated losses. . . . . . . . . . . . . . . . (360.4) (532.6) (677.9) (179.9)

Total Reserves . . . . . . . . . . . . . . . . . . (41.0) (91.3) (204.8) (54.4)

Note:

(1) As appear in the financial statements for the year ended 31 March 2004. Restated to reflect MASB 25 relating to

deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards Board — MASB 25, Income

Taxes’’.

30

Financial Ratios(1)

As at and for the year ended 31 March

2003 2004 2005

(%) (%) (%)

Net interest margin. . . . . . . . . . . . . . . . . . . . . . . . . 2.0 1.8 2.0

Non-interest income/total operating income . . . . . . . . . . 15.2 19.0 25.0

Return on average assets . . . . . . . . . . . . . . . . . . . . . (0.2) (1.6) (1.2)

Return on average equity . . . . . . . . . . . . . . . . . . . . . (5.0) (31.8) (23.4)

Operating expense/total operating income . . . . . . . . . . . 61.7 73.0 70.6

Net non-performing loan ratio . . . . . . . . . . . . . . . . . . 17.5 13.8 18.8

Gross non-performing loan ratio . . . . . . . . . . . . . . . . . 22.1 21.2 25.5

Loans and advances/customer deposits . . . . . . . . . . . . . 86.2 87.3 87.9

Core capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 4.6 2.9

Risk-weighted capital . . . . . . . . . . . . . . . . . . . . . . . 12.9 11.9 9.5

Notes:

(1) Financial ratios definitions:

— Net interest margin means net interest income, including net financing income from Islamic banking operations,

as a percentage of the average of the beginning and year end interest-earning assets including Islamic banking

assets.

— Return on average assets means net profit for the year as a percentage of the average of the opening and

closing balances of total assets.

— Return on average equity means net profit for the year as a percentage of the average of the opening and

closing balances of total equity.

— Net non-performing loan ratio means net non-performing loans as a percentage of gross loans, advances and

financing less specific provisions for doubtful debts and interest-in-suspense.

— Gross non-performing loan ratio means gross non-performing loans as a percentage of gross loans, advances

and financing.

— Loans and advances/total deposits means gross loans, advances and financing as a percentage of total deposits.

Total deposits comprises deposits from customers and deposits and placements with banks and other financial

institutions.

— Core capital ratio means the ratio of Tier 1 capital to risk-weighted assets calculated in accordance with BNM

guidelines. However, if the total of investment in subsidiaries and holdings of other banking institutions’ capital

is greater than the Tier 2 capital of the banking institution, then the core capital is equivalent to the capital base.

— Risk-weighted capital ratio means the ratio of capital base to risk-weighted assets calculated in accordance with

BNM guidelines.

(2) Based on figures which appear in the financial statements for the year ended 31 March 2004. Such figures are restated

to reflect MASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards

Board — MASB 25, Income Taxes’’.

31

CHANGES IN ACCOUNTING POLICIES

The following are descriptions of certain changes in accounting policies referred to elsewhere

in this Offering Circular.

Malaysian Accounting Standards Board (‘‘MASB’’)

The following MASB standards became effective during the year ended 31 March 2004 :

(1) MASB 25, Income Taxes

Before MASB Standard 25 was adopted, a general provision for doubtful debts was

recognised as a permanent difference and no deferred tax asset was recognised on the amount

provided. With the adoption of MASB 25, a general provision for doubtful debts is treated as a

temporary difference resulting in the recognition of a deferred tax asset. This change in

accounting policy has been accounted for retrospectively.

(2) MASB 29, Employee Benefits

This standard requires wages, salaries, paid annual leave and sick leave, bonuses and non-

monetary benefits to be accrued in the period in which the associated services are rendered by

the employees of the Bank.

As required by law, companies in Malaysia make contributions to the state pension

scheme, The Employees Provident Fund (‘‘EPF’’). Such contributions are recognised as an

expense in the income statement as incurred. Once the contributions have been paid, the Bank

has no further payment obligations.

This change in accounting policy has been accounted for prospectively and has no

significant impact on the financial statements.

BNM

The following BNM guidelines became effective during the year ended 31 March 2004 :

(1) BNM Circulars, Adoption of full charge out of handling fees paid to motor vehicledealers

Before the adoption of BNM’s Circulars dated 4 July 2003 and 8 August 2003, the Bank

amortised handling fees (commission) paid to motor vehicle dealers over the course of the

related hire purchase loans. The amortisation was calculated using the ‘‘sum-of-digits’’ method.

These BNM Circulars require handling fees paid by financial institutions to motor vehicle

dealers for hire purchase loans approved and disbursed after 1 January 2004 to be expensed in

the period in which they are incurred. However, for hire purchase loans approved and disbursed

prior to 1 January 2004 and where the amortisation method had been adopted, the unamortised

balance of the handling fees may continue to be amortised. In the event such hire purchase

loans become non-performing, or where the borrowers repay such loans early, the balance of

the unamortised handling fees will be expensed at that time. Financial institutions are given

discretion to expense the unamortised handling fees with effect from 1 January 2004 against

retained earnings.

This change in accounting policy has been accounted for retrospectively in the audited

financial statements for the year ended 31 March 2005.

32

The following BNM guidelines became effective on 1 April 2005 :

(2) Revised GP8

The following is a description of certain of the accounting policies required by Revised

GP8. The Revised GP8 requirement for a certain test on impaired loans is not set out below as

the Bank is exempted by BNM from such requirement for the year ending 31 March 2006.

(i) The holdings of the securities portfolio of the Bank are classified based on the

following categories and valuation methods:

(a) Securities held-for-trading

Securities are classified as held-for-trading if they are acquired principally for

the purpose of benefiting from actual or expected short-term price movement or to

lock in arbitrage profits. Securities held-for-trading will be 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 statements.

(b) Securities held-to-maturity

Securities held-to-maturity are financial assets with fixed or determinable

payments and fixed maturity that the 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 statements.

(c) 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 amortised cost (less impairment losses) if the fair value cannot be

reliably measured. Any gain or loss arising from a change in fair value is 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 statements.

(ii) Interest Income Recognition on Loans, Advances and Financing

When a loan turns non-performing, interest accrued and recognised as income prior

to the date the loan is classified as non-performing is reversed out of income and set-off

against the accrued interest receivable account in the balance sheet. Thereafter, the

interest accrued on the non-performing loan shall be recognised as income on a cash basis

instead of being accrued and suspended at the same time as practised previously. Hence,

there is no longer any IIS in the balance sheet.

(iii) Interest Income Recognition on Securities Portfolio and Financial Liabilities

Interest income from the securities portfolio and interest expense on financial

liabilities of the Bank which were previously recognised on an actual basis using the

straight line method are now accrued based on the effective interest rate method.

33

ADOPTION OF THREE-MONTH NPL CLASSIFICATION

Previously, loans were classified as non-performing when such loans are in arrears for more

than six months with the exception of trade bills, bankers’ acceptances, trust receipts and credit

cards.

In March 2005, the Bank adopted the three-month NPL classification basis where loans are

classified as non-performing where repayment is in arrears for more than three months instead of six

months.

While it is the Bank’s policy to recognise interest and financing income on the accrual basis,

interest and financing income on non-performing accounts is not recognised as income and is

suspended unless received in cash or realisation in cash is assured.

The classification of non-performing loans and financing is now more stringent than BNM’s

Guideline on Classification of Non-Performing Loans and Allowance for Bad and Doubtful Debts

which provides that loans are classified as non-performing where repayment is in arrears for more

than six months.

This change in accounting policy has been accounted for retrospectively in the audited

financial statements for the year ended 31 March 2005.

ADOPTION OF MERGER ACCOUNTING

The Bank adopted the merger accounting method for the reporting of the business combination

of the Bank and ABB in accordance with FRS 122 — Business Combinations (formerly known as

MASB 21), which deems both AmFinance and ABB to be operating as a single entity from the

earliest financial period presented herein. Merger accounting has been applied to the financial

information of the Bank for the six months ended 30 September 2005 resulting in restated

comparatives for the corresponding six months ending 30 September 2004 and financial year ended

31 March 2005 therein.

34

RISK FACTORS

Before investing in the Preference Shares, prospective investors should pay particular attentionto the fact that the Issuer, the AmBank Group and their activities are governed by the legal,regulatory and business environment in Malaysia, which may in some respects differ from that whichprevails in other countries. The business of each of the Issuer and the Bank is subject to a numberof factors, many of which are outside its control. Prior to making an investment decision,prospective investors should carefully consider, along with the other information in this OfferingCircular, the following risks. The risks and risk factors set forth below are not an exhaustive list ofthe challenges currently facing each of the Issuer and the Bank or that may develop in the future.Additional risks, whether known or unknown, may in the future have a material adverse effect on theIssuer, the Bank or the Preference Shares.

Risks Relating to Malaysia

Developments in Asia may negatively impact the Bank

All of the Bank’s revenues are derived from activities in Malaysia. In mid-1997, following the

substantial depreciation of the Thai Baht, the Malaysian Ringgit and the Indonesian Rupiah, many

countries in Asia, including Malaysia, experienced a significant economic downturn and related

economic, financial and social difficulties. As a result of the decline in value of a number of the

region’s currencies, many Asian governments and companies had difficulty in servicing their

foreign-currency denominated debt and many borrowers defaulted on their debt repayments. As the

economic crisis spread across the region, governments raised interest rates to defend weakening

currencies, which adversely impacted domestic growth rates. In addition, liquidity was substantially

reduced as foreign investors withdrew or reduced investment in the region and both domestic and

international banks restricted additional lending activity. The currency fluctuations, as well as higher

interest rates and other factors, materially and adversely affected the economies of many countries in

Asia. Similar adverse economic developments could recur in Asia and could have a material adverse

effect on Malaysia and its economy and consequently on the Bank’s business, financial condition

and results of operations. In addition, any other adverse change in trends or a general economic

slowdown as a result of changes in labour costs, inflation, interest rates, taxation or other political

or economic developments in Malaysia could materially affect the business, financial condition or

results of operations of the Bank and the ability of the Bank to fulfil its obligations under the

Subordinated Guarantee and the Subordinated Loan.

The outbreak of an infectious disease in Asia may affect the Malaysian economy and, in turn, theBank’s business, financial condition and results of operations

In late 2003 and in 2004, outbreaks of avian influenza occurred in eight countries in Asia. By

February 2004, these countries reported that the outbreak had been contained. However, by June

2004 new outbreaks were being reported in Asia and, for the first time, in Malaysia. These outbreaks

severely affected the poultry and related industries and resulted in the culling of large stocks of

poultry. Vietnam experienced a resurgence of poultry outbreaks and Thailand, Indonesia, Cambodia

and Vietnam have reported cases of bird-to-human transmission of avian influenza in poultry. The

World Health Organization and other agencies continue to issue warnings of a potential avian

influenza pandemic if there is sustained human-to-human transmission.

In 2003, Hong Kong, Taiwan, China, Singapore, Malaysia and other places experienced an

outbreak of Severe Acute Respiratory Syndrome (‘‘SARS’’), which adversely affected the Asian

economy, including Malaysia’s economy.

Any future outbreak of avian influenza, SARS, or other contagious diseases could adversely

affect the economy of Malaysia and economic activity in the region and could have a material

adverse effect on the Bank’s business, financial condition, cash flows, prospects and results of

operations. Such an epidemic or outbreak could also require quarantine and other safeguard

measures, possibly resulting in temporary closures or work stoppages at the Bank’s main office and

branches, which may also have a material adverse effect on the Bank’s business, financial condition

and results of operations.

35

Political, economic and social developments in Malaysia may adversely affect the Bank

The Bank’s business, prospects, financial condition and results of operations may be adversely

affected by political, economic and social developments in Malaysia, including, but not limited to,

the risks of war, terrorism, nationalism and changes in interest rates and methods of taxation.

The Malaysian Ringgit may be subject to exchange rate fluctuations

BNM, Malaysia’s Central Bank, has in the past intervened in the foreign exchange market to

stabilise the Malaysian Ringgit and, from 2 September 1998 until 21 July 2005, maintained a fixed

exchange rate of RM3.80 to U.S.$1.00. However, on, and with effect from, 21 July 2005, BNM

announced that the exchange rate would be allowed to operate in a managed float, with its value

being determined by various economic factors. BNM has stated that it will monitor the exchange rate

against a currency basket to ensure that the exchange rate remains close to its fair value. However,

there can be no assurance that BNM will, or would be able to, intervene or maintain this managed

float system in the future or that any such intervention or managed float system would be effective.

In addition, there can be no assurance that the exchange rate will not deviate significantly from the

previous fixed exchange rate. Significant changes in the exchange rate or exchange rate policy may

result in significantly higher domestic interest rates, liquidity shortages, capital or exchange

controls.

There can be no assurance that the Malaysian Government or BNM will not impose restrictive

or other foreign exchange controls. Any imposition, variation or removal of foreign exchange

controls may adversely affect the value of the Preference Shares and the ability of investors to

repatriate the income earned from, or the proceeds arising from the sale or redemption of, the

Preference Shares from Malaysia.

A re-imposition of capital controls may affect investors’ ability to repatriate the proceeds from thesale of the Preference Shares and principal or interest paid on the Preference Shares fromMalaysia

As part of the package of policy responses to the 1997 economic crisis in Southeast Asia, the

Malaysian Government introduced, on 1 September 1998, selective capital control measures. The

Malaysian Government subsequently liberalised such selective capital control measures in 1999 to

allow foreign investors to repatriate principal capital and profits, subject to an exit levy based on a

percentage of profits repatriated. On 1 February 2001, the Malaysian Government revised the levy to

apply only to profits made from portfolio investments retained in Malaysia for less than one year.

On 2 May 2001, the Malaysian Government lifted all such controls in respect of the repatriation of

foreign portfolio funds (largely consisting of proceeds from the sale of stocks listed on Bursa

Malaysia Securities Berhad (‘‘Bursa Malaysia’’)).

There can be no assurance that the Malaysian Government will not re-impose these or other

capital controls in the future. If the Malaysian Government re-imposes foreign exchange controls,

investors may not be able to repatriate the proceeds of the sale of the Preference Shares and interest

and principal paid on the Preference Shares from Malaysia for a specified period of time or may

only be able to do so after paying a levy.

Malaysian corporate and other disclosure and accounting standards differ from those in otherjurisdictions

The financial statements of the Bank are prepared in accordance with Malaysian GAAP and

BNM Guidelines as applicable at that time. The financial statements of AmFinance and ABB are

prepared in accordance with Malaysian GAAP and BNM Guidelines, but do not reflect Revised GP8.

As a result, this may make it difficult to compare the financial statements of the Bank, AmFinance

and ABB. In addition, Malaysian GAAP and BNM Guidelines differ in certain material respects from

IFRS. As a result, the Bank’s financial statements and reported earnings could be significantly

different from those which would be reported under IFRS. This Offering Circular does not contain a

reconciliation of the Bank’s financial statements to IFRS and there is no assurance that such a

36

reconciliation would not reveal material quantitative differences. See ‘‘Summary of SignificantDifferences Between Malaysian GAAP and IFRS’’ for a summary of significant accounting

differences which may be applicable to the Bank.

Risks Relating to the Malaysian Banking Industry

The AmBank Group may be adversely affected by changes to the Malaysian regulatoryenvironment for the financial industry

To the extent that the member companies of AmBank Group are financial institutions licensed

under the Banking and Financial Institutions Act 1989 (‘‘BAFIA’’), those member companies are

regulated by BNM. Those member companies are also subject to relevant securities and other laws in

Malaysia. These differ in certain material respects from those in effect in certain other countries.

BNM is given extensive powers to regulate the Malaysian banking industry under BAFIA. This

includes the authority to limit the interest rates charged by banks on certain types of loans, establish

limits on lending to certain sectors of the Malaysian economy and establish priority lending

guidelines in furtherance of certain social and economic objectives. BNM also has broad

investigative and enforcement powers. See ‘‘Supervision and Regulation’’. Accordingly, potential

investors should be aware that BNM could, in the future, set interest rates at levels or restrict credit

in a way which may be adverse to the operations, financial condition or asset quality of banks and

financial institutions in Malaysia, including those member companies of AmBank Group which are

financial institutions licensed under BAFIA, and may otherwise significantly restrict the activities of

those member companies of AmBank Group and Malaysian banks and financial institutions

generally.

Most of the AmBank Group’s businesses operate in highly competitive markets and may not beable to compete successfully

In March 2001, BNM launched its Financial Sector Master Plan. The Financial Sector Master

Plan is a 10-year blueprint of BNM’s proposed and projected development of the Malaysian

insurance and financial services industries. BNM proposes to develop the banking industry in

Malaysia in three phases. According to the Financial Sector Master Plan, the main objective of the

phase is to develop a core set of strong domestic banking institutions alongside a more market-based

consumer protection framework in order to increase the efficiency and competitiveness of the

domestic banking sector. In the last five years, the domestic banking industry has consolidated into

10 banking groups, several of which are larger in terms of total assets and have greater financial

resources than AmBank Group. In the future, there could be further consolidation, which could result

in the size of such financial institutions exceeding that of AmBank Group to an even greater degree.

The second phase of development aims to remove the restrictions on foreign banks which currently

have access to the Malaysian market, and the third phase of development aims to liberalise the

banking sector and increase foreign participation in the Malaysian market while conversely

encouraging domestic banks to expand into foreign markets. Recent initiatives by the Malaysian

Government and BNM include the change in foreign exchange policy to a managed float regime, the

issuance of three new Islamic Banking licenses to foreign institutions, allowing unit trust companies

to invest 30.0% of assets under management in overseas markets and allowing licensed banking

institutions to invest in unit trust funds. In addition, in January 2006, the BNM is permitting

additional branches of foreign banks to be opened in Malaysia. These initiatives, and the further

proposals under the Financial Sector Master Plan may, in the future, result in increased competition

from international banks (many of whom are better capitalised and more established than the Bank)

in addition to existing competition from foreign banks in Malaysia. To the extent AmBank Group

acquires or merges with another bank or financial institution, its financial condition, operating

results, asset quality, capital adequacy and business prospects could be adversely affected.

The government of Malaysia continues to implement a policy of liberalising the financial and

banking sectors by allowing banks and financial institutions to provide their customers with a wider

range of services, both by permitting increased competition from foreign banks and other financial

institutions (as described above) and by broadening the range of investment instruments, such as

mutual funds, available to the public. These policies are designed, in part, to encourage the

37

development of Malaysia as a regional financial centre and to strengthen domestic financial

institutions in preparation for increased foreign competition as a result of the implementation of the

Financial Sector Master Plan (‘‘FSMP’’).

Increased competition could have an adverse effect on the Bank’s business, results of

operations and financial condition in the future, including, for instance, reduced growth in the

Bank’s loan portfolio, reduced net interest margins and spreads and increased non-interest expense,

as well as a decline in the volume of the Bank’s related businesses. While the Bank believes that it

has formulated a strategy to compete effectively, there can be no assurance that it will be able to

execute its strategy or that it will be able to compete effectively against its current and future

competitors.

Deposits in Malaysia are not insured up to their full amount

BNM is not required to act as lender of last resort to meet liquidity needs in the banking

system generally or for specific institutions. In the past, BNM has on a case-by-case basis provided

a safety net between individual banks with an isolated liquidity crisis. However, there can be no

assurance that BNM will provide such assistance in the future. Effective from 1 September 2005,

BNM introduced deposit insurance. Under the Deposit Insurance System, eligible deposits are

insured up to a prescribed limit of RM60,000 (inclusive of principal and interest) per depositor, per

member institution. There is also separate coverage of up to RM60,000 per depositor, per member

institution for Islamic deposits (such as those accepted under Shariah principles), accounts held

under joint ownership, trust accounts and accounts in the name of sole proprietorships and

partnerships. The Deposit Insurance System is administrated by Malaysia Deposit Insurance

Corporation, an independent statutory body, and all licensed commercial banks (including

subsidiaries of foreign banks operating in Malaysia), finance companies and Islamic banks are

member institutions of the Deposit Insurance System.

However, the fact that deposits exceeding the prescribed limits are not insured up to their full

amount could lead to or exacerbate liquidity problems, which, if severe, could have an adverse effect

on the Bank’s operations, results of operations and financial condition, or on the Malaysian financial

markets generally.

Risks Relating to the AmBank Group

Due to the size of the loan portfolio of the Bank, a decrease in rates or a downturn in certainmarkets could adversely affect the Bank

As at 30 September 2005, the Bank had the third largest retail assets in Malaysia (based on the

published financial results of the 10 domestic banks in Malaysia). The Bank also provides traditional

corporate lending activities, including bridging, long-term and working capital financing. As at 30

September 2005, the Bank had total gross loan assets after deduction of interest suspension

amounting to approximately RM42.6 billion.

Due to the size of the Bank’s loan portfolio, in particular, its retail loan portfolio, a change in

interest rates may adversely affect the Bank’s operations, results of operations and financial

condition. Such changes could be brought about by various factors beyond the Bank’s control

including domestic economic growth, volatility of interest rates and the level of competition. As the

Bank operates in a highly competitive market, increased competition may reduce interest rate

margins and may therefore threaten the Bank’s interest yield. Given such increased competition,

particularly in the hire purchase and retail services sectors, there can be no assurance that the Bank’s

retail loan portfolio will not decrease. The occurrence of any of the risks discussed under the section

‘‘Risks Relating to Malaysia’’ may also adversely affect the ability of the Bank’s retail and business

customers to service loans or may require the Bank to make additional loan loss provisions and

increase reserve requirements.

38

Integration problems arising from the Merger (as defined below) may affect the AmBank Group’soperations

Following the merger of the commercial banking business of ABB with and into the finance

business of AmFinance, the Bank (formerly known as AmFinance) adopted its present name with

effect from 1 June 2005. As part of the Merger, the Bank integrated the systems, personnel,

employees and customers of ABB and AmFinance. Most of the integration processes related to the

Merger are now substantially complete. However, there can be no assurance that integration

problems relating to the Merger will not arise in the future, which may have a material adverse

effect on the Bank’s financial condition, liquidity and results of operations.

The summary restated consolidated financial information of the Bank may not be, and is notpresented nor is to be relied upon as being, representative of the financial statements of the Bankas they would have been if the Merger had occurred in and been in effect for the year ended 31March 2005

The summary restated consolidated financial information of the Bank for the year ended 31

March 2005 (the ‘‘Restated Financial Information’’) has been derived from (i) the audited

consolidated financial statements of AmFinance for the year ended 31 March 2005 as adjusted for

the adoption of Revised GP8, (ii) the audited financial statements of ABB for the year ended 31

March 2005 as adjusted for the adoption of the Revised GP8 and (iii) the consolidation of (i) and (ii)

above in accordance with the merger accounting method under Malaysian GAAP (which deems both

AmFinance and ABB to be operating as a single entity from the earliest financial period presented

herein).

The summary restated consolidated financial information of the Bank for the six months ended

30 September 2004 are derived from (i) the unaudited interim consolidated financial statements of

AmFinance for the six months period ended 30 September 2004 as adjusted for the adoption of

Revised GP8 and three-month NPL classification and full charge out of handling fees; (ii) the

unaudited interim financial statements of ABB for the six months period ended 30 September 2004

as adjusted for the adoption of Revised GP8 and three-month NPL classification and (iii) the

consolidation of (i) and (ii) above in accordance with the merger accounting method under

Malaysian GAAP (which deems both AmFinance and ABB to be operating as a single entity from

the earliest financial period presented herein). See ‘‘Changes in Accounting Policies’’.

The Bank has provided the Restated Financial Information because it believes that such

information allows investors to better understand the Merger and the context in which it occurred.

However, the Restated Financial Information should not be relied upon as a confirmation of the

financial condition or operating results that would have been achieved had the Merger been

completed as at 1 April 2004. In addition, the Restated Financial Information may not necessarily be

indicative of the future financial condition or future results of operations of the Bank. The Merger

occurred on 1 June 2005 and the historical financial statements of AmFinance and ABB are not

directly comparable to the Bank’s financial statements.

The procedure for writing off loans in Malaysia differs from that in other countries and theBank’s loan provisions may prove inadequate

BNM’s ‘‘GP3’’ guidelines require banks to classify non-performing loans into three categories

according to the number of months such loans are in default: namely, sub-standard, doubtful and

bad. With respect to provisioning and write-off standards, the Bank’s policies are in line with

BNM’s ‘‘GP3’’ guidelines. See ‘‘Asset Quality — Non-Performing Loans’’. The Bank’s policy on

classifications of accounts as non-performing is more stringent than BNM’s ‘‘GP3’’ guidelines. The

Bank classifies an account as non-performing when it is in arrears for three months or more as

compared to the period of six months or more stipulated in BNM’s ‘‘GP3’’ guidelines. Once an

account becomes non-performing, the interest will not be accrued for financial disclosure and

interest earned is recognised as income only on a cash received basis. Specific provision is made

against the uncollateralised portion of the outstanding balance of the loan and the realisable security

value of any collateral. For further information on collateral, see ‘‘Asset Quality — Credit ApprovalProcess — Collateral’’. The provisioning level applied by the Bank to non-performing loans is

20.0% (in the case of sub-standard accounts), 50.0% (in the case of doubtful accounts) or 100.0% (in

39

the case of bad accounts), in which levels are consistent with BNM’s ‘‘GP3’’ guidelines. Generally, a

non-performing loan is not provisioned for until it is six months in arrears. Typically, the Bank

writes off an account, or a portion thereof, which it deems to be uncollectible, worthless or with

remote prospect of recovery.

The Bank has also recently adopted internally a practice of assigning zero value for property

collaterals for non-performing corporate loans that are over seven years in arrears which is

consistent with a recommendation from BNM. This policy change may have an adverse impact on

the provisions the Bank makes.

The policies of the Bank may, in certain respects, differ from those applicable to banks in the

United States and certain European countries and may result in loans being classified as non-

performing later than might be required elsewhere. Furthermore, no assurance can be given that the

level of provisions made by the Bank will prove to be adequate, that the Bank will not have to make

significant additional provisions for possible loan losses in the future, or that the Bank would be

able to realise adequate proceeds from collateral disposals to cover non-performing loans. The

procedures for writing off loans in Malaysia generally result in loans being written off later than

would be the case for banks in the United States and certain European countries. Consequently,

loans may be classified as non-performing several years before they are ultimately written off. The

Asian economic crisis of 1997, and the acquisition of another financial institution, MBf Finance

pursuant to the government-led consolidation of the Malaysian domestic banking and financial

services industries have historically adversely affected the Bank’s gross non-performing loan ratio.

However, as at 30 September 2005, the Bank’s gross non-performing loan ratio was 13.6% (the

Bank’s net non-performing loan ratio was 10.0% as at 30 September 2005). No assurance can be

given, however, that the number and value of non-performing loans will continue to decrease in the

future.

In addition, the Bank expects to resolve a significant amount of its gross NPLs by the end of

2007. There can be no assurance that the Bank will be successful in its efforts for recovery in

respect of such non-performing loans.

Loan concentration in vehicle hire purchase loans may adversely affect the Bank’s loan portfolio

Loans for vehicle hire purchase have historically accounted for a significant portion of the

Bank’s loan portfolio, amounting to approximately RM19.0 billion (45%) of the Bank’s gross loan

portfolio (net of interest-in-suspense) as at 30 September 2005.

Due to a high level of competition within the vehicle hire purchase industry, rates may be

reduced and may therefore threaten the Bank’s interest yield. Furthermore, the future growth of the

Bank’s vehicle hire purchase business will depend on a number of factors, including continued

strong growth in the Malaysian economy leading to buoyant car sales. Therefore there can be no

assurance that the Bank’s loan portfolio for the purchase of transport vehicles will continue to grow.

In addition, inability of its retail and business customers to service loans will lead to higher default

and an increased number of non-performing loans.

A decline in the Bank’s asset quality could adversely affect its results of operations if its loanprovisions are insufficient to cover its liabilities

As at 30 September 2005, the Bank’s gross non-performing loan ratio was 13.6%, which is

among the highest NPL ratios for domestic and foreign banks operating in Malaysia. The Bank has a

loan coverage ratio (ratio of provisions to total NPLs) of approximately 40% as of 30 September

2005 which is generally lower than other Malaysian banks. The Bank’s results of operations could

be adversely affected if the Bank’s provisions are insufficient, the value of the Bank’s collateral

declines, a material amount of the Bank’s loans becomes uncollectible, or there is a downturn in the

Malaysian economy. A significant amount of the Bank’s collateral is in the form of vehicles, which

do not maintain their value due to depreciation. Any significant decline in the Bank’s asset quality

could adversely affect its results of operations.

40

Problems arising in connection with further consolidation of the Bank’s businesses may have amaterial adverse effect on the Bank

In 1999, the Malaysian government called for a consolidation of the banking sector in order to

further develop and strengthen the domestic banking system, so that domestic banks could be better

positioned to respond to the new and changing requirements of the economy and to be more efficient

and competitive. The Bank was one of the 10 anchor banks which participated in the consolidation

via its acquisition of MBf. Further consolidation with other financial institutions is possible and may

again, due to taking on non-performing loans or otherwise, result in the Bank’s financial condition

and results of operations being adversely affected. Furthermore, any merger of entities involves the

integration of various systems, processes and cultures which may require significant resources to be

expended. There can be no assurance that such integration processes would be undertaken effectively

or in a timely manner, and any failure or delay in doing so may have a material adverse effect on

the Bank’s financial condition and results of operations.

The Bank may experience liquidity problems as it is dependent on short-term funding and has ahigh loans-to-deposits ratio

The funding requirements of Malaysian banks are primarily met through short-term funding,

namely fixed term deposits from customers and from other financial institutions. The Bank’s

experience is that a substantial portion of its customers’ fixed deposits are rolled over upon

maturity. However, no assurance can be given that this will continue in the future. If a substantial

number of depositors, or a small number of large depositors, fail to roll over deposited funds upon

maturity, the Bank’s liquidity position could be adversely affected and the Bank may be required to

seek alternative sources of short-term or long-term funding, which may be more expensive than

deposits, to finance its operations. Furthermore, there can be no guarantee that the Bank will be able

to obtain such funds. See ‘‘Funding, Liquidity and Capital Adequacy’’.

As at 31 March 2005, an amount of RM17.9 billion or 72.0% of the Bank’s customers’ fixed

deposits and negotiable instruments of deposits were due within the next six months and RM12.5

billion or 33.2% of gross loans and advances (after deduction of interest-in-suspense and Islamic

financing sold to Cagamas Berhad) were due within one year. As at 31 March 2005, approximately

0.5% of the Bank’s funding was met through interbank borrowings.

As at 30 September 2005, an amount of RM19.4 billion or 71.5% of the Bank’s customers’

fixed deposits and negotiable instruments of deposits were due within the next six months and

RM12.4 billion or 29.8% of gross loans and advances (after deduction of interest suspension) were

due within one year. As at 30 September 2005, approximately 2.3% of the Bank’s funding was met

through interbank borrowings.

The Bank’s risk management system may be inadequate or ineffective in managing risks

The Bank is exposed to a variety of risks, including credit risk, market risk (including interest

rate risk), funding risk and operational risk. The Bank has established a risk management framework

including a number of risk committees with the intention of strengthening its internal risk

management policies and procedures. There can be no assurance, however, that the present risk

management framework will be effective. Any failure in the effectiveness of the Bank’s risk

management procedures could have a material adverse effect on the Bank’s financial condition and

results of operations.

The new interest rate framework in Malaysia may give rise to more competition and may adverselyaffect the Bank’s profits

The Bank’s exposure to interest rates arises mainly from its loan portfolio, holdings of

securities and its inter bank deposit/placement position.

When interest rates decline, the Bank’s net interest margin generally decreases due to a faster

repricing of its base lending rate loans compared to a slower adjustment in the interest rates paid on

its customers’ deposits. Conversely, when interest rates rise, the opposite generally occurs. In

addition, the part of the Bank’s loan portfolio which comprises fixed rate loans (including hire

41

purchase loans) is principally financed by deposits with maturities of, typically, less than one year

that generally move in tandem with short-term interest rates. As at 30 September 2005, the Bank had

RM27,808.6 million of fixed rate loans, which represented 66.6% of its total gross loans (after

deduction of interest-in-suspense and Islamic financing sold to Cagamas Berhad). To mitigate the

risk of mismatch of interest rate of fixed rate hire purchase loans, among other measures, the Bank

has introduced floating rate hire purchase loans with effect from October 2005. However, the actual

effect on earnings due to a change in interest rates depends on the direction, degree and timing of

such change in interest rates, the behaviour and contractual repricing dates of the Bank’s banking

operations, assets and liabilities and its ability to respond to changes in interest rates.

To a certain extent, interest rates are regulated in Malaysia. Hence, there is less flexibility to

manage asset liability than in jurisdictions where interest rates are not regulated by the government.

The recent liberalisation of the interest rate framework introduced on 23 April 2004 represents a

change in the system of implementing monetary policy and was intended to promote more efficient

pricing by banking institutions, see ‘‘Supervision and Regulation — Interest Rate Regulation’’.Although BNM continues to influence interest rates, the new interest rate framework allows more

freedom and flexibility for the Bank and the banking industry in setting lending rates, and so allows

the Bank to compete more effectively in terms of pricing in its target business segments. There can

be no assurance that BNM will not impose increased or additional controls on interest rates which

may have an adverse impact on the Bank’s financial condition, business and results of operations.

Major shareholders may influence policies of the Bank

As of 30 September 2005, Arab-Malaysian Corporation Berhad (‘‘Amcorp’’) and the Employee

Provident Fund held 32.9% and 16.2%, respectively, of the issued share capital of AMMB, which, in

turn, holds 100% of the issued share capital of the Bank through AMFB Holdings Bhd. As of 30

September 2005, Tan Sri Dato’ Azman Hashim held directly and indirectly, a 37.3% controlling

interest in Amcorp. To comply with a BNM directive, Amcorp will need to reduce its interest, direct

or indirect, in the shares of the Bank from 32.9% to 20.0% by 2007. On 17 January 2006, the Board

of Directors of Amcorp announced that they would recommend a proposal for the privatisation of

Amcorp by Tan Sri Dato’ Azman Hashim by way of an Amcorp members’ scheme of arrangement

under Section 176 of the Companies Act, 1965. This scheme of arrangement proposal may result in

Tan Sri Dato’ Azman Hashim significantly increasing his stake in Amcorp. In light of this

development, under BAFIA, if Tan Sri Dato’ Azman Hashim owns more than 75.0% of Amcorp,

current regulations may require that Amcorp would need to reduce its interest, direct or indirect, in

the shares of the Bank to 10.0% or below. The requirement to sell shares may increase the likelihood

that there might be a change in control. This may result in Amcorp having less influence over the

affairs of the AMMB Group.

Based on these shareholding interests in Amcorp, AMMB and the Bank, each of these major

shareholders may, to a certain extent, be able to exercise control over matters which require

shareholders’ approval. There can be no assurance that the corporate objectives and strategies of the

Bank would not be substantially influenced by the policies of the shareholders.

The Bank may be adversely affected by the implementation of Basel II

BNM has announced an intention to fully implement the standards recommended by the Bank

of International Settlements set out in ‘‘International Convergence of Capital Measurement and

Capital Standards: A Revised Framework’’ (‘‘Basel II’’) in Malaysia by 2008 for the Standardised

Approach and optionally in addition 2010 for the Foundation Internal Ratings Based approach. The

Bank has embarked on initiatives in order to meet the requirements of the Standardised Approach by

2008. The Bank does not currently comply with the standards of Basel II and there can be no

assurance that it will be able to do so by the time it is implemented in Malaysia. Further, the Bank

may incur substantial costs in attaining and maintaining compliance with Basel II. The incurrence of

any such costs or the failure by the Bank to attain compliance with Basel II may have a material

adverse effect on AmBank Group’s financial condition and results of operations.

42

A decline in collateral values or inability to realise collateral value may necessitate an increase inthe Bank’s provisions

A significant portion of the Bank’s loans is secured by collateral such as real estate and

securities, the values of which, in many cases, have declined due to economic deterioration since

1997. Due to the Asian economic crisis, a portion of the Bank’s loans may exceed the value of the

underlying collateral. Any decline in the value of the collateral securing the Bank’s non-performing

loans, inability to obtain additional collateral or inability to realise the value of collateral may

require the Bank to increase its loan loss provisions, which may adversely affect the Bank’s

business, financial condition and results of operations.

Risks relating to the Preference Shares

Preferred Dividends on the Preference Shares are not cumulative and will not be required to bepaid under certain circumstances

Preferred Dividends on the Preference Shares are not cumulative. Subject to applicable law and

the limitations described below, Preferred Dividends will be paid only if declared by the Board of

Directors of the Issuer in its discretion, on each Preferred Dividend Payment Date out of its legally

available resources. Preferred Dividends may not be paid in full, or at all, and the Issuer or, as the

case may be, the Bank may not make any payment or pay any distribution or Preferred Dividend in

respect of the Preference Shares if: (i) it does not have sufficient Distributable Funds (as defined

below) to pay the Preferred Dividends as well as any other dividends and distributions scheduled to

be paid on the relevant Preferred Dividend Payment Date in respect of the Preferred Dividend Parity

Obligations, as described below under ‘‘Description of the Preference Shares — PreferredDividends’’ and (ii) even if Distributable Funds are sufficient, it is unable to make such payment

without breaching or causing or continuing a breach of the BNM published capital adequacy

requirements then applicable to the Bank. If Preferred Dividends are not paid on any Preferred

Dividend Payment Date as a result of the above limitations, investors will not be entitled to receive

such Preferred Dividends whether or not funds are or subsequently become available.

Investors will receive Preferred Dividends on the Preference Shares only if the Bank pays intereston the Subordinated Loan

The ability of the Issuer to make payments on the Preference Shares is dependent solely upon

the Bank making the related payments on the Subordinated Loan when due. If the Bank defaults on

its obligations to make payments on the Subordinated Loan, the Issuer will not have sufficient funds

to make payments on the Preference Shares. In those circumstances, investors will have to rely upon

the Subordinated Guarantee from the Bank for payment of these amounts.

The Preference Shares have no fixed redemption date and investors have no right to call forredemption of the Preference Shares.

The Preference Shares have no fixed final redemption date and Holders have no right to call

for the redemption of the Preference Shares. Although the Preference Shares may be redeemed by

the Issuer on the First Call Date or on any Preferred Dividend Payment Date thereafter and at any

time prior to the First Call Date following the occurrence of a Capital Disqualification Event or a

Tax Event, there are limitations on redemption of the Preference Shares, including the obtaining of

BNM’s consent, the availability of sufficient funds to effect redemption and the general provisions

of applicable law. See ‘‘Description of the Preference Shares — Redemption and Purchase’’.

The Bank’s obligations under the Subordinated Guarantee are limited

Under the Subordinated Guarantee, the Bank is only obliged to pay (i) declared but unpaid

Preferred Dividends for the most recent Preferred Dividend Period, (ii) Compulsory Payments (as

defined below), (iii) the redemption price payable with respect to any Preference Shares to be

redeemed, (iv) payments payable upon the liquidation of the Issuer and (v) payments required to be

made to Holders as may be necessary to make up for any withholding tax imposed by Malaysia. See

‘‘Description of the Preference Shares’’.

43

Further, investors will have no right to seek payment of amounts under the Subordinated

Guarantee that would exceed the amount investors would have been able to receive had they

invested in directly issued non-cumulative, non-voting preference shares of the Bank.

Under no circumstances does the Subordinated Guarantee provide for acceleration of any

payments on, or repayments of, the Preference Shares.

The Preference Shares may be substituted by Substitute Preference Shares and there can be nocertainty that dividends would be paid in respect of the Substitute Preference Shares

In certain circumstances, including the commencement of proceedings for the winding-up of the

Issuer or the Bank and the occurrence of a Substitution Event, or following an election by the Issuer

upon the occurrence of a Capital Disqualification Event or a Tax Event, the Preference Shares may

be substituted by directly issued preference shares of the Bank. There can be no assurance that, in

the event of such substitution, the LFX or SGX-ST or other stock exchanges will agree to list the

Substitute Preference Shares. In addition, the tax treatment for holders of Substitute Preference

Shares may be different from that for holders of Preference Shares.

Dividends payable on the Substitute Preference Shares are not cumulative. Such dividends may

not be paid in full, or at all, if (i) the shareholders of the Bank do not approve the declaration of the

dividends, (ii) the Bank does not have sufficient Distributable Funds to pay the dividends, and/or

dividends or distributions on other Preferred Dividend Parity Obligations or (iii) the Bank is unable

to make such payment without breaching or causing or continuing a breach of the BNM published

capital adequacy requirements then applicable to the Bank. In addition, unless the payment of a

dividend is compulsory, it would be at the Bank’s discretion whether or not it pays dividends on the

Substitute Preference Shares.

There can be no assurance as to the market prices for the Preference Shares; therefore, investorsmay suffer a loss

The Bank cannot give investors any assurance as to the market prices for the Preference Shares

or, following substitution upon the occurrence of a Substitution Event or following an election by

the Issuer upon the occurrence of a Capital Disqualification Event or a Tax Event, the Substitute

Preference Shares that may be distributed in exchange for the Preference Shares. The Preference

Shares and the Substitute Preference Shares may trade at a discount to the price at which investors

purchased the Preference Shares. In addition, because the Bank’s obligation to make payments under

the Subordinated Guarantee is limited to the extent of the underlying payment obligations on the

Preference Shares which may, in turn, be similarly limited due to insufficient Distributable Funds or

other limitations, the market price for these securities may be more volatile than other securities that

do not reflect these limitations.

The Bank is not required to pay investors under the Subordinated Guarantee unless it first makesother required payments

The Bank’s obligations under the Subordinated Guarantee will rank junior to all of its

liabilities to creditors and claims of holders of senior ranking securities.

Non-payment of Preferred Dividends may adversely affect the trading price of the PreferenceShares

If in the future, the Issuer makes less than full payment on the Preference Shares because the

Bank has insufficient Distributable Funds or because of other limitations, the Preference Shares may

trade at a lower price. In addition, because the Bank’s obligation to make payments under the

Subordinated Guarantee is limited to the extent of the underlying payment obligations on the

Preference Shares which may be similarly limited due to insufficient Distributable Funds or other

limitations, the market price for the Preference Shares may be more volatile than other securities

that are not subject to such limitations.

44

There could be adverse consequences for investors if the Bank liquidates the Issuer and distributesSubstitute Preference Shares to Holders, resulting in possible tax and liquidity consequences forinvestors

In the event the Bank liquidates the Issuer following a Substitution Event, the Bank has

undertaken in the Subordinated Guarantee to distribute Substitute Preference Shares to investors on a

proportionate basis in return for the surrender and cancellation of the Preference Shares. If the

Preference Shares are replaced:

. the trading value of the Substitute Preference Shares investors receive may be lower than

the trading value of the Preference Shares and, as a result, investors may receive a lower

return upon the sale of the Substitute Preference Shares; and

. investors may incur an additional tax liability in excess of that which investors originally

contemplated.

Under current Malaysian tax law, a distribution of Substitute Preference Shares to investors on

the dissolution of the Issuer or on the occurrence of a Substitution Event should not be a taxable

event to investors.

Exchange controls may apply if the Substitute Preference Shares are issued to or acquired byMalaysian residents

Pursuant to exchange control regulations in Malaysia, the prior permission of the Controller of

Foreign Exchange (through BNM’s Foreign Exchange Department) would be required for a resident

to make payment in foreign currency to another resident except in certain limited circumstances.

Accordingly, any issue to or subsequent acquisition by Malaysian residents of the Substitute

Preference Shares would result in exchange control approvals being required for the payments in US

dollars of dividends and other distributions (including the Liquidation Preference) to such Malaysian

residents.

Investors will have limited rights under the Preference Shares and Substitute Preference Shares

Investors will have limited voting rights under the Preference Shares and Substitute Preference

Shares and will not be entitled to receive notice of, or attend or vote at any meeting of shareholders

of the Issuer or the Bank, as the case may be, or participate in the management of the Issuer or the

Bank, as the case may be, except in limited circumstances, including certain instances of failure by

the Issuer and the Bank to make payments of amounts due in relation to the Preference Shares or the

Substitute Preference Shares or under the Subordinated Guarantee.

A downgrade in ratings may affect the market price of the Preference Shares

The Preference Shares have been rated ‘‘Ba2’’ by Moody’s, ‘‘BB’’ by Fitch and ‘‘BB’’ by

Standard & Poor’s. There can be no assurance that the ratings will remain in effect for any given

period or that the ratings will not be revised by the rating agencies in the future if, in their

judgement, circumstances so warrant.

Recent terrorist attacks, the war in Iraq and the outbreak of SARS and Avian Influenza have ledto volatility in international capital markets, which may adversely affect the market price of thePreference Shares

Terrorist attacks in the United States on 11 September 2001 and subsequent terrorist activities

elsewhere and military responses by the United States and others have resulted in substantial and

continuing volatility in international capital markets. Any further terrorist activities or military

responses could have a material adverse effect on worldwide financial markets, the economy of

Malaysia and regional economies. In addition, another outbreak of SARS and/or Avian Influenza in

Asia or elsewhere could exacerbate this volatility. Any material change in the financial markets or

the Malaysian economy or regional economies as a result of these events or developments may

adversely affect the market price of the Preference Shares.

45

USE OF PROCEEDS

The gross proceeds of the issue of the Preference Shares is US$200,000,000. The net proceeds

(following the deduction of commissions from the gross proceeds) will be on-lent by the Issuer to

the Bank pursuant to the terms of the Subordinated Loan. The Bank is responsible for certain

expenses related to the issue and offer of the Preference Shares.

The Bank intends to use the proceeds received under the Subordinated Loan for general

working capital purposes. The principal reason for the issuance is to provide additional Tier 1

capital to strengthen the capital base of the Bank.

46

EXCHANGE RATES

The following table sets forth the exchange rates between Malaysian Ringgit and US dollars (in

Malaysian Ringgit per US dollar) since 1997. The Malaysian Ringgit was fixed at an exchange rate

against the U.S. dollar of RM3.80 to U.S.$1.00 from 2 September 1998 until 21 July 2005. On and

with effect from 21 July 2005, BNM announced that the exchange rate of the Malaysian Ringgit

would be allowed to operate in a managed float. The exchange rate as of 20 January 2006 was

RM3.7480 to U.S.$1.00. No representation is made that the Malaysian Ringgit amounts referred to

herein actually represent such US dollar amounts or could have been or could be converted into US

dollars at the rates indicated, at any other rate or at all.

Year Period End

Period

Average(1)

(RM per

USD)

(RM per

USD)

1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8883 2.8132

1998 (up to 1 September) . . . . . . . . . . . . . . . . . . . . . . . . . 4.0900 3.9826

1998 (full year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8000 3.9229

1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8000 3.8000

2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8000 3.8000

2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8000 3.8000

2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8000 3.8000

2003. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8000 3.8000

2004. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8000 3.8000

2005 (up to 21 July 2005) . . . . . . . . . . . . . . . . . . . . . . . . . 3.8000 3.8000

2005 (from 22 July 2005 to 30 December 2005) . . . . . . . . . . . 3.7800 3.7691

2006 (up to 20 January 2006) . . . . . . . . . . . . . . . . . . . . . . . 3.7480 3.7539

Source: BNM

Note:

(1) The average of the monthly average exchange rates for each month of the applicable period.

Exchange Controls

On 1 September 1998, the Malaysian Government introduced a series of selective exchange

control measures to contain speculation and stabilise short-term capital flows. These measures

affected, among other things, transfers among non-residents via non-resident external accounts, the

import and export of Malaysian Ringgit by resident and non-resident travellers and investment

abroad by Malaysian residents. In furtherance of the Malaysian Government’s ongoing measures to

liberalise the rules governing the administration of foreign exchange, the Malaysian Government

recently announced changes which became effective on 1 April 2005 that relaxed conditions for

investments abroad.

As a result of these various changes, there are currently no controls imposed on current account

transactions (where trade transactions for goods and services are settled only in foreign currencies),

repatriation of interest, dividends, fees, commission and rental income from portfolio investments

and other forms of Malaysian Ringgit assets and foreign direct investment inflows and outflows,

including income and capital gains.

Financial guarantees in excess of the equivalent of RM5.0 million issued by residents in favour

of non-residents must be registered with BNM upon issuance and must be denominated in a foreign

currency with all payments being made in foreign currency. Payment under financial guarantees may

be freely made upon acknowledgement of receipt of specified information submitted to BNM and

subject to informing BNM when the guarantees are called upon.

47

Exchange Control Approvals Required in Relation to the Offering

The Issuer is a non-resident for exchange control purposes. We have obtained approval in

principle from the Controller of Foreign Exchange for the on-lending of up to U.S.$200 million from

the Issuer. No approval will be required from the Controller of Foreign Exchange for the repayment

of the loan from the Issuer.

The prescribed registration form for the Subordinated Guarantee will be submitted shortly after

the issuance of the Preferred Shares to the Controller of Foreign Exchange as required for exchange

control purposes.

48

CAPITALISATION AND INDEBTEDNESS

The following table sets forth the capitalisation and indebtedness of the Bank, on a

consolidated basis, as at 30 September 2005, and as adjusted to reflect the Preference Shares and

the Subordinated Loan. This table is derived from, and should be read in conjunction with, the

unaudited consolidated interim financial statements of the Bank as at 30 September 2005 as set out

in ‘‘Interim Financial Statements’’. See ‘‘Index to Financial Statements.

As at 30 September 2005(1)

Actual Actual(2)

As Adjusted

for this

Offering(3)

As adjusted

for this

Offering(2)(3)

(unaudited)

(in millions)

(RM) (U.S.$) (RM) (U.S.$)

Short-term and long-term liabilities

Deposits from customers . . . . . . . . 31,646.9 8,396.6 31,646.9 8,396.6

Deposits and placements of banks and

other financial institutions . . . . . . 11,048.3 2,931.4 11,048.3 2,931.4

Obligations on securities sold under

repurchase agreements . . . . . . . . 227.3 60.3 227.3 60.3

Bills and acceptances payable . . . . . 678.4 180.0 678.4 180.0

Other liabilities . . . . . . . . . . . . . . 1,335.2 354.3 1,335.2 354.3

Amount due to Cagamas Berhad . . . 2,020.7 536.1 2,020.7 536.1

46,956.8 12,458.7 46,956.8 12,458.7

Loan Capital

Preference Shares/Subordinated Loan/

bonds . . . . . . . . . . . . . . . . . . . 1,340.0 355.5 2,093.7 555.5

Total Liabilities . . . . . . . . . . . . . 48,296.8 12,814.2 49,050.5 13,014.2

Minority Interests. . . . . . . . . . . . . — — — —

Shareholder’s Funds

Share capital. . . . . . . . . . . . . . . . 610.4 161.9 610.4 161.9

Reserves . . . . . . . . . . . . . . . . . . 2,707.2 718.3 2,707.2 718.3

3,317.6 880.2 3,317.6 880.2

Total Liabilities and Shareholder’s

Funds . . . . . . . . . . . . . . . . . . 51,614.4 13,694.4 52,368.1 13,894.4

Commitments and contingencies . . . 15,406.3 4,087.6 15,406.3 4,087.6

Notes:

(1) Save as disclosed above and elsewhere in this Offering Circular, there has been no material change in the

capitalisation, indebtedness or contingent liabilities of the Bank on a consolidated basis, since 30 September

2005.

(2) The Malaysian Ringgit amounts relating to 30 September 2005 have been translated into US dollars based on the

prevailing exchange rate of RM3.769 to U.S.$1.00, being the noon buying rate on 30 September 2005.

(3) Adjusted to reflect the issuance of U.S.$200,000,000 aggregate principal amount of the Preference Shares. The

figures have not been adjusted for interest expense.

49

CAPITAL ADEQUACY RATIOS

The minimum capital adequacy ratio requirement in Malaysia is 8.0% of which at least 4.0%

must be in Tier 1 regulatory capital and the balance may be in Tier 2 regulatory capital. See

‘‘Regulation and Supervision’’.

The following table sets forth details of capital resources and capital adequacy ratios of the

Bank as at the dates indicated:

As at

31 March

2005(1)

As at

30 September

2005

Adjusted as at 30

September 2005(2)

(unaudited)

(in millions)

RM RM RM

Tier 1 Capital:

Paid-up share capital. . . . . . . . . . . . . . . 528.4 610.4 610.4Share premium . . . . . . . . . . . . . . . . . . 380.0 380.0 380.0Other reserves . . . . . . . . . . . . . . . . . . . 528.4 1,681.3 1,681.3Unappropriated profit . . . . . . . . . . . . . . 1,174.4 636.4 636.4Minority interest . . . . . . . . . . . . . . . . . — — —Preference Shares(3) . . . . . . . . . . . . . . . — — 433.4Less: Deferred tax asset . . . . . . . . . . . . (600.2) (852.2) (852.2)

Total Tier 1 Capital . . . . . . . . . . . . . . 2,011.0 2,455.9 2,889.3

Tier 2 Capital:

Preference Shares(3) . . . . . . . . . . . . . . . — — 320.4General allowance for bad and doubtful debtsand financing . . . . . . . . . . . . . . . . . . 425.9 612.1 612.1

Subordinated term loans. . . . . . . . . . . . . 680.0 1,140.0 1,140.0Subordinated bonds. . . . . . . . . . . . . . . . 200.0 200.0 200.0

1,305.9 1,952.1 2,272.5

Maximum allowable Tier 2 Capital(4) . . . . 1,305.9 1,840.0 2,056.8

Total capital fund . . . . . . . . . . . . . . . . 3,316.9 4,295.8 4,946.1Less: Investment in subsidiary companies . . (29.8) (29.8) (29.8)

Capital base . . . . . . . . . . . . . . . . . . . 3,287.1 4,266.1 4,916.3

Capital ratios:

Core capital ratio (Tier 1) . . . . . . . . . . . 7.04% 6.02% 7.08%Risk-weighted capital ratio . . . . . . . . . . . 11.51% 10.46% 12.05%

Notes:

(1) The comparative ratios are not adjusted for the prior year adjustments.

(2) The adjusted figures as of 30 September 2005 are arrived at after taking into account the issuance of the

Preference Shares.

(3) The maximum amount allowable for innovative Tier 1 Capital is limited to 15.0% of the total Tier 1 Capital. The

balance will be included in Tier 2 Capital.

(4) The maximum amount of Tier 2 Capital eligible for inclusion as capital funds is limited to the amount of Tier 1

Capital.

50

DESCRIPTION OF THE ISSUER

General

The Issuer was incorporated under the Offshore Companies Act 1990 in the Federal Territory

of Labuan, Malaysia on 23 September 2005 as a company limited by shares. Its sole business

activities (as described in paragraph (3) of its Memorandum of Association) are that of issuing the

Preference Shares and lending the net proceeds of the issue of the Preference Shares to the Bank.

The Issuer’s registered office is located at Unit 3(1), Main Office Tower, Financial Park Labuan,

Jalan Merdeka, 87000 Labuan, F.T. Labuan, Malaysia. The Issuer does not have any subsidiaries. As

at the date of this Offering Circular, the Issuer’s authorised share capital is U.S.$250,000 with a

nominal value of U.S.$1.00 per share, of which U.S.$3.00 has been issued and paid up. The Issuer

does not prepare interim financial statements. The Issuer will issue audited financial statements as of

and for each year ending 31 March. The first financial statements for the Issuer will be for the year

ending 31 March 2006. The auditors of the Issuer are Ernst & Young.

Management

The Directors of the Issuer are Mahdi Bin Morad, Sim How Chuah and Koid Phaik Gunn.

As at the date of this Offering Circular, the Directors of the Issuer do not have any interest or

short positions in the shares or debentures of the Issuer.

The following are the personal profiles of the Directors:

. Mahdi Morad

Encik Mahdi Morad, a Malaysian, aged 49, was appointed to the Board of the Bank on 26

July 2002. He joined Arab-Malaysian Finance Berhad (now known as AMFB Holdings Berhad)

in 1990 and currently serves as an Executive Director in the Retail Banking Division of the

Bank. Prior to this, he held various positions in Asia Commercial Finance Berhad and Sime

Darby Plantations Berhad.

Encik Mahdi Morad has a Bachelor of Science degree in Agricultural Business from Iowa

State University and a Masters degree in Business Administration from University of Missouri.

He also serves as a director on the boards of various subsidiaries of the Bank, namely MBf

Information Services Sdn Bhd, MBf Trustees Bhd, Bougainvillea Development Sdn Bhd,

AmProperty Holdings Sdn Bhd and AmCredit & Leasing Sdn Bhd.

. Sim How Chuah

Mr Sim How Chuah, aged 51, is currently a Senior General Manager in the Business

Banking Division at the Bank. He joined Arab-Malaysian Finance Berhad (now known as

AMFB Holdings Berhad) in 1984 and was subsequently transferred to AmBank Berhad in 1994.

Prior to joining Arab-Malaysian Finance Berhad, he was with BDO Binder from 1974 to 1984

where he was initially with the audit arm and his last position was the Director and Manager of

the company secretarial department. He has more than 20 years of experience in the banking

industry.

. Koid Phaik Gunn

Ms Koid Phaik Gunn, aged 40, is currently the Company Secretary of the Bank. She

joined AmSecurities Sdn Bhd, a sister company of the Bank, in 1993 and was appointed as

Company Secretary of the Bank in 2004. Prior to joining AmSecurities Sdn Bhd, she was with

PG Corporate Services Sdn Bhd from 1985 to 1993 and her last position was the Manager of

the company secretarial department.

Ms Koid is an Associate Member of the Institute of Chartered Secretaries and

Administrators and holds a Bachelor of Law degree from the University of London.

51

Share Ownership

The following table sets forth certain information of the Issuer, as at the date of this Offering

Circular, with respect to the ownership of the shares by each person or entity who or which owned

more than 5% of the shares of the Issuer.

Shareholders

Place of

incorporation/

establishment

Number of ordinary shares held

Direct % Indirect %

AmBank (M) Berhad. . . . . . . . . . . Malaysia 3 100 — —

Material Contracts

The Issuer has not engaged, since its incorporation, and will not engage in any material

activities other than those relating, or incidental, to the issue of the Preference Shares.

Litigation

None of the Issuer, the Bank nor any of its subsidiaries is involved in any legal or arbitration

proceedings (including proceedings which, as far as the Issuer or the Bank are aware, are pending or

threatened) which management of the Issuer or the Bank believes would, individually or taken as a

whole, have a material adverse effect on the business, financial condition or results of operations of

any of them.

Capitalisation of the Issuer

Except as described below, there has been no material change in the capitalisation,

indebtedness or contingent liabilities of the Issuer since 23 September 2005.

The following table sets forth the Issuer’s total capitalisation as at 23 September 2005, the date

of its incorporation, and as adjusted to give effect to the issue of the Preference Shares:

As at 23 September 2005

Actual As adjusted

(RM) (U.S.$) (RM) (U.S.$)

Shareholders’ equity . . . . . . . . . 11 3 11 3

Total capitalisation . . . . . . . . . . 11 3 753,800,011 200,000,003

52

DESCRIPTION OF THE BUSINESS OF THE BANK

Overview

The Bank was the sixth largest domestic bank in Malaysia in terms of total assets (based on the

published financial results of the 10 domestic banks in Malaysia) as at 30 September 2005. The

Bank is engaged in a wide range of retail and business banking activities. It is a market leader in the

retail banking sector and had the third largest retail assets by value in Malaysia (based on the

published financial results of the 10 domestic banks in Malaysia) as at 30 September 2005. The

Bank’s principal retail banking activities are the provision of consumer loans (such as vehicle hire

purchase, mortgages and personal financing) and credit cards. The focus of the Bank’s business

banking activity is commercial lending and, in particular, on SMEs in Malaysia.

The AMMB Group was the fifth largest financial services group in Malaysia in terms of total

assets (based on the published financial results of both domestic and foreign financial services

groups in Malaysia) as at 30 September 2005. The AMMB Group’s business operations include

investment banking, commercial banking, retail banking, Islamic banking, insurance and other

related financial services. AMMB controls 100.0% of the share capital of the Bank, through its

wholly-owned subsidiary AMFB Holdings Berhad.

As at 30 September 2005, the Bank had issued and paid-up share capital of RM610,363,762

divided into 610,363,762 ordinary shares of RM1.00 each.

As at 30 September 2005, the Bank had unaudited consolidated total assets of RM51,614.4

million, loans, advances and financing of RM39,438.6 million, customer deposits of RM31,646.9

million and shareholder’s funds of RM3,317.6 million. Currently, the Bank’s distribution network

comprises 170 branches, 226 ATMs and 47 self-service EBCs in Malaysia.

Recent Developments

On 9 December 2005, the Bank announced it has entered into a sale and purchase agreement to

sell its 14.1% stake in AmAssurance Berhad, 10% to IAG International Pty. Limited, a subsidiary of

Insurance Australia Group Limited, and 4.1% to AMMB Holdings.

In 2005, the Bank announced its intention to rename its subsidiary AMBB Capital Berhad as

AmIslamic Bank Berhad by 1 April 2006. AmIslamic Bank Berhad will offer Islamic banking

products and services.

On 21 December 2005, the Bank incorporated a wholly-owned subsidiary in Hong Kong,

AmTrade Services Limited (‘‘AmTrade Services’’). AmTrade Services was established to provide

trade finance services to the Bank.

On 17 January 2006, the Board of Directors of Amcorp (which owns 32.9% of the issued

capital of AMMB as of 30 September 2005) announced that they would recommend a proposal for

the privatisation of Amcorp by Tan Sri Dato’ Azman Hashim by way of an Amcorp members’

scheme of arrangement under Section 176 of the Companies Act, 1965. Under the proposed

privatisation, Tan Sri Dato’ Azman Hashim (or persons to be nominated by him) will acquire all of

the ordinary shares of RM1.00 each in Amcorp (the ‘‘Amcorp Shares’’) that are not currently held by

Tan Sri Dato’ Azman Hashim or his investment holding companies, for a cash consideration of

RM1.40 for each Amcorp Share. This scheme of arrangement proposal may result in Tan Sri Dato’

Azman Hashim significantly increasing his stake in Amcorp. In light of this development, under

BAFIA, if Tan Sri Dato’ Azman Hashim owns more than 75.0% of Amcorp, current regulations may

require that Amcorp would need to reduce its interest, direct or indirect, in the shares of the Bank to

10.0% or below. The requirement to sell shares may increase the likelihood that there might be a

change in control. This may result in Amcorp having less influence over the affairs of the AMMB

Group. Tan Sri Dato’ Azman Hashim is currently a Director of Amcorp and the Chairman of the

Bank and, as at 31 December 2005, he had a total direct and indirect interest of 38.1% of the issued

and paid-up share capital of Amcorp. Subject to obtaining all the required approvals, the proposed

privatisation is expected to be completed by the third quarter of 2006. See ‘‘Risk Factors — Risksrelating to the Ambank Group — Major shareholders may influence policies of the Bank’’.

53

History

The Bank traces its history back to the incorporation of Malaysian Industrial Finance Corporate

Limited (‘‘MIFCL’’) in Malaysia in 1964. MIFCL was renamed Arab-Malaysian Finance Berhad

(‘‘AMFB’’) in 1977 following the acquisition of a 70.0% stake in AMFB by AMMB Holdings

Berhad. In 1982, AMFB became a wholly-owned subsidiary of AMMB.

In 1990, AMFB acquired First Malaysia Finance Berhad under a rescue scheme approved by

the Ministry of Finance of Malaysia. AMFB was listed on the Kuala Lumpur Stock Exchange (now

known as Bursa Malaysia) in 1992.

In December 2001, AMFB acquired the entire share capital of MBf Finance Berhad (‘‘MBf

Finance’’). MBf Finance was subsequently renamed AmFinance Berhad. AMFB transferred all of its

assets and liabilities to AmFinance on 15 June 2002. Following this transfer, AMFB was transformed

into an investment holding company. This restructuring created Malaysia’s largest finance company

in terms of assets and branch network and was in line with the consolidation objectives of the FSMP

issued by BNM.

The Banking and Financial Institutions (Amendment) Act 2003 came into effect on 15 January

2004 and allows for the creation of a new banking entity through the merger of a banking business

and finance company business within the same banking group (called a ‘‘banking and finance

company’’ or ‘‘BAFIN’’). AMFB was privatised, becoming a wholly-owned subsidiary of AMMB,

and delisted from Bursa Malaysia in March 2005. AmFinance acquired all of the shares of its

affiliate, ABB, on 31 May 2005. Subsequently, as part of an internal reorganisation, substantially all

of the commercial banking business and assets and liabilities of ABB were merged into AmFinance

pursuant to a High Court Vesting Order made under section 50 of the Banking and Financial

Institutions Act 1989 with effect from 1 June 2005 and AmFinance adopted its present name,

AmBank (M) Berhad.

As a result of the Merger, the Bank is licensed as a composite commercial banking and finance

company under the Banking and Financial Institutions Act.

Corporate Structure

The following diagram shows the corporate structure of the AMMB Group and its material

subsidiaries before the Merger:

AmBank Berhad14.1%

100.0% 65.9%

AMFBHoldings Berhad

AmFinance Berhad

100.0%

AMMB Holdings(1)

64.28%

AmInvestmentGroup Berhad(1)

AmMerchantBank Berhad

100.0%

51.0%

AmAssurance Berhad

Note:

(1) Listed on Bursa Malaysia.

54

The following diagram shows the corporate structure of the AMMB Group after the Merger:

AmAssurance Berhad

65.9%

AMFBHoldings Berhad

AmBank (M)Berhad

100.0%

AMMB Holdings(1)

100.0%

AmInvestmentGroup Berhad(1)

AmMerchantBank Berhad

100.0%

51.0%

AMBBCapital Berhad(3)

100.0%

14.1%(2)

Notes:

(1) Listed on Bursa Malaysia.

(2) The Bank has entered into a sale and purchase agreement to sell its 14.1% state in AmAssurance.

(3) Formerly AmBank Berhad. On 1 April 2006, AmBB Capital Berhad will be renamed as AmIslamic Bank Berhad.

Competitive Strengths

The Bank considers the following to be its principal competitive strengths:

. Extensive and diversified retail banking business

The Bank offers a diversified range of retail banking products and services covering six

principal areas: (i) vehicle hire purchase; (ii) mortgages and other consumer loans; (iii) credit

cards and line of credit; (iv) personal financing; (v) consumer sales (including bancassurance)

and deposits; and (vi) asset financing and small business. This range provides the Bank with an

extensive retail loan base. As at 30 September 2005, the Bank’s retail assets (after deduction of

interest-in-suspense and Islamic financing sold to Cagamas Berhad) were RM30,302.6 million,

comprising of loans for the purchase of transport vehicles, loans for the purchase of residential

properties and loans for consumption credit. The Bank’s retail assets as at 30 September 2005

were the third largest by value in Malaysia. For further details on interest-in-suspension, see

‘‘Changes in Accounting Policies’’. The Bank was also the leading provider of vehicle hire

purchase in Malaysia, with a market share of approximately 23.0% as at 30 September 2005,

and currently has relationships with over 3,200 hire purchase vehicle dealers in Malaysia.

These relationships provide an extensive distribution network for the Bank’s vehicle financing

products.

. Extensive and diversified distribution network

The Bank had the sixth largest distribution network in Malaysia as at 30 September 2005.

The Bank currently operates 170 branches, 226 ATMs and 47 EBCs in Malaysia. In early 2004,

the Bank commenced remodelling its branches into sales and service centres to enhance

customer service and increase sales activities and expects to substantially complete such

remodelling within 2006. In addition to its branch network, the Bank has recently upgraded its

call centre into a 24-hour customer contact centre aimed at providing its customers with

convenient point of contact. The Bank is exploring the possibility of expanding its branches to

200 by the end of 2007.

55

. Ability to provide a wide range of products and services

As part of the AMMB Group, the Bank is able to leverage a groupwide sales force to

assist it in offering a wide range of products and services provided by other members of the

AMMB Group, making it a ‘‘one-stop’’ financial centre for customers. At the Bank’s branches,

customers can purchase, for example, trust services, insurance products and stock-broking

services offered by other members of the AMMB Group.

. Established and reputable brand name

The Bank believes it has established a reputable and recognised brand name in Malaysia.

The Bank was voted the most innovative bank in responding to customer needs by the Far

Eastern Economic Review for Malaysia in the category of innovation in 2003. In 2004, the

Bank was awarded the Superbrand status by Superbrands Malaysia. The Bank continues to

focus on enhancing its brand name through advertising and promotional campaigns.

. Important strategic alliances

The Bank has entered into a number of strategic alliances including an arrangement with

MBf Cards, currently the largest non-bank credit card issuer in Malaysia, for the provision of

credit card financing to credit card holders of MBf Cards. In addition, the Bank has mortgage

alliances with certain state governments and housing developers. The Bank also has

relationships with government co-operatives to expand its personal financing services

throughout Malaysia.

Strategy

The Bank’s focus is on sustainable and profitable growth within its risk management

framework. In order to achieve this objective, the Bank aims to meet the needs of its customers and

develop innovative and competitive products and services.

The Bank’s principal strategies are as follows:

. Continue to deliver profitable growth by focusing on its core business areas

The Bank continues to focus on all of its core business areas: (i) vehicle hire purchase,

(ii) mortgages and other consumer loans, (iii) credit cards and line of credit, (iv) personal

financing, (v) consumer sales (including bancassurance) and deposits, (vi) asset financing and

small business and (vii) business banking. The Bank is pursuing the following in line with this

strategy:

. The Bank aims to increase its leading market share in the vehicle hire purchase

market and increase its geographical reach by offering its hire purchase products in

most of its branches and by forming new alliances with vehicle distributors.

. The Bank aims to become one of the top three residential mortgage providers in

Malaysia. To achieve this aim, the Bank is developing a wider range of mortgages

and other consumer loans products, such as internet-based sales of mortgages. The

Bank is also seeking to expand its relationships with property developers.

. The Bank aims to grow the number of its credit cards in circulation by co-branding

with retailers and reward points programmes.

. The Bank is seeking to increase its personal financing business by offering financing

facilities to members of co-operatives who are government employees.

. The Bank continues to offer products and services designed to attract younger

customers (below 30 years old) through various deposits, credit cards and other loan

products.

56

. The Bank aims to increase its fee-based income and will focus on consumer sales

products by promoting AMMB Group insurance and investment products and

establishing alliances with third party investment funds.

. The Bank is currently expanding its range of products and services offered by the

business banking division, with an emphasis on corporate lending, trade services,

factoring and cash management services.

. The Bank continues to focus on trade services and building fee income from the

SME market by offering such products as lending packages and working capital

financing.

. Increase cross-selling initiatives with other AMMB Group companies

The Bank continues to develop its ability to cross-sell products and services offered by

other AMMB Group companies so as to become a ‘‘one-stop’’ financial centre and to offer its

products and services through such other companies. The AmBank Group has access to over

7,500 dedicated sales agents, marketing officers and personal bankers to cross sell the products

of the AmBank Group.

. Leverage on the Bank’s expanded and diversified distribution network

The Bank aims to leverage on its distribution network in Malaysia, which was expanded

and diversified as a result of the Merger. Currently, the Bank has a network of 170 branches,

226 ATMs and 47 EBCs in Malaysia. This enlarged distribution network has enabled the Bank

to offer all of its products and services throughout its branches nationwide. Presently, the Bank

offer throughout its branch network vehicle hire purchase products and services and 57 of its

branches serve as processing centres for such products and services. The Bank has 21 branches

across Malaysia with mortgage relationship desks and five mortgage business centres. In

addition, the Bank has Commercial Business Centres which support four regional hubs located

at Penang, Kuching, Kota Kinabalu and Johor Bahru in Malaysia.

. Leverage on the synergies of the Bank’s Business Banking and Retail Banking divisions

The Bank aims to utilise the synergies of its Business Banking and Retail Banking

divisions to:

. reduce the cost of borrowing by achieving current account portfolio growth;

. reduce operational cost by achieving cost efficiencies; and

. introduce new products and services.

. Expand distribution of banking products and services to all branches

The Bank aims to expand its comprehensive banking products and services to all of its

branches, including offering overdraft services and additional international remittance services.

. Focus on risk management and recovery

The Bank is in the process of strengthening its credit risk infrastructure. The Bank has

established a retail collection centre (‘‘Retail Collection Centre’’) to focus on maximising

recovery efforts.

In addition, the Bank expects to resolve a significant amount of its gross NPLs by the end

of 2007.

For more detailed discussions of the strategies specific to the different business divisions

of the Bank, see ‘‘The Bank’s Businesses — Retail Banking’’ and ‘‘The Bank’s Businesses —Business Banking’’.

57

The Bank’s Businesses

The Bank’s operations are divided into two business divisions: the retail banking division (the

‘‘Retail Banking division’’) and the business banking division (the ‘‘Business Banking division’’). As

at 30 September 2005, the majority of the Bank’s net profits are derived from its Retail Banking

division. The Bank’s Islamic Banking Division crosses the Bank’s various lines of businesses,

including both the Business Banking and Retail Banking divisions.

Retail Banking

The Bank’s Retail Banking services and products are offered across the following Business

Units:

. vehicle hire purchase;

. mortgages and other consumer loans;

. credit cards and line of credit;

. personal financing;

. consumer sales (including investment products, insurance products and other

bancassurance products) and deposits (savings accounts, demand deposits and fixed

term deposits); and

. asset financing and small business (including leasing and equipment financing).

As at 30 September 2005, the Retail Banking business served approximately 3.9 million

customers through its extensive distribution network of branches, ATMs, EBCs, 24-hour customer

contact centre and internet banking services. The Bank’s retail assets (after deduction of interest-in-

suspense and Islamic financing sold to Cagamas Berhad) were RM30,302.6 million as at 30

September 2005 comprised of loans for the purchase of transport vehicles, for the purchase of

residential properties and loans for consumption credit.

To emphasise its commitment to customers, the Bank has adopted a customer service campaign

known as Customer F.I.R.S.T. (which stands for Friendly, Innovative, Responsive, Simple and

Trustworthy). This initiative includes media advertisements and a staff training programme. In

addition, the Bank has rolled out the sales and service centres (‘‘SSC’’) model to integrate its

consumer sales and branch network to improve performance and efficiency. Personal banking

officers have also been placed at branches to offer AMMB Group products.

Vehicle Hire Purchase

The Bank was the largest provider of vehicle hire purchase financing in Malaysia, with vehicle

loans of approximately RM19.0 billion, representing a market share of approximately 23.5% as at 30

September 2005. As at 30 September 2005, the financing of transport vehicles represented

approximately 45% of the Bank’s total loan portfolio. The following table sets out the Bank’s

vehicle financing portfolio as at the dates indicated.

As at 31 March

2005

As at 30 September

2005

(restated) (unaudited)

(RM million)

Loans for purchase of transport vehicles

(net of IIS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,165.2 19,011.4

58

The following table sets out AmFinance’s vehicle financing portfolio as at the dates indicated.

As at 31 March(1)

2003(2)

2004 2005

(RM million)

Loans for purchase of transport vehicles . . . . . . . . 13,214.7 14,391.2 16,220.8

Note:

(1) Not restated in accordance with the Revised GP8. See ‘‘Summary of Significant Differences Between Revised

GP8 and the Relevant IFRS’’.

(2) As appear in the audited consolidated financial statements for the year ended 31 March 2004. Restated to reflect

MASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards

Board — MASB 25, Income Taxes.’’

The Bank has achieved an increase in the value of financing loans for new vehicles compared

to used vehicles during the last three years. The ratio of loans granted for new vehicles to loans

granted for used vehicles at AmFinance was 46 : 54, 49 : 51 and 56 : 44 in the years ended 31 March

2003, 2004 and 2005, respectively, and at the Bank was 56 : 44 for the six months ended 30

September 2005. The Bank has established relationships with over 3,200 vehicle dealers in Malaysia.

The Bank also has strategic alliances with all of the major vehicle companies in Malaysia, including

Auto Italia, Daimler Chrysler Malaysia, Hicomobil Kleeman, Honda, Nazakia, Perodua, Proton and

Toyota.

The Bank’s market share has grown in recent years as a result of the Bank’s competitive

pricing strategies, its focus on service, and its continued good relationships with vehicle dealers. As

at 30 September 2005, financing for foreign brand vehicles gradually increased to approximately

40.0% of the Bank’s vehicle financing portfolio. The Bank continues to form new alliances with

vehicle distributors so as to increase growth in, and diversify, its vehicle financing portfolio.

Vehicle hire purchase is usually offered on a fixed rate basis, is generally secured by the

vehicle being purchased and typically has a term of three to five years (with a maximum of nine

years). The financing typically represents 60.0% to 80.0% of the assessed collateral value of the

vehicle to be financed, depending in part on the age of the vehicle.

To assess the roadworthiness of hire purchase vehicles, the Bank requires all used vehicles to

undergo an inspection by Pusat Pemeriksaan Kenderaan Berkomputer Sdn Bhd, the official vehicle

inspection body in Malaysia.

In June 2004, the Bank’s vehicle hire purchase fulfilment department obtained ISO 9001

certifications from the Department of Standards Malaysia, the United Kingdom Accreditation Service

and the Comite francais d’accreditation, for vehicle hire purchase processing, documentation,

disbursement and customer service.

The Bank continues to reinforce its presence in the vehicle financing market through marketing

initiatives, participation in road shows and sales promotions with vehicle distributors and dealers

throughout Malaysia. The Bank intends to grow and enhance the asset quality of its hire purchase

portfolio by:

. increasing its geographical reach by offering hire purchase products in more of its

branches. Currently, the Bank offers hire purchase products in 57 of its branches;

. improving service and turn-around time in credit appraisals and disbursements via its

automated credit scoring system;

. introducing variable interest rate financing, so as to reduce exposure to rising interest

rates;

59

. conducting regular dealer satisfaction surveys and establishing tie-ups with new dealers;and

. offering differential interest rates according to credit risk assessments of customers.

The Bank implemented an automated credit scoring system in January 2005 as part of itsongoing efforts to improve credit risk management. In addition, it has also improved the Bank’sturn-around time in credit processing. See ‘‘Funding, Liquidity and Capital Adequacy — CreditApproval’’ and ‘‘Risk Management — Credit Risk Management’’.

Mortgages and Other Consumer Loans

In the residential mortgages segment, the Bank had approximately 6.7% of the domestic market(including securitised assets) as at 30 September 2005 with loan assets of RM8.9 billion, based onfigures published by BNM of residential property purchases. As at 30 September 2005, the financingof residential mortgages represented approximately 21.0% of the Bank’s total loan portfolio. As at30 September 2005, the Bank was the fifth largest provider of residential mortgages amongstdomestic banks in Malaysia (based on published financial results of the 10 domestic banks inMalaysia). The table below sets out the Bank’s residential property financing portfolio as at thedates indicated.

As at 31 March

2005

As at 30 September

2005

(restated) (unaudited)

(RM million)

Loans for residential property (net of IIS) . . . . . . . . . . 8,113.7 8,869.0

The table below sets out AmFinance’s residential property financing portfolio as at the dates

indicated.

As at 31 March(1)

2003(2)

2004 2005

(RM million)

Loans for residential property . . . . . . . . . . . . . . . 4,639.2 5,073.3 5,528.0

Note:

(1) Not restated in accordance with the Revised GP8. See ‘‘Summary of Significant Differences Between RevisedGP8 and the Relevant IFRS’’.

(2) As appear in the audited consolidated financial statements for the year ended 31 March 2004. Restated to reflectMASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting StandardsBoard — MASB 25, Income Taxes.’’

The table below sets out ABB’s residential property financing portfolio as at the dates

indicated.

As at 31 March(1)

2003(2)

2004 2005

(RM million)

Loans for residential property . . . . . . . . . . . . . . . 1,473.0 2,043.1 2,959.7

Note:

(1) Not restated in accordance with the Revised GP8. See ‘‘Summary of Significant Differences Between RevisedGP8 and the Relevant IFRS’’.

(2) As appear in the audited consolidated financial statements for the year ended 31 March 2004. Restated to reflectMASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting StandardsBoard — MASB 25, Income Taxes’’.

60

Residential property loans are typically fixed-term variable rate loans secured by a registered

charge on the property being financed. Interest on residential property loans is calculated either on a

daily or monthly basis. The Bank’s residential property loans normally have terms of between 10

and 15 years, up to a maximum of 30 years. The Bank’s policy is to lend up to 90.0% of the

assessed value of the property or up to 95.0% if mortgage insurance, known as mortgage reducing

term assurance (‘‘MRTA’’), is obtained.

Residential property loan products offered by the Bank include margin financing of up to

90.0% for properties under construction, 100.0% financing for properties that have a value of less

than RM100,000 and a deferred payment sale scheme for Islamic financing.

The Bank’s marketing activities in relation to mortgages and other consumer loans include

product-bundling initiatives and active participation in sales launches and major property

expositions, such as the Malaysia Property Expo (MAPEX, which is organised annually by the

Real Estate and Housing Developers’ Association). For example, the Bank also has an alliance with

the state government of Selangor whereby it is the sole provider of financing for public housing. In

addition, the Bank has partnerships with selected housing developers and real estate agents.

The Bank rolled out several key initiatives during 2005, such as the outsourcing of loan

application data entry processes and the implementation of on-line credit history checking with

BNM’s credit bureau system. These initiatives are expected to help reduce the Bank’s processing and

turn-around time and increase efficiency. The Bank is also in the process of introducing a new

automated credit scoring system. See ‘‘Funding, Liquidity and Capital Adequacy — CreditApproval’’ and ‘‘Risk Management — Credit Risk Management’’.

As part of its strategy of offering a wide product range to meet customer requirements, the

Bank expects to introduce a deferred repayment home loan campaign by the end of 2006.

The Bank currently has five mortgage business centres in Kuala Lumpur, Penang, Johor Bahru,

Kuching and Kota Kinabalu and 21 relationship desks located in branches nationwide.

Credit Cards and Line of Credit

The Bank is the third largest financier of credit cards in Malaysia based on receivables. The

Bank has formed a strategic alliance with MBf Cards which had a credit cards receivables base of

RM1.44 billion as at 30 September 2005. The Bank provides financing for 912,000 credit cards (of

which 500,000 are issued in the name of MBf Cards). The Bank’s total credit cards receivables as at

30 September 2005 amounted to RM2.07 billion, representing 13.5% of the domestic industry’s total

outstanding of RM15.5 billion. The Bank’s Retail Banking business issues Mastercard, Visa, Al-

Taslif, AmBank Real Rewards, RedHall Gallery Virtual and Platinum credit cards. The Bank offers

pre-approved credit cards packaged together with its retail lending products, such as residential

property loans and auto financing. Other marketing initiatives implemented by the Bank include co-

marketing programmes with AmAssurance Berhad, a programme to encourage cardholders to transfer

their outstanding credit card balance to one of the Bank’s credit cards and a 0% interest rate

repayment instalment programme.

The Bank also offers the Al-Taslif Credit Card-i, which was the first Islamic credit card in

Malaysia. This card allows cardholders to perform ‘‘umrah’’ (a religious visit made during the Haj

season) under a 12-month instalment payment plan with Tabung Haji Travel Services (the official

agency of the Tabung Haji) and can also be used to make ‘‘zakat’’ payments (alms) at the Bank’s

branches and Retail Collection Centre as well as via the Bank’s internet banking channel.

In early 2005, the Bank completed a migration of its magnetic-strip credit cards to Europay-

Mastercard-Visa-compliant chip-based cards. These chip-based cards are difficult to clone and help

reduce credit card fraud. The Bank has also upgraded to a new card management system in order to

support the growth of its card business.

Revenues from the Bank’s credit card business consist principally of annual fees paid by its

cardholders, finance charges on outstanding balances, cash advance fees and merchant fees payable

by service establishments.

61

Personal Financing

As at 30 September 2005, the Bank ranked second in personal financing, based on the

published financial results of domestic and foreign financial institutions in Malaysia with a market

share of 5.8% based on a gross loan portfolio of RM1,227 million.

The principal personal financing products offered by the Bank are personal loans aimed at

members of co-operatives who are government employees. The asset quality of such personal loans

is significantly enhanced by the method of repayment, which is typically via a deduction from

monthly salary.

The Bank has launched sales campaigns to involve the Bank’s staff in the marketing of

personal financing products. In addition, the Bank has formed business alliances with Tabung Haji

Travel Services for ‘‘umrah’’ and other Islamic travel packages, entered new market segments such

as employees of quasi-government companies and formed tie-ups with companies for vehicle hire

purchase and other loan financing.

Consumer Sales and Deposits

The consumer sales products offered by the Bank include investment products in the form of

fixed income and equity unit trusts, insurance products (such as MRTA, life, general and auto

insurance) and other bancassurance products. In furtherance of the Bank’s strategy to cross-sell, such

investment and insurance products are substantially sourced within the AMMB Group.

The various deposit products offered by the Retail Banking division include savings accounts,

demand deposits and fixed term deposits.

As part of the Bank’s strategy to expand its business, the Bank has embarked on nationwide

advertising, marketing campaigns and road shows. The Bank has also established new arrangements

to act as agents for sales of third party unit trust funds such as unit trust funds of Hwang DBS, TA

Unit Trust and other leading mutual fund companies. The Bank has placed sales representatives at

branches focused on promoting consumer sales products.

Asset Financing and Small Business

Asset financing and small business primarily provides financing products to SMEs, including

industrial hire purchase, loans funded by BNM, loans backed by Credit Guarantee Corporation

Malaysia Berhad (‘‘CGC’’), block discounting, overdrafts, Bumiputra development loans and direct

access guarantee schemes (‘‘DAGS’’). DAGS are guaranteed by CGC and referred to the Bank for

further credit review and processing after CGC has conducted its initial round of credit checking.

The Bank actively promotes BNM-funded loan schemes, such as the Fund for Small and

Medium Industries, the New Entrepreneurs Fund, and CGC loan schemes, all of which are intended

to assist SMEs in accessing cheaper loan financing.

As at 30 September 2005, the Bank’s asset financing and small business gross loan portfolio

amounted to RM1,986 million.

The Bank’s asset financing and small business unit marketing team has recently been

reorganised into two teams, a vendor and an industry team. The vendor team is responsible for

focusing on strategic tie-ups with vendors and suppliers to obtain sales and business referrals, while

the industry team targets selected industries through direct marketing initiatives.

e-Channels

In addition to its branches, the Bank has established e-channels for its products and services,

including ATMs and EBCs, Internet banking, a 24-hour contact centre and mobile banking.

Currently, the Bank has 226 ATMs and 47 EBCs. EBCs are facilities comprising at least one of each

of an ATM, a cash deposit machine and a cheque deposit machine. In order to reduce its branch

transaction costs and to improve services offered to customers, the Bank continues to promote the

62

use of EBCs by increasing the number of EBCs and organising campaigns and nationwide road

shows to promote awareness of electronic banking. The Bank introduced Internet banking in

December 2001, which allows customers to perform selected transactions over the internet including

paying their bills, checking their account balances and transferring funds online. The Bank continues

to encourage customers to use its online banking services for improved customer service

productivity.

The Bank’s contact centre, which operates 24 hours a day, enables customers to access

financial products and services over the telephone with both an automated system and live operators.

Customers can check their account balances and transaction history, transfer funds, obtain insurance

services, and make credit card and loan repayments and subscribe to new services. The contact

centre is equipped with automated self-service support technology, predictive auto dialler, multi-

channel integration (which synchronises the contact centre with other channels) and automated

service request tracking.

The Bank also has a mobile banking service that allows customers to perform certain banking

transactions using the SMS function of their mobile telephones. Current services include reloading

prepaid mobile telephone accounts and making balance enquiries. The Bank intends to increase the

types of mobile banking services it provides to include bill payment services and auto payroll/claims

alert. In addition, the Bank currently has partnerships with 49 corporations including utilities, clubs

and telecommunication providers, which enable the Bank’s customers to transact or pay their bills

with those companies through the use of online banking and mobile banking. The Bank intends to

increase the number of partners in this bill payment programme to 60 by March 2006.

Business Banking

The Bank’s Business Banking division provides banking products and services to corporate

customers who typically have borrowing needs exceeding RM2.0 million. These customers range

from SMEs to large corporations. The primary range of products and services offered by the

Business Banking division comprises working capital financing and other commercial loans (such as

overdrafts, revolving credit facilities, project financing, bridging loans and syndicated loan

participation), trade services (such as letters of credit, trust receipts, guarantees, export credit

refinancing, bankers’ acceptances, and foreign currency trade loans), factoring and cash management

services.

The Bank’s Business Banking division comprises eight marketing teams focused on corporate

lending, supported by three specialist teams (trade service, factoring and cash management services).

Each of the specialist teams is supported by its own operations team. The Bank’s Business Banking

products and services are offered through five regional business centres in Johor Bahru, Kota

Kinabalu, Kuala Lumpur, Kuching and Penang and 11 commercial business centres in various

locations throughout Johor, Melaka, Penang, Perak, Sabah, Sarawak and Selangor. Each of the

commercial business centres reports to one of the regional business centres. The commercial

business centres provide marketing services and serve as document collection centres. In addition to

offering the products and services of the Business Banking division, the regional business centres

function as a platform for cross-selling AMMB Group’s products and services, such as debt capital

markets products, corporate finance advisory services and private banking products. In addition, the

Business Banking division utilises the Bank’s branch network to provide support and services to

corporate customers.

One of the current and continuing key strategies of the Business Banking division is to focus

on the SME market and, in particular, to establish long-term relationships with smaller SMEs and

assist in their development to become larger and potentially listed companies.

Corporate Lending

The Bank provides traditional corporate lending products and services, including working

capital financing and other commercial loans (such as overdrafts, revolving credit facilities, project

financing, bridging loans and syndicated loan participation).

63

During the past 18 months, the Bank has upgraded its credit rating system in order to enhance

the corporate loan approval process. For more information, see ‘‘Funding, Liquidity and CapitalAdequacy — Credit Approval’’ and ‘‘Risk Management — Credit Risk Management.’’

The Business Banking division offers a lending programme (introduced by ABB in January

2005) focusing on SMEs, financing requirements in respect of the purchase of commercial and

industrial properties. This programme offers a more flexible and faster approval process compared to

the approval process normally applicable within the Business Banking division. The facilities offered

by this programme can also be structured as facilities in accordance with Islamic law.

Trade Services

The Bank’s trade services comprise of trade financing and fee-based products which

contributed equally to the Bank’s total trade loans and advances of approximately RM2 billion as

of 30 September 2005. The Business Banking division intends to further increase its trade services

due to lower capital cost and risk exposure as well as to boost non-interest income.

Trade transactions in relation to foreign exchange have increased due to the liberalisation of

the Malaysian Ringgit peg in July 2005. Strategic alliances with correspondent bank partners with

global networking capabilities have contributed to the Bank’s ability to compete for trade and

foreign exchange transactions.

Factoring

The Bank had factoring loans of RM31.9 million as at 30 September 2005. In May 2005, the

Business Banking division introduced a lending programme, which allocated RM100 million to

support its factoring products. The factoring lending programme focuses primarily on providing

loans to contractors that supply products and services to government ministries and state agencies,

multi-national companies and large corporations. Borrowers who qualify for the factoring loan

programme are given lower ratings. This risk is mitigated because the assignment of receivables and

collection are from a stronger-rated debtor party.

The factoring lending programme has a flexible approval system which allows the Bank to

process loans faster. Factoring products offer attractive working capital financing instruments due to

the inexpensive fees, faster turnaround time, comprehensive package offering, inclusive of

performance guarantee, advanced payment guarantee, upfront mobilisation funding prior to

commencement of work and certification of progress works.

Cash management

To provide better support to SME and large corporates, the Bank is currently developing a cash

management service, which it expects to launch by the end of 2006. The Bank’s cash management

service offers an end-to-end service to customers covering payments, collection and liquidity

management. It utilises a front-end internet platform and straight-through processing to assist

customers to improve their collections, payments and liquidity management capabilities. In addition,

cash management services will offer the Bank opportunities to cross-sell its other products.

Islamic Banking

As at 30 September 2005, the Bank was ranked number 2 in Islamic Banking based on total

assets, number 1 in Islamic hire purchase based on assets and number 1 in Islamic credit cards in

Malaysia (based on the published financial results of the 10 domestic banks in Malaysia). The

Bank’s Islamic Banking division crosses the Bank’s various lines of businesses, including both the

Business Banking and Retail Banking divisions, in which Islamic financial products and services

(including deposits, credit cards, residential financing, vehicle hire purchase and equipment

financing), such as personal financing-i and Taslif Credit Card-i, are offered as alternatives to the

conventional interest-based products and services. In 2005, the Bank announced its intention to

rename its subsidiary AMBB Capital Berhad as AmIslamic Bank Berhad by 1 April 2006. AmIslamic

Bank Berhad will offer Islamic banking products and services. The Islamic Banking division applies

the same credit approval process, credit scoring system and collateral policy as those of the Bank.

64

As at 30 September 2005, the Bank’s Islamic Banking division had gross total financing of

approximately RM8.8 billion.

In line with BNM’s Financial Sector Master Plan and plans for making Malaysia a regional

Islamic Financial Centre, the Bank expects to transfer its Islamic assets and liabilities to a newly-

formed banking subsidiary, which will be established by 2006. The Bank hopes that this transfer will

establish the AmBank Group as a major player in the Islamic banking business in Asia, strengthen

the Bank’s competitive position and further capitalise on this potential market for alternative

financing.

Technology

In 2004, the Bank began consolidating its IT systems infrastructure for retail and business

banking. In 2004, it enhanced its group data warehousing facility.

The Bank also upgraded its customer contact centre facility to provide convenient customer

access to the Bank’s financial services and products and create a single point of contact. This is

aimed at addressing the financial needs of customers promptly by offering extended banking

facilities and automated self-service support technology equipped with workforce management,

predictive auto dialler, multi-channel integration, customer relationship management and automated

service request tracking. In addition, the Bank has upgraded its internet and mobile banking systems.

The Bank has upgraded its credit rating facility system to allow faster and more efficient loan

processing. It established centralised retail collections and credit scoring systems to improve retail

business recovery rates and risk management. The Bank expects such technology upgrading and

investments to improve retail asset quality for vehicle hire purchase, consumer sales, mortgages and

card services. The Bank also replaced its conventional magnetic strip credit cards with Europay-

Mastercard-Visa-compliant chip-based smart cards to support credit card business growth.

The Bank is currently taking several technology initiatives to meet Basel II requirements,

especially in the area of credit risk management.

Branch Network

The Bank has a physical presence in all major towns in Malaysia. Currently, the Bank has 170

branches nationwide. The table below shows the number of branches the Bank has in the different

regions and states of Malaysia.

Region States

No. of

Branches

1 Perlis, Kedah, Penang . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

2 Perak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

3 Selangor(1), Negri Sembilan, Melaka . . . . . . . . . . . . . . . . . . . . . 25

4 Johor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

5 Pahang, Terengganu, Kelantan . . . . . . . . . . . . . . . . . . . . . . . . . 15

6 Sarawak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

7 Sabah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

8 Wilayah Persekutuan — Kuala Lumpur, WP — Putrajaya, Selangor(1) . 39

Total 170

Note:

(1) The state of Selangor is in both region 3 and region 8.

65

As at 30 September 2005, the Bank was ranked sixth among local banks in Malaysia in terms

of number of branches based on BNM’s published reports. The Bank is targeting to grow its network

to 200 branches by 2007.

From 2002, the Bank began a process to convert all of its branches to SSCs to enhance the

Bank’s service to its customers and refocus branches to be more sales oriented. Key changes made

were as follows:

. the appointment of customer service relationship officers to assist customers;

. the establishment of sales targets;

. staff recruitment to maintain a minimum of seven staff per branch to support commercial

banking services; and

. the establishment of commercial banking services.

The Bank recently refocused its SSC structure by, first, the appointment of one person per

branch to head both the sales and services lines of the branches and secondly, the re-designation of

financial and banking executives as personal bankers. The objective of this restructuring was to

enhance the synergy between sales and service.

The Bank plans to continue enhancing the efficiency of branches and business units through the

centralisation of operations and processes, such as centralised confirmation of daily transaction and

balance reporting; enhancing its queue management system to monitor real time queue status of

customers at the branch level; outsourcing cheque clearing of cheques drawn on other banks; and

encouraging customers to use EBCs and ATMs for deposit and loan repayment transactions. At the

Bank’s branches, customers have access to an array of services. However, the Bank has not yet

introduced certain services such as foreign demand drafts and foreign exchange at all of its branches

which are offered by other domestic and foreign banks in Malaysia.

Competition

The Bank faces competition from a number of sources. The Bank’s primary competitors consist

of other major Malaysian banks as well as international banks operating in Malaysia and elsewhere

in Southeast Asia. In addition, the Bank faces indirect competition for customers from a variety of

other types of financial services companies, such as finance companies, credit and leasing companies

as well as other types of financial service providers. The Bank also faces competition from a variety

of banks and financial institutions in international markets. Many of these banks and financial

institutions have extensive worldwide operations.

The merger programme for domestic financial institutions initiated in 1999 has intensified the

competition faced by the existing banking and financial institutions in Malaysia. In addition, with

the impending liberalisation of the financial services industry, it is envisaged that the Bank will face

increased competition from foreign players. A number of commercial banks, finance companies and

building societies in Malaysia also offer residential property loans, resulting in intense competition

for such loans.

Litigation

None of the Issuer, the Bank nor any of its subsidiaries is involved in any legal or arbitration

proceedings (including proceedings which, as far as the Issuer or the Bank are aware, are pending or

threatened) which management of the Issuer or the Bank believes would, individually or taken as a

whole, have a material adverse impact on the business, financial condition or results of operations of

any of them.

66

FUNDING, LIQUIDITY AND CAPITAL ADEQUACY

Introduction

The Bank’s funding strategy is to continue to diversify its funding sources, customer base and

maturity profile.

The Bank’s funding strategy is guided by such factors as the Bank’s target loan-to-deposit

ratio, the maturity profile of its deposit base and the Bank’s ratio of retail deposits to corporate

deposits. These targets and parameters are set by and monitored by the Bank’s Market & Funding

Risk Management Committee and benchmarked against BNM’s guidelines and targets.

Funding

Most of the Bank’s funding is denominated in Malaysian Ringgit and sourced from retail and

business customer deposits. The majority of deposits, by value, are from retail customers. As at 30

September 2005, customer deposits accounted for 67.5% of the Bank’s total sources of funds, while

deposits and placements of banks and other financial institutions accounted for 23.5% of the Bank’s

total sources of funds. Other funding sources include securities sold under repurchase agreements,

interbank borrowings and funding obtained from Cagamas Berhad. See ‘‘— Other Funding Sources’’.

Currently, the Bank has shifted emphasis to growing and strengthening its retail deposit base.

As at 30 September 2005, retail customer deposits accounted for 60.2% of the Bank’s total customer

deposits, while business customer deposits accounted for 26.8% of the Bank’s total customer

deposits.

The following table illustrates the profile of the Bank’s total funding sources as at the dates

indicated:

As at 31 March 2005 As at 30 September 2005

(restated) (unaudited)

(RM million) (%) (RM million) (%)

Deposits from customers . . . . . . . . . . . . 29,161.8 67.4 31,646.9 67.5

Deposits and placements of banks and other

financial institutions . . . . . . . . . . . . . . 9,526.4 22.0 11,048.3 23.5

Securities sold under repurchase agreements 103.8 0.2 227.3 0.5

Bills and acceptances payable . . . . . . . . . 515.8 1.2 678.4 1.4

Amount due to Cagamas Berhad . . . . . . . 2,653.6 6.1 2,020.7 4.3

Subordinated term loan . . . . . . . . . . . . . 1,140.0 2.6 1,140.0 2.4

Subordinated bonds. . . . . . . . . . . . . . . . 200.0 0.5 200.0 0.4

Total . . . . . . . . . . . . . . . . . . . . . . . . 43,301.3 100.0 46,961.6 100.0

67

The following table illustrates the profile of AmFinance’s total funding sources as at the dates

indicated:

As at 31 March

2003(1)

2004 2005

(RM million) (%) (RM million) (%) (RM million) (%)

Deposits from customers . . . 19,609.2 65.5 20,411.8 67.4 22,271.8 70.7

Deposits and placements of

banks and other financial

institutions . . . . . . . . . . 5,109.1 17.0 5,063.4 16.7 5,877.5 18.6

Securities sold under

repurchase agreements . . . 305.5 1.0 275.0 0.9 33.1 0.1

Amount due to Cagamas

Berhad . . . . . . . . . . . . . 4,018.9 13.4 3,675.6 12.1 2,455.7 7.8

Subordinated term loan . . . . 680.0 2.3 680.0 2.2 680.0 2.2

Subordinated loan notes . . . . 250.0 0.8 — — — —

Subordinated bonds. . . . . . . — — 200.0 0.7 200.0 0.6

Total . . . . . . . . . . . . . . . 29,972.7 100.0 30,305.8 100.0 31,518.1 100.0

Note:

(1) As appear in the audited consolidated financial statements for the year ended 31 March 2004. Restated to reflect

MASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards

Board — MASB 25, Income Taxes’’.

The following table illustrates the profile of ABB’s total funding sources as at the dates

indicated:

As at 31 March

2003(1)

2004 2005

(RM million) (%) (RM million) (%) (RM million) (%)

Deposits from customers . . . 6,495.4 64.3 6,680.3 65.8 6,890.0 58.5

Deposits and placements of

banks and other financial

institutions . . . . . . . . . . 2,528.3 25.0 2,508.7 24.7 3,648.9 30.9

Securities sold under

repurchase agreements . . . 12.6 0.1 4.7 0.1 70.7 0.6

Bills and acceptances payable 189.5 1.9 264.6 2.6 515.8 4.4

Amount due to Cagamas

Berhad . . . . . . . . . . . . . 348.1 3.4 238.1 2.3 197.9 1.7

Subordinated term loan . . . . 75.0 0.7 460.0 4.5 460.0 3.9

Exchangeable subordinated

capital . . . . . . . . . . . . . 460.0 4.6 — — — —

Total . . . . . . . . . . . . . . . 10,108.9 100.0 10,156.4 100.0 11,783.3 100.0

Note:

(1) As appear in the audited financial statements for the year ended 31 March 2004. Restated to reflect MASB 25

relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards Board —MASB 25, Income Taxes’’.

68

Customer Deposits

Funding from customer deposits is divided into four categories: current accounts, savings

deposits, fixed deposits and negotiable certificates of deposit. As at 30 September 2005, 84.2% of

the total customer deposits of the Bank were in the form of fixed deposits (deposits with fixed

maturities, with tenures mainly ranging from one month to 15 months), with current accounts and

savings deposits accounting for 5.0% and 9.0%, respectively. Fixed deposits may be withdrawn by

the depositor prior to maturity, subject to prepayment penalties. As at 30 September 2005,

substantially all of the Bank’s customer deposits had maturities of one year or less. The Bank has

concentration and large depositor limits that are designed to reduce the likelihood of the Bank

relying on a small number of depositors. Based on the Bank’s historical experience, a substantial

portion of deposits are rolled over upon maturity, thereby providing a stable source of funding. The

Bank’s customer deposits are mostly denominated in Malaysian Ringgit.

The following table sets out the profile of customer deposits by type for the Bank as at the

dates indicated:

As at 31 March 2005 As at 30 September 2005

(restated) (unaudited)

(RM million) (%) (RM million) (%)

Current accounts . . . . . . . . . . . . . . . . . 1,334.3 4.6 1,592.6 5.0

Savings deposits . . . . . . . . . . . . . . . . . 2,878.8 9.9 2,864.2 9.0

Fixed/investment deposits . . . . . . . . . . . . 24,654.3 84.5 26,631.5 84.2

Negotiable certificates of deposits . . . . . . 294.4 1.0 558.6 1.8

Total . . . . . . . . . . . . . . . . . . . . . . . . 29,161.8 100.0 31,646.9 100.0

The following table sets out the profile of customer deposits by type for AmFinance as at the

dates indicated:

As at 31 March

2003(1)

2004 2005

(RM million) (%) (RM million) (%) (RM million) (%)

Savings deposits . . . . . . . . 2,307.2 11.8 2,579.4 12.6 2,688.7 12.1

Fixed/investment deposits . . . 17,292.1 88.2 17,794.8 87.2 19,363.9 86.9

Negotiable certificates of

deposits . . . . . . . . . . . . 9.9 — 37.6 0.2 219.2 1.0

Total . . . . . . . . . . . . . . . 19,609.2 100.0 20,411.8 100.0 22,271.8 100.0

Note:

(1) As appear in the audited consolidated financial statements for the year ended 31 March 2004. Restated to reflect

MASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards

Board — MASB 25, Income Taxes’’.

69

The following table sets out the profile of customer deposits by type for ABB as at the dates

indicated:

As at 31 March

2003(1)

2004 2005

(RM million) (%) (RM million) (%) (RM million) (%)

Current accounts . . . . . . . . 900.5 13.9 1,173.9 17.6 1,334.3 19.4

Savings deposits . . . . . . . . 137.8 2.1 163.5 2.4 190.1 2.7

Fixed/investment deposits . . . 5,380.2 82.8 5,342.9 80.0 5,290.4 76.8

Negotiable certificates of

deposit . . . . . . . . . . . . . 76.9 1.2 — — 75.2 1.1

Total . . . . . . . . . . . . . . . 6,495.4 100.0 6,680.3 100.0 6,890.0 100.0

Note:

(1) As appear in the audited financial statements for the year ended 31 March 2004. Restated to reflect MASB 25

relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards Board —

MASB 25, Income Taxes’’.

Profile of fixed deposits and negotiable certificates of deposit by remaining maturity

The following table sets out the profile of fixed deposits and negotiable certificates of deposit

by remaining maturity for the Bank as at the dates indicated:

As at 31 March 2005 As at 30 September 2005

(restated) (unaudited)

(RM million) (%) (RM million) (%)

Due within six months . . . . . . . . . . . . . 17,958.9 72.0 19,439.6 71.5

Six months to one year . . . . . . . . . . . . . 5,340.6 21.4 6.127.3 22.5

One year to three years . . . . . . . . . . . . . 933.5 3.7 884.8 3.3

Over three years . . . . . . . . . . . . . . . . . 715.7 2.9 738.4 2.7

Total . . . . . . . . . . . . . . . . . . . . . . . . 24,948.7 100.0 27,190.1 100.0

The following table sets out the profile of fixed deposits and negotiable certificates of deposit

by remaining maturity for AmFinance as at the dates indicated:

As at 31 March

2003(1)

2004 2005

(RM million) (%) (RM million) (%) (RM million) (%)

Due within six months . . . . 12,113.1 70.0 12,551.3 70.4 13,412.8 68.5

Six months to one year . . . . 3,887.0 22.5 4,258.8 23.9 4,689.9 23.9

One year to three years . . . . 851.2 4.9 667.0 3.7 853.4 4.4

Three years to five years . . . 450.7 2.6 355.3 2.0 627.0 3.2

Total . . . . . . . . . . . . . . . 17,302.0 100.0 17,832.4 100.0 19,583.1 100.0

Note:

(1) As appear in the audited consolidated financial statements for the year ended 31 March 2004. Restated to reflect

MASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting StandardsBoard — MASB 25, Income Taxes’’.

70

The following table sets out the profile of fixed deposits and negotiable certificates of deposits

by remaining maturity for ABB as at the dates indicated:

As at 31 March

2003(1)

2004 2005

(RM million) (%) (RM million) (%) (RM million) (%)

Due within six months . . . . 4,452.2 81.6 4,586.8 85.8 4,546.1 84.7Six months to one year . . . . 773.5 14.2 652.4 12.2 650.7 12.1One year to three years . . . . 184.5 3.4 63.7 1.2 80.1 1.5Over three years . . . . . . . . 46.9 0.8 40.0 0.8 88.7 1.7

Total . . . . . . . . . . . . . . . 5,457.1 100.0 5,342.9 100.0 5,365.6 100.0

Note:

(1) As appear in the audited financial statements for the year ended 31 March 2004. Restated to reflect MASB 25

relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards Board —

MASB 25, Income Taxes’’.

Profile of customer deposits by type of depositor

The following table sets out the type of depositor for the Bank as at the dates indicated:

As at 31 March 2005 As at 30 September 2005

(restated) (unaudited)

(RM million) (%) (RM million) (%)

Business enterprises . . . . . . . . . . . . . . . 7,773.6 26.7 8,476.6 26.8Individuals . . . . . . . . . . . . . . . . . . . . . 18,236.4 62.5 19,042.3 60.2Others(1) . . . . . . . . . . . . . . . . . . . . . . 3,151.8 10.8 4,128.0 13.0

Total . . . . . . . . . . . . . . . . . . . . . . . . 29,161.8 100.0 31,646.9 100.0

Note:

(1) ‘‘Others’’ primarily comprises government agencies, co-operatives, societies, associations and educational

institutions.

The following table sets out the profile of customer deposits by type of depositor for

AmFinance as at the dates indicated:

As at 31 March

2003(1)

2004 2005

(RM million) (%) (RM million) (%) (RM million) (%)

Business enterprises . . . . . . 3,375.6 17.2 3,160.1 15.5 3,876.1 17.4Individuals . . . . . . . . . . . . 14,014.1 71.5 14,911.7 73.0 16,395.8 73.6Others(2) . . . . . . . . . . . . . 2,219.5 11.3 2,340.0 11.5 1,999.9 9.0

Total . . . . . . . . . . . . . . . 19,609.2 100.0 20,411.8 100.0 22,271.8 100.0

Note:

(1) As appear in the audited consolidated financial statements for the year ended 31 March 2004. Restated to reflectMASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting StandardsBoard — MASB 25, Income Taxes’’.

(2) ‘‘Others’’ primarily comprises government agencies, co-operatives, societies, associations and educationalinstitutions.

71

The following table sets out the profile of customer deposits by type of depositor for ABB as at

the dates indicated:

As at 31 March

2003(1)

2004 2005

(RM million) (%) (RM million) (%) (RM million) (%)

Business enterprises . . . . . . 4,046.1 62.3 3,677.0 55.0 3,897.5 56.6

Individuals . . . . . . . . . . . . 1,492.9 23.0 1,624.0 24.3 1,840.6 26.7

Others(2) . . . . . . . . . . . . . 956.4 14.7 1,379.3 20.7 1,151.9 16.7

Total . . . . . . . . . . . . . . . 6,495.4 100.0 6,680.3 100.0 6,890.0 100.0

Notes:

(1) As appear in the audited financial statements for the year ended 31 March 2004. Restated to reflect MASB 25

relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards Board —

MASB 25, Income Taxes’’.

(2) ‘‘Others’’ primarily comprises government agencies, co-operatives, societies, associations and educational

institutions.

The funding cost of the Bank for customer deposits is not significantly different from its

competitors or the industry average in view of the low interest rate environment arising from excess

liquidity in the banking system. The interest rates paid by banks for customers’ fixed deposits not

exceeding RM1 million are guided by the floor set by BNM, with one-month tenure at 3.00% per

annum and 12-month tenure at 3.70% per annum. Interest rates to be paid by banks for fixed

deposits exceeding RM1 million can be freely negotiated between the parties.

Deposits and Placements of Banks and Other Financial Institutions

The following table sets out the deposits and placements of banks and other financial

institutions held by the Bank as at the dates indicated:

As at 31 March 2005 As at 30 September 2005

(restated) (unaudited)

(RM million) (%) (RM million) (%)

Licensed banks(1) . . . . . . . . . . . . . . . . . 2,963.0 31.1 4,386.8 39.7

Licensed finance companies . . . . . . . . . . 309.7 3.2 — —

Non-banking institutions . . . . . . . . . . . . 5,445.7 57.2 5,853.5 53.0

Bank Negara Malaysia. . . . . . . . . . . . . . 808.0 8.5 808.0 7.3

Total . . . . . . . . . . . . . . . . . . . . . . . . 9,526.4 100.0 11,048.3 100.0

Note:

(1) Includes merchant banks.

72

The following table sets out the deposits and placements of banks and other financial

institutions held by AmFinance as at the dates indicated:

As at 31 March

2003(1)

2004 2005

(RM million) (%) (RM million) (%) (RM million) (%)

Licensed banks(2) . . . . . . . . 918.8 18.0 1,060.8 20.9 1,597.2 27.2

Licensed finance companies . 10.0 0.2 — — 19.9 0.3

Non-banking institutions . . . 3,372.3 66.0 3,194.6 63.1 3,452.4 58.8

Bank Negara Malaysia. . . . . 808.0 15.8 808.0 16.0 808.0 13.7

Total . . . . . . . . . . . . . . . 5,109.1 100.0 5,063.4 100.0 5,877.5 100.0

Notes:

(1) As appear in the audited consolidated financial statements for the year ended 31 March 2004. Restated to reflect

MASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards

Board — MASB 25, Income Taxes’’.

(2) Includes merchant banks.

The following table sets out the deposits and placements of banks and other financial

institutions held by ABB as at the dates indicated:

As at 31 March

2003(1)

2004 2005

(RM million) (%) (RM million) (%) (RM million) (%)

Licensed banks(2) . . . . . . . . 1,095.8 43.4 1,132.7 45.2 1,365.8 37.4

Licensed finance companies . 301.7 11.9 116.9 4.6 289.8 8.0

Other financial institutions . . 1,130.8 44.7 1,259.1 50.2 1,993.3 54.6

Total . . . . . . . . . . . . . . . 2,528.3 100.0 2,508.7 100.0 3,648.9 100.0

Notes:

(1) As appear in the audited financial statements for the year ended 31 March 2004. Restated to reflect MASB 25

relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards Board —

MASB 25, Income Taxes’’.

(2) Includes merchant banks.

The Bank is able to obtain funds from other financial institutions in the interbank market.

Interbank borrowings are normally used to fund short term mismatches in the Bank’s maturity

profiles. The Bank’s interbank borrowings as at 30 September 2005 were at 2.3% of its total sources

of funds. The Bank seeks to maintain borrowings from the interbank market within manageable

levels so as to avoid dependence on the interbank market for borrowings.

The Bank also issues negotiable certificates of deposits and sells securities under repurchase

agreements to raise short term funds of generally up to three months tenure.

73

Other Funding Sources

Sale of credit facilities to Cagamas Berhad

The Bank is able to secure longer-term sources of funds of three to seven years tenure by

selling consumer loans to Cagamas Berhad (the Malaysian national mortgage corporation) with

recourse to the Bank. The Bank continues to service such loans, retaining the fixed or floating

interest collected on the loans, and pays a fixed or floating rate of interest to Cagamas Berhad as

selected by the Bank at the time of the sale.

Asset securitisation

The Bank obtains alternative funding by undertaking asset securitisation whereby it sells credit

facilities or a portfolio of loans to a special purpose vehicle (‘‘SPV’’), which, in turn, issues

securities to fund the acquisition from the Bank. By doing so, the Bank is able to realise the value

of the assets sold to the SPV as well as diversify external sources of asset funding and to transfer

specific risk exposures. The Bank has completed one such exercise with CEPAT Assets Berhad in

the year ended 31 March 2005.

New BNM guidelines issued on 28 December 2005 allow for the sale of NPLs to an SPV. The

Bank is currently reviewing the possibility of an asset securitisation in accordance with the new

BNM guidelines.

Issue of negotiable certificates of deposit

The Bank issues negotiable certificates of deposit in order to obtain longer-term funding. The

Bank prefers to issue, and is currently focusing on, negotiable certificates of deposit as a funding

option compared to funding from fixed deposits as negotiable certificates of deposit are more

marketable and easily resaleable. More importantly, negotiable certificates of deposit represent

longer-term funding compared to deposits which do not have a fixed maturity date or which can be

withdrawn at any time before maturity.

Liquidity Management

Liquidity management is a significant element of the Bank’s operations. The Bank has put in

place various measures to monitor its liquidity status, including:

. establishing a threshold limit for the loan-deposit ratio which is regularly reviewed to

ensure that the Bank’s liquidity position is not compromised;

. imposing an internal limit on interbank borrowings of 20.0% of the total funding of the

Bank or 100.0% of total shareholders’ funds, whichever is lower;

. imposing a threshold limit on the total funding obtained from depositors within a single

business group at 10.0% and the total collective funding from the top 20 depositors at

25.0% of the total funding of the Bank;

. imposing a threshold limit on the amount of net offshore borrowing at 10.0% of total

domestic deposits;

. a preference to issue negotiable certificates of deposit to obtain longer-term funding;

. reviewing strategies relating to funding dependence, for example, an internal single

customer deposit limit is set at 10.0% of total deposits of the Bank. The Bank is actively

focusing on more stable and reliable funding sources, especially from non-bank

customers’ deposits. From time to time, AmBank Group utilises its available credit

lines from other financial institutions in the interbank market in order to ensure that such

credit lines are always available;

74

. maintaining sufficient liquidity surpluses to sustain sudden withdrawal shocks for up to

one month by maintaining a higher buffer than what has been prescribed under the BNM

liquidity framework; and

. liquidity policies and limits taking into consideration BNM’s liquidity framework whereby

assets and liabilities are slotted into six maturity bands based on behavioural maturity

profiles. The Bank employs an in-house method approved by BNM for revolving credit

and loans, fixed deposit, savings deposit and current deposit accounts and undrawn

facilities. Other factors that influence the Bank’s liquidity management include internal

cash flow limits, periodic analysis of the top 20 depositors and the need to diversify

funding sources.

Capital Adequacy

The Bank employs a capital management strategy that balances risk tolerance with earnings

capability. The Bank continues to rely on retained earnings to enlarge its capital resources to drive

its business and the Bank’s policy is to maintain a strong capital base to support the development of

its business and to ensure that shareholders’ returns are optimised. It also seeks to maintain a

prudent balance between the different components of its capital between Tier 1 and Tier 2 Capital.

The Bank seeks to limit dividend payout to not more than 25% of total profit distributable to

shareholders in order to ensure stable internal capital generation. Since 1 April 2002, the Bank has

not paid any dividends.

The capital adequacy ratios of the Bank as at 30 September 2005 have incorporated a market

risk element pursuant to the BNM’s Market Risk Capital Adequacy Framework which became

effective on 1 April 2005. As at 30 September 2005, the Bank’s consolidated core capital ratio

(being the ratio of Tier 1 Capital to risk-weighted assets) was 6.02% and its risk-weighted capital

ratio (the ratio of capital base to risk-weighted assets) was 10.46%, which are higher than the BNM

minimum requirement of an 8.0% risk-weighted capital ratio. Assuming the issuance of the

Preference Shares, the Bank would have had a core capital ratio of 7.08% and a risk-weighted

capital ratio of 12.05% as at 30 September 2005.

75

The following table provides details of the Bank’s consolidated Tier 1 Capital and consolidated

Tier 2 Capital and shows the consolidated capital adequacy ratios of the Bank as at the dates

indicated:

As at

31 March

2005(1)

As at

30 September

2005

Adjusted as at

30 September

2005(2)

(RM million)

Tier 1 Capital:

Paid-up share capital. . . . . . . . . . . . . . . 528.4 610.4 610.4

Share premium . . . . . . . . . . . . . . . . . . 380.0 380.0 380.0

Other reserves . . . . . . . . . . . . . . . . . . . 528.4 1,681.3 1,681.3

Unappropriated profit . . . . . . . . . . . . . . 1,174.4 636.4 636.4

Minority interest . . . . . . . . . . . . . . . . . — — —

Preference Shares(3) . . . . . . . . . . . . . . . — — 433.4

Less: Deferred tax asset . . . . . . . . . . . . (600.2) (852.2) (852.2)

Total Tier 1 Capital . . . . . . . . . . . . . . 2,011.0 2,455.9 2,889.3

Tier 2 Capital:

Preference Shares(3) . . . . . . . . . . . . . . . . . — — 320.3

General allowance for bad and doubtful debts

and financing . . . . . . . . . . . . . . . . . . 425.9 612.1 612.1

Subordinated term loans. . . . . . . . . . . . . 680.0 1,140.0 1,140.0

Subordinated bonds. . . . . . . . . . . . . . . . 200.0 200.0 200.0

1,305.9 1,952.1 2,272.4

Maximum allowable Tier 2 Capital(4) . . . . . 1,305.9 1,840.0 2,056.7

Total capital fund . . . . . . . . . . . . . . . . 3,316.9 4,295.8 4,946.0

Less: Investment in subsidiary companies . . (29.8) (29.8) (29.8)

Capital base . . . . . . . . . . . . . . . . . . . 3,287.1 4,266.1 4,916.2

Capital ratios:

Core capital ratio (Tier 1) . . . . . . . . . . . 7.04% 6.02% 7.08%

Risk-weighted capital ratio . . . . . . . . . . . 11.51% 10.46% 12.05%

Notes:

(1) The comparative ratios are not adjusted for the prior year adjustments.

(2) The adjusted figures as of 30 September 2005 are arrived at after taking into account the issuance of the

Preference Shares.

(3) The maximum amount allowable for innovative Tier 1 Capital is limited to 15.0% of the total Tier 1 Capital. The

balance will be included in Tier 2 Capital.

(4) The maximum amount of Tier 2 Capital eligible for inclusion as capital funds is limited to the amount of Tier 1

Capital.

76

The following table provides details of AmFinance’s consolidated Tier 1 Capital and

consolidated Tier 2 Capital and shows the consolidated capital adequacy ratios of AmFinance as

at the dates indicated:

As at 31 March(1)

2003 2004 2005

(RM million)

Tier 1 Capital:

Paid-up share capital. . . . . . . . . . . . . . . 528.4 528.4 528.4

Share premium . . . . . . . . . . . . . . . . . . 380.0 380.0 380.0

Statutory reserves. . . . . . . . . . . . . . . . . 214.4 483.1 528.4

Deferred tax asset in respect of unabsorbed

losses . . . . . . . . . . . . . . . . . . . . . . . 112.8 — —

Unappropriated profit at end of year . . . . . 193.3 410.4 585.5

Minority interests . . . . . . . . . . . . . . . . . 0.1 0.1 —

Total Tier 1 Capital . . . . . . . . . . . . . . 1,429.0 1,802.0 2,022.3

Tier 2 Capital:

General allowance for bad and doubtful debts

and financing . . . . . . . . . . . . . . . . . . 385.1 402.4 425.9

Subordinated term loans. . . . . . . . . . . . . 680.0 581.7 680.0

Subordinated loan notes . . . . . . . . . . . . . 250.0 — —

Subordinated bonds. . . . . . . . . . . . . . . . — 200.0 200.0

Total Tier 2 Capital . . . . . . . . . . . . . . 1,315.1 1,184.1 1,305.9

Capital base . . . . . . . . . . . . . . . . . . . 2,744.1 2,986.1 3,328.2

Capital ratios:

Core capital ratio . . . . . . . . . . . . . . . . . 5.66% 6.86% 7.08%

Risk-weighted capital ratio . . . . . . . . . . . 10.87% 11.37% 11.65%

Note:

(1) The comparative ratios are not adjusted for the prior year adjustments.

77

The following table provides details of ABB’s Tier 1 Capital and Tier 2 Capital and shows the

capital adequacy ratios of ABB as at the dates indicated:

As at 31 March(1)

2003 2004 2005

(RM million)

Tier 1 Capital:

Paid-up share capital. . . . . . . . . . . . . . . 505.4 708.6 761.7Share premium . . . . . . . . . . . . . . . . . . 223.3 345.2 377.0Statutory reserves. . . . . . . . . . . . . . . . . 95.6 95.6 95.6Capital revenue . . . . . . . . . . . . . . . . . . 0.5 0.5 0.5Accumulated losses at end of year . . . . . . (391.4) (782.4) (969.5)

Total Tier 1 Capital . . . . . . . . . . . . . . 433.4 367.5 265.3

Tier 2 Capital:

General allowance for bad and doubtful debtsand financing . . . . . . . . . . . . . . . . . . 110.9 110.9 127.3

Exchangeable subordinated capital loan . . . 460.0 — —Subordinated term loan . . . . . . . . . . . . . 30.0 460.0 460.0

Total Tier 2 Capital . . . . . . . . . . . . . . 600.9 570.9 587.3

Capital base . . . . . . . . . . . . . . . . . . . 1,034.3 938.4 852.6

Capital ratios:

Core capital ratio . . . . . . . . . . . . . . . . . 5.41% 4.64% 2.94%Risk-weighted capital ratio . . . . . . . . . . . 12.91% 11.86% 9.46%

Note:

(1) The comparative ratios are not adjusted for the prior year adjustments.

The following table shows a breakdown of notional risk-weighted assets of the Bank in the

various categories of risk-weighting as at the dates indicated:

As at

31 March

2005

As at

30 September

2005

Adjusted(1)

as at

30 September

2005

(RM million)

Notional risk-weighted assets

Categories0%. . . . . . . . . . . . . . . . . . . . . . . . . . 4,022.1 6,876.7 7,630.510% . . . . . . . . . . . . . . . . . . . . . . . . . 294.8 258.5 258.520% . . . . . . . . . . . . . . . . . . . . . . . . . 1,516.9 2,324.8 2,324.850% . . . . . . . . . . . . . . . . . . . . . . . . . 3,889.3 7,332.4 7,332.4100% . . . . . . . . . . . . . . . . . . . . . . . . 26,295.0 36,501.7 36,501.7

Total . . . . . . . . . . . . . . . . . . . . . . . . 36,018.1 53,294.1 54,047.9

Note:

(1) The adjusted figures as at 30 September 2005 are arrived at after taking into account the issuance of the

Preference Shares. Calculated based on the assumption that the proceeds from the Preference Shares are invested

in 0% risk weighted assets pending its utilisation.

78

The following table shows a breakdown of notional risk-weighted assets of AmFinance in the

various categories of risk-weights as at the dates indicated:

As at 31 March

2003 2004 2005

(RM million)

Notional risk-weighted assets

Categories

0%. . . . . . . . . . . . . . . . . . . . . . . . . . 3,193.6 3,635.9 4,022.1

10% . . . . . . . . . . . . . . . . . . . . . . . . . 57.4 — 294.8

20% . . . . . . . . . . . . . . . . . . . . . . . . . 2,497.7 1,665.1 1,516.9

50% . . . . . . . . . . . . . . . . . . . . . . . . . 4,006.8 4,357.0 3,889.3

100% . . . . . . . . . . . . . . . . . . . . . . . . 22,722.9 23,760.1 26,295.0

Total . . . . . . . . . . . . . . . . . . . . . . . . 32,478.4 33,418.1 36,018.1

The following table shows a breakdown of notional risk-weighted assets of ABB in the various

categories of risk-weights as at the dates indicated:

As at 31 March

2003 2004 2005

Notional risk-weighted assets

Categories

0%. . . . . . . . . . . . . . . . . . . . . . . . . . 1,880.2 2,342.4 2,836.4

10% . . . . . . . . . . . . . . . . . . . . . . . . . — — 56.0

20% . . . . . . . . . . . . . . . . . . . . . . . . . 939.4 548.6 448.1

50% . . . . . . . . . . . . . . . . . . . . . . . . . 1,573.6 2,139.6 2,658.8

100% . . . . . . . . . . . . . . . . . . . . . . . . 7,036.2 6,736.1 7,585.7

Total . . . . . . . . . . . . . . . . . . . . . . . . 11,429.4 11,766.7 13,585.0

79

ASSET QUALITY

Loan Portfolio

The Bank has a diversified loan portfolio with approximately 82% of its loans in the consumer

banking sector as at 30 September 2005. Currently, the Bank’s largest loan exposures by sector are

for the purchase of transport vehicles and the purchase of landed property (including residential and

non-residential property). As at 30 September 2005, the Bank’s total outstanding gross loans

amounted to RM41.7 billion (after deduction of interest-in-suspense and Islamic financing sold to

Cagamas Berhad).

Loans and advances by type

The following table shows a breakdown of loans and advances by type of the Bank as at the

dates indicated:

As at 31 March As at 30 September

2005 2005

(restated) (unaudited)

(RM million) (%) (RM million) (%)

Overdrafts . . . . . . . . . . . . . . . . . . . . . 833.1 1.9 813.0 1.7

Term loan facility:

— Housing loans/financing . . . . . . . . . . 8,174.4 19.0 8,990.0 18.8

— Hire purchase receivables . . . . . . . . . 21,674.6 50.5 25,233.3 52.8

— Other loans/financing . . . . . . . . . . . . 7,564.0 17.6 7,986.6 16.7

Credit card receivables . . . . . . . . . . . . . 1,933.6 4.5 2,073.6 4.3

Bills receivables . . . . . . . . . . . . . . . . . 10.6 0.1 10.1 0.1

Trust receipts . . . . . . . . . . . . . . . . . . . 211.6 0.5 187.2 0.4

Claims on customers under acceptance

credits . . . . . . . . . . . . . . . . . . . . . . 809.5 1.9 820.3 1.7

Revolving credits . . . . . . . . . . . . . . . . . 1,577.1 3.7 1,506.3 3.2

Staff loans . . . . . . . . . . . . . . . . . . . . . 139.5 0.3 147.9 0.3

42,928.0 100.0 47,768.3 100.0

Unearned interest and income . . . . . . . . . (4,440.9) (5,174.6)

Total . . . . . . . . . . . . . . . . . . . . . . . . 38,487.1 42,593.7

Islamic financing sold to Cagamas Berhad . (928.7) (850.6)

Gross loans, advances and financing . . . . 37,558.4 41,743.1

Allowance for bad and doubtful debts and

financing:

— Specific . . . . . . . . . . . . . . . . . . (556.7) (614.2)

— General . . . . . . . . . . . . . . . . . . (1,365.5) (1,690.3)

Net loans, advances and financing . . . . . 35,636.2 39,438.6

80

The following table shows a breakdown of loans, advances and financing by type of

AmFinance as at the dates indicated:

As at 31 March(1)

2003(2)

2004 2005

(RM million) (%) (RM million) (%) (RM million) (%)

Term loans and revolving

credit facilities . . . . . . . 5,710.9 18.3 4,505.0 14.2 3,958.9 11.4

Housing loans . . . . . . . . . 4,357.6 14.0 4,839.2 15.2 5,252.2 15.1

Hire-purchase . . . . . . . . . 16,681.4 53.6 18,105.3 57.0 21,746.7 62.6

Lease receivables/industrial

hire purchase . . . . . . . . 1,681.6 5.4 1,322.7 4.2 — —

Block discounting . . . . . . 64.6 0.2 51.0 0.2 59.4 0.2

Staff loans . . . . . . . . . . . 119.2 0.4 104.2 0.3 106.5 0.3

Line of credit . . . . . . . . . 1,222.9 3.9 1,181.1 3.7 1,389.9 4.0

Other loans . . . . . . . . . . 1,311.4 4.2 1,645.2 5.2 2,211.4 6.4

31,149.6 100.0 31,753.7 100.0 34,725.0 100.0

Unearned interest and

unearned income . . . . . . (3,420.7) (3,674.2) (4,230.1)

Total . . . . . . . . . . . . . . 27,728.9 28,079.5 30,494.9

Islamic financing sold to

Cagamas Berhad . . . . . . — — (925.4)

Gross loans, advances and

financing . . . . . . . . . . 27,728.9 28,079.5 29,569.5

Allowance for bad and

doubtful debts and

financing

— Specific . . . . . . . . . (989.3) (677.5) (890.2)

— General . . . . . . . . . (388.7) (405.2) (429.4)

Interest/income-in-

suspense(3) . . . . . . . . . . (1,190.5) (947.9) (971.4)

Net loans, advances and

financing . . . . . . . . . . 25,160.4 26,048.9 27,278.5

Notes:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8

and the Relevant IFRS’’.

(2) As appear in the audited consolidated financial statements for the year ended 31 March 2004. Restated to reflect

MASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards

Board — MASB 25, Income Taxes’’.

(3) Not restated for years 2003 and 2004 to reflect the adoption of three-month NPL classification in 2005. See

‘‘Changes in Accounting Policies — Adoption of Three-Month NPL classification’’.

81

The following table shows a breakdown of loans, advances and financing by type of ABB as at

the dates indicated:

As at 31 March(1)

2003(2)

2004 2005

(RM million) (%) (RM million) (%) (RM million) (%)

Term loans . . . . . . . . . . . 6,104.0 78.4 6,311.8 78.7 6,676.2 72.0

Overdrafts . . . . . . . . . . . 730.8 9.4 771.6 9.6 865.7 9.3

Claims on customers under

acceptance credits . . . . . 251.2 3.2 375.7 4.7 810.7 8.8

Credit cards receivables . . . 218.3 2.8 362.0 4.5 555.2 6.0

Trust receipts . . . . . . . . . 205.5 2.6 84.2 1.0 212.9 2.3

Bills receivables . . . . . . . 193.8 2.5 56.4 0.7 70.0 0.8

Factoring receivables . . . . 50.9 0.7 30.9 0.4 38.4 0.4

Staff loans . . . . . . . . . . . 28.2 0.4 32.8 0.4 33.0 0.4

Total . . . . . . . . . . . . . . 7,782.7 100.0 8,025.4 100.0 9,262.1 100.0

Islamic financing sold to

Cagamas Berhad . . . . . . (3.7) (3.5) (3.3)

Gross loans, advances and

financing . . . . . . . . . . 7,779.0 8,021.9 9,258.8

Allowances for bad and

doubtful debts and

financing

— Specific . . . . . . . . . (194.3) (466.9) (475.3)

— General . . . . . . . . . (110.9) (110.9) (127.3)

Interest/income-in-

suspense(3) . . . . . . . . . . . (246.4) (222.8) (298.5)

Net loans, advances and

financing . . . . . . . . . . 7,227.4 7,221.3 8,357.7

Notes:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8

and the Relevant IFRS’’.

(2) As appear in the audited financial statements for the year ended 31 March 2004. Restated to reflect MASB 25

relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards Board —

MASB 25, Income Taxes’’.

(3) Not restated for years 2003 and 2004 to reflect the adoption of three-month NPL classification in 2005. See

‘‘Changes in Accounting Policies — Adoption of Three-Month NPL classification’’.

82

Loans by industry sector

The following table shows a breakdown of loans, advances and financing by industry sector of

the Bank as at the dates indicated:

As at

31 March

2005

As at

30 September

2005

(restated) (unaudited)

(RM million)

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 456.7 425.5Mining and quarrying . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.3 35.8Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,678.2 1,696.2Electricity, gas and water . . . . . . . . . . . . . . . . . . . . . . . . . 265.4 200.6Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,336.7 2,321.6Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786.0 711.8Purchase of landed property:Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,113.7 8,869.0Non-residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,574.5 1,622.2

General commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,435.2 1,708.5Transport, storage and communication . . . . . . . . . . . . . . . . . 458.3 429.6Finance, insurance and business services . . . . . . . . . . . . . . . 935.5 999.1Purchase of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 875.3 804.0Purchase of transport vehicles . . . . . . . . . . . . . . . . . . . . . . 16,165.2 19,011.4Consumption credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,928.1 3,272.9Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443.0 485.5

Gross loans, advances and financing . . . . . . . . . . . . . . . . . . 38,487.1 42,593.7Less: Islamic financing sold to Cagamas Berhad . . . . . . . . . . (928.7) (850.6)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,558.4 41,743.1

83

The following table shows a breakdown of loans, advances and financing by industry sector ofAmFinance as at the dates indicated:

As at 31 March(1)

2003(2)

2004 2005

(RM million)

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . 262.0 273.4 338.6Mining and quarrying . . . . . . . . . . . . . . . . . . . . 37.4 33.5 23.7Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . 830.1 742.2 807.1Electricity, gas and water . . . . . . . . . . . . . . . . . . 11.7 11.5 14.0Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 2,446.9 1,776.4 1,671.7Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . 412.2 319.4 272.0Purchase of landed property:Residential . . . . . . . . . . . . . . . . . . . . . . . . . . 4,639.2 5,073.3 5,528.0Non-residential . . . . . . . . . . . . . . . . . . . . . . . 1,662.7 1,450.3 1,195.5

General commerce . . . . . . . . . . . . . . . . . . . . . . 623.6 681.3 755.3Transport, storage and communication . . . . . . . . . . 651.7 373.6 385.7Finance, insurance and business services . . . . . . . . 357.7 312.9 256.4Purchase of securities . . . . . . . . . . . . . . . . . . . . 771.3 652.8 530.2Purchase of transport vehicles . . . . . . . . . . . . . . . 13,214.7 14,391.2 16,220.8Consumption credit . . . . . . . . . . . . . . . . . . . . . . 1,425.3 1,674.2 2,197.6Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382.4 313.5 298.3

Gross loans, advances and financing . . . . . . . . . . . 27,728.9 28,079.5 30,494.9Less: Islamic financing sold to Cagamas Berhad . . . — — (925.4)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,728.9 28,079.5 29,569.5

Notes:

(1) Not restated in accordance with the Revised GP8. See ‘‘Summary of Significant Differences Between RevisedGP8 and the Relevant IFRS’’.

(2) As appear in the audited consolidated financial statements for the year ended 31 March 2004. Restated to reflect

MASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting StandardsBoard — MASB 25, Income Taxes’’.

84

The following table shows a breakdown of loans, advances and financing by industry sector of

ABB as at the dates indicated:

As at 31 March(1)

2003(2)

2004 2005

(RM million)

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . 143.6 144.1 158.4

Mining and quarrying . . . . . . . . . . . . . . . . . . . . 12.9 12.4 13.0

Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . 799.4 794.6 916.8

Electricity, gas and water . . . . . . . . . . . . . . . . . . 198.1 213.5 251.7

Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 847.6 845.1 794.0

Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . 523.1 549.8 536.4

Purchase of landed property:

Residential . . . . . . . . . . . . . . . . . . . . . . . . . . 1,473.0 2,043.1 2,959.7

Non-residential . . . . . . . . . . . . . . . . . . . . . . . 848.3 741.6 681.0

General commerce . . . . . . . . . . . . . . . . . . . . . . 423.7 411.5 721.1

Transport, storage and communication . . . . . . . . . . 171.9 292.2 100.4

Finance, insurance and business services . . . . . . . . 1,131.7 818.7 802.8

Purchase of securities . . . . . . . . . . . . . . . . . . . . 530.8 438.9 395.5

Consumption credit . . . . . . . . . . . . . . . . . . . . . . 218.3 362.0 555.2

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460.3 357.9 376.1

Gross loans, advances and financing . . . . . . . . . . . 7,782.7 8,025.4 9,262.1

Less: Islamic financing sold to Cagamas Berhad

with recourse . . . . . . . . . . . . . . . . . . . . . (3.7) (3.5) (3.3)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,779.0 8,021.9 9,258.8

Notes:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8

and the Relevant IFRS’’.

(2) As appear in the audited financial statements for the year ended 31 March 2004. Restated to reflect MASB 25

relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards Board —MASB 25, Income Taxes’’.

85

Loans by customer type

The following table shows a breakdown of loans by customer type of the Bank as at the dates

indicated:

As at

31 March

2005

As at

30 September

2005

(restated) (unaudited)

(RM million)

Domestic non-bank financial institutions. . . . . . . . . . . . . . . . 438.5 404.8

Domestic business enterprises:

Small medium enterprises . . . . . . . . . . . . . . . . . . . . . . . 2,794.2 2,980.8

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,202.9 7,132.9

Government and statutory bodies . . . . . . . . . . . . . . . . . . . . 21.2 20.7

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,036.8 31,137.7

Other domestic entities . . . . . . . . . . . . . . . . . . . . . . . . . . 23.6 29.6

Foreign entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.2 36.6

Gross loans, advances and financing (net of Islamic financing sold

to Cagamas Berhad) . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,558.4 41,743.1

The following table shows a breakdown of loans by customer type of AmFinance as at the

dates indicated:

As at 31 March(1)

2003 2004 2005

(RM million)

Domestic non-bank financial institutions. . . . . . . . . 207.0 176.1 125.0

Domestic business enterprises:

Small medium enterprises . . . . . . . . . . . . . . . . . 1,767.9 1,723.5 1,806.9

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,705.7 4,400.9 4,121.1

Government and statutory bodies . . . . . . . . . . . . . — 0.1 0.1

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,007.3 21,731.0 23,462.6

Other domestic entities . . . . . . . . . . . . . . . . . . . 15.5 19.4 23.9

Foreign entities . . . . . . . . . . . . . . . . . . . . . . . . 25.5 28.5 29.9

Gross loans, advances and financing (net of Islamic

financing sold to Cagamas Berhad) . . . . . . . . . . 27,728.9 28,079.5 29,569.5

Notes:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8

and the Relevant IFRS’’.

86

The following table shows a breakdown of loans by customer type of ABB as at the dates

indicated:

As at 31 March(1)

2003 2004 2005

(RM million)

Domestic non-bank financial institutions. . . . . . . . . 556.1 344.9 313.9

Domestic business enterprises:

Small medium enterprises . . . . . . . . . . . . . . . . . 1,013.5 898.7 1,056.7

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,791.0 3,677.7 3,678.1

Government and statutory bodies . . . . . . . . . . . . . 7.7 21.2 21.2

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,380.9 3,062.8 4,175.9

Other domestic entities . . . . . . . . . . . . . . . . . . . 13.6 1.4 1.2

Foreign entities . . . . . . . . . . . . . . . . . . . . . . . . 16.2 15.2 11.8

Gross loans, advances and financing (net of Islamic

financing sold to Cagamas Berhad) . . . . . . . . . . 7,779.0 8,021.9 9,258.8

Notes:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8and the Relevant IFRS’’.

Loans by interest rate sensitivity

The following table shows a breakdown of loans by interest rate sensitivity of the Bank as at

the dates indicated:

As at

31 March

2005

As at

30 September

2005

(restated) (unaudited)

(RM million)

Fixed rate:

Housing loans/financing . . . . . . . . . . . . . . . . . . . . . . . . 1,483.4 2,724.5

Hire purchase receivables . . . . . . . . . . . . . . . . . . . . . . . 17,161.1 20,154.0

Other fixed rate loan/financing . . . . . . . . . . . . . . . . . . . 4,200.5 4,930.1

Variable rate:

Base lending rate plus . . . . . . . . . . . . . . . . . . . . . . . . . 12,082.1 12,854.2

Cost plus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,293.0 658.8

Other variable rates . . . . . . . . . . . . . . . . . . . . . . . . . . 1,338.3 421.5

Gross loans, advances and financing (net of Islamic financing

sold to Cagamas Berhad) . . . . . . . . . . . . . . . . . . . . . . 37,558.4 41,743.1

87

Loans by currency

The following table shows a breakdown of loans by currency of the Bank as at the dates

indicated:

Currency

As at

31 March

2005

As at

30 September

2005

(restated) (unaudited)

FX loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.1 75.5

RM loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,466.3 41,667.6

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,558.4 41,743.1

The following table shows a breakdown of loans by currency of AmFinance as at the dates

indicated:

As at 31 March(1)

Currency 2003 2004 2005

(RM million)

FX Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —

RM Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,728.9 28,079.5 29,569.5

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,728.9 28,079.5 29,569.5

Note:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8

and the Relevant IFRS’’.

The following table shows a breakdown of loans by currency of ABB as at the dates indicated:

As at 31 March(1)

Currency 2003 2004 2005

(RM million)

FX loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1 8.8 92.1

RM loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,766.9 8,013.1 9,166.7

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,779.0 8,021.9 9,258.8

Note:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8

and the Relevant IFRS’’.

Loan maturity profile

As at 30 September 2005, the Bank had a loan maturity profile as follows: loans maturing

within one year constituted 29.8% of the Bank’s total gross loans; loans maturing between one to

three years constituted 25.3% of the total gross loans (net of Islamic financing sold to Cagamas

Berhad); loans maturing between three to five years constituted 17.0% of the total gross loans (net

of Islamic financing sold to Cagamas Berhad); and loans with maturity of more than five years

constituted 27.9% of the total gross loans (net of Islamic financing sold to Cagamas Berhad).

88

The following table shows a breakdown of the Bank’s gross loan portfolio (net of financing

sold to Cagamas Berhad) by loan maturity as at the dates indicated:

As at

31 March

2005(1)

As at

30 September

2005

(restated) (unaudited)

(RM million)

Within one year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,503.0 12,415.1

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . 8,741.0 10,565.2

Three years to five years . . . . . . . . . . . . . . . . . . . . . . . . . 5,804.8 7,102.4

Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,509.6 11,660.4

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,558.4 41,743.1

Note:

(1) The financials in the table above reflect Revised GP8. See ‘‘Summary of Significant Differences Between Revised

GP8 and the Relevant IFRS’’.

The following table shows a breakdown of AmFinance’s gross loan portfolio by loan maturity

as at the dates indicated:

As at 31 March(1)

2003(2)

2004 2005

(RM million)

Within one year. . . . . . . . . . . . . . . . . . . . . . . . 9,404.8 8,813.8 9,468.7

One year to three years . . . . . . . . . . . . . . . . . . . 8,061.5 8,446.0 8,244.2

Three years to five years . . . . . . . . . . . . . . . . . . 4,844.0 5,222.2 5,405.5

Over five years . . . . . . . . . . . . . . . . . . . . . . . . 5,418.6 5,597.5 6,451.1

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,728.9 28,079.5 29,569.5

Notes:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8

and the Relevant IFRS’’.

(2) As appear in the audited consolidated financial statements for the year ended 31 March 2004. Restated to reflect

MASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards

Board — MASB 25, Income Taxes’’.

89

The following table shows a breakdown of ABB’s gross loan portfolio by loan maturity as atthe dates indicated:

As at 31 March(1)

2003(2)

2004 2005

(RM million)

Within one year. . . . . . . . . . . . . . . . . . . . . . . . 3,208.8 3,520.0 4,304.2

One year to three years . . . . . . . . . . . . . . . . . . . 1,077.8 596.1 496.8

Three years to five years . . . . . . . . . . . . . . . . . . 684.6 612.1 399.3

Over five years . . . . . . . . . . . . . . . . . . . . . . . . 2,807.8 3,293.7 4,058.5

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,779.0 8,021.9 9,258.8

Notes:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8and the Relevant IFRS’’.

(2) As appear in the audited financial statements for the year ended 31 March 2004. Restated to reflect MASB 25

relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards Board —MASB 25, Income Taxes’’.

90

Twenty Largest Borrowers

As at 30 September 2005, the top 20 largest borrowers of the Bank accounted for

approximately 6.9% or RM2,870 million of the Bank’s gross loans (net of financing sold to

Cagamas Berhad). The following table sets out the 20 largest single borrower groups of the Bank

(net of IIS) as at 30 September 2005 :

As at 30 September 2005(1)

Industry sector(s)

Outstanding

amount

As a

percentage

of the

Bank’s total

gross loan

portfolio(2)

(RM million) (%)

BorrowerBorrower 1. . . . . . . Real Estate & Business Services 476.4 1.14Borrower 2. . . . . . . Construction 243.9 0.58Borrower 3. . . . . . . Real Estate & Business Services 231.6 0.55Borrower 4. . . . . . . Electricity, gas & water 176.0 0.42Borrower 5(3) . . . . . Financial Services 158.2 0.38Borrower 6. . . . . . . Construction 135.4 0.32Borrower 7. . . . . . . Manufacturing — Wood & Wood Products 145.2 0.35Borrower 8. . . . . . . Construction 123.8 0.30Borrower 9. . . . . . . Financial Services 120.0 0.29Borrower 10 . . . . . . Manufacturing — Textiles, Wearing

Apparel & Leather Goods102.5 0.25

Borrower 11 . . . . . . Real Estate & Business Services 109.6 0.26Borrower 12 . . . . . . Construction 119.9 0.29Borrower 13 . . . . . . Construction 119.4 0.28Borrower 14 . . . . . . Other Financial Institutions 99.5 0.24Borrower 15 . . . . . . Restaurant & Hotels 103.7 0.25Borrower 16 . . . . . . Manufacturing — Wood & Wood Products 92.7 0.22Borrower 17 . . . . . . Construction 82.3 0.20Borrower 18 . . . . . . Real Estate & Business Services 71.6 0.17Borrower 19 . . . . . . Construction 80.0 0.19Borrower 20 . . . . . . Real Estate & Business Services 78.3 0.19

Total . . . . . . . . . . 2,870.0 6.87

Notes:

(1) The financials in the table above reflect Revised GP8. See ‘‘Summary of Significant Differences Between Revised

GP8 and the Relevant IFRS’’.

(2) As at 30 September 2005, the total gross loan portfolio of the Bank less Islamic financing sold to Cagamas

Berhad was RM41,743.1 million (excluding IIS).

(3) Borrower 5 is a related person of the Bank as defined by Bursa Malaysia.

Credit Approval Process

Business and consumer credits

The Bank applies the same credit approval process in general irrespective of whether

responsibility for the account lies within the Retail Banking division or the Business Banking

division of the Bank. In approving a new business credit, the relevant relationship managers initiate

the customer identification process, establishing the customer’s background and financing needs and

procuring related information in order to analyse and structure a suitable credit package for the

customer. See ‘‘Risk Management — Credit Risk Management — Credit Risk Management Method’’.

91

The relevant relationship manager then prepares a credit report for submission for credit

approval, which will be independently reviewed by the Risk Management Department to ascertain

that credit risks are identified correctly and appropriately mitigated, prior to submission for credit

approval, either by the Individual Delegated Approving Authority or the Credit and Commitments

Committee (‘‘CACC’’). In the Retail Banking division, a customer’s credit application is first

processed by the Bank’s automated credit scoring system. If an application falls outside of the

parameters set by the automated credit scoring system, it may be presented to the Individual

Delegated Approving Authority for review on an exceptional basis. The Bank continues to monitor

the criteria and justifications for such exceptions.

The Individual Delegated Approving Authorities are individuals, usually from senior staff, with

the power to approve a credit report. The amount of credit each Individual Delegated Approving

Authority can approve varies according to the seniority and experience of the individual officer and

the nature and amount of the collateral.

The CACC is responsible for reviewing and approving credit requests that exceed the limits of

the Individual Delegated Approving Authorities.

The Executive Committee of the Bank has the power to endorse or reject credit requests

approved by the CACC that are inconsistent with the credit policies, internal lending limits or

portfolio management strategies of the Bank.

Where the application for loans are of RM30 million and above, a second independent credit

review is performed by the Credit Risk Management Unit at the AMMB Group level prior to

approval deliberation by the approving authority.

All approved loan applications are sent to the respective Relationship Management teams for

issuance of facility offers. The Credit Administration Department is responsible for transaction

management, for ensuring that all terms of the transaction are complied with and that external

lawyers have correctly reflected the agreed commercial terms in the relevant documents.

The Bank is in the process of replacing its existing corporate loans system. The Bank expects

the new system to enable the Bank to improve its customer service and roll-out of new product

offerings. The Bank believes that tracking staff performance will also be further enhanced to

improve customer service and staff productivity.

The Bank has a detailed set of guidelines specifying the various loan approval limits, which

depend on the product type, the availability and value of security and the level of seniority of the

relevant officer of the Bank.

92

Collateral

As at 30 September 2005, approximately 93.0% of all loans by book value granted by the Bank

were secured by collateral. Approximately 37.0% of the Bank’s collateralised loans were secured

with property and the remainder with motor vehicles, plant and machinery, shares, unit trusts and

other security. The value of the collateral depends on the type of collateral being pledged and is

determined, for example, by professional evaluations or market prices in accordance with the Bank’s

policy. The Bank reviews such policies periodically or when required. For example, properties

offered as collateral are valued by independent professional valuers. The collateral is revalued

periodically in connection with the review of the loan account. As at 30 September 2005, the value

of collateral held against the NPLs of the Bank was RM5.9 billion. The following table sets out the

type of collateral in relation to the Bank’s loans as at the dates indicated:

As at

31 March

2005

As at

30 September

2005

(restated) (unaudited)

(RM million)

Type

Loans secured by property . . . . . . . . . . . . . . . . . . . . . . . . 14,198.6 15,185.2

Loans secured entirely by other collateral . . . . . . . . . . . . . . . 20,583.2 24,396.2

Loans secured entirely by quoted shares . . . . . . . . . . . . . . . . 622.7 538.3

Loans secured entirely by unquoted shares . . . . . . . . . . . . . . 21.8 6.6

Loans secured entirely by UTF(1) Units . . . . . . . . . . . . . . . . 18.9 16.2

Loans secured partly by QS(2), UQS(3), UTF(1) . . . . . . . . . . . . 733.5 734.7

Unsecured loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,578.3 3,036.6

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,757.0 43,913.8

Less: Islamic financing sold to Cagamas Berhad . . . . . . . . . . (928.7) (850.6)

Less: Interest-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . (1,269.9) (1,320.1)

Gross loans, advances and financing (net of Islamic financing

sold to Cagamas Berhad) . . . . . . . . . . . . . . . . . . . . . . . 37,558.4 41,743.1

Notes:

(1) UTF means Unit Trust Funds.

(2) QS means Quoted Shares.

(3) UQS means Unquoted Shares.

93

The following table sets out the type of collateral in relation to AmFinance’s loans as at the

dates indicated:

As at 31 March(1)

2003 2004 2005

(RM million)

Type

Loans secured by property . . . . . . . . . . . . . . . . . 8,585.5 8,026.9 8,055.8

Loans secured entirely by other collateral . . . . . . . . 16,731.2 17,531.2 19,589.9

Loans secured entirely by quoted shares . . . . . . . . . 514.7 368.1 259.3

Loans secured entirely by unquoted shares . . . . . . . 48.7 23.6 21.8

Loans secured entirely by UTF(2) Units . . . . . . . . . 51.1 32.4 16.2

Loans secured partly by QS(3), UQS(4), UTF(2) . . . . . 433.5 479.2 397.0

Unsecured loans . . . . . . . . . . . . . . . . . . . . . . . 1,364.2 1,618.1 2,154.9

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,728.9 28,079.5 30,494.9

Less: Islamic Financing sold to Cagamas Berhad. . . — — (925.4)

Gross loans, advances and financing (net of Islamic

financing sold to Cagamas Berhad) . . . . . . . . . . 27,728.9 28,079.5 29,569.5

Notes:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8

and the Relevant IFRS’’.

(2) UTF means Unit Trust Funds.

(3) QS means Quoted Shares.

(4) UQS means Unquoted Shares.

94

The following table sets out the type of collateral in relation to ABB’s loans as at the dates

indicated:

As at 31 March(1)

2003 2004 2005

(RM million)

Type

Loans secured by property . . . . . . . . . . . . . . . . . 5,841.9 5,606.3 6,143.1

Loans secured entirely by other collateral . . . . . . . . 392.2 308.6 988.1

Loans secured entirely by quoted shares . . . . . . . . . 278.2 227.4 363.4

Loans secured entirely by unquoted shares . . . . . . . 1.9 1.2 —

Loans secured entirely by UTF(2) Units . . . . . . . . . 10.7 2.8 2.8

Loans secured partly by QS(3), UQS(4) UTF(2) . . . . . 427.7 255.1 336.5

Unsecured loans . . . . . . . . . . . . . . . . . . . . . . . 830.1 1,624.0 1,428.2

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7782.7 8,025.4 9,262.1

Less: Islamic financing sold to Cagamas Berhad . . . (3.7) (3.5) (3.3)

Gross loans, advances and financing (net of Islamic

financing sold to Cagamas Berhad) . . . . . . . . . . 7,779.0 8,021.9 9,258.8

Notes:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8

and the Relevant IFRS’’.

(2) UTF means Unit Trust Funds.

(3) QS means Quoted Shares.

(4) UQS means Unquoted Shares.

Single customer limit

BNM’s guidelines on single customer limits prohibit a bank from lending to any single

customer or related group of customers an amount in excess of 25% of a Bank’s capital funds (the

sum of Tier 1 Capital and Tier 2 Capital). As at 30 September 2005, the Bank’s largest exposure to

a single customer was RM476.7 million or 11% of the Bank’s capital base, which was RM4,266.1

million. Furthermore, the Bank seeks to limit its exposure to any one particular industry sector to

less than 15% of the overall loan portfolio, with the exception of loans for the purchase of

residential properties and motor vehicles.

Loan Collection and Recovery

Business Banking

Business loans are generally monitored through the loan officer assigned to the borrower. The

Bank seeks to maintain regular contact with the borrowers and site visits may be paid to these

borrowers as required. In addition, any arrears will be notified immediately to the relevant loan

officer. Periodic account reviews are made at least once a year and submitted to the Risk

Management Department and the relevant approving authorities for review and approval.

Regular portfolio monitoring is also conducted to assess trends in lending as well as risk

mitigation.

The responsibility of initial loan collection and recovery lies with the relevant loan account

manager and his immediate supervisor within the respective business unit of the Bank.

95

Where a loan account is in arrears, reminders will be sent to the defaulting borrower. The loan

account manager will be alerted with respect to the defaulting account to ensure that the account is

repaid as soon as possible. Where a loan account is in arrears for more than one month, it is the

Bank’s policy to include it in the Bank’s ‘‘watchlist’’ and there will be increased scrutiny in terms of

management involvement in monitoring the loan account and the actions undertaken to monitor and

recover the loan. Any non-performing loans which are in arrears for more than three months are

typically transferred to the Group Loan Rehabilitation Unit for recovery. Exceptions will be made in

limited circumstances with the approval of the Managing Director of the respective banking unit.

Retail Banking

Retail loans are monitored by the Retail Collection Centre when they fall into default.

Loan collection on defaulting accounts is handled by the Retail Collection Centre. The Retail

Collection Centre has several different units, including an early collections unit, a remedial

collections unit, a write-off collections unit, an asset management unit, a legal recovery unit, a

collection liaison office and a policy and portfolio unit. The Bank also has a dedicated team to

handle watchlist accounts. The Retail Collection Centre typically commences recovery action once

payment is overdue for more than five days and may initiate legal action to recover the loan when

necessary. Loan collection activities include the rehabilitation of non-performing loan accounts.

When payment in respect of a defaulting account is three months overdue, the Retail Collection

Centre will consider commencing legal action.

Non-Performing Loans

Classification of non-performing loans

BNM’s ‘‘GP3’’ guidelines classify NPLs into three categories according to periods of default:

sub-standard, doubtful and bad. Specific allowance is made against the uncollateralised portion of

the outstanding balance of the loan, that is, the outstanding balance of the loan net of interest-in-

suspense and the realisable security value of any collateral. According to the classification status of

each account, the provisioning level will be 20.0% (in the case of sub-standard accounts), 50.0% (in

the case of doubtful accounts) or 100.0% (in the case of bad accounts), as stipulated by BNM’s GP3

guidelines.

BNM requires Malaysian banks to keep a general allowance equal to at least 1.5% of gross

loans net of interest-in-suspense and specific provisions.

The Bank will consider a loan non-performing when it is three months in arrears. An NPL will

be classified as ‘‘sub-standard’’ if it is between three to nine months in arrears and is considered by

the Bank to represent a substantial and unreasonable degree of risk. An NPL will be classified as

‘‘doubtful’’ if it is more than nine months in arrears and collection thereof is considered by the Bank

to be highly improbable. An NPL that is more than 12 months in arrears and is considered by the

Bank to be impossible to collect or worthless will be classified as ‘‘bad’’. As at 30 September 2005,

the value of collateral held against the NPLs of the Bank was RM5.9 billion.

For the year ended 31 March 2005, the Bank internally adopted a practice of assigning zero

value for property collaterals for non-performing corporate loans that are over seven years in arrears.

The amount of loan loss provisioning the Bank will have to set aside will depend on the number of

NPLs exceeding seven years in arrears. However, any amount the Bank realises from such property

collateral thereafter will be written back to the Bank’s income statement at the relevant time.

96

The following table sets forth the classification of the Bank’s gross NPL portfolio based on the

three-month classification as at the dates indicated:

As at

31 March

2005

As at

30 September

2005

(restated) (unaudited)

(RM million)

Sub-standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,160.0 1,211.4Doubtful . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297.6 423.8Bad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,190.7 5,462.0Less: Interest/income-in-suspense . . . . . . . . . . . . . . . . . . . (1,269.9) (1,320.1)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,378.4 5,777.1

Note:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8

and the Relevant IFRS’’.

The following table sets forth the classification of AmFinance’s gross NPL portfolio based on

the policy adopted at the dates indicated:

As at 31 March(1)

2003(2)

2004(2)

2005

(RM million)

Sub-standard . . . . . . . . . . . . . . . . . . . . . . . . . . 186.5 130.4 1,486.8

Doubtful . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230.8 343.3 182.8

Bad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,932.2 3,578.2 3,612.5

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,349.5 4,051.9 5,282.1

Notes:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8

and the Relevant IFRS’’.

(2) Not restated for years 2003 and 2004 to reflect the adoption of three-month NPL classification in 2005. See

‘‘Changes in Accounting Policies — Adoption of Three-Month NPL classification’’.

97

The following table sets forth the classification of ABB’s gross NPL portfolio based on the

policy adopted at the dates indicated:

As at 31 March(1)

2003(2)

2004(2)

2005

(RM million)

Sub-standard . . . . . . . . . . . . . . . . . . . . . . . . . . 231.4 162.1 673.2

Doubtful . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148.8 62.3 114.8

Bad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,343.2 1,474.0 1,578.2

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,723.4 1,698.4 2,366.2

Notes:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8and the Relevant IFRS’’.

(2) Not restated for years 2003 and 2004 with the adoption of three-month classification of NPLs in 2005. See

‘‘Changes in Accounting Policies — Adoption of Three-Month NPL classification’’.

A substantial portion of the NPLs from Business banking are from loans originated pre-2002

(including a number from MBf).

Loan loss provisioning policy

The Bank’s provisioning policy is in line with BNM’s regulatory requirements. The Bank

maintains both a general provision and specific provisions for NPLs. The Bank’s policy in relation

to the write-back of specific provisions is in line with the BNM’s ‘‘GP3’’ guidelines, where the

write-back of specific provisions is permitted under certain circumstances.

Specific loan loss provision will be made against the uncollateralised portion of the outstanding

balance of a loan (i.e. the outstanding balance of the loan net of interest-in-suspense and the

realisable security value of any collateral). The loan loss provision assigned will vary depending on

the status of the loan account. In the case of sub-standard accounts, the provisioning level ranges

from 0% to 20.0%, in the case of doubtful accounts, the provisioning level is 50.0% and for bad

accounts, the provisioning level is 100.0%.

BNM also requires all domestic bank to keep a general loan loss allowance of at least 1.5% of

total gross loans net of interest-in-suspense and specific provisions.

The realisable security value of the various forms of collateral pledged is ascertained in

accordance with the Bank’s policy on valuation of collateral pledged for NPLs while the review of

the adequacy of the specific provisions in the policy is carried out monthly. The determination of the

realisable security value of collateral pledged is based on BNM’s ‘‘GP3’’ guidelines, for example, as

a general rule:

. the realisable security value for property is based on the forced sale value of the property.

Under certain circumstances, as stipulated in BNM’s ‘‘GP3’’ guidelines, the reserve price

or the auction price of the property may be used as its realisable security value;

. the realisable security value for quoted shares is based on the latest market price subject

to BNM’s approval. For unquoted shares, net tangible value is used as the realisable

security value; and

. the realisable security value for plant and machinery is based on the valuation report

prepared by a professional valuer if there is one. In the absence of professional valuation,

a 20% depreciation rate will be applied annually on the amount financed and no value is

assigned for bad accounts.

98

The Bank observes BNM’s ‘‘GP3’’ guidelines for specific provisioning. The following tables

show the Bank’s NPL classification standards and the specific provisioning required for different

loan products:

Overdrafts and loans (repayment at intervals of less than three months)

Months in arrears

(from first day of default) Classification status Specific provisioning required

3–6 . . . . . . . . . . . . . . . . . Sub-standard 0%

6–9 . . . . . . . . . . . . . . . . . Sub-standard 20%

9–12. . . . . . . . . . . . . . . . . Doubtful 50%

512 . . . . . . . . . . . . . . . . . Bad 100%

Loans (repayment at intervals of three months or longer)

Months in arrears

(from first day of default) Classification status Specific provisioning required

3–6 . . . . . . . . . . . . . . . . . Sub-standard 20%

6–9 . . . . . . . . . . . . . . . . . Doubtful 50%

59 . . . . . . . . . . . . . . . . . Bad 100%

Trade bills

Months in arrears

(from first day of default) Classification status Specific provisioning required

3–6 . . . . . . . . . . . . . . . . . Doubtful 50%

56 . . . . . . . . . . . . . . . . . Bad 100%

Credit cards

Months in arrears

(from first day of default) Classification status Specific provisioning required

3–6 . . . . . . . . . . . . . . . . . Doubtful 50%

56 . . . . . . . . . . . . . . . . . Bad 100%

99

The following table sets forth the Bank’s loan loss provisions as at the dates indicated:

As at

31 March

As at 30

September

2005 2005

(restated) (unaudited)

(RM million)

General allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . 516.2 556.7

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . 40.5 57.5

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . 556.7 614.2

% of total loans less specific allowance . . . . . . . . . . . . . . . . . 1.50% 1.50%

Specific allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . 1,144.4 1,365.5

Allowance made during the year . . . . . . . . . . . . . . . . . . . . 1,247.7 595.2

Amount written back in respect of recoveries . . . . . . . . . . . . (323.1) (231.6)

Net charge to income statements . . . . . . . . . . . . . . . . . . . . . 924.6 363.6

Debt equity conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.0) (1.0)

Amount written off/Adjustment to Asset Deficiency Account . . . . (702.5) (37.8)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,365.5 1,690.3

100

The following table sets forth AmFinance’s loan loss provisions as at the dates indicated:

As at 31 March

2003(1)

2004 2005

(RM million)

General allowance

Balance at beginning of year. . . . . . . . . . . . . . . . 115.1 388.7 405.2

Allowance made during the year . . . . . . . . . . . . . 17.0 16.5 24.2

Amount vested over from AMFB Holdings . . . . . . . 256.6 — —

Balance at end of year . . . . . . . . . . . . . . . . . . . 388.7 405.2 429.4

% of total loans less specific allowance and interest/

income-in-suspense . . . . . . . . . . . . . . . . . . . . 1.52% 1.53% 1.50%

Specific allowance

Balance at beginning of year. . . . . . . . . . . . . . . . 1,810.2 989.3 677.5

Allowance made during the year . . . . . . . . . . . . 578.4 696.9 877.4

Amount written back in respect of recoveries . . . . (225.8) (268.8) (278.9)

Net charge to income statements . . . . . . . . . . . . . 352.6 428.1 598.5

Debt equity conversion . . . . . . . . . . . . . . . . . . . (25.0) (49.4) —

Amount vested over from AMFB Holdings . . . . . . . 490.2 — —

Amount written off/adjustment to Asset Deficiency

Account . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,638.7) (690.5) (385.8)

Balance at end of year . . . . . . . . . . . . . . . . . . . 989.3 677.5 890.2

Note:

(1) As appear in the audited consolidated financial statements for the year ended 31 March 2004. Restated to reflect

MASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards

Board — MASB 25, Income Taxes’’.

101

The following table sets forth ABB’s loan loss provisions as at the dates indicated:

As at 31 March

2003(1)

2004 2005

(RM million)

General allowance

Balance at beginning of year. . . . . . . . . . . . . . . . 121.1 110.9 110.9

Allowance made during the year . . . . . . . . . . . . . — — 16.4

Amount transferred to specific allowance . . . . . . . . (10.2) — —

Balance at end of year . . . . . . . . . . . . . . . . . . . 110.9 110.9 127.3

% of total loans less specific allowance and interest/

income-in-suspense . . . . . . . . . . . . . . . . . . . . 1.51% 1.51% 1.50%

Specific allowance

Balance at beginning of year. . . . . . . . . . . . . . . . 159.3 194.3 466.9

Allowance made during the year . . . . . . . . . . . . 199.1 501.5 370.3

Amount written back in respect of recoveries . . . . (40.5) (93.5) (44.2)

Net charge to income statements . . . . . . . . . . . . . 158.6 408.0 326.1

Debt equity conversion . . . . . . . . . . . . . . . . . . . (29.8) (6.8) (1.0)

Amount written off. . . . . . . . . . . . . . . . . . . . . . (113.5) (128.6) (316.7)

Amount vested over from related company . . . . . . . 9.5 — —

Amount transferred from general allowance . . . . . . . 10.2 — —

Balance at end of year . . . . . . . . . . . . . . . . . . . 194.3 466.9 475.3

Note:

(1) As appear in the audited financial statements for the year ended 31 March 2004. Restated to reflect MASB 25

relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards Board —

MASB 25, Income Taxes’’.

Write-off policy

The Bank’s write-off policy is in compliance with BNM’s ‘‘GP3’’ guidelines, which, in brief,

provide that banks may write off accounts or portions thereof which have been classified as bad and

deemed uncollectable. The Bank writes off a particular loan after management has determined that

the particular loan is not recoverable and (i) after either commencement of legal action to recover

amounts unpaid or after the borrower has been declared bankrupt or (ii) if appropriate action has

been taken to foreclose/enforce on collateral securing the loan. The Bank continues to monitor loans

which are written off for possible repayment of any amounts outstanding until all arrears are

collected. Write-offs of loans must be approved by the Bank’s Board of Directors.

The Bank also adopts BNM’s ‘‘GP3’’ guidelines for the partial write-off of accounts. Where

there is adequate justification for the relevant Committee to approve a partial write-off of a loan, the

amount of the loan is written down to the realisable value of the security, and the shortfall in

realisable security value over the outstanding balance of the loan will be written off. The Bank

continues to evaluate effective procedures for improving recovery. As a general rule, a partial write-

off is permitted when:

. the realisable value of the security is less than the outstanding balance of the loan and

further collateral to improve the security deficiency is not forthcoming; or

102

. the shortfall in realisable security value over the outstanding balance of the loan is

deemed uncollectible and worthless.

Profile of non-performing loans

The Bank’s gross NPLs were RM5.78 billion and net NPLs were RM4.09 billion as at 30

September 2005, representing a ratio of gross NPL to total gross loans of 13.56% and a ratio of net

NPL to total net loans of 9.99%, respectively. Based on BNM statistics, as at 30 September 2005,

the ratio of net NPLs to net loans for the industry was 6.3%. As at 30 September 2005, the top 20

NPL exposures represented 24.5% of the Bank’s total gross NPLs and 3.3% of the Bank’s total gross

loans.

In addition, the Bank expects to resolve a significant amount of its gross NPLs by the end of

2007.

The table below shows the Bank’s NPLs as at the dates indicated:

As at

31 March

2005

As at

30 September

2005

(restated) (unaudited)

(RM million)

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . 8,257.8 7,648.3

Less: Interest/income-in-suspense . . . . . . . . . . . . . . . . . . . (1,220.6) (1,269.9)

As restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,037.2 6,378.4

Non-performing during the year . . . . . . . . . . . . . . . . . . . . . 846.3 1,138.2

NPL reclassified as performing . . . . . . . . . . . . . . . . . . . . . (742.0) (1,404.9)

Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (291.7) (295.8)

Debt equity conversion . . . . . . . . . . . . . . . . . . . . . . . . . . (39.4) (1.0)

Amount written off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (432.0) (37.8)

Balance at end of period (gross) . . . . . . . . . . . . . . . . . . . . 6,378.4 5,777.1

Less: specific allowance . . . . . . . . . . . . . . . . . . . . . . . . . (1,365.5) (1,690.3)

Non-performing loans and financing (net) . . . . . . . . . . . . . . . 5,012.9 4,086.8

% of net NPL to total net loans, advances and financing . . . . . 13.50% 10.00%

103

The table below shows AmFinance’s NPLs as at the dates indicated:

As at 31 March(1)

2003(2)(3)

2004(3)

2005

(RM million)

Balance at beginning of year. . . . . . . . . . . . . . . . 3,756.8 4,349.5 4,051.9

Prior year adjustment on adoption of three-month

classification of NPLs . . . . . . . . . . . . . . . . . . — — 1,579.6

Non-performing during the year . . . . . . . . . . . . . . 1,354.4 1,599.1 981.5

NPL reclassified as performing . . . . . . . . . . . . . . (709.3) (297.6) (341.1)

Amount recovered . . . . . . . . . . . . . . . . . . . . . . (380.1) (490.2) (390.0)

Debt equity conversion . . . . . . . . . . . . . . . . . . . (46.7) (53.8) (69.7)

Amount vested over from AMFB Holdings . . . . . . . 2,386.5 — —

Amount written off. . . . . . . . . . . . . . . . . . . . . . (2,012.1) (1,055.1) (530.1)

Balance at end of year (gross). . . . . . . . . . . . . . . 4,349.5 4,051.9 5,282.1

Less: specific allowances . . . . . . . . . . . . . . . . . (989.3) (677.5) (890.2)

Interest/income-in-suspense . . . . . . . . . . . . . . . . . (1,190.5) (947.9) (971.4)

Balance at end of year (net) . . . . . . . . . . . . . . . . 2,169.7 2,426.5 3,420.5

% of net NPL to total net loans, advances and

financing. . . . . . . . . . . . . . . . . . . . . . . . . . . 8.49% 9.17% 11.95%

Notes:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8

and the Relevant IFRS’’.

(2) As appear in the audited consolidated financial statements for the year ended 31 March 2004. Restated to reflect

MASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards

Board — MASB 25, Income Taxes’’.

(3) Not restated for years 2003 and 2004 to reflect the adoption of three-month NPL classification in 2005. See

‘‘Changes in Accounting Policies — Adoption of Three-Month NPL classification’’.

104

The table below shows ABB’s NPLs as at the dates indicated:

As at 31 March(1)

2003(2)(3)

2004(3)

2005

(RM million)

Balance at beginning of year. . . . . . . . . . . . . . . . 1,874.6 1,723.4 1,698.4

Prior year adjustment on adoption of three-month

classification of NPLs . . . . . . . . . . . . . . . . . . — — 927.9

Non-performing during the year . . . . . . . . . . . . . . 773.3 561.4 80.7

NPL reclassified as performing . . . . . . . . . . . . . . (285.1) (205.9) (231.0)

Amount recovered . . . . . . . . . . . . . . . . . . . . . . (237.6) (154.2) (82.7)

Debt equity conversion . . . . . . . . . . . . . . . . . . . (223.5) (50.9) —

Amount written off. . . . . . . . . . . . . . . . . . . . . . (190.8) (175.4) (27.1)

Amount vested over from related company . . . . . . . 12.5 — —

Balance at end of year (gross). . . . . . . . . . . . . . . 1,723.4 1,698.4 2,366.2

Less: specific allowances . . . . . . . . . . . . . . . . . (194.3) (466.9) (475.3)

Interest/income-in-suspense . . . . . . . . . . . . . . . . . (246.4) (222.8) (298.5)

Balance at end of year (net) . . . . . . . . . . . . . . . . 1,282.7 1,008.7 1,592.4

% of net NPL to total net loans, advances and

financing. . . . . . . . . . . . . . . . . . . . . . . . . . . 17.47% 13.75% 18.76%

Note:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8

and the Relevant IFRS’’.

(2) As appear in the audited financial statements for the year ended 31 March 2004. Restated to reflect MASB 25

relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards Board —

MASB 25, Income Taxes’’.

(3) Not restated for years 2003 and 2004 to reflect the adoption of three-month NPL classification in 2005. See

‘‘Changes in Accounting Policies — Adoption of Three-Month NPL classification’’.

105

Non-performing loans by industry sector

The following table sets out the Bank’s gross NPL portfolio according to industry sector as at

the dates indicated herein:

As at

31 March

2005(1)

As at

30 September

2005(1)

(restated) (unaudited)

(RM million)

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.5 48.8Mining and quarrying . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1 11.3Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363.9 279.9Electricity, gas and water . . . . . . . . . . . . . . . . . . . . . . . . . 177.5 177.5Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,116.4 807.2Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445.7 330.3Purchase of landed property:Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,415.2 1,347.7Non-residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 690.5 630.1

General commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254.9 193.7Transport, storage and communication . . . . . . . . . . . . . . . . . 49.0 71.8Finance, insurance and business services . . . . . . . . . . . . . . . 161.8 239.1Purchase of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 449.6 284.5Purchase of transport vehicles . . . . . . . . . . . . . . . . . . . . . . 916.3 1,042.1Consumption credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185.8 193.2Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117.2 119.9

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,378.4 5,777.1

Note:

(1) The financials in the table above reflect the Revised GP8. See ‘‘Summary of Significant Differences Between

Revised GP8 and the Relevant IFRS’’.

106

The following table sets out AmFinance’s gross NPL portfolio according to industry sector as

at the dates indicated herein:

As at 31 March(1)

2003(2)

2004(2)

2005

(in millions)

RM RM RM

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.1 20.1 23.0

Mining and quarrying . . . . . . . . . . . . . . . . . . . . 8.9 7.3 4.1

Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . 184.2 101.7 169.9

Electricity, gas and water . . . . . . . . . . . . . . . . . . 0.4 1.1 1.4

Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 636.6 674.5 954.5

Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . 160.8 155.9 175.5

Purchase of landed property:

Residential . . . . . . . . . . . . . . . . . . . . . . . . . . 844.2 919.9 1,259.6

Non-residential . . . . . . . . . . . . . . . . . . . . . . . 691.7 747.0 766.9

General commerce . . . . . . . . . . . . . . . . . . . . . . 132.1 117.1 208.3

Transport, storage and communication . . . . . . . . . . 141.6 115.2 71.3

Finance, insurance and business services . . . . . . . . 231.2 187.6 172.8

Purchase of securities . . . . . . . . . . . . . . . . . . . . 377.7 337.0 323.6

Purchase of transport vehicles . . . . . . . . . . . . . . . 749.9 539.7 971.9

Consumption credit . . . . . . . . . . . . . . . . . . . . . . 101.7 80.9 99.5

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71.4 46.9 79.8

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,349.5 4,051.9 5,282.1

Notes:

(1) Not restated in accordance with the Revised GP8. See ‘‘Summary of Significant Differences Between Revised

GP8 and the Relevant IFRS’’.

(2) Not restated for years 2003 and 2004 to reflect the adoption of three-month NPL classification in 2005. See

‘‘Changes in Accounting Policies — Adoption of three-month NPL classification’’.

107

The following table sets out ABB’s NPL portfolio according to industry sector as at the dates

indicated herein:

As at 31 March(1)

2003(2)

2004(2)

2005

(in millions)

RM RM RM

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8 8.7 39.7

Mining and quarrying . . . . . . . . . . . . . . . . . . . . 2.0 9.0 9.5

Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . 227.0 170.1 239.6

Electricity, gas and water . . . . . . . . . . . . . . . . . . — 176.1 176.4

Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 404.6 344.0 290.9

Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . 223.7 207.4 244.2

Purchase of landed property:

Residential . . . . . . . . . . . . . . . . . . . . . . . . . . 174.3 202.6 529.7

Non-residential . . . . . . . . . . . . . . . . . . . . . . . 203.9 166.5 225.7

General commerce . . . . . . . . . . . . . . . . . . . . . . 117.5 81.2 87.8

Transport, storage and communication . . . . . . . . . . 33.7 20.4 5.5

Finance, insurance and business services . . . . . . . . 98.2 116.0 166.3

Purchase of securities . . . . . . . . . . . . . . . . . . . . 66.1 81.6 176.4

Consumption credit . . . . . . . . . . . . . . . . . . . . . . 64.7 67.7 108.5

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.9 47.1 66.0

1,723.4 1,698.4 2,366.2

Notes:

(1) Not restated in accordance with the Revised GP8. See ‘‘Summary of Significant Differences Between RevisedGP8 and the Relevant IFRS’’.

(2) Not restated for years 2003 and 2004 to reflect the adoption of three-month NPL classification in 2005. See

‘‘Changes in Accounting Policies — Adoption of three-month NPL classification’’.

Securities Portfolio

Prior to 1 April 2005, AmFinance and ABB classified the holdings of their respective securities

portfolios into Investment Securities and Dealing Securities. With effect from 1 April 2005, the

Bank adopted Revised GP8 except for the requirement for a certain test on impaired loans. The

adoption of Revised GP8 resulted in the following new accounting policies:

(i) The holdings of the securities portfolio of the Bank are classified based on the following

categories and valuation methods:

(a) Securities held-for-trading

Securities are classified as held-for-trading if they are acquired principally for the

purpose of benefiting from actual or expected short-term price movement or to lock in

arbitrage profits. Securities held-for-trading will be 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 statements.

(b) Securities held-to-maturity

Securities held-to-maturity are financial assets with fixed or determinable payments

and fixed maturity that the 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

108

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 statements.

(c) 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 amortised cost (less impairment losses) if the fair value cannot be reliably measured.

Any gain or loss arising from a change in fair value is 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 statements.

The following tables set out the Bank’s securities portfolio as at 31 March 2005 and 30

September 2005 :

Securities held-for-trading

As at

31 March

2005

As at

30 September

2005

(restated) (unaudited)

(RM million)

At fair value

Money market securities:

Malaysian Government securities . . . . . . . . . . . . . . . . . . . . 119.2 117.1

Malaysian Government investment certificates . . . . . . . . . . . . 150.6 153.6

Cagamas Berhad bonds . . . . . . . . . . . . . . . . . . . . . . . . . . 174.5 174.7

Negotiable instruments of deposit . . . . . . . . . . . . . . . . . . . . 645.2 450.0

Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110.2 112.1

1,199.7 1,007.5

Quoted securities:

Shares in Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90.1 71.4

90.1 71.4

Unquoted securities:

Private debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 202.7 203.8

202.7 203.8

Total securities held-for-trading . . . . . . . . . . . . . . . . . . . . 1,492.5 1,282.7

109

Securities available-for-sale

As at

31 March

2005

As at

30 September

2005

(restated) (unaudited)

(RM million)

At fair value

Unquoted securities:

Private debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 96.3 94.5

Total securities available-for-sale . . . . . . . . . . . . . . . . . . . 96.3 94.5

Securities held-to-maturity

As at

31 March

2005

As at

30 September

2005

(restated) (unaudited)

(In millions)

RM RM

At amortised cost

Quoted securities in Malaysia:

Debt equity conversion . . . . . . . . . . . . . . . . . . . . . . . . . . 811.8 763.7

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.5 0.5

812.3 764.2

Unquoted securities in Malaysia:

Debt equity conversion . . . . . . . . . . . . . . . . . . . . . . . . . . 1,141.7 1,118.3

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85.9 85.9

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.5 0.9

1,269.1 1,205.1

Unquoted securities outside Malaysia:

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4 —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,081.8 1,969.3

Less: Allowances for diminution in value of investments . . . . . (537.5) (514.3)

Total securities held-to-maturity . . . . . . . . . . . . . . . . . . . 1,544.3 1,455.0

110

The following tables set out AmFinance’s portfolio of dealing securities and investment

securities as classified below. Prior to 1 April 2005, BNM regulations required securities to be

classified as either dealing or investment securities.

As at 31 March(1)

Dealing Securities 2003(2)

2004 2005

(RM million)

Quoted securities in Malaysia:

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112.6 174.0 105.6

Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2 0.3 —

Loan stocks . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3 0.2 —

113.1 174.5 105.6

Unquoted private debt securities in Malaysia:

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . — 98.3 —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113.1 272.8 105.6

Less:

Allowance for diminution in value of quoted securities (40.2) (16.8) (29.8)

Total dealing securities . . . . . . . . . . . . . . . . . . 72.9 256.0 75.8

Market value:

Unquoted private debt securities in Malaysia:

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . — 98.3 —

Quoted securities in Malaysia:

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71.8 157.1 75.8

Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3 0.3 —

Loan stocks . . . . . . . . . . . . . . . . . . . . . . . . . . 0.8 0.3 —

72.9 256.0 75.8

Notes:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8and the Relevant IFRS’’.

(2) As appear in the audited consolidated financial statements for the year ended 31 March 2004. Restated to reflect

MASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards

Board — MASB 25, Income Taxes’’.

111

As at 31 March(1)

Investment securities 2003(2)

2004 2005

(RM million)

Money market securities:Malaysian Government securities . . . . . . . . . . . . . 126.7 1.7 111.7Malaysian Government investment certificates . . . . . 92.8 145.3 100.0Treasury bills . . . . . . . . . . . . . . . . . . . . . . . . . 589.9 311.8 —BNM bills . . . . . . . . . . . . . . . . . . . . . . . . . . . 143.0 44.5 —Negotiable certificate of deposits . . . . . . . . . . . . . 572.0 393.9 401.1Islamic acceptance bills . . . . . . . . . . . . . . . . . . . — 3.0 —Cagamas bonds . . . . . . . . . . . . . . . . . . . . . . . . 38.9 — 173.5Bankers’ acceptances . . . . . . . . . . . . . . . . . . . . 66.7 — —Danamodal bonds . . . . . . . . . . . . . . . . . . . . . . . 69.7 — —Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . 49.6 — 79.4Islamic negotiable certificate of deposits . . . . . . . . 20.0 — —

1,769.3 900.2 865.7

Quoted shares in Malaysia:Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —Loan stocks . . . . . . . . . . . . . . . . . . . . . . . . . . — — —Quoted shares . . . . . . . . . . . . . . . . . . . . . . . . . 0.4 0.5 0.5

0.4 0.5 0.5

Debt equity conversion quoted in Malaysia:Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.7 171.0 167.6Shares — with options . . . . . . . . . . . . . . . . . . . 41.5 41.5 41.5Loan stocks — collateralised. . . . . . . . . . . . . . . . 346.1 355.5 356.5Corporate bonds/warrants . . . . . . . . . . . . . . . . . . 29.5 — —

456.8 568.0 565.6

Unquoted securities in Malaysia:Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.4 36.4 36.4Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . 0.8 0.8 0.8

37.2 37.2 37.2

Unquoted debt equity conversion in Malaysia:Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45.0 125.8 82.1Loan stocks — secured . . . . . . . . . . . . . . . . . . . 10.2 501.3 537.0Corporate bonds secured . . . . . . . . . . . . . . . . . . 103.0 121.5 117.8

158.2 748.6 736.9

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,421.9 2,254.5 2,205.9

Less: Allowances for diminution in value of:— quoted securities. . . . . . . . . . . . . . . . . . . . . (107.2) (205.3) (201.8)— unquoted securities . . . . . . . . . . . . . . . . . . . (15.1) (145.3) (142.0)Accretion of discount less amortisation of premium. . 11.0 14.7 12.8

Total Investment Securities . . . . . . . . . . . . . . . . 2,310.6 1,918.6 1,874.9

Notes:

(1) Not restated in accordance with the Revised GP8. See ‘‘Summary of Significant Differences Between Revised

GP8 and the Relevant IFRS’’.

(2) As appear in the audited consolidated financial statements for the year ended 31 March 2004. Restated to reflect

MASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards

Board — MASB 25, Income Taxes’’.

112

As at 31 March(1)

Investment securities 2003(2)

2004 2005

(RM million)

Market value:

Money market securities

Malaysian Government securities . . . . . . . . . . . . . 118.1 1.9 119.3

Malaysian Government investment certificates . . . . . 96.2 152.8 104.2

BNM bills . . . . . . . . . . . . . . . . . . . . . . . . . . . 144.2 44.8 —

Treasury bills . . . . . . . . . . . . . . . . . . . . . . . . . 599.2 319.0 —

Cagamas bonds . . . . . . . . . . . . . . . . . . . . . . . . 39.3 — 174.5

Danamodal bonds . . . . . . . . . . . . . . . . . . . . . . . 74.3 — —

Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . 51.3 — 81.4

Negotiable certificate of deposits . . . . . . . . . . . . . — — 401.1

Quoted debt equity conversion in Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2 79.2 62.7

Shares — with options . . . . . . . . . . . . . . . . . . . 21.3 23.8 23.4

Loan stocks . . . . . . . . . . . . . . . . . . . . . . . . . . 287.1 374.1 324.8

Warrants — collateralised . . . . . . . . . . . . . . . . . 0.4 0.5 0.3

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . 4.8 — —

The maturity structure of money market securities

held for investments is as follows:

Maturing within one year . . . . . . . . . . . . . . . . . . 1,674.6 865.8 457.1

One year to three years . . . . . . . . . . . . . . . . . . . 92.8 33.1 407.3

Three years to five years . . . . . . . . . . . . . . . . . . 0.6 1.3 1.3

Over five years . . . . . . . . . . . . . . . . . . . . . . . . 1.3 — —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,769.3 900.2 865.7

Notes:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8and the Relevant IFRS’’.

(2) As appear in the audited consolidated financial statements for the year ended 31 March 2004. Restated to reflect

MASB 25 relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting StandardsBoard — MASB 25, Income Taxes’’.

113

The following tables set out ABB’s portfolio of dealing securities and investment securities as

classified below:

As at 31 March(1)

Dealing securities 2003(2)

2004 2005

(RM million)

Quoted securities in Malaysia:

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.1 36.2 18.4Unquoted securities in Malaysia:

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . 190.3 209.6 192.5Allowance for diminution in value of investment . . . (0.6) (12.6) (14.3)

Total dealing securities . . . . . . . . . . . . . . . . . . 218.8 233.2 196.6

Market value:

Quoted securities in Malaysia — Shares. . . . . . . . . 28.5 36.1 14.3Unquoted securities in Malaysia — Corporate bonds . n/a n/a 182.3

Investment securities:

Money market securities:

Malaysian Government securities . . . . . . . . . . . . . 41.5 41.5 —Malaysian Government investment certificates . . . . . 45.2 45.2 45.0BNM bills . . . . . . . . . . . . . . . . . . . . . . . . . . . 198.8 59.3 —Danaharta bonds . . . . . . . . . . . . . . . . . . . . . . . 7.0 7.0 —Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . 82.5 82.5 26.6Negotiable certificate of deposits . . . . . . . . . . . . . 15.0 5.0 20.1Bankers’ acceptances . . . . . . . . . . . . . . . . . . . . — 4.5 —Negotiable Islamic debt certificates . . . . . . . . . . . . — 237.7 224.0

390.0 482.7 315.7

Quoted securities outside Malaysia:

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 0.4 0.4

Quoted debt equity conversion in Malaysia:

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53.1 90.2 95.0Shares — with options . . . . . . . . . . . . . . . . . . . 32.6 32.6 32.5Loan stocks . . . . . . . . . . . . . . . . . . . . . . . . . . 23.5 41.2 19.2Loan stocks — collateralised. . . . . . . . . . . . . . . . 96.2 85.7 99.5

205.4 249.7 246.2

Unquoted securities in Malaysia:

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9 4.9 49.5Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . 0.1 0.1 158.3

5.0 5.0 207.8

Notes:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8and the Relevant IFRS’’.

(2) As appear in the audited financial statements for the year ended 31 March 2004. Restated to reflect MASB 25

relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards Board —MASB 25, Income Taxes’’.

114

As at 31 March(1)

Investment securities 2003(2)

2004 2005

(RM million)

Unquoted debt equity conversion in Malaysia:

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114.4 138.5 39.3

Loan stocks . . . . . . . . . . . . . . . . . . . . . . . . . . 26.7 181.5 276.0

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . 120.8 103.3 89.7

261.9 423.3 405.0

Unquoted private debt securities in Malaysia:

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . 82.7 158.3 —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 946.2 1,319.4 1,175.1

Allowance for diminution in value of investment . . . (144.9) (193.4) (193.7)

Accretion of discount less amortisation of premium. . 6.4 9.4 2.6

Total Investment Securities . . . . . . . . . . . . . . . . 807.7 1,135.4 984.0

Market value:

Money market securities

Malaysian Government Securities . . . . . . . . . . . . . 41.1 40.2 —

Malaysian Government investment certificates . . . . . 48.3 49.7 46.6

BNM bills . . . . . . . . . . . . . . . . . . . . . . . . . . . 199.7 59.8 —

Danaharta bonds . . . . . . . . . . . . . . . . . . . . . . . 8.5 8.8 —

Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . 84.9 87.2 28.8

Negotiable certificate of deposits . . . . . . . . . . . . . 15.1 5.1 20.1

Negotiable Islamic debt certificates . . . . . . . . . . . . — 237.6 225.6

Quoted securities outside Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.8 n/a n/a

Quoted debt equity conversion in Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.0 26.4 22.5

Shares — with options . . . . . . . . . . . . . . . . . . . 16.7 18.7 18.4

Loan stocks . . . . . . . . . . . . . . . . . . . . . . . . . . 18.6 35.8 14.0

Loan stocks — collateralised. . . . . . . . . . . . . . . . 56.8 51.9 62.7

The maturity structure of money market securities

held for investments is as follows:

Maturing within one year . . . . . . . . . . . . . . . . . . 213.8 248.2 135.7

One year to three years . . . . . . . . . . . . . . . . . . . 163.0 234.5 180.0

Three years to five years . . . . . . . . . . . . . . . . . . 13.2 — —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390.0 482.7 315.7

Notes:

(1) Not restated in accordance with Revised GP8. See ‘‘Summary of Significant Differences Between Revised GP8and the Relevant IFRS’’.

(2) As appear in the audited financial statements for the year ended 31 March 2004. Restated to reflect MASB 25

relating to deferred tax. See ‘‘Changes in Accounting Policies — Malaysian Accounting Standards Board —MASB 25, Income Taxes’’.

115

RISK MANAGEMENT

The Bank’s risk management policy is to identify, capture and analyse risks at an early stage,

continuously measure and monitor risks and to set limits, policies and procedures to control them to

ensure sustainable risk-taking and sufficient returns. The Bank invests to ensure that adequate

infrastructure is in place in order to define risk policy, monitor risk exposure limits and to establish

an effective approach in risk assessment, measurement and management.

Managing risks is the responsibility of every unit within the Bank. The Bank has a Risk

Management Committee of Directors and Executive Risk Management Committees where risk issues

are centrally reviewed for management attention and bank-wide decisions. The Executive Risk

Management Committees comprise (i) the Market & Funding Risk Management Committee, (ii) the

Credit, Strategic & Capital Risk Management Committee and (iii) the Operation & Legal Risk

Committee. See ‘‘Management and Employees of the Bank — Committees — Risk Management’’.

Overall Supervision and Management of Risk

The Risk Management Committee of Directors oversees senior management’s activities in

managing the Bank’s overall risks, and institutes periodic reviews to ensure that risk management

processes remain relevant, and that controls and mitigating procedures are in place. The Risk

Management Committee of Directors’ responsibilities include ensuring the appropriate formulation

and assessment of risk management policies, recommending and reviewing major risk management

policies and reviewing major risks exposures, ensuring risks are within risk tolerance levels of the

Board and ensuring that infrastructure, resources and systems are in place for risk management. The

Risk Management Committee of Directors receives quarterly reports from the Executive Risk

Management Committees on risk exposures. The Risk Management Committee of Directors is

independent from management and comprises only non-executive directors and is chaired by an

independent director. The Board of Directors of the Bank receives and reviews regular risk exposure

reports from the management, and opinions and recommendations from the Risk Management

Committee of Directors, on key risk statistics, such as asset quality, stress testing, capital adequacy

and operational losses.

Market Risk Management

Market risk is the risk of loss from changes in the value of portfolios and financial instruments

caused by movements in market variables, such as interest rates and foreign exchange rates, credit

spreads and equity prices.

The Bank’s primary objective for its market risk management is to ensure that losses from

market risk can be promptly arrested and risk positions are sufficiently liquid so as to enable the

Bank to reduce its position without incurring potential loss that is beyond its sustainability.

In order to manage such risks, the Market & Funding Risk Management Committee evaluates

and identifies the Bank’s risk exposures as well as formulates and develops risk measurement and

valuation methodology. Market risk policies approved by the Market & Funding Risk Management

Committee are implemented by the appropriate business units and, if necessary, are monitored and

reported back to the Risk Management Committee of Directors on a regular basis.

Market Risk Management Method

The market risk of the trading and non-trading portfolio is managed separately. The duration-

weighted-gap value-at-risk (‘‘VAR’’) approach is used to compute market risk exposure for the

Bank’s non-trading portfolio and parametric VAR as well as a 25 basis point movement sensitivity

analysis are used for its trading portfolio.

The market risk exposure of the Bank’s trading and non-trading activities is primarily

controlled through a series of limits. Stop loss, parametric VAR and position sensitivity limits

govern the trading activities while the duration-weighted-gap VAR governs the non-trading

positions. Each relevant trading desk is assigned month-to-date, quarter-to-date and year-to-date

stop loss limits based on the business profitability budget. VAR limits are used to control the size of

116

risk positions to ensure that they are within the sustainable capacity of the Bank. As approved by the

Bank’s Board of Directors, these limits seek to align specific risk-taking activities with the overall

risk appetite of the Bank and of its individual business units.

All business units are expected to maintain their exposures within assigned limits. If a limit is

exceeded, business units are responsible for reducing their exposure immediately to a level within

the limit. Where this is not possible, senior management is consulted on the appropriate method to

address the exposure. Together, these techniques reduce the likelihood of trading and non-trading

losses that will exceed the risk appetite of the Bank. The Bank seeks to review limits regularly

taking into account the Bank’s performance.

To complement VAR, the Bank has a set of scenario analysis that serves as an indicator of the

change in portfolio value under various potential market conditions such as shifts in currency rates,

general equity prices, interest rates and yield curve shifts.

Funding Risk Management

Funding risk is the risk that the Bank will not be able to fund its day-to-day operations at a

competitive cost.

The Bank’s primary objective of its funding risk management framework is to ensure the

availability of sufficient funds at a competitive cost to honour all financial commitments as they

become due.

The Bank’s secondary objective is to ensure an optimal funding core structure and to balance

the key funding risk management objectives, which include diversification of funding sources,

customer base and maturity period.

Funding Risk Management Method

Funding risk management is the responsibility of the Market & Funding Risk Management

Committee and funding risk policies approved by the Committee are implemented by the appropriate

business units and, if necessary, are monitored and reported back to the Risk Management

Committee of Directors on a regular basis.

The Bank’s current funding risk management is based on the following key strategies:

. management of cash-flow, through maintenance of adequate cash and liquefiable assets

over and above the minimum level recommended by BNM in their cash flow maturity

mismatch framework;

. scenario analysis, new business, changes in portfolio as well as stress scenarios based on

historical experience of large withdrawals; and

. diversification and stabilisation of liabilities through management of funding sources,

diversification of customer depositor base and inter-bank exposures.

The measures utilised for funding risk management are varied and ranges from daily to

monthly monitoring and reporting. These include weekly cash flows, daily monitoring of depositors

and relevant key ratios and monthly reporting to the Committee on the measures as well as any

breaches of limits, if any.

In the event of an actual liquidity crisis occurring, a Contingency Funding Plan provides a

formal process to identify a liquidity crisis and detail responsibilities among the relevant

departments to ensure orderly execution of procedures to restore the liquidity position and

confidence in the Bank.

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Credit Risk Management

Credit risk is the risk of loss due to the inability or unwillingness of a counterparty to meet its

payment obligations. Exposure to credit risk arises primarily from lending activities and, to a lesser

extent, pre-settlement and settlement exposures of sales and trading activities.

The Bank’s primary objective of its credit risk management framework is to ensure that

exposure to credit risk is always kept within its capability and financial capacity to withstand

potential future losses.

Credit Risk Management Method

The Credit, Strategic & Capital Risk Management Committee oversees credit risk management.

The Executive Committee of the Bank also reviews loans of significant amounts and reviews and

approves loans which require exemptions from pre-set lending criteria or portfolio management

strategies set by the Board of Directors.

For non-retail credits, risk management begins with an assessment of the financial standing of

the borrower or counterparty using an internally developed credit rating model. The model consists

of quantitative and qualitative scores which are then translated into a rating grade, which ranges

from ‘‘AAA’’ (lowest risk) to ‘‘C’’ (highest risk). The Bank’s credit analysis seeks to not only

highlight the key credit issues that need to be mitigated but also to reflect the overall level of risk

for each new borrower. The Board of Directors also sets the minimum credit acceptance criteria for

new credits. The assigned credit rating forms a crucial part of the credit analysis for each credit

exposure. The Bank reviews the credit rating assigned to each borrower typically once a year and

more frequently as may be required.

The Bank quantifies credit risk based on expected default frequencies from its portfolio of

loans and off-balance sheet credit commitments. Expected default frequencies are calibrated to the

internal rating model.

Lending activities are guided by internal credit policies and guidelines that are approved by the

Board of Directors or the Executive Committee of the Bank. Within these policies, the Bank seeks to

limit total exposure allowed to corporate groups according to their level of creditworthiness through

single borrower limits, while sector limits seek to ensure that total credit exposure to each economic

sector is within prudent thresholds. These limits are monitored and reported to senior management

monthly. The pricing of non-retail exposure is also guided by benchmark return guidelines to ensure

minimum returns that compensate for the risk taken, operating expenses and the cost of capital.

In order to further enhance the overall quality of loan exposures, the Bank has also endorsed a

credit portfolio management strategy designed to achieve an ideal portfolio risk tolerance level and

sector distribution over the next few years. These portfolio management strategies include minimum

credit rating targets for new facilities, a more aggressive approach towards reducing existing high-

risk exposures and exposures to certain sectors.

For retail credits, the Bank uses an in-house developed credit-scoring system to support the

credit card, housing and hire purchase applications to complement the credit assessment process.

This has improved the Bank’s turn-around time and the consistency of evaluation in credit

processing for its dealers and customers. The Bank is further seeking to enhance the robustness of

this credit scoring system to a level capable of performing credit-based decisions and automated

approval in order to speed up credit granting processes.

BNM has announced an intention to fully implement the standards recommended by the Bank

of International Settlements set out in ‘‘International Convergence of Capital Measurement and

Capital Standards: A revised Framework’’ (‘‘Basel II’’) in Malaysia by 2008 for the Standardised

Approach and optionally in addition 2010 for the Foundation Internal Ratings Based approach.

A project plan has been approved by the respective boards of the companies within AMMB

Group to implement Basel II compliance on a group-wide basis by January 2008. The project plan

has identified a number of components relating to credit risk that need to be addressed in order for

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the AMMB Group to meet the requirements of Basel II. There include required policies and

procedures, system and reporting requirements. The major policies have been identified, and the

AMMB Group is currently in the process of assessing its systems and data to be Basel II compliant.

Operational Risk Management

Operational risk is the risk arising from inadequate or failed internal processes, people and

systems or from external events affecting the Bank’s day-to-day operations, which restrict or prevent

the Bank’s business objectives from being achieved.

Operational Risk Management Method

The Operational & Legal Risk Committee is responsible for operational risk management. The

Committee reviews the adequacy of controls to manage operational risks based on the assessment

performed on each operating unit. Operational risk policies as approved by the Committee will be

implemented by the various departments and reported back to the Risk Management Committee on a

regular basis.

The Bank seeks to minimise operational risk by putting in place appropriate policies, internal

controls and procedures as well as maintaining back-up procedures for key activities and undertaking

contingency planning. These are supported by independent reviews conducted by the Internal Audit

Committee.

Each operating unit within the Bank has primary responsibility for managing its operational

risk. The operating units are responsible for assessing their operational risks and review controls

instituted periodically to ensure that the measures introduced continue to be relevant and

appropriate. The Risk Management Department supports and provides guidance to the operating

units for the execution of risk assessment methodology. The Risk Management Department

recommends minimum standards, policies and methodologies, monitors compliance and identifies as

well as reports on the Bank’s risk exposures.

Legal Risk Management

Legal risks arise from potential breaches of applicable laws and regulatory requirements,

unenforceability of contracts, lawsuits or adverse judgment which may lead to losses and disruption

to the Bank’s business or otherwise adversely affect the reputation of the Bank. The Operational &

Legal Risk Committee together with the Bank’s internal legal counsel manage legal risk. Where

necessary, the Bank consults with external legal counsel to ensure that its legal risk is minimised.

The Operational & Legal Risk Committee ensures that appropriate measures are introduced and

applied accordingly to recognise and address regulatory risk. These measures include a compliance

monitoring and reporting process that requires identification of risk areas, prescription of controls to

minimise these risks, staff training and assessments, provision of advice and dissemination of

information.

The Bank conducts compliance awareness training to ensure that staff are up to date with

respect to banking, securities and anti-money laundering laws as well as other regulatory

developments. The training programmes help the Bank’s staff develop their skills to identify

compliance issues as well as to cultivate good corporate ethics.

The Operational & Legal Risk Committee also provides advice on regulatory matters and

measures to be implemented by the Bank to facilitate compliance with rules and regulations. To

further promote understanding, the Operational & Legal Risk Committee conducts briefings,

disseminates information as well as leading co-ordination efforts.

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Hedging Strategy

Financial derivatives

Purpose of engaging in financial derivatives

As part of its risk management strategy, the Bank uses financial derivatives instruments to

manage the Bank’s market risk exposure. The Bank’s involvement in financial derivatives is

currently focused on interest rate derivatives. In relation to foreign exchange risk, the Bank has

minimal risk exposure as the Bank will fund foreign currency assets with liabilities of the same

currency unless circumstances require otherwise.

The principal interest rate contracts used are interest rate swaps. Interest rate swap transactions

generally involve the exchange of fixed and floating interest payment obligations without the

exchange of the underlying principal amounts.

As derivatives are contracts that transfer risks, they expose the Bank to the same types of

market and credit risk as other financial instruments and the Bank seeks to manage these risks in a

consistent manner under the overall risk management framework.

Credit risk of derivatives

Counterparty credit risk arises from the possibility that a counterparty may be unable to meet

the terms of the derivatives contract. Unlike conventional asset instruments, the Bank’s financial loss

is not the entire contracted principal value of the derivatives but rather a fraction equivalent to the

cost to replace the defaulted contract with another in the market. The cost of replacement is

equivalent to the difference between the original value of the derivatives at the time of contract with

the defaulted counterparty and the current fair value of a similar substitute at current market prices.

The Bank will only suffer a replacement cost if the contract carries a fair value gain at the time of

default. The Bank seeks to limit its credit risks by dealing with creditworthy counterparties, setting

credit limits on exposures to counterparties and obtaining collateral where appropriate.

As at 30 September 2005, the amount of counterparty credit risk measured in terms of the cost

of replacing the positive value contracts of the Bank was zero.

Interest rate risk

The Bank is exposed to interest rate risk due to its loan portfolio, its holding of securities and

its interbank deposits and placement position. In order to mitigate such risks, the Bank regularly

introduces floating rate loan products, sells loans to Cagamas Berhad and undertakes asset

securitisation, amongst others.

Future Developments

In the area of risk management, the Bank’s focus continues to be on improvement of portfolio

quality and ensuring that credit risks taken are adequately compensated with the appropriate returns.

Systems to manage the risks are also being enhanced to facilitate better risk measurement and faster

turnaround time in credit evaluation and processing. The Bank will be reviewing its existing risk

management framework and intends to formulate new policies to address the Revised International

Capital Framework, also known as Basel II, which is formulated by the Basel Committee on Banking

Supervision, an international institution. A number of projects are already in progress to address

Basel II requirements. The progress of these projects is monitored regularly through the Group Risk

Forum.

The Group Risk Forum is a central executive platform that reviews all major organisational

risks and sets common standards on risk management for the AMMB Group. This includes the

assessment of AMMB Group’s regulatory capital needs. The Group Risk Forum comprises the

AMMB Group’s managing director and the managing director, executive director, the key heads of

risks and other senior management of the entities within the AMMB Group.

120

MANAGEMENT AND EMPLOYEES

Board of Directors of the Bank

The Bank’s Board of Directors currently comprises seven Directors of whom four are Non-

Executive Directors and three are Executive Directors. Of the four Non-Executive Directors, three

are independent.

In accordance with the Memorandum and Articles of Association of the Bank, the number of

Directors shall not be less than two and shall not be subject to any maximum, unless otherwise

determined by its shareholders. Furthermore, members of the Board of Directors retire from office at

due intervals by rotation. However, they may offer themselves for re-election. Directors who have

attained the age of 70 years retire at every annual general meeting and shall be eligible for re-

appointment to hold office until the next annual general meeting pursuant to the Malaysian

Companies Act 1965. The current Directors of the Bank are as follows:

Name Position Date of appointment

Y Bhg Tan Sri Dato’ Azman Hashim . Non-Executive Chairman 20 December 2001

Y A Bhg Tun Mohammed Hanif bin

Omar . . . . . . . . . . . . . . . . . . . .

Independent Non-

Executive Director

20 December 2001

Y Bhg Tan Sri Datuk Clifford Francis

Herbert . . . . . . . . . . . . . . . . . . .

Independent Non-

Executive Director

1 October 2005

Mr Tan Kheng Soon . . . . . . . . . . . . Independent Non-

Executive Director

1 October 2005

Mr Cheah Tek Kuang . . . . . . . . . . . Chief Executive Officer 20 December 2001

Encik Mohamed Azmi Mahmood . . . . Managing Director, Retail

Banking

20 December 2001

Encik Mahdi Morad . . . . . . . . . . . . Executive Director, Retail

Banking

26 July 2002

The Board of Directors meets every month to consider and discuss the latest financial and

operational developments as well as strategic and policy issues, and to ensure that disclosures are in

accordance with accounting standards and regulatory guidelines. The Bank complies with the

recommendation contained in the Malaysian Code on Corporate Governance of March 2000 (the

‘‘Code’’) that one-third of the Board of Directors should comprise independent directors.

Profiles of Directors

Y Bhg Tan Sri Dato’ Azman Hashim

Y Bhg Tan Sri Dato’ Azman Hashim, a Malaysian, aged 66, was appointed a Director of

the Bank on 20 December 2001. Tan Sri Dato’ Azman has been the Chairman of AMMB

Holdings Berhad, the holding company of the Bank, since 1991.

Tan Sri Dato’ Azman sits as Chairman of the Board of several subsidiaries of AMMB

Holdings Berhad, namely, AmInvestment Group Berhad, AMFB Holdings Berhad, AmMerchant

Bank Berhad, AmProperty Trust Management Berhad and AmAssurance Berhad.

Tan Sri Dato’ Azman, a Chartered Accountant, a Fellow of the Institute of Chartered

Accountants and a Fellow of the Institute of Chartered Secretaries and Administrators, has been

in the banking industry since 1960 when he joined Bank Negara Malaysia and served there

until 1964. He practised as a Chartered Accountant in Azman Wong Salleh and Co. from 1964

to 1971. He then joined the Board of Malayan Banking Berhad from 1966 until 1980 and was

its Executive Director from 1971 until 1980. He was the Executive Chairman of Kwong Yik

Bank Berhad, a subsidiary of Malayan Banking Berhad, from 1980 until April 1982 when he

acquired AmMerchant Bank Berhad.

121

Tan Sri Dato’ Azman is the Executive Chairman of AmcorpGroup Berhad (formerly

known as Arab-Malaysian Corporation Berhad) and Chairman of AMDB Berhad, RCE Capital

Berhad, Malaysian South-South Corporation Berhad, and MCM Technologies Berhad. He serves

as a member on the Board of Cagamas Berhad and Pembangunan MasMelayu Berhad. He is

also involved in several charitable organisations including AmGroup Foundation, ECM Libra

Foundation and Perdana Leadership Foundation and he is one of the Governors of the Japanese

Chamber of Trade and Industry Malaysia Foundation (JACTIM).

Tan Sri Dato’ Azman is the Chairman of the Association of Merchant Banks in Malaysia,

the National Productivity Corporation, East-Asia Business Council and the Pacific Basin

Economic Council (PBEC) Malaysia, and Co-Chairman of Malaysia — Singapore Roundtable.

He is President of the Malaysia South-South Association, Malaysia-Japan Economic

Association, Malaysian Prison FRIENDS Club and Non-Aligned Movement’s Business

Council and Vice Chairman of PBEC International. He is a Member of the APEC Business

Advisory Council, The Trilateral Commission (Asia-Pacific Group), the Malaysian-British

Business Council, the Malaysia-China Business Council, and UNESCAP Business Advisory

Council. He is also the leader of the ASEAN-Japanese Business Meeting (Malaysia Committee,

Keizai Doyukai) and is on the Board of Advisors, AIM Centre for Corporate Social

Responsibility. He was recently appointed Pro-Chancellor of Open University Malaysia.

Y A. Bhg Tun Mohammed Hanif bin Omar

Tun Mohammed Hanif bin Omar, a Malaysian, aged 66, was appointed to the Board of the

Bank on 20 December 2001. He is also a Board member of AMMB Holdings Berhad and its

subsidiary, AMFB Holdings Berhad.

Tun Mohammed Hanif was the Inspector General of the Malaysian Police Force for 20

years until his retirement in January 1994. He is also currently the Chairman of General

Corporation Berhad, Deputy Chairman of Genting Berhad and Resorts World Berhad as well as

a Director of Fullmark Manufacturing Berhad. Tun Muhammed Hanif has been the President of

the Malaysian Institute of Management since 2002.

Tun Mohammed Hanif received his Bachelor of Arts degree from the then University of

Malaya, Singapore in 1959, his Bachelor of Laws Honours degree from Buckingham

University, United Kingdom in 1986 and his Certificate of Legal Practice (Honours) from

the Legal Qualifying Board in 1987.

Y Bhg Tan Sri Datuk Clifford Francis Herbert

Tan Sri Datuk Clifford Francis Herbert, a Malaysian, aged 64, was appointed to the Board

of the Bank on 1 October 2005. He is also a Board member of AmMerchant Bank Berhad,

AMMB Holdings Berhad and AmInvestment Group Berhad.

Tan Sri Datuk Clifford joined the Malaysian civil service in 1964 as Assistant Secretary

in the Public Service Department. From 1968 to 1975, he was the Assistant Secretary in the

Development Administration Unit, Prime Minister’s Department. Tan Sri Datuk Clifford served

in the Ministry of Finance from 1975 to 1997, culminating as Secretary General to the

Treasury. He has been a Board member of numerous statutory bodies and government-related

public companies.

Tan Sri Datuk Clifford is currently the Chairman of Percetakan Nasional Malaysia Berhad

and a Board member of Resorts World Berhad. Additionally, Tan Sri Datuk is also involved in

several charitable organisations.

Tan Sri Datuk Clifford holds a Master of Public Administration degree from University of

Pittsburgh and a Bachelor of Arts (Honours) from the University of Malaya.

122

Tan Kheng Soon

Mr Tan Kheng Soon, a Malaysian, aged 66, was appointed to the Board of the Bank on 1

October 2005.

Mr Tan began his career in the financial industry with his attachment to BNM from 1959

to 1986. He served in various departments including economics, foreign exchange, exchange

control and investment, until he was promoted to Manager of the Exchange Control

Department, and was later seconded to Cagamas Berhad as its first General Manager in

1986. In 1989, he joined Malaysian French Bank Berhad (now known as Alliance Bank Berhad)

as Senior Vice-President and retired from office in October 1996.

Cheah Tek Kuang

Mr Cheah Tek Kuang, a Malaysian, aged 58, was appointed to the Board of the Bank on

20 December 2001 and became the Chief Executive Officer of the Bank on 16 September 2005.

Mr Cheah is also currently the Group Managing Director of AMMB Holdings Berhad, the

ultimate holding company of AmBank (M) Berhad.

Mr Cheah joined AmMerchant Bank Berhad in 1978 and served in various senior

positions. In 1994, he was promoted to Managing Director and from January 2002 to December

2004, he served as the Group Managing Director in AmMerchant Bank Berhad before assuming

the office of Group Managing Director in AMMB Holdings Berhad. Mr Cheah remains as a

non-independent non-executive Director of AmMerchant Bank Berhad.

His directorships in other public companies include AmInvestment Group Berhad and

AMBB Capital Berhad. Mr Cheah also currently serves on the Board of Employees’ Provident

Fund and Bursa Malaysia Securities Berhad, and is the Alternate Chairman of the Association

of Merchant Banks in Malaysia.

Mr Cheah has a Bachelor of Economics (Honours) degree from the University of Malaya

and is a Fellow of the Institute of Bankers Malaysia.

Encik Mohamed Azmi Mahmood

Encik Mohamed Azmi Mahmood, a Malaysian, aged 51, Managing Director, Retail

Banking, was appointed to the Board of the Bank on 20 December 2001. Encik Mohamed Azmi

first joined Arab-Malaysian Finance Berhad (now known as AMFB Holdings Berhad) in 1981

as an accountant and over the years he rose to become Senior General Manager. In 1989, he

was seconded by Bank Negara Malaysia to First Malaysia Finance Berhad as its Chief

Executive Officer in a rescue scheme of the company. In January 1991, Encik Mohamed Azmi

rejoined Arab-Malaysian Finance Berhad and was promoted to Managing Director on 1 August

1994. He assumed the office of Managing Director of AmFinance Berhad (now known as

AmBank (M) Berhad) with effect from 15 June 2002 after the completion of the acquisition of

MBf Finance Berhad by Arab-Malaysian Finance Berhad. He has more than 20 years of

experience in the banking industry.

Encik Mohamed Azmi is a member of the Executive Committee of the Bank. He is also a

Director and an Audit Committee Member of AmSecurities Sdn Bhd, AmAssurance Berhad and

Malaysian Electronic Payment System (1997) Sdn Bhd, and a Director of Cagamas Berhad. He

is also a Member of the Council and Committee of the Institute of Bankers Malaysia as well as

a Fellow of the Institute of Bankers Malaysia.

Encik Mahdi Morad

Encik Mahdi Morad, a Malaysian, aged 49, was appointed to the Board of the Bank on 26

July 2002. He joined Arab-Malaysian Finance Berhad (now known as AMFB Holdings Berhad)

in 1990 and currently serves as an Executive Director in the Retail Banking Division of the

Bank. Prior to this he held various positions in Asia Commercial Finance Berhad and Sime

Darby Plantations Berhad.

123

Mahdi Morad has a Bachelor of Science degree in Agricultural Business from Iowa State

University and a Master’s degree in Business Administration from the University of Missouri.

He also serves as a Director for various subsidiaries of the Bank, namely, MBf Information

Services Sdn Bhd, MBf Trustees Bhd, Bougainvillea Development Sdn Bhd, AmProperty

Holdings Sdn Bhd and AmCredit & Leasing Sdn Bhd.

The total remuneration (including benefits in kind) paid to the Directors of AmFinance by

AmFinance during the year ended 31 March 2005 amounted to RM2.9 million.

The total remuneration (including benefits in kind) paid to the Directors of ABB by ABB

during the year ended 31 March 2005 amounted to RM1.1 million.

Committees

Under the Bank’s corporate governance structure, the Board of Directors delegates some of its

duties to specific committees. In compliance with statutory requirements, the Board of Directors has

established the following committees:

Overall Management

The Audit & Examination Committee

The Audit & Examination Committee has been appointed by the Board to assist in

discharging its duties of maintaining a sound system of internal control to safeguard the Bank’s

assets and shareholders’ investments. The principal duties and responsibilities of the Audit &

Examination Committee include (i) reviewing of financial statements of the Bank to ensure

compliance with appropriate accounting policies and standards, (ii) reviewing the scope and

audit programme of the external auditors and evaluating their findings, and (iii) reviewing the

scope and audit programme of the internal auditors and reviewing the performance of the

internal audit team to ensure that they have the standing to exercise independence in

discharging their duties. Currently the Audit & Examination Committee consists of three

members, two of whom are independent Non-Executive Directors, and it is chaired by an

independent Non-Executive Director.

The Nomination Committee

The Nomination Committee currently comprises five members and it is chaired by an

independent Non-Executive Director. Four of the five members are Non-Executive Directors

and three of whom are independent Non-Executive Directors. The Nomination Committee is

responsible for regularly reviewing the Board structure, size and composition as well as making

recommendations to the Board of Directors with regard to any changes that are deemed

necessary. It also recommends the appointment of Directors to committees of the Board and

reviews annually the mix of skills and experience and other qualities and competencies that

Non-Executive Directors should bring to the Board.

The Remuneration Committee

All members of the Remuneration Committee are Non-Executive Directors and it is

chaired by an independent Non-Executive Director. This Committee is responsible for

determining and recommending to the Board the framework or Board policy for the

remuneration of the Directors, Chief Executive Officer and other senior management members.

Remuneration is determined by the Remuneration Committee at levels which enable the

Bank to attract and retain the Directors, Chief Executive Officer and senior management staff

with the relevant experience and expertise needed to assist in managing the Bank effectively.

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Risk Management

For effective assessment and management of risk, the Board currently delegates risk

management to the following committees:

The Risk Management Committee of Directors

The Risk Management Committee of Directors oversees senior management’s activities in

managing risk and seeks to ensure that the risk management process is in place and

functioning. This Committee reports directly to the Board of Directors and advises it on risk

issues. It comprises two Non-Executive Directors and is chaired by an independent Non-

Executive Director.

The Credit, Strategic & Capital Risk Management Committee

The Credit, Strategic & Capital Risk Management Committee consists of the Group

Managing Director/CEO and nine members of senior management. This Committee is

responsible for establishing the appropriate risk management policies, measurement and

valuation methodology, acceptable risk exposure levels and establishment of appropriate

operational processes, systems and controls with respect to credit risks and capital level.

The Market & Funding Risk Management Committee

The Market & Funding Risk Management Committee consists of the Group Managing

Director/CEO and eight members of senior management. This Committee is responsible for

establishing appropriate risk management policies, measurement and valuation methodology,

acceptable risk exposure levels and appropriate operational processes, systems and controls

with respect to market and funding risks.

The Operational & Legal Risk Committee

The Operational & Legal Risk Committee consists of the Group Managing Director/CEO

and nine members of senior management. It assists the Group Managing Director/CEO of the

Bank in setting an effective infrastructure and policy framework to manage operational risk and

is also responsible for developing appropriate assessment and measurement procedures and best

practices for the Bank in relation to operational risk issues.

AMMB Group Internal Audit Department

The internal auditing function is conducted by the AMMB Group Internal Audit Department to

ensure consistency in the control environment and the application of policies and procedures. A

systematic and disciplined approach is adopted to provide the required assurance to stakeholders, and

also to add value and improve the Bank’s operations by providing an independent and objective

review.

The AMMB Group Internal Audit Department reports to the Audit & Examination Committee

and the Board of Directors by providing an independent assessment on the effectiveness of the risk

management structure, control systems and methodologies used to manage risks.

The Audit & Examination Committee approves the work of the AMMB Group Internal Audit

Department and monitors and reviews the conclusion of its work. The AMMB Group Internal Audit

Department covers all units and operations within the Bank, with major emphasis being placed on

high risk units. The frequency of audits carried out by the Internal Audit Department depends on the

risk profile of the business or operations unit and high risk units are audited at least once a year.

The audit function carried out by the AMMB Group Internal Audit Department covers all major

business groups and consists of five main categories of work: (1) planned audits, (2) systems

development life-cycle review of major internet technology infrastructure projects, (3) special focus

reviews, (4) mandatory audits and (5) ad-hoc reviews and special assignments.

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The audit plan covers reviews of adequacy of risk management, operational controls,

compliance with law and regulations, quality of assets, management efficiency and level of

customer service amongst others. The audit plans are drawn up based on the inherent business risks

and control risks in each operating unit and their financial significance, and these reviews are on a

risk-based approach, rather than sole compliance.

Senior Management

The senior management of the Bank as at the date of this Offering Circular is set forth

below:

Name Position

Mr Cheah Tek Kuang . . . . . . . . . . . Group Managing Director of AMMB Group/

Chief Executive Officer

Encik Mohamed Azmi Mahmood . . . . Managing Director, Retail Banking

Dato’ James Lim Cheng Poh . . . . . . . Managing Director, Business Banking

Encik Mahdi Morad . . . . . . . . . . . . Executive Director, Retail Banking

Mr Sim How Chuah . . . . . . . . . . . . Senior General Manager

Mr Lam Song Shen . . . . . . . . . . . . Senior General Manager, Group Loan

Rehabilitation

Encik Ahmad Zaini Bin Othman . . . . Senior General Manager, Islamic Banking

Mr Quek Kim Heng . . . . . . . . . . . . General Manager, Business Banking

Mr Man Fuk Lim. . . . . . . . . . . . . . General Manager, Business Banking

Miss Teoh Guat Khim, Celia. . . . . . . General Manager, Business Banking

Mr Michael Lim Tung Kean . . . . . . . General Manager, Business Banking

Mr Lam Yin Chon . . . . . . . . . . . . . General Manager, Business Banking

Mr Chia Swee Yuen . . . . . . . . . . . . General Manager, Risk Management

Mr Ho Fook Meng . . . . . . . . . . . . . General Manager, Business Banking

Mr Andre Lee Ean Chye . . . . . . . . . General Manager, Cash and Trade Services

Management

Mr Leong Fook Heng . . . . . . . . . . . General Manager, Enterprise Banking Unit

Encik Shaharudin Ismail . . . . . . . . . General Manager, Hire Purchase

Encik Abdul Rahman Abdullah Munir . General Manager, Personal Finance

Encik Mohd Zahri Abdullah . . . . . . . General Manager, Branch Network

Tuan Haji Mohamad Sabirin Bin Abdul

Rahman . . . . . . . . . . . . . . . . . .

General Manager, Consumer Sales

Encik Dzulkipli Ibrahim. . . . . . . . . . General Manager, Assets Financing Marketing

Encik Firdaus Samad . . . . . . . . . . . General Manager, Retail Collection

Mr Perry Ong Chin Seng . . . . . . . . . General Manager, Credit Card

Mr Lim Hock Aun . . . . . . . . . . . . . General Manager, Finance

Encik Ishak Bin Ismail . . . . . . . . . . General Manager, Inspection

Encik Suhardi Buyong . . . . . . . . . . . General Manager, Mortgage Fulfillment

Employees

As at 30 September 2005, the Bank had approximately 6,856 employees.

The Bank emphasises human resource policies and training as it recognises the value of its

staff in contributing towards its growth. Training is continuously provided by the Bank to upgrade

the skills level of its staff. Structured training programmes are developed with career path planning

intended to groom staff for advancement with higher retention of high performers. The Bank’s

training aims to improve staff performance in servicing both external and internal customers, thereby

contributing to increasing customer satisfaction and business volume, higher productivity and

profitability for the Bank.

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Currently, the Bank is the only bank in Malaysia that has an in-house employee union.

Previously, before the Merger, ABB belonged to the National Union of Bank Employees. After the

merger, an in-house union was formed. As at 30 September 2005, over 50.0% of the Bank’s

employees belong to the Bank’s in-house union.

Related Party Transactions

From time to time, the Bank enters into transactions with affiliates or related parties. The

Bank’s policy is that such transactions are made on an arm’s-length basis on no less favorable terms

than if such transactions were carried out with unaffiliated third parties. For details of related party

transactions see notes of the financial statements included in this Offering Circular.

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DESCRIPTION OF THE PREFERENCE SHARES

Under the Articles, the Issuer is authorised to provide for the issuance of up to 2,000 non-cumulative guaranteed preference shares of par value U.S.$100,000 per share. Set forth below iscondensed information concerning the Preference Shares and a summary of certain provisions of theIssuer’s Memorandum and Articles of Association (the ‘‘Articles’’), as in effect on the date hereof,insofar as they relate to the rights and privileges of the holders of the Preference Shares. Thesummaries set forth in this Offering Circular contain all material information concerning thePreference Shares but do not purport to be complete and are subject to, and qualified in theirentirety by reference to, the Articles and the resolutions adopted, or to be adopted, by the IssuerBoard establishing the rights, preferences, privileges, limitations and restrictions relating to thePreference Shares. Copies of the Articles and such resolutions or forms of resolutions will be madeavailable to prospective purchasers upon request to the Issuer.

1 Definitions

In the Articles, except to the extent that the context otherwise requires:

‘‘3 month U.S. dollar LIBOR’’ means, in respect of any Preferred Dividend Period falling after

the First Call Date, the three month London interbank offered rate for deposits in U.S. dollars which

appears on page 3750 of Moneyline Telerate as of 11 : 00 a.m., London time, on the second Business

Day prior to the first day of the relevant Preferred Dividend Period; provided that, if, at such time,

no such rate appears or the relevant Moneyline Telerate page is unavailable, it shall mean the rate

calculated by the Calculation Agent as the arithmetic mean of at least two offered quotations

obtained by the Calculation Agent after requesting the principal London offices of each of four

major reference banks in the London interbank market to provide the Calculation Agent with its

offered quotation for deposits for three months in U.S. dollars commencing on the first day of the

relevant Preferred Dividend Period to prime banks in the London interbank market at approximately

11 : 00 a.m., London time, on the second Business Day prior to the first day of the relevant Preferred

Dividend Period and in a principal amount that is representative for a single transaction in U.S.

dollars in that market at that time; provided further that if fewer than two such offered quotations

are provided as requested, it shall mean the rate calculated by the Calculation Agent as the

arithmetic mean of the rates quoted at approximately 11 : 00 a.m., New York time, on the second

Business Day prior to the first day of the relevant Preferred Dividend Period, by three major banks

in New York selected by the Calculation Agent for loans for three months in U.S. dollars to leading

European banks and in a principal amount that is representative for a single transaction in U.S.

dollars in that market at that time; provided however that if the banks selected by the Calculation

Agent are not quoting as mentioned above, it shall mean three month U.S. dollar LIBOR as

determined by the Calculation Agent at its discretion;

‘‘Account Holder’’ means a person who holds an account directly with BMD and not through a

Depository Agent;

‘‘Additional Amounts’’ has the meaning given to that term in Clause 7;

‘‘Alternative Stock Exchange’’ means any of the SGX-ST or the Stock Exchange of Hong Kong

Limited;

‘‘BMD’’ means Bursa Malaysia Depositary Sdn Bhd.;

‘‘BMD Register’’ means the register maintained by BMD in respect of Book-Entry Securities;

‘‘BNM’’ means Bank Negara Malaysia and shall include any successor organisation responsible

for the supervision of banks in Malaysia;

‘‘Bank’’ means AmBank (M) Berhad;

‘‘Bank Board’’ means the board of directors of the Bank for the time being;

‘‘Bank Group’’ means the Bank together with its Subsidiaries taken as a whole;

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‘‘Book-Entry Securities’’ means the securities of a corporation that are listed on any Designated

Stock Exchange and have not been delisted or had its quotation removed:

(a) the documents evidencing title to which are deposited by a Depositor with BMD and are

registered in the name of the Depository or its nominee; and

(b) which are transferable by way of book-entry in the BMD Register and not by way of an

instrument of transfer;

‘‘Business Day’’ means a day other than a Saturday or Sunday on which commercial banks and

foreign exchange markets settle payments in U.S. dollars and are open for general business in New

York City and London;

‘‘Calculation Agent’’ means such entity as the Issuer Board (or an authorised committee

thereof) shall appoint to act as calculation agent and notified to Holders in the manner described in

Clause 11;

‘‘Capital Disqualification Event’’ means a change in BNM regulations or the application or

official interpretation thereof occurring after 20 January 2006 as a result of which, for the purposes

of capital adequacy requirements applicable to banks in Malaysia at that time, the Preference Shares

will not by their terms be eligible for inclusion in the Tier 1 Capital of the Bank;

‘‘Capital Disqualification Event Redemption Date’’ means any date designated for redemption

of the Preference Shares following the occurrence of a Capital Disqualification Event pursuant to the

provisions of Clause 5.4;

‘‘Clearstream, Luxembourg’’ means Clearstream Banking, societe anonyme;

‘‘Companies Act’’ means the Companies Act 1965 of Malaysia;

‘‘Company Registrar’’ means the person appointed as Registrar of Companies pursuant to the

Offshore Companies Act;

‘‘Compulsory Payment’’ has the meaning given to that term in Clause 3.7;

‘‘Day Count Fraction’’ means in respect of any period ending (x) on or prior to the First Call

Date, the number of days in the relevant period divided by 360 (the number of days to be calculated

on the basis of a year of 360 days with 12 30-day months and in the case of an incomplete month

the actual number of days elapsed) and (y) after the First Call Date, the actual number of days in the

relevant period divided by 360;

‘‘Depositor’’ means an Account Holder or a Depository Agent, but does not include a Sub-

Account Holder;

‘‘Depository Agent’’ means a person approved by BMD which:

(a) performs services as a depository agent for Sub-Account Holders in accordance with the

terms of a depository agent agreement between BMD and such depository agent;

(b) deposits Book-Entry Securities with BMD on behalf of the Sub-Account Holders; and

(c) establishes an account in its name with BMD;

‘‘Designated Stock Exchange’’ means the LFX and the SGX-ST for so long as the Preference

Shares are listed or quoted on the LFX and the SGX-ST or such other stock exchange in respect of

which the Preference Shares are listed or quoted and where such stock exchange deems such listing

or quotation to be the primary listing or quotation of the Preference Shares;

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‘‘Distributable Funds’’ means, at any time, the aggregate amount of:

(i) the profit and any accumulated retained earnings and any other reserves and surpluses of

each member of the Bank’s consolidated group available for distribution as cash dividends

to shareholders of the Bank under the companies laws of, and generally accepted

accounting principles in, Malaysia (but before deduction of the amount of any dividend or

other distribution declared on the Bank’s ordinary share capital in respect of such

preceding financial year), as calculated as of the end of the immediately preceding

financial year of the Bank; and

(ii) any profit, accumulated retained earnings and other reserves and surpluses of each

member of the Bank’s consolidated group available for distribution as cash dividends to

shareholders of the Bank under the companies laws of, and generally accepted accounting

principles in, Malaysia which have accrued or accumulated since the end of the

immediately preceding financial year up to the relevant Preferred Dividend Determination

Date, as determined by the Bank Board and certified by any two Directors of the Bank

(which certificate shall be binding absent manifest error and shall be available for

inspection by Holders at the offices of the Principal Paying Agent);

‘‘Euroclear’’ means Euroclear Bank S.A./N.V. as operator of the Euroclear system;

‘‘First Call Date’’ means 27 January 2016;

‘‘Global Certificate’’ has the meaning given to that term in Clause 12.2;

‘‘Guaranteed Payments’’ means, collectively (i) any declared but unpaid Preferred Dividends

for the most recent Preferred Dividend Period, (ii) any Compulsory Payments, (iii) any cash amounts

to which the Holders are entitled pursuant to these terms in respect of redemption of the Preference

Shares, (iv) any Liquidation Distribution to which the Holders are entitled pursuant to these terms

and (v) for the avoidance of doubt, any Additional Amounts;

‘‘Holder’’ means each person registered as a shareholder on the Register as holding such

Preference Share at the relevant time;

‘‘Issue Date’’ means 27 January 2006;

‘‘Issuer’’ means AMBB Capital (L) Ltd, a corporation with limited liability organised under the

laws of Labuan and a wholly-owned subsidiary of the Bank;

‘‘Issuer Board’’ means the board of directors of the Issuer for the time being;

‘‘Junior Obligations’’ means (i) ordinary shares of the Bank, (ii) any preferred or preference

shares or similar securities or other obligations of the Bank that rank junior to the Subordinated

Guarantee, (iii) any security or other obligation of a Subsidiary including the Issuer (other than the

Preference Shares) entitled to the benefit of a guarantee, support agreement or other similar

undertaking of the Bank that ranks junior to the Subordinated Guarantee and (iv) any such

guarantees, support agreements or similar undertakings of the Bank;

‘‘LFX’’ means the Labuan International Financial Exchange Inc.;

‘‘Labuan’’ means the Federal Territory of Labuan, Malaysia;

‘‘Liquidation Distribution’’ means, upon a dissolution or winding-up of the Issuer, (i) the

Liquidation Preference together with an amount equal to any accrued but unpaid Preferred Dividend

(whether or not declared) from (and including) the commencement of the Preferred Dividend Period

in which the date of the dissolution or winding-up falls to (but excluding) the date of actual payment

and (ii) for the avoidance of doubt, any Additional Amounts;

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‘‘Liquidation Parity Obligations’’ means (i) the most senior preferred or preference shares or

similar securities of the Bank, (ii) other obligations of the Bank and any guarantee, support

agreement or other similar undertaking of the Bank, in each case ranking pari passu with the

Subordinated Guarantee as regards entitlement to distributions on liquidation or on a return of assets

thereunder and (iii) any preferred or preference share or security or other obligation of a Subsidiary

of the Bank including the Issuer, entitled to the benefit of a guarantee, support agreement or other

similar undertaking of the Bank, which guarantee, support agreement or other similar undertaking

ranks pari passu with the Subordinated Guarantee as regards entitlement to distributions on

liquidation or on a return of assets thereunder;

‘‘Liquidation Preference’’ means one hundred thousand United States dollars (U.S.$100,000)

per Preference Share;

‘‘Make Whole Amount’’ means, in respect of a Preference Share, an amount equal to the sum

of:

(i) the present value of its Liquidation Preference; and

(ii) the present value of each remaining scheduled Preferred Dividend (assuming the same to

have been declared) to (and including) the First Call Date, discounted from (a) in relation

to the Liquidation Preference, the First Call Date and (b) in relation to each such

remaining scheduled Preferred Dividend, the relevant Preferred Dividend Payment Date,

in each case, to the Capital Disqualification Event Redemption Date or Tax Event

Redemption Date, as the case may be, at a rate equal to the sum of (x) 0.50 per cent. and

(y) the U.S. Treasury Yield on a semi-annual compounding basis (rounded to four decimal

places) at 3.00 p.m. (London time) on the fifth Business Day prior to the relevant Capital

Disqualification Event Redemption Date or Tax Event Redemption Date, as the case may

be;

‘‘Margin’’ means 2.90%;

‘‘Offshore Companies Act’’ means the Offshore Companies Act, 1990 of Labuan together with

any amendments or revisions thereto;

‘‘Optional Redemption Date’’ means the First Call Date and each Preferred Dividend Payment

Date thereafter;

‘‘Ordinary Shares’’ has the meaning given to that term in Clause 2.1;

‘‘Parity Obligations’’ means Liquidation Parity Obligations and Preferred Dividend Parity

Obligations;

‘‘Principal Paying Agent’’ means Citibank, N.A., London Branch or such entity or entities

having an office outside Malaysia as the Issuer Board (or an authorised committee thereof) shall

appoint, in each case notified to the Holders in the manner described in Clause 11;

‘‘Permitted Reorganisation’’ means a solvent reconstruction, amalgamation, reorganisation,

merger or consolidation whereby all or substantially all the business, undertakings and assets of the

Bank are transferred to a successor entity which assumes all the obligations of the Bank under the

Subordinated Guarantee;

‘‘Preference Shares’’ means the U.S.$200,000,000 Fixed-to-Floating Rate Step-up Non-

cumulative Non-voting Guaranteed Preference Shares of the Issuer;

‘‘Preferred Dividends’’ means the non-cumulative cash dividends on the Preference Shares as

described in Clause 3 and ‘‘Preferred Dividend’’ has a corresponding meaning; where applicable, the

term ‘‘Preferred Dividend’’ shall also include any Additional Amounts due and payable with respect

thereto;

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‘‘Preferred Dividend Determination Date’’ means the date which is 20 business days in

Malaysia immediately preceding a Preferred Dividend Payment Date;

‘‘Preferred Dividend Parity Obligations’’ means (i) the most senior preferred or preference

shares or similar securities of the Bank, (ii) other obligations of the Bank and any guarantee, support

agreement or other similar undertaking of the Bank, in each case ranking pari passu with the

Subordinated Guarantee as regards entitlement to distributions thereunder and (iii) any preferred or

preference share or security or other obligation of a Subsidiary, including the Issuer, entitled to the

benefit of a guarantee, support agreement or other similar undertaking of the Bank which guarantee,

support agreement or other similar undertaking ranks pari passu with the Subordinated Guarantee as

regards entitlement to distributions thereunder;

‘‘Preferred Dividend Payment Date’’ means, with respect to the Preference Shares, 27 January

and 27 July in each year commencing 27 July 2006 up to (and including) the First Call Date and

thereafter 27 January, 27 April, 27 July and 27 October in each year commencing 27 April 2016

provided that where a Preferred Dividend Payment Date falling after the First Call Date is not a

Business Day, it shall be postponed to the next day that is a Business Day;

‘‘Preferred Dividend Period’’ means the period from (and including) the Issue Date to (but

excluding) the first Preferred Dividend Payment Date and each period thereafter from (and

including) a Preferred Dividend Payment Date to (but excluding) the next following Preferred

Dividend Payment Date;

‘‘Preferred Dividend Rate’’ means (x) for each Preferred Dividend Period from (and including)

the Issue Date to (but excluding) the First Call Date, 6.77% of the Liquidation Preference per

Preference Share per annum and (y) for each Preferred Dividend Period thereafter, a floating rate per

annum equal to 3 month U.S. dollar LIBOR plus the Margin;

‘‘Redemption and Purchase Conditions’’ means that the prior written consent of (i) the Bank to

the redemption or purchase as applicable and (ii) BNM to the redemption or purchase, as applicable,

if then required, has been obtained and that any conditions that BNM may impose at the time of any

consent, if then required, have been satisfied;

‘‘Redemption Date’’ means an Optional Redemption Date, a Tax Event Redemption Date or a

Capital Disqualification Event Redemption Date, as applicable;

‘‘Redemption Price’’ means an amount equal to the Liquidation Preference, together with an

amount equal to any accrued but unpaid Preferred Dividends (whether or not declared) from (and

including) the commencement of the Preferred Dividend Period in which the relevant Redemption

Date falls to (but excluding) the relevant Redemption Date and, for the avoidance of doubt, any

Additional Amounts;

‘‘Register’’ means the register of Holders maintained on behalf of the Issuer by the Registrar

outside Malaysia;

‘‘Registrar’’ means Citigroup Global Markets Deutschland AG & Co. KGaA or such other

entity having its office outside Malaysia as the Issuer Board (or an authorised committee thereof)

shall appoint, in each case notified to the Holders in the manner described in Clause 11;

‘‘Relevant Proportion’’ means (i) in relation to any partial payment of a Preferred Dividend, the

amount of Distributable Funds as of the Preferred Dividend Determination Date divided by the sum

of (a) the full amount originally scheduled to be paid by way of Preferred Dividend on the relevant

Preferred Dividend Payment Date and (b) the sum of the full amount of any dividends or other

distribution or payments originally scheduled to be paid in respect of Parity Obligations on the

relevant Preferred Dividend Payment Date converted where necessary into the same currency in

which Distributable Funds are calculated by the Bank; and (ii) in relation to any partial payment of

any Liquidation Distribution, the total amount available for any such payment and for making any

liquidation distribution on any Parity Obligations divided by the sum of (a) the full Liquidation

Distribution before any reduction or abatement under the Articles and (b) the amount (before any

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reduction or abatement under the Articles or the terms of such Parity Obligations) of the full

liquidation distribution on such Parity Obligations, converted where necessary into the same

currency in which liquidation payments are made to creditors of the Bank;

‘‘Replacement Instrument’’ means any debt securities or instruments issued by a Malaysian tax

resident member of the Bank Group having substantially the same terms as the Subordinated Loan

including those relating to interest rate, which will be equal to the then current Preferred Dividend

Rate on the Preference Shares;

‘‘SGX-ST’’ means Singapore Exchange Securities Trading Limited;

‘‘Securities Act’’ has the meaning given to that term in Clause l2.2;

‘‘Senior Obligations’’ means, in relation to the Bank, all liabilities of the Bank other than any

liability ranking pari passu with or junior to the Subordinated Guarantee;

‘‘Special Redemption Price’’ means the higher of the Redemption Price and the Make Whole

Amount;

‘‘Sub-Account Holder’’ means a holder of an account maintained with a Depository Agent;

‘‘Subordinated Guarantee’’ means the subordinated guarantee of the Bank in respect of the

Preference Shares as set out in the Deed of Guarantee dated 27 January 2006, executed by the Bank

for the benefit of the Holders;

‘‘Subordinated Loan’’ means a subordinated loan by the Issuer to the Bank of the proceeds of

the issue of the Preference Shares;

‘‘Subsidiary’’ means any entity which is for the time being a subsidiary of the Bank (within the

meaning given to this term in the Companies Act);

‘‘Substitute Preference Shares’’ has the meaning given to that term in Clause 6.1;

‘‘Substitution Event’’ means that (i) the Bank’s total capital adequacy ratio or Tier 1 Capital

ratio calculated on a consolidated basis or the Bank’s total capital adequacy ratio or Tier 1 Capital

ratio calculated on an unconsolidated basis, in each case calculated in accordance with BNM’s

published capital adequacy requirements from time to time applicable to the Bank, has fallen below

the then applicable minimum ratio applicable to the Bank; (ii) the Bank Board in its sole discretion

has notified BNM and the Issuer that it has determined, in view of the Bank’s deteriorating financial

condition, that any of the events described in (i) above is expected to occur in the near term; (iii)

proceedings have been commenced for a winding-up of the Bank; (iv) BNM has assumed control of

the Bank under Section 73(2) of the Banking and Financial Institutions Act 1989 of Malaysia (or any

successor statute); or (v) an administrator for the Bank has been appointed;

‘‘Tax Event’’ means that (i) as a result of any change in, or amendment to, any law or

regulation of Malaysia or any political subdivision or any authority thereof or therein having power

to tax, or any change in the general application or official interpretation of any law or regulation by

any relevant body in Malaysia occurring after 20 January 2006 (a) payments to Holders would be

subject to deduction or withholding for or on account of tax or would give rise to any obligation of

the Issuer to account for any tax in Malaysia, or (b) payments by the Bank or any Malaysian tax

resident member of the Bank Group in respect of the Subordinated Loan or any Replacement

Instrument and/or the Subordinated Guarantee would be subject to deduction or withholding for or

on account of tax in Malaysia, or (ii) the Issuer or the Bank, in relation to the Preference Shares or

the Subordinated Guarantee, or the Bank or any Malaysian tax resident member of the Bank Group

in respect of the Subordinated Loan or any Replacement Instrument, is or would be required to pay

more than a de minimis amount of Malaysian tax or (iii) the Bank or any such Malaysian tax

resident member of the Bank Group would not obtain relief for the purposes of Malaysian corporate

tax for the payment of interest in respect of the Subordinated Loan or any Replacement Instrument,

and in each case such obligation cannot be avoided by the Bank or the Issuer, as the case may be,

taking reasonable measures available to it (which may include, in the case of the Bank, the

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substitution as the branch of account in respect of such Subordinated Loan of another branch of the

Bank, or the head office of the Bank, or the establishment of a new branch to be the branch of

account in respect of such Subordinated Loan);

‘‘Tax Event Redemption Date’’ means any date designated for redemption of the Preference

Shares following the occurrence of a Tax Event pursuant to the provisions of Clause 5.3;

‘‘Taxes’’ has the meaning given to that term in Clause 7;

‘‘Tier 1 Capital’’ has the meaning ascribed to it in the BNM’s published capital adequacy

requirements from time to time; and

‘‘U.S. Treasury Yield’’ means the yield calculated by the Calculation Agent, under the heading

which represents the average for the immediately prior week, appearing in the most recently

published statistical release designated as ‘‘H.15 (519)’’ or any successor publication which is

published by the Board of Governors of the Federal Reserve system and which establishes yields on

actively traded U.S. Treasury securities adjusted to constant maturity under the caption ‘‘Treasury

Constant Maturities’’, for the maturity most closely corresponding to the First Call Date.

2 Share Capital

2.1 The authorised share capital of the Issuer is divided into 250,000 ordinary shares of par

value one United States dollar (U.S.$1.00) per share (the ‘‘Ordinary Shares’’) and

following amendment of the articles of association of the Issuer on or about 23 January

2006, 2,000 Preference Shares of par value 100,000 United States dollars (U.S.$100,000)

per share, each such class of shares having the rights hereinafter appearing.

2.2 Subject as herein provided, all shares in the Issuer for the time being unissued shall be

under the control of the Issuer Board (or an authorised committee thereof), which may

allot and dispose of or grant options over the same to such persons, on such terms and in

such manner as it may think fit and it may in its absolute discretion refuse to accept any

application for shares.

2.3 Ordinary Shares shall only be issued at par value to, and may only be held by, the Bank

or any wholly owned Subsidiary or any nominee for the Bank or any such Subsidiary.

2.4 Subject as hereinafter provided, the Issuer may allot and issue preference shares for cash

in such currency or currencies as may be specified by the Issuer Board (or an authorised

committee thereof) at or prior to the time of issuance, in one or more series, with such

designations, dividend rights, liquidation preferences per share, redemption provisions,

conversion provisions, voting rights and other rights, preferences, privileges, limitations

and restrictions as shall be set forth in the resolutions of the Issuer Board (or an

authorised committee thereof) providing for the issue thereof. The Preference Shares shall

have the rights hereinafter appearing and as specified in the resolutions of the Issuer

Board (or an authorised committee thereof) providing for the issue thereof. Any further

issuances by the Issuer of any shares in its capital from time to time as redeemable

preference shares subject to and in accordance with the Offshore Companies Act and the

Articles shall be for the purpose only of raising funds for the redemption of the

Preference Shares (as further set out in Clause 5.6 below) and shall have such rights and

shall bear such designation as the Issuer Board (or an authorised committee thereof) shall

prescribe prior to their issue.

2.5 Subject to Clause 2.4, the terms upon which and the price per share at which further

issuances of preference shares shall be issued and the time of each such issue shall be

determined by the Issuer Board (or an authorised committee thereof).

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3 Preferred Dividends

3.1 Subject as provided by the Offshore Companies Act and Clauses 3.3, 3.4 and 3.7,

Preferred Dividends shall accrue with respect to the Preference Shares from the Issue

Date and shall be payable in arrear on each Preferred Dividend Payment Date when, as

and if declared by the Issuer Board (or an authorised committee thereof). If the Issuer

Board (or an authorised committee thereof) does not declare a dividend payable on a

Preferred Dividend Payment Date (either due to the limitations set out in Clause 3.3

below or otherwise), then, subject to the rights of the Holders under the Subordinated

Guarantee and as otherwise provided herein, the right of such Holders to receive a

Preferred Dividend in respect of the Preferred Dividend Period ending on the relevant

Preferred Dividend Payment Date shall be lost and the Issuer shall have no obligation to

pay the Preferred Dividend accrued for such Preferred Dividend Period or to pay any

interest thereon whether or not Preferred Dividends are declared for any future Preferred

Dividend Period.

3.2 Subject as provided by the Offshore Companies Act and Clauses 3.1, 3.3 and 3.4,

Preferred Dividends in respect of any Preferred Dividend Period will be payable at the

Preferred Dividend Rate on the Liquidation Preference. In respect of each Preferred

Dividend Payment Date falling on or prior to the First Call Date, the amount of each

Preferred Dividend payable in respect of the Liquidation Preference of each Preference

Share shall be U.S.$3,385. In respect of each Preferred Dividend Period falling after the

First Call Date, the Calculation Agent will at, or as soon as practicable after, each time at

which a Preferred Dividend Rate is to be determined, determine the Preferred Dividend

Rate for the relevant Preferred Dividend Period and the Preferred Dividend payable on the

Preferred Dividend Payment Date relating to that Preferred Dividend Period. Each such

determination will be notified to the Issuer, the Registrar, the Principal Paying Agent, the

LFX and the SGX-ST and the Holders in accordance with Clause 11 before the

commencement of such Preferred Dividend Period.

3.3 Preferred Dividends will be non-cumulative and will, in respect of any period prior to the

First Call Date which is less than a full Preferred Dividend Period and in respect of any

period after the First Call Date, accrue in accordance with the Day Count Fraction.

Subject as provided by the Offshore Companies Act, this Clause and Clauses 3.1 and 3.4,

Preferred Dividends will be payable out of the Issuer’s own legally available resources on

a Preferred Dividend Payment Date. Notwithstanding the existence of resources legally

available for distribution by the Issuer, neither the Issuer nor the Bank will, save to the

extent provided in Clause 3.7, be obligated to pay any Preferred Dividend or make any

payment in respect of any Preferred Dividend or make any payment under the

Subordinated Guarantee:

3.3.1 to the extent that such payment of Preferred Dividends (if paid in full), together with

the sum of any other dividends and other distributions paid or scheduled to be paid

(whether or not paid in whole or part) to holders of Preferred Dividend Parity

Obligations on the relevant Preferred Dividend Payment Date, would exceed the

Distributable Funds as of the Preferred Dividend Determination Date immediately

preceding such Preferred Dividend Payment Date; or

3.3.2 even if Distributable Funds are sufficient, (a) to the extent that such payment of

Preferred Dividends and/or dividends or other distributions on Preferred Dividend

Parity Obligations or under the Subordinated Guarantee would breach or cause or

continue a breach of BNM published capital adequacy requirements from time to

time applicable to the Bank or (b) the Bank Board (or an authorised committee

thereof) in its sole discretion has notified BNM and the Issuer that it has determined

that (a) above is expected to occur in the near term.

3.4 If, whether by reason of the provisions of Clause 3.3 or any equivalent article or term of a

Preferred Dividend Parity Obligation, on the relevant Preferred Dividend Payment Date, a

Preferred Dividend is not paid in full or dividends or other distributions are not paid in

full on any Preferred Dividend Parity Obligations, but on such Preferred Dividend

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Payment Date there are sufficient Distributable Funds so as to allow payment of part of

any Preferred Dividend, then each Preference Share will entitle its Holder to receive the

Relevant Proportion in respect of such Preferred Dividend. No Holder shall have any

claim in respect of any Preferred Dividend or part thereof not payable as a result of the

limitations set out in Clause 3.3. Accordingly, such amount will not accumulate for the

benefit of the Holders or entitle such Holders to any claim in respect thereof against the

Issuer or the Bank under the Subordinated Guarantee.

3.5 On each Preferred Dividend Determination Date, the Bank Board (or an authorised

committee thereof) will determine whether sufficient Distributable Funds exist as of such

Preferred Dividend Determination Date to allow a payment of some or all of the relevant

Preferred Dividend. In the event that any Preferred Dividend cannot be paid in full, (i) the

Bank Board (or an authorised committee thereof) will notify or procure notification, no

later than the day following the relevant Preferred Dividend Determination Date, to the

Issuer, the Principal Paying Agent, the Registrar, the LFX and the SGX-ST and the Issuer

Board (or the Principal Paying Agent on its behalf) upon receipt of such notice shall

notify the Holders, in accordance with Clause 11, of the fact and of the amount, if any, to

be paid in respect of that Preferred Dividend and (ii) the Issuer shall deliver to the

Registrar a certificate signed by two directors of the Bank stating such fact and the

amount, if any, to be paid in respect of that Preferred Dividend.

3.6 Save as described above, Holders will have no right to participate in the profits of the

Issuer or the Bank and, in particular, will have no rights to receive from the Issuer

amounts paid under any Subordinated Loan or any Replacement Instrument in excess of

Preferred Dividends with respect to the Preference Shares due and payable under the

Preference Shares as provided herein. If any amounts received by the Issuer exceed the

amount (if any) then due by way of Preferred Dividend under the Preference Shares, the

amount of such excess will be paid to the Bank by way of distribution on the Ordinary

Shares and Holders will have no rights in respect thereof.

3.7 Notwithstanding Clauses 3.1 and 3.3 but subject as provided by the Offshore Companies

Act, if the Bank, the Issuer or any other Subsidiary (a) pays any distribution or makes any

other payment on or in respect of any class of Preferred Dividend Parity Obligations or

Junior Obligations (other than in the form of Junior Obligations) or (b) redeems,

repurchases or otherwise acquires any class of Junior Obligations (other than any Junior

Obligations in existence on 20 January 2006 which contain a mandatory obligation to

redeem, repurchase or otherwise acquire such Junior Obligations), then, in each case, the

Issuer will be required, subject to the Bank having sufficient Distributable Funds available

at the relevant time to make such payment, to declare and pay Preferred Dividends on the

Preference Shares on one of more Preferred Dividend Payment Dates contemporaneous

with, or following, such distribution or other payment or redemption, repurchase or other

acquisition (each such payment of Preferred Dividends a ‘‘Compulsory Payment’’), as

follows:

3.7.1 in the case of (a) above:

(i) payment of the full amount of the Preferred Dividend payable on the

Preference Shares on each of the next two Preferred Dividend Payment Dates

(in the case of Preferred Dividend Payment Dates falling on or prior to the

First Call Date) or the next four Preferred Dividend Payment Dates (in the case

of Preferred Dividend Payment Dates falling after the First Call Date) if the

distribution or other payment on the Preferred Dividend Parity Obligation or

Junior Obligation, as the case may be, is made in respect of an annual period;

and

(ii) payment of the full amount of the Preferred Dividend payable on the

Preference Shares on the next Preferred Dividend Payment Date (in the case

of Preferred Dividend Payment Dates falling on or prior to the First Call Date)

or each of the next two Preferred Dividend Payment Dates (in the case of

Preferred Dividend Payment Dates falling after the First Call Date) if the

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distribution or other payment on the Preferred Dividend Parity Obligation or

Junior Obligation, as the case may be, is made in respect of a semi-annual

period or shorter periods; and

3.7.2 in the case of (b) above, payment of the full amount of the Preferred Dividend

payable on the Preference Shares on each of the next two Preferred Dividend

Payment Dates (in the case of Preferred Dividend Payment Dates falling on or prior

to the First Call Date) or the next four Preferred Dividend Payment Dates (in the

case of Preferred Dividend Payment Dates falling after the First Call Date),

provided that for the avoidance of doubt, the amount of any Compulsory Payments

payable pursuant to Clause 3.7.1(i) or Clause 3.7.2 above shall not exceed the amount of

Preferred Dividends payable in respect of a period of 12 calendar months.

Promptly following the occurrence of an event in (a) or (b) above, the Issuer’s Board will

notify or procure notification of such occurrence to the Issuer, the Principal Paying Agent,

the Registrar, and shall notify the Holders, in accordance with Clause 11.

4 Liquidation Distributions

4.1 Without prejudice to Clause 9.5, in the event of the commencement of any bankruptcy,

winding-up, liquidation or dissolution of the Issuer before any redemption in full of the

Preference Shares or any substitution of the Preference Shares with Substitute Preference

Shares under Clause 6, the Holders at that time will be entitled to receive the Liquidation

Distribution, in respect of each Preference Share held, out of the assets of the Issuer

available for distribution to such Holders under the Offshore Companies Act. Such

entitlement will arise after the claims (if any) of all other creditors of the Issuer which do

not rank pari passu with or junior to the Preference Shares but before any distribution is

made to the holders of the Ordinary Shares.

Notwithstanding the availability of sufficient assets of the Issuer to pay any Liquidation

Distribution to Holders of the Preference Shares as aforesaid, if, at the time such

Liquidation Distribution is to be paid, proceedings are pending or have been commenced

for the voluntary or involuntary liquidation, dissolution or winding-up of the Bank other

than pursuant to a Permitted Reorganisation, the Liquidation Distribution payable per

Preference Share shall not exceed the amount per Preference Share that would have been

paid as a liquidation distribution out of the assets of the Bank had the Preference Shares

been issued by the Bank (whether or not the Bank could in fact have issued such

securities at such time) and ranked:

(a) junior to all Senior Obligations of the Bank;

(b) pari passu with Liquidation Parity Obligations of the Bank; and

(c) senior to all Junior Obligations of the Bank.

4.2 If the Liquidation Distribution and any other such liquidation distributions cannot be

made in full by reason of the limitation described in Clause 4.1, but there are funds

available for payment so as to allow payment of part of the Liquidation Distribution, then

each Preference Share will entitle its Holder to receive the Relevant Proportion in respect

of the Liquidation Distribution. The Issuer shall notify the Registrar, the Principal Paying

Agent and the Holders of the amount of the Liquidation Distribution, or the Relevant

Proportion thereof, if applicable, as soon as reasonably practicable after it has been

determined. After payment of the Liquidation Distribution, or the Relevant Proportion, if

applicable, the holders of the Ordinary Shares will be entitled to any remaining assets of

the Issuer available for distribution and Holders will have no right or claim to any of the

remaining assets of the Issuer or the Bank.

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4.3 In the event of an order being made for the liquidation, dissolution or winding-up of the

Bank other than pursuant to a Permitted Reorganisation or a declaration being made that

the Bank is insolvent, the Issuer Board shall convene an extraordinary general meeting for

the purpose of proposing a special resolution to dissolve the Issuer and the amount per

Preference Share to which Holders will be entitled as a Liquidation Distribution will be as

described in Clauses 4.1 and 4.2.

4.4 Subject to the Offshore Companies Act, other than in the event referred to in Clause 4.3,

unless (i) BNM has given its consent, if then required, and (ii) the Bank has sufficient

Distributable Funds in an amount at least equal to the aggregate Liquidation Distribution,

neither the Issuer Board nor the Issuer will permit, or take any action and the Bank has

undertaken in the Subordinated Guarantee that it will not permit, or take any action that

would or might cause, the liquidation, dissolution or winding-up of the Issuer.

5 Redemption and Purchase

5.1 The Preference Shares are perpetual securities with no fixed final Redemption Date and

Holders have no rights at any time to call for the redemption of the Preference Shares.

Subject to the provisions in this Clause 5, any redemption of Preference Shares shall

require only a resolution of the Issuer Board.

5.2 The Preference Shares may be redeemed (or, if sub-paragraph (ii) of Clause 5.6 applies,

purchased by the Bank) in whole but not in part, at the option of the Issuer, subject to the

satisfaction of the Redemption and Purchase Conditions and to the Offshore Companies

Act, on any Optional Redemption Date upon not less than 30 nor more than 60 days’

notice to the Holders in accordance with Clause 11 (which notice shall be irrevocable)

specifying the Optional Redemption Date at the Redemption Price. Where a notice of

redemption has been given in accordance with the foregoing, the Issuer shall also notify

the Registrar, the Principal Paying Agent and the Holders of the Redemption Price as

soon as reasonably practicable after it has been determined (and in any event not later

than the second Business Day before the Optional Redemption Date). Upon the expiry of

such notice, the Issuer (or the Bank) shall be bound to redeem (or purchase) the

Preference Shares by payment of the Redemption Price in accordance with and subject to

the Offshore Companies Act.

5.3 If at any time a Tax Event has occurred and is continuing, then either (i) the Issuer may

elect to substitute the Substitute Preference Shares for the Preference Shares in the

manner provided in Clause 6 as if such event were a Substitution Event, or (ii) the

Preference Shares may be redeemed (or, if sub-paragraph (ii) of Clause 5.6 applies,

purchased by the Bank), in whole but not in part, at the option of the Issuer, subject to

the satisfaction of the Redemption and Purchase Conditions and to the Offshore

Companies Act, at any time prior to the First Call Date upon not less than 30 nor

more than 60 days’ notice to the Holders in accordance with Clause 11 (which notice

shall be irrevocable) specifying the Tax Event Redemption Date, at (x) in the case of

redemption pursuant to clause (i) of the definition of ‘‘Tax Event’’, the Redemption Price,

and (y) in the case of redemption pursuant to clause (ii) or (iii) of the definition of ‘‘Tax

Event’’, the Special Redemption Price (unless such event in (ii) or (iii) is caused by any

change in, or amendment to, any law or regulation of Malaysia or any political

subdivision or any authority thereof or therein having power to tax, or any change in the

general application or official interpretation of any law or regulation by any relevant body

in Malaysia occurring after 20 January 2006, in which case, the Redemption Price).

Where a notice of redemption has been given in accordance with the foregoing sentence,

the Issuer shall also notify the Registrar, the Principal Paying Agent and the Holders in

accordance with Clause 11 of the Redemption Price or the Special Redemption Price, as

applicable, as soon as reasonably practicable after it has been determined (and in any

event not later than the second Business Day before the Tax Event Redemption Date).

Prior to the publication of any notice of redemption pursuant to the foregoing, the Issuer

shall deliver to the Registrar a certificate signed by two directors of the Bank stating that

the Issuer is entitled to effect such redemption and an opinion of legal counsel to the

Bank of recognised standing experienced in such matters to the effect that a Tax Event

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has occurred (and specifying which of clauses (i) to (iii) as set out in the definition of

‘‘Tax Event’’ is applicable). The delivery of such opinion shall constitute conclusive

evidence of the occurrence of a ‘‘Tax Event’’ for all purposes of the Articles. Upon the

expiry of such notice, the Issuer (or the Bank) shall be bound to redeem (or purchase) the

Preference Shares by the payment of the Redemption Price or the Special Redemption

Price, as applicable, in accordance with and subject to the Offshore Companies Act.

5.4 If at any time a Capital Disqualification Event has occurred and is continuing, either (i)

the Issuer may elect to substitute the Substitute Preference Shares for the Preference

Shares in the manner provided in Clause 6 as if such event were a Substitution Event, or

(ii) the Preference Shares may be redeemed (or, if sub-paragraph (ii) of Clause 5.6

applies, purchased by the Bank), in whole but not in part, at the option of the Issuer,

subject to the satisfaction of the Redemption and Purchase Conditions and to the Offshore

Companies Act, at any time prior to the First Call Date upon not less than 30 nor more

than 60 days’ notice to the Holders in accordance with Clause 11 (which notice shall be

irrevocable) specifying the Capital Disqualification Event Redemption Date, at the Special

Redemption Price. Where a notice of redemption has been given in accordance with the

foregoing, the Issuer shall also notify the Registrar, the Principal Paying Agent and the

Holders in accordance with Clause 11 of the Special Redemption Price as soon as

reasonably practicable after it has been determined (and in any event not later than the

second Business Day before the Capital Disqualification Event Redemption Date). Prior to

the publication of any notice of redemption pursuant to the foregoing, the Issuer shall

deliver to the Registrar a certificate signed by two directors of the Bank stating that the

Issuer is entitled to effect such redemption and an opinion of legal counsel to the Bank of

recognised standing experienced in such matters to the effect that a Capital

Disqualification Event has occurred. The delivery of such opinion shall constitute

conclusive evidence of the occurrence of a ‘‘Capital Disqualification Event’’ for all

purposes of the Articles. Upon the expiry of such notice, the Issuer (or the Bank) shall be

bound to redeem (or purchase) the Preference Shares by the payment of the Special

Redemption Price in accordance with and subject to the Offshore Companies Act.

5.5 Subject to the satisfaction of the Redemption and Purchase Conditions, the Issuer, the

Bank or any of its Subsidiaries may purchase or otherwise acquire, any of the Preference

Shares at any time. Subject to the foregoing, the Issuer, the Bank or any of its

Subsidiaries may at any time and from time to time purchase outstanding Preference

Shares by tender, in the open market or by private agreement. Any Preference Shares so

purchased by the Issuer shall be immediately cancelled in accordance with the Offshore

Companies Act and shall form part of the authorised but unissued share capital of the

Issuer. The Issuer may make any payment in respect of such a purchase as is authorised

by the Offshore Companies Act, including out of capital.

5.6 To effect redemption of the Preference Shares, the Issuer must have sufficient legally

available resources to enable it to pay in full the aggregate Redemption Price or Special

Redemption Price, as the case may be, of the Preference Shares. If the Issuer does not

have such resources: (i) the Issuer shall issue ordinary shares or further preference shares

to the Bank in an amount equal to the aggregate Redemption Price or Special Redemption

Price, as the case may be, of the Preference Shares, and apply the proceeds of such

issuance towards redemption of the Preference Shares; or (ii) if the Issuer is unable for

any reason to issue ordinary shares or further preference shares as described in (i) above,

the Issuer shall procure that the Bank purchases the Preference Shares from the Holders at

an amount equal to the aggregate Redemption Price or Special Redemption Price, as the

case may be, of the Preference Shares.

5.7 Following any redemption or purchase and cancellation with respect to Preference Shares

pursuant to this Clause 5, the Issuer and the Bank shall promptly notify the LFX and the

SGX-ST of the number of Preference Shares that remain outstanding, if any.

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6 Substitution by Substitute Preference Shares

6.1 As soon as reasonably practicable following the occurrence of a Substitution Event or

following an election by the Issuer in accordance with Clauses 5.3 or 5.4 and providing

no notice of redemption has been given in accordance with Clause 5, the Issuer

undertakes, and the Bank has undertaken in the Subordinated Guarantee to the extent it is

legally able to do so at the relevant time, to take all reasonable steps to cause the

substitution for, and in satisfaction of the rights of the Holders with respect to, the

Preference Shares of fully-paid non-cumulative redeemable perpetual preference shares

issued directly by the Bank having economic terms which are in all material respects

equivalent (as more fully set out in the following Clause) to those of the Preference

Shares and the Subordinated Guarantee taken together (the ‘‘Substitute Preference

Shares’’) as at the date of the issuance of the Substitute Preference Shares.

The Substitute Preference Shares shall be denominated in RM and shall be issued at the

rate of one Substitute Preference Share with a liquidation preference equal to the RM

equivalent at the time of U.S.$100,000 for each Preference Share with a Liquidation

Preference of U.S.$100,000, and shall, among other things, provide economic terms that

are equivalent to those of the Preference Shares in respect of the non-cumulative nature of

the dividends thereon, the ranking of the securities and the rights attaching to the

securities in respect of rights on a winding-up of the Bank. Any dividends payable in

respect of the Substitute Preference Shares shall be calculated by applying the Preferred

Dividend Rate to an amount in RM equal to the liquidation preference of US$100,000,

converted into US dollars at the prevailing RM/USD spot rate, and shall following such

conversion into US dollars be payable to holders of the Substitute Preference Shares. Any

liquidation distribution payable in respect of the Substitute Preference Shares in the event

of the liquidation, dissolution or winding-up of the Bank shall be an amount in RM equal

to US$100,000 converted into US dollars at the prevailing RM/USD spot rate plus any

accrued and unpaid dividends (whether or not declared) calculated from and including the

immediately preceding dividend payment date to but excluding the date of payment, and

any additional amounts thereon, in each case payable in cash only. The Substitute

Preference Shares shall be redeemable and will contain provisions similar to those

contained in Clauses 5.2, 5.3 and 5.4; provided that (i) for purposes of Clause 5.3, ‘‘Tax

Event’’ shall mean, with respect to the Substitute Preference Shares, that, as a result of a

change after the date of issuance of such Substitute Preference Shares in any law or

regulation of Malaysia, or in the official interpretation or application of any law or

regulation by any relevant body in Malaysia, payments to holders with respect to such

Substitute Preference Shares would be subject to deduction or withholding for or on

account of tax or would give rise to any obligation to account for any tax in Malaysia at a

rate in excess of the rate in effect immediately prior to such substitution; and (ii) for

purposes of Clause 5.4, ‘‘Capital Disqualification Event’’ shall mean, with respect to the

Substitute Preference Shares that for any reason for the purposes of BNM’s capital

adequacy requirements applicable to banks in Malaysia at that time such Substitute

Preference Shares will not by their terms be eligible for inclusion in the Tier 1 Capital of

the Bank.

6.2 The Bank has undertaken in the Subordinated Guarantee that it will at all times while the

Preference Shares are outstanding, have a sufficient amount of authorised but unissued

Substitute Preference Shares available to enable substitution thereof in accordance with

this Clause 6. The Bank has further undertaken in the Subordinated Guarantee that as

soon as practicable after the occurrence of a Substitution Event or following an election

by the Issuer in accordance with Clauses 5.3 or 5.4, the Bank will give written notice to

the Holders in accordance with Clause 11 enclosing a substitution confirmation form

which each Holder will be required to complete. To receive Substitute Preference Shares,

each such Holder must deliver to the Principal Paying Agent the duly completed

substitution confirmation together with any certificate representing its holding of the

Preference Shares. Any such substitution shall be effected subject in each case to any

applicable fiscal laws or other laws or regulations. Following such substitution, dividends

will accrue on the Substitute Preference Shares from (and including) the Preferred

Dividend Payment Date with respect to the Preference Shares immediately preceding the

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allotment of such Substitute Preference Shares. Following any substitution pursuant to this

Clause 6, the Issuer and the Bank shall promptly notify the SGX-ST and the LFX of the

number of Preference Shares that remain outstanding, if any.

6.3 If the Preference Shares are at the time listed on one or more stock exchange and/or held

with one or more depositary or clearing system, as soon as practicable following the

issuance of the Substitute Preference Shares, the Bank has undertaken in the Subordinated

Guarantee to use its best endeavours to:

(i) procure that the Substitute Preference Shares will at the relevant time be listed on

the same stock exchange as the Preference Shares are then listed, or if the rules of

such stock exchange at the relevant time do not allow such listing, on any

Alternative Stock Exchange or such other exchange as the Holders of not less than

50% in Liquidation Preference of the outstanding Preference Shares may agree; and

(ii) obtain all necessary regulatory approvals in relation to the listing of and payments

under or in relation to the Substitute Preference Shares,

and, upon issuance, the Bank will use best endeavours to procure the clearing of such

Substitute Preference Shares through the same depositary(ies) or clearing system(s).

6.4 The Bank has undertaken in the Subordinated Guarantee that if Substitute Preference

Shares are issued (i) upon a Substitution Event, Holders may elect (a) to receive such

Substitute Preference Shares in certificated form or (b) to require the Bank to issue such

Substitute Preference Shares to a depositary (or a nominee or agent for such depositary)

which will issue depositary receipts representing such Substitute Preference Shares to a

clearing system (or a nominee for such clearing system); or (ii) other than upon a

Substitution Event, the Bank will issue such Substitute Preference Shares to a depositary

(or a nominee or agent for such depositary) which will issue depositary receipts

representing such Preference Shares to a clearing system (or a nominee for such clearing

system), and in each event set forth in clauses (i) and (ii) above, the Bank will pay any

taxes or capital duties or stamp duties or other similar taxes payable in Malaysia arising

on the allotment and issue of Substitute Preference Shares. The Bank will not be obligated

to pay, and each Holder delivering such Preference Shares and a duly completed

substitution confirmation to a paying agent must pay, any other taxes, stamp duty reserve

taxes and capital, stamp, issue and registration duties arising on the relevant substitution.

The Bank will not be obligated to pay, and each such Holder must pay, all, if any, taxes

arising from any disposal or deemed disposal of the Preference Shares in connection with

such substitution.

6.5 Certificates (if any) representing Substitute Preference Shares will be despatched by mail

free of charge (but uninsured and at the risk of the person entitled thereto) within one

month after receipt of a duly completed substitution confirmation. If Substitute Preference

Shares are required to be issued, Holders will continue to be entitled to receive Preferred

Dividends and/or a Liquidation Distribution with respect to the Preference Shares until

such time as notice is given by the Bank in accordance with Clause 11 that Substitute

Preference Shares are available for issue upon substitution. Thereafter the Holders will

have no further rights, title or interest in or to the Preference Shares or under the

Subordinated Guarantee. Subject to the Offshore Companies Act, upon an involuntary

dissolution or winding-up of the Issuer occurring after the occurrence of a Substitution

Event or an election by the Issuer in accordance with Clauses 5.3 or 5.4 but prior to the

substitution being effected, Holders will have no further rights, title or interest in or to

the Preference Shares or under the Subordinated Guarantee except the right to have their

respective Preference Shares substituted in the manner described above.

7 Withholding Taxes

All payments on the Preference Shares will be made free and clear by the Issuer without

deduction or withholding for or on account of any present or future taxes, duties, assessments or

government charges of whatever nature (‘‘Taxes’’) imposed or levied by or on behalf of Malaysia or

141

any authority thereof or therein having power to tax, unless deduction or withholding of such Taxes

is required by law. In the event that any such withholding or deduction in respect of any payment on

the Preference Shares is required, the Issuer will pay such additional amounts (‘‘Additional

Amounts’’) as will result in the receipt by the Holders of the amounts which would otherwise have

been receivable in respect of such payment on the Preference Shares in the absence of such

withholding or deduction, provided that no such Additional Amounts shall be payable in respect of

any of the Preference Shares:

7.1 to or on behalf of a Holder or beneficial owner with respect to the Preference Shares who

is (a) treated as a resident of Malaysia or a permanent establishment in Malaysia for tax

purposes or (b) who is liable for such taxes, duties, assessments or governmental charges

in respect of the Preference Shares by reason of his, her or its being connected with

Malaysia other than by reason only of the holding of any of the Preference Shares (or

benefiting from the Subordinated Guarantee) or the receipt of Preferred Dividends, the

Redemption Price or the Special Redemption Price with respect to the Preference Shares

or under the Subordinated Guarantee; or

7.2 to the extent that such Taxes would not have been required to be deducted or withheld but

for the failure to comply by the Holder or beneficial owner with respect to the Preference

Shares with a request of the Issuer addressed to such Holder to make any declaration of

non-residence or other similar claim, which is required or imposed by a statute, treaty or

administrative practice of Malaysia, as the case may be, as a precondition to exemption

from all or part of such Taxes.

8 Payments

8.1 Preferred Dividends will be payable subject to the Offshore Companies Act and as

otherwise provided herein on the relevant Preferred Dividend Payment Date (or, where

any Preferred Dividend Payment Date is not a Business Day, on the next Business Day

immediately following such Preferred Dividend Payment Date, without interest in respect

of such delay) to the Holders of record of the Preference Shares as they appear on the

Register on the relevant record date, which will be five Business Days prior to the

relevant Preferred Dividend Payment Date. Payment will be made to a common depository

for Euroclear or Clearstream, Luxembourg (or its nominee) if such clearing agencies

appear as the Holders of record on the Register on the relevant record date. If the Issuer

gives a notice of redemption pursuant to Clause 5.2, 5.3 or 5.4 in respect of the

Preference Shares, then, on the Redemption Date, the Issuer shall procure that the

Redemption Price or the Special Redemption Price, as the case may be, will be paid by

the Registrar or the Principal Paying Agent on behalf of the Issuer to the Holders. Upon

such payment, all rights of Holders to participate in the assets of the Issuer or to receive

any amount in respect of the Preference Shares or under the Subordinated Guarantee will

be extinguished and each Holder shall thereupon cease to be a shareholder of the Issuer.

8.2 In the event that Preference Shares are issued in certificated form as set out in Clause

12.4, subject to all applicable fiscal or other laws and regulations, a Holder shall receive

payment of amounts due to it in respect of the Preference Shares by direct transfer to an

account maintained by the Holder with a bank arranged by the Principal Paying Agent in

accordance with the direct transfer instructions received by the Registrar at least five

Business Days prior to the relevant date of payment; provided that if in the opinion of the

Principal Paying Agent, it is illegal or impracticable for payment to be made by direct

transfer as aforesaid:

8.2.1 each payment in respect of Preferred Dividends will be made by cheque and mailed

on the relevant Preferred Dividend Payment Date to the Holder of record at such

Holder’s address as it appears on the Register on the relevant record date for the

Preference Shares; and

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8.2.2 any payment of amounts in respect of the Redemption Price or the Special

Redemption Price, as the case may be, or the Liquidation Distribution (or Relevant

Proportion thereof) will be made by cheque against presentation and surrender of the

relevant certificate of entitlement at the office of the Registrar or any paying agent,

Holders will not be entitled to any interest or other payment for any delay after the due

date in receiving the amount due if the due date is not a Business Day, if the Holder is

late in surrendering certificates (if required to do so) or if a cheque mailed in accordance

with this Clause arrives after the due date for payment.

In the event that payment of the Redemption Price or the Special Redemption Price, as

the case may be, is improperly withheld or refused and not paid by the Issuer, Preferred

Dividends, subject as described in Clauses 3.1 and 3.3, will continue to accrue on a day-

by-day basis compounding annually, from the Redemption Date to the date of actual

payment of the Redemption Price, or the Special Redemption Price, as the case may be.

8.3 The Issuer will, and the Bank has undertaken in the Subordinated Guarantee that it will

procure that the Issuer will, maintain at all times while the Preference Shares are in issue,

(a) a paying agent outside Malaysia, and (b) a Registrar having its office outside

Malaysia. The Issuer Board (or an authorised committee thereof) may prescribe at any

time further provisions with respect to the relevant paying agent or Registrar, including

the location of such parties.

9 Voting Rights

9.1 Except as described below and provided by the Offshore Companies Act, Holders will not

be entitled to receive notice of or attend or vote at any meeting of shareholders of the

Issuer or participate in the management of the Issuer.

9.2 If in respect of two consecutive Preferred Dividend Periods, in the case of Preferred

Dividend Periods ending on or before the First Call Date, or thereafter for any four

consecutive Preferred Dividend Periods (subject, for the avoidance of doubt, to a

maximum period of 12 calendar months):

9.2.1 Preferred Dividends (including for the avoidance of doubt, any Additional Amounts

payable thereon) have not been paid in full; or

9.2.2 the Bank has not made Guaranteed Payments under the Subordinated Guarantee in

respect of such Preferred Dividends (including for the avoidance of doubt, any

Additional Amounts),

then the Holders of the outstanding Preference Shares, acting as a single class, will be

entitled, by written notice to the Issuer given by Holders of at least a majority in

Liquidation Preference of all such Preference Shares or by resolution passed by Holders

of at least a majority in Liquidation Preference of all such Preference Shares, and present

in person or by proxy at an extraordinary meeting of all such Holders convened for the

purpose, to appoint two additional members of the Issuer Board, to remove any such

member from office and to appoint in place another such member.

Not later than 30 days after such entitlement arises, if the written notice of such Holders

in the circumstances described in the preceding Clause has not been given as provided for

in the preceding Clause, the Issuer Board (or an authorised committee thereof) will

convene an extraordinary meeting for the purpose. If the Issuer fails to convene such

meeting within such 30-day period, such Holders of 10% in Liquidation Preference of all

such Preference Shares, as a single class, will be entitled to convene such a meeting for

the purpose. The Articles contain provisions concerning the convening and conduct of

meetings of holders of preference shares of all series.

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Any director so appointed shall, subject to the terms of such other preference shares,

vacate office if, after his or her appointment Preferred Dividends in respect of the next

two consecutive Preferred Dividend Periods, in the case of Preferred Dividend Periods

ending on or before the First Call Date, or thereafter for the next four consecutive

Preferred Dividend Periods (subject, for the avoidance of doubt, to a maximum period of

12 calendar months) have been paid in full or an amount equivalent to the Preferred

Dividends in respect of the next two consecutive Preferred Dividend Periods, in the case

of Preferred Dividend Periods ending on or before the First Call Date, or thereafter for

the next four consecutive Preferred Dividend Periods have been irrevocably set aside in a

separately designated trust account for payment to the Holders.

9.3 The consent in writing of the Holders of at least a majority in Liquidation Preference of

the outstanding Preference Shares or the sanction of a resolution, passed at an

extraordinary meeting by Holders of at least a majority in Liquidation Preference of

the outstanding Preference Shares present in person or by proxy, shall be required in order

to give effect to any variation or abrogation of the rights, preferences and privileges of

the Preference Shares by way of amendment of the Articles or otherwise (including,

without limitation, the authorisation or creation of any securities or ownership interests of

the Issuer ranking, as to participation in the profits or assets of the Issuer, senior to the

Preference Shares) (unless otherwise required by applicable law). No such consent or

sanction shall be required if the change is solely of a formal, minor or technical nature, or

is to correct an error or cure an ambiguity; provided that, the change does not reduce the

amounts payable to Holders, impose any material obligation on the Holders or materially

and adversely affect their voting rights; and provided, further; that the rights of a Holder

relating to the amount of Preferred Dividends, Liquidation Distributions or, for the

avoidance of doubt, any Additional Amounts or the amount received upon redemption of

the Preference Shares or the date of the First Call Date may not be varied or abrogated

without the written consent of such Holder; and provided, further, that no provision of the

Preference Shares may be amended without the prior written consent of BNM if then

required.

9.4 Notwithstanding the foregoing, no vote of the Holders will be required for the

redemption, purchase, cancellation or substitution of the Preference Shares in

accordance with the Articles.

9.5 Subject to the Offshore Companies Act, the Issuer may not be dissolved while the

Preference Shares are in issue, unless a resolution approving such action is passed at an

extraordinary meeting attended by Holders of at least a majority in Liquidation Preference

of the outstanding Preference Shares. Such approval shall not be required if the

dissolution of the Issuer is proposed or initiated because of the liquidation, dissolution or

winding-up of the Bank.

9.6 Any Preference Share at any time owned by the Bank or any entity (i) of which the Bank

either directly or indirectly, owns 20% or more of the voting shares or similar ownership

interests or (ii) which is a Subsidiary of the Bank, shall not carry a right to vote either by

written resolution or in a meeting of Holders of Preference Shares or at any meeting

called to vote for the election of directors pursuant to Clause 9.2 and shall, for voting

purposes, be treated as if it were not in issue other than in the case of the approval

required by Clause 9.5.

9.7 The Issuer will cause a notice of any meeting at which Holders are entitled to vote and

any voting forms to be mailed to each Holder, in accordance with Clause 11. Each such

notice will include a statement setting forth (a) the date, time and place of such meeting,

(b) a description of any resolution to be proposed for adoption at such meeting on which

such Holders are entitled to vote and (c) instructions for the delivery of proxies.

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10 Covenants of the Issuer

The Issuer shall not engage in any activities other than (i) issuing the Preference Shares, (ii)

lending the proceeds from such issuance pursuant to clause (i) to the Bank or any other Malaysian

tax resident member of the Bank Group, (iii) issuing ordinary shares to the Bank in accordance with

the Subordinated Guarantee, and (iv) issuing any ordinary shares or further preference shares to the

Bank, the proceeds of which will be utilised to redeem the Preference Shares, and (v) conducting

other activities reasonably incidental to (i) to (iv).

11 Notices

All notices to the Holders will be mailed to such Holders of record at their respective addresses

in the Register and shall be deemed to have been given on the weekday (being a day other than a

Saturday or a Sunday) after the date of mailing; provided however that, if the Preference Shares are

listed on a stock exchange (and the rules of that exchange so require), notices will also be published

in accordance with the requirements of such stock exchange. Notwithstanding the foregoing, all

notices shall also be sent to Clearstream, Luxembourg and Euroclear. Any such notice shall be

deemed to have been given on the date of such publication or, if published more than once or on

different dates, on the first date on which such publication is made.

12 Transfers and Form

12.1 The Preference Shares will be issued in registered form.

12.2 On or about the closing date of the offering of the Preference Shares, a single global

preference share certificate (the ‘‘Global Certificate’’) representing the Preference Shares

will be deposited with Citibank, N.A., London Branch (the ‘‘Common Depositary’’) as

common depositary for Euroclear and Clearstream, Luxembourg. The Global Certificate

will be registered in the name of Citvic Nominees Limited as nominee for the Common

Depositary. For so long as the Global Certificate is deposited and registered as described

above, book-entry interests in the Preference Shares will be shown on, and transfers of

such interests will be effected only through, records maintained by Euroclear and

Clearstream, Luxembourg.

12.3 Except in the limited circumstances described in Section 12.4 below, owners of beneficial

interests in the Global Certificate will not be entitled to receive physical delivery of

certificated Preference Shares. The Preference Shares are not issuable in bearer form.

12.4 The Preference Shares will be issued in certificated form only in exchange for the Global

Certificate if Euroclear or Clearstream, Luxembourg is closed for business for a

continuous period of 14 days (other than by reason of holidays, statutory or otherwise)

or announces an intention permanently to cease business or does in fact do so. In such

event, a number of Preference Shares corresponding to its book-entry interest in the

Preference Shares represented by the Global Certificate held by the Common Depositary

referred to above will be transferred to each holder of an interest in the Preference Shares

whose name is notified by the Common Depositary to the Registrar. Each holder will be

registered as a Holder in the Register and receive a certificate made out in its name.

Other than in the circumstances referred to in this Clause, definitive certificates will not

be available to Holders.

13 Replacement Certificates

If a certificate evidencing Preference Shares is damaged or defaced or alleged to have been

lost, stolen or destroyed, a new certificate representing the same Preference Share may be issued on

payment of such fee and on such terms (if any) as to evidence and indemnity and the payment of

out-of-pocket expenses as the Issuer may think fit and on payment of the costs of the Issuer

incidental to its investigation of the evidence and, if damaged or defaced, on delivery up of the old

certificate at the specified office of the Principal Paying Agent.

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14 Prescription

Any Preferred Dividends, Redemption Price or Special Redemption Price, as the case may be,

or Liquidation Distribution unclaimed for 10 years after having been declared may be forfeited by

the Issuer Board and shall revert to the Issuer and after such forfeiture no Holder or other person

shall have any right to or claim in respect of any such payments.

15 Governing Law

The Preference Shares shall be governed by, and construed in accordance with, Malaysian law.

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DESCRIPTION OF THE SUBORDINATED GUARANTEE

Set forth below is summary information concerning the Subordinated Guarantee. This summarycontains all material information concerning the Subordinated Guarantee but does not purport to becomplete. References to provisions of the Deed of Guarantee are qualified in their entirety byreference to the Deed of Guarantee, a copy of which will be made available to prospective investorsupon request to the Bank.

1 Definitions

As used in the Deed of Guarantee, capitalised terms not defined herein shall have the meanings

ascribed to them in the Articles (as defined below) and unless the context otherwise requires:

‘‘Articles’’ means the articles of association of the Issuer as of 23 September 2005, as

amended and restated on or about 23 January 2006, and as the same may be amended from

time to time;

‘‘this Subordinated Guarantee’’ means the guarantee as set forth in Clause 2;

‘‘Issuer’’ means AMBB Capital (L) Ltd, a corporation with limited liability organised

under the laws of Labuan and a wholly-owned subsidiary of the Bank;

‘‘Preference Shares’’ means the U.S.$200,000,000 Fixed-to-Floating Rate Step-up Non-

cumulative Non-voting Guaranteed Preference Shares of the Issuer;

‘‘Purchase Condition’’ means that the prior written consent of BNM to the purchase, if

then required, has been obtained and that any conditions that BNM may impose at the time of

any consent, if then required, have been satisfied.

2 Subordinated Guarantee

2.1 Subject to the exceptions and limitations contained in the following provisions of this

Clause 2, the Bank hereby irrevocably agrees to pay in full to the Holders the Guaranteed

Payments, as and when due, to the extent that such payments shall not have been paid by

the Issuer to the Holders, regardless of any defence, right of set-off or counterclaim which

the Issuer may have or assert. This Subordinated Guarantee is continuing and irrevocable.

The rights of the Holders to receive from the Bank Guaranteed Payments are subordinated

so as to rank, in the event of the winding-up of the Bank, (i) junior to the Senior

Obligations of the Bank, (ii) pari passu with the Liquidation Parity Obligations of the

Bank, and (iii) senior only to all Junior Obligations of the Bank. The rights of the Holders

against the Bank under this Subordinated Guarantee will, in the event of the winding-up

of the Bank, rank pari passu with claims of the Issuer under the Subordinated Loan and

any Replacement Instruments.

In the event of the Bank making any Guaranteed Payment to the Holders, the Issuer will

allot and issue at par such number of ordinary shares of par value of U.S.$100,000 per

share in the name of the Bank as shall equal the aggregate amount of the Guaranteed

Payment so made.

2.2 Notwithstanding Clause 2.1, the Bank will not, save to the extent of any Compulsory

Payment, be obligated to make any Guaranteed Payment:

2.2.1 to the extent that such payment in respect of Preferred Dividends (if paid in full),

together with the sum of any other dividends and other distributions paid or

scheduled to be paid (whether or not paid in whole or part) to holders of Preferred

Dividend Parity Obligations on the relevant Preferred Dividend Payment Date, would

exceed the Distributable Funds as of the Preferred Dividend Determination Date

immediately preceding such Preferred Dividend Payment Date; or

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2.2.2 even if Distributable Funds are sufficient, (a) to the extent that such payment in

respect of Preferred Dividends and/or dividends or other distributions on Preferred

Dividend Parity Obligations would breach or cause or continue a breach of BNM

published capital adequacy requirements from time to time applicable to the Bank or

(b) the Bank Board (or an authorised committee thereof) in its sole discretion has

notified BNM and the Issuer that it has determined that (a) above is expected to

occur in the near term.

2.3 On each Preferred Dividend Determination Date, the Bank Board (or an authorised

committee thereof) will determine whether sufficient Distributable Funds exist as of such

Preferred Dividend Determination Date to allow a payment of some or all of the Preferred

Dividends to which such Guaranteed Payments relate. In the event that any Preferred

Dividend with respect to the Preference Shares to which such Guaranteed Payments relate

cannot be paid in full, (i) the Bank Board (or an authorised committee thereof) will notify

or procure notification, no later than the day following the relevant Preferred Dividend

Determination Date, to the Issuer, the Principal Paying Agent, the Registrar, the LFX and

the SGX-ST and the Issuer Board (or the Principal Paying Agent on its behalf) upon

receipt of such notice shall notify the Holders in accordance with Article 2A.11 of the

Articles, of the fact and of the amount, if any, to be paid in respect of such Preferred

Dividend to which such Guaranteed Payments relate and (ii) the Bank shall deliver to the

Issuer (for onward delivery to the Registrar) a certificate signed by two directors of the

Bank stating such fact and the amount, if any, to be paid in respect of that Preferred

Dividend to which such Guaranteed Payments relate.

2.4 Notwithstanding Clause 2.1, if, at the time that a Guaranteed Payment in respect of the

Liquidation Distribution is to be paid by the Bank under this Subordinated Guarantee,

proceedings are pending or have been commenced for the voluntary or involuntary

liquidation, dissolution or winding-up of the Bank other than pursuant to a Permitted

Reorganisation, payment under this Subordinated Guarantee of such Guaranteed Payment

in respect of such Liquidation Distribution shall not exceed the amount per Preference

Share that would have been paid as a liquidation distribution out of the assets of the Bank

had the Preference Shares been issued by the Bank (whether or not the Bank could in fact

have issued such securities at such time) and ranked:

(a) junior to all Senior Obligations of the Bank;

(b) pari passu with Liquidation Parity Obligations of the Bank; and

(c) senior to all Junior Obligations of the Bank.

2.5 In the event that Guaranteed Payments with respect to the Preference Shares cannot be

paid in full by reason of the conditions referred to in Clause 2.2, then each Preference

Share will entitle its Holder to receive the Relevant Proportion in respect of such

Guaranteed Payment; provided that no Holder shall have any claims in respect of amounts

not payable as a result of the conditions in Clause 2.2 and the obligations of the Bank in

respect of any such unpaid amount shall lapse.

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2.6 All payments under the Subordinated Guarantee will be made free and clear by the Bank

without deduction or withholding for or on account of any present or future taxes, duties,

assessments or government charges of whatever nature (‘‘Taxes’’) imposed or levied by or

on behalf of Malaysia or any authority thereof or therein having power to tax, unless

deduction or withholding of such Taxes is required by law. In the event that any such

withholding or deduction in respect of any payment under the Subordinated Guarantee is

required, the Bank will pay such additional amounts (‘‘Additional Amounts’’) as will

result in the receipt by the Holders of the amounts which would otherwise have been

receivable in respect of such payment under the Subordinated Guarantee in the absence of

such withholding or deduction, provided that no such Additional Amounts shall be

payable in respect of any Guaranteed Payment:

2.6.1 for the benefit of a Holder or beneficial owner with respect to the Preference Shares

who is (a) treated as a resident of Malaysia or a permanent establishment in

Malaysia for tax purposes or (b) who is liable for such taxes, duties, assessments or

governmental charges in respect of the Preference Shares by reason of his, her or its

being connected with Malaysia other than by reason only of the holding of any of

the Preference Shares (or benefiting from the Subordinated Guarantee) or the receipt

of Preferred Dividends or other amounts with respect to the Preference Shares or

Guaranteed Payments under the Subordinated Guarantee; or

2.6.2 to the extent that such Taxes would not have been required to be deducted or

withheld but for the failure to comply by the Holder or beneficial owner with respect

to the Preference Shares with a request of the Bank addressed to such Holder to

make any declaration of non-residence or other similar claim, which is required or

imposed by a statute, treaty or administrative practice of Malaysia, as the case may

be, as a precondition to exemption from all or part of such Taxes.

2.7 The obligations, covenants, agreements and duties of the Bank under the Subordinated

Guarantee shall in no way be affected, impaired or discharged by reason of the happening

from time to time of any of the following:

2.7.1 the release or waiver, by operation of law or otherwise, of the performance or

observance by the Issuer of any express or implied agreement, covenant, term or

condition relating to the Preference Shares to be performed or observed by or on

behalf of the Issuer; or

2.7.2 the extension of time for the payment by or on behalf of the Issuer of all or any

portion of any Preferred Dividend, the Redemption Price or the Special Redemption

Price, as the case may be, the Liquidation Distribution or any other sums payable

under the terms of the Preference Shares or the extension of time for the

performance of any other obligation under, arising out of, or in connection with

the Preference Shares; or

2.7.3 any failure, omission, delay or lack of diligence on the part of Holders to enforce,

assert or exercise any right, privilege, power or remedy conferred on such Holders

pursuant to the terms of the Preference Shares, or any action on the part of the

Issuer granting indulgence or extension of any kind; or

2.7.4 the voluntary or involuntary winding-up, dissolution, amalgamation, reconstruction,

sale of any collateral, receivership, insolvency, bankruptcy, assignment for the

benefit of creditors, reorganisation, arrangement, composition or readjustment of

debt of, or other similar proceedings affecting, the Issuer or any of the assets of the

Issuer; or

2.7.5 any invalidity of, or defect or deficiency in, the Preference Shares; or

2.7.6 the settlement or compromise of any obligation guaranteed hereby or hereby

incurred.

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There shall be no obligation on the Holders to give notice to, or obtain consent of, the

Bank with respect to the happening of any of the foregoing.

2.8 The Deed of Guarantee shall be deposited with and held by the Registrar until all the

obligations of the Bank have been discharged in full. The Bank hereby acknowledges the

right of every Holder to the production of, and the right of every Holder to obtain a copy

of, the Deed of Guarantee from the Registrar.

2.9 A Holder may enforce this Deed of Guarantee directly against the Bank, and the Bank

waives any right or remedy to require that any action be brought against the Issuer or any

other person or entity before proceeding against the Bank. Subject to Clause 2.10, all

waivers contained in the Deed of Guarantee shall be without prejudice to the right to

proceed against the assets of the Issuer as permitted by the terms of the Preference

Shares. The Bank agrees that the Deed of Guarantee shall not be discharged except by

complete performance of all obligations of the Bank under the Deed of Guarantee or

under the circumstances set out in Clause 4.

2.10 The Bank shall be subrogated to any and all rights of the Holders against the assets of the

Issuer in respect of any amounts paid to the Holders by the Bank under the Deed of

Guarantee. The Bank shall not (except to the extent required by mandatory provisions of

law) exercise any rights which it may acquire by way of subrogation or any indemnity,

reimbursement or other agreement, in all cases as a result of a payment under the Deed of

Guarantee, if, at the time of any such payment, any amounts are due and unpaid under the

Deed of Guarantee. If the Bank shall receive or be paid any amount with respect to the

Preference Shares in violation of the preceding sentence, the Bank agrees to pay over

such amount to the Holders.

2.11 The Bank acknowledges that its obligations hereunder are several and independent of the

obligations of the Issuer with respect to the Preference Shares and that the Bank shall be

liable as principal and sole obligor hereunder to make the payments undertaken to be

made by it pursuant to the terms of the Subordinated Guarantee, notwithstanding the

occurrence of any event referred to in Clause 2.7.

2.12 Following a failure by the Bank to make a Guaranteed Payment on the due date therefor

which failure continues for more than 5 days, a Holder may commence legal proceedings

against the Bank to enforce its payment obligations under the Deed of Guarantee. Upon

obtaining judgment against the Bank, the Holder may petition for the winding-up of the

Bank based on such judgment and may claim in the liquidation of the Bank in accordance

with the terms of such judgment, but no other remedy shall be available to such Holder.

2.13 No Holder may exercise, claim or plead any right of set-off, counterclaim or retention

owed to it by the Bank arising under or in connection with the Deed of Guarantee. Each

Holder shall be deemed to have waived all such rights of set-off, counterclaim or

retention to the fullest extent permitted by law. If at any time any Holder receives

payment or benefit of any sum in respect of the Deed of Guarantee (including any benefit

received pursuant to any such set-off, counterclaim or retention) other than in accordance

with the Deed of Guarantee, the payment of such sum or receipt of such benefit shall, to

the fullest extent permitted by law, be deemed void for all purposes and such Holder,

shall agree as a separate and independent obligation that any sum or benefit so received

shall be paid or returned by such Holder to the Bank upon demand by the Bank, whether

or not such payment or receipt shall have been deemed void under the Deed of Guarantee.

Any sum so paid or returned shall then be treated for the purposes of the Bank’s

obligations as if it had not been paid by the Bank, and its original payment shall be

deemed not to have discharged any of the obligation of the Bank under this Deed of

Guarantee.

2.14 In the event of the winding-up of the Bank, if any payment or distribution of assets of the

Bank of any kind or character, whether in cash, property or securities, including any such

payment or distribution which may be payable or deliverable by reason of the payment of

any other indebtedness of the Bank being subordinated to the payment of amounts owing

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under this Deed of Guarantee, shall be received by any Holders, before the Senior

Obligations of the Bank have been paid in full, such payment or distribution shall be held

in trust by the Holder, as applicable, and shall be immediately returned by it to the

liquidator of the Bank and in that event the receipt by the liquidator shall be a good

discharge to the relevant Holder. Thereupon, such payment or distribution will be deemed

not to have been made to, or received by, the relevant Holder.

2.15 The Bank hereby waives notice of acceptance of the Deed of Guarantee and of any

liability to which it applies or may apply, presentment, demand for payment, protest,

notice of non-payment, notice of dishonor, notice of redemption and all other notices and

demands.

3 Undertakings

So long as any of the Preference Shares are outstanding, the Bank hereby covenants and

undertakes with each Holder that:

3.1 (a) unless the Bank is itself being wound up, it will not permit, or take any action that

would or might cause, the liquidation, dissolution or winding-up of the Issuer otherwise

than (i) with the prior written approval of BNM (if then required), and (ii) if the Bank has

sufficient Distributable Funds in an amount at least equal to the aggregate Liquidation

Distribution and (b) the Issuer will at all times be a directly or indirectly wholly-owned

subsidiary of the Bank, unless BNM shall have given its prior written approval (if then

required) and unless, in the case of (b), otherwise approved by each Holder;

3.2 it will have a sufficient amount of authorised but unissued share capital for the issuance

of the Substitute Preference Shares to permit the substitution thereof for all outstanding

Preference Shares and undertakes to take all reasonable steps to cause such substitution

including ensuring that all corporate authorisations will have been taken for the allotment

and issue of the same free from pre-emptive rights;

3.3 it shall to the extent it is legally able to do so at the relevant time, allot, issue and deliver

Substitute Preference Shares with respect to the Preference Shares in satisfaction of the

rights of the Holders with respect to the Preference Shares in the circumstances described

in the terms of the Preference Shares contained in the Articles, such Substitute Preference

Shares having the rights and being subject to the conditions set out in the Articles;

3.4 as soon as practicable after the occurrence of a Substitution Event or following an

election by the Issuer upon the occurrence of a Tax Event or a Capital Disqualification

Event, it shall give written notice to the Holders in accordance with the terms of the

Preference Shares enclosing a substitution confirmation form which each Holder will be

required to complete;

3.5 if the Preference Shares are then listed on a stock exchange and/or held by a depositary or

clearing system, as soon as practicable following the issuance of the Substitute Preference

Shares, it will use its best endeavours to:

(i) procure that the Substitute Preference Shares will at the relevant time be listed on

the same stock exchange as the Preference Shares are then listed, or if the rules of

such stock exchange at the relevant time do not allow such listing, on any

Alternative Stock Exchange or such other exchange as the Holders of not less than

50% in Liquidation Preference of the outstanding Preference Shares may agree; and

(ii) obtain all necessary regulatory approvals in relation to the listing of and payments

under or in relation to the Substitute Preference Shares,

and, upon issuance, the Bank will use best endeavours to procure the clearing of such

Substitute Preference Shares through the same depositary(ies) or clearing system(s);

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3.6 if Substitute Preference Shares are issued (i) upon a Substitution Event, it will allow the

Holders to elect (x) to receive such Substitute Preference Shares in certificated form or

(y) to require the Bank to issue such Substitute Preference Shares to a depositary (or a

nominee or agent for such depositary) which will issue depositary receipts representing

such Substitute Preference Shares to a clearing system (or a nominee for such clearing

system); or (ii) other than upon a Substitution Event, it will issue such Substitute

Preference Shares to a depositary (or a nominee or agent for such depositary) which will

issue depositary receipts representing such Preference Shares to a clearing system (or a

nominee for such clearing system); in each event set forth in clauses (i) and (ii) above, it

will pay any taxes or capital duties or stamp duties or other similar taxes payable in

Malaysia, arising on the allotment and issue of Substitute Preference Shares;

3.7 it will procure that the Issuer will maintain (a) a paying agent outside Malaysia and (b) a

Registrar having its office outside Malaysia;

3.8 it will not, and will procure that neither the Issuer nor any of the Bank’s other

Subsidiaries will, make any payment to the Holders, or procure or permit to be made such

a payment, in respect of the Preference Shares or under the Deed of Guarantee, except for

payments to which the Holders are expressly entitled under the terms of the Preference

Shares or the Deed of Guarantee;

3.9 it will not (and will compel its Subsidiaries not to) purchase any Preference Shares at any

time other than in accordance with the Articles 2A.5.2, 2A.5.3 and 2A.5.4 of the

Preference Shares or unless the Purchase Condition is satisfied. Subject to the preceding

sentence, the Bank may at any time and from time to time purchase outstanding

Preference Shares by tender, in the open market or by private agreement; and

3.10 it will not repay, prior to maturity, the Subordinated Loan other than in connection with

(i) the early redemption of the Preference Shares issued by the Issuer or (ii) the

replacement of the Subordinated Loan with a Replacement Instrument.

4 Termination

With respect to the Preference Shares, the Deed of Guarantee shall terminate and be of no

further force and effect upon (i) payment of the Redemption Price or the Special Redemption Price,

as the case may be, on all Preference Shares, (ii) purchase and cancellation of all Preference Shares,

(iii) payment of the Liquidation Distribution, or the Relevant Proportion thereof with respect to all

Preference Shares, or (iv) substitution in full of the Preference Shares with Substitute Preference

Shares; provided, however, that the Deed of Guarantee will continue to be effective or will be

reinstated, as the case may be, if at any time payment of any sums paid in respect of the Preference

Shares or under the Deed of Guarantee must be restored by a Holder or the Substitute Preference

Shares returned for any reason whatsoever.

5 Transfer, Amendment and Notices

5.1 Subject to operation of law, all guarantees and agreements contained in the Deed of

Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the

Bank and shall inure to the benefit of the Holders. The Bank shall not transfer its

obligations hereunder without the prior written consent given by at least a majority in

Liquidation Preference of Holders of outstanding Preference Shares, acting as a class,

whose approval shall be obtained in accordance with the procedures contained in the

Articles and applicable laws.

5.2 The consent in writing of the Holders of at least a majority in Liquidation Preference of

the outstanding Preference Shares or the sanction of a resolution, passed at an

extraordinary meeting by Holders of at least a majority in Liquidation Preference of

the outstanding Preference Shares present in person or by proxy, shall be required in order

to give effect to any variation or abrogation of the rights, preferences and privileges of

the Preference Shares by way of amendment of the Deed of Guarantee (unless otherwise

required by any applicable laws). No such consent or sanction shall be required if the

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change is solely of a formal, minor or technical nature, or is to correct an error or cure an

ambiguity; provided that the change does not reduce the amounts payable to the Holders,

impose any material obligation on the Holders or materially and adversely affect their

voting rights; provided further that the amount of any Guaranteed Payments may not be

varied or abrogated without the written consent of each Holder affected thereby; and

provided further that no provision of the Preference Shares or of the Subordinated

Guarantee may be amended without the prior written consent of BNM if then required.

5.3 Any notice, request or other communication required or permitted to be given hereunder

to the Bank shall be given in writing by delivering the same against receipt therefor or by

pre-paid registered post addressed to the Bank, as follows:

AmBank (M) Berhad

22nd Floor, Bangunan AmBank Group

55 Jalan Raja Chulan, 50200

Kuala Lumpur, Malaysia

Attn: Company Secretary

The address of the Bank may be changed at any time and from time to time and shall be

the most recent such address furnished in writing by the Bank to the Registrar and

notified to the Holders.

Any notice, request or other communication required or permitted to be given hereunder

to the Holders shall be given by the Bank in the same manner as notices sent on behalf of

the Issuer to Holders.

5.4 For purposes of this Clause 5, any Preference Shares held by the Bank or any entity (i) of

which the Bank, either directly or indirectly, owns 20 per cent. or more of the voting

shares or similar ownership interests, or (ii) which is a Subsidiary of the Bank, will be

deemed not to be outstanding.

5.5 The Deed of Guarantee is solely for the benefit of the Holders and is not separately

transferable from their interests in respect of the Preference Shares.

6 Governing Law

The Deed of Guarantee shall be governed by, and construed in accordance with, English law,

save that the subordination provisions in Clause 2.1 and Clause 2.4 shall be governed by Malaysian

law.

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SUPERVISION AND REGULATION

The Bank is regulated by BNM, which was established on 26 January, 1959, pursuant to the

Central Bank of Malaya Ordinance, 1958 (now the Central Bank of Malaysia Act, 1958) as the

central bank of Malaysia. BNM is directly involved in the regulation and supervision of Malaysia’s

financial systems. Its principal functions are to: (i) act as a banker and financial advisor to the

Malaysian Government; (ii) issue currency and keep reserves to safeguard the value of the currency;

(iii) promote monetary stability and a sound financial structure; (iv) influence the credit situation to

the advantage of the country; and (v) promote the reliable, efficient and smooth operation of

national payment and settlement systems and to ensure that the national payment and settlement

systems policy is directed to the advantage of Malaysia.

BNM and the Minister of Finance have extensive powers under BAFIA, which is the principal

statute that sets forth the laws for the licensing and regulation of institutions carrying on banking,

finance company, merchant banking, discount house and money-broking businesses. In addition to

BAFIA, Malaysian banks are subject to regulations, guidelines, circulars and notes issued by BNM

from time to time. The following discussion sets out information with respect to the regulation of

the banking industry by BNM.

Licensing and Limitation of Business Activities of Banks

Under BAFIA, a banking business, which is defined to include deposit taking and providing

financing, can only be conducted by a public company (which includes domestic public limited

companies and subsidiaries of foreign banks incorporated as public limited companies in Malaysia)

which has obtained a licence from the Minister of Finance.

Banks are also subject to a number of other restrictions on the operation of their business. In

particular, a bank may not: (i) pay any dividend on its shares until all of its capitalised expenditures

have been written off in full and the prior approval of BNM has been obtained; (ii) grant any credit

facilities to any of its directors or officers except as permitted under BAFIA; (iii) accept its own

shares or shares of its holding company as security; (iv) acquire or hold any shares or otherwise

have an interest in shares in any corporation except as permitted under BAFIA or by prescribed

regulation; and (v) open any branch offices unless the approval of BNM has been obtained.

Statutory Reserves

BNM requires Malaysian banks to maintain a sum equivalent to the Statutory Reserve

Requirement ratio (‘‘SRR’’) in the form of non-interest bearing cash reserves with BNM. The SRR is

currently set at 4.0% of total eligible liabilities.

Pursuant to section 36(1) of BAFIA, banks are also required to maintain a reserve fund out of

net profits of each year. Until the reserve fund holds the equivalent of the Bank’s paid-up capital,

the Bank is obliged to transfer specified amounts from the net profits of each year into its reserve

fund before declaring dividends. BNM may from time to time specify a different portion of the net

profits of the Bank for each year to be transferred to the reserve fund for the purpose of ensuring

that the amount of the reserve fund of the Bank is sufficient for the purpose of its business and

adequate in relation to its liabilities.

Capital Adequacy Requirements

Effective 1 September 1989, capital adequacy regulations implementing the agreement reached

by the Basel Committee on Banking Regulations and Supervision Practices (the ‘‘Basel Committee’’)

in July 1988 were introduced into the Malaysian banking system. These regulations, which were

phased in over a two-year period, specify a minimum total capital to risk-weighted assets ratio of

8.0%. Tier 1 capital includes paid-up capital, perpetual non-cumulative preference shares, statutory

reserves and retained earnings. Tier 2 capital includes certain subordinated debt, revaluation reserves

relating to premises (land and buildings), certain types of preference shares, perpetual debt and

general provisions for bad and doubtful debts.

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Risk-weighted assets consist of all the assets on a bank’s balance sheet together with certain

off-balance sheet items weighted by certain percentages (0%, 10.0%, 20.0%, 50.0% and 100.0%)

depending on the type of asset and counterparty.

Single Customer Limit

Banks are prohibited from extending credit facilities to any customer in excess of the

prescribed ratio, subject to certain exemptions.

Qualifications of Directors; Power to Remove Directors

Under BAFIA, a person cannot be appointed as a director of a bank if, for example, that person

has been declared bankrupt; has suspended payments with his creditors; has been convicted of any

offence under BAFIA; if there has been any order of detention, supervision, restricted residence,

banishment or deportation made against him; or if that person has been a director of or directly

concerned in the management of, any company which is being or has been wound up by a court or a

bank whose licence has been revoked under BAFIA. The appointment of directors and the chief

executive of a bank is subject to the approval of BNM. BNM’s guideline regarding directorships in a

bank stipulates that (i) the Board of Directors of a banking institution should determine the

appropriate size of the board and at least one-third of the board members have to be independent

directors; (ii) there should not be more than one executive director (preferably this should be the

CEO) on the board, although in exceptional cases, with the consent of BNM, up to a maximum of

two executive directors may be appointed; and (iii) individuals active in politics may not be

appointed as directors of a bank. There shall be a clear separation between the roles of Chairman

and CEO, to ensure an appropriate balance of role, responsibility, authority and accountability. The

Chairman of the board should be in a non-executive capacity.

BNM is also empowered under BAFIA to remove any director of a bank with the consent of the

Minister of Finance if, for example, it is satisfied that the bank is carrying on its business in a

manner detrimental to the interests of its depositors, its creditors or the public generally or is

insolvent or has become or is likely to become unable to meet all or any of its obligations or is

about to suspend payment of its debts.

Interest Rate Regulation

A new interest rate framework was recently introduced on 23 April 2004, which represents a

change in the system of implementing monetary policy and promotes more efficient pricing by

banking institutions. Under the new framework, each banking institution will announce its own base

lending rate based on its cost structure and business strategies. However, the prescribed lending rates

under the following initiatives will be maintained: (i) Special Funds for SMEs, which provide

financing to SMEs at below market rates, ranging between 3.75% and 5.0%; (ii) Lending Guidelines

for Priority Sector, which impose a maximum lending rate on housing loans obtained by those in the

lower income group for the purchase of houses priced at RM180,000 and below; currently the cap is

the lower of 9.0% or the base lending rate plus 1.75%; and (iii) Guidelines on Credit Card

Operations, which prescribe the maximum lending rates on credit card loans of 18.0%.

Exchange Control Policy

Malaysia has historically maintained a liberal system of exchange controls. Prior to September

1998, the few exchange control rules that were in place were aimed at monitoring the settlement of

payments and receipts for compilation of balance of payments statistics and to ensure that funds

raised abroad were channelled to finance productive investments in Malaysia which either directly or

indirectly generated foreign exchange.

On 1 September 1998, the Malaysian Government introduced a series of selective exchange and

capital control measures. These measures were designed to eliminate the internationalisation of the

Malaysian Ringgit, to contain speculation and to stabilise short-term capital flows. Between 2

September 1998 and 21 July 2005, BNM maintained a fixed exchange rate of RM3.80 to U.S.$1.00.

However, on 21 July 2005, BNM announced that the exchange rate of the Malaysian Ringgit would

155

be allowed to operate in the managed float, with its value being determined by various economic

factors. BNM has stated that it will monitor the exchange rate against a currency basket to ensure

that the exchange rate remains close to its fair value.

The exchange control measures affect, among other things, transfers among non-residents via

non-resident external accounts, the import and export of Malaysian Ringgit in and out of Malaysia

by resident and non-resident travellers, and investments abroad by Malaysian residents.

Although there are currently no restrictions imposed on current account transactions (where

payments for the import of goods and services are to be settled only in foreign currencies other than

the currency of Israel), proceeds arising from the export of goods are required to be repatriated back

to Malaysia in accordance with the payment schedule as specified in the sales contract, which would

not exceed six months from the date of export. Non-residents are allowed to repatriate interest,

dividends, fees, commissions and rental income from portfolio investments and other forms of

Malaysian Ringgit assets and foreign direct investment inflows and outflows, including income and

capital gains through Malaysian Ringgit accounts maintained with Malaysian financial institutions.

In respect of external borrowing, effective 1 April 2005 the foreign exchange administration

rules have been liberalised. The limit for Malaysian resident companies to obtain foreign currency

credit facilities was increased from RM5,000,000 equivalent to RM50,000,000 equivalent. In respect

of any amount of foreign currency credit facilities exceeding RM50,000,000 Malaysian resident

companies are required to obtain the permission of the Controller of Foreign Exchange (through

BNM’s Foreign Exchange Control Department). There are no restrictions on authorised dealers

(which include the Bank) borrowing in foreign currency from a non-resident. An offshore company

which has submitted to the Controller of Foreign Exchange certified true copies of the requisite

statutory forms shall be declared by the Controller of Foreign Exchange to be a non-resident for

exchange control purposes.

Financial guarantees above the equivalent of RM5.0 million issued by residents in favour of

non-residents must be registered with BNM upon issuance (the name of the issuer of the guarantee,

name of party on whose behalf the guarantee is issued, amount guaranteed, beneficiary and purpose

of guarantee must be submitted to BNM) and must be denominated in foreign currency with all

payments being made in foreign currency. Payments under such a guarantee can be made upon

acknowledgment of receipt of the above information submitted to BNM and subject to informing

BNM when the guarantee is called upon.

On 23 March 2005, BNM announced the relaxation of the foreign exchange administration

rules governing overseas investments by residents (both individual and corporations) and the

retention of foreign currency in foreign currency accounts by residents. Limits on foreign currency

credit facilities that can be obtained by residents from non-residents, licensed onshore banks and

licensed merchant banks were increased, and the rules governing domestic borrowings by Non-

Resident Controlled Companies were removed. These changes in the foreign exchange administration

rules became effective on 1 April 2005.

Priority Lending Guidelines

There are currently two priority lending BNM Guidelines, which are applicable for the period

from 1 January 2006 to 31 December 2007. These are (i) Housing Loans Commitments; and (ii)

Loans to Small and Medium Enterprises (‘‘SMEs’’). All the banking institutions are required to

submit their lending targets for number of loans approved during the compliance period to BNM.

The guideline for Housing Loans is to ensure that home ownership is available to lower income

groups. The interest rate on such loans should not be more than BLR plus 1.75% and the cost of the

house for financing should not be more than RM60,000 for a house located in Peninsular Malaysia

and not more than RM72,000 for a house located in the states of Sabah and Sarawak.

156

The guidelines on lending to SMEs aim to provide financial assistance to small and medium-

sized enterprises to obtain financing for their business operations. For this guideline, an SME is

defined as a business with annual turnover not exceeding RM25 million and where the number of

full-time employees does not exceed 150. At least 50% of the target set for SMEs must be lending

for Bumiputera SMEs.

Powers of Enforcement

BNM has broad powers to enforce BAFIA. In particular, where a bank is insolvent or is likely

to become unable to meet all or any of its obligations or is about to suspend payments, BNM may,

with the concurrence of the Minister of Finance, remove from office any officer or director of the

bank concerned and/or appoint any person to advise the bank in relation to the proper conduct of its

business. Further, BNM may recommend that the Minister of Finance place the bank under the

control of BNM or authorise BNM to make a court application to appoint a receiver or manager to

manage the affairs of the bank or authorise BNM to present a petition for the winding-up of the

institution concerned.

In addition, if BNM is of the opinion that a bank is likely to become unable to meet its

obligations or is about to suspend payment on such obligations, BNM may, with the concurrence of

the Minister of Finance, grant loans (against the security of shares) to, or purchase shares of, such

bank, or grant loans to another bank to purchase shares, or purchase part or all of the properties and

liabilities, of such bank.

Inspections by Bank Negara Malaysia

BNM is empowered to examine from time to time, without any prior notice, the books or other

documents, accounts and transactions of a bank and may be directed by the Minister of Finance to

do so in the event the Minister suspects that the bank is carrying on its business in a manner which

is, or which is likely to be, detrimental to the interests of its depositors or creditors or has

insufficient assets to cover its liabilities to the public or is contravening any provision of BAFIA or

the Central Bank of Malaysia Act, 1958.

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TAXATION

The statements made herein regarding taxation are based on the laws in force as at the date ofthis Offering Circular and are subject to any changes in law occurring after such date, whichchanges could be made on a retrospective basis. The following summary does not purport to be acomprehensive description of all of the tax considerations that may be relevant to a decision topurchase, own or dispose of the Preference Shares and does not purport to deal with the taxconsequences applicable to all categories of investors, some of which (such as dealers in securitiesor commodities) may be subject to special rules. Prospective purchasers of the Preference Sharesare advised to consult their own tax advisors concerning the overall tax consequences of theirownership of the Preference Shares.

Labuan

Preferred Dividends paid by Labuan offshore companies

Pursuant to the Income Tax (Exemption) (No. 16) Order 1991, dividends received from an

offshore company which are paid, credited or distributed out of income derived from an offshore

business activity or income exempt from tax are exempt from tax in the hands of the shareholders.

In addition, Labuan does not impose any withholding tax on payment of dividends.

As such, tax free dividend income may be received by the holders of the Preference Shares in

the Issuer.

Capital Gains Tax and Income Tax

Malaysia (including Labuan) has a restricted capital gains tax regime, namely Real Property

Gains Tax (‘‘RPGT’’), applying only on the disposal of real property and shares in real property

companies (‘‘RPCs’’). RPGT is governed by the Real Property Gains Tax Act 1976.

An RPC is defined to mean a controlled company which as at 21 October 1988 or any later

date, acquires real property or shares in a real property company or both, whereby the defined value

of the real property or shares or both, owned at that date is not less than 75% of the value of its

total tangible assets.

Aside from RPGT, there are no other taxes on capital gains on the disposition of securities

(including shares, notes, bonds and loan stocks).

However, gains from a disposal of securities may be construed to be of an income nature and

be subject to income tax if they arise from activities which the Malaysian Inland Revenue Board

(‘‘MIRB’’) regards as the carrying on of a trade, or as a result of speculation trading in the

securities.

As the Issuer’s only asset is the Subordinated Loan and does not hold any real property or

shares in RPCs, it would not be an RPC. Hence, any gains arising from a disposal of the Preference

Shares in the Issuer by foreign investors would not be subject to RPGT.

Proceeds from the sale, assignment, transfer or other disposition by holders of the Preference

Shares, i.e. foreign investors, may be subject to Malaysian income tax to the extent that such

proceeds constitute income to such holder accruing in, earned or otherwise derived from Malaysia as

a result of speculation trading in the Preference Shares or in the ordinary course of carrying on any

business in Malaysia.

Exchange Control

Generally, Labuan offshore companies would not be subject to any exchange control

requirements. As such, the issuance of preference shares by the Issuer to the foreign investors in

foreign currencies is free from exchange control requirements.

158

Stamp duty

Pursuant to the Stamp Duty (Exemption) Order 2000, all instruments which are executed by

offshore companies in connection with an offshore business activity as defined under the LOBATA

are exempted from stamp duty. The sale of shares in offshore companies and the Memorandum and

Articles of Association of an offshore company are also exempted from stamp duty.

In this connection, all instruments relating to the Preference Shares which are executed by the

Issuer in Labuan are exempted from stamp duty. Additionally, any execution of instruments that

relate to the transfer of the Preference Shares by foreign investors is also exempted from stamp duty.

Estate tax and Inheritance Tax

There is neither estate tax nor inheritance tax in Labuan.

Malaysia

General

Resident individuals and resident companies are subject to Malaysian income tax on income

accruing in or derived from Malaysia. Foreign income derived by resident companies and residents is

also exempted from Malaysian tax. Nevertheless, resident companies carrying on the business of

banking, insurance and air transport will continue to be subject to Malaysian tax on the foreign

income wherever derived.

Non-resident individuals and companies are subject to Malaysian tax only on income accruing

in or derived from Malaysia.

The tax rate for resident and non-resident companies in Malaysia is currently 28%. However, a

resident company with paid-up capital of less than RM2.5 million is taxed on its chargeable income

at the following rate:

. For the first RM500,000 of chargeable income at 20%

. In excess of RM500,000 at 28%

Resident

A company is considered to be resident for tax purposes if the management and control of its

business or one of its businesses or its affairs (if not carrying on a business) is exercised in

Malaysia. As a general rule, the place of control and management will be where the board of

directors of a company holds its meetings.

On the other hand, the residence status of an individual for tax purposes is determined on the

basis of a physical presence test. Generally, individuals are residents if they are physically present in

Malaysia for at least 182 days in a calendar year. Apart from this, there are some other rules

governing the residence status of an individual.

Withholding Tax

Subject to the double tax agreement signed between Malaysia and the relevant countries,

withholding tax is applicable to the following type of payments made to non-residents, if these

payments are deemed to be derived from Malaysia:

. Interest at 15%

. Royalties at 10%

. Special classes of income (service fees, technical fees and rental of moveable property) at

10%

159

. Contract payments at 10% + 3% (10% is on the account of tax which is or may be

payable by the non-resident contractor. 3% is on the account of tax which is or may be

payable by employees of the non-resident contractor).

Based on the above, interest on subordinated loans paid or credited to non-resident persons is

generally subject to withholding tax of 15%.

However, given that the borrower of the Subordinated Loan is a banking entity licensed under

the Banking and Financial Instructions Act 1989, any interest paid or credited on the Subordinated

Loan by the Bank is exempted from any withholding tax pursuant to Paragraph 33, Schedule 6 of the

MITA. Moreover, on the basis that the lender, namely the Issuer, is a tax resident in Malaysia, the

payment of interest by the Bank to the Issuer would not attract any withholding tax.

Capital Gains Tax and Income Tax

Malaysia has a restricted capital gains tax regime, namely RPGT, applying only to the disposal

of real property and shares in RPCs. Aside from RPGT, there are no other taxes on capital gains

from the disposition of securities or loans.

However, the gains may be construed to be of an income nature and subject to income tax if

they arise from activities which the MIRB regards as the carrying on of a trade, or if they are short-

term gains from the sale of securities or loans. In other words, proceeds from the sale, assignment,

transfer or other disposition by a lender of a subordinated loan may be subject to Malaysian income

tax to the extent that such proceeds constitute income to such lender accruing in, earned or

otherwise derived from Malaysia as a result of speculation trading in the subordinated loan or in the

ordinary course of carrying on any business in Malaysia.

Stamp Duty

No Malaysian Stamp duty is payable in connection with the execution of the Subordinated

Loan by the Issuer. Pursuant to the Stamp Duty (Exemption) Order 2000, all instruments which are

executed by offshore companies in connection with an offshore business activity as defined under

the LOBATA are exempted from stamp duty.

Estate tax and Inheritance Tax

There is neither estate tax nor inheritance tax in Malaysia.

160

SUBSCRIPTION AND SALE

Pursuant to a Subscription Agreement (the ‘‘Subscription Agreement’’) dated 20 January 2006,

BNP Paribas, acting through its Labuan Branch, Credit Suisse, acting through its Labuan Branch and

AmMerchant Bank Berhad, acting through its Labuan Branch (the ‘‘Joint Lead Managers’’) have

agreed to subscribe for, or procure subscribers for, the Preference Shares at a price of U.S.$100,000

per Preference Share. Certain combined management and underwriting commission have been

deducted from the issue proceeds. In addition, the Joint Lead Managers shall be reimbursed for

certain of their expenses in connection with the issue of the securities. The Joint Lead Managers are

entitled to terminate the Subscription Agreement in certain circumstances before the issue of the

Preference Shares.

AmMerchant Bank is an affiliate of the Issuer and the Bank and provides the Issuer and the

Bank with investment banking and advisory services for which it receives customary fees, and may

do so in the future.

AmMerchant Bank is a wholly-owned subsidiary of AmInvestment Group Berhad, which is

presently a 51% owned subsidiary of AMMB. The Bank is a wholly-owned subsidiary of AMFB

Holdings Berhad (‘‘AMFB’’), which in turn is a wholly-owned subsidiary of AMMB. As such,

AMMB, AmMerchant Bank, AMFB and the Bank are deemed to be related corporations.

AmMerchant Bank has been appointed as principal adviser, Joint Lead Manager and Joint

Bookrunner to the Bank in respect of the Preference Shares. In appointing AmMerchant Bank, the

Board of Directors of the Bank is fully informed of and aware of any potential conflict of interest

that may arise due to AmMerchant Bank being a related corporation and acting in its capacity as

principal adviser, Joint Lead Manager and Joint Bookrunner to the Bank.

Notwithstanding the aforementioned, AmMerchant Bank believes that objectivity and

independence in carrying out its role has been/will be maintained at all times for the following

reasons:

. AmMerchant Bank’s appointment as the principal adviser, Joint Lead Manager and Joint

Bookrunner for the proposals is in the ordinary course of its business.

. The conduct of AmMerchant Bank is regulated strictly by the Banking and Financial

Institutions Act 1989 (‘‘BAFIA’’) and by its own internal controls and checks.

. The lines of business of AmMerchant Bank and AmBank are distinct and their operations

are independent of one another.

. Save for the professional fees charged as the principal adviser and the commission to be

received as Joint Lead Manager and Joint Bookrunner for the proposals, AmMerchant

Bank will not be deriving any monetary benefit from the proposals outside of its aforesaid

capacities.

. There are no financial facilities granted by AmMerchant Bank to the AMMB group other

than loans extended to subsidiaries of AMMB and inter-bank transactions carried out in

the ordinary course of business.

United States

The Preference Shares and the Subordinated Guarantee have not been and will not be registered

under the Securities Act and may not be offered or sold within the United States or to, or for the

account or benefit of, U.S. persons except in certain transactions exempt from the registration

requirements of the Securities Act.

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Each Joint Lead Manager has severally agreed that, except as permitted by the Subscription

Agreement, it will not offer, sell or deliver the Preference Shares (i) as part of their distribution at

any time or (ii) otherwise until 40 days after the later of the commencement of the Offering and the

Closing Date within the United States or to, for the account or benefit of, U.S. persons and that it

will have sent to each dealer to which it sells any Preference Shares during the distribution

compliance period a confirmation or other notice setting forth the restrictions on offers and sales of

the Preference Shares within the United States or to, or for the account or benefit of, U.S. persons.

Terms used in this paragraph have the meanings given to them by Regulation S under the Securities

Act.

The Preference Shares are being offered and sold outside of the United States in reliance on

Regulation S.

In addition, until 40 days after the commencement of the Offering, an offer or sale of

Preference Shares within the United States by any dealer that is not participating in the Offering

may violate the registration requirements of the Securities Act.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the

Prospectus Directive (each, a ‘‘Relevant Member State’’), each Joint Lead Manager has represented

and agreed that with effect from and including the date on which the Prospectus Directive is

implemented in that Relevant Member State (the ‘‘Relevant Implementation Date’’), it has not made

and will not make an offer of Preference Shares to the public in that Relevant Member State prior to

the publication of a prospectus in relation to the Preference Shares which has been approved by the

competent authority in that Relevant Member State or, where appropriate, approved in another

Relevant Member State and notified to the competent authority in that Relevant Member State, all in

accordance with the Prospectus Directive, except that it may, with effect from and including the

Relevant Implementation Date, make an offer of Preference Shares to the public in that Relevant

Member State at any time:

(a) to legal entities which are authorised or regulated to operate in the financial markets or, if

not so authorised or regulated, whose corporate purpose is solely to invest in securities;

(b) to any legal entity which has two or more of (1) an average of at least 250 employees

during the last financial year; (2) a total balance sheet of more than 43,000,000 and (3)

an annual net turnover of more than 50,000,000, as shown in its last annual or

consolidated accounts;

(c) to fewer than 100 natural or legal persons (other than qualified investors as defined in the

Prospectus Directive) subject to obtaining the prior consent of the Joint Lead Managers

for any such offer; or

(d) in any other circumstances which do not require the publication by the Issuer of a

prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an ‘‘offer of Preference Shares to the public’’

in relation to any Preference Shares in any Relevant Member State means the communication in any

form and by any means of sufficient information on the terms of the offer and the Preference Shares

to be offered so as to enable an investor to decide to purchase or subscribe the Preference Shares, as

the same may be varied in that Member State by any measure implementing the Prospectus Directive

in that Member State and the expression Prospectus Directive means Directive 2003/71/EC and

includes any relevant implementing measure in each Relevant Member State.

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United Kingdom

Each Joint Lead Manager has represented and agreed that:

(i) it has only communicated or caused to be communicated and will only communicate or

cause to be communicated an invitation or inducement to engage in investment activity

(within the meaning of Section 21 of the Financial Services and Markets Act 2000

(‘‘FSMA’’)) received by it in connection with the issue or sale of the Preference Shares in

circumstances in which Section 21(1) of the FSMA does not apply to the Issuer or the

Bank; and

(ii) it has complied and will comply with all applicable provisions of the FSMA with respect

to anything done by it in relation to the Preference Shares in, from or otherwise involving

the United Kingdom.

Malaysia

The issue of, offer for subscription, or invitation to subscribe for, the Preference Shares may

only be made directly or indirectly to non-residents of Malaysia (being persons who are not citizens

or permanent residents of Malaysia and who does not engage in a trade or business in Malaysia, and

includes any offshore company incorporated under the Offshore Companies Act 1990 (‘‘OCA’’) and

any foreign offshore company registered under the OCA). Neither this Offering Circular nor any

other offering document or material relating to the Preference Shares may be circulated or

distributed, to any residents of Malaysia.

Hong Kong

Each of the Joint Lead Managers has represented and agreed that:

(i) it has not offered or sold and will not offer or sell in Hong Kong, by means of any

document, any Preference Shares other than (a) to ‘‘professional investors’’ as defined in

the Securities and Futures Ordinance (Cap. 571) of Hong Kong and rules made under that

Ordinance; or (b) in other circumstances which do not result in the document being a

‘‘prospectus’’ as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which

do not constitute an offer to the public within the meaning of that Ordinance; and

(ii) it has not issued or had in its possession for the purposes of issue, and will not issue or

have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any

advertisement, invitation or document relating to the Preference Shares, which is directed

at, or the contents of which are likely to be accessed or read by, the public of Hong Kong

(except if permitted to do so under the securities laws of Hong Kong) other than with

respect to the Preference Shares which are or are intended to be disposed of to any

persons outside Hong Kong or only to ‘‘professional investors’’ as defined in the

Securities and Futures Ordinance (Cap. 571) and any rules made under that Ordinance.

Singapore

Each of the Joint Lead Managers has acknowledged that this Offering Circular has not beenregistered as a prospectus with the Monetary Authority of Singapore. Accordingly, each Joint LeadManager has represented, warranted and agreed that it has not offered or sold any Preference Sharesor caused such Preference Shares to be made the subject of an invitation for subscription orpurchase, and will not offer or sell such Preference Shares or cause such Preference Shares to bemade the subject of an invitation for subscription or purchase, and has not circulated or distributed,nor will it circulate or distribute, this Offering Circular or any other document or material inconnection with the offer or sale, or invitation for subscription or purchase of such PreferenceShares, whether directly or indirectly, to persons in Singapore other than (i) to an institutionalinvestor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the‘‘SFA’’), (ii) to a relevant person, or any person pursuant to Section 275(1A) of the SFA, and inaccordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to,and in accordance with the conditions of, any other applicable provision of the SFA.

163

Each of the Joint Lead Managers has further represented and agreed to notify and herebynotifies each of the following relevant persons specified in Section 275 of the SFA which hassubscribed or purchased the Preference Shares from or through that Joint Lead Manager, namely aperson which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA))the sole business of which is to hold investments and the entire share capital of which isowned by one or more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to holdinvestments and each beneficiary of the trust is an individual who is an accreditedinvestor,

shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rightsand interest (however described) in that trust shall not be transferred within six months after thatcorporation or that trust has acquired the Preference Shares pursuant to an offer made under Section275 of the SFA except:

(1) to an institutional investor (for corporations, under Section 274 of the SFA) or to arelevant person defined in Section 275(2) of the SFA, or any person pursuant to an offerthat is made on terms that such rights or interest are acquired at a consideration of notless than S$200,000 (or its equivalent in a foreign currency) for each transaction, whethersuch amount is to be paid for in cash or by exchange of securities or other assets, andfurther for corporations, in accordance with the conditions specified in Section 275 of theSFA;

(2) where no consideration is or will be given for the transfer; or

(3) where the transfer is by operation of law.

General

No action has been taken by the Issuer, the Bank or any of the Joint Lead Managers thatwould, or is intended to, permit a public offer of the Preference Shares in any country or jurisdictionwhere any such action for that purpose is required. Accordingly, the Preference Shares may not beoffered or sold, directly or indirectly, and no offering circular, prospectus, form of application,advertisement or other document or information may be distributed or published in any country orjurisdiction except under circumstances that will result in compliance with all applicable laws andregulations.

The Joint Lead Managers and their affiliates have engaged in, and may in for future engage in,investment banking and other commercial dealings in the ordinary course with the Bank and/or theIssuer.

164

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN MALAYSIAN GAAP AND IFRS

Set out below is a summary of significant differences between Malaysian GAAP and IFRS,

which were issued by the International Accounting Standards Board (‘‘IASB’’) and effective for

application, as of 31 December 2005.

The financial statements for each of the Bank, AmFinance and ABB, which are included in this

Offering Circular, have been prepared and presented in accordance with Malaysian GAAP and as

modified by BNM Guidelines, which differs in certain significant aspects from IFRS.

As of 1 January 2006, new changes to Malaysian GAAP were effective. As none of the

financial data inserted in this Offering Circular reflect these changes, the description below does not

describe such changes.

Malaysian GAAP is based on extant IAS adopted and other Malaysian Accounting Standards

Board (‘‘MASB’’) standards issued by the MASB and in the absence of a specific MASB Standard,

reference is made to guidance in technical pronouncements issued by MASB and BNM Guidelines.

This summary does not and is not intended to provide a comprehensive listing of all existing or

future differences between Malaysian GAAP and IFRS including specially related to the Bank,

AmFinance and ABB or to the industry in which we operate. The following pages summarise the

areas of differences between Malaysian GAAP and IFRS, which could be significant to the financial

position of each of the Bank, AmFinance and ABB and results of operations for the years ended 31

March 2005 and in the case of the Bank, the six months ended 30 September 2005. Such a summary

should not be construed to be exhaustive. The differences between Malaysian GAAP and IFRS have

not been quantified nor has a reconciliation of Malaysian GAAP to IFRS been undertaken. Had any

such quantification or reconciliation been undertaken by the Bank, other potential significant

accounting and disclosure differences may have come to its attention which are not identified below.

There can be no assurances that net profits and shareholders’ equity reported under Malaysian GAAP

would not have been lower if determined in accordance with IFRS.

No attempts have been made to identify (a) future differences between Malaysian GAAP and

IFRS as the results of prescribed changes in accounting standards, or (b) disclosure, presentation or

classification differences that would affect the manner in which transactions and events are reflected

in the financial statements. Regulatory bodies that promulgate Malaysian GAAP and IFRS may

develop rules and policies which could affect future comparisons such as this one. In addition, no

attempt has been made to identify future differences between Malaysian GAAP and IFRS that may

affect the financial statements as a result of transactions or events that may occur in the future.

Accordingly, there can be no assurance that this summary provides a complete description of all

differences which may have a significant impact on the financial statements of the Bank, AmFinance

and ABB.

In making an investment decision, prospective investors must rely upon their own examination

of the Bank, AmFinance, ABB, the terms of the Offering and the financial information presented in

this Offering Circular. Potential investors should consult their own professional advisors for an

understanding of the principal differences between Malaysian GAAP and IFRS and how these

differences might affect the financial information herein.

A brief description of certain differences between Malaysian GAAP and GP8 prior to the

revision as defined as Revised GP8 herein and discussed in ‘‘Summary of Significant Differences

between Revised GP8 and the Relevant IFRS’’ is set forth below:

Investments

Classification

The following are classifications of investments under BNM Guidelines:

. dealing securities — marketable securities that are acquired and held with the intention of

resale in the short-term; and

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. investment securities — securities that are acquired and held for yield or capital growth

or to meet the minimum liquid assets requirement pursuant to Section 38 of the Banking

and Financial Institutions Act, 1989 and are usually held to maturity.

Under IFRS, investments in securities are classified into one of three categories as follows:

. at fair value through profit or loss — financial assets held for trading, or those designated

on initial recognition as to be measured at fair value (other than those whose fair value is

not readily available) with fair value changes recognised in profit or loss. Financial assets

held for trading are those acquired or incurred principally for the purpose of selling or

repurchasing them in the near term; or part of a portfolio of identified financial

instruments that are managed together and for which there is evidence of a recent actual

pattern of short-term profit-taking; or a derivative (except for a derivative that is a

designated and effective hedging instrument);

. held to maturity — non-derivative financial assets with fixed or determinable payments

and fixed maturity that an entity has the positive intention and ability to hold to maturity

other than those that the entity upon initial recognition designates as at fair value through

profit or loss, those that the entity designates as available for sale, and those that meet the

definition of loans and receivables; or

. available for sale — non-derivative financial assets that are designated as available for

sale or are not classified as loans and receivables, held-to-maturity investments, or

financial assets at fair value through profit or loss.

Carrying value

Under Malaysian GAAP, dealing securities are stated at the lower of cost and market value.

Any reduction in market value is recorded in the income statement.

Under IFRS, financial assets classified as held-for-trading are measured at their fair value, with

any changes in fair value recorded in the income statement.

Under Malaysian GAAP, investment securities are accorded the following treatment:

. Malaysian government securities, Malaysian government investment issues, Cagamas

bonds, Danaharta and Khazanah bonds, Kuala Lumpur International Airport Islamic

primary notes, other government securities and bank guaranteed private debt securities

held for investment are stated at cost adjusted for amortisation of premium or accretion of

discount to maturity dates;

. other quoted securities are valued at lower of cost and market value; and

. long-term investments in quoted shares and unquoted shares are stated at cost less

provision for any permanent diminution in value. Provision is made for any permanent

diminution in value of such investments as determined on an individual basis.

Under IFRS, investment securities are accorded the following treatment:

. securities classified as held-to-maturity are measured at amortised cost, using the effective

interest method. Held-to-maturity securities are subject to review for impairment; and

. securities classified as available-for-sale are measured at fair value with gains or losses

on remeasurement to fair value reflected directly in equity until sold, collected, disposed

or impaired, at which time the cumulative gain or loss will be included in the income

statement. An exception to this is where an equity instrument (including an investment

that is in substance an equity instrument) does not have a quoted market price in an active

market and for which other methods of reasonably estimating fair value are clearly

inappropriate or unworkable, in which case the securities are measured at cost less

impairment.

166

Transfers

Under Malaysian GAAP, transfers between investment and dealing securities are made at the

lower of carrying value and market value.

Under IFRS, the transfer of a security between categories of financial assets is accounted for at

fair value. The transfer of a security into and out of the ‘‘at fair value through profit and loss’’

category is not permissible. The transfer of a security from available-for-sale to held-to-maturity is

also not permissible.

Derivatives and Hedge Accounting

Under BNM Guidelines, derivatives are accorded the following treatment:

. unmatured forward exchange contracts are stated at forward rates prevailing at balance

sheet date, applicable to the respective dates of maturity, and resultant losses and gains

are taken up in the income statement;

. interest rate swaps that qualify as hedges are recognised over the life of the swap

agreement as a component of interest income or interest expense; and

. gains and losses on interest rate futures contracts that qualify as hedges are generally

deferred and amortised over the life of the hedged assets or liabilities as adjustments to

interest income or interest expense. Gains and losses on interest rate swaps and futures

contracts that do not qualify as hedges are recognised in the current year using the mark-

to-market method and are included in the income statement.

Under IFRS, derivatives are accorded the following treatment:

. derivatives are measured initially at fair value on the contract date and subsequently

remeasured to their fair value at subsequent reporting dates. Changes in fair value are

included in the income statement;

. changes in the fair value of the effective portions of derivatives that are designated and

qualify as fair value hedges and that prove to be highly effective in relation to hedged

risk, are recorded in the income statement, along with the corresponding change in fair

value of the hedged asset or liability that is attributable to that specific hedged risk;

. changes in the fair value of the effective portions of derivatives that are designated and

qualify as cash flow hedges and that prove to be highly effective in relation to the hedged

risk, are recognised in equity. Where the forecasted transaction or firm commitment

results in the recognition of an asset or of a liability, the gains and losses previously

deferred in equity are transferred from equity and included in the initial measurement of

the cost of the asset or liability. Otherwise, amounts deferred in equity are transferred to

the income statement and classified as revenue or expense in the periods during which the

hedged firm commitment or forecasted transaction affects the income statement; and

. hedge accounting is discontinued when the hedging instrument expires or is sold,

terminated or exercised, or no longer qualifies for hedge accounting. At that time, for

forecast transactions, any cumulative gain or loss on the hedging instrument recognised in

equity is retained in equity until the forecasted transaction occurs. If a hedged transaction

is no longer expected to occur, the net cumulative gain or loss recognised in equity is

transferred to income statement.

Under Malaysian GAAP, the criteria for the use of hedge accounting are not dealt with.

167

Under IFRS, the following conditions are required to qualify for the application of hedge

accounting:

. at the inception of the hedge there is formal documentation of the hedging relationship

and the enterprise’s risk management objective and strategy for undertaking the hedge;

. the hedge is expected to be highly effective in achieving offsetting changes in fair value

or cash flows attributable to the hedged risk, both retrospectively and prospectively;

. for cash flow hedges, a forecasted transaction that is the subject of the hedge must be

highly probable and must present an exposure to variations in cash flows that could

ultimately affect reported net profit or loss;

. the effectiveness of the hedge can be reliably measured; and

. the hedge was assessed on an ongoing basis and determined actually to have been highly

effective throughout the financial reporting period.

Provision for Doubtful Debts

Specific provisions

Under BNM Guidelines, specific provisions are made for doubtful debts which have been

individually reviewed and specifically identified as bad and doubtful. An uncollectible loan or

portion of a loan 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 are no prospects of recovery.

Banking institutions in Malaysia are guided by specific requirements provided by BNM on the

following matters:

. classification of NPL — a loan where repayments are in arrears for six months or more

will be classified as non-performing;

. extent of provision — a certain minimum percentage of the shortfall in the value of

collateral against the outstanding balances is required to be provided for based on the

number of months in default; and

. valuation of collateral.

Under IFRS, the following treatment is accorded for specific provisions:

. a loan is considered impaired when the lender does not expect to receive full contractual

interest and principal. There is no prescriptive guidance provided for assessing whether a

loan is impaired, instead the creditor should apply its normal loan review procedures in

making that judgement; and

. the overall credit risk provision of an impaired loan is determined based on the present

value of expected future cash flows, discounted at the loan’s original effective interest

rate, or, as a practical expedient, on the loan’s observable market value, or the fair value

of the collateral if the loan is collateral dependent.

General provisions

Under BNM Guidelines, a general provision based on a certain percentage of total outstanding

loans, less interest-in-suspense and specific provision, is maintained based on a minimum percentage

stipulated by BNM (currently at 1.5% of net loans, advances and financing).

Under IFRS, a loan loss provision is made where there is objective evidence that probable

losses are present in components of the loan portfolio at the balance sheet date.

168

Other Differences

The Profit Equalisation Reserve (‘‘PER’’) refers to the amount appropriated, under the Islamic

Banking Business, out of gross income in order to maintain a market based return for depositors. It

is deducted from total gross income (in deriving the net gross income) as approved and endorsed by

the National Advisory Council for Islamic Banking and Takaful of BNM. The PER is generally

deducted at a rate that does not exceed the maximum amount of 15% of total gross income of each

financial year and is maintained up to the maximum of 30% of total Islamic Banking Capital Fund.

Under Malaysian GAAP leasehold land is included in Property and Equipment and is amortised

over the term of the lease. Under IFRS, leasehold land is classified as operating lease and premium

paid for a leasehold interest in land represents prepaid lease payments and is amortised over the

lease term. They are not tangible fixed assets but are disclosed as non-current assets.

Under Malaysian GAAP, equity-settled transactions for services of employee are not dealt with.

Shares options granted are not charged to the income statement and are merely disclosed in the

financial statements. Under IFRS, equity-settled transactions for services of employees is accounted

for at the fair value of the employee share options granted.

Under Malaysian GAAP, loan arrangement fees and commissions are recognised as income

when all conditions precedent are fulfilled, guarantee fees are recognised as income upon issuance

and where the guarantee period is longer than one year, over the duration of the guarantee period.

Under IFRS, loan origination fees for loans which are probable of being drawn down, are deferred

(together with related direct costs) and recognised as an adjustment to the effective yield on the

loan.

169

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN REVISED GP8 AND

THE RELEVANT IFRS

On 5 October 2004, BNM issued the ‘‘Revised Guidelines on Financial Reporting for Licensed

Institutions (BNM/GP8)’’ (‘‘Revised GP8’’). The Revised GP8 was implemented by the Bank on 1

April 2005. However, except for the income statements and balance sheets of the Bank for the six

months ended/as at 30 September 2005 and 30 September 2004 and the restated financials ended/as

at 31 March 2005, the financial statements of the Bank included in this Offering Circular have not

been prepared and presented in accordance with the Revised GP8. The Bank is exempted by BNM

from Revised GP8 requirement for a certain test on impaired loans for the year ending 31 March

2006. For further information see ‘‘Summary of Significant Differences Between Revised GP8 and

the Relevant IFRS — Test on Impaired Loans’’.

Set out below is a summary of significant differences between the Revised GP8 and the

relevant IFRS, which were issued by the IASB and effective for application as at 1 January 2005.

The differences as summarised below could be significant to the Bank’s results of operations for the

six months ended 30 September 2005 and its financial position as at 30 September 2005. Such a

summary should not be construed to be exhaustive. The differences between the Revised GP8 and

the relevant IFRS have not been quantified nor has a reconciliation of the Revised GP8 to the

relevant IFRS been undertaken. Had any such quantification or reconciliation been undertaken by the

Bank, other potential significant accounting and disclosure differences may have come to its

attention which are not identified below. There can be no assurances that net profits and

shareholders’ equity reported under the Revised GP8 would not have been lower if determined in

accordance with the relevant IFRS.

No attempts have been made to identify future differences between the Revised GP8 and the

relevant IFRS as the result of prescribed changes in accounting standards. BNM and the regulatory

body that promulgates BNM Guidelines and IFRS may develop rules and policies which could affect

future comparisons such as this one. In addition, no attempt has been made to identify future

differences between the Revised GP8 and the relevant IFRS that may affect the financial statements

as a result of transactions or events that may occur in the future.

Potential investors should consult their own professional advisors for an understanding of the

principal differences between the Revised GP8 and the relevant IFRS and how these differences

might affect the financial information herein.

The following are certain differences between the Revised GP8 and the relevant IFRS:

Investments

Classification

The following are classifications of investments under the Revised GP8 :

(i) The holdings of the securities portfolio of the Bank are classified based on the following

categories and valuation methods:

(a) Securities held-for-trading

Securities are classified as held-for-trading if they are acquired principally for the

purpose of benefiting from actual or expected short-term price movement or to lock in

arbitrage profits. Securities held-for-trading will be 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 statements.

(b) Securities held-to-maturity

Securities held-to-maturity are financial assets with fixed or determinable payments

and fixed maturity that the 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

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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 statements.

(c) 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 amortised 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 statements.

Held-for-trading securities are measured at fair value with changes in fair value recognised in

the income statement whilst held-to-maturity investments are measured at amortised cost using the

effective interest method. Available-for-sale securities are measured at fair value with changes in

fair value recognised directly in equity, unless fair value cannot be reliably measured, in which case

they are stated at cost less impairment.

Under IFRS, investments in securities are classified into one of three categories as follows:

. at fair value through profit or loss — financial assets held-for-trading, or those designated

on initial recognition as to be measured at fair value (other than those whose fair value is

not readily available) with fair value changes recognised in profit or loss. Financial assets

held-for-trading are those acquired or incurred principally for the purpose of selling or

repurchasing them in the near term; or part of a portfolio of identified financial

instruments that are managed together and for which there is evidence of a recent actual

pattern of short-term profit-taking; or a derivative (except for a derivative that is a

designated and effective hedging instrument);

. held-to-maturity — non-derivative financial assets with fixed or determinable payments

and fixed maturity that an entity has the positive intention and ability to hold to maturity

other than those that the entity upon initial recognition designates as at fair value through

profit or loss, those that the entity designates as available for sale, and those that meet the

definition of loans and receivables; or

. available-for-sale — non-derivative financial assets that are designated as

available-for-sale or are not classified as loans and receivables, held-to-maturity

investments, or financial assets at fair value through profit or loss.

Financial assets at fair value through profit or loss and those classified as available-for-sale are

measured at fair value. Changes in fair value of financial assets at fair value through profit or loss

are recognised in the income statement whilst changes in fair value of available-for-sale are

recognised directly in equity, except for impairment losses and foreign exchange gains or losses,

until they are derecognised. Held-to-maturity assets are measured at amortised cost using the

effective interest method.

Under the Revised GP8, the following equity instruments may be classified as held-to-maturity

investments:

. equity holdings held in organisations which are set up for specific socio-economic

reasons;

. equity instruments received as a result of loan restructuring or loan conversion that do not

have a quoted market price in an active market and whose fair value cannot be reliably

measured.

Under IFRS, equity instruments could not be classified as held-to-maturity investments.

171

Derivatives

The Revised GP8 allows as an alternative for a reporting institution to disclose its derivative

transactions as off-balance sheet items if it does not engage in proprietary trading of derivatives and

all derivatives transacted are for the purpose of hedging. However, a banking institution is not

allowed to revert to off-balance sheet if the fair value option has been adopted. For reporting

institution opting for off-balance sheet treatment for their derivative transaction, they are required to

fair value their derivative effective 1 January 2007.

IFRS requires that derivatives be recognised on the balance sheet at fair value, with changes in

fair value recognised in profit or loss as they arise, unless they are designated as an effective

hedging instrument in a cash flow or net investment hedge.

Other Differences

Financial Liabilities

Choice of fair value option for financial liabilities under Revised GP8 is restrictive as

compared to IAS 39. Revised GP8 requires financial liabilities to be carried at amortised cost except

for derivatives and financial liabilities which arise from transfer of financial assets not qualified for

derecognition. However, IFRS allows a financial liability to be measured at fair value if it is

classified as held-for-trading or designated on initial recognition as liability at fair value through

profit or loss.

Restatement of Comparatives

Revised GP8 requires a one-year restatement of comparatives but a restatement of comparatives

is not allowed as per IAS39.

Test on Impaired Loans

Revised GP8 requires additional test on impaired loans based on the estimated recoverable

amount, which is the present value of the estimated future cash flows, discounted at original

effective interest rate. Additional allowance is required when the estimated recoverable amount is

lower than the net book value of the loans (outstanding amount of loans, advances and financing, net

of specific provision). Revised GP8 does not allow reversal if additional test indicates excess of

provision. In contrast, such a reversal is allowed per IAS39.

Handling Charges

Inconsistent with treatment of Transaction Cost under IAS39 whereby handling charges are

expensed off as incurred per Revised GP8 whilst transaction cost is capitalised and amortised over

such relevant period per IAS39.

Tainting Rules for Held-to-Maturity investments

Revised GP8 has stipulated a limit of 10% for the application of tainting rules for held-to-

maturity investments for the application of ‘‘more than an insignificant amount’’ rule per IAS39.

Revised GP8 also exempts the disposal of equity instruments received as a result of loan

restructuring or loan conversion from the tainting rules.

Embedded Derivatives

Embedded derivatives are not dealt with under Revised GP8. IAS 39 requires separation of

embedded derivatives from host contracts if they are not already carried at fair value.

172

Islamic Banking business

Classification of ‘‘Available for Sale’’ investment does not apply, i.e., investments for Islamic

Banking business are only ‘‘Held-for-Trading’’ or ‘‘Held-to-Maturity’’. Per BNM’s circular dated 12

January 2005, securities in the Islamic Banking business are now allowed to be classified into the

three categories namely held-for-trading, held-to-maturity and available-for-sale.

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GENERAL INFORMATION

Authorisation

The issue of the Preference Shares was duly authorised by a resolution of the Board of

Directors of the Issuer on 1 December 2005.

The giving of the Subordinated Guarantee and entering into of the Subordinated Loan by the

Bank was duly authorised by a resolution of the Board of Directors of the Bank on 30 November

2005.

Listing

Approval in-principle has been received to list the Preference Shares on the LFX and the SGX-

ST. Admission to the Official List of the LFX is not to be taken as an indication of the merits of the

Issuer, the Bank and their associated companies, or the Preference Shares. Admission of the

Preference Shares to the Official List of the SGX-ST is not to be taken as an indication of the merits

of the Issuer, the Bank, the AmBank Group or the Preference Shares.

The Preference Shares will be traded on the SGX-ST in a minimum board lot size of

U.S.$200,000 for so long as the Preference Shares are listed on the SGX-ST.

For so long as the Preference Shares are listed on the SGX-ST and the rules of the SGX-ST so

require, the Issuer shall appoint and maintain a paying agent in Singapore, where the Preference

Shares may be presented or surrendered for payment or redemption. In the event that the Global

Certificate is exchanged for Certificated Preference Shares, an announcement of such exchange shall

be made by or on behalf of the Issuer through the SGX-ST and such announcement will include all

material information with respect to the delivery of the Certificated Preference Shares, including

details of the paying agent in Singapore.

Clearing Systems

The Preference Shares have been accepted for clearance through Euroclear and Clearstream,

Luxembourg. The ISIN for this issue is XS0241612265 and the Common Code is 024161226.

No Material Change

Save as disclosed in this Offering Circular, there has been no adverse change in the financial

position or prospects of the Bank since 30 September 2005 which is material in the context of the

issue of the Preference Shares.

In the case of the Issuer, save as disclosed in this Offering Circular, there has been no material

adverse change in its financial position since its incorporation on 23 September 2005.

Auditors

The auditors of the Bank are Ernst & Young, chartered accountants, who have audited the

Bank’s financial statements, without qualification, in accordance with applicable approved standards

on auditing in Malaysia for the year ended 31 March 2005.

For the years ended 31 March 2003 and 2004, financial statements of AmFinance and ABB

were audited by Deloitte KassimChan in accordance with applicable approved standards on auditing

in Malaysia.

Litigation

Neither the Bank nor any of its subsidiaries are a party to any litigation or legal proceedings

which management believes would, individually or taken as a whole, have a material adverse effect

on its business, financial condition or results of operations.

174

Documents for Inspection

Copies of the following documents will be available in English from the registered office of

the Issuer, the Bank and the specified office of the Principal Paying Agent so long as any of the

Preference Shares or Substitute Preference Shares, as the case may be remains outstanding:

(a) the Memorandum and Articles of Association of each of the Bank and the Issuer;

(b) the unaudited consolidated interim financial statements of the Bank in respect of the six

months ended 30 September 2005;

(c) the consolidated audited financial statements of each of AmFinance and ABB in respect

of the years ended 31 March 2003, 2004 and 2005;

(d) the Subordinated Guarantee;

(e) the paying agency agreement dated on or about 27 January 2006 made between the Issuer,

the Bank, the Agent and the other agents named therein;

(f) the Subscription Agreement; and

(g) the Offering Circular.

175

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INDEX TO FINANCIAL STATEMENTS

Unaudited consolidated interim financial statements of the Bank as at and

for the six months ended 30 September 2005, including restated financials

as at the year ended 31 March 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

Directors’ and Auditors’ reports for the consolidated financial statements of AmFinance

for the year ended 31 March 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-31

Consolidated financial statements of AmFinance as at and

for the year ended 31 March 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-41

Directors’ and Auditors’ reports for the consolidated financial statements of AmFinance

for the year ended 31 March 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-128

Consolidated financial statements of AmFinance as at and

for the year ended 31 March 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-136

Directors’ and Auditors’ reports for the consolidated financial statements of AmFinance

for the year ended 31 March 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-223

Consolidated financial statements of AmFinance as at and

for the year ended 31 March 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-235

Directors’ and Auditors’ reports for the financial statements of ABB

for the year ended 31 March 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-306

Financial statements of ABB as at and for the year ended 31 March 2005 . . . . . . . . . . . . . F-315

Directors’ and Auditors’ reports for the financial statements of ABB

for the year ended 31 March 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-380

Financial statements of ABB as at and for the year ended 31 March 2004 . . . . . . . . . . . . . F-388

Directors’ and Auditors’ reports for the financial statements of ABB as at and

for the year ended 31 March 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-449

Financial statements of ABB for the year ended 31 March 2003 . . . . . . . . . . . . . . . . . . . . . . F-459

Each of the auditors’ reports and audited financial statements presented herein has been

reproduced in its entirety save for page numbers and references thereto, which have been altered to

conform with the pagination of this Offering Circular.

F-1

This page is intentionally left blank

AmBANK (M) BERHAD

UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS AT AND FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2005,

INCLUDING RESTATED FINANCIALS

AS AT THE YEAR ENDED 31 MARCH 2005

AmBank (M) Berhad

(formerly known as AmFinance Berhad)

(Incorporated in Malaysia)

And Its Subsidiary Companies

UNAUDITED BALANCE SHEETS

as at 30 September 2005

Group Bank

30 September

2005

31 March

2005

30 September

2005

31 March

2005

As restated As restated

RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . 5,317,628 5,398,793 5,303,459 3,156,862

Deposits and placements with banks

and other financial institutions . . 793,196 381,003 793,094 358,800

Securities held-for-trading . . . . . . 1,282,702 1,492,533 1,282,702 956,208

Securities available-for-sale. . . . . . 94,532 96,383 94,532 —

Securities held-to-maturity . . . . . . 1,454,986 1,544,280 1,454,731 996,064

Loans, advances and financing. . . . 39,438,618 35,636,185 39,441,878 27,282,390

Deferred tax asset . . . . . . . . . . . 852,206 907,881 699,168 616,284

Other assets . . . . . . . . . . . . . . . 541,392 502,950 542,820 349,608

Statutory deposit with Bank Negara

Malaysia . . . . . . . . . . . . . . . . 1,430,107 1,301,583 1,430,107 988,930

Investment in subsidiary companies. — — 111,741 29,779

Investment in associated companies. 542 458 150 150

Property and equipment . . . . . . . . 408,531 416,449 376,654 351,890

TOTAL ASSETS . . . . . . . . . . . . 51,614,440 47,678,498 51,531,036 35,086,965

The Interim Financial Statements should be read in conjunction with the audited financial statements

of the Group and the Bank for the year ended 31 March 2005.

F-2

AmBank (M) Berhad

(formerly known as AmFinance Berhad)

(Incorporated in Malaysia)

And Its Subsidiary Companies

UNAUDITED BALANCE SHEETS

as at 30 September 2005

Group Bank

30 September

2005

31 March

2005

30 September

2005

31 March

2005

As restated As restated

RM’000 RM’000 RM’000 RM’000

LIABILITIES AND

SHAREHOLDER’S FUNDS

Deposits from customers . . . . . . . 31,646,900 29,161,743 31,648,624 22,273,456

Deposits and placements of banks

and other financial institutions . . 11,048,260 9,526,356 11,048,260 5,877,505

Securities sold under repurchase

agreements . . . . . . . . . . . . . . 227,302 103,795 227,302 33,059

Bills and acceptance payable . . . . . 678,452 515,752 678,452 —

Amount due to Cagamas Berhad . . 2,020,677 2,653,650 2,020,677 2,455,723

Other liabilities . . . . . . . . . . . . . 1,335,210 1,196,387 1,745,249 954,697

Subordinated term loan . . . . . . . . 1,140,000 1,140,000 1,140,000 680,000

Subordinated bonds. . . . . . . . . . . 200,000 200,000 200,000 200,000

Total Liabilities . . . . . . . . . . . . . 48,296,801 44,497,683 48,708,564 32,474,440

Minority interests . . . . . . . . . . . . 84 86 — —

Share capital. . . . . . . . . . . . . . . 610,364 610,364 610,364 528,402

Reserves . . . . . . . . . . . . . . . . . 2,707,191 2,570,365 2,212,108 2,084,123

Shareholder’s Funds . . . . . . . . . . 3,317,555 3,180,729 2,822,472 2,612,525

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . 51,614,440 47,678,498 51,531,036 35,086,965

COMMITMENTS AND

CONTINGENCIES . . . . . . . . . 15,406,352 13,416,581 15,406,252 6,646,477

NET TANGIBLE ASSETS PER

SHARE (RM) . . . . . . . . . . . . 5.44 5.21 4.62 4.94

The Interim Financial Statements should be read in conjunction with the audited financial statements

of the Group and the Bank for the year ended 31 March 2005.

F-3

AmBank (M) Berhad

(formerly known as AmFinance Berhad)

(Incorporated in Malaysia)

And Its Subsidiary Companies

UNAUDITED CONSOLIDATED INCOME STATEMENTS

For the financial half year ended 30 September 2005

Half year ended Year ended

Group

30 September

2005

30 September

2004

31 March

2005

As restated As restated

RM’000 RM’000 RM’000

Interest income . . . . . . . . . . . . . . . . . . . . . . . 1,251,321 1,188,086 2,406,796

Interest expense . . . . . . . . . . . . . . . . . . . . . . . (626,780) (580,762) (1,187,969)

Net interest income . . . . . . . . . . . . . . . . . . . . 624,541 607,324 1,218,827

Net income from Islamic Banking business . . . . . . 229,688 189,878 387,894

Other operating income . . . . . . . . . . . . . . . . . . 78,459 39,307 161,372

Net income . . . . . . . . . . . . . . . . . . . . . . . . . 932,688 836,509 1,768,093

Other operating expenses . . . . . . . . . . . . . . . . . (456,850) (388,896) (774,233)

Operating profit . . . . . . . . . . . . . . . . . . . . . . . 475,838 447,613 993,860

Allowance for losses on loans and financing . . . . . (300,085) (234,509) (715,797)

Impairment writeback on securities held-to-maturity 27,737 6,466 4,845

Held-for-trading securities marked-to-market . . . . . — — 1,288

Impairment of property and equipment . . . . . . . . . — (28,386) (29,834)

Transfer to profit equalisation reserve . . . . . . . . . (9,053) (36,237) (55,754)

Profit before share in results of associated company

and taxation . . . . . . . . . . . . . . . . . . . . . . . . 194,437 154,947 198,608

Share of profits in associated company . . . . . . . . 132 126 281

Profit before taxation . . . . . . . . . . . . . . . . . . . 194,569 155,073 198,889

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . (55,920) (55,831) (95,590)

Profit before minority interests . . . . . . . . . . . . . 138,649 99,242 103,299

Minority interests . . . . . . . . . . . . . . . . . . . . . . 4 5 15

Net profit attributable to shareholder of the Bank . . 138,653 99,247 103,314

Basic earnings per share (sen) . . . . . . . . . . . . . . 22.72 16.26 16.93

The Interim Financial Statements should be read in conjunction with the audited financial statements

of the Group and the Bank for the year ended 31 March 2005.

F-4

AmBank (M) Berhad

(formerly known as AmFinance Berhad)

(Incorporated in Malaysia)

And Its Subsidiary Companies

UNAUDITED INCOME STATEMENTS

For the financial half year ended 30 September 2005

Half year ended Year ended

Bank

30 September

2005

30 September

2004

31 March

2005

As restated As restated

RM’000 RM’000 RM’000

Interest income . . . . . . . . . . . . . . . . . . . . . . . 1,166,121 954,668 1,919,030

Interest expense . . . . . . . . . . . . . . . . . . . . . . . (577,435) (444,289) (908,469)

Net interest income . . . . . . . . . . . . . . . . . . . . 588,686 510,379 1,010,561

Income from Islamic banking operations . . . . . . . 219,896 179,904 362,995

Other operating income . . . . . . . . . . . . . . . . . . 62,896 5,975 79,806

Net income . . . . . . . . . . . . . . . . . . . . . . . . . 871,478 696,258 1,453,362

Other operating expenses . . . . . . . . . . . . . . . . . (412,020) (287,152) (556,368)

Operating profit . . . . . . . . . . . . . . . . . . . . . . . 459,458 409,106 896,994

Allowance for losses on loans and financing . . . . . (294,334) (159,654) (448,458)

Impairment writeback/(loss) on securities held-to-

maturity . . . . . . . . . . . . . . . . . . . . . . . . . . 25,701 1,638 (4,597)

Held-for-trading securities marked-to-market . . . . . — — 1,288

Impairment of property and equipment . . . . . . . . . — (28,386) (28,386)

Transfer to profit equalisation reserve . . . . . . . . . (8,738) (29,449) (45,353)

Profit before taxation . . . . . . . . . . . . . . . . . . . 182,087 193,255 371,488

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . (52,275) (66,010) (133,837)

Net profit attributable to shareholder of the Bank . . 129,812 127,245 237,651

Basic earnings per share (sen) . . . . . . . . . . . . . . 22.37 24.08 44.98

The Interim Financial Statements should be read in conjunction with the audited financial statements

of the Group and the Bank for the year ended 31 March 2005.

F-5

AmBank (M) Berhad

(formerly known as AmFinance Berhad)

(Incorporated in Malaysia)

And Its Subsidiary Companies

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the financial half year ended 30 September 2005

Non-distributable Distributable

Group

Share

Capital

Share

Premium

Statutory

Reserve

Merger

Reserve

Capital

Reserve

Available-

for-Sale

Securities

Revaluation

Reserve

Unappro-

priated

Profits Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Balance as at 1 April 2004

As previously stated . . . . 528,402 379,953 578,712 626,632 623,959 — 172,386 2,910,044

Prior year adjustments . . . — — — — — 35 409 444

Deemed issue of shares . . 81,962 — — — — — — 81,962

As restated . . . . . . . . . . 610,364 379,953 578,712 626,632 623,959 35 172,795 2,992,450

Unrealised net loss on

revaluation of securities

available-for-sale . . . . — — — — — (35) — (35)

Adjustment in Merger

Reserve and Capital

Reserve arising from

increase in share

capital of acquiree . . . — — — 53,125 31,875 — — 85,000

Profit for the year . . . . . — — — — — — 103,314 103,314

Transfer to statutory

reserve . . . . . . . . . . — — 45,332 — — — (45,332) —

Transfer from capital

reserve to

unappropriated profit . . — — — — (278,342) — 278,342 —

Balance as at 31 March

2005 as restated. . . . . 610,364 379,953 624,044 679,757 377,492 — 509,119 3,180,729

Balance as at 1 April 2005

As previously stated . . . . 528,402 379,953 624,044 679,757 377,492 — 507,783 3,097,431

Prior year adjustments . . . — — — — — — 1,336 1,336

Deemed issue of shares . . 81,962 — — — — — — 81,962

As restated . . . . . . . . . . 610,364 379,953 624,044 679,757 377,492 — 509,119 3,180,729

Unrealised net loss on

revaluation of securities

available-for-sale . . . . — — — — — (1,827) — (1,827)

Profit for the year . . . . . — — — — — — 138,653 138,653

Balance as at 30

September 2005 . . . . . 610,364 379,953 624,044 679,757 377,492 (1,827) 647,772 3,317,555

The Interim Financial Statements should be read in conjunction with the audited financial statements

of the Group and the Bank for the year ended 31 March 2005.

F-6

AmBank (M) Berhad

(formerly known as AmFinance Berhad)

(Incorporated in Malaysia)

And Its Subsidiary Companies

UNAUDITED STATEMENTS OF CHANGES IN EQUITY

For the financial half year ended 30 September 2005

Non-distributable Distributable

Bank

Share

Capital

Share

Premium

Statutory

Reserve

Merger

Reserve

Capital

Reserve

Available-

for-Sale

Securities

Revaluation

Reserve

Unappro-

priated

Profits Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Balance as at 1 April 2004

As previously stated . . . . 528,402 379,953 483,070 — 278,342 — 704,698 2,374,465

Prior year adjustments . . . — — — — — 35 409 444

As restated . . . . . . . . . . 528,402 379,953 483,070 — 278,342 35 705,107 2,374,909

Profit for the year . . . . . — — — — — — 237,651 237,651

Transfer to statutory

reserve . . . . . . . . . . — — 45,332 — — — (45,332) —

Transfer from capital

reserve to

unappropriated profit . . — — — — (278,342) — 278,342 —

Unrealised net loss on

revaluation of securities

available-for-sale . . . . — — — — — (35) — (35)

Balance as at 31 March

2005 as restated. . . . . 528,402 379,953 528,402 — — — 1,175,768 2,612,525

Balance as at 1 April 2005

As previously stated . . . . 528,402 379,953 528,402 — — — 1,174,432 2,611,189

Prior year adjustments . . . — — — — — — 1,336 1,336

As restated . . . . . . . . . . 528,402 379,953 528,402 — — — 1,175,768 2,612,525

Issue of shares . . . . . . . 81,962 — — — — — — 81,962

Unrealised net loss on

revaluation of securities

available-for-sale . . . . — — — — — (1,827) — (1,827)

Profit for the year . . . . . — — — — — — 129,812 129,812

Balance as at 30

September 2005 . . . . . 610,364 379,953 528,402 — — (1,827) 1,305,580 2,822,472

The Interim Financial Statements should be read in conjunction with the audited financial statements

of the Group and the Bank for the year ended 31 March 2005.

F-7

AmBank (M) Berhad

(formerly known as AmFinance Berhad)

(Incorporated in Malaysia)

And Its Subsidiary Companies

UNAUDITED CASH FLOW STATEMENTS

For the financial half year ended 30 September 2005

Group Bank

30 September

2005

30 September

2004

30 September

2005

30 September

2004

Restated Restated

RM’000 RM’000 RM’000 RM’000

Profit before taxation . . . . . . . . . 194,569 155,073 182,087 193,255

Adjustments for non-cash items . . . 529,615 584,273 552,429 443,180

Operating Profit Before Working

Capital Changes . . . . . . . . . . . 724,184 739,346 734,516 636,435

Changes in working capital:

Net changes in operating assets . . . (4,916,653) (2,182,157) (13,877,725) (1,783,491)

Net changes in operating liabilities . 3,790,056 698,462 15,765,386 (77,232)

Tax expense paid . . . . . . . . . . . . (186) (468) — —

Net Cash (Used in)/Generated From

Operating Activities . . . . . . . . . (402,599) (744,817) 2,622,177 (1,224,288)

Net Cash Generated From/(Used in)/

Investing Activities . . . . . . . . . 323,261 401,838 (851,791) 269,642

Net Cash (Used in)/Generated From

Financing Activities . . . . . . . . . (1,827) 50,000 376,211 —

Net Decrease/Increase In Cash And

Cash Equivalents . . . . . . . . . . . (81,165) (292,979) 2,146,597 (954,646)

Cash And Cash Equivalents At

Beginning Of The Period. . . . . . 5,398,793 4,765,069 3,156,862 3,052,558

Cash And Cash Equivalents At End

Of The Period . . . . . . . . . . . . 5,317,628 4,472,090 5,303,459 2,097,912

The Interim Financial Statements should be read in conjunction with the audited financial statements

of the Group and the Bank for the year ended 31 March 2005.

F-8

AmBank (M) Berhad

(formerly known as AmFinance Berhad)

(Incorporated in Malaysia)

And Its Subsidiary Companies

EXPLANATORY NOTES

1. Basis of Preparation

The interim financial statements have been prepared in accordance with Financial Reporting

Standard (‘‘FRS’’) 134 : Interim Financial Reporting (formerly known as Malaysian Accounting

Standards Board (‘‘MASB’’) Standard 26) issued by MASB and should be read in conjunction with

the annual financial statements of the AmBank (M) Berhad (‘‘the Bank’’) and its subsidiary

companies (‘‘the Group’’) for the year ended 31 March 2005.

The accounting policies applied in the unaudited interim financial statements are consistent

with those adopted in the previous audited annual financial statements except for the following

accounting policies adopted in the current period:

(i) revised guidelines on Financial Reporting for Licensed Institutions (‘‘BNM/GP8’’) issued

by Bank Negara Malaysia (‘‘BNM’’) which became effective for the current financial

year. The adoption of the revised BNM/GP8 have resulted in changes in the accounting

policies of the Group and the Bank which have been applied retrospectively in this

unaudited interim financial statements and the details are disclosed in Note 27. The Bank

has not complied with the revised BNM/GP8 in full as it is currently exempted by BNM

from the requirement for a further test on impaired loans for the current financial year.

(ii) merger accounting method for the reporting of the business combination of the Bank

Group and AmBank Berhad (now known as AMBB Capital Berhad (‘‘AMBB Capital’’)),

as permitted under FRS 122 : Business Combinations (formerly known as MASB 21) and

the details are disclosed in Note 27.

2. Audit Qualification

The auditors’ report on the audited annual financial statements for the financial year ended 31

March 2005 was not qualified.

3. Seasonality or Cyclicality of Operations

The operations of the Group are not subject to seasonal or cyclical fluctuation.

4. Unusual Items

There were no unusual items during the current period.

5. Use of Estimates

There was no material change in estimates of amounts reported in prior financial years that

have a material effect on the current period.

6. Issuance, Cancellation, Repurchase, Resale and Repayment of Debt and Equity Securities

In current period, the issued and paid-up share capital of the Bank was increased from

528,402,120 ordinary shares of RM1.00 each to 610,363,762 ordinary shares arising from the

issuance of 81,961,642 shares, as consideration for the acquisition of the entire share capital of

AMBB Capital as referred to in Note 1(ii) above.

F-9

7. Dividends Paid

The directors do not recommend the payment of any dividend in respect of the financial half

year ended 30 September 2005.

8. Securities Held-for-trading

Group Bank

30 September

2005

31 March

2005

30 September

2005

31 March

2005

As restated As restated

RM’000 RM’000 RM’000 RM’000

At fair value

Money market securities:

Malaysian Government Securities . . 117,066 119,252 117,066 119,252

Malaysia Government Investment

Certificates . . . . . . . . . . . . . . 153,582 150,556 153,582 104,225

Cagamas bonds . . . . . . . . . . . . . 174,693 174,476 174,693 174,476

Negotiable instruments of deposit . . 450,045 645,185 450,045 401,075

Khazanah bonds. . . . . . . . . . . . . 112,102 110,214 112,102 81,384

1,007,488 1,199,683 1,007,488 880,412

Quoted securities:

Shares in Malaysia . . . . . . . . . . . 71,433 90,095 71,433 75,796

Unquoted securities:

Private debt securities . . . . . . . . . 203,781 202,755 203,781 —

1,282,702 1,492,533 1,282,702 956,208

9. Securities Available-for-sale

Group Bank

30 September

2005

31 March

2005

30 September

2005

31 March

2005

As restated As restated

RM’000 RM’000 RM’000 RM’000

At fair value

Unquoted securities:

Private debt securities . . . . . . . . . 94,532 96,383 94,532 —

F-10

10. Securities Held-to-maturity

Group Bank

30 September

2005

31 March

2005

30 September

2005

31 March

2005

As restated As restated

RM’000 RM’000 RM’000 RM’000

At amortised cost

Quoted Securities In Malaysia:

Debt equity conversion . . . . . . . . 763,718 811,816 763,718 565,583

Shares. . . . . . . . . . . . . . . . . . . 497 497 — —

764,215 812,313 763,718 565,583

Unquoted securities In Malaysia:

Debt equity conversion . . . . . . . . 1,118,292 1,141,729 1,118,292 736,791

Shares. . . . . . . . . . . . . . . . . . . 85,884 85,885 85,468 36,014

Corporate bonds . . . . . . . . . . . . 859 41,443 859 792

1,205,035 1,269,057 1,204,619 773,597

Unquoted securities Outside Malaysia:

Shares. . . . . . . . . . . . . . . . . . . 13 432 13 —

1,969,263 2,081,802 1,968,350 1,339,180

Less: Allowances for diminution in

value of investments . . . . . . (514,277) (537,522) (513,619) (343,116)

1,454,986 1,544,280 1,454,731 996,064

F-11

11. Loans, Advances and Financing

Group Bank

30 September

2005

31 March

2005

30 September

2005

31 March

2005

As restated As restated

RM’000 RM’000 RM’000 RM’000

Overdrafts . . . . . . . . . . . . . . . . . 813,057 833,065 813,057 —

Term loans facilities

— Housing loans/financing . . . . . . 8,990,035 8,174,357 8,990,035 4,959,174

— Hire-purchase receivables . . . . . 25,233,260 21,674,599 25,233,260 21,674,599

— Other loans/financing . . . . . . . 7,986,612 7,564,006 7,989,872 4,625,974

Card receivables . . . . . . . . . . . . . 2,073,551 1,933,632 2,073,551 1,383,852

Bills receivables . . . . . . . . . . . . . 10,152 10,636 10,152 —

Trust receipts . . . . . . . . . . . . . . . 187,211 211,647 187,211 —

Claims on customers under acceptance

credits . . . . . . . . . . . . . . . . . . 820,283 809,482 820,283 —

Revolving credits . . . . . . . . . . . . . 1,506,287 1,577,143 1,506,287 1,004,875

Staff loans . . . . . . . . . . . . . . . . . 147,881 139,457 147,881 106,484

47,768,329 42,928,024 47,771,589 33,754,958

Unearned interest and income . . . . . (5,174,610) (4,440,967) (5,174,610) (4,230,155)

Gross loans, advances and financing . 42,593,719 38,487,057 42,596,979 29,524,803

Less: Islamic financing sold to

Cagamas Berhad . . . . . . . . . (850,640) (928,658) (850,640) (925,365)

41,743,079 37,558,399 41,746,339 28,599,438

Allowance for bad and doubtful debts

and financing:

General . . . . . . . . . . . . . . . . . . (614,194) (556,695) (614,194) (429,408)

Specific . . . . . . . . . . . . . . . . . . (1,690,267) (1,365,519) (1,690,267) (887,640)

Net loans, advances and financing . . 39,438,618 35,636,185 39,441,878 27,282,390

11a. By type of customer

Group Bank

30 September

2005

31 March

2005

30 September

2005

31 March

2005

As restated As restated

RM’000 RM’000 RM’000 RM’000

Domestic non-bank financial

institutions . . . . . . . . . . . . . . . 404,822 438,549 404,822 124,673

Domestic business enterprises

— Small medium enterprises . . . . . 2,980,828 2,794,164 2,980,828 1,737,480

— Others. . . . . . . . . . . . . . . . . 7,132,880 7,202,920 7,136,140 3,730,272

Government and statutory bodies . . . 20,733 21,194 20,733 61

Individuals . . . . . . . . . . . . . . . . . 31,988,306 27,965,429 31,988,306 23,880,502

Other domestic entities . . . . . . . . . 29,604 23,602 29,604 22,378

Foreign entities . . . . . . . . . . . . . . 36,546 41,199 36,546 29,437

Gross loans, advances and financing . 42,593,719 38,487,057 42,596,979 29,524,803

F-12

11b. By interest/profit rate sensitivity

Group Bank

30 September

2005

31 March

2005

30 September

2005

31 March

2005

As restated As restated

RM’000 RM’000 RM’000 RM’000

Fixed rate:

— Housing loans/financing . . . . . . 2,724,449 1,483,383 2,724,449 272,184

— Hire purchase receivables . . . . . 21,004,651 18,089,715 21,004,651 18,086,421

— Other fixed rate loan/financing . 4,930,137 4,200,557 4,930,137 2,160,026

Variable rate:

— Base lending rate plus . . . . . . . 12,854,241 12,082,056 12,857,501 7,753,560

— Cost plus . . . . . . . . . . . . . . . 658,757 1,293,030 658,757 —

— Other variable rates . . . . . . . . 421,484 1,338,316 421,484 1,252,612

Gross loans, advances and financing . 42,593,719 38,487,057 42,596,979 29,524,803

11c. By economic purposes

Group Bank

30 September

2005

31 March

2005

30 September

2005

31 March

2005

As restated As restated

RM’000 RM’000 RM’000 RM’000

Agriculture . . . . . . . . . . . . . . . . . 425,452 456,719 425,452 333,348

Mining and quarrying . . . . . . . . . . 35,820 35,239 35,820 23,121

Manufacturing . . . . . . . . . . . . . . . 1,696,194 1,678,226 1,696,194 775,641

Electricity, gas and water . . . . . . . . 200,626 265,407 200,626 13,803

Construction . . . . . . . . . . . . . . . . 2,321,617 2,336,680 2,321,617 1,551,835

Real estate . . . . . . . . . . . . . . . . . 711,835 786,024 711,835 255,288

Purchase of landed property

— Residential . . . . . . . . . . . . . . 8,868,995 8,113,708 8,868,995 5,209,734

— Non-residential . . . . . . . . . . . 1,622,190 1,574,452 1,625,450 946,699

General commerce . . . . . . . . . . . . 1,708,534 1,435,189 1,708,534 715,709

Transport, storage and communication 429,575 458,277 429,575 358,240

Finance, insurance and business

services . . . . . . . . . . . . . . . . . 999,120 935,494 999,120 223,025

Purchase of securities . . . . . . . . . . 804,045 875,295 804,045 485,611

Purchase of transport vehicles . . . . . 19,011,414 16,165,198 19,011,414 16,165,198

Consumption credit . . . . . . . . . . . . 3,272,855 2,928,128 3,272,855 2,180,880

Others. . . . . . . . . . . . . . . . . . . . 485,447 443,021 485,447 286,671

Gross loans, advances and financing . 42,593,719 38,487,057 42,596,979 29,524,803

F-13

11d. Non-performing loans by sector

Group Bank

30 September

2005

31 March

2005

30 September

2005

31 March

2005

As restated As restated

RM’000 RM’000 RM’000 RM’000

Agriculture . . . . . . . . . . . . . . . . . 48,839 22,460 48,839 17,807

Mining and quarrying . . . . . . . . . . 11,321 12,076 11,321 3,472

Manufacturing . . . . . . . . . . . . . . . 279,876 363,941 279,876 138,456

Electricity, gas and water . . . . . . . . 177,517 177,523 177,517 1,247

Construction . . . . . . . . . . . . . . . . 807,202 1,116,364 807,202 834,620

Real estate . . . . . . . . . . . . . . . . . 330,283 445,667 330,283 207,153

Purchase of landed property

— Residential . . . . . . . . . . . . . . 1,347,735 1,415,234 1,347,735 941,296

— Non-residential . . . . . . . . . . . 630,108 690,542 630,108 514,170

General commerce . . . . . . . . . . . . 193,757 254,916 193,757 168,694

Transport, storage and communication 71,840 48,956 71,840 43,805

Finance, insurance and business

services . . . . . . . . . . . . . . . . . 239,073 161,788 239,073 91,104

Purchase of securities . . . . . . . . . . 284,448 449,613 284,448 279,061

Purchase of transport vehicles . . . . . 1,042,055 916,347 1,042,055 916,347

Consumption credit . . . . . . . . . . . . 193,152 185,793 193,152 82,807

Others. . . . . . . . . . . . . . . . . . . . 119,922 117,229 119,922 68,145

Gross loans, advances and financing . 5,777,128 6,378,449 5,777,128 4,308,184

11e. Movements in non-performing loans, advances and financing (‘‘NPL’’) are as follows:

Group Bank

30 September

2005

31 March

2005

30 September

2005

31 March

2005

As restated As restated

RM’000 RM’000 RM’000 RM’000

Gross

Balance at 1 April

As previously reported . . . . . . . . . 7,648,349 8,257,834 5,273,097 5,622,481

Income-in-suspense as at 1 April . . . (1,269,900) (1,220,562) (964,913) (980,636)

As restated . . . . . . . . . . . . . . . . . 6,378,449 7,037,272 4,308,184 4,641,845

Non-performing during the period. . . 1,138,189 846,378 1,027,511 765,619

Reclassified as performing . . . . . . . (1,404,897) (742,031) (1,028,492) (456,085)

Recoveries . . . . . . . . . . . . . . . . . (295,807) (291,735) (273,346) (209,026)

Debt equity conversion . . . . . . . . . (982) (39,401) (982) (39,401)

Amount vested from AmBank Berhad — — 1,779,464 —

Amount written off. . . . . . . . . . . . (37,824) (432,034) (35,211) (394,768)

Balance at end of period . . . . . . . . 5,777,128 6,378,449 5,777,128 4,308,184

Less:

Specific allowance . . . . . . . . . . . . (1,690,267) (1,365,519) (1,690,267) (887,640)

Non-performing loans and financing

(net) . . . . . . . . . . . . . . . . . . . 4,086,861 5,012,930 4,086,861 3,420,544

Ratio of net non-performing loans to

loans, advances and financing . . . . 9.99% 13.50% 9.99% 11.94%

F-14

11f. Movements in the allowance for bad and doubtful debts (and financing) accounts are as

follows:

Group Bank

30 September

2005

31 March

2005

30 September

2005

31 March

2005

As restated As restated

RM’000 RM’000 RM’000 RM’000

General Allowance:

Balance at 1 April . . . . . . . . . . . . 556,695 516,173 429,408 405,255

Allowance made during the period . . 57,499 40,522 56,500 24,153

Amount vested over from AmBank

Bhd . . . . . . . . . . . . . . . . . . . . — — 128,286 —

Balance at end of period . . . . . . . . 614,194 556,695 614,194 429,408

% of total loans less specific

allowance . . . . . . . . . . . . . . . . 1.50% 1.50% 1.50% 1.50%

Specific Allowance:

Balance at 1 April . . . . . . . . . . . . 1,365,519 1,144,408 887,640 674,950

Allowance made during the period . . 595,219 1,247,729 561,143 877,367

Amount written back in respect of

recoveries . . . . . . . . . . . . . . . . (231,640) (323,067) (209,179) (278,830)

Net charge to income statements . . . 363,579 924,662 351,964 598,537

Debt equity conversion . . . . . . . . . (982) (1,005) (982) —

Amount written off/Adjustment to

Asset Deficiency Account . . . . . . (37,849) (702,546) (35,237) (385,847)

Amount vested over from AmBank

Bhd . . . . . . . . . . . . . . . . . . . . — — 486,882 —

Balance at end of period . . . . . . . . 1,690,267 1,365,519 1,690,267 887,640

12. Deposits from Customers

Group Bank

30 September

2005

31 March

2005

30 September

2005

31 March

2005

As restated As restated

RM’000 RM’000 RM’000 RM’000

By type of customer:

Business enterprises . . . . . . . . . . . 8,476,561 7,773,619 8,478,285 3,877,767

Individuals . . . . . . . . . . . . . . . . . 19,042,325 18,236,389 19,042,325 16,395,827

Government and other statutory bodies 3,685,146 2,748,974 3,685,146 1,682,335

Others. . . . . . . . . . . . . . . . . . . . 442,868 402,761 442,868 317,527

31,646,900 29,161,743 31,648,624 22,273,456

F-15

13. Deposits and Placements of Banks and Other Financial Institutions

Group Bank

30 September

2005

31 March

2005

30 September

2005

31 March

2005

As restated As restated

RM’000 RM’000 RM’000 RM’000

Licensed banks . . . . . . . . . . . . . . 1,789,313 2,962,983 1,789,313 1,597,184

Licensed merchant banks . . . . . . . . 2,597,470 — 2,597,470 —

Licensed finance companies . . . . . . — 309,676 — 19,928

Non-banking institutions . . . . . . . . 5,853,477 5,445,697 5,853,477 3,452,393

Bank Negara Malaysia (‘‘BNM’’) . . . 808,000 808,000 808,000 808,000

11,048,260 9,526,356 11,048,260 5,877,505

14. Interest Income

Half Year ended Year ended

31 March

2005

30 September

2005

30 September

2004

As restated As restated

RM’000 RM’000 RM’000

Group

Loans and advances . . . . . . . . . . . . . . . . . . . 1,170,457 1,110,704 2,349,501

Money at call and deposits placements with

financial institutions . . . . . . . . . . . . . . . . . . 67,304 74,989 139,072

Investments . . . . . . . . . . . . . . . . . . . . . . . . 40,253 28,385 102,060

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,467 20,782 50,711

1,315,481 1,234,860 2,641,344

Net interest suspended . . . . . . . . . . . . . . . . . . (58,931) (47,498) (233,395)

(Amortisation of premiums)/accretion of

discounts — net . . . . . . . . . . . . . . . . . . . . (5,229) 724 (1,153)

1,251,321 1,188,086 2,406,796

Bank

Loans and advances . . . . . . . . . . . . . . . . . . . 1,101,687 918,450 1,934,149

Money at call, deposits and placements with

financial institutions . . . . . . . . . . . . . . . . . . 54,955 40,035 63,064

Investments . . . . . . . . . . . . . . . . . . . . . . . . 36,812 19,427 53,192

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,832 14,467 50,676

1,230,286 992,379 2,101,081

Net interest suspended . . . . . . . . . . . . . . . . . . (57,204) (38,260) (180,661)

(Amortisation of premium)/accretion of

discounts — net . . . . . . . . . . . . . . . . . . . . (6,961) 549 (1,390)

1,166,121 954,668 1,919,030

F-16

15. Interest Expense

Half Year ended Year ended

31 March

2005

30 September

2005

30 September

2004

As restated As restated

RM’000 RM’000 RM’000

Group

Deposits and placements of banks and other

financial institution . . . . . . . . . . . . . . . . . . 487,770 437,845 896,230

Amounts due to Cagamas Berhad . . . . . . . . . . . 40,050 71,406 133,325

Subordinated term loan and subordinated bonds . . 45,973 46,119 75,912

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,987 25,392 82,502

626,780 580,762 1,187,969

Bank

Deposits and placements of banks and other

financial institutions . . . . . . . . . . . . . . . . . . 449,750 322,587 656,499

Amounts due to Cagamas Berhad . . . . . . . . . . . 40,050 66,935 125,332

Subordinated term loan and subordinated bonds . . 40,703 30,176 44,200

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,932 24,591 82,438

577,435 444,289 908,469

16. Other Operating Income

Half Year ended Year ended

31 March

2005

30 September

2005

30 September

2004

As restated As restated

RM’000 RM’000 RM’000

Group

(a) Fee Income:

Commissions. . . . . . . . . . . . . . . . . . . . 15,263 11,881 34,096

Guarantee fees . . . . . . . . . . . . . . . . . . 3,073 2,409 6,063

Income from asset securitisation. . . . . . . . 42,838

Other fee income . . . . . . . . . . . . . . . . . 43,677 34,228 65,615

62,013 48,518 148,612

(b) Gain/(loss) arising from sale of securities . . 363 (23,085) (13,664)

(c) Gross dividends income. . . . . . . . . . . . . . 8,125 6,875 10,993

(d) Other Income:

Foreign exchange gain. . . . . . . . . . . . . . 3,638 688 2,651

Rental income . . . . . . . . . . . . . . . . . . . 3,859 4,503 8,157

Other non-operating income . . . . . . . . . . 461 1,808 4,623

7,958 6,999 15,431

78,459 39,307 161,732

F-17

Half Year ended Year ended

31 March

2005

30 September

2005

30 September

2004

As restated As restated

RM’000 RM’000 RM’000

Bank

(a) Fee Income:

Commissions. . . . . . . . . . . . . . . . . . . . 14,136 9,220 19,188

Guarantee fees . . . . . . . . . . . . . . . . . . 2,385 118 1,085

Income from asset securitisation. . . . . . . . 42,838

Other fee income . . . . . . . . . . . . . . . . . 31,699 5,780 12,599

48,220 15,118 75,710

(b) Gain/(loss) arising from sale of securities . . 641 (18,627) (12,348)

(c) Gross dividends income. . . . . . . . . . . . . . 7,129 5,344 8,203

(d) Other Income:

Rental income . . . . . . . . . . . . . . . . . . . 3,561 3,718 7,365

Foreign exchange profit . . . . . . . . . . . . . 2,884 — —

Others. . . . . . . . . . . . . . . . . . . . . . . . 461 422 876

6,906 4,140 8,241

Total other operating income. . . . . . . . . . 62,896 5,975 79,806

17. Other Operating Expenses

Half Year ended Year ended

31 March

2005

30 September

2005

30 September

2004

As restated As restated

RM’000 RM’000 RM’000

Group

Personnel costs . . . . . . . . . . . . . . . . . . . . . . 183,758 150,386 302,726

Establishment costs. . . . . . . . . . . . . . . . . . . . 90,737 89,714 164,836

Marketing and communication expenses . . . . . . . 144,171 116,136 234,640

Administration and general expenses . . . . . . . . . 38,184 32,660 72,031

456,850 388,896 774,233

Bank

Personnel costs . . . . . . . . . . . . . . . . . . . . . . 162,636 103,596 214,633

Establishment costs. . . . . . . . . . . . . . . . . . . . 84,162 72,401 126,605

Marketing and communication expenses . . . . . . . 134,497 91,339 178,028

Administration and general expenses . . . . . . . . . 30,725 19,816 37,102

412,020 287,152 556,368

F-18

18. Allowance for Losses on Loans, Advances and Financing

Half Year ended Year ended

31 March

2005

30 September

2005

30 September

2004

As restated As restated

RM’000 RM’000 RM’000

Group

Allowance for bad and doubtful debts and

financing:

Specific allowance (net)

— made in the financial year . . . . . . . . . . . 595,219 502,838 1,247,729

— written back . . . . . . . . . . . . . . . . . . . . (231,640) (164,559) (323,067)

General allowance . . . . . . . . . . . . . . . . . . 57,499 23,908 40,522

Bad debts and financing recovered . . . . . . . . . . (120,993) (127,678) (249,387)

300,085 234,509 715,797

Bank

Allowance for bad and doubtful debts and

financing:

Specific allowance (net)

— made in the financial year . . . . . . . . . . . 561,143 375,582 877,367

— written back . . . . . . . . . . . . . . . . . . . . (209,179) (149,482) (278,830)

General allowance . . . . . . . . . . . . . . . . . . 56,500 21,802 24,153

Bad debts and financing recovered . . . . . . . . . . (114,130) (88,248) (174,232)

294,334 159,654 448,458

19. Taxation

Half Year ended Year ended

31 March

2005

30 September

2005

30 September

2004

As restated As restated

RM’000 RM’000 RM’000

Group

Estimated current tax payable . . . . . . . . . . . . . 197 392 63

Share in taxation of associated company . . . . . . 48 44 73

Net transfer from deferred taxation . . . . . . . . . . 55,675 55,395 86,466

Underprovision in prior years . . . . . . . . . . . . . — — 8,988

55,920 55,831 95,590

Bank

Net transfer from deferred taxation . . . . . . . . . . 52,275 66,010 125,290

Underprovision in prior years . . . . . . . . . . . . . — — 8,547

52,275 66,010 133,837

F-19

20. Earnings Per Share

Half Year ended Year ended

31 March

2005

30 September

2005

30 September

2004

As restated As restated

RM’000 RM’000 RM’000

Group

Net profit attributable to shareholders of the Bank 138,653 99,247 103,314

Number of ordinary shares in issue . . . . . . . . . . 610,364 610,364 610,364

Basic earnings per share (sen) . . . . . . . . . . . . . 22.72 16.26 16.93

There are no dilutive potential ordinary shares during the financial period.

Half Year ended Year ended

31 March

2005

30 September

2005

30 September

2004

As restated As restated

RM’000 RM’000 RM’000

Bank

Net profit attributable to shareholders of the Bank 129,812 127,245 237,651

Number of ordinary shares in issue . . . . . . . . . . 580,421 528,402 528,402

Basic earnings per share (sen) . . . . . . . . . . . . . 22.37 24.08 44.98

There are no dilutive potential ordinary shares during the financial period.

21. Segment Information on Operating Revenue and Results

By Business Segments

Group

30 September 2005

Bank Others Elimination Consolidated

RM’000 RM’000 RM’000 RM’000

Operating Revenue

External revenue . . . . . . . . . . . . 1,579,248 158 — 1,579,406

Inter-segment revenue . . . . . . . . . 142 971 (1,113) —

Total revenue . . . . . . . . . . . . . . 1,579,390 1,129 (1,113) 1,579,406

Results

Profit from operations . . . . . . . . . 194,262 195 (20) 194,437

Share of profits of associated Bank. — — 132 132

Profit before tax . . . . . . . . . . . . 194,262 195 112 194,569

Taxation . . . . . . . . . . . . . . . . . (55,675) (198) (47) (55,920)

Profit after taxation . . . . . . . . . . 138,587 (3) 65 138,649

F-20

30 September 2004

Bank Others Elimination Consolidated

RM’000 RM’000 RM’000 RM’000

Operating Revenue

External revenue . . . . . . . . . . . . 1,416,740 214 — 1,416,954

Inter-segment revenue . . . . . . . . . 335 2,628 (2,963) —

Total revenue . . . . . . . . . . . . . . 1,417,075 2,842 (2,963) 1,416,954

Results

Profit from operations . . . . . . . . . 153,081 1,482 384 154,947

Share of profits of associated Bank. — — 126 126

Profit before tax . . . . . . . . . . . . 153,080 1,482 510 155,073

Taxation . . . . . . . . . . . . . . . . . (55,395) (392) (44) (55,831)

Profit after taxation . . . . . . . . . . 97,685 1,090 466 99,242

The directors are of the opinion that all inter-segment transactions have been entered into in

the normal course of business and have been established under terms and conditions that are no less

favourable than those arranged with independent parties.

The financial information by geographical segment is not presented as the Group’s activities

are principally conducted in Malaysia.

22. Valuation of Property & Equipment

The Group’s and the Bank’s property and equipment are stated at cost or valuation less

accumulated depreciation and accumulated impairment losses.

23. Events Subsequent To Balance Sheet Date

There has not arisen in the interval between the end of the financial half year and the date of

this report any items, transaction or event of a material and unusual nature likely, in the opinion of

the directors, to affect substantially the result of the operations of the Group for the current financial

period.

24. Significant Events

(a) Acquisition of AMBB Capital Berhad (formerly known as AmBank Berhad) (‘‘AMBBCapital’’) by the Bank

During the financial half year ended 30 September 2005, the Bank acquired the entire

equity interest in AMBB Capital, a related Bank, for a purchase consideration of RM412.7

million based on the unaudited net tangible assets (‘‘NTA’’) of AMBB Capital after adjusting

for certain non-transferable assets. The purchase consideration was satisfied by the issuance of

81,961,642 ordinary shares in the Bank at an issue price of RM5.035 based on the NTA of the

Group at the completion date.

(b) Business Merger

Upon completion of the acquisition of AMBB Capital by the Bank, the finance business

of the Bank and the commercial banking business of AMBB Capital was merged by way of

vesting of AMBB Capital’s assets and liabilities (save for non-transferable assets) amounting to

RM412.7 million to the Bank on 1 June 2005. The assets and liabilities were vested pursuant to

a High Court Vesting Order made under section 50 of the Banking and Financial Institutions

Act, 1989.

F-21

Subsequently, the Bank changed its name to AmBank (M) Berhad to reflect the merger of

the commercial banking and finance operations under a single entity.

25. Changes in the Composition of Group

There were no significant changes in the composition of the Group for current period, other

than as disclosed in Note 24 above.

26. Capital Adequacy

Bank Negara Malaysia’s (‘‘BNM’’) guideline on capital adequacy requires the Bank to maintain

an adequate level of capital to withstand any losses which may result from credit and other risks

associated with financing operations. The capital adequacy ratio is computed based on the eligible

capital in relation to the total risk-weighted assets as determined by BNM.

The risk weighted capital adequacy ratio of the Bank of 10.46% (31 March 2005 : 11.51%)

exceeds the minimum requirements of BNM.

Bank

30 September

2005

31 March

2005

RM’000 RM’000

(Note 1)

Tier 1 capital:

Paid-up share capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . 610,364 528,402

Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379,953 379,953

Other reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,681,295 528,402

Unappropriated profit . . . . . . . . . . . . . . . . . . . . . . . . . . . 636,430 1,174,432

3,308,042 2,611,189

Less: Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . (852,206) (600,173)

Total Tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,455,836 2,011,016

Tier 2 capital:

General allowance for bad and doubtful debts and financing . . . 612,064 425,857

Subordinated term loan . . . . . . . . . . . . . . . . . . . . . . . . . . 1,140,000 680,000

Subordinated bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 200,000

1,952,064 1,305,857

Maximum Allowable Tier 2 Capital . . . . . . . . . . . . . . . . . . 1,839,982 1,305,857

Total capital funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,295,818 3,316,873

Less: Investment in subsidiary companies . . . . . . . . . . . . . . (29,779) (29,779)

Capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,266,039 3,287,094

F-22

30 September 2005 31 March 2005

Principal

Risk-

Weighted Principal

Risk-

Weighted

RM’000 RM’000 RM’000 RM’000

Notional risk-weighted assets* . . . . 53,294,088 40,789,891 35,976,179 28,545,183

Capital Ratios

Core capital ratio . . . . . . . . . . . . 6.02% 7.04%

Risk-weighted capital ratio . . . . . . 10.46% 11.51%

Note:

1. The ratios for the period ended 30 September 2005 are based on the consolidated risk weighted capital adequacy

ratio of AmBank (M) Berhad and AMBB Capital Berhad (formerly known as AmBank Berhad).

* The notional risk-weighted assets of the Bank as at 30 September 2005 have been adjusted to incorporate market

risk, pursuant to Bank Negara Malaysia’s Market Risk Capital Adequacy Framework which became effective on

1 April 2005.

The comparative ratios are not adjusted for the prior year adjustments.

Group

30 September

2005

31 March

2005

RM’000 RM’000

Tier 1 capital:

Paid-up share capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . 610,364 528,402

Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379,953 379,953

Other reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,681,295 528,402

Unappropriated profit . . . . . . . . . . . . . . . . . . . . . . . . . . . 647,772 1,185,677

Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 86

3,319,468 2,622,520

Less: Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . (852,206) (600,173)

Total Tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,467,262 2,022,347

Tier 2 capital:

General allowance for bad and doubtful debts and financing . . . 612,064 425,857

Subordinated term loan . . . . . . . . . . . . . . . . . . . . . . . . . . 1,140,000 680,000

Subordinated bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 200,000

1,952,064 1,305,857

Maximum Allowable Tier 2 Capital . . . . . . . . . . . . . . . . . . 1,845,695 1,305,857

Capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,312,957 3,328,204

F-23

30 September 2005 31 March 2005

Principal

Risk-

Weighted Principal

Risk-

Weighted

RM’000 RM’000 RM’000 RM’000

Notional risk-weighted assets* . . . . 53,336,195 40,820,581 36,018,148 28,572,563

Capital Ratios

Core capital ratio . . . . . . . . . . . . 6.04% 7.08%

Risk-weighted capital ratio . . . . . . 10.57% 11.65%

* The notional risk-weighted assets of the Group as at 30 September 2005 have been adjusted to incorporate

market risk, pursuant to Bank Negara Malaysia’s Market Risk Capital Adequacy Framework which became

effective on 1 April 2005.

The comparative ratios are not adjusted for the prior year adjustments.

27. Change in Accounting Policies and Merger Accounting

(a) Change in Accounting Policies for the period ended 30 September 2005

During the financial half year ended 30 September 2005, the Group and the Bank have

adopted the revised BNM/GP8 which have resulted in the following new accounting policies:

1) The holdings of the securities portfolio of the Group and the Bank are segregated

based on the following categories and valuation methods:

i) Securities held-for-trading

Securities are classified as held-for-trading if they are acquired principally for

the purpose of benefiting from actual or expected short-term price movement or to

lock in arbitrage profits. The securities held-for-trading will be 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 statements.

ii) Securities held-to-maturity

Securities held-to-maturity are financial assets with fixed or determinable

payments and fixed maturity that the Group and Bank have 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 statements.

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 amortised 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 statements.

F-24

2) Where a loan becomes non-performing, interest accrued and recognised as income

prior to the date the loans are classified as non-performing shall be reversed out of

income and set-off against the accrued interest receivable account in the balance

sheet. Thereafter, the interest accrued on the non-performing loans shall be

recognised as income on a cash basis instead of being accrued and suspended at

the same time as prescribed previously.

(b) Merger Accounting

Arising from the acquisition of AMBB Capital by the Bank, merger accounting method

for the reporting of the business combination of the Bank Group and AMBB Capital, as

permitted under FRS 122 : Business Combinations (formerly known as MASB 21) is applied to

and comparatives have been restated.

F-25

Resulting from the change in accounting policies and adoption of merger accounting as

described in (a) and (b) above, the audited balance sheet and income statement as at and for the

year ended 31 March 2005 have been restated as follows:

BALANCE SHEET

As at 31 March 2005

Group

As Previously

stated

Change in

Accounting

Policy

Merger

adjustments As Restated

RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . . . . 3,174,996 — 2,223,797 5,398,793Deposits and placements with banks and

other financial institutions . . . . . . . . 358,903 — 22,100 381,003Dealing securities. . . . . . . . . . . . . . . 75,796 (75,796)Investment securities . . . . . . . . . . . . . 1,874,874 (1,874,874)Securities held-for-trading . . . . . . . . . 956,208 536,325 1,492,533Securities available-for-sale. . . . . . . . . — 96,383 96,383Securities held-to-maturity . . . . . . . . . 996,318 547,962 1,544,280Loans, advances and financing. . . . . . . 27,278,509 — 8,357,676 35,636,185Deferred tax asset . . . . . . . . . . . . . . 616,284 (520) 291,597 907,881Other assets . . . . . . . . . . . . . . . . . . 344,531 — 158,419 502,950Statutory deposit with Bank Negara

Malaysia . . . . . . . . . . . . . . . . . . . 988,930 — 312,653 1,301,583Investment in associated companies. . . . 458 — — 458Property and equipment . . . . . . . . . . . 384,050 — 32,399 416,449

TOTAL ASSETS . . . . . . . . . . . . . . . 35,097,851 1,336 12,579,311 47,678,498

LIABILITIES AND

SHAREHOLDER’S FUNDS

Deposits from customers . . . . . . . . . . 22,271,757 — 6,889,986 29,161,743Deposits and placements of banks and

other financial institutions . . . . . . . . 5,877,505 — 3,648,851 9,526,356Securities sold under repurchase

agreements . . . . . . . . . . . . . . . . . 33,059 — 70,736 103,795Bills and acceptance payable . . . . . . . . — — 515,752 515,752Amount due to Cagamas Berhad . . . . . 2,455,723 — 197,927 2,653,650Other liabilities . . . . . . . . . . . . . . . . 957,256 — 239,131 1,196,387Subordinated term loan . . . . . . . . . . . 680,000 — 460,000 1,140,000Subordinated bonds. . . . . . . . . . . . . . 200,000 — — 200,000

Total Liabilities . . . . . . . . . . . . . . . . 32,475,300 — 12,022,383 44,497,683

Minority interests . . . . . . . . . . . . . . . 86 — — 86

Share capital. . . . . . . . . . . . . . . . . . 528,402 — 81,962 610,364Reserves . . . . . . . . . . . . . . . . . . . . 2,094,063 1,336 474,966 2,570,365

Shareholder’s Funds . . . . . . . . . . . . . 2,622,465 1,336 556,928 3,180,729

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . . . . 35,097,851 1,336 12,579,311 47,678,498

COMMITMENTS AND

CONTINGENCIES . . . . . . . . . . . . 6,646,577 — 6,770,004 13,416,581

NET TANGIBLE ASSETS PER SHARE

(RM) . . . . . . . . . . . . . . . . . . . . . 4.96 5.21

F-26

INCOME STATEMENT

For the year ended 31 March 2005

Group

As Previously

stated

Change in

Accounting

Policy

Merger

adjustments As Restated

RM’000 RM’000 RM’000 RM’000

Interest income . . . . . . . . . . . . . . . . 1,918,414 — 488,382 2,406,796

Interest expense . . . . . . . . . . . . . . . . (908,412) — (279,557) (1,187,969)

Net interest income . . . . . . . . . . . . . 1,010,002 — 208,825 1,218,827

Net income from Islamic Banking

business . . . . . . . . . . . . . . . . . . . 362,995 — 24,899 387,894

Other operating income . . . . . . . . . . . 83,413 — 77,959 161,372

Net income . . . . . . . . . . . . . . . . . . 1,456,410 — 311,683 1,768,093

Other operating expenses . . . . . . . . . . (554,336) — (219,897) (774,233)

Operating profit . . . . . . . . . . . . . . . . 902,074 — 91,786 993,860

Allowance for losses on loans and

financing. . . . . . . . . . . . . . . . . . . (448,458) — (267,339) (715,797)

Impairment writeback/(loss) on securities

held-to-maturity . . . . . . . . . . . . . . (4,631) — 9,476 4,845

Held-for-trading securities marked-to-

market . . . . . . . . . . . . . . . . . . . . — 1,288 — 1,288

Impairment of property and equipment . . (29,834) — — (29,834)

Transfer from/(to) profit equalisation

reserve . . . . . . . . . . . . . . . . . . . . (45,353) — (10,401) (55,754)

Profit before share in results of associated

company and taxation . . . . . . . . . . . 373,798 1,288 (176,478) 198,608

Share of profits in associated company . 281 — — 281

Profit before taxation . . . . . . . . . . . 374,079 1,288 (176,478) 198,889

Taxation . . . . . . . . . . . . . . . . . . . . (134,053) (361) 38,824 (95,590)

Profit before minority interests . . . . . . 240,026 927 (137,654) 103,299

Minority interests . . . . . . . . . . . . . . . 15 — — 15

Net profit attributable to shareholder of

the Bank . . . . . . . . . . . . . . . . . . . 240,041 927 (137,654) 104,314

Basic earnings per share (sen) . . . . . . . 45.43 16.93

F-27

BALANCE SHEET

As at 31 March 2005

Bank

As Previously

stated

Change in

Accounting

Policy As Restated

RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . . . . . . . . . . . . . 3,156,862 3,156,862

Deposits and placements with banks and other financial

institutions . . . . . . . . . . . . . . . . . . . . . . . . . . 358,800 358,800

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . 75,796 (75,796) —

Investment securities . . . . . . . . . . . . . . . . . . . . . . 1,874,620 (1,874,620) —

Securities held-for-trading . . . . . . . . . . . . . . . . . . — 956,208 956,208

Securities held-to-maturity . . . . . . . . . . . . . . . . . . — 996,064 996,064

Loans, advances and financing. . . . . . . . . . . . . . . . 27,282,390 27,282,390

Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . 616,804 520 616,284

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 349,608 — 349,608

Statutory deposit with Bank Negara Malaysia . . . . . . 988,930 — 988,930

Investment in subsidiary companies. . . . . . . . . . . . . 29,779 — 29,779

Investment in associated companies. . . . . . . . . . . . . 150 — 150

Property and equipment . . . . . . . . . . . . . . . . . . . . 351,890 — 351,890

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 35,085,629 1,336 35,086,965

LIABILITIES AND SHAREHOLDER’S FUNDS

Deposits from customers . . . . . . . . . . . . . . . . . . . 22,273,456 — 22,273,456

Deposits and placements of banks and other financial

institutions . . . . . . . . . . . . . . . . . . . . . . . . . . 5,877,505 — 5,877,505

Securities sold under repurchase agreements . . . . . . . 33,059 — 33,059

Amount due to Cagamas Berhad . . . . . . . . . . . . . . 2,455,723 — 2,455,723

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 954,697 — 954,697

Subordinated term loan . . . . . . . . . . . . . . . . . . . . 680,000 — 680,000

Subordinated bonds. . . . . . . . . . . . . . . . . . . . . . . 200,000 — 200,000

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 32,474,440 — 32,474,440

Share capital. . . . . . . . . . . . . . . . . . . . . . . . . . . 528,402 — 528,402

Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,082,787 1,336 2,084,123

Shareholder’s Funds . . . . . . . . . . . . . . . . . . . . . . 2,611,189 1,336 2,612,525

TOTAL LIABILITIES AND SHAREHOLDER’S

FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,085,629 1,336 35,086,965

COMMITMENTS AND CONTINGENCIES . . . . . . . 6,646,477 — 6,646,477

NET TANGIBLE ASSETS PER SHARE (RM) . . . . 4.94 4.94

F-28

INCOME STATEMENT

For the year ended 31 March 2005

Bank

As Previously

stated

Change in

Accounting

Policy As Restated

RM’000 RM’000 RM’000

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . 1,919,030 — 1,919,030

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . (908,469) — (908,469)

Net interest income . . . . . . . . . . . . . . . . . . . . . . 1,010,561 — 1,010,561

Net income from Islamic Banking business . . . . . . . . 362,995 — 362,995

Other operating income . . . . . . . . . . . . . . . . . . . . 79,806 — 79,806

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,453,362 — 1,453,362

Other operating expenses . . . . . . . . . . . . . . . . . . . (556,368) — (556,368)

Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . 896,994 — 896,994

Allowance for losses on loans and financing . . . . . . . (448,458) — (448,458)

Held-for-trading securities marked-to-market . . . . . . . — 1,288 1,288

Allowance for diminution in value of investments — net (4,597) — (4,597)

Impairment of property and equipment . . . . . . . . . . . (28,386) — (28,386)

Transfer from/(to) profit equalisation reserve . . . . . . . (45,353) — (45,353)

Profit before taxation . . . . . . . . . . . . . . . . . . . . . 370,200 — 371,488

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (133,476) (361) (133,837)

Net profit attributable to shareholder of the Bank . . . . 236,724 927 237,651

Basic earnings per share (sen) . . . . . . . . . . . . . . . . 44.80 44.98

F-29

(c) Change in Accounting Policies for the year ended 31 March 2005

During the year ended 31 March 2005, the Group and the Bank adopted the following new

accounting policies:

(i) the adoption of the 3-month classification for non-performing loans from the

previous 6-month classification, which is accounted for retrospectively

(ii) the Bank Negara Malaysia’s Revised Guidelines on Financial Reporting for Licensed

Institutions dated 5 October 2004 on the accounting treatment of charging handling

fees paid for motor vehicle dealers for hire-purchase loans in the year that it was

incurred to the income statement and this change is accounted for retrospectively

The interim unaudited income statement for the financial period ended 30 September 2004

has been adjusted to reflect the changes as described in (a), (b) and (c) above as follows:

As previously

stated Adjustments As restated

RM’000 RM’000 RM’000

Group

Income from Islamic Banking operations . . . . . . 175,277 14,601 189,878

Other operating income . . . . . . . . . . . . . . . . . 56,239 (16,932) 39,307

Profit before taxation . . . . . . . . . . . . . . . . . . 158,526 (3,453) 155,073

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . 56,797 (966) 55,831

Profit after taxation . . . . . . . . . . . . . . . . . . . 101,729 (2,487) 99,242

Bank

Income from Islamic Banking operations . . . . . . 164,805 15,099 179,904

Other operating income . . . . . . . . . . . . . . . . . 17,578 (11,603) 5,975

Profit before taxation . . . . . . . . . . . . . . . . . . 199,511 (6,256) 193,255

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . 67,761 (1,751) 66,010

Profit after taxation . . . . . . . . . . . . . . . . . . . 131,750 (4,505) 127,245

F-30

AmFINANCE BERHAD

DIRECTORS’ REPORT AND AUDITORS’

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2005

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

DIRECTORS’ REPORT

The directors have pleasure in submitting their report and the audited financial statements of

the Group and of the Company for the financial year ended 31 March 2005.

PRINCIPAL ACTIVITIES

The principal activity of the Company is to carry on the business of a licensed finance

company which also includes the provision of Islamic banking services.

The principal activities of its subsidiary companies are disclosed in Note 11 to the Financial

Statements.

There have been no significant changes in the nature of the activities of the Company and its

subsidiary companies during the financial year.

FINANCIAL RESULTS

The Group The Company

RM’000 RM’000

Profit before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374,079 370,200

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (134,053) (133,476)

Profit before minority interests . . . . . . . . . . . . . . . . . . . . . . . 240,026 236,724

Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 —

Net profit attributable to shareholder of the Company . . . . . . . . . 240,041 236,724

BUSINESS PLAN AND STRATEGY FOR CURRENT FINANCIAL YEAR

The Company’s business plan and strategies were formulated in line with its mission to be a

premier financial services provider in retail banking, delivering innovative products and services to

its customers.

The Company’s Strategic Business Directions are:

i. to establish the Company as the premier financial services provider by providing

innovative products and services to customers;

ii. to maximise income from core products and services by focusing on asset quality,

maintaining profitability and achieving best in class performances for core retail products;

iii. to optimise retail delivery channels by:

a. remodelling and up scaling its current branches towards commercial banking

readiness; rationalisation of the bank and finance branch network to reduce

duplication and increased cost savings; and

b. expanding alternative electronic banking channels.

iv. to focus on receivables management and collections by maximising recovery efforts and

continuing to strengthen the risk assessment and credit scoring infrastructure; and

F-31

v. to increase non-interest/fee based income and broaden earnings base by aggressive

penetration into non-interest income business.

OUTLOOK FOR NEXT FINANCIAL YEAR

Malaysia’s economic growth is expected to moderate from 7.1% for 2004 to around 6% for

2005. The moderation in economic growth can be primarily attributed to the volatility of crude

petroleum prices that has heightened uncertainties in the sustainability of economic growth globally

which in turn have weakened external demand for Malaysian goods. The overall growth in the

economy in 2005 would be supported largely by sustained domestic demand with the main

contribution to growth coming from the private sector.

Despite lower external demand for Malaysian goods, the manufacturing sector is still expected

to be the main growth engine for the Malaysian economy with higher value-added production

playing a more prominent role in the manufacturing sector. The services sector, the second engine of

growth, is also expected to expand in line with the expansion of trade and tourism activities,

communications and financial services.

However, a moderating economy coupled with ample liquidity in the banking system will

further suppress the profitability of the banking industry’s traditional lending business. Although

inflationary pressures are picking up, it is unlikely interest rates will rise appreciably in the short

term. Therefore, the banking sector as a whole will continue to experience downward pressure on

lending margins.

The Company is targeting to complete its legal merger with AmBank Berhad by the first

quarter of the financial year ending 31 March 2006. With the recent modifications to the Banking

and Financial Institutions Act, 1989 to enable a single entity to hold both bank and finance company

licenses, the Company is committed to transforming its branches into commercial bank branches

offering a full range of commercial banking services.

Despite the competition and narrowing of interest spreads, the Company is confident that

together with the increased commercial bank branches services, it is well positioned to further

improve on its performance.

SIGNIFICANT EVENT

On 25 February 2004, the Company entered into a conditional sale and purchase agreement

with MBf Corporation Berhad (‘‘MBf Corp’’) for the sale of its entire 100% equity interest

consisting of 1,000,000 ordinary shares of RM1.00 each, in MBf Property Trust Management Berhad

(‘‘MBfPT’’) for a consideration of RM1.00.

The purchase consideration was arrived at on a willing-buyer and willing-seller basis after

taking into consideration the financial position of MBfPT which had negative shareholder’s funds as

at 31 March 2004.

The disposal was completed on 9 August 2004.

SUBSEQUENT EVENTS

Subsequent to the balance sheet date, its ultimate holding company, AMMB Holdings Berhad

(‘‘AHB’’) proposed a rationalisation exercise which involves the following proposals:

(i) Proposed Acquisition of AmBank Berhad (‘‘AmBank’’) by its holding company,

AMFB Holdings Berhad (‘‘AMFB Holdings’’)

The Proposed Acquisition involves the acquisition by AMFB Holdings of the entire equity

interest in a related company, AmBank, comprising 761,718,750 ordinary shares from

AHB for a purchase consideration based on the carrying value of AHB’s investment in

AmBank as at the date of completion of the Proposed Acquisition by AMFB Holdings.

F-32

The Purchase Consideration is proposed to be satisfied by the issuance of new shares in

AMFB Holdings to AHB at an issue price to be determined based on the unaudited net

tangible assets (‘‘NTA’’) per share of AMFB Holdings as at the completion date.

Upon completion of the Proposed Acquisition by AMFB Holdings, AmBank will become a

wholly-owned subsidiary of AMFB Holdings.

(ii) Proposed AmBank Acquisition by the Company

Upon completion of the Proposed Acquisition by AMFB Holdings, the Company proposes

to acquire the entire equity interest in AmBank comprising 761,718,750 shares from

AMFB Holdings for a purchase consideration based on the NTA of AmBank after

adjusting for certain non-transferable assets as at the date of completion of the Proposed

AmBank Acquisition by the Company. The Purchase Consideration is proposed to be

satisfied by the issuance of new shares in the Company to AMFB Holdings at an issue

price to be determined based on the unaudited NTA per share of the Company as at the

completion date.

(iii) Proposed Business Merger

Upon completion of the Proposed AmBank Acquisition by the Company, the finance

company business of the Company and the commercial banking business of AmBank will

be merged by way of a transfer of AmBank’s assets and liabilities (save for certain non-

transferable assets) to the Company via a vesting order under Section 50 of the Banking

and Financial Institutions Act, 1989.

The Proposed Business Merger is conditional on the completion of the Proposed AmBank

Acquisition by the Company which is in turn conditional upon completion of the Proposed

Acquisition by AMFB Holdings.

The Proposed Acquisition by AMFB Holdings, Proposed AmBank Acquisition by the Company

and the Proposed Business Merger are subject to the approvals from the Securities Commission

(‘‘SC’’), Minister of Finance, BNM and other relevant authorities.

ITEMS OF AN UNUSUAL NATURE

In the opinion of the directors, the results of the operations of the Group and of the Company

during the financial year have not been substantially affected by any item, transaction or event of a

material and unusual nature other than the accounting treatment of charging handling fees paid to

motor vehicle dealers for hire purchase loans in the year that it was incurred to the Group and

Company’s income statements.

There has not arisen in the interval between the end of the financial year and the date of this

report any item, transaction or event of a material and unusual nature likely, in the opinion of the

directors, to affect substantially the results of the operations of the Group and of the Company for

the current financial year in which this report is made.

DIVIDENDS

No dividend has been paid or declared by the Company since the end of the previous financial

year. The directors do not recommend the payment of any dividend in respect of the current

financial year.

RESERVES AND ALLOWANCES

There were no material transfers to or from reserves, allowances or provisions during the

financial year other than those disclosed in the financial statements.

F-33

ISSUANCE OF SHARES AND DEBENTURES

There were no issuance of shares and debentures during the financial year.

SHARE OPTIONS

No options have been granted by the Company to any parties during the financial year to take

up unissued shares of the Company.

No shares have been issued during the financial year by virtue of the exercise of any option to

take up unissued shares of the Company. As at the end of the financial year, there were no unissued

shares of the Company under options.

BAD AND DOUBTFUL DEBTS AND FINANCING

Before the income statements and balance sheets 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 debts and financing and the making of allowances for doubtful debts and

financing, and have satisfied themselves that all known bad debts and financing had been written off

and adequate allowances had been made for doubtful debts and financing.

At the date of this report, the directors of the Company 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 income statements and balance sheets of the Group and of the Company were made

out, the directors took reasonable steps to ascertain that any current assets, other than debts and

financing which were unlikely to be realised in the ordinary course of business, their values as

shown in the accounting records of the Group and of the Company have been written down to their

estimated realisable values.

At the date of this report, the directors are not aware of any circumstances, which would render

the values attributed to the current assets in the financial statements of the Group and of the

Company 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 methods 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 which secures the liability of any other person; or

(b) any contingent liability 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 normal course of 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 their obligations as and when they fall due.

F-34

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.

DIRECTORS

The directors of the Company in office since the date of the last report and at the date of this

report are:

Tan Sri Dato’ Azman Hashim

Tun Mohammed Hanif Omar

Datuk Oh Chong Peng (appointed on 1 July 2004 and resigned on 31 March 2005)

Sharkawi bin Alis (resigned on 31 March 2005)

Cheah Tek Kuang

Mohamed Azmi Mahmood

Mahdi Morad

In accordance with Article 96 of the Company’s Articles of Association, Mahdi Morad retires

from the Board at the forthcoming Annual General Meeting, and being eligible, offers himself for re-

election.

DIRECTORS’ INTERESTS

The interests in shares, debentures and share options in the holding and ultimate holding

company and in related companies, of those who were directors at the end of the financial year as

recorded in the Register of Directors’ Shareholdings kept by the Company under Section 134 of the

Companies Act, 1965, are as follows:

DIRECT INTERESTS

In the holding company, AMFB Holdings Berhad (‘‘AMFB Holdings’’)

No. of ordinary shares of RM1.00 each

Shares

Balance at

1.4.2004 Bought Sold

Share

Exchange*

Balance at

31.3.2005

Tan Sri Dato’ Azman Hashim

— held directly . . . . . . . . . . . 211,505 — — 211,505 —

— held through nominees . . . . . 522,985 — 59,000 463,985 —

Cheah Tek Kuang . . . . . . . . . . . 38,000 — — 38,000 —

Mohamed Azmi Mahmood . . . . . . 50,000 — — 50,000 —

Mahdi Morad . . . . . . . . . . . . . . 27,000 — 10,000 17,000 —

* Arising from the exchange of shares on the basis of one (1) new AHB share for every one (1) existing AMFB Holdings

share held by AMFB Holdings’ shareholders other than AHB.

F-35

In the ultimate holding company, AMMB Holdings Berhad (‘‘AHB’’)

No. of ordinary shares of RM1.00 each

Shares

Balance at

1.4.2004

Bought/

Converted

From Share

Option

Share

Exchange* Sold

Balance at

31.3.2005

Tan Sri Dato’ Azman Hashim . . . . — — 675,490 — 675,490

Cheah Tek Kuang . . . . . . . . . . . 485,800 — 38,000 500,000 23,800

Mohamed Azmi Mahmood . . . . . . 143,200 329,924 50,000 323,100 200,024

Mahdi Morad . . . . . . . . . . . . . . 116,500 104,552 17,000 — 238,052

No. of Warrants

Warrants 2003/2008

Balance at

1.4.2004 Bought Sold

Balance at

31.3.2005

Tan Sri Dato’ Azman Hashim . . . . . . . . . . . 245,793 — 245,793 —

Cheah Tek Kuang . . . . . . . . . . . . . . . . . . 46,189 — — 46,189

Mohamed Azmi Mahmood . . . . . . . . . . . . . 16,083 — — 16,083

No. of ordinary shares of RM1.00 each

Share Options

Balance at

1.4.2004 Granted Exercised Expired

Balance at

31.3.2005

Mohamed Azmi Mahmood . . . . . . 329,924 — 329,924 — —

Mahdi Morad . . . . . . . . . . . . . . 104,552 — 104,552 — —

* Arising from the exchange of shares on the basis of one (1) new AHB share for every one (1) existing AMFB Holdings

share held by AMFB Holdings’ shareholders other than AHB.

In a related company, AmInvestment Group Berhad

No. of Renounceable Rights of RM1.00 each Offer for sale

Renounceable Rights

Balance at

1.4.2004

Rights/

Allocation

Eligible

Employees/

Directors Bought Sold

Balance at

31.3.2005

Tan Sri Dato’ Azman Hashim — 118,954,848 — — — 118,954,848

Tun Mohammed Hanif Omar — — 200,000 — — 200,000

Datuk Oh Chong Peng. . . . — — 30,000 — — 30,000

Sharkawi bin Alis . . . . . . — — 30,000 — — 30,000

Cheah Tek Kuang . . . . . . — 120,075 2,500,000 — — 2,620,075

Mohamed Azmi Mahmood . — 66,461 30,000 — — 96,461

Mahdi Morad . . . . . . . . . — 54,570 19,000 — — 73,570

DEEMED INTERESTS

In the holding company, AMFB Holdings Berhad

No. of ordinary shares of RM1.00 each

Shares Name of Company

Balance at

1.4.2004 Bought Sold

Share

Exchange*

Balance at

31.3.2005

Tan Sri Dato’ Azman

Hashim . . . . . . . . . . AMDB Equipment

Trading Sdn Bhd

241,047 — — 241,047 —

F-36

In the ultimate holding company, AMMB Holdings Berhad

No. of ordinary shares of RM1.00 each

Shares Name of Company

Balance at

1.4.2004 Bought Sold

Share

Exchange*

Balance at

31.3.2005

Tan Sri Dato’ Azman

Hashim . . . . . . . . . . Arab-Malaysian

Corporation

Berhad

605,826,825 94,425,596 42,000,000 — 658,252,421

AMDB Equipment

Trading Sdn Bhd

198,000 — — 241,047 439,047

Azman Hashim

Holdings Sdn

Bhd

5,713,905 — 4,800,000 — 913,905

Ginagini Sdn Bhd 12,184,809 — 12,184,809 — —

Regal Genius Sdn

Bhd

21,750,000 7,740,000 — — 29,490,000

* Arising from the exchange of shares on the basis of one (1) new AHB share for every one (1) existing AMFB Holdings

share held by AMFB Holdings’ shareholders other than AHB.

No. of Warrants

Warrants 2003/2008 Name of Company

Balance at

1.4.2004 Bought

Sold/

Exercised

Balance at

31.3.2005

Tan Sri Dato’ Azman

Hashim. . . . . . . . . . . Arab-Malaysian

Corporation

Berhad

75,214,328 — 69,260,231 5,954,097

AMDB

Equipment

Trading Sdn

Bhd

22,682 — — 22,682

Azman Hashim

Holdings Sdn

Bhd

3,342,309 — 3,342,309 —

Slan Sdn Bhd 82,132 — 82,132 —

Ginagini Sdn

Bhd

3,945,451 — 3,945,451 —

Indigenous

Capital Sdn

Bhd

280,435 — 280,435 —

Regal Genius

Sdn Bhd

2,989,936 — — 2,989,936

Corporateview

Sdn Bhd

— 31,658,738 — 31,658,738

F-37

In a related company, AmInvestment Group Berhad

No. of Renounceable Rights of RM1.00 each Offer for sale

Renounceable Rights Name of Company

Balance at

1.4.2004

Rights/

Allocation Bought Sold

Balance at

31.3.2005

Tan Sri Dato’ Azman

Hashim . . . . . . . . Arab-Malaysian

Corporation

Berhad

— 150,896,688 — — 150,896,688

AMDB Equipment

Trading Sdn Bhd

— 100,646 — — 100,646

Azman Hashim

Holdings Sdn

Bhd

— 209,502 — — 209,502

Regal Genius Sdn

Bhd

— 6,760,238 — — 6,760,238

AMMB Holdings

Sdn Bhd

— 1,109,442,000 — — 1,109,442,000

The share options in the ultimate holding company, which had an option period of five years

were granted pursuant to AMMB Holdings Berhad Employees’ Share Option Scheme II (‘‘AHB

Group ESOS’’) and the persons to whom the options are granted under the scheme have no right to

participate in any staff share option scheme of any other company in the Group.

By virtue of the directors’ shareholding in the holding and ultimate holding company, these

directors are deemed to have an interest in the shares of the Company and its related companies.

Other than as disclosed, none of the directors in office at the end of the financial year had any

interest in shares in the Company or its related companies during the financial year.

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no director of the Company has received or

become entitled to receive a benefit (other than benefits included in the aggregate amount of

emoluments received or due and receivable by directors shown in the financial statements, or the

fixed salary of full-time employees 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 the related party

transactions as shown in Note 29 to the Financial Statements.

Neither during nor at the end of the financial year, did there subsist any arrangements to which

the Company is a party whereby directors might acquire benefits by means of the acquisition of

shares in, or debentures of, the Company or any other body corporate, other than AHB Group ESOS

and the restricted offer for sale by AMMB Holdings Berhad to its shareholders and AmInvestment

Group Berhad to eligible employees and directors pursuant to the listing of AmInvestment Group

Berhad on the Main Board of Bursa Malaysia Securities Berhad, as disclosed.

HOLDING AND ULTIMATE HOLDING COMPANY

The directors regard AMFB Holdings Berhad and AMMB Holdings Berhad, both of which are

incorporated in Malaysia, as the holding company and the ultimate holding company respectively.

RATING BY EXTERNAL AGENCY

The Company’s long term rating of A2 and short term rating of P1 was reaffirmed by Rating

Agency Malaysia Berhad. The Company’s RM200.0 million Redeemable Unsecured Subordinated

Bonds’ long-term rating of A3 was also reaffirmed by Rating Agency Malaysia Berhad.

F-38

AUDITORS

The auditors, Ernst & Young, have expressed their willingness to continue in office.

Signed on behalf of the Board

in accordance with a resolution of the Directors,

TAN SRI DATO’ AZMAN HASHIM MOHAMED AZMI MAHMOOD

Chairman Managing Director

Kuala Lumpur

16 May 2005

Audited Financial Statements for the financial year ended 31 March 2005

F-39

REPORT OF THE AUDITORS TO THE MEMBER OF

AmFinance Berhad

(Incorporated in Malaysia)

We have audited the financial statements set out on pages F-41 to F-126. These financial

statements are 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 applicable Approved Standards on Auditing in

Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance

about whether the financial statements are free of material misstatement. An audit includes

examining, on a test basis, evidence supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the accounting principles used and significant estimates

made by the directors, as well as evaluating the overall presentation of the financial statements. We

believe that our audit provides a reasonable basis for our opinion.

In our opinion,

(a) the financial statements have been properly drawn up in accordance with the provisions of

the Companies Act, 1965, Bank Negara Malaysia Guidelines and applicable MASB

Approved Accounting Standards in Malaysia so as to give a true and fair view of:

(i) the financial position of the Group and of the Company as at 31 March 2005 and of

the results and the cash flows of the Group and of the Company for the financial

year then ended; and

(ii) the matters required by Section 169 of the Act to be dealt with in the financial

statements and consolidated financial statements; and

(b) the accounting and other records and the registers required by the Act to be kept by the

Company and by the subsidiary companies have been properly kept in accordance with the

provisions of the Act.

We are satisfied that the financial statements of the subsidiary companies that have been

consolidated with the financial statements of the Company 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 these purposes.

The auditors’ reports on the financial statements of the subsidiary companies were not subject

to any qualification and did not include any comment made under Section 174(3) of the Act.

Ernst & Young Gladys Leong

AF: 0039 No. 1902/04/06(J)

Chartered Accountants Partner

Kuala Lumpur, Malaysia

16 May 2005

F-40

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

BALANCE SHEETS

As at 31 March 2005

The Group The Company

2005 2004 2005 2004

Note RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds . . . 4 3,174,996 3,054,767 3,156,862 3,052,558

Deposits and placements with

financial institutions . . . . . 5 358,903 19,230 358,800 19,132

Dealing securities. . . . . . . . . 6 75,796 256,059 75,796 256,059

Investment securities . . . . . . . 7 1,874,874 1,918,590 1,874,620 1,918,301

Loans, advances and financing. 8 27,278,509 26,009,653 27,282,390 26,017,926

Other assets . . . . . . . . . . . . 9 344,531 165,639 349,608 169,219

Deferred tax asset . . . . . . . . 32 616,804 741,733 616,804 741,733

Statutory deposit with Bank

Negara Malaysia . . . . . . . . 10 988,930 923,736 988,930 923,736

Investment in subsidiary

companies . . . . . . . . . . . . 11 — — 29,779 29,779

Investment in associated

companies . . . . . . . . . . . . 12 458 250 150 150

Property and equipment . . . . . 13 384,050 424,599 351,890 374,476

TOTAL ASSETS . . . . . . . . . 35,097,851 33,514,256 35,085,629 33,503,069

LIABILITIES AND

SHAREHOLDER’S FUNDS

Deposits from customers . . . . 14 22,271,757 20,411,793 22,273,456 20,413,587

Deposits and placements of

banks and other financial

institutions . . . . . . . . . . . 15 5,877,505 5,063,411 5,877,505 5,063,411

Securities sold under

repurchase agreements . . . . 16 33,059 274,991 33,059 274,991

Amount due to Cagamas

Berhad . . . . . . . . . . . . . . 17 2,455,723 3,675,607 2,455,723 3,675,607

Other liabilities . . . . . . . . . . 18 957,256 825,929 954,697 821,008

Subordinated term loan . . . . . 19 680,000 680,000 680,000 680,000

Subordinated bonds. . . . . . . . 20 200,000 200,000 200,000 200,000

Total Liabilities . . . . . . . . . . 32,475,300 31,131,731 32,474,440 31,128,604

Minority interests . . . . . . . . . 21 86 101 — —

Share capital. . . . . . . . . . . . 22 528,402 528,402 528,402 528,402

Reserves . . . . . . . . . . . . . . 23 2,094,063 1,854,022 2,082,787 1,846,063

Shareholder’s Funds . . . . . . . 2,622,465 2,382,424 2,611,189 2,374,465

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS 35,097,851 33,514,256 35,085,629 33,503,069

COMMITMENTS AND

CONTINGENCIES . . . . . . 34 6,646,577 4,361,007 6,646,477 4,360,907

NET TANGIBLE ASSETS

PER SHARE (RM) . . . . . . 35 4.96 4.51 4.94 4.49

The accompanying Notes form an integral part of the Financial Statements.

F-41

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

INCOME STATEMENTS

For the year ended 31 March 2005

The Group The Company

2005 2004 2005 2004

Note RM’000 RM’000 RM’000 RM’000

Interest income . . . . . . . . 24 1,918,414 2,027,783 1,919,030 2,028,616

Interest expense . . . . . . . . 25 (908,412) (958,992) (908,469) (959,059)

Net interest income . . . . . 1,010,002 1,068,791 1,010,561 1,069,557

Income from Islamic

banking operations . . . . . 45 362,995 292,303 362,995 292,303

Non-interest income . . . . . 26 83,413 40,640 79,806 40,019

Net income . . . . . . . . . . 1,456,410 1,401,734 1,453,362 1,401,879

Operating expenses . . . . . . 27 (554,336) (542,969) (556,368) (547,270)

Operating profit . . . . . . . . 902,074 858,765 896,994 854,609

Allowance for losses on

loans and financing . . . . 28 (448,458) (297,762) (448,458) (297,762)

(Allowance)/Writeback of

allowance for diminution

in value of investments —

net . . . . . . . . . . . . . . (4,631) 20,034 (4,597) 20,118

Transfer to profit

equalisation reserve . . . . (45,353) (46,976) (45,353) (46,976)

Impairment losses on

property and equipment. . 13 (29,834) — (28,386) —

General allowance for

contingencies . . . . . . . . — (37,000) — (37,000)

Profit before share in results

of associated company

and taxation . . . . . . . . . 373,798 497,061 370,200 492,989

Share of profits in

associated company . . . . 281 208 — —

Profit before taxation . . . 374,079 497,269 370,200 492,989

Taxation . . . . . . . . . . . . 31 (134,053) 36,393 (133,476) 37,075

Profit before minority

interests . . . . . . . . . . . 240,026 533,662 236,724 530,064

Minority interests . . . . . . . 15 12 — —

Net profit attributable to

shareholder of the

Company . . . . . . . . . . 240,041 533,674 236,724 530,064

Basic earnings per ordinary

share (sen) . . . . . . . . . 33 45.43 101.00 44.80 100.31

The accompanying Notes form an integral part of the Financial Statements.

F-42

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

STATEMENTS OF CHANGES IN EQUITY

For the year ended 31 March 2005

Non-distributable Distributable

The Group

Share

Capital

Share

Premium

Statutory

Reserve

Capital

Reserve

Unappro-

priated

Profits Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Balance as at

1 April 2003

As previously stated . . . 528,402 379,953 214,382 392,045 430,718 1,945,500

Prior year adjustments

(Note 44) . . . . . . . . — — — 37,683 (134,433) (96,750)

As restated . . . . . . . . . 528,402 379,953 214,382 429,728 296,285 1,848,750

Profit for the year . . . . — — — — 533,674 533,674

Transfer to statutory

reserve . . . . . . . . . . — — 268,688 — (268,688) —

Transfer from capital

reserve to

unappropriated profit . — — — (151,386) 151,386 —

Balance as at

31 March 2004 . . . . 528,402 379,953 483,070 278,342 712,657 2,382,424

Balance as at

1 April 2004

As previously stated . . . 528,402 379,953 483,070 237,845 857,216 2,486,486

Prior year adjustments

(Note 44) . . . . . . . . — — — 40,497 (144,559) (104,062)

As restated . . . . . . . . . 528,402 379,953 483,070 278,342 712,657 2,382,424

Profit for the year . . . . — — — — 240,041 240,041

Transfer to statutory

reserve . . . . . . . . . . — — 45,332 — (45,332) —

Transfer from capital

reserve to

unappropriated profit . — — — (278,342) 278,342 —

Balance as at

31 March 2005 . . . . 528,402 379,953 528,402 — 1,185,708 2,622,465

F-43

Non-distributable Distributable

The Company

Share

Capital

Share

Premium

Statutory

Reserve

Capital

Reserve

Unappro-

priated

Profits Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Balance as at

1 April 2003

As previously stated . . . 528,402 379,953 214,382 392,045 426,369 1,941,151

Prior year adjustments

(Note 44) . . . . . . . . — — — 37,683 (134,433) (96,750)

As restated . . . . . . . . . 528,402 379,953 214,382 429,728 291,936 1,844,401

Profit for the year . . . . — — — — 530,064 530,064

Transfer to statutory

reserve . . . . . . . . . . — — 268,688 — (268,688) —

Transfer from capital

reserve to

unappropriated profit . — — — (151,386) 151,386 —

Balance as at

31 March 2004 . . . . 528,402 379,953 483,070 278,342 704,698 2,374,465

Balance as at

1 April 2004

As previously stated . . . 528,402 379,953 483,070 237,845 849,257 2,478,527

Prior year adjustments

(Note 44) . . . . . . . . — — — 40,497 (144,559) (104,062)

As restated . . . . . . . . . 528,402 379,953 483,070 278,342 704,698 2,374,465

Profit for the year . . . . — — — — 236,724 236,724

Transfer to statutory

reserve . . . . . . . . . . — — 45,332 — (45,332) —

Transfer from capital

reserve to

unappropriated profit . — — — (278,342) 278,342 —

Balance as at

31 March 2005 . . . . 528,402 379,953 528,402 — 1,174,432 2,611,189

The accompanying Notes form an integral part of the Financial Statements.

F-44

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

CASH FLOW STATEMENTS

For the year ended 31 March 2005

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM OPERATING

ACTIVITIES

Profit before taxation . . . . . . . . . . 374,079 497,269 370,200 492,989

Adjustments for:

Interest/Income-in-suspense, net of

writeback . . . . . . . . . . . . . . . 194,265 258,840 194,265 258,840

Loan and financing loss and

allowances, net of writeback . . . 622,690 444,602 622,690 444,602

Allowance on amount recoverable

from Danaharta . . . . . . . . . . . . — 62,794 — 62,794

Depreciation of property and

equipment . . . . . . . . . . . . . . . 41,431 54,318 40,630 53,468

Impairment loss on property and

equipment . . . . . . . . . . . . . . . 29,834 — 28,386 —

Transfer to profit equalisation

reserve . . . . . . . . . . . . . . . . . 45,353 46,976 45,353 46,976

Accretion of discount less

amortisation of premium . . . . . . (4,604) (21,607) (4,604) (21,607)

Property and equipment written off . 3,907 145 3,907 145

Share of profits of associated

company . . . . . . . . . . . . . . . . (281) (208) — —

Gross dividend income . . . . . . . . (8,230) (10,169) (8,203) (10,114)

Loss on disposal of dealing

securities — net . . . . . . . . . . . 10,622 4,324 10,622 4,324

Loss on disposal of investment

securities — net . . . . . . . . . . . 1,726 3,949 1,726 3,949

Allowance/(Writeback of allowance)

for diminution in value of dealing

and investment securities — net . 4,631 (20,034) 4,597 (20,118)

Gain on disposal of property and

equipment . . . . . . . . . . . . . . . (2,845) (1,134) (688) (1,134)

Gain on disposal of properties . . . . (567) — (185) —

Gain on disposal of subsidiary

company (note a) . . . . . . . . . . (402) — — —

Impairment loss on foreclosed

property . . . . . . . . . . . . . . . . 2,000 4,000 2,000 4,000

Allowance for doubtful debts —

other receivables . . . . . . . . . . . 1,964 464 1,911 464

General allowance for contingencies — 37,000 — 37,000

Operating Profit Before Working

Capital Changes . . . . . . . . . . . 1,315,573 1,361,529 1,312,607 1,356,578

F-45

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

(Increase)/Decrease In Operating

Assets:

Deposits and placements with

financial institutions . . . . . . . . . (339,673) (636) (339,668) (632)

Dealing securities. . . . . . . . . . . . 156,637 (164,105) 156,637 (164,105)

Loans, advances and financing. . . . (2,167,266) (2,107,605) (2,162,874) (2,105,359)

Other assets . . . . . . . . . . . . . . . (102,818) (4,224) (102,831) (9,171)

Statutory deposit with Bank Negara

Malaysia . . . . . . . . . . . . . . . . (65,194) (22,990) (65,194) (22,990)

Increase/(Decrease) In Operating

Liabilities:

Deposits from customers . . . . . . . 1,859,964 802,599 1,859,869 802,540

Deposits and placements of banks

and other financial institutions . . 814,094 (45,729) 814,094 (45,729)

Securities sold under repurchase

agreements . . . . . . . . . . . . . . (241,932) (30,479) (241,932) (30,479)

Amount due to Cagamas Berhad . . (1,219,884) (343,323) (1,219,884) (343,323)

Other liabilities . . . . . . . . . . . . . 88,626 137,196 88,336 142,745

Cash Generated From/(Used in)

Operations . . . . . . . . . . . . . . . . 98,127 (417,767) 99,160 (419,925)

Taxation paid . . . . . . . . . . . . . . . (8,988) (22,010) (8,047) (20,859)

Net Cash Generated From/(Used in)

Operating Activities . . . . . . . . . . 89,139 (439,777) 91,113 (440,784)

CASH FLOWS FROM INVESTING

ACTIVITIES

Net proceeds from disposal of

investment securities . . . . . . . . . 55,849 915,085 55,848 915,085

Net dividend received . . . . . . . . . . 7,019 8,899 6,992 8,859

Proceeds from disposal of property

and equipment . . . . . . . . . . . . . 19,511 1,242 1,640 1,242

Purchase of property and equipment . (51,289) (46,283) (51,289) (46,250)

Net Cash Generated From Investing

Activities . . . . . . . . . . . . . . . . 31,090 878,943 13,191 878,936

CASH FLOWS FROM FINANCING

ACTIVITIES

Proceeds from issue of subordinated

bonds . . . . . . . . . . . . . . . . . . . — 200,000 — 200,000

Redemption of subordinated loan notes — (250,000) — (250,000)

Net Cash Used in Financing Activities — (50,000) — (50,000)

Net Increase In Cash And Cash

Equivalents . . . . . . . . . . . . . . . 120,229 389,166 104,304 388,152

Cash And Cash Equivalents At

Beginning Of Year . . . . . . . . . . 3,054,767 2,665,601 3,052,558 2,664,406

Cash And Cash Equivalents At End Of

Year (note b) . . . . . . . . . . . . . . 3,174,996 3,054,767 3,156,862 3,052,558

F-46

Note a: The summary of the effects of the disposal of the subsidiary company during the year, on the financial

position of the Group is as follows:

RM’000

Net assets disposed:

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,250

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,652)

Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (402)

Net gain on disposal of subsidiary company . . . . . . . . . . . . . . . . . . . . . . . . 402

Total consideration received from disposal . . . . . . . . . . . . . . . . . . . . . . . . . —

Note b: Cash and Cash Equivalents

For the purpose of the cash flow statements, cash and cash equivalents consist of cash and short term

funds net of bank overdrafts. Cash and cash equivalents included in the cash flow statements comprise the

following balance sheets amounts:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Cash and short term funds

(Note 4) . . . . . . . . . . . 3,174,996 3,054,767 3,156,862 3,052,558

The accompanying Notes form an integral part of the Financial Statements.

F-47

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

NOTES TO THE FINANCIAL STATEMENTS

31 March 2005

1. PRINCIPAL ACTIVITIES

The principal activity of the Company is to carry on the business of a licensed finance

company which also includes the provision of Islamic banking services.

The principal activities of the subsidiary companies are disclosed in Note 11.

There have been no significant changes in the nature of the activities of the Company and its

subsidiary companies during the financial year.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The financial statements of the Group and the Company have been approved by the Board of

Directors for issuance on 4 May 2005.

The financial statements of the Group and of the Company have been prepared in accordance

with the provisions of the Companies Act, 1965, the Banking and Financial Institutions Act, 1989,

Bank Negara Malaysia Guidelines and the applicable MASB Approved Accounting Standards. The

financial statements incorporate those activities relating to the Islamic Banking Business undertaken

by the Company.

The Islamic Banking Business refers generally to the acceptance of deposits and granting of

financing under the Syariah principles. The Islamic Banking Business transactions are accounted for

on the accrual basis in compliance with the revised Garis Panduan 8 Guidelines on Presentation of

Financial Statements for Financial Institutions issued by Bank Negara Malaysia. The financial

position as at 31 March 2005 and the results for the financial year ended on that date of the Islamic

Banking Business of the Company are shown in Note 45.

3. SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies adopted by the Group and the Company are consistent with

those adopted in the previous years except for the adoption of:

(i) 3-month classification for non-performing loans from the previous 6-month classification

which has been adopted retrospectively. The effects of adopting the 3-month classification

for non-performing loans retrospectively on the Group’s and the Company’s

unappropriated profits are reflected as prior year adjustments in the statement of

changes in equity and is disclosed in Note 44. The change in accounting policy has

resulted in a decrease in interest income credited to the income statements for the

financial year by RM4.9 million.

(ii) Bank Negara Malaysia’s Revised Guidelines on Financial Reporting for Licensed

Institutions dated 5 October 2004 on the accounting treatment of charging handling

fees paid for motor vehicle dealers for hire purchase loans in the year that it was incurred

to the income statement. This change in accounting policy has been accounted for

retrospectively and has resulted in a decrease in handling fees charged to the income

statements for the financial year by RM48.8 million.

(a) Basis of Accounting

The financial statements of the Group and of the Company have been prepared under the

historical cost convention unless otherwise indicated in the accounting policies below.

F-48

(b) Basis of Consolidation

The financial statements of the Group include the financial statements of the Company

and all its subsidiary companies listed under Note 11 made up to the end of the financial year.

The Company adopts the acquisition method in preparing the consolidated financial

statements. Under the acquisition method, the excess of the cost of investments in the

subsidiary companies over the attributable share in the fair value of the net assets of the

subsidiary companies at the date of the acquisition is taken up as goodwill on consolidation.

The interest of minority shareholders is stated at the minority’s proportion of the fair values of

the assets and liabilities recognised.

The results of subsidiary companies acquired or disposed during the financial year are

included in the consolidated financial statements from the effective date of acquisition or up to

the effective date of disposal.

All significant intercompany transactions and balances have been eliminated on

consolidation.

The gain or loss on disposal is the difference between the net disposal proceeds and the

Group’s share of its net assets.

(c) Interest and Financing Income and Expense Recognition

Interest income is recognised in the income statement for all interest bearing assets on an

accrual basis. Interest income includes the amortisation of premium or accretion of discount.

Interest and financing income on dealing and investment securities are recognised on an

effective yield basis.

The Company follows the financing method of accounting for income from leasing

activities. Under the financing method, the excess of aggregate rentals over the cost (reduced

by estimated residual value at the end of the lease) of the leased property is taken as income

over the term of the lease in decreasing amounts proportionate to the declining balance of the

unrecovered sum using the ‘sum-of-digits’ method.

Interest and financing income on term loans and housing loans is accounted for on an

accrual basis by reference to the rest periods as stipulated in the loan agreements. Interest and

financing income from hire purchase financing and block discounting of the Group and

Company is recognised using the ‘sum-of-digits’ method.

While it is the Group and Company’s policy to recognise interest and financing income on

an accrual basis, interest and financing income on non-performing accounts is not recognised as

income and is reversed and suspended with retrospective adjustments made to the date of first

default unless received in cash or realisation in cash is assured. An account is classified as

non-performing where repayment is in arrears for more than three months.

Prior to this financial year, customers’ accounts were deemed to be non-performing when

repayment were in arrears for more than six months. The change in accounting policy has been

accounted for retrospectively and the effect of this change is disclosed in Note 44.

The classification of non-performing loans and financing is in conformity with Bank

Negara Malaysia’s Guideline On Classification of Non-Performing Loans and Allowance for

Bad and Doubtful Debts.

Interest expense and attributable income on deposits and borrowings (pertaining to

activities relating to Islamic Banking Business) of the Company are accrued on a straight-line

basis.

F-49

(d) Recognition of Fees and Other Income

Loan arrangement fees and commissions are recognised as income when all conditions

precedent are fulfilled.

Guarantee fees are recognised as income upon issuance and where the guarantee period is

longer than one year, over the duration of the guarantee period.

Other fees on a variety of services and facilities extended to customers are recognised on

inception of such transactions.

Dividends from dealing and investment securities are recognised when received.

(e) Allowance for Doubtful Debts and Financing

Based on management’s evaluation of the portfolio of loans, advances and financing,

specific allowances for doubtful debts and financing are made when the collectibility of

receivables becomes uncertain. In evaluating collectibility, management considers several

factors such as the borrower’s financial position, cash flow projections, management, quality of

collateral or guarantee supporting the receivables as well as prevailing and anticipated

economic conditions.

A general allowance based on set percentages of the net increase in receivables 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.

An uncollectible loan and financing or portion of a loan and 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.

(f) Repurchase Agreements

Obligations on securities sold under repurchase agreements are securities which the

Company had sold from its portfolio with a commitment to repurchase at a future date. Such

financing transactions and the obligations to repurchase the securities are reflected as a liability

in the balance sheet, whilst the carrying values of the securities underlying these repurchase

agreements remain in the respective asset accounts.

(g) Dealing Securities

Dealing securities are marketable securities that are acquired and held with the intention

of resale in the short term, and are stated at the lower of cost and market value on a portfolio

basis. On disposal of the dealing securities, the differences between the net disposal proceeds

and their carrying amounts are charged or credited to the income statement.

Transfers, if any, from dealing to investment securities are made at the lower of cost and

market value.

(h) Investment Securities

Investment securities are securities that are acquired and held for yield or capital growth

or to meet minimum liquid assets requirement pursuant to Section 38 of the Banking and

Financial Institutions Act, 1989 and are usually held to maturity.

Malaysian Government Securities, Malaysian Government Investment Certificates,

Cagamas bonds and other government securities and bank guaranteed private debt securities

are stated at cost adjusted for amortisation of premium or accretion of discount. Quoted

securities are stated at the lower of cost and market value on a portfolio basis. Unquoted

securities are stated at cost and allowance is made in the event of any permanent diminution in

value.

F-50

On disposal of investment securities, the differences between the net disposal proceeds

and their carrying amounts are charged or credited to the income statement.

Transfers, if any, from investment securities to dealing securities are made at the lower of

carrying value and market value.

(i) Investment in Subsidiary Companies

A subsidiary company is a company in which the Group has power to exercise control

over the financial and operating policies so as to obtain benefits from their activities.

Investments in subsidiary companies, which are eliminated on consolidation, are stated in

the Company’s financial statements at cost or directors’ valuation, and are written down when

the directors consider that there is an impairment loss that is other than temporary on the value

of such investments. The impairment loss is charged to the income statement.

On disposal of such investments, the differences between the net disposal proceeds and

their carrying amounts are charged or credited to the income statement.

(j) Investment in Associated Companies

An associated company is a company in which the Group has a long term equity interest

of between 20% to 50% and where the Group has representation on the Board and is in a

position to exercise significant influence in its management.

Investments in associated companies are stated at cost and are written down when the

directors consider there is an impairment loss that is other than temporary on the value of such

investments in the Company’s financial statements. The impairment loss is charged to the

income statement. In the consolidated financial statements, the results of associated companies

are accounted for under the equity method whereby the Group’s share of post-acquisition

profits less losses of associated companies is included in the consolidated income statement and

the Group’s interest in associated companies is stated at cost plus adjustments to reflect

changes in the Group’s share of the net assets of the associated companies in the consolidated

balance sheet.

On disposal of such investments, the differences between the net disposal proceeds and

their carrying amounts are charged or credited to the income statement.

(k) Property and Equipment and Depreciation

Property and equipment are stated at cost or valuation less accumulated depreciation and

impairment losses. The policy for the recognition and measurement of impairment losses is in

accordance with the policy on impairment of assets.

Gain or loss arising from disposal of an asset is determined as the difference between the

estimated net disposal proceeds and the carrying amount of the asset, and is recognised in the

income statements.

Freehold land and capital work in progress are not depreciated. Short term leasehold land

is amortised over the term of leases of between 20 to 49 years. Long term leasehold land is

amortised over the term of leases of between 66 to 999 years. Depreciation of other property

and equipment is calculated using the straight-line method at rates based on the estimated

useful lives of the various assets.

F-51

The annual depreciation rates for the various classes of property and equipment are as

follows:

Buildings . . . . . . . . . . . . . . . . . . . 2% or over the short term lease of between

20 to 49 years

Leasehold improvements . . . . . . . . . 10%–20%

Office equipment . . . . . . . . . . . . . . 10%–20%

Furniture and fittings . . . . . . . . . . . 10%–25%

Computer equipment and software . . . 20%–331/3%

Motor vehicles . . . . . . . . . . . . . . . 20%

(l) Impairment of Assets

The carrying values of assets are reviewed for impairment when there is an indication that

the asset might be impaired. Impairment is measured by comparing the carrying values of the

assets with their recoverable amounts. The recoverable amount is the higher of net realisable

value and value in use, which is measured by reference to discounted future cash flows. An

impairment loss is charged to the income statements immediately.

Subsequent increase in the recoverable amount of an asset is treated as reversal of the

previous impairment loss and is recognised to the extent of the carrying amount of the asset

that would have been determined (net of amortisation and depreciation) had no impairment loss

been recognised. The reversal is recognised in the income statements immediately.

(m) Assets Purchased Under Lease

Assets purchased under lease, which in substance transfer the risks and benefits of

ownership of the assets to the lessee are capitalised under property and equipment. The assets

and the corresponding lease obligations are recorded at the lower of the present value of the

minimum lease payments or the fair value of the leased assets at the beginning of the lease

terms.

Leases which do not meet such criteria are classified as operating leases and the related

rentals are charged to the income statements as incurred.

When an operating lease is terminated before the lease period has expired, any payment

required to be made to the lessor by way of penalty is recognised as an expense in the period

which termination takes place.

As at 31 March 2005, the Group and the Company do not have any assets purchased

under lease.

(n) Trade and Other Receivables

Trade and other receivables are stated at book value as reduced by the appropriate

allowances for estimated irrecoverable amounts. Allowance for doubtful debts is made based on

estimates of possible losses which may arise from non-collection of certain receivable accounts.

(o) Trade and Other Payables

Trade and other payables are stated at cost which is the fair value of the consideration to

be paid in the future for goods and services received.

(p) Income Tax

Income tax on profit or loss for the financial year comprises current and deferred tax.

Income tax is recognised in the income statements except to the extent it relates to items

recognised directly in equity, in which case it is recognised in equity.

F-52

Current tax expense is determined according to the tax laws of each jurisdiction in which

the Group operates and includes all taxes based on the taxable profits.

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. In principle, deferred tax liabilities are recognised for all taxable temporary

differences and deferred tax assets are recognised for all deductible temporary differences and

unutilised tax losses to the extent it is probable that taxable profit will be available against

which the deductible temporary differences and unutilised tax losses can be utilised. Temporary

differences are not recognised for goodwill or from the initial recognition of assets and

liabilities that at the time of 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 substantively enacted at

the balance sheet date.

(q) Amount Recoverable from Danaharta

This relates to the loans sold to Danaharta where the total consideration is received in two

portions; upon the sale of the loans (initial consideration) and upon the recovery of the loans

(final consideration). The final consideration amount represents the Company’s predetermined

share of the surplus over the initial consideration upon recovery of the loans.

The difference between the carrying value of the loans and the initial consideration is

recognised as ‘Amounts Recoverable from Danaharta’ within the ‘Other Assets’ component of

the balance sheets. Allowances against these amounts are made to reflect the directors’

assessment of the realisable value of the final consideration as at the balance sheet date.

The amount recoverable from Danaharta was fully amortised as at 31 March 2005.

(r) Amount Recoverable Under Asset-Backed Securitisation (‘ABS’) Transactions

This relates to the balance of sale consideration under ABS transactions due from the

Special Purpose Vehicle (‘SPV’), which amount will be recovered upon maturity of the

underlying bonds. Under the ABS, portfolios of receivables are sold to a SPV which are funded

through the issuance of bonds secured by the receivables.

When an indication of impairment exists, the carrying amount of the amount recoverable

under ABS transaction is assessed and written down to its recoverable amount.

The difference between the sale consideration and the receivables sold is recognised to

the income statement.

(s) Foreclosed Properties

Foreclosed properties are those acquired in full or partial satisfaction of debts and are

stated at cost less allowance for diminution in value, if any, of such properties.

(t) Interest Rate Swaps Contracts

The Company uses the interest rate swaps as a hedging instrument.

Interest income or interest expense associated with interest rate swaps is recognised over

the life of the swap agreement as a component of interest income or interest expense.

(u) Interest-Bearing Instruments

These are interest-bearing loans and bonds with remaining maturity of more than one

year, and are recognised at the amount of proceeds received. The interest is recognised on a

straight line accrual basis.

F-53

(v) Financial Instruments

Financial instruments are recognised in balance sheet when the Company has become a

party to the contractual provisions of the instrument.

Financial instruments are classified as liabilities or equity in accordance with the

substance of the contractual arrangement. Interest, dividends and gains and losses relating to a

financial instruments classified as liabilities, is reported as expense or income. Distributions to

holders of financial instruments classified as equity are charged directly to equity. Financial

instruments are offset when the Company has a legally enforceable right to offset and intends

to settle either on a net basis or to realise the asset and settle the liability simultaneously.

(w) Equity Instruments

Ordinary shares are classified as equity. Dividends on ordinary shares are recognised as

equity in the year in which they are declared.

The transaction costs of equity are accounted for as deduction from equity, net of tax.

Equity transaction costs comprise only those incremental external costs directly attributable to

the equity transaction which would otherwise have been avoided.

(x) Profit Equalisation Reserve

The Profit Equalisation Reserve (‘‘PER’’) refers to the amount appropriated, under the

Islamic Banking Business, out of the gross income in order to maintain a market based return

for depositors. It is deducted from the total gross income (in deriving the net gross income) as

approved and endorsed by the National Advisory Council for Islamic Banking and Takaful of

Bank Negara Malaysia. The PER is generally deducted at a rate that does not exceed the

maximum amount of 15% of total gross income of each financial year and is maintained up to

the maximum of 30% of total Islamic Banking Capital Fund.

(y) Provisions

Provisions are recognised when the Group or the Company has a present legal obligation

as a result of past events, when it is probable that an outflow of resources embodying economic

benefits will be required to settle the obligation, and when a reliable estimate of the amount

can be made.

(z) Employee Benefits

(i) Short-Term Benefits

Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary

benefits are accrued in the period in which the associated services are rendered by

employees of the Group.

(ii) Defined Contribution Plan

As required by law, companies in Malaysia make contributions to the state pension

scheme, the Employees Provident Fund (‘‘EPF’’). Such contributions are recognised as an

expense in the income statement as incurred. Once the contributions have been paid, the

Group has no further payment obligations.

(aa) Operating Revenue

Operating revenue of the Group and the Company comprise net interest and financing

income after interest and income suspended or recovered but before amortisation of premiums

less accretion of discounts, fee income, net trading income from money market securities, net

F-54

gain/loss on sale of quoted investments, gross dividend income from quoted and unquoted

investments and income from Islamic Banking Business before income attributable to

depositors.

(ab) Cash Flow Statement

The Group and the Company adopt the indirect method in the preparation of the cash flow

statements.

(ac) Cash and Cash Equivalents

For the purpose of the cash flow statements, cash and cash equivalents consist of cash on

hand and at bank, deposit at call and short term highly liquid investments, which have an

insignificant risk of changes in value, net of outstanding overdrafts.

4. CASH AND SHORT-TERM FUNDS

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Cash and balances with banks

and other financial

institutions . . . . . . . . . . . 219,276 121,467 201,142 119,258

Money at call and deposits

placements maturing within

one month . . . . . . . . . . . . 2,955,720 2,933,300 2,955,720 2,933,300

3,174,996 3,054,767 3,156,862 3,052,558

Deposits of the Group amounting to RM203,000 (2004 : RM198,000) are pledged to certain

banks for banking facilities granted to the subsidiary companies.

Included in the above are interbank lending of RM2,955,720,000 (2004 : RM2,933,300,000) for

the Group and the Company.

As at 31 March 2005, the net interbank borrowing and lending position of the Group and of the

Company are as follows:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Interbank lending

Cash and short term funds . 2,955,720 2,933,300 2,955,720 2,933,300

Deposits with financial

institutions (Note 5) . . . . 358,800 19,132 358,800 19,132

3,314,520 2,952,432 3,314,520 2,952,432

Interbank borrowing (Note 15). — (200) — (200)

Net interbank lending . . . . . . 3,314,520 2,952,232 3,314,520 2,952,232

F-55

5. DEPOSITS AND PLACEMENTS WITH FINANCIAL INSTITUTIONS

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Licensed banks . . . . . . . . . . 40,103 98 40,000 —

Bank Negara Malaysia. . . . . . 318,800 19,132 318,800 19,132

358,903 19,230 358,800 19,132

Included in the above are interbank lending of RM358,800,000 (2004 : RM19,132,000) for the

Group and the Company.

6. DEALING SECURITIES

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Quoted Securities in Malaysia

Shares. . . . . . . . . . . . . . 105,631 173,994 105,631 173,994

Warrants . . . . . . . . . . . . — 331 — 331

Loan stocks . . . . . . . . . . — 275 — 275

105,631 174,600 105,631 174,600

Unquoted Private Debt

Securities in Malaysia

Corporate bonds . . . . . . . — 98,290 — 98,290

Total . . . . . . . . . . . . . . . . 105,631 272,890 105,631 272,890

Less:

Allowance for diminution in

value of quoted securities . . (29,835) (16,831) (29,835) (16,831)

Net . . . . . . . . . . . . . . . . . 75,796 256,059 75,796 256,059

Market value:

Unquoted Private Debt

Securities in Malaysia

Corporate bonds . . . . . . — 98,325 — 98,325

Quoted Securities in

Malaysia

Shares. . . . . . . . . . . . . 75,796 157,090 75,796 157,090

Warrants . . . . . . . . . . . — 362 — 362

Loan stocks . . . . . . . . . — 317 — 317

F-56

7. INVESTMENT SECURITIES

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Money Market Securities

Malaysian Government

Securities . . . . . . . . . . 111,700 1,700 111,700 1,700

Malaysian Government

Investment Certificates . . 100,043 145,319 100,043 145,319

Treasury bills . . . . . . . . . — 311,799 — 311,799

BNM bills . . . . . . . . . . . — 44,467 — 44,467

Negotiable certificate of

deposits . . . . . . . . . . . 401,102 393,908 401,102 393,908

Islamic acceptance bills . . . — 2,979 — 2,979

Cagamas bonds . . . . . . . . 173,530 — 173,530 —

Islamic Khazanah bonds. . . 79,352 — 79,352 —

865,727 900,172 865,727 900,172

Quoted shares in Malaysia . . . 497 497 — —

Debt Equity Conversion Quoted

in Malaysia

Shares. . . . . . . . . . . . . . 167,604 170,960 167,604 170,960

Shares — with options . . . 41,520 41,520 41,520 41,520

Loan stocks — collateralised 356,444 355,499 356,444 355,499

Warrants . . . . . . . . . . . . 15 15 15 15

565,583 567,994 565,583 567,994

Unquoted Securities in

Malaysia

Shares. . . . . . . . . . . . . . 36,431 36,431 36,014 36,014

Corporate bonds . . . . . . . 792 792 792 792

37,223 37,223 36,806 36,806

Unquoted Debt Equity

Conversion in Malaysia

Shares. . . . . . . . . . . . . . 82,069 125,816 82,069 125,816

Loan stocks . . . . . . . . . . 536,959 501,269 536,959 501,269

Corporate bonds — secured 117,763 121,518 117,763 121,518

736,791 748,603 736,791 748,603

Total . . . . . . . . . . . . . . . . 2,205,821 2,254,489 2,204,907 2,253,575

Add/(Less):

Allowance for diminution in

value of

— quoted securities . . . . . (201,806) (205,275) (201,345) (204,849)

— unquoted securities . . . . (141,970) (145,323) (141,771) (145,124)

Accretion of discount less

amortisation of premium . . . 12,829 14,699 12,829 14,699

1,874,874 1,918,590 1,874,620 1,918,301

F-57

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Market value:

Money Market Securities

Malaysian Government

Securities . . . . . . . . . 119,252 1,872 119,252 1,872

Malaysian Government

Investment Certificates . 104,224 152,801 104,224 152,801

Treasury bills . . . . . . . . — 319,035 — 319,035

BNM bills . . . . . . . . . . — 44,817 — 44,817

Cagamas bonds . . . . . . . 174,476 — 174,476 —

Negotiable certificate of

deposits . . . . . . . . . . 401,075 393,916 401,075 393,916

Islamic Khazanah bonds. . 81,384 — 81,384 —

Quoted shares in Malaysia . 61 95 — —

Debt Equity Conversion

Quoted in Malaysia

Shares. . . . . . . . . . . . . 62,717 79,196 62,717 79,196

Shares — with options . . 23,439 23,840 23,439 23,840

Loan stocks —

collateralised . . . . . . . 324,786 374,110 324,786 374,110

Warrants . . . . . . . . . . . 266 488 267 488

The maturity structure of money market instruments held for investment is as follows:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Maturing within one year . . . . 457,083 865,759 457,083 865,759

One year to three years . . . . . 407,324 33,093 407,324 33,093

Three years to five years . . . . 1,320 1,320 1,320 1,320

Over five years . . . . . . . . . . — — — —

865,727 900,172 865,727 900,172

Certain money market securities held for investment have been sold under repurchase

agreements for funding purposes and their carrying values remain in the respective asset accounts

while obligations to repurchase such securities at an agreed price on a specified future date are

accounted for as a liability as mentioned in Note 16.

F-58

8. LOANS, ADVANCES AND FINANCING

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Term loans and revolving

credit facilities . . . . . . . . . 3,958,890 4,504,989 3,954,063 4,504,554

Housing loans . . . . . . . . . . . 5,252,237 4,839,185 5,252,237 4,839,185

Hire-purchase . . . . . . . . . . . 21,746,653 19,397,018 21,746,644 19,397,009

Block discounting . . . . . . . . 59,436 51,048 59,434 51,046

Staff loans (of which to

Directors: RM1,997,000;

2004 : RM2,148,000) . . . . . 106,489 104,160 106,489 104,160

Line of credit . . . . . . . . . . . 1,389,862 1,181,073 1,389,862 1,181,073

Other loans . . . . . . . . . . . . 2,211,459 1,676,257 2,211,142 1,675,940

34,725,026 31,753,730 34,719,871 31,752,967

Unearned interest and unearned

income . . . . . . . . . . . . . . (4,230,155) (3,674,200) (4,230,155) (3,674,200)

Gross loans, advances and

financing. . . . . . . . . . . . . 30,494,871 28,079,530 30,489,716 28,078,767

Less: Islamic financing sold to

Cagamas Berhad . . . . . . . . (925,365) — (925,365) —

29,569,506 28,079,530 29,564,351 28,078,767

Allowance for bad and doubtful

debts and financing:

— Specific . . . . . . . . . . . (890,196) (677,506) (887,640) (674,950)

— General . . . . . . . . . . . (429,408) (405,255) (429,408) (405,255)

Interest/Income-in-suspense . . . (971,393) (987,116) (964,913) (980,636)

27,278,509 26,009,653 27,282,390 26,017,926

(i) The maturity structure of loans, advances and financing is as follows:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Maturing within one year 9,468,735 8,813,851 9,463,580 8,813,088

One year to three years . 8,244,237 8,445,974 8,244,237 8,445,974

Three years to five years 5,405,440 5,222,211 5,405,440 5,222,211

Over five years . . . . . . 6,451,094 5,597,494 6,451,094 5,597,494

29,569,506 28,079,530 29,564,351 28,078,767

F-59

(ii) Loans, advances and financing analysed by type of customer are as follows:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Domestic non-bank

financial institutions . . 125,035 176,058 125,035 176,058

Domestic business

enterprises

— Small medium

enterprises . . . . . . . 1,806,937 1,723,484 1,806,937 1,723,484

— Others. . . . . . . . . 4,121,141 4,400,949 4,115,986 4,400,186

Government and statutory

bodies . . . . . . . . . . 61 98 61 98

Individuals . . . . . . . . . 23,462,554 21,731,012 23,462,554 21,731,012

Other domestic entities . 23,949 19,416 23,949 19,416

Foreign entities . . . . . . 29,829 28,513 29,829 28,513

Gross loans, advances and

financing. . . . . . . . . 29,569,506 28,079,530 29,564,351 28,078,767

(iii) Loans, advances and financing analysed by their economic purposes are as follows:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Agriculture . . . . . . . . . 338,566 273,401 338,566 273,401

Mining and quarrying . . 23,740 33,511 23,740 33,511

Manufacturing . . . . . . . 807,114 742,257 807,114 742,257

Electricity, gas and water 13,998 11,507 13,998 11,507

Construction . . . . . . . . 1,671,692 1,776,356 1,671,692 1,776,356

Real estate . . . . . . . . . 271,963 319,434 271,963 319,434

Purchase of landed

property

— Residential . . . . . . 5,527,998 5,073,287 5,527,998 5,073,287

— Non-residential . . . 1,195,520 1,450,322 1,199,399 1,458,596

General commerce . . . . 755,285 681,355 746,249 672,318

Transport, storage and

communication . . . . . 385,717 373,583 385,717 373,583

Finance, insurance and

business services . . . . 256,386 312,900 256,386 312,900

Purchase of securities . . 530,200 652,792 530,200 652,792

Purchase of transport

vehicles . . . . . . . . . 16,220,767 14,391,180 16,220,767 14,391,180

Consumption credit . . . . 2,197,566 1,674,165 2,197,566 1,674,165

Others. . . . . . . . . . . . 298,359 313,480 298,361 313,480

Gross loans, advances and

financing. . . . . . . . . 30,494,871 28,079,530 30,489,716 28,078,767

Less: Islamic financing

sold to Cagamas Berhad (925,365) — (925,365) —

29,569,506 28,079,530 29,564,351 28,078,767

F-60

(iv) Movements in the non-performing loans and financing (including interest and income

receivables) are as follows:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Gross

Balance at beginning of

year

As previously reported . 4,051,944 4,349,529 4,042,907 4,340,492

Prior year adjustments

(Note 44) . . . . . . . . 1,579,574 1,459,592 1,579,574 1,459,592

As restated . . . . . . . . . 5,631,518 5,809,121 5,622,481 5,800,084

Non-performing during

the year . . . . . . . . . 981,487 1,719,071 981,487 1,719,071

Reclassification to

performing loans . . . . (341,088) (297,627) (341,088) (297,627)

Amount recovered . . . . (389,979) (490,210) (389,979) (490,210)

Debt equity conversion . (69,749) (53,770) (69,749) (53,770)

Amount written off. . . . (530,055) (1,055,067) (530,055) (1,055,067)

Balance at end of year . 5,282,134 5,631,518 5,273,097 5,622,481

Less:

Specific allowance . . . . (890,196) (677,506) (887,640) (674,950)

Interest/Income-in-

suspense . . . . . . . . . (971,393) (987,116) (964,913) (980,636)

(1,861,589) (1,664,622) (1,852,553) (1,655,586)

Non-performing loans and

financing (net) . . . . . 3,420,545 3,966,896 3,420,544 3,966,895

Ratio of net non-

performing loans to

loans, advances and

financing. . . . . . . . . 11.95% 15.02% 11.94% 15.01%

During the financial year, for certain loans in arrears of more than 7 years, the Company

has not assigned any value for the property collaterals.

F-61

(v) Movements in the allowance for bad and doubtful debts and financing and interest/

income-in-suspense accounts are as follows:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

General Allowance

Balance at beginning ofyear . . . . . . . . . . . 405,255 388,705 405,255 388,705

Allowance made duringthe year (Note 28) . . 24,153 16,550 24,153 16,550

Balance at end of year 429,408 405,255 429,408 405,255

% of total loans lessspecific allowanceand interest/income-in-suspense . . . . . . 1.50% 1.53% 1.50% 1.53%

Specific Allowance

Balance at beginning ofyear . . . . . . . . . . . 677,506 989,277 674,950 986,721

Allowance made duringthe year (Note 28) . . 877,367 696,900 877,367 696,900

Amount written back inrespect of recoveries(Note 28) . . . . . . . (278,830) (268,848) (278,830) (268,848)

Net charge to incomestatements . . . . . . . 598,537 428,052 598,537 428,052

Debt equity conversion — (49,387) — (49,387)Amount written off/

Adjustment to AssetDeficiency Account . (385,847) (690,436) (385,847) (690,436)

Balance at end of year 890,196 677,506 887,640 674,950

Interest/Income-in-

suspense

Balance at beginning ofyear

As previously reported 947,905 1,190,485 941,425 1,184,005Prior year adjustments

(Note 44) . . . . . . . 39,211 46,279 39,211 46,279As restated . . . . . . . . 987,116 1,236,764 980,636 1,230,284Allowance made during

the year . . . . . . . . 358,112 480,202 358,112 480,202Amount written back in

respect of recoveries (163,847) (221,362) (163,847) (221,362)

Net charge to incomestatements . . . . . . . 194,265 258,840 194,265 258,840

Debt equity conversion (76,437) (135,778) (76,437) (135,778)Amount written off/

Adjustment to AssetDeficiency Account . (133,551) (372,710) (133,551) (372,710)

Balance at end of year 971,393 987,116 964,913 980,636

F-62

9. OTHER ASSETS

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Deferred assets . . . . . . . . . . 77,140 72,022 77,140 72,022

Other receivables, deposits and

prepayments . . . . . . . . . . . 84,844 91,010 89,921 94,590

Amount recoverable from

Danaharta . . . . . . . . . . . . — — — —

Amount recoverable under

asset-backed securitisation

transactions . . . . . . . . . . . 97,566 — 97,566 —

Foreclosed properties net of

impairment loss of

RM87,129,000 (2004 :

RM10,000,000) . . . . . . . . . 84,981 2,607 84,981 2,607

344,531 165,639 349,608 169,219

(i) Deferred Assets

The Group and Company

2005 2004

RM’000 RM’000

Arising from takeover of Kewangan Usahasama Makmur

Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,184 61,184

Arising from takeover of Abrar Finance Berhad . . . . . . 15,956 10,838

Balance at end of year . . . . . . . . . . . . . . . . . . . . . 77,140 72,022

In 1988, the Company took over the operations of Kewangan Usahasama Makmur Berhad

(‘‘KUMB’’), a deposit taking co-operative in Malaysia. The Government of Malaysia granted to

KUMB a future tax benefit amounting to RM434 million; subsequently adjusted to RM426.69

million upon finalisation of KUMB’s tax credit in consideration of the deficit in assets taken

over from the deposit taking co-operatives. The tax benefit is a fixed monetary sum and is not

dependent on any changes in tax rates.

The net tax benefit is shown as a deferred asset and the utilisation of the deferred tax

benefit is based on the receipt of notices of assessment and subsequent remission of the tax

liabilities by the relevant authority net of the amount payable to the tax authorities for purposes

of Section 108 tax credit.

Subsequent to the vesting of assets and liabilities from AMFB Holdings Berhad (‘‘AMFB

Holdings’’), the deferred assets arising from the takeover of Abrar Finance Berhad were vested

over to the Company. This deferred assets arose when AMFB Holdings participated in a

scheme approved by the Minister of Finance and sanctioned by the High Court of Malaya,

whereby certain assets and liabilities of Abrar Finance Berhad (‘‘AFB’’), a licensed finance

company incorporated in Malaysia, were transferred with effect from 18 December 1998, to

AMFB Holdings with financial assistance from Bank Negara Malaysia (‘‘BNM’’).

The net asset deficiency representing the excess of liabilities over the assets transferred

from AFB arising from the scheme, is shown as deferred assets, and is reduced progressively

by net income derived from the utilisation of the deposit placed by BNM, as mentioned in Note

15, and net recoveries of defaulted loans of AFB computed based on a formula determined by

BNM.

F-63

(ii) Included under the gross amount of other receivables, deposits and prepayments of the

Group and Company are outstanding balances totalling RM1,024,000 (2004 :

RM6,185,000) and RM8,300,000 (2004 : RM14,447,000) respectively owing by other

related companies. These amounts are interest-free and represent amounts paid on behalf.

(iii) Other receivables, deposits and prepayments are net of allowance for doubtful debts of the

Group and Company of RM6,698,000 (2004 : RM4,796,000) and RM4,595,000 (2004 :

RM2,684,000) respectively.

(iv) Amount recoverable from Danaharta

The Group and Company

2005 2004

RM’000 RM’000

Balance at beginning of year. . . . . . . . . . . . . . . . . . — 67,497

Allowance made during the year . . . . . . . . . . . . . . . — (62,794)

Amount recovered . . . . . . . . . . . . . . . . . . . . . . . . (4,703)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . — —

10. STATUTORY DEPOSIT WITH BANK NEGARA MALAYSIA

The non-interest bearing statutory deposit is maintained with Bank Negara Malaysia in

compliance with Section 37(1)(c) of the Central Bank of Malaysia Act, 1958, the amounts of which

are determined as a set percentage of total eligible liabilities.

11. INVESTMENT IN SUBSIDIARY COMPANIES

The Company

2005 2004

RM’000 RM’000

Unquoted shares at cost . . . . . . . . . . . . . . . . . . . . . . . . 39,779 41,280

Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,000) (11,501)

Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,779 29,779

The subsidiary companies, which are all incorporated in Malaysia are as follows:

Name of Company Principal Activities

Effective Equity Interest

2005 2004

% %

MBf Nominees (Tempatan) Sdn. Bhd. . . Nominee company 100.0 100.0

MBf Information Services Sdn. Bhd. . . . Rental of computer

equipment and the

provision of related

support services

100.0 100.0

AmProperty Holdings Sdn. Bhd. . . . . . . Property investment 100.0 100.0

MBf Equity Partners Sdn. Bhd. . . . . . . Venture capital 100.0 100.0

MBf Trustees Berhad . . . . . . . . . . . . Trustee services 60.0 60.0

Bougainvillaea Development Sdn. Bhd. . Property holding 100.0 100.0

Natprop Sdn. Bhd. . . . . . . . . . . . . . . Investment holding 100.0 100.0

Teras Oak Pembangunan Sdn. Bhd. . . . . Dormant 100.0 100.0

Komuda Credit & Leasing Sdn. Bhd. . . Dormant 100.0 100.0

Everflow Credit & Leasing Corporation

Sdn. Bhd. . . . . . . . . . . . . . . . . . .

Dormant 100.0 100.0

F-64

Name of Company Principal Activities

Effective Equity Interest

2005 2004

% %

AmCredit & Leasing Sdn Bhd (formerly

known as Komewah Credit & Leasing

Sdn. Bhd.) . . . . . . . . . . . . . . . . . .

Dormant 100.0 100.0

Li & Ho Sdn. Bhd. . . . . . . . . . . . . . Dormant 100.0 100.0

Malco Properties Sdn. Bhd. . . . . . . . . Dormant 51.0 51.0

Annling Sdn. Bhd. . . . . . . . . . . . . . . Dormant 100.0 100.0

MBf Nominees (Asing) Sdn. Bhd. . . . . Dormant 100.0 100.0

Lekir Development Sdn. Bhd. . . . . . . . Ceased operations 100.0 100.0

Crystal Land Sdn. Bhd. . . . . . . . . . . . Ceased operations 80.0 80.0

MBf Property Trust Management Berhad Dormant —* 100.0

* This subsidiary was disposed on 9 August 2004.

12. INVESTMENT IN ASSOCIATED COMPANIES

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Unquoted shares, at cost . . . . 100 100 150 150

Share of post-acquisition

results, net of tax . . . . . . . 358 150 — —

458 250 150 150

The associated companies, which are incorporated in Malaysia are as follows:

Principal Activity

AmTrustee Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trustee Services

MBf Trustees Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trustee Services

The effective equity interests are as follows:

The Group The Company

Effective Equity Interest Effective Equity Interest

2005 2004 2005 2004

AmTrustee Berhad . . . . . . . . 20% 20% 20% 20%

MBf Trustees Berhad . . . . . . 60% 60% 20% 20%

The investment in MBf Trustees Berhad is classified as investment in subsidiary companies at

Group level through additional equity interest held by another subsidiary company.

As at 31 March 2005, the carrying value of the investment in associated companies is

represented by:

The Group

Effective Equity Interest

2005 2004

RM’000 RM’000

Group’s share of aggregate net tangible assets . . . . . . . . . . 854 628

F-65

13. PROPERTY AND EQUIPMENT

The Group

Freehold

land and

buildings

Leasehold

land and

buildings

Leasehold

improve-

ments

Office

equipment,

furniture

and fittings

Computer

equipment

and

software

Motor

vehicles Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

COST

At beginning of year. . . 312,613 36,890 117,035 82,626 362,127 5,914 917,205

Additions . . . . . . . . . . — — 21,401 10,364 19,099 425 51,289

Disposals . . . . . . . . . . (13,365) (5,526) — (2,885) (2,228) (654) (24,658)

Write offs . . . . . . . . . — — (2,788) — (3,064) — (5,852)

Reclassification/Transfer. — — (3,016) 2,973 43 — —

At end of year . . . . . . 299,248 31,364 132,632 93,078 375,977 5,685 937,984

ACCUMULATED

DEPRECIATION

AND IMPAIRMENT

LOSSES

At beginning of year. . . 33,632 4,787 91,239 60,607 298,183 4,158 492,606

Current depreciation . . . 5,268 691 7,349 9,386 18,117 620 41,431

Impairment losses . . . . 29,834 — — — — — 29,834

Disposals . . . . . . . . . . (1,830) (1,201) — (2,118) (2,189) (654) (7,992)

Write offs . . . . . . . . . — — (1,945) — — — (1,945)

At end of year . . . . . . 66,904 4,277 96,643 67,875 314,111 4,124 553,934

Analysed as:

Accumulated

depreciation . . . . . . 37,070 4,277 96,643 67,875 314,111 4,124 524,100

Accumulated impairment

losses . . . . . . . . . . 29,834 — — — — — 29,834

66,904 4,277 96,643 67,875 314,111 4,124 553,934

NET BOOK VALUE

As at 31.03.2005 . . . . . 232,344 27,087 35,989 25,203 61,866 1,561 384,050

As at 31.03.2004 . . . . . 278,981 32,103 25,796 22,019 63,944 1,756 424,599

Depreciation charge for

the year ended

31.03.2004 . . . . . . . 5,127 787 9,449 6,633 31,519 803 54,318

Details as at 1.04.2003

Cost . . . . . . . . . . . . . 312,613 36,890 105,647 74,640 343,561 8,215 881,566

Accumulated

depreciation . . . . . . 28,505 4,000 81,894 54,434 267,200 6,184 442,217

F-66

The Company

Freehold

land and

buildings

Leasehold

land and

buildings

Leasehold

improve-

ments

Office

equipment,

furniture

and fittings

Computer

equipment

and

software

Motor

vehicles Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

COST

At beginning of year. . . 263,848 26,420 117,001 82,620 362,127 5,914 857,930

Additions . . . . . . . . . . — — 21,401 10,364 19,099 425 51,289

Disposals . . . . . . . . . . (195) — — (2,885) (2,228) (654) (5,962)

Write offs . . . . . . . . . — — (2,788) — (3,064) — (5,852)

Reclassification/Transfer. — — (3,016) 2,973 43 — —

At end of year . . . . . . 263,653 26,420 132,598 93,072 375,977 5,685 897,405

ACCUMULATED

DEPRECIATION

AND IMPAIRMENT

LOSSES

At beginning of year. . . 26,409 2,870 91,233 60,601 298,183 4,158 483,454

Current depreciation . . . 4,628 537 7,342 9,386 18,117 620 40,630

Impairment losses . . . . 28,386 — — — — — 28,386

Disposals . . . . . . . . . . (48) — — (2,119) (2,189) (654) (5,010)

Write offs . . . . . . . . . — — (1,945) — — — (1,945)

At end of year . . . . . . 59,375 3,407 96,630 67,868 314,111 4,124 545,515

Analysed as:

Accumulated

depreciation . . . . . . 30,989 3,407 96,630 67,868 314,111 4,124 517,129

Accumulated impairment

losses . . . . . . . . . . 28,386 — — — — — 28,386

59,375 3,407 96,630 67,868 314,111 4,124 545,515

NET BOOK VALUE

As at 31.03.2005 . . . . . 204,278 23,013 35,968 25,204 61,866 1,561 351,890

As at 31.03.2004 . . . . . 237,439 23,550 25,768 22,019 63,944 1,756 374,476

Depreciation charge for

the year ended

31.03.2004 . . . . . . . 4,457 613 9,443 6,633 31,519 803 53,468

Details as at 1.04.2003

Cost . . . . . . . . . . . . . 263,848 26,420 105,647 74,633 343,561 8,215 822,324

Accumulated

depreciation . . . . . . 21,952 2,257 81,894 54,428 267,200 6,184 433,915

F-67

(a) Details of leasehold land and buildings are as follows:

Long term

leasehold land

and buildings

Short term

leasehold land

and buildings Total

RM’000 RM’000 RM’000

The Group

Cost . . . . . . . . . . . . . . . . . . . . . . . 30,415 949 31,364

Accumulated Depreciation . . . . . . . . . (3,889) (388) (4,277)

26,526 561 27,087

The Company

Cost . . . . . . . . . . . . . . . . . . . . . . . 26,165 255 26,420

Accumulated Depreciation . . . . . . . . . (3,187) (220) (3,407)

22,978 35 23,013

The long term leasehold properties for the Group and the Company are for lease periods

of 66–999 years and 85–855 years respectively and with unexpired lease periods of 54–875

years and 63–788 years respectively.

The short term leasehold properties for the Group and the Company are for lease periods

of 20–49 years and 20 years respectively and with unexpired lease periods of 1–34 years and 1

year respectively.

(b) Included in the net book value of computer equipment and software is capital work-in-

progress for the Group and Company of RM14,776,000 (2004 : RM29,103,000).

(c) Details of fully depreciated property and equipment of the Group and the Company, which

are still in use are as follows:

The Group

and Company

Freehold

land and

building

Leasehold

improvements

Office

equipment,

furniture

and fittings

Computer

equipment

and

software

Motor

vehicles Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Cost . . . . . . . . 75 68,172 40,544 267,576 2,563 378,930

14. DEPOSITS FROM CUSTOMERS

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Savings deposits . . . . . . . . . 2,688,669 2,579,429 2,688,669 2,579,429

Fixed/Investment deposits . . . . 19,363,863 17,794,831 19,365,562 17,796,625

Negotiable certificates of

deposits . . . . . . . . . . . . . 219,225 37,533 219,225 37,533

22,271,757 20,411,793 22,273,456 20,413,587

F-68

(i) The maturity structure of deposits from customers is as follows:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Due within six months . 16,101,534 15,130,704 16,103,233 15,132,498

Six months to one year . 4,689,867 4,258,784 4,689,867 4,258,784

One year to three years . 853,386 666,963 853,386 666,963

Three years to five years 626,970 355,342 626,970 355,342

22,271,757 20,411,793 22,273,456 20,413,587

(ii) The deposits are sourced from the following types of customers:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Business enterprises . . . 3,876,068 3,160,118 3,877,767 3,161,912

Individuals . . . . . . . . . 16,395,827 14,911,651 16,395,827 14,911,651

Government and other

statutory bodies . . . . 1,682,335 2,046,943 1,682,335 2,046,943

Others. . . . . . . . . . . . 317,527 293,081 317,527 293,081

22,271,757 20,411,793 22,273,456 20,413,587

15. DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Licensed banks . . . . . . . . . . 1,597,184 1,060,804 1,597,184 1,060,804

Licensed finance companies . . 19,928 — 19,928 —

Non-banking institutions . . . . 3,452,393 3,194,607 3,452,393 3,194,607

Bank Negara Malaysia

(‘‘BNM’’) . . . . . . . . . . . . 808,000 808,000 808,000 808,000

5,877,505 5,063,411 5,877,505 5,063,411

Included under deposits and placements of other financial institutions of the Group and of the

Company are the following:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Negotiable instruments of

deposits . . . . . . . . . . . . . 2,581,594 2,182,031 2,581,594 2,182,031

Interbank borrowing (Note 4) . — 200 — 200

2,581,594 2,182,231 2,581,594 2,182,231

F-69

Deposits from BNM represent long-term deposits and interest-free loans placed with the Group

and the Company in connection with the transfer of certain assets and liabilities of Abrar Finance

Berhad and Kewangan Usahasama Makmur Berhad to the Company as mentioned in Note 9.

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Soft deposit . . . . . . . . . . . . 135,000 135,000 135,000 135,000

Soft loan . . . . . . . . . . . . . . 513,000 513,000 513,000 513,000

Commercial loan . . . . . . . . . 160,000 160,000 160,000 160,000

808,000 808,000 808,000 808,000

Included above are soft deposit of RM135,000,000 (2004 : RM135,000,000) and soft loan of

RM180,000,000 (2004 : RM180,000,000) bearing interest of 1% (2004 : 1%) per annum. The

remaining soft loan and the commercial loan are interest free. The soft loan of RM180,000,000

(2004 : RM180,000,000) is repayable on 18 December 2008 or when the deferred assets relating to

AFB referred to in Note 9 are fully utilised, whichever is earlier. The remaining loans and soft

deposit are repayable when the deferred assets relating to KUMB referred to in Note 9 are fully

utilised.

16. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

Securities sold under repurchase agreements represent the obligations to repurchase these

securities sold as mentioned in Note 7.

17. AMOUNT DUE TO CAGAMAS BERHAD

Amount due to Cagamas Berhad represents the proceeds received from loans (excluding Islamic

financing) sold directly and indirectly to Cagamas Berhad with recourse to the Company. Under this

arrangement, the Company undertakes to administer the loans on behalf of Cagamas Berhad and to

buy back any loans, which are regarded as defective based on prudential criteria.

18. OTHER LIABILITIES

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Tax payable . . . . . . . . 18 253 — —

Lease deposits and

advance rentals . . . . . 39,373 42,005 39,373 42,005

Interest payable . . . . . . 181,783 172,533 181,783 172,533

Other creditors and

accruals . . . . . . . . . (i) 625,730 507,139 623,189 502,471

General allowance for

commitment and

contingencies . . . . . . (ii) 13,000 52,000 13,000 52,000

Profit equalisation

reserve . . . . . . . . . . 97,352 51,999 97,352 51,999

957,256 825,929 954,697 821,008

F-70

(i) Other creditors and accruals

Included under other creditors and accruals of the Group and of the Company are

outstanding balances totalling RM48,252,000 (2004 : RM5,895,000) and RM48,515,000 (2004 :

RM6,420,000) respectively owing to other related companies. The amounts are interest-free and

represent amounts paid on behalf.

(ii) General allowance for commitment and contingencies

The Group and Company

2005 2004

RM’000 RM’000

Balance at beginning of year. . . . . . . . . . . . . . . . . . 52,000 15,000

Allowance made during the year . . . . . . . . . . . . . . . — 37,000

Payment during the year . . . . . . . . . . . . . . . . . . . . (39,000) —

Balance at end of year . . . . . . . . . . . . . . . . . . . . . 13,000 52,000

The above general provision for contingencies is in connection with three legal suits

relating to the Highland Towers tragedy, whereby the plaintiffs had contended that AMFB

Holdings caused or contributed to the collapse of Block 1 and forced evacuation of Blocks 2

and 3 of the Highland Towers.

By a Vesting Order of the High Court of Malaya dated 21 May 2002 pursuant to Section

50 of the Banking and Financial Institutions Act, 1989, all rights and liabilities (including

rights and liabilities under and or in respect of any past, pending or future litigation) accruing

to, owed or incurred by AMFB Holdings in relation to its finance company business have been

transferred to and assumed by the Company with effect from 15 June 2002 and AMFB

Holdings shall cease to be liable in respect of such liabilities with effect therefrom.

On 31 May 2004, the Company entered into a settlement agreement with the plaintiffs in

respect of the legal suits whereby the Company agreed to pay plaintiffs a settlement sum of

RM52.0 million in full and final settlement inclusive of costs and the plaintiffs shall, among

others, release and assign to the Company all their rights of action in the suits against Highland

Properties Sdn. Bhd. (the developer of Highland Towers) as well as all their rights and title to

their individual apartment units and their rights to common property, unencumbered and free

from claims of end financiers.

The Company had made full provision in prior year of which RM39.0 million has been

paid during the year.

19. SUBORDINATED TERM LOAN

The subordinated term loan is unsecured, subordinated to all other liabilities and was obtained

from Danamodal Nasional Berhad (‘‘Danamodal’’), a company incorporated for the purpose of

recapitalising the local banking and financial institutions, to strengthen the Company’s capital base.

Pursuant to the acquisition of the Company by AMFB Holdings on 20 December 2001,

Danamodal extended the loan for a further period of ten (10) years to be repaid on 20 December

2011. The loan bore interest at 6.5% per annum for the first five years and at 7.5% per annum or

1.0% above 3 months KLIBOR, whichever is higher, for the next five years. The interest is payable

on a half yearly basis.

On 28 October 2003, the Company entered into a Supplemental Facility Agreement with

Danamodal whereby the subordinated term loan was novated to Astute Assets Berhad, a special

purpose vehicle. In accordance with the new terms of agreement, interest on the loan is charged at

6.5% per annum until 19 December 2006, 7.0% per annum from 20 December 2006 until 19

December 2007, and 7.5% per annum from 20 December 2007 until 19 December 2011.

F-71

20. REDEEMABLE UNSECURED SUBORDINATED BONDS

Pursuant to a Trust Deed dated 24 April 2003, the Company issued RM200,000,000 nominal

amount of Negotiable Interest-bearing Redeemable Unsecured Subordinated Bonds (‘‘Subordinated

Bonds’’) for the purpose of increasing the Company’s capital funds.

The salient features of the Subordinated Bonds are as follows:

(a) The Subordinated Bonds bear interest at 7.95% per annum for the first five years and

subsequently at 8.45% to 10.45% per annum. The interest is payable on a semi-annual

basis.

(b) The Subordinated Bonds are for a period of ten years maturing on 30 April 2013.

However, subject to the prior approval of Bank Negara Malaysia, the Company may

redeem the Subordinated Bonds on 30 April 2008 or on each anniversary date thereafter,

at nominal value together with interest accrued to the date of redemption.

21. MINORITY INTERESTS

Minority interests in the Group represent that part of the net results of operations, or of net

assets, of subsidiary companies attributable to shares owned, directly or indirectly other than by the

Company or subsidiary companies.

The movements in minority interests in subsidiary companies are as follows:

The Group

2005 2004

RM’000 RM’000

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . 101 113

Share in net results of subsidiary companies . . . . . . . . . . . (15) (12)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . 86 101

22. SHARE CAPITAL

The Group and the Company

2005 2004

RM’000 RM’000

Authorised

Balance at beginning and end of year

Ordinary shares . . . . . . . . . . . . . . . . . . . . . . . . . . 1,386,250 1,386,250

8% Irredeemable Non-Cumulative Convertible Preference

Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 2,500,000

3,886,250 3,886,250

Issued and fully paid

Balance at beginning and end of year

Ordinary shares . . . . . . . . . . . . . . . . . . . . . . . . . . 528,402 528,402

F-72

23. RESERVES

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Non-distributable Reserves:

Share premium . . . . . . . . . . 379,953 379,953 379,953 379,953

Statutory reserve . . . . . . . . . 528,402 483,070 528,402 483,070

Capital reserve . . . . . . . . . . — 278,342 — 278,342

Total non-distributable reserves 908,355 1,141,365 908,355 1,141,365

Distributable Reserves:

Unappropriated profits . . . . . . 1,185,708 712,657 1,174,432 704,698

2,094,063 1,854,022 2,082,787 1,846,063

Movements in reserves are shown in the statements of changes in equity on pages 15 and 16.

Share premium is used to record premium arising from new shares issued in the Company.

The statutory reserve is maintained in compliance with Section 36 of the Banking and Financial

Institutions Act, 1989 and is not distributable as cash dividends.

The capital reserve is in respect of the deferred tax asset on the Company’s unabsorbed tax

losses recognised in equity. During the year, the entire capital reserve has been transferred to

unappropriated profits.

Distributable reserves are those available for distribution by way of dividends. There is no tax

credit available under Section 108 of the Income Tax Act, 1967 to frank the payment of dividends

out of the Company’s distributable reserves as at 31 March 2005.

24. INTEREST INCOME

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Loans and advances . . . . . . . 1,933,533 2,141,921 1,934,149 2,142,754

Money at call, deposits and

placements with financial

institutions . . . . . . . . . . . 63,064 79,344 63,064 79,344

Dealing securities. . . . . . . . . 1,076 892 1,076 892

Investment securities . . . . . . . 52,116 33,239 52,116 33,239

Others. . . . . . . . . . . . . . . . 50,676 23,583 50,676 23,583

2,100,465 2,278,979 2,101,081 2,279,812

Net interest suspended . . . . . . (180,661) (267,951) (180,661) (267,951)

(Amortisation of premium)/

accretion of discounts . . . . . (1,390) 16,755 (1,390) 16,755

1,918,414 2,027,783 1,919,030 2,028,616

F-73

25. INTEREST EXPENSE

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Deposits and placements . . . . 656,426 698,816 656,499 698,898

Amounts due to Cagamas

Berhad . . . . . . . . . . . . . . 125,332 147,186 125,332 147,186

Others. . . . . . . . . . . . . . . . 126,654 112,990 126,638 112,975

908,412 958,992 908,469 959,059

26. NON-INTEREST INCOME

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Fee and Other Operating

Income:

Commissions. . . . . . . . . . 19,188 15,978 19,188 15,978

Guarantee fees . . . . . . . . 1,085 999 1,085 999

Income from asset

securitisation . . . . . . . . 42,838 — 42,838 —

Other fee income . . . . . . . 12,599 11,908 12,599 11,908

75,710 28,885 75,710 28,885

Investment and Trading

Income:

Net loss on disposal of

dealing securities . . . . . (10,622) (4,324) (10,622) (4,324)

Net loss on disposal of

investment securities . . . (1,726) (3,949) (1,726) (3,949)

Gain on disposal of

subsidiary company . . . . 402 — — —

Gross dividends from

investment securities:

Shares quoted in Malaysia 7,590 3,091 7,590 3,091

Unquoted shares . . . . . . 640 7,078 613 7,023

(3,716) 1,896 (4,145) 1,841

Other Income:

Gain on disposal of leased

assets . . . . . . . . . . . . . 3 8 3 8

Gain on disposal of

properties . . . . . . . . . . 567 — 185 —

Rental income . . . . . . . . . 8,004 8,659 7,365 8,151

Gain on disposal of property

and equipment . . . . . . . 2,845 1,134 688 1,134

Other income . . . . . . . . . — 58 — —

11,419 9,859 8,241 9,293

83,413 40,640 79,806 40,019

F-74

27. OPERATING EXPENSES

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Personnel/Staff costs . . . . . . . 214,633 194,366 214,633 194,366

Establishment costs. . . . . . . . 123,908 137,580 126,605 140,794

Marketing and communication

expenses . . . . . . . . . . . . . 178,028 165,612 178,028 165,612

Administration and general

expenses . . . . . . . . . . . . . 37,767 45,411 37,102 46,498

554,336 542,969 556,368 547,270

The above expenditure includes the following statutory disclosure:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Directors’ remuneration

(Note 30) . . . . . . . . . . . . 2,771 2,479 2,771 2,479

Rental of premises

— subsidiary companies . . — — 4,971 5,257

— others . . . . . . . . . . . . 15,945 17,534 15,945 17,534

Lease rental . . . . . . . . . . . . 1,419 1,338 1,419 1,338

Depreciation of property and

equipment (Note 13) . . . . . 41,431 54,318 40,630 53,468

Auditors’ remuneration:

Statutory audit . . . . . . . . 316 316 300 300

Special audit. . . . . . . . . . 120 120 120 120

Property and equipment written

off . . . . . . . . . . . . . . . . 3,907 145 3,907 145

Impairment losses on

foreclosed property . . . . . . 2,000 4,000 2,000 4,000

Allowance for doubtful debts

— other receivables . . . . . . 1,964 464 1,911 464

The total number of employees of the Group and of the Company as at 31 March 2005 was

5,335 (2004 : 5,220).

Staff costs include salaries, bonuses, contributions to employees’ provident fund and all other

staff related expenses. Contributions to employees’ provident fund of the Group and of the Company

amounted to RM20,956,000 (2004 : RM19,046,000).

F-75

28. ALLOWANCE FOR LOSSES ON LOANS AND FINANCING

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Allowance for bad and doubtful

debts and financing:

Specific allowance (net)

— made in the financial

year . . . . . . . . . . . 877,367 696,900 877,367 696,900

— written back . . . . . . . (278,830) (268,848) (278,830) (268,848)

General allowance . . . . . . 24,153 16,550 24,153 16,550

Bad debts and financing

recovered . . . . . . . . . . . . (174,232) (209,634) (174,232) (209,634)

448,458 234,968 448,458 234,968

Allowance on amount

recoverable from Danaharta . — 62,794 — 62,794

448,458 297,762 448,458 297,762

29. HOLDING AND ULTIMATE HOLDING COMPANIES AND SIGNIFICANT RELATED

PARTY TRANSACTIONS AND BALANCES

The holding and ultimate holding companies are AMFB Holdings Berhad and AMMB Holdings

Berhad respectively, both of which are incorporated in Malaysia.

During the financial year, the significant related party transactions and balances are as follows:

(a) The significant transactions and balances of the Company with its holding and ultimate

holding companies and related companies are as follows:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Income

Related companiesInterest on deposits and

placement

AmMerchant Bank

Berhad . . . . . . . . . 2,292 25,624 2,292 25,624

AmBank Berhad . . . . 1,244 7,544 1,244 7,544

3,536 33,168 3,536 33,168

Interest on investment

securities

AmMerchant Bank

Berhad . . . . . . . . . 7,842 9,187 7,842 9,187

AmBank Berhad . . . . 1,659 2,042 1,659 2,042

9,501 11,229 9,501 11,229

F-76

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Interest on loans and

advances

AmProperty Holdings

Sdn Bhd . . . . . . . . — — 616 832

Arab-Malaysian Credit

Berhad . . . . . . . . . — 36 — 36

— 36 616 868

Other income

Arab-Malaysian Credit

Berhad . . . . . . . . . 306 350 306 350

AmSecurities Berhad . . — 435 — 435

AmAssurance Berhad . 17,965 15,343 15,808 15,343

AmInvestment Services

Berhad . . . . . . . . . 1,070 1,070 1,070 1,070

19,341 17,198 17,184 17,198

Expenditure

Ultimate holding companyInterest on deposits and

placements

AMMB Holdings

Berhad . . . . . . . . . 28 270 28 270

Holding companyInterest on subordinated

loan notes

AMFB Holdings Berhad — 9,445 — 9,445

Related companiesInterest on deposits and

placements

AmMerchant Bank

Berhad . . . . . . . . . 2,211 944 2,211 944

AmAssurance Berhad . 6,993 7,029 6,993 7,029

AmBank Berhad . . . . 578 1,119 578 1,119

AmTrustee Berhad . . . 6 12 6 12

AmSecurities Berhad . . — 9 — 9

AmFutures Sdn Bhd . . — 5 — 5

MBf Information

Services Sdn Bhd . . — — 39 42

MBf Nominees

(Tempatan) Sdn Bhd — — — 1

MBf Trustees Berhad . — — 4 8

AmProperty Holdings

Sdn Bhd . . . . . . . . — — — 2

Bougainvillaea

Development Sdn

Bhd . . . . . . . . . . . — — 14 13

9,788 9,118 9,845 9,184

F-77

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Other expenses

AmAssurance Berhad . 280 1,892 280 1,892

Arab-Malaysian Credit

Berhad . . . . . . . . . 2,220 1,314 2,220 1,314

AmInvestment

Management Sdn Bhd 288 81 288 81

AmProperty Trust

Management Berhad . 2,200 1,951 2,200 1,951

AmProperty Holdings

Sdn Bhd . . . . . . . . — — 3,643 4,150

Bougainvillaea

Development Sdn

Bhd . . . . . . . . . . . — — 1,106 1,106

4,988 5,238 9,737 10,494

Amount due from

Related companiesLoans and advances

AmProperty Holdings

Sdn Bhd . . . . . . . . — — 3,881 8,273

Deposits and placements

AmMerchant Bank

Berhad . . . . . . . . . 127,600 727,500 127,600 727,500

AmBank Berhad . . . . 99,700 — 99,700 —

227,300 727,500 227,300 727,500

Investment securities

AmMerchant Bank

Berhad . . . . . . . . . 401,102 393,908 401,102 393,908

Interest receivable

AmMerchant Bank

Berhad . . . . . . . . . 81 1,174 81 1,174

AmBank Berhad . . . . 225 — 225 —

306 1,174 306 1,174

Amount due to

Ultimate holding companyDeposits and placements

AMMB Holdings

Berhad . . . . . . . . . 331 2,560 331 2,560

Interest payable

AMMB Holdings

Berhad . . . . . . . . . — 5 — 5

AmMerchant Bank

Berhad . . . . . . . . . 45 — 45 —

F-78

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Related companiesDeposits and placements

AmMerchant Bank

Berhad . . . . . . . . . 711,922 277,700 711,922 277,700

AmBank Berhad . . . . 43,852 42,464 43,852 42,464

AmAssurance Berhad . 100,393 100,382 100,393 100,382

AmTrustee Berhad . . . 100 100 100 100

MBf Information

Services Sdn Bhd . . — — 1,316 1,277

MBf Trustees Berhad . — — 100 218

Bougainvillaea

Development Sdn

Bhd . . . . . . . . . . . — — 283 275

856,267 420,646 857,966 422,416

Interest payable

AmAssurance Berhad . 1,087 1,107 1,087 1,107

AmTrustee Berhad . . . 1 1 1 1

1,088 1,108 1,088 1,108

Commitments and

Contingencies

AmMerchant Bank

Berhad . . . . . . . . . 1,700,000 630,000 1,700,000 630,000

The above transactions have been entered into in the normal course of business and have

been established under terms and conditions that are no less favourable than those arranged

with independent parties.

(b) Directors related transactions

The significant non-banking transactions of the Group and the Company with companies

in which Tan Sri Dato’ Azman Hashim is deemed to have a substantial interest, are as follows:

Company Types of transactions 2005 2004

RM’000 RM’000

Expense

MCM Horizon Sdn Bhd (formerly

known as Blue Star Infotech

(M) Sdn Bhd) . . . . . . . . . .

Computer maintenance

and consultancy

services

1,730 1,520

MCM Consulting Sdn Bhd

(formerly known as Gamarapi

Sdn Bhd) . . . . . . . . . . . . .

Computer maintenance

and consultancy

services

2,876 2,094

MCM Systems Sdn Bhd (formerly

known as Infotech Project Sdn

Bhd) . . . . . . . . . . . . . . . .

Computer maintenance 205 —

Modular Corporation (M) Sdn

Bhd . . . . . . . . . . . . . . . . .

Provision of PMPC cards 1,025 —

Conquest Marketing Sdn Bhd . . Advertising — 707

Arab-Malaysian Realty Sdn Bhd. Rental of premises and

property maintenance

costs

234 261

F-79

Company Types of transactions 2005 2004

RM’000 RM’000

Taifab Properties Sdn Bhd . . . . Rental of premises 80 193

Melawangi Sdn Bhd . . . . . . . . Rental of premises 300 —

Aon Insurance Brokers (M) Sdn

Bhd . . . . . . . . . . . . . . . . .

Insurance brokerage fees 2,338 3,010

Capital expenditure

MCM Consulting Sdn Bhd

(formerly known as Gamarapi

Sdn Bhd) . . . . . . . . . . . . .

Purchase of computer

hardware, software and

related consultancy

services

2,440 3,092

MCM Systems Sdn Bhd (formerly

known as Infotech Project Sdn

Bhd) . . . . . . . . . . . . . . . .

Purchase of computer

hardware, software and

related consultancy

services

2,333 412

MCM Horizon Sdn Bhd (formerly

known as Blue Star Infotech

(M) Sdn Bhd) . . . . . . . . . .

Purchase of computer

hardware, software and

related consultancy

services

289 389

The significant non-banking transactions of the Group and the Company with companies

in which Tun Mohammed Hanif Omar is also a director is as follows:

Company Types of transactions 2005 2004

RM’000 RM’000

Expense

Unigaya Protection Systems Sdn

Bhd . . . . . . . . . . . . . . . . .

Provision of security

services

373 460

The above transactions have been entered into in the normal course of business and have

been established under terms and conditions that are not materially different from those

arranged with independent parties.

As at 31 March 2005 and 31 March 2004, there are no outstanding balances arising from

directors related transactions.

F-80

30. DIRECTORS’ REMUNERATION

Forms of remuneration in aggregate for all the Group’s and the Company’s directors charged to

the income statements for the financial year are as follows:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Directors of the Company

Executive directors

Salaries and other

remuneration . . . . . . . . 2,225 1,973 2,225 1,973

Benefits-in-kind . . . . . . . . 110 132 110 132

2,335 2,105 2,335 2,105

Non-executive directors

Other remuneration . . . . . . 546 506 546 506

Total . . . . . . . . . . . . . . . . 2,881 2,611 2,881 2,611

Total (excluding benefits-in-

kind) . . . . . . . . . . . . . . . 2,771 2,479 2,771 2,479

The remuneration attributable to the Managing Director of the Company, including benefits-in-

kind during the financial year amounted to RM1,352,000 (2004 : RM1,516,000).

31. TAXATION

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Estimated current tax payable . 63 944 — —

Share in taxation of associated

company . . . . . . . . . . . . . 73 73 — —

Net transfer from/(to) deferred

taxation (Note 32) . . . . . . . 124,929 (58,191) 124,929 (57,934)

125,065 (57,174) 124,929 (57,934)

Under/(Over) provision of

current taxation in respect of

prior years. . . . . . . . . . . . 941 (78) 500 —

Prior year tax expense in

respect of business vested

over from AMFB Holdings . 8,047 20,859 8,047 20,859

134,053 (36,393) 133,476 (37,075)

Taxation of the Group is in respect of estimated taxable income of certain subsidiary

companies. There is no tax charge for the Company for the current year and prior year due to the

utilisation of unabsorbed tax losses and capital allowances brought forward of RM403.9 million

(2004 : RM894.4 million) and RM10.1 million (2004 : RM22.4 million) respectively.

As at 31 March 2005, the Company has unabsorbed tax losses and unutilised capital allowances

amounting to approximately RM1,055.4 million (2004 : RM1,459.3 million) and RM101.9 million

(2004 : RM123.1 million) respectively, which can be used to offset future taxable profits subject to

agreement with the Inland Revenue Board.

F-81

The prior year taxation in respect of AMFB Holdings’ business has been vested over to the

Company pursuant to the Vesting Order of the High Court of Malaya dated 21 May 2002, whereby

all rights and liabilities accruing to, owed or incurred by AMFB Holdings in relation to its finance

company business have been transferred to and assumed by the Company with effect from 15 June

2002.

A reconciliation of income tax expense applicable to profit before taxation at the statutory

income tax rate to income tax expense at the effective income tax rate of the Group and of the

Company is as follows:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Profit before taxation . . . . . . 374,079 497,269 370,200 492,989

Taxation at Malaysian statutory

tax rate of 28% (2004 : 28%) 104,742 139,235 103,656 138,037

Income not subject to tax. . . . (1,094) (2,357) (1,094) (1,639)

Expenses not deductible for tax

purposes . . . . . . . . . . . . . 8,608 15,231 9,558 14,951

Deferred tax asset charged out/

(not recognised in prior

years). . . . . . . . . . . . . . . 12,809 (209,283) 12,809 (209,283)

Tax charge/(tax credit) for the

year . . . . . . . . . . . . . . . . 125,065 (57,174) 124,929 (57,934)

32. DEFERRED TAX ASSET

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Balance at beginning of year

As previously reported . . . (701,236) (645,859) (701,236) (646,116)

Prior year adjustments

(Note 44)* . . . . . . . . . (40,497) (37,683) (40,497) (37,683)

As restated . . . . . . . . . . . (741,733) (683,542) (741,733) (683,799)

Transfer from income

statements . . . . . . . . . . . . 124,929 (58,191) 124,929 (57,934)

Balance at end of year . . . . . (616,804) (741,733) (616,804) (741,733)

* The prior year adjustment is in respect of the decrease in utilisation of unabsorbed tax losses resulting from the

change of accounting policy on hire purchase handling fees.

F-82

The deferred tax (assets)/liabilities are in respect of the following temporary differences:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Unabsorbed tax losses . . . . . . (295,510) (444,288) (295,510) (444,288)

Leasing temporary differences . — (15,691) — (15,691)

Temporary differences between

depreciation and tax

allowances on property and

equipment . . . . . . . . . . . . 15,496 14,285 15,496 14,285

Temporary differences arising

from impairment loss on

foreclosed properties . . . . . (24,396) (2,930) (24,396) (2,930)

Temporary differences arising

from allowance on amount

recoverable from Danaharta . (74,357) (76,929) (74,357) (76,929)

Temporary difference arising

from allowance for

diminution in value of

investments . . . . . . . . . . . (93,717) (92,265) (93,717) (92,265)

Temporary difference arising

from general allowance . . . . (120,234) (113,471) (120,234) (113,471)

Others. . . . . . . . . . . . . . . . (24,086) (10,444) (24,086) (10,444)

(616,804) (741,733) (616,804) (741,733)

33. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net profit for the financial year

attributable to shareholders of the Group and of the Company by the weighted average number of

ordinary shares in issue during the financial year.

The Group The Company

2005 2004 2005 2004

RM’000/’000 RM’000/’000 RM’000/’000 RM’000/’000

Net profit attributable to

shareholders of the Company 240,041 533,674 236,724 530,064

Weighted average number of

ordinary shares in issue . . . 528,402 528,402 528,402 528,402

Basic earnings per share (sen) . 45.43 101.00 44.80 100.31

There are no dilutive potential ordinary shares during the financial year.

34. COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Group and the Company make various commitments and

incur certain contingent liabilities with legal recourse to its customers. No material losses are

anticipated as a result of these transactions. The commitments and contingencies are not secured

against the Group’s and the Company’s assets.

F-83

The risk-weighted exposure of the Group and the Company is as follows:

The Group

2005 2004

Principal

Amount

Credit

Equivalent

Amount*

Risk

Weighted

Amount

Principal

Amount

Credit

Equivalent

Amount*

Risk

Weighted

Amount

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Direct credit substitutes 51,404 51,404 15,300 81,045 81,045 26,634

Transaction-related

contingent items . . . — — — 616 308 308

Unpaid portion of

partly paid shares . . 250 250 250 250 250 250

Irrevocable

commitments to

extend credit:

— maturing less than

one year . . . . . 3,056,148 — — 2,880,399 — —

— maturing more

than one year . . 483,410 241,705 241,705 568,697 284,349 284,349

Interest rate swap

contracts:

— maturing within

one year . . . . . 250,000 500 100 30,000 75 15

— maturing more

than one year to

less than five

years . . . . . . . 1,880,000 33,986 6,797 800,000 13,230 2,646

Islamic financing sold

to Cagamas Berhad

with recourse . . . . . 925,365 925,365 925,365 — — —

Total . . . . . . . . . . . 6,646,577 1,253,210 1,189,517 4,361,007 379,257 314,202

F-84

The Company

2005 2004

Principal

Amount

Credit

Equivalent

Amount*

Risk

Weighted

Amount

Principal

Amount

Credit

Equivalent

Amount*

Risk

Weighted

Amount

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Direct credit substitutes 51,404 51,404 15,300 81,045 81,045 26,634

Transaction-related

contingent items . . . — — — 616 308 308

Unpaid portion of

partly paid shares . . 150 150 150 150 150 150

Irrevocable

commitments to

extend credit:

— maturing less than

one year . . . . . 3,056,148 — — 2,880,399 — —

— maturing more

than one year . . 483,410 241,705 241,705 568,697 284,349 284,349

Interest rate swap

contracts:

— maturing within

one year . . . . . 250,000 500 100 30,000 75 15

— maturing more

than one year to

less than five

years . . . . . . . 1,880,000 33,986 6,797 800,000 13,230 2,646

Islamic financing sold

to Cagamas Berhad

with recourse . . . . . 925,365 925,365 925,365 — — —

Total . . . . . . . . . . . 6,646,477 1,253,110 1,189,417 4,360,907 379,157 314,102

* The credit equivalent amount is arrived at using the credit conversion factor as per Bank Negara Malaysia

guidelines.

F-85

35. NET TANGIBLE ASSETS PER SHARE (RM)

Net tangible assets per share represent the balance sheet total assets value less total liabilities

and minority interests expressed as an amount per ordinary share.

Net tangible assets per share is calculated as follows:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Total assets . . . . . . . . . . . . 35,097,851 33,514,256 35,085,629 33,503,069

Less:

Total Liabilities . . . . . . . . 32,475,300 31,131,731 32,474,440 31,128,604

Minority interests . . . . . . . 86 101 — —

32,475,386 31,131,832 32,474,440 31,128,604

Net tangible assets . . . . . . . . 2,622,465 2,382,424 2,611,189 2,374,465

Issued and fully paid up

ordinary shares of RM1.00

each (’000) . . . . . . . . . . . 528,402 528,402 528,402 528,402

Net tangible assets per share

(RM) . . . . . . . . . . . . . . . 4.96 4.51 4.94 4.49

F-86

36. SEGMENT ANALYSIS

Analysis by activity

The Group

31 March 2005

Finance Others Elimination Consolidated

RM’000 RM’000 RM’000 RM’000

Operating Revenue

External revenue . . . . . . . . . 2,495,170 366 — 2,495,536

Inter-segment revenue . . . . . . 616 4,749 (5,365) —

Total revenue . . . . . . . . . . . 2,495,786 5,115 (5,365) 2,495,536

Results

Profit from operations . . . . . . 370,200 3,231 367 373,798

Share of profits of associated

company . . . . . . . . . . . . . 281 281

Profit before tax . . . . . . . . . 374,079

Taxation . . . . . . . . . . . . . . (134,053)

Profit after taxation . . . . . . . 240,026

Other information

Capital additions . . . . . . . . . 51,289 — — 51,289

Depreciation . . . . . . . . . . . . 40,630 765 36 41,431

Loan and financing loss and

allowance (net of recoveries) 448,458 — — 448,458

Writeback of allowance for

diminution in value of

investment securities . . . . . 4,597 34 — 4,631

Accretion of discounts less

amortisation of premium . . . (4,604) — — (4,604)

Property and equipment written

off . . . . . . . . . . . . . . . . 3,907 — — 3,907

Impairment losses on property

and equipment . . . . . . . . . 28,386 1,448 — 29,834

Consolidated Balance Sheet

Assets

Segment assets . . . . . . . . . . 35,085,479 86,941 (75,027) 35,097,393

Investment in associated

companies . . . . . . . . . . . . 150 — 308 458

Consolidated total assets . . . . 35,097,851

Liabilities

Segment liabilities . . . . . . . . 32,474,440 153,863 (153,003) 32,475,300

Consolidated total liabilities . . 32,475,300

F-87

The Group

31 March 2004

Finance Others Elimination Consolidated

RM’000 RM’000 RM’000 RM’000

Operating Revenue

External revenue . . . . . . . . . 2,463,810 508 — 2,464,318

Inter-segment revenue . . . . . . 832 5,257 (6,089) —

Total revenue . . . . . . . . . . . 2,464,642 5,765 (6,089) 2,464,318

Results

Profit from operations . . . . . . 492,989 4,107 (35) 497,061

Share of profits of associated

company . . . . . . . . . . . . . 208 208

Profit before tax . . . . . . . . . 497,269

Taxation . . . . . . . . . . . . . . 36,393

Profit after taxation . . . . . . . 533,662

Other information

Capital additions . . . . . . . . . 46,250 33 — 46,283

Depreciation . . . . . . . . . . . . 53,468 814 36 54,318

Loan and financing loss and

allowance (net of recoveries) 234,968 — — 234,968

Allowance on amount

recoverable from Danaharta . 62,794 — — 62,794

Writeback of allowance for

diminution in value of

investment securities . . . . . (20,118) 84 — (20,034)

Accretion of discounts less

amortisation of premium . . . (21,607) — — (21,607)

Property and equipment written

off . . . . . . . . . . . . . . . . 145 — — 145

General allowance for

contingencies . . . . . . . . . . 37,000 — — 37,000

Consolidated Balance Sheet

Assets

Segment assets . . . . . . . . . . 33,502,919 90,573 (79,486) 33,514,006

Investment in associated

companies . . . . . . . . . . . . 150 — 100 250

Consolidated total assets . . . . 33,514,256

Liabilities

Segment liabilities . . . . . . . . 31,128,604 161,795 (158,668) 31,131,731

Consolidated total liabilities . . 31,131,731

The directors are of the opinion that all inter-segment transactions have been entered into in

the normal course of business and have been established under terms and conditions that are no less

favourable than those arranged with independent parties.

F-88

The financial information by geographical segment is not presented as the Group’s activities

are principally conducted in Malaysia.

37. CAPITAL COMMITMENTS

As at the balance sheet date, the Group and the Company have the following commitments:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Authorised and contracted for:

Purchase of computer

equipment and software . 36,816 39,506 36,816 39,506

Leasehold improvements . . 18,530 6,805 18,530 6,805

Unpaid portion of partly

paid-up shares in

associated companies . . . 250 250 150 150

55,596 46,561 55,496 46,461

38. LEASE COMMITMENTS

The Group and the Company have lease commitments in respect of rented premises and

equipment on hire, all of which are classified as operating leases. A summary of the non-cancellable

long-term commitments, net of sub-leases is as follows:

The Group The Company

2005 2004 2005 2004

RM’000 RM’000 RM’000 RM’000

Year ending

2005. . . . . . . . . . . . . . . . . — 21,330 — 21,330

2006. . . . . . . . . . . . . . . . . 19,318 20,139 19,318 20,139

2007. . . . . . . . . . . . . . . . . 18,423 19,534 18,423 19,534

2008. . . . . . . . . . . . . . . . . 19,040 19,021 19,040 19,021

2009 and thereafter . . . . . . . 124,008 88,597 124,008 88,597

180,789 168,621 180,789 168,621

The lease commitments represent minimum rentals not adjusted for operating expenses which

the Company is obligated to pay. These amounts are insignificant in relation to the minimum lease

obligations. In the normal course of business, leases that expire will be renewed or replaced by

leases on other properties, thus it is anticipated that future annual minimum lease commitments will

not be less than rental expenses for the financial year.

39. CAPITAL ADEQUACY RATIO

Bank Negara Malaysia’s (‘‘BNM’’) guideline on capital adequacy requires the Company to

maintain an adequate level of capital to withstand any losses which may result from credit and other

risks associated with financing operations. The capital adequacy ratio is computed based on the

eligible capital in relation to the total risk-weighted assets as determined by BNM.

F-89

The risk weighted capital adequacy ratio of the Company of 11.51% (2004 : 11.24%) exceeds

the minimum requirements of BNM.

The Company

2005 2004

RM’000 RM’000

Tier 1 capital

Paid-up share capital. . . . . . . . . . . . . . . . . . . . . . . . . . 528,402 528,402

Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379,953 379,953

Statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . 528,402 483,070

Unappropriated profit at end of year* . . . . . . . . . . . . . . . 574,259 402,498

Total tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,011,016 1,793,923

Tier 2 capital

General allowance for bad and doubtful debts and financing . 425,857 402,415

Subordinated term loan . . . . . . . . . . . . . . . . . . . . . . . . 680,000 581,710

Subordinated bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 200,000

Total tier 2 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,305,857 1,184,125

Total capital funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,316,873 2,978,048

Less: Investment in subsidiary companies . . . . . . . . . . . . . (29,779) (29,779)

Capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,287,094 2,948,269

* The unappropriated profit included in the Tier-1 capital excludes the deferred tax asset that was recognised by

the Company and this is in accordance to the revised guideline issued by Bank Negara Malaysia in August 2003.

The comparative ratios are not adjusted for the prior year adjustments.

The Company

2005 2004

Principal Risk-Weighted Principal Risk-Weighted

RM’000 RM’000 RM’000 RM’000

Notional risk-weighted assets:

Categories

0%. . . . . . . . . . . . . . . . . . 4,022,069 — 3,635,821 —

10% . . . . . . . . . . . . . . . . . 294,805 29,481 — —

20% . . . . . . . . . . . . . . . . . 1,498,658 299,731 1,662,809 332,562

50% . . . . . . . . . . . . . . . . . 3,889,353 1,944,677 4,357,048 2,178,524

100% . . . . . . . . . . . . . . . . 26,271,294 26,271,294 23,721,454 23,721,454

35,976,179 28,545,183 33,377,132 26,232,540

Capital Ratios

Core capital ratio . . . . . . . . . 7.04% 6.84%

Risk-weighted capital ratio . . . 11.51% 11.24%

F-90

The risk weighted capital adequacy ratio of the Group are as follows:

The Group

2005 2004

RM’000 RM’000

Tier 1 capital

Paid-up share capital. . . . . . . . . . . . . . . . . . . . . . . . . . 528,402 528,402

Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379,953 379,953

Statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . 528,402 483,070

Unappropriated profit at end of year* . . . . . . . . . . . . . . . 585,504 410,457

Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 101

Total tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,022,347 1,801,983

Tier 2 capital

General allowance for bad and doubtful debts and financing . 425,857 402,415

Subordinated term loan . . . . . . . . . . . . . . . . . . . . . . . . 680,000 581,710

Subordinated bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 200,000

Total tier 2 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,305,857 1,184,125

Capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,328,204 2,986,108

* The unappropriated profit included in the Tier-1 capital excludes the deferred tax asset that was recognised by

the Company and this is in accordance to the revised guideline issued by Bank Negara Malaysia in August 2003.

The comparative ratios are not adjusted for the prior year adjustments.

The Group

2005 2004

Principal Risk-Weighted Principal Risk-Weighted

RM’000 RM’000 RM’000 RM’000

Notional risk-weighted assets:

Categories

0%. . . . . . . . . . . . . . . . . . 4,022,069 — 3,635,821 —

10% . . . . . . . . . . . . . . . . . 294,805 29,481 — —

20% . . . . . . . . . . . . . . . . . 1,516,895 303,379 1,665,116 333,023

50% . . . . . . . . . . . . . . . . . 3,889,353 1,944,677 4,357,048 2,178,524

100% . . . . . . . . . . . . . . . . 26,295,026 26,295,026 23,760,113 23,760,113

36,018,148 28,572,563 33,418,098 26,271,660

Capital Ratios

Core capital ratio . . . . . . . . . 7.08% 6.86%

Risk-weighted capital ratio . . . 11.65% 11.37%

40. SIGNIFICANT EVENT

On 25 February 2004, the Company entered into a conditional sale and purchase agreement

with MBf Corporation Berhad (‘‘MBf Corp’’) for the sale of its entire 100% equity interest

consisting of 1,000,000 ordinary shares of RM1.00 each, in MBf Property Trust Management Berhad

(‘‘MBfPT’’) for a consideration of RM1.00.

F-91

The purchase consideration was arrived at on a willing-buyer and willing-seller basis after

taking into consideration the financial position of MBfPT which had negative shareholder’s funds as

at 31 March 2004.

The disposal was completed on 9 August 2004.

41. SUBSEQUENT EVENTS

Subsequent to the balance sheet date, its ultimate holding company AMMB Holdings Berhad

(‘‘AHB’’) proposed a rationalisation exercise which involves the following proposals:

(i) Proposed Acquisition of AmBank Berhad (‘‘AmBank’’) by its holding company AMFB

Holdings Berhad (‘‘AMFB Holdings’’)

The Proposed Acquisition involves the acquisition by AMFB Holdings of the entire equity

interest in a related company, AmBank, comprising 761,718,750 ordinary shares from AHB for

a purchase consideration based on the carrying value of AHB’s investment in AmBank as at the

date of completion of the Proposed Acquisition by AMFB Holdings. The Purchase

Consideration is proposed to be satisfied by the issuance of new shares in AMFB Holdings

to AHB at an issue price to be determined based on the unaudited net tangible assets (‘‘NTA’’)

per share of AMFB Holdings as at the completion date.

Upon completion of the Proposed Acquisition by AMFB Holdings, AmBank will become a

wholly-owned subsidiary of AMFB Holdings.

(ii) Proposed AmBank Acquisition by the Company

Upon completion of the Proposed Acquisition by AMFB Holdings, the Company proposes

to acquire the entire equity interest in AmBank comprising 761,718,750 shares from AMFB

Holdings for a purchase consideration based on the NTA of AmBank after adjusting for certain

non-transferable assets as at the date of completion of the Proposed AmBank Acquisition by

the Company. The Purchase Consideration is proposed to be satisfied by the issuance of new

shares in the Company to AMFB Holdings at an issue price to be determined based on the

unaudited NTA per share of the Company as at the completion date.

(iii) Proposed Business Merger

Upon completion of the Proposed AmBank Acquisition by the Company, the finance

company business of the Company and the commercial banking business of AmBank will be

merged by way of a transfer of AmBank’s assets and liabilities (save for certain non-

transferable assets) to the Company via a vesting order under Section 50 of the Banking and

Financial Institutions Act, 1989.

The Proposed Business Merger is conditional on the completion of the Proposed AmBank

Acquisition by the Company which is in turn conditional upon completion of the Proposed

Acquisition by AMFB Holdings.

The Proposed Acquisition by AMFB Holdings, Proposed AmBank Acquisition by the Company

and the Proposed Business Merger are subject to the approvals from the Securities Commission

(‘‘SC’’), Minister of Finance, BNM and other relevant authorities.

42. RISK MANAGEMENT POLICY

Risk management is about managing uncertainties such that deviations from the Group’s

intended objectives are kept within acceptable levels. Sustainable profitability forms the core

objectives of the Group’s risk management strategy.

F-92

Every risk assumed by the Group carries with it potential for gains as well as potential to erode

shareholders’ value. The Group’s risk management policy is to identify, capture and analyse these

risks at an early stage, continuously measure and monitor these risks and to set limits, policies and

procedures to control them to ensure sustainable risk-taking and sufficient returns.

The management approach towards the significant risks of the Group are enumerated below.

Market Risk Management

Market risk is the risk of loss from changes in the value of portfolios and financial

instruments caused by movements in market variables, such as interest rates, foreign exchange

rates and equity prices.

The primary objective of market risk management is to ensure that losses from market

risk can be promptly arrested and risk positions are sufficiently liquid so as to enable the

Group to reduce its position without incurring potential loss that is beyond the sustainability of

the Group.

The market risk of the Group’s trading and non-trading portfolio is managed separately

using value at risk approach to compute the market risk exposure of non-trading portfolio and

trading portfolio. Value at risk is a statistical measure that estimates the potential changes in

portfolio value that may occur brought about by daily changes in market rates over a specified

holding period at a specified confidence level under normal market condition. For the Group’s

trading portfolio, the Group’s value at risk measurement takes a more sophisticated form by

taking into account the correlation effects of various instruments in the portfolio.

The Group controls its market risk exposure of its trading and non-trading activities

primarily through a series of threshold limits. Stop loss, value at risk and position sensitivity

limits are the primary means of control governing the trading activities of the Group while

value at risk limits governs the non-trading positions.

To complement value at risk measurement, the Group also institutes a set of scenario

analysis under various potential market conditions such as shifts in currency rates, general

equity prices and interest rate movements to assess the changes in portfolio value.

F-93

The following table shows the interest rate sensitivity gap, by time bands, on which

interest rates of instruments are next repriced on a contractual basis or, if earlier, the dates on

which the instruments mature.

2005

The Group

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

interest

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term funds . . 2,706,370 — — — — — 468,626 3,174,996 2.57

Deposits and placements with

financial institutions . . . . — 336,700 — 103 — — 22,100 358,903 2.60

Dealing securities. . . . . . . . — — — — — — 75,796 75,796 —

Investment securities . . . . . . 100,238 — 300,863 228,405 574,629 371,888 298,851 1,874,874 3.64

Loans, advances and

financing

— Performing . . . . . . . . 6,201,675 308,752 785,445 1,393,892 8,208,473 1,963,188 5,425,948 24,287,373 7.75

— Non-performing* . . . . — — — — — — 2,991,136 2,991,136 —

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 2,334,773 2,334,773 —

TOTAL ASSETS. . . . . . . . 9,008,283 645,452 1,086,308 1,622,400 8,783,102 2,335,076 11,617,230 35,097,851

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers . . . 7,040,820 3,477,785 2,843,115 4,580,875 1,365,278 — 2,963,884 22,271,757 3.15

Deposits and placements of

banks and other financial

institutions . . . . . . . . . . 614,920 926,745 423,872 199,773 313,434 908,000 2,490,761 5,877,505 2.66

Securities sold under

repurchase agreements . . . 33,059 — — — — — — 33,059 2.46

Amount due to Cagamas

Berhad . . . . . . . . . . . . 341,683 154,481 110,392 223,961 1,498,163 127,043 — 2,455,723 3.92

Subordinated term loan . . . . — — — — 680,000 — — 680,000 6.50

Subordinated bonds. . . . . . . — — — — 200,000 — — 200,000 7.95

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 957,256 957,256 —

Total Liabilities . . . . . . . . . 8,030,482 4,559,011 3,377,379 5,004,609 4,056,875 1,035,043 6,411,901 32,475,300

Minority interests . . . . . . . . — — — — — — 86 86

Shareholder’s Funds . . . . . . — — — — — — 2,622,465 2,622,465 —

TOTAL LIABILITIES AND

SHAREHOLDER’S

FUNDS . . . . . . . . . . . . 8,030,482 4,559,011 3,377,379 5,004,609 4,056,875 1,035,043 9,034,452 35,097,851

On-balance sheet interest

sensitivity gap . . . . . . . . 977,801 (3,913,559) (2,291,071) (3,382,209) 4,726,227 1,300,033 2,582,778 —

Off-balance sheet interest

sensitivity gap . . . . . . . . 860,000 1,220,000 — (150,000) (1,930,000) — — —

Total interest sensitivity gap . 1,837,801 (2,693,559) (2,291,071) (3,532,209) 2,796,227 1,300,033 2,582,778 —

F-94

2004

The Group

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

interest

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term funds . . 2,862,100 — — — — — 192,667 3,054,767 2.77

Deposits and placements with

financial institutions . . . . — — 19,132 98 — — — 19,230 5.71

Dealing securities. . . . . . . . — — — — — 98,290 157,769 256,059 5.25

Investment securities . . . . . . 320,021 275,892 60,144 104,013 371,742 441,716 345,062 1,918,590 2.83

Loans, advances and

financing

— Performing . . . . . . . . 5,864,035 475,117 1,037,847 1,259,842 8,264,392 671,337 4,875,442 22,448,012 8.32

— Non-performing* . . . . — — — — — — 3,561,641 3,561,641 —

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 2,255,957 2,255,957 —

TOTAL ASSETS. . . . . . . . 9,046,156 751,009 1,117,123 1,363,953 8,636,134 1,211,343 11,388,538 33,514,256

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers . . . 7,292,777 2,941,112 2,673,027 4,065,573 892,774 6 2,546,524 20,411,793 3.24

Deposits and placements of

banks and other financial

institutions . . . . . . . . . . 152,997 139,193 388,260 786,275 380,237 908,000 2,308,449 5,063,411 2.48

Securities sold under

repurchase agreements . . . 274,991 — — — — — — 274,991 2.78

Amount due to Cagamas

Berhad . . . . . . . . . . . . 56,510 113,567 171,726 870,530 2,322,410 140,864 — 3,675,607 3.92

Subordinated term loan . . . . — — — — 680,000 — — 680,000 6.50

Subordinated bonds. . . . . . . — — — — — 200,000 — 200,000 7.95

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 825,929 825,929 —

Total Liabilities . . . . . . . . . 7,777,275 3,193,872 3,233,013 5,722,378 4,275,421 1,248,870 5,680,902 31,131,731

Minority interests . . . . . . . . — — — — — — 101 101 —

Shareholder’s Funds . . . . . . — — — — — — 2,382,424 2,382,424 —

TOTAL LIABILITIES AND

SHAREHOLDER’S

FUNDS . . . . . . . . . . . . 7,777,275 3,193,872 3,233,013 5,722,378 4,275,421 1,248,870 8,063,427 33,514,256

On-balance sheet interest

sensitivity gap . . . . . . . . 1,268,881 (2,442,863) (2,115,890) (4,358,425) 4,360,713 (37,527) 3,325,111 —

Off-balance sheet interest

sensitivity gap . . . . . . . . 350,000 480,000 — (30,000) (800,000) — — —

Total interest sensitivity gap . 1,618,881 (1,962,863) (2,115,890) (4,388,425) 3,560,713 (37,527) 3,325,111 —

F-95

2005

The Company

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

interest

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term funds . . 2,706,370 — — — — — 450,492 3,156,862 2.57

Deposits and placements with

financial institutions . . . . — 336,700 — — — — 22,100 358,800 2.60

Dealing securities. . . . . . . . — — — — — — 75,796 75,796 —

Investment securities . . . . . . 100,239 — 300,863 228,405 574,629 371,888 298,596 1,874,620 3.64

Loans, advances and

financing

— Performing . . . . . . . . 6,201,736 308,951 785,750 1,394,522 8,211,160 1,963,188 5,425,947 24,291,254 7.75

— Non-performing* . . . . — — — — — — 2,991,136 2,991,136 —

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 2,337,161 2,337,161 —

TOTAL ASSETS. . . . . . . . 9,008,345 645,651 1,086,613 1,622,927 8,785,789 2,335,076 11,601,228 35,085,629

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers . . . 7,042,519 3,477,785 2,843,115 4,580,875 1,365,278 — 2,963,884 22,273,456 3.15

Deposits and placements of

banks and other financial

institutions . . . . . . . . . . 614,920 926,745 423,872 199,773 313,434 908,000 2,490,761 5,877,505 2.66

Securities sold under

repurchase agreements . . . 33,059 — — — — — — 33,059 2.46

Amount due to Cagamas

Berhad . . . . . . . . . . . . 341,683 154,481 110,392 223,961 1,498,163 127,043 — 2,455,723 3.92

Subordinated term loan . . . . — — — — 680,000 — — 680,000 6.50

Subordinated bonds. . . . . . . — — — — 200,000 — — 200,000 7.95

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 954,697 954,697 —

Total Liabilities . . . . . . . . . 8,032,181 4,559,011 3,377,379 5,004,609 4,056,875 1,035,043 6,409,342 32,474,440

Shareholder’s Funds . . . . . . — — — — — — 2,611,189 2,611,189 —

TOTAL LIABILITIES AND

SHAREHOLDER’S

FUNDS . . . . . . . . . . . . 8,032,181 4,559,011 3,377,379 5,004,609 4,056,875 1,035,043 9,020,531 35,085,629

On-balance sheet interest

sensitivity gap . . . . . . . . 976,164 (3,913,360) (2,290,766) (3,381,682) 4,728,914 1,300,033 2,580,697 —

Off-balance sheet interest

sensitivity gap . . . . . . . . 860,000 1,220,000 — (150,000) (1,930,000) — — —

Total interest sensitivity gap . 1,836,164 (2,693,360) (2,290,766) (3,531,682) 2,798,914 1,300,033 2,580,697 —

F-96

2004

The Company

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

interest

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term funds . . 2,862,100 — — — — — 190,458 3,052,558 2.77

Deposits and placements with

financial institutions . . . . — — 19,132 — — — — 19,132 5.71

Dealing securities. . . . . . . . — — — — — 98,290 157,769 256,059 5.25

Investment securities . . . . . . 320,021 275,892 60,144 104,013 371,742 441,716 344,773 1,918,301 2.83

Loans, advances and

financing

— Performing . . . . . . . . 5,864,233 475,512 1,038,430 1,260,968 8,269,621 672,080 4,875,442 22,456,286 8.32

— Non-performing* . . . . — — — — — — 3,561,640 3,561,640 —

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 2,239,093 2,239,093 —

TOTAL ASSETS. . . . . . . . 9,046,354 751,404 1,117,706 1,364,981 8,641,363 1,212,086 11,369,175 33,503,069

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers . . . 7,294,571 2,941,112 2,673,027 4,065,573 892,774 6 2,546,524 20,413,587 3.24

Deposits and placements of

banks and other financial

institutions . . . . . . . . . . 152,997 139,193 388,260 786,275 380,237 908,000 2,308,449 5,063,411 2.48

Securities sold under

repurchase agreements . . . 274,991 — — — — — — 274,991 2.78

Amount due to Cagamas

Berhad . . . . . . . . . . . . 56,510 113,567 171,726 870,530 2,322,410 140,864 — 3,675,607 3.92

Subordinated term loan . . . . — — — — 680,000 — — 680,000 6.50

Subordinated loan notes . . . . — — — — — 200,000 — 200,000 7.95

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 821,008 821,008 —

Total Liabilities . . . . . . . . . 7,779,069 3,193,872 3,233,013 5,722,378 4,275,421 1,248,870 5,675,981 31,128,604

Shareholder’s Funds . . . . . . — — — — — — 2,374,465 2,374,465 —

TOTAL LIABILITIES AND

SHAREHOLDER’S

FUNDS . . . . . . . . . . . . 7,779,069 3,193,872 3,233,013 5,722,378 4,275,421 1,248,870 8,050,446 33,503,069

On-balance sheet interest

sensitivity gap . . . . . . . . 1,267,285 (2,442,468) (2,115,307) (4,357,397) 4,365,942 (36,784) 3,318,729 —

Off-balance sheet interest

sensitivity gap . . . . . . . . 350,000 480,000 — (30,000) (800,000) — — —

Total interest sensitivity gap . 1,617,285 (1,962,468) (2,115,307) (4,387,397) 3,565,942 (36,784) 3,318,729 —

* This is arrived at after deducting the general allowance, specific allowance and interest/income-in-suspense from

gross non-performing loans outstanding.

Liquidity Risk

Liquidity risk is the risk that the organisation will not be able to fund its day-to-dayoperations at a reasonable cost.

The primary objective of liquidity risk management framework is to ensure theavailability of sufficient funds at a reasonable cost to honour all financial commitments asthey come due.

The secondary objective is to ensure an optimal funding structure and to balance the keyliquidity risk management objectives, which includes diversification of funding sources,customer base, and maturity period.

The ongoing liquidity risk management at the Group is based on the following keystrategies:

. Management of cash-flow; an assessment of potential cash flow mismatches that mayarise over a period of one-year ahead and the maintenance of adequate cash andliquefiable assets over and above the standard requirements of Bank NegaraMalaysia.

F-97

. Scenario analysis; a simulation on liquidity demands of new business, changes in

portfolio as well as stress scenarios based on historical experience of large

withdrawals.

. Diversification and stabilisation of liabilities through management of funding

sources, diversification of customer depositor base and inter-bank exposures.

In the event of actual liquidity crisis occurring, a Contingency Funding Plan provides a

formal process to identify a liquidity crisis and detailing responsibilities among the relevant

departments to ensure orderly execution of procedures to restore the liquidity position and

confidence in the Group.

The following table shows the maturity analysis of the Group’s and the Company’s assets

and liabilities based on contractual terms:

2005

The Group

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

specific

maturity Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds 3,174,996 — — — — — — 3,174,996

Deposits and placements

with financial

institutions . . . . . . . . — 358,800 — 103 — — — 358,903

Dealing securities. . . . . . — — — — — — 75,796 75,796

Investment securities . . . . 100,238 300,863 296,668 691,628 371,888 113,589 1,874,874

Loans, advances and

financing . . . . . . . . . 2,821,211 1,276,438 1,818,783 3,443,759 12,176,116 5,742,202 — 27,278,509

Other assets . . . . . . . . . — — — — — — 344,531 344,531

Deferred tax asset . . . . . — — — — — — 616,804 616,804

Statutory deposit with Bank

Negara Malaysia . . . . — — — — — — 988,930 988,930

Investment in associated

companies . . . . . . . . — — — — — — 458 458

Property and equipment . . — — — — — — 384,050 384,050

TOTAL ASSETS. . . . . . 6,096,445 1,635,238 2,119,646 3,740,530 12,867,744 6,114,090 2,524,158 35,097,851

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers . 8,742,748 4,198,546 3,160,240 4,689,867 1,480,356 — — 22,271,757

Deposits and placements of

banks and other

financial institutions . . 1,239,194 1,600,866 620,406 683,360 825,679 908,000 — 5,877,505

Securities sold under

repurchase agreements . 33,059 — — — — — — 33,059

Amount due to Cagamas

Berhad . . . . . . . . . . 341,683 154,481 110,392 223,961 1,498,163 127,043 — 2,455,723

Other liabilities . . . . . . . — — — — — — 957,256 957,256

Subordinated term loan . . — — — — — 680,000 — 680,000

Subordinated bonds. . . . . — — — — — 200,000 — 200,000

Total Liabilities . . . . . . . 10,356,684 5,953,893 3,891,038 5,597,188 3,804,198 1,915,043 957,256 32,475,300

Minority interests . . . . . . — — — — — — 86 86

Shareholder’s funds . . . . — — — — — — 2,622,465 2,622,465

TOTAL LIABILITIES

AND

SHAREHOLDER’S

FUNDS . . . . . . . . . . 10,356,684 5,953,893 3,891,038 5,597,188 3,804,198 1,915,043 3,579,807 35,097,851

Net maturity mismatch . . (4,260,239) (4,318,655) (1,771,392) (1,856,658) 9,063,546 4,199,047 (1,055,649) —

F-98

2004

The Group

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

specific

maturity Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds 3,054,767 — — — — — — 3,054,767

Deposits and placements

with financial

institutions . . . . . . . . — — 19,132 98 — — — 19,230

Dealing securities. . . . . . — — — — — 98,290 157,769 256,059

Investment securities . . . . 323,000 395,000 60,144 104,013 405,034 441,716 189,683 1,918,590

Loans, advances and

financing . . . . . . . . . 2,601,433 1,216,898 1,686,561 3,239,834 12,240,533 5,024,394 — 26,009,653

Other assets . . . . . . . . . — — — — — — 165,639 165,639

Deferred tax asset . . . . . — — — — — — 741,733 741,733

Statutory deposit with Bank

Negara Malaysia . . . . — — — — — — 923,736 923,736

Investment in associated

companies . . . . . . . . — — — — — — 250 250

Property and equipment . . — — — — — — 424,599 424,599

TOTAL ASSETS. . . . . . 5,979,200 1,611,898 1,765,837 3,343,945 12,645,567 5,564,400 2,603,409 33,514,256

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers . 8,373,324 3,701,326 3,056,053 4,258,784 1,022,300 6 — 20,411,793

Deposits and placements of

banks and other

financial institutions . . 837,398 708,005 661,499 1,146,777 801,732 908,000 — 5,063,411

Securities sold under

repurchase agreements . 274,991 — — — — — — 274,991

Amount due to Cagamas

Berhad . . . . . . . . . . 56,510 113,567 171,726 870,530 2,322,410 140,864 — 3,675,607

Other liabilities . . . . . . . — — — — — — 825,929 825,929

Subordinated term loan . . — — — — — 680,000 — 680,000

Subordinated loan notes . . — — — — — 200,000 — 200,000

Total Liabilities . . . . . . . 9,542,223 4,522,898 3,889,278 6,276,091 4,146,442 1,928,870 825,929 31,131,731

Minority interests . . . . . . — — — — — — 101 101

Shareholder’s funds . . . . — — — — — — 2,382,424 2,382,424

TOTAL LIABILITIES

AND

SHAREHOLDER’S

FUNDS . . . . . . . . . . 9,542,223 4,522,898 3,889,278 6,276,091 4,146,442 1,928,870 3,208,454 33,514,256

Net maturity mismatch . . (3,563,023) (2,911,000) (2,123,441) (2,932,146) 8,499,125 3,635,530 (605,045) —

F-99

2005

The Company

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

specific

maturity Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds 3,156,862 — — — — — — 3,156,862

Deposits and placements

with financial

institutions . . . . . . . . — 358,800 — — — — — 358,800

Dealing securities. . . . . . 75,796 75,796

Investment securities . . . . 100,239 — 300,863 296,668 691,628 371,888 113,334 1,874,620

Loans, advances and

financing . . . . . . . . . 2,821,272 1,276,637 1,819,088 3,444,389 12,178,803 5,742,201 — 27,282,390

Other assets . . . . . . . . . — — — — — — 349,608 349,608

Deferred tax asset . . . . . — — — — — — 616,804 616,804

Statutory deposit with Bank

Negara Malaysia . . . . — — — — — — 988,930 988,930

Investment in subsidiary

companies . . . . . . . . — — — — — — 29,779 29,779

Investment in associated

companies . . . . . . . . — — — — — — 150 150

Property and equipment . . — — — — — — 351,890 351,890

TOTAL ASSETS. . . . . . 6,078,373 1,635,437 2,119,951 3,741,057 12,870,431 6,114,089 2,526,291 35,085,629

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers . 8,744,447 4,198,546 3,160,240 4,689,867 1,480,356 — — 22,273,456

Deposits and placements of

banks and other

financial institutions . . 1,239,194 1,600,866 620,406 683,360 825,679 908,000 — 5,877,505

Securities sold under

repurchase agreements . 33,059 — — — — — — 33,059

Amount due to Cagamas

Berhad . . . . . . . . . . 341,683 154,481 110,392 223,961 1,498,163 127,043 — 2,455,723

Other liabilities . . . . . . . — — — — — — 954,697 954,697

Subordinated term loan . . — — — — — 680,000 — 680,000

Subordinated bonds. . . . . — — — — — 200,000 — 200,000

Total Liabilities . . . . . . . 10,358,383 5,953,893 3,891,038 5,597,188 3,804,198 1,915,043 954,697 32,474,440

Shareholder’s funds . . . . — — — — — — 2,611,189 2,611,189

TOTAL LIABILITIES

AND

SHAREHOLDER’S

FUNDS . . . . . . . . . . 10,358,383 5,953,893 3,891,038 5,597,188 3,804,198 1,915,043 3,565,886 35,085,629

Net maturity mismatch . . (4,280,010) (4,318,456) (1,771,087) (1,856,131) 9,066,233 4,199,046 (1,039,595) —

F-100

2004

The Company

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

specific

maturity Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds 3,052,558 — — — — — — 3,052,558

Deposits and placements

with financial

institutions . . . . . . . . — — 19,132 — — — — 19,132

Dealing securities. . . . . . — — — — — 98,290 157,769 256,059

Investment securities . . . . 323,000 395,000 60,144 104,013 405,034 441,716 189,394 1,918,301

Loans, advances and

financing . . . . . . . . . 2,601,629 1,217,293 1,687,144 3,240,960 12,245,763 5,025,137 — 26,017,926

Other assets . . . . . . . . . — — — — — — 169,219 169,219

Deferred tax asset . . . . . — — — — — — 741,733 741,733

Statutory deposit with Bank

Negara Malaysia . . . . — — — — — — 923,736 923,736

Investment in subsidiary

companies . . . . . . . . — — — — — — 29,779 29,779

Investment in associated

companies . . . . . . . . — — — — — — 150 150

Property and equipment . . 374,476 374,476

TOTAL ASSETS. . . . . . 5,977,187 1,612,293 1,766,420 3,344,973 12,650,797 5,565,143 2,586,256 33,503,069

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers . 8,375,118 3,701,326 3,056,053 4,258,784 1,022,300 6 — 20,413,587

Deposits and placements of

banks and other

financial institutions . . 837,398 708,005 661,499 1,146,777 801,732 908,000 — 5,063,411

Securities sold under

repurchase agreements . 274,991 — — — — — — 274,991

Amount due to Cagamas

Berhad . . . . . . . . . . 56,510 113,567 171,726 870,530 2,322,410 140,864 — 3,675,607

Other liabilities . . . . . . . — — — — — — 821,008 821,008

Subordinated term loan . . — — — — — 680,000 — 680,000

Subordinated loan notes . . — — — — — 200,000 — 200,000

Total Liabilities . . . . . . . 9,544,017 4,522,898 3,889,278 6,276,091 4,146,442 1,928,870 821,008 31,128,604

Shareholder’s funds . . . . — — — — — — 2,374,465 2,374,465

TOTAL LIABILITIES

AND

SHAREHOLDER’S

FUNDS . . . . . . . . . . 9,544,017 4,522,898 3,889,278 6,276,091 4,146,442 1,928,870 3,195,473 33,503,069

Net maturity mismatch . . (3,566,830) (2,910,605) (2,122,858) (2,931,118) 8,504,355 3,636,273 (609,217) —

Credit Risk Management

Credit risk is the risk of loss due to the inability or unwillingness of a counterparty to

meet its payment obligations. Exposure to credit risk arises primarily from lending and

guarantee activities and, to a lesser extent, pre-settlement and settlement exposures of sales and

trading activities.

The primary objective of the credit risk management framework is to ensure that exposure

to credit risk is always kept within its capability and financial capacity to withstand potential

future losses.

For non-retail credits, risk management begins with an assessment of the financial

standing of the borrower or counterparty using an internally developed credit rating model. The

model consists of quantitative and qualitative scores which are then translated into a rating

grade, which ranges from ‘AAA’ (lowest risk) to ‘C’ (highest risk). Credit risk is quantified

based on Expected Default Frequencies and Expected Losses on default from its portfolio of

loans and off-balance sheet credit commitments. Expected Default Frequencies are calibrated to

the internal rating model while Loan Loss Estimates are based on past portfolio default

experiences.

F-101

For retail credits, an in-house developed credit-scoring system to support the housing and

hire purchase applications is being used to complement the credit assessment process.

The Group’s lending activities are guided by internal credit policies and guidelines that

are approved by the Board of Directors. Within these policies, single customer limits restrict

total exposure allowed to corporate groups according to their level of creditworthiness, while

sector limits ensure that the Group’s total credit exposure to each economic sector is within

prudent thresholds.

Operational Risk Management

Operational risk is the potential loss from a breakdown in internal process, systems,

deficiencies in people and management or operational failure arising from external events. It is

increasingly recognised that operational risk is the single most widespread risk facing financial

institutions today.

Operational risk management is the discipline of systematically identifying the critical

potential points and causes of failure, assess the potential cost and to minimise the impact of

such risk through the initiation of risk mitigating measures and policies.

The Group minimises operational risk by putting in place appropriate policies, internal

controls and procedures as well as maintaining back-up procedures for key activities and

undertaking contingency planning. These are supported by independent reviews by the Group’s

Internal Audit team.

Legal and Regulatory Risk

The Group manages legal and regulatory risks to its business. Legal risk arises from the

potential that breaches of applicable laws and regulatory requirements, unenforceability of

contracts, lawsuits, or adverse judgement, may lead to the incurrence of losses, disrupt or

otherwise resulting in financial and reputational risk.

Legal risk is managed by internal legal counsel and where necessary, in consultation with

external legal counsel to ensure that legal risk is minimised.

Regulatory risk is managed through the implementation of measures and procedures

within the organisation to facilitate compliance with regulations. These include a compliance

monitoring and reporting process that requires identification of risk areas, prescription of

controls to minimise these risks, staff training and assessments, provision of advice and

disseminating of information.

Risk Management Policy on Financial Derivatives

Purpose of engaging in financial derivatives

Financial derivative instruments are contracts whose value is derived from one or more

underlying financial instruments or indices. They include swaps, forward rate agreements,

futures, options and combinations of these instruments. Derivatives are contracts that transfer

risks, mainly market risks. Financial derivatives are used by the Group to manage the Group’s

own market risk exposure. The Group’s involvement in financial derivatives is currently

focussed on interest rate swaps.

Interest rate swap transactions generally involve the exchange of fixed and floating

interest payment obligations without the exchange of the underlying principal amounts.

As part of the asset and liability exposure management, the Group uses derivatives to

manage the Group’s market risk exposure. As the value of these financial derivatives are

principally driven by interest rate factors, the Group uses them to reduce the overall interest

rate exposure of the Group. These are performed by entering into an exposure in derivatives

that produces opposite value movements vis-a-vis exposures generated by other non-derivative

F-102

activities of the Group. The Group manages these risks on a portfolio basis. Hence, exposures

on derivatives are aggregated or netted against similar exposures arising from other financial

instruments engaged by the Group.

Fair value of financial derivatives

The estimated fair values of the Group’s and the Company’s outstanding derivative

financial instruments are as below. These values are stand-alone without taking into account

their potential offsetting relationships with other non-derivatives exposures of the Group.

2005 2004

Principal

Amount Fair Value

Principal

Amount Fair Value

RM’000 RM’000 RM’000 RM’000

Interest rate related

contracts:

Interest rate swaps . . . 2,130,000 (8,472) 830,000 (5,048)

Risk associated with financial derivatives

As derivatives are contracts that transfer risks, they expose the holder to the same types

of market and credit risk as other financial instruments, and the Group manages these risks in a

consistent manner under the overall risk management framework.

The Group uses interest rate swaps as hedging instruments to offset exposures generated

by other non-derivative activities of the Group.

Credit risk of derivatives

Counterparty credit risk arises from the possibility that a counterparty may be unable to

meet the terms of the derivatives contract. Unlike conventional asset instruments, the Group’s

financial loss is not the entire contracted principal value of the derivatives, but rather a fraction

equivalent to the cost to replace the defaulted contract with another in the market. The cost of

replacement is equivalent to the difference between the original value of the derivatives at time

of contract with the defaulted counterparty and the current fair value of a similar substitute at

current market prices. The Group will only suffer a replacement cost if the contract carries a

fair value gain at time of default.

As at 31 March 2005, the Group has no counterparty credit risk as there were no

outstanding positive value contracts. This may vary over the life of the contracts, mainly as a

function of movement in market rates and time.

The Group limits its credit risk within a conservative framework by dealing with

creditworthy counterparties, setting credit limits on exposures to counterparties, and obtaining

collateral where appropriate.

43. FAIR VALUES OF FINANCIAL INSTRUMENTS

Financial instruments are contracts that gives rise to both a financial asset of one enterprise

and a financial liability or equity instrument of another enterprise. The fair value of a financial

instrument is the amount at which the instrument could be exchanged or settled between

knowledgeable and willing parties in an arm’s length transaction, other than a forced or

liquidated sale. The information presented herein represents best estimates of fair values of

financial instruments at the balance sheet date.

F-103

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 number of methodologies and assumptions regarding risk characteristics of various financial

instruments, discount rates, estimates of future cash flows and other factors. Changes in the

assumptions could materially affect these estimates and the corresponding fair values.

In addition, fair value information for non-financial assets and liabilities such as investments in

subsidiary companies and taxation are excluded, as they do not fall within the scope of Financial

Reporting Standard 132 (‘‘FRS 132’’), which requires the fair value information to be disclosed.

The estimated fair values of the Group’s and the Company’s financial instruments are as

follows:

2005 2004

The Group Carrying Value Fair Value Carrying Value Fair Value

RM’000 RM’000 RM’000 RM’000

Financial Assets

Cash and short-term funds . . . 3,174,996 3,174,996 3,054,767 3,054,767

Deposits and placements with

financial institutions . . . . . . 358,903 358,903 19,230 19,230

Dealing securities. . . . . . . . . 75,796 75,796 256,059 256,093

Investment securities . . . . . . . 1,874,874 2,076,793 1,918,590 2,085,517

Loans, advances and financing* 27,707,916 28,437,082 26,414,908 28,060,511

Other financial assets . . . . . . 262,160 262,160 198,965 198,965

33,454,645 34,385,730 31,862,519 33,675,083

Non-financial assets . . . . . . . 1,643,206 1,643,206 1,651,737 1,651,737

TOTAL ASSETS . . . . . . . . . 35,097,851 36,028,936 33,514,256 35,326,820

Financial Liabilities

Deposits from customers . . . . 22,271,757 22,359,208 20,411,793 20,432,491

Deposits and placements of

banks and other financial

institutions . . . . . . . . . . . 5,877,505 5,776,389 5,063,411 4,970,987

Securities sold under

repurchase agreements . . . . 33,059 33,059 274,991 274,991

Amount due to Cagamas

Berhad . . . . . . . . . . . . . . 2,455,723 2,451,554 3,675,607 3,677,937

Subordinated term loan . . . . . 680,000 670,269 680,000 778,997

Subordinated bonds. . . . . . . . 200,000 201,622 200,000 231,976

Other financial liabilities . . . . 846,904 846,904 720,505 720,505

32,364,948 32,339,005 31,026,307 31,087,884

Non-Financial Liabilities

Other non-financial liabilities . 110,352 110,352 105,424 105,424

Minority interests . . . . . . . . . 86 86 101 101

Shareholder’s funds . . . . . . . 2,622,465 2,622,465 2,382,424 2,382,424

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS 35,097,851 35,071,908 33,514,256 33,575,833

F-104

2005 2004

The Company Carrying Value Fair Value Carrying Value Fair Value

RM’000 RM’000 RM’000 RM’000

Financial Assets

Cash and short-term funds . . . 3,156,862 3,156,862 3,052,558 3,052,558

Deposits and placements with

financial institutions . . . . . . 358,800 358,800 19,132 19,132

Dealing securities. . . . . . . . . 75,796 75,796 256,059 256,093

Investment securities . . . . . . . 1,874,620 2,075,160 1,918,301 2,083,850

Loans, advances and financing* 27,711,798 28,440,964 26,423,181 28,069,739

Other financial assets . . . . . . 267,238 267,238 202,545 202,545

33,445,114 34,374,820 31,871,776 33,683,917

Non-financial assets . . . . . . . 1,640,515 1,640,515 1,631,293 1,631,293

TOTAL ASSETS . . . . . . . . . 35,085,629 36,015,335 33,503,069 35,315,210

Financial Liabilities

Deposits from customers . . . . 22,273,456 22,360,908 20,413,587 20,434,285

Deposits and placements of

banks and other financial

institutions . . . . . . . . . . . 5,877,505 5,776,389 5,063,411 4,970,987

Securities sold under

repurchase agreements . . . . 33,059 33,059 274,991 274,991

Amount due to Cagamas

Berhad . . . . . . . . . . . . . . 2,455,723 2,451,554 3,675,607 3,677,937

Subordinated term loan . . . . . 680,000 670,269 680,000 778,997

Subordinated bonds. . . . . . . . 200,000 201,622 200,000 231,976

Other financial liabilities . . . . 844,344 844,344 717,009 717,009

32,364,087 32,338,145 31,024,605 31,086,182

Non-Financial Liabilities

Other non-financial liabilities . 110,353 110,353 103,999 103,999

Shareholder’s funds . . . . . . . 2,611,189 2,611,189 2,374,465 2,374,465

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS 35,085,629 35,059,687 33,503,069 33,564,646

* The general allowance for both the Group and the Company amounting to RM429,408,000 (2004 :

RM405,255,000) has been included under non-financial assets.

The fair value of derivatives financial instruments are shown in Note 43.

The fair value of contingent liabilities and undrawn credit facilities are not readily

ascertainable. These financial instruments are presently not sold or traded. They generate fees that

are in line with market prices for similar arrangements. The estimated fair value may be represented

by the present value of the fees expected to be received, less associated costs and potential loss that

may arise should these commitments crystallise. The Group assess that their respective fair values

are unlikely to be significant given that the overall level of fees involved is not significant and no

allowances is necessary to be made.

F-105

The following methods and assumptions were used to estimate the fair value of assets and

liabilities as at 31 March 2005 :

(a) Cash And Short-Term Funds

The carrying values are a reasonable estimate of the fair values because of negligible

credit risk, short-term nature or frequent repricing.

(b) Securities Purchased Under Repurchased Agreements And Deposits With Financial

Institutions

The fair values of securities purchased under repurchased agreements and deposits with

financial institutions with remaining maturities less than six months are estimated to

approximate their carrying values. For securities purchased under repurchase agreements and

deposits with financial institutions with maturities of more than six months, the fair value are

estimated based on discounted cash flows using the prevailing KLIBOR rates and interest rate

swap rates.

(c) Dealing And Investment Securities

The estimated fair value is based on quoted or observable market prices at the balance

sheet date. Where such quoted or observable market prices are not available, the fair value is

estimated using discounted cash flow or net tangible assets techniques. The fair values of

unquoted debt equity conversion securities which are not actively traded, are estimated to be at

par value, taking into consideration the underlying collateral values. Where the discounted cash

flow technique is used, the estimated future cash flows are discounted using market indicative

rates of similar instruments at the balance sheet date.

(d) Loans, Advances And Financing (‘‘Loans And Financing’’)

The fair value of variable rate loans and financing are estimated to approximate their

carrying values. For fixed rate loans and financing, the fair values are estimated based on

expected future cash flows of contractual instalment payments and discounted at prevailing

indicative rates adjusted for credit risk. In respect of non-performing loans and financing, the

fair values are deemed to approximate the carrying value, net of interest in suspense and

specific allowance for bad and doubtful debts and financing.

(e) Deposits From Customers, Deposits Of Banks And Other Financial Institutions And

Securities Sold Under Repurchase Agreements

The fair value of deposits liabilities payable on demand (‘‘current and savings deposits’’)

or with remaining maturities of less than six months are estimated to approximate their

carrying values at balance sheet date. The fair value of term deposits, negotiable instrument of

deposits and securities sold under repurchase agreements with remaining maturities of more

than six months are estimated based on discounted cash flows using KLIBOR rates and interest

rate swap rates.

(f) Amount Due To Cagamas Berhad

The fair values for amount due to Cagamas Berhad are determined based on discounted

cash flows of future instalment payments at prevailing rates quoted by Cagamas Berhad as at

balance sheet date.

F-106

(g) Subordinated Term Loan, Subordinated Bonds And Subordinated Loan Notes

(‘‘Borrowings’’)

The fair value of borrowings with remaining maturities of less than six months are

estimated to approximate their carrying values at balance sheet date. The fair value of

borrowings with remaining maturities of more than six months are estimated based on

discounted cash flows using market indicative rates of instruments with similar risk profiles at

balance sheet date.

(h) Interest Rate Swaps

The estimated fair value is based on the market price to enter into an offsetting contract

at balance sheet date.

The fair value of the other financial assets and other financial liabilities, which are considered

short term in nature, are estimated to be approximately their carrying value.

As assumptions were made regarding risk characteristics of the various financial instruments,

discount rates, future expected loss experience and other factors, changes in the uncertainties and

assumptions could materially affect these estimates and the resulting value estimates.

44. PRIOR YEAR ADJUSTMENTS

During the financial year, the Group and the Company changed its accounting policy on:

(i) the 3-month classification for non-performing loans from the previous 6-month

classification which has been adopted retrospectively.

(ii) in the previous years, handling fees paid to motor vehicle dealers for hire purchase loans

and financing approved and disbursed after 1 January 2004 were expensed off to income

statements in the year in which the handling fees were incurred, whereas handling fees

paid to motor vehicle dealers for hire purchase loans and financing approved and

disbursed prior to 1 January 2004 were amortised to the income statements over the tenor

of the hire purchase loans using the ‘‘sum-of-digits’’ method. During the current year, the

Company changed its accounting policy to fully expense off all handling fees paid in the

year incurred.

The accounting change has been accounted for retrospectively and the effects on prior years

have been taken up as prior year adjustments in the financial statements.

F-107

Accordingly, the following accounts in prior years have been restated to reflect the effects of

the accounting change:

The Group

As previously

stated Adjustments As restated

RM’000 RM’000 RM’000

As at 31 March 2003

Non-performing loans . . . . . . . . . . . . . . . 4,349,529 1,459,592 5,809,121

Interest/Income-in-suspense . . . . . . . . . . . . 1,190,485 46,279 1,236,764

Deferred tax asset . . . . . . . . . . . . . . . . . 645,859 37,683 683,542

Capital reserve . . . . . . . . . . . . . . . . . . . 392,045 37,683 429,728

Unappropriated profit at end of year . . . . . . 430,718 (134,433) 296,285

For the financial year ended 31 March 2004

Interest suspended . . . . . . . . . . . . . . . . . 247,371 20,580 267,951

Operating expenses . . . . . . . . . . . . . . . . . 525,775 17,194 542,969

Taxation . . . . . . . . . . . . . . . . . . . . . . . (33,579) (2,814) (36,393)

As at 31 March 2004

Non-performing loans . . . . . . . . . . . . . . . 4,051,944 1,579,574 5,631,518

Interest/Income-in-suspense . . . . . . . . . . . . 947,905 39,211 987,116

Other assets . . . . . . . . . . . . . . . . . . . . . 270,987 (105,348) 165,639

Deferred tax asset . . . . . . . . . . . . . . . . . 701,236 40,497 741,733

Capital reserve . . . . . . . . . . . . . . . . . . . 237,845 40,497 278,342

Unappropriated profit at end of year . . . . . . 857,216 (144,559) 712,657

The Company

As previously

stated Adjustments As restated

RM’000 RM’000 RM’000

As at 31 March 2003

Non-performing loans . . . . . . . . . . . . . . . 4,340,492 1,459,592 5,800,084

Interest/Income-in-suspense . . . . . . . . . . . . 1,184,005 46,279 1,230,284

Deferred tax asset . . . . . . . . . . . . . . . . . 646,116 37,683 683,799

Capital reserve . . . . . . . . . . . . . . . . . . . 392,045 37,683 429,728

Unappropriated profit at end of year . . . . . . 426,369 (134,433) 291,936

For the financial year ended 31 March 2004

Interest suspended . . . . . . . . . . . . . . . . . 247,371 20,580 267,951

Operating expenses . . . . . . . . . . . . . . . . . 530,076 17,194 547,270

Taxation . . . . . . . . . . . . . . . . . . . . . . . (34,261) (2,814) (37,075)

As at 31 March 2004

Non-performing loans . . . . . . . . . . . . . . . 4,042,907 1,579,574 5,622,481

Interest/Income-in-suspense . . . . . . . . . . . . 941,425 39,211 980,636

Other assets . . . . . . . . . . . . . . . . . . . . . 274,567 (105,348) 169,219

Deferred tax asset . . . . . . . . . . . . . . . . . 701,236 40,497 741,733

Capital reserve . . . . . . . . . . . . . . . . . . . 237,845 40,497 278,342

Unappropriated profit at end of year . . . . . . 849,257 (144,559) 704,698

F-108

45. THE OPERATIONS OF ISLAMIC BANKING SCHEME

The state of affairs as at 31 March 2005 (20 Safar 1426 Hijrah) and the results for the financial

year ended on that date under the Islamic Banking Scheme are summarised as follows:

Balance Sheets

As at 31 March 2005

The Group and Company

2005 2004

Note RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . . . . . . . (b) 249,385 71,472

Deposits and placements with financial

institutions . . . . . . . . . . . . . . . . . . . . (c) 22,100 —

Investment securities . . . . . . . . . . . . . . . . (d) 185,262 155,379

Financing activities. . . . . . . . . . . . . . . . . (e) 5,602,309 5,161,756

Statutory deposit with Bank Negara Malaysia 204,938 185,185

Property and equipment . . . . . . . . . . . . . . 15 32

Other assets . . . . . . . . . . . . . . . . . . . . . (f) 11,068 383

Deferred tax asset . . . . . . . . . . . . . . . . . (q) 53,450 35,054

TOTAL ASSETS . . . . . . . . . . . . . . . . . . 6,328,527 5,609,261

LIABILITIES AND ISLAMIC BANKING

FUND

Deposits from customers . . . . . . . . . . . . . (g) 2,963,884 2,546,524

Deposits and placements of banks and other

financial institutions . . . . . . . . . . . . . . . (h) 2,562,903 2,467,979

Other liabilities . . . . . . . . . . . . . . . . . . . (i) 161,034 136,798

Total Liabilities . . . . . . . . . . . . . . . . . . . 5,687,821 5,151,301

Capital funds . . . . . . . . . . . . . . . . . . . . (j) 420,542 360,542

Unappropriated profits . . . . . . . . . . . . . . . 220,164 97,418

Islamic Banking Fund . . . . . . . . . . . . . . . 640,706 457,960

TOTAL LIABILITIES AND ISLAMIC

BANKING FUND . . . . . . . . . . . . . . . . 6,328,527 5,609,261

COMMITMENTS AND CONTINGENCIES . (s) 1,100,797 317,357

The accompanying Notes form an integral part of

the Islamic Banking Business Financial Statements.

F-109

Income Statements

For the year ended 31 March 2005

The Group and Company

2005 2004

Note RM’000 RM’000

Income derived from investment of depositors’

funds . . . . . . . . . . . . . . . . . . . . . . . . (k) 498,363 372,546

Allowance for losses on financing . . . . . . . (l) (113,535) (69,160)

Transfer to profit equalisation reserve . . . . . (i) (45,353) (46,976)

Total attributable income . . . . . . . . . . . . . 339,475 256,410

Income attributable to the depositors . . . . . . (m) (185,035) (112,998)

Profit attributable to the Company . . . . . . . 154,440 143,412

Income derived from investment of Islamic

Banking Capital Fund . . . . . . . . . . . . . . (n) 49,667 32,755

Total net income . . . . . . . . . . . . . . . . . . 204,107 176,167

Operating expenditure . . . . . . . . . . . . . . . (o) (33,532) (53,309)

Profit before taxation . . . . . . . . . . . . . . . 170,575 122,858

Taxation . . . . . . . . . . . . . . . . . . . . . . . (p) (47,829) (34,340)

Profit after taxation . . . . . . . . . . . . . . . . 122,746 88,518

The accompanying Notes form an integral part of

the Islamic Banking Business Financial Statements.

F-110

Statements of Changes in Islamic Banking Fund

For the year ended 31 March 2005

The Group and Company Capital

Unappropriated

profit Total

RM’000 RM’000 RM’000

Balance as at 1 April 2003

As previously stated . . . . . . . . . . . . . . . . 160,542 44,469 205,011

Prior year adjustments (note w) . . . . . . . . . — (35,569) (35,569)

As restated . . . . . . . . . . . . . . . . . . . . . . 160,542 8,900 169,442

Increase in capital fund . . . . . . . . . . . . . . 200,000 — 200,000

Profit for the year . . . . . . . . . . . . . . . . . — 88,518 88,518

Balance as at 31 March 2004 . . . . . . . . . 360,542 97,418 457,960

Balance as at 1 April 2004

As previously stated . . . . . . . . . . . . . . . . 360,542 132,224 492,766

Prior year adjustments (note w) . . . . . . . . . — (34,806) (34,806)

As restated . . . . . . . . . . . . . . . . . . . . . . 360,542 97,418 457,960

Increase in capital fund . . . . . . . . . . . . . . 60,000 — 60,000

Profit for the year . . . . . . . . . . . . . . . . . — 122,746 122,746

Balance as at 31 March 2005 . . . . . . . . . 420,542 220,164 640,706

The accompanying Notes form an integral part of

the Islamic Banking Business Financial Statements.

F-111

Cash Flow Statement

For the year ended 31 March 2005

The Group and Company

2005 2004

RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before taxation . . . . . . . . . . . . . . . . . . . . . . . . . 170,575 122,858Adjustments for:Income-in-suspense, net of recoveries . . . . . . . . . . . . . . . 13,604 (9,111)Loan and financing loss and allowances, net of recoveries . . 117,557 72,842Depreciation of property and equipment . . . . . . . . . . . . . . 17 35Transfer to profit equalisation reserve . . . . . . . . . . . . . . . 45,353 46,976Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . (5,994) (4,852)

Operating Profit Before Working Capital Changes. . . . . . . . 341,112 228,748

(Increase)/Decrease In Operating Assets:Deposits and placements with financial institutions . . . . . . . (22,100) —Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . (571,714) (3,102,251)Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,685) 14,164Statutory deposit with Bank Negara Malaysia . . . . . . . . . . (19,753) (118,087)Increase/(Decrease) In Operating Liabilities:Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . 417,360 1,366,585Deposits and placements of banks and other financialinstitutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,924 1,440,118

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (87,342) (14,580)

Net Cash Generated From/(Used in) Operating Activities . . . 141,802 (185,303)

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from disposal of investment securities — net. . . . . (23,889) 16,557

Net Cash (Used in)/Generated From Investing Activities . . . . (23,889) 16,557

CASH FLOWS FROM FINANCING ACTIVITY

Increase in capital fund . . . . . . . . . . . . . . . . . . . . . . . . 60,000 200,000

Net Cash Generated From Financing Activity . . . . . . . . . . 60,000 200,000

Net Increase In Cash And Cash Equivalents . . . . . . . . . . . 177,913 31,254Cash And Cash Equivalents At Beginning Of Year . . . . . . . 71,472 40,218

Cash And Cash Equivalents At End Of Year . . . . . . . . . . . 249,385 71,472

Cash and Cash Equivalents

For the purpose of the cash flow statements, cash and cash equivalents consist of cash andshort term funds net of bank overdrafts. Cash and cash equivalents included in the cash flowstatements comprise the following balance sheets amounts:

The Group and Company

2005 2004

RM’000 RM’000

Cash and short term funds . . . . . . . . . . . . . . . . . . . 249,385 71,472

The accompanying Notes form an integral part of

the Islamic Banking Business Financial Statements.

F-112

NOTES TO THE ISLAMIC BANKING SCHEME FINANCIAL STATEMENTS

(a) Islamic Banking Operation

Disclosure of Shariah Advisor

The Company’s Islamic Banking activities are subject to conformity with Shariah requirements and confirmation

by the Shariah Advisor, Professor Madya Dato’ Hj Md. Hashim bin Yahaya, Dato’ Sheikh Ghazali bin Hj Abdul

Rahman and Professor Dr Mohd Daud Bakar.

The role and authority of the Shariah Advisors is to advise and provide guidance on all matters with respect to

compliance with Shariah principles including product development, business, marketing and operational implementation

activities.

Zakat Obligations

The Group does not pay zakat on behalf of the shareholders or depositors.

(b) Cash and Short Term Funds

The Group and Company

2005 2004

RM’000 RM’000

Cash and balances with banks and other financial institutions . . . . . . . . . . 35 272

Money at call and deposit placements maturing within one month . . . . . . . . 249,350 71,200

249,385 71,472

(c) Deposits and Placements with Financial Institutions

The Group and Company

2005 2004

RM’000 RM’000

Bank Negara Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,100 —

(d) Investment Securities

The Group and Company

2005 2004

RM’000 RM’000

Money Market Securities:

Malaysian Government Investment Certificates . . . . . . . . . . . . . . . . . . 100,044 145,319

Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,351 —

Islamic acceptance bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,979

179,395 148,298

Add:

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,867 7,081

185,262 155,379

Market value:

Money Market Securities:

Malaysian Government Investment Certificates . . . . . . . . . . . . . . . . . . 104,225 152,801

Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,384 —

The maturity structure of money market securities held for investment are as

follows:

Maturing within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,656 115,792

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,739 32,506

Three to five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

179,395 148,298

F-113

(e) Financing Activities

The Group and Company

2005 2004

RM’000 RM’000

Term financing and revolving credit facilities . . . . . . . . . . . . . . . . . . . . 135,928 246,490

House financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 476,440 419,085

Islamic hire-purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,886,185 5,610,842

Other financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,126,710 576,633

8,625,263 6,853,050

Unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,828,692) (1,474,527)

Gross financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,796,571 5,378,523

Less: Islamic financing sold to Cagamas Berhad. . . . . . . . . . . . . . . . . . . (925,365) —

5,871,206 5,378,523

Allowance for bad and doubtful financing:

— Specific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (108,721) (58,247)

— General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (99,406) (80,276)

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (60,770) (78,244)

5,602,309 5,161,756

(i) Financing analysed by concepts are as follows:

The Group and Company

2005 2004

RM’000 RM’000

Al-Bai’ Bithaman Ajil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,004,461 617,704

Al-Ijarah/Al-Ijarah Thumma Al-Bai’ . . . . . . . . . . . . . . . . . . . . . . 4,747,879 4,534,832

Al-Musyarakah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,866 225,987

5,871,206 5,378,523

(ii) The maturity structure of financing is as follows:

The Group and Company

2005 2004

RM’000 RM’000

Maturing within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,954,566 1,454,802

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,748,066 1,710,690

Three years to five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,325,448 1,360,758

Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 843,126 852,273

5,871,206 5,378,523

F-114

(iii) Financing analysed by their economic purposes are as follows:

The Group and Company

2005 2004

RM’000 RM’000

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176,852 76,594

Mining and quarrying . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,987 6,941

Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202,242 151,309

Electricity, gas and water . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,809 2,539

Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196,047 179,668

Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,431 1,089

Purchase of landed property

— Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239,941 203,052

— Non-residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,030 170,145

General commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,402 73,432

Transport, storage and communication . . . . . . . . . . . . . . . . . . . . . 103,732 113,613

Finance, insurance and business services . . . . . . . . . . . . . . . . . . . 19,206 14,122

Purchase of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,824 24,548

Purchase of transport vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . 4,955,689 3,962,298

Consumption credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 719,844 368,339

Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,535 30,834

6,796,571 5,378,523

Less: Islamic financing sold to Cagamas Berhad. . . . . . . . . . . . . . . (925,365) —

5,871,206 5,378,523

(iv) Financing analysed by type of customers are as follows:

The Group and Company

2005 2004

RM’000 RM’000

Domestic non-bank financial institutions . . . . . . . . . . . . . . . . . . . . 431 437

Business enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391,439 397,025

Small medium industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443,322 399,715

Local government and statutory authorities . . . . . . . . . . . . . . . . . . 48 80

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,027,320 4,570,266

Other domestic entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,769 6,243

Foreign entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,877 4,757

5,871,206 5,378,523

F-115

(v) Movements in the non-performing financing are as follows:

The Group and Company

2005 2004

RM’000 RM’000

At beginning of the year

As previously reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,634 189,843

Prior year adjustments (Note w) . . . . . . . . . . . . . . . . . . . . . . . 288,447 51,835

As restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503,081 241,678

Classified as non-performing during the year . . . . . . . . . . . . . . . . . 131,421 341,355

Reclassified as performing during the year . . . . . . . . . . . . . . . . . . (30,406) (29,033)

Amount recovered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (81,179) (5,204)

Amount written off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (77,658) (42,977)

Transfer to conventional business . . . . . . . . . . . . . . . . . . . . . . . . — (2,738)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445,259 503,081

Less:

Specific allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (108,721) (58,247)

Income in suspense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (60,770) (78,244)

(169,491) (136,491)

Net non-performing financing . . . . . . . . . . . . . . . . . . . . . . . . . . 275,768 366,590

Ratio of net non-performing financing to gross financing . . . . . . . . . 4.16% 6.99%

(vi) Movements in the allowance for bad and doubtful financing and income-in-suspense accounts are as follows:

The Group and Company

2005 2004

RM’000 RM’000

General Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . 80,276 33,179

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . . 19,130 47,097

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,406 80,276

% of total financing less specific allowance and income-in-suspense 1.50% 1.53%

Specific Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . 58,247 49,758

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . . 162,716 42,872

Amount written back in respect of recoveries . . . . . . . . . . . . . . (64,289) (17,127)

Net charge to income statement . . . . . . . . . . . . . . . . . . . . . . . 98,427 25,745

Amount written off/Adjustment to Asset

Deficiency Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . (47,953) (17,256)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,721 58,247

Income-in-suspense

Balance at beginning of year

As previously reported . . . . . . . . . . . . . . . . . . . . . . . . . . 73,490 71,267

Prior year adjustments (Note w) . . . . . . . . . . . . . . . . . . . . . 4,754 32,402

As restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,244 103,669

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . . 30,103 2,794

Amount written back in respect of recoveries . . . . . . . . . . . . . . (16,499) (11,905)

Net charge/(writeback) to income statement . . . . . . . . . . . . . . . . 13,604 (9,111)

Amount written off/Adjustment to Asset

Deficiency Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31,078) (16,314)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,770 78,244

F-116

(f) Other Assets

The Group and Company

2005 2004

RM’000 RM’000

Other receivables, deposits and prepayments . . . . . . . . . . . . . . . . . . . . . 593 383

Amount owing from Head Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,475 —

11,068 383

(g) Deposits from Customers

The Group and Company

2005 2004

RM’000 RM’000

Mudharabah fund

General investment deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,571,190 2,267,071

Non-Mudharabah fund

Saving deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353,844 241,921

Islamic negotiable certificates of deposits . . . . . . . . . . . . . . . . . . . . . 38,850 37,532

2,963,884 2,546,524

The maturity structure of deposits is as follows:

The Group and Company

2005 2004

RM’000 RM’000

Due within six months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,739,814 2,223,787

Six months to one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,992 193,211

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,777 107,860

Three years to five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,301 21,666

2,963,884 2,546,524

The deposits are sourced from the following customers:

The Group and Company

2005 2004

RM’000 RM’000

Business enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,219,037 1,235,147

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,068,116 626,427

Government and other statutory bodies. . . . . . . . . . . . . . . . . . . . . . . . . 638,824 658,732

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,907 26,218

2,963,884 2,546,524

(h) Deposits and Placements of Banks and Other Financial Institutions

The Group and Company

2005 2004

RM’000 RM’000

Mudharabah fund

Other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,020,244 1,160,682

Non-Mudharabah fund

Licensed banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,013,827 457,506

Licensed finance companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,070 159,530

Other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436,762 690,261

2,562,903 2,467,979

F-117

Included under deposits and placements of licensed finance companies is an amount of RM72,142,000 (2004 :

RM159,530,000) due to Head Office.

(i) Other Liabilities

The Group and Company

2005 2004

RM’000 RM’000

Amount owing to Head Office . . . . . . . . . . . . . . . . . . — 41,382

Lease deposits and advance rental . . . . . . . . . . . . . . . 17,050 11,124

Dividends payable to depositors . . . . . . . . . . . . . . . . . — 18,006

Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,632 14,287

Profit equalisation reserve . . . . . . . . . . . . . . . . . . . . (i) 97,352 51,999

161,034 136,798

(i) Profit equalisation reserve

The movements in profit equalisation reserve are as follows:

The Group and Company

2005 2004

RM’000 RM’000

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . 51,999 5,023

Provided during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,353 46,976

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,352 51,999

(j) Capital Funds

The Group and Company

2005 2004

RM’000 RM’000

Allocated:

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460,542 210,542

Increase during the year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 250,000

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460,542 460,542

Utilised:

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360,542 160,542

Increase during the year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000 200,000

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420,542 360,542

(k) Income Derived from Investment of Depositors’ Funds and Others

The Group and Company

2005 2004

RM’000 RM’000

Income derived from investment of:

(i) General investment deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 283,835 262,917

(ii) Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,528 109,629

498,363 372,546

F-118

(i) Income derived from investment of general investment deposits

The Group and Company

2005 2004

RM’000 RM’000

Finance income and hibah:

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278,905 253,176

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 16

Money at call and deposits with financial institutions . . . . . . . . . . . 2,174 1,625

281,079 254,817

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,489) 1,780

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,095 3,309

281,685 259,906

Fee and commission income:

Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229 969

Other fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,921 2,042

2,150 3,011

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283,835 262,917

(ii) Income derived from investment of other funds

The Group and Company

2005 2004

RM’000 RM’000

Finance income and hibah:

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219,556 99,798

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 6

Money at call and deposits with financial institutions . . . . . . . . . . . 1,656 556

221,212 100,360

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,680) 7,109

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,357 1,131

212,889 108,600

Fee and commission income:

Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 331

Other fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,464 698

1,639 1,029

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,528 109,629

(l) Allowance for Losses on Financing

The Group and Company

2005 2004

RM’000 RM’000

Allowance for bad and doubtful financing:

— Specific allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,427 25,745

— General allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,130 47,097

Bad debts and financing recovered . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,022) (3,682)

113,535 69,160

F-119

(m) Income Attributable to Depositors

The Group and Company

2005 2004

RM’000 RM’000

Mudharabah fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,663 80,346

Non-Mudharabah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,471 28,737

Special placement deposits by Head Office . . . . . . . . . . . . . . . . . . . . . . 7,901 3,915

185,035 112,998

(n) Income Derived from Investment of Islamic Banking Capital Fund

The Group and Company

2005 2004

RM’000 RM’000

Finance income and hibah:

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,804 31,542

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2

Money at call and deposits with financial institutions . . . . . . . . . . . . . . . 380 202

49,184 31,746

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (435) 222

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542 412

49,291 32,380

Fee and commission income:

Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 121

Other fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336 254

376 375

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,667 32,755

(o) Operating Expenditure

The Group and Company

2005 2004

RM’000 RM’000

Personnel/Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

Establishment costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 36

Marketing and communication expenses . . . . . . . . . . . . . . . . . . . . . . . . 32,324 51,975

Administration and general expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 1,191 1,298

33,532 53,309

(p) Taxation

The Group and Company

2005 2004

RM’000 RM’000

Estimated current tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,225 60,104

Transfer to deferred tax asset (note q) . . . . . . . . . . . . . . . . . . . . . . . . . (18,396) (25,764)

47,829 34,340

F-120

(q) Deferred Tax Asset

The Group and Company

2005 2004

RM’000 RM’000

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,054 9,290

Transfer from income statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,396 25,764

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,450 35,054

The deferred tax assets/(liabilities) are in respect of the following:

The Group and Company

2005 2004

RM’000 RM’000

Temporary differences arising from general allowance for financing. . . . . . . 27,834 22,477

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,643) (1,983)

Profit equalisation reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,259 14,560

53,450 35,054

(r) Net Income from Islamic Banking Operations

For consolidation with the conventional operations, net income from Islamic Banking Business comprises the following

items:

The Group and Company

2005 2004

RM’000 RM’000

Income derived from investment of depositors’ fund . . . . . . . . . . . . . . . . 498,363 372,546

Income attributable to depositors . . . . . . . . . . . . . . . . . . . . . . . . . . . . (185,035) (112,998)

Income attributable to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . 313,328 259,548

Income derived from Islamic Banking Fund . . . . . . . . . . . . . . . . . . . . . 49,667 32,755

362,995 292,303

F-121

(s) Commitments and Contingencies

In the normal course of business, the Group and the Company makes various commitments and incurs certain contingent

liabilities with legal recourse to its customers. No material losses are anticipated as a result of these transactions. The

commitments and contingencies are not secured against the Company’s assets.

The risk-weighted exposure of the Group and of the Company is as follows:

The Group and Company

2005 2004

Principal

Amount

Credit

Equivalent

Amount*

Risk-

Weighted

Amount

Principal

Amount

Credit

Equivalent

Amount*

Risk-

Weighted

Amount

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Direct credit

substitutes. . . . . . 30,000 30,000 6,000 — — —

Irrevocable

commitments to

extend credit:

— maturing less

than one year . 136,268 — — 277,301 — —

— maturing more

than one year . 9,164 4,582 4,582 40,056 20,028 20,028

Islamic financing sold

to Cagamas Berhad

with recourse. . . . 925,365 925,365 925,365 — — —

Total . . . . . . . . . . 1,100,797 959,947 935,947 317,357 20,028 20,028

* The credit equivalent amount is arrived at using the credit conversion factor as per Bank Negara Malaysia

guidelines.

(t) Capital Adequacy Ratio

The capital adequacy ratio of the Islamic Banking Scheme of the Group and Company as at 31 March 2005 is analysed

as follows:

2005 2004

RM’000 RM’000

Tier 1 capital

Islamic Banking Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420,542 360,542

Retained profits* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166,714 97,170

Total tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 587,256 457,712

Tier 2 capital

General allowance for bad and doubtful debts . . . . . . . . . . . . . . . . . . . . 99,406 80,276

Total tier 2 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,406 80,276

Capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 686,662 537,988

* The amount as at 31 March 2005 excludes deferred tax asset recognised todate.

F-122

2005 2004

Principal Risk-Weighted Principal Risk-Weighted

RM’000 RM’000 RM’000 RM’000

Notional risk-weighted assets:

Categories

0%. . . . . . . . . . . . . . . . . . . . . . 591,094 — 364,591 —

10% . . . . . . . . . . . . . . . . . . . . . — — — —

20% . . . . . . . . . . . . . . . . . . . . . 101,157 20,231 48,106 9,621

50% . . . . . . . . . . . . . . . . . . . . . 181,273 90,637 188,308 94,154

100% . . . . . . . . . . . . . . . . . . . . 6,460,773 6,460,773 5,121,805 5,121,805

Total notional risk-weighted assets . . 7,334,297 6,571,641 5,722,810 5,225,580

Capital Ratios

Core capital ratio . . . . . . . . . . . . . 8.93% 8.76%

Risk-weighted capital ratio . . . . . . . 10.44% 10.30%

The comparative ratios are not adjusted for the prior year adjustments.

(u) Yield/Profit Rate Risk

The following table shows the profit sensitivity gap, by time bands, on which profit rates of instruments are next

repriced on a contractual basis or, if earlier, the dates on which the instruments mature.

2005

The Group and Company

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

yield/

profit rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term funds . . 249,350 — — — — — 35 249,385 2.78

Deposits and placements with

banks and other financial

institutions . . . . . . . . . . — 22,100 — — — — — 22,100 2.81

Investment securities . . . . . . — — — 68,263 116,999 — — 185,262 3.18

Financing

— Performing . . . . . . . . 163,303 283,638 345,575 681,467 3,368,665 583,299 — 5,425,947 8.26

— Non-performing* . . . . — — — — — — 176,362 176,362 —

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 269,471 269,471 —

TOTAL ASSETS. . . . . . . . 412,653 305,738 345,575 749,730 3,485,664 583,299 445,868 6,328,527

LIABILITIES AND

ISLAMIC BANKING

FUNDS

Deposits from customers . . . 1,701,928 720,761 317,125 108,992 115,078 — — 2,963,884 2.87

Deposits and placements of

banks and other financial

institutions . . . . . . . . . . 696,416 674,121 196,534 483,587 512,245 — — 2,562,903 3.06

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 161,034 161,034 —

Total Liabilities . . . . . . . . . 2,398,344 1,394,882 513,659 592,579 627,323 — 161,034 5,687,821

Islamic Banking Fund . . . . . — — — — — — 640,706 640,706 —

TOTAL LIABILITIES AND

ISLAMIC BANKING

FUNDS . . . . . . . . . . . . 2,398,344 1,394,882 513,659 592,579 627,323 — 801,740 6,328,527

On-balance sheet interest

sensitivity gap . . . . . . . . (1,985,691) (1,089,144) (168,084) 157,151 2,858,341 583,299 (355,872) —

Off-balance sheet interest

sensitivity gap . . . . . . . . — — — — — — — —

Total interest sensitivity gap . (1,985,691) (1,089,144) (168,084) 157,151 2,858,341 583,299 (355,872) —

F-123

2004

The Group and Company

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

yield/

profit rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term funds . . 71,200 — — — — — 272 71,472 2.80

Deposits and placements with

banks and other financial

institutions . . . . . . . . . . — — — — — — — — —

Investment securities . . . . . . 2,979 119,108 — — 33,292 — — 155,379 3.05

Financing

— Performing . . . . . . . . 274,678 199,002 9,759 729,577 2,565,379 1,097,047 — 4,875,442 8.61

— Non-performing* . . . . — — — — — — 286,314 286,314 —

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 220,654 220,654 —

TOTAL ASSETS. . . . . . . . 348,857 318,110 9,759 729,577 2,598,671 1,097,047 507,240 5,609,261

LIABILITIES AND

ISLAMIC BANKING

FUNDS

Deposits from customers . . . 1,080,547 760,214 383,026 193,211 129,526 — — 2,546,524 2.93

Deposits and placements of

banks and other financial

institutions . . . . . . . . . . 843,931 568,812 273,239 360,502 421,495 — — 2,467,979 3.03

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 136,798 136,798 —

Total Liabilities . . . . . . . . . 1,924,478 1,329,026 656,265 553,713 551,021 — 136,798 5,151,301

Islamic Banking Fund . . . . . — — — — — — 457,960 457,960 —

TOTAL LIABILITIES AND

ISLAMIC BANKING

FUNDS . . . . . . . . . . . . 1,924,478 1,329,026 656,265 553,713 551,021 — 594,758 5,609,261

On-balance sheet interest

sensitivity gap . . . . . . . . (1,575,621) (1,010,916) (646,506) 175,864 2,047,650 1,097,047 (87,518) —

Off-balance sheet interest

sensitivity gap . . . . . . . . — — — — — — — —

Total interest sensitivity

gap . . . . . . . . . . . . . . (1,575,621) (1,010,916) (646,506) 175,864 2,047,650 1,097,047 (87,518) —

* This is arrived at after deducting the general allowance, specific allowance and interest/income-in-suspense from

gross non-performing loan outstanding.

F-124

(v) Fair Value of Islamic Banking Operations Financial Instruments

The estimated fair values of the Group’s and Company’s Islamic Banking operations financial instruments are as

follows:

2005 2004

The Group and Company Carrying Value Fair Value Carrying Value Fair Value

RM’000 RM’000 RM’000 RM’000

Financial Assets

Cash and short-term funds . . . . . . . 249,385 249,385 71,472 71,472

Deposits and placements with banks

and other financial institutions . . . 22,100 22,100 — —

Investment securities . . . . . . . . . . . 185,262 185,609 155,379 155,798

Financing activities* . . . . . . . . . . . 5,701,715 6,000,916 5,242,032 5,867,326

Other financial assets . . . . . . . . . . 11,068 11,068 383 383

6,169,530 6,469,078 5,469,266 6,094,979

Non-financial assets . . . . . . . . . . . 158,997 158,997 139,995 139,995

TOTAL ASSETS . . . . . . . . . . . . . 6,328,527 6,628,075 5,609,261 6,234,974

Financial Liabilities

Deposits from customers . . . . . . . . 2,963,884 2,973,108 2,546,524 2,547,141

Deposits and placements of banks and

other financial institutions . . . . . . 2,562,903 2,567,485 2,467,979 2,468,862

Other financial liabilities . . . . . . . . 63,682 63,682 84,799 84,799

5,590,469 5,604,275 5,099,302 5,100,802

Non-Financial Liabilities

Other non-financial liabilities . . . . . 97,352 97,352 51,999 51,999

Shareholder’s funds . . . . . . . . . . . 640,706 640,706 457,960 457,960

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . . 6,328,527 6,342,333 5,609,261 5,610,761

* The general allowance for both the Group and the Company amounting to RM99,406,000 (2004 : RM80,276,000)

has been included under non-financial assets.

(w) Prior Year Adjustments

As explained in Note 44 above, certain comparative figures have been adjusted as a result of the change in accounting

policy in respect of the 3-month classification for non-performing loans from the previous 6-month classification and the

accounting policy on handling fees on hire purchase loans.

The Group and Company

As previously

reported Adjustments As restated

RM’000 RM’000 RM’000

As at 31 March 2003

Non-performing loans . . . . . . . . . . . . . . . . . . . . . . . 189,843 51,835 241,678

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . 71,267 32,402 103,669

Unappropriated profit at end of year . . . . . . . . . . . . . . 44,469 (35,569) 8,900

For the financial year ended 31 March 2004

Income suspended . . . . . . . . . . . . . . . . . . . . . . . . . 18,537 (27,648) (9,111)

Operating expenditure . . . . . . . . . . . . . . . . . . . . . . . 26,664 26,645 53,309

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,100 (240) 34,340

As at 31 March 2004

Non-performing loans . . . . . . . . . . . . . . . . . . . . . . . 214,634 288,447 503,081

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . 73,490 4,754 78,244

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,927 (43,544) 383

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,290 (13,492) 136,798

Unappropriated profit at end of year . . . . . . . . . . . . . . 132,224 (34,806) 97,418

F-125

46. COMPARATIVE FIGURES

The comparative figures have been audited by a firm of chartered accountants other than Ernst

and Young.

47. GENERAL INFORMATION

The Company is a public limited liability company, incorporated and domiciled in Malaysia.

The principal place of business of the Company is located at Bangunan AmFinance, No 8, Jalan

Yap Kwan Seng, 50450 Kuala Lumpur.

F-126

AmFinance Berhad

(Incorporated in Malaysia)

AUDITED FINANCIAL STATEMENTS

For the financial year ended 31 March 2005

STATEMENT BY DIRECTORS

PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT,1965

We, Tan Sri Dato’ Azman Hashim and Mohamed Azmi Mahmood, being two of the directors of

AmFinance Berhad, do hereby state that, in the opinion of the directors, the accompanying

financial statements as set on pages F-41 to F-126 are drawn up in accordance with the provisions of

the Companies Act, 1965 and the applicable MASB Approved Accounting Standards in Malaysia so

as to give a true and fair view of the financial position of the Group and of the Company as at 31

March 2005 and of the results and the cash flows of the Group and of the Company for the financial

year then ended.

Signed on behalf of the Board

in accordance with a resolution of the Directors,

TAN SRI DATO’ AZMAN HASHIM

ChairmanMOHAMED AZMI MAHMOOD

Managing Director

Kuala Lumpur,

16 May 2005

STATUTORY DECLARATION

PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT,1965

I, Lim Hock Aun, being the Officer primarily responsible for the financial management of

AmFinance Berhad, do solemnly and sincerely declare that the accompanying financial statements

set out on pages 13 to 111 are, in my opinion, 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

abovenamed at KUALA

LUMPUR this 16 day of May, 2005.

Before me,

COMMISSIONER FOR OATHS

F-127

AmFINANCE BERHAD

DIRECTORS’ AND AUDITORS’

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2004

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

DIRECTORS’ REPORT

The directors have pleasure in submitting their report and the audited financial statements of

the Group and of the Company for the financial year ended 31 March 2004 which have been

prepared in accordance with the provisions of the Companies Act, 1965, the Banking and Financial

Institutions Act, 1989, and the applicable approved accounting standards in Malaysia.

PRINCIPAL ACTIVITIES

The principal activities of the Company are the carrying on of the business of a licensed

finance company which also includes the provision of Islamic banking services.

The principal activities of its subsidiary companies are disclosed in Note 11 to the Financial

Statements.

There have been no significant changes in the nature of the activities of the Company and its

subsidiary companies during the financial year.

FINANCIAL RESULTS

The Group The Company

RM’000 RM’000

Profit before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507,395 503,115

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,579 34,261

Profit before minority interests . . . . . . . . . . . . . . . . . . . . . . . 540,974 537,376

Minority shareholders’ interests in results of subsidiary companies . 12 —

Net profit attributable to shareholder of the Company . . . . . . . . . 540,986 537,376

BUSINESS PLAN AND STRATEGY FOR CURRENT FINANCIAL YEAR

The Company’s corporate plan and strategy were formulated in line with its mission to be a

premier financial services provider in retail banking, delivering innovative products and services to

its customers. The Company focused on the merger of its business and operations with AmBank

Berhad (‘‘AmBank’’), the AmBank Group’s commercial banking arm. Particular emphasis was placed

on the upgrading of the finance company branch network towards commercial banking readiness, in

preparation for the proposed legal merger between the Company and AmBank. To this end, the

Company had rolled out 40 commercial banking windows at its premises by the financial year ended

31 March 2004 with another 28 targeted for roll-out by mid 2004.

The Company’s Strategic Business Directions are:

i. to establish the Company as the premier financial services provider in the Malaysian retail

banking industry;

ii. to develop a customer focused sales and service oriented culture, increase market share in

core products and deepen customer relationships;

iii. to optimise its retail delivery channels by:

a. remodelling and up scaling its current branches towards commercial banking

readiness as well as rationalisation of the bank and finance branch network; and

F-128

b. expanding of alternate banking channels such as ATM/EBC network and developing

mobile banking capabilities

iv. to be effective in recoveries and asset management by instituting proactive management

and recovery efforts;

v. to enhance overall credit risk management capabilities by enhancing credit scoring

models;

vi. to focus on reorganising its retail delivery channels and developing new consumer

financing products; and

vii. to continue to invest in technology and resources to improve customer service and

operational efficiency and cost controls to improve earning capacity.

OUTLOOK FOR NEXT FINANCIAL YEAR

The global economic outlook for 2004 is increasingly positive, with a strong economic upturn

witnessed in the second half of 2003. The Malaysian economy expanded by 5.2% in 2003, exceeding

earlier projections, despite the dampening effect of the severe acute respiratory syndrome (‘‘SARS’’)

and geopolitical concerns in the earlier half of the year.

Growth momentum is expected to pick up in 2004 as a result of the rebounding corporate

investments, sustained consumption, improving external trade and accommodative fiscal and

monetary policies by Bank Negara Malaysia (‘‘BNM’’). The positive outlook for year 2004 has

led to the upward revision of GDP growth forecast of 5.5% to 6.0% by BNM. In addition to an

already improving economy, the resounding endorsement of the ruling party in the election in March

2004 removed any further uncertainty in the Malaysian political climate.

The banking sector, which remained resilient and well capitalised in 2003, is seen to mirror its

economic performance in year 2004. Loan growth is expected to match forecasted GDP growth, with

continued strong consumer financing in the market. Although retail financing will remain strong for

2004, moving forward, stronger balance sheets and improving asset quality in the corporate sector

will pave the way for a more balanced corporate-retail exposure in banks.

ITEMS OF AN UNUSUAL NATURE

In the opinion of the directors, the results of the operations of the Group and of the Company

during the financial year have not been substantially affected by any item, transaction or event of a

material and unusual nature other than the change in accounting policy as disclosed in Note 46 in

the financial statements.

There has not arisen in the interval between the end of the financial year and the date of this

report any item, transaction or event of a material and unusual nature likely, in the opinion of the

directors, to affect substantially the results of the operations of the Group and of the Company for

the current financial year in which this report is made.

STATUS OF CORPORATE EXERCISES

There were no corporate exercises during the financial year.

DIVIDENDS

No dividend has been paid or declared by the Company since the end of the previous financial

year. The directors do not recommend the payment of any dividend in respect of the current

financial year.

F-129

RESERVES AND ALLOWANCES

There were no material transfers to or from reserves, allowances or provisions during the

financial year other than those disclosed in the financial statements.

ISSUANCE OF SHARES AND DEBENTURES

There were no issuance of shares and debentures during the financial year.

SHARE OPTIONS

No options have been granted by the Company to any parties during the financial year to take

up unissued shares of the Company.

No shares have been issued during the financial year by virtue of the exercise of any option to

take up unissued shares of the Company. As at the end of the financial year, there were no unissued

shares of the Company under options.

BAD AND DOUBTFUL DEBTS AND 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

debts and financing and the making of allowances for doubtful debts and financing, and have

satisfied themselves that all known bad debts and financing had been written off and adequate

allowances had been made for doubtful debts and financing.

At the date of this report, the directors of the Company 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 made out, the directors

took reasonable steps to ascertain that any current assets, other than debts and financing, which were

unlikely to be realised in the ordinary course of business, their values as shown in the accounting

records of the Group and of the Company have been written down to their estimated realisable

values.

At the date of this report, the directors are not aware of any circumstances which would render

the values attributed to the current assets in the financial statements of the Group and of the

Company 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 methods 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 which secures the liability of any other person; or

(b) any contingent liability 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 normal course of business.

F-130

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.

SIGNIFICANT EVENTS

The significant events are disclosed in Note 42 to the Financial Statements

SUBSEQUENT EVENTS

There are no significant subsequent events for this financial year.

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.

DIRECTORS

The directors of the Company in office since the date of the last report and at the date of this

report are:

Tan Sri Dato’ Azman Hashim

Tun Mohammed Hanif Omar

Sharkawi bin Alis (appointed on 1 April 2004)

Cheah Tek Kuang

Mohamed Azmi Mahmood

Mahdi Morad

Prof Tan Sri Dato’ Dr Mohd Rashdan Haji Baba (resigned on 19 December 2003)

Dato’ Mohd Tahir Haji Abdul Rahim (resigned on 19 December 2003)

In accordance with Article 96 of the Company’s Articles of Association, Cheah Tek Kuang

retires from the Board at the forthcoming Annual General Meeting, and being eligible, offers himself

for re-election.

In accordance with Article 90 of the Company’s Articles of Association, Sharkawi bin Alis,

who was appointed to the Board since the last Annual General Meeting, retires and, being eligible,

offers himself for re-election.

F-131

DIRECTORS’ INTERESTS

The interests in shares, debentures and share options in the holding and ultimate holding

company and in related companies, of those who were directors at the end of the financial year as

recorded in the Register of Directors’ Shareholdings kept by the Company under Section 134 of the

Companies Act, 1965, are as follows:

DIRECT INTERESTS

In the holding company, AMFB Holdings Berhad

No. of ordinary shares of RM1.00 each

Shares

Balance at

1.4.2003 Bought Sold

Balance at

31.3.2004

Tan Sri Dato’ Azman Hashim

— held directly . . . . . . . . . . . . . . . . . . . 211,505 — — 211,505

— held through nominees . . . . . . . . . . . . 522,985 — — 522,985

Cheah Tek Kuang . . . . . . . . . . . . . . . . . . 38,000 — — 38,000

Mohamed Azmi Mahmood . . . . . . . . . . . . . 50,000 — — 50,000

Mahdi Morad . . . . . . . . . . . . . . . . . . . . . 27,000 — — 27,000

In the ultimate holding company, AMMB Holdings Berhad

No. of ordinary shares of RM1.00 each

Shares

Balance at

1.4.2003

Bought/

Converted

From Share

Option

Bonus &

Rights Issue Sold

Balance at

31.3.2004

Tan Sri Dato’ Azman Hashim . . . . 1,188,422 — 594,211 1,782,633 —

Cheah Tek Kuang . . . . . . . . . . . 217,200 140,000 178,600 50,000 485,800

Mohamed Azmi Mahmood . . . . . . 80,000 — 63,200 — 143,200

Mahdi Morad . . . . . . . . . . . . . . 9,000 100,000 7,500 — 116,500

No. of Warrants

Warrants 2003/2008

Balance at

1.4.2003 Bought

Adjustment

for Bonus &

Rights Issue Sold

Balance at

31.3.2004

Tan Sri Dato’ Azman Hashim . . . . 149,000 — 96,793 — 245,793

Cheah Tek Kuang . . . . . . . . . . . 28,000 — 18,189 — 46,189

Mohamed Azmi Mahmood . . . . . . 9,750 — 6,333 — 16,083

No. of ordinary shares of RM1.00 each

Share Options

Balance at

1.4.2003 Granted

Adjustment

for Bonus &

Rights Issue Exercised

Balance at

31.3.2004

Cheah Tek Kuang . . . . . . . . . . . 140,000 — — 140,000 —

Mohamed Azmi Mahmood . . . . . . 200,000 — 129,924 — 329,924

Mahdi Morad . . . . . . . . . . . . . . 124,000 — 80,552 100,000 104,552

F-132

DEEMED INTERESTS

In the holding company, AMFB Holdings Berhad

No. of ordinary shares of RM1.00 each

Shares Name of Company

Balance at

1.4.2003 Bought

Bonus &

Rights Issue Sold

Balance at

31.3.2004

Tan Sri Dato’ Azman Hashim

AMDB Equipment

Trading Sdn Bhd

241,047 — — — 241,047

In the ultimate holding company, AMMB Holdings Berhad

No. of ordinary shares of RM1.00 each

Shares Name of Company

Balance at

1.4.2003 Bought

Bonus &

Rights Issue Sold

Balance at

31.3.2004

Tan Sri Dato’ Azman Hashim

Arab-Malaysian

Corporation Berhad

343,884,550 — 275,107,640 13,165,365 605,826,825

AMDB Equipment

Trading Sdn Bhd

110,000 — 88,000 — 198,000

Azman Hashim

Holdings Sdn Bhd

9,408,876 — 6,918,343 10,613,314 5,713,905

Slan Sdn Bhd 398,316 — 199,158 597,474 —

Ginagini Sdn Bhd 17,330,749 — 7,525,374 12,671,314 12,184,809

Regal Genius Sdn

Bhd

— 14,500,000 11,600,000 4,350,000 21,750,000

No. of Warrants

Warrants 1997/2007 Name of Company

Balance at

1.4.2003 Bought Sold

Balance at

31.3.2004

Tan Sri Dato’ Azman

Hashim . . . . . . . . . . . Arab-Malaysian Corporation

Berhad

16,231,498 — 16,231,498 —

No. of Warrants

Warrants 2003/2008 Name of Company

Balance at

1.4.2003 Bought

Adjustment

for Bonus &

Rights Issue Sold

Balance at

31.3.2004

Tan Sri Dato’ Azman Hashim

Arab-Malaysian

Corporation Berhad

45,594,942 — 29,619,386 — 75,214,328

AMDB Equipment

Trading Sdn Bhd

13,750 — 8,932 — 22,682

Azman Hashim

Holdings Sdn Bhd

2,026,109 — 1,316,200 — 3,342,309

Slan Sdn Bhd 49,789 — 32,343 — 82,132

Ginagini Sdn Bhd 2,391,734 — 1,553,717 — 3,945,451

Indigenous Capital

Sdn Bhd

— 170,000 110,435 — 280,435

Regal Genius Sdn

Bhd

— 1,812,500 1,177,436 — 2,989,936

The share options in the ultimate holding company, which had an option period of five years

were granted pursuant to AMMB Holdings Berhad Employees’ Share Option Scheme II (‘‘AHB

Group ESOS’’) and the persons to whom the options are granted under the scheme have no right to

participate in any staff share option scheme of any other company in the Group.

By virtue of the directors’ shareholding in the holding and ultimate holding company, these

directors are deemed to have an interest in the shares of the Company and its related companies.

F-133

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no director of the Company has received or

become entitled to receive any benefit (other than a benefit included in the aggregate amount of

emoluments received or due and receivable by directors 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 the related party

transactions as shown in Note 30 to the Financial Statements.

Neither during nor at the end of the financial year, did there subsist any arrangements to which

the Company is a party whereby directors might acquire benefits by means of the acquisition of

shares in, or debentures of, the Company or any other body corporate.

HOLDING AND ULTIMATE HOLDING COMPANY

The directors regard AMFB Holdings Berhad and AMMB Holdings Berhad, both of which are

incorporated in Malaysia, as the holding company and the ultimate holding company respectively.

RATING BY EXTERNAL AGENCY

The Company’s long term rating of A2 and short term rating of P1 was reaffirmed by Rating

Agency Malaysia Berhad. The Company’s RM200.0 million Subordinated Bonds was accorded a

long-term rating of A3 by Rating Agency Malaysia Berhad.

AUDITORS

The auditors, Messrs Deloitte KassimChan, have indicated that they would not be seeking re-

appointment as auditors at the forthcoming Annual General Meeting of the Company.

Signed on behalf of the Board

in accordance with a resolution of the Directors,

TAN SRI DATO’ AZMAN HASHIM MOHAMED AZMI MAHMOOD

Chairman Managing Director

Kuala Lumpur

31 May 2004

Audited Financial Statements for the financial year ended 31 March 2004

F-134

REPORT OF THE AUDITORS TO THE MEMBER OF

AmFinance Berhad

(Incorporated in Malaysia)

We have audited the accompanying balance sheets as at 31 March 2004 and the related

statements of income, changes in equity and cash flows for the financial year then ended. These

financial statements are the responsibility of the Company’s directors. Our responsibility is to

express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the approved standards on auditing in Malaysia.

These standards require that we plan and perform the audit to obtain reasonable assurance about

whether the financial statements are free of material misstatement. An audit includes examining, on

a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit

also includes assessing the accounting principles used and significant estimates made by the

directors, as well as evaluating the overall financial statements presentation. We believe that 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 Sub-section (19) of Section 169 of the Act and the

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 as at 31 March 2004 and of the

results and the cash flows of the Group and of the Company for the financial year

ended on that date; and

(ii) the matters required by Section 169 of the Act to be dealt with in the financial

statements and consolidated financial statements; and

(b) the accounting and other records and the registers required by the Act to be kept by the

Company and by the subsidiary companies have been properly kept in accordance with the

provisions of the Act.

We are satisfied that the financial statements of the subsidiary companies that have been

consolidated with the financial statements of the Company 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 as required by us for these purposes.

Our auditors’ reports on the financial statements of the subsidiary companies were not subject

to any qualification and did not include any comment made under Sub-section (3) of Section 174 of

the Act.

DELOITTE KASSIMCHAN

AF 0080

Chartered Accountants

ROSITA TAN

1874/9/04 (J)

Partner

Petaling Jaya

31 May 2004

F-135

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

BALANCE SHEETS

As at 31 March 2004

The Group The Company

2004 2003 2004 2003

Note RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . 4 3,054,767 2,665,601 3,052,558 2,664,406Deposits and placements with

financial institutions . . . . . . . . 5 19,230 18,594 19,132 18,500Dealing securities. . . . . . . . . . . 6 256,059 72,875 256,059 72,875Investment securities . . . . . . . . . 7 1,918,590 2,310,621 1,918,301 2,310,344Loans, advances and financing. . . 8 26,048,864 25,160,438 26,057,137 25,170,957Other assets . . . . . . . . . . . . . . 9 270,987 315,368 274,567 314,203Deferred tax asset . . . . . . . . . . 33 701,236 645,859 701,236 646,116Statutory deposit with Bank Negara

Malaysia . . . . . . . . . . . . . . . 10 923,736 900,746 923,736 900,746Investment in subsidiary companies 11 — — 29,779 29,779Investment in associated companies 12 250 115 150 150Property and equipment . . . . . . . 13 424,599 439,349 374,476 388,409

TOTAL ASSETS . . . . . . . . . . . 33,618,318 32,529,566 33,607,131 32,516,485

LIABILITIES AND

SHAREHOLDER’S FUNDS

Deposits from customers . . . . . . 14 20,411,793 19,609,194 20,413,587 19,611,047Deposits and placements of banks

and other financial institutions . 15 5,063,411 5,109,140 5,063,411 5,109,140Securities sold under repurchase

agreements . . . . . . . . . . . . . 16 274,991 305,470 274,991 305,470Amount due to Cagamas Berhad . 17 3,675,607 4,018,930 3,675,607 4,018,930Other liabilities . . . . . . . . . . . . 18 825,929 611,219 821,008 600,747Subordinated term loan . . . . . . . 19 680,000 680,000 680,000 680,000Subordinated loan notes . . . . . . . 20 — 250,000 — 250,000Subordinated bonds. . . . . . . . . . 21 200,000 — 200,000 —

Total Liabilities . . . . . . . . . . . . 31,131,731 30,583,953 31,128,604 30,575,334

Minority interests . . . . . . . . . . . 22 101 113 — —

Share capital. . . . . . . . . . . . . . 23 528,402 528,402 528,402 528,402Reserves . . . . . . . . . . . . . . . . 24 1,958,084 1,417,098 1,950,125 1,412,749

Shareholder’s Funds . . . . . . . . . 2,486,486 1,945,500 2,478,527 1,941,151

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . 33,618,318 32,529,566 33,607,131 32,516,485

COMMITMENTS AND

CONTINGENCIES . . . . . . . . 35 4,361,007 4,411,202 4,360,907 4,411,102

NET TANGIBLE ASSETS PER

SHARE (RM) . . . . . . . . . . . 36 4.71 3.68 4.69 3.67

The accompanying Notes form an integral part of the Financial Statements.

F-136

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

INCOME STATEMENTS

For the year ended 31 March 2004

The Group The Company

2004 2003 2004 2003

Note RM’000 RM’000 RM’000 RM’000

Interest income . . . . . . . . . . . . 25 2,048,363 1,896,929 2,049,196 1,898,002

Interest expense . . . . . . . . . . . . 26 (958,992) (900,256) (959,059) (900,657)

Net interest income . . . . . . . . . 1,089,371 996,673 1,090,137 997,345

Income from Islamic Banking

Scheme. . . . . . . . . . . . . . . . 48 264,655 74,404 264,655 74,404

1,354,026 1,071,077 1,354,792 1,071,749

Loan and financing loss and

allowances. . . . . . . . . . . . . . 27 (297,762) (368,725) (297,762) (346,068)

1,056,264 702,352 1,057,030 725,681

Non-interest income . . . . . . . . . 28 40,640 32,152 40,019 31,563

Writeback of allowance for

diminution in value of

investments — net . . . . . . . . . 20,034 34,588 20,118 34,588

Transfer to profit equalisation

reserve . . . . . . . . . . . . . . . . (46,976) (3,655) (46,976) (3,655)

General allowance for contingencies (37,000) — (37,000) —

1,032,962 765,437 1,033,191 788,177

Staff costs and overheads . . . . . . 29 (525,775) (424,433) (530,076) (427,198)

Profit before share in results of

associated company and taxation 507,187 341,004 503,115 360,979

Share of profits in associated

company . . . . . . . . . . . . . . . 208 52 — —

Profit before taxation . . . . . . . 507,395 341,056 503,115 360,979

Taxation . . . . . . . . . . . . . . . . 32 33,579 23,011 34,261 24,570

Profit before minority interests . . 540,974 364,067 537,376 385,549

Minority shareholders’ interests in

results of subsidiary companies . 12 6 — —

Net profit attributable to

shareholder of the Company . . . 540,986 364,073 537,376 385,549

Basic earnings per ordinary share

(sen) . . . . . . . . . . . . . . . . . 34 102.38 46.80 101.70 49.56

The accompanying Notes form an integral part of the Financial Statements.

F-137

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

STATEMENTS OF CHANGES IN EQUITY

For the year ended 31 March 2004

Non-distributable Distributable

The Company Share Capital

Share

Premium

Statutory

Reserve

Capital

Reserve

(Accumulated

loss)/

Unappro-

priated Profit Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Balance as at

1 April 2002

As previously stated . . 2,613,750 — 432,587 — (2,978,179) 68,158

Prior year adjustments

(Note 46) . . . . . . . — — — — 32,229 32,229

As restated . . . . . . . . 2,613,750 — 432,587 — (2,945,950) 100,387

Capital reduction . . . . (2,613,750) — (408,595) — 3,022,345 —

Issue of ordinary shares 528,402 379,953 — — — 908,355

Recognition of deferred

tax asset against

capital reserve . . . . — — — 500,845 — 500,845

Profit for the year . . . — — — — 364,073 364,073

Deferred tax asset

recognised on general

allowance vested over — — — — 71,840 71,840

Transfer to statutory

reserve . . . . . . . . . — — 190,390 — (190,390) —

Transfer from capital

reserve to

unappropriated profit — — — (108,800) 108,800 —

Balance as at

31 March 2003 . . . 528,402 379,953 214,382 392,045 430,718 1,945,500

Balance as at

1 April 2003

As previously stated . . 528,402 379,953 214,382 392,045 321,881 1,836,663

Prior year adjustments

(Note 46) . . . . . . . — — — — 108,837 108,837

As restated . . . . . . . . 528,402 379,953 214,382 392,045 430,718 1,945,500

Profit for the year . . . — — — — 540,986 540,986

Transfer to statutory

reserve . . . . . . . . . — — 268,688 — (268,688) —

Transfer from capital

reserve to

unappropriated profit — — — (154,200) 154,200 —

Balance as at

31 March 2004 . . . 528,402 379,953 483,070 237,845 857,216 2,486,486

F-138

Non-distributable Distributable

The Company Share Capital

Share

Premium

Statutory

Reserve

Capital

Reserve

(Accumulated

loss)/

Unappro-

priated Profit Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Balance as at

1 April 2002

As previously stated . . 2,613,750 — 432,587 — (3,004,004) 42,333

Prior year adjustments

(Note 46) . . . . . . . — — — — 32,229 32,229

As restated . . . . . . . . 2,613,750 — 432,587 — (2,971,775) 74,562

Capital reduction . . . . (2,613,750) — (408,595) — 3,022,345 —

Issue of ordinary shares 528,402 379,953 — — — 908,355

Recognition of deferred

tax asset against

capital reserve . . . . — — — 500,845 — 500,845

Profit for the year . . . — — — — 385,549 385,549

Deferred tax asset

recognised on general

allowance vested over — — — — 71,840 71,840

Transfer to statutory

reserve . . . . . . . . . — — 190,390 — (190,390) —

Transfer from capital

reserve to

unappropriated profit — — — (108,800) 108,800 —

Balance as at

31 March 2003 . . . 528,402 379,953 214,382 392,045 426,369 1,941,151

Balance as at

1 April 2003

As previously stated . . 528,402 379,953 214,382 392,045 317,532 1,832,314

Prior year adjustments

(Note 46) . . . . . . . — — — — 108,837 108,837

As restated . . . . . . . . 528,402 379,953 214,382 392,045 426,369 1,941,151

Profit for the year . . . — — — — 537,376 537,376

Transfer to statutory

reserve . . . . . . . . . — — 268,688 — (268,688) —

Transfer from capital

reserve to

unappropriated profit — — — (154,200) 154,200 —

Balance as at

31 March 2004 . . . 528,402 379,953 483,070 237,845 849,257 2,478,527

The accompanying Notes form an integral part of the Financial Statements.

F-139

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

CASH FLOW STATEMENTS

For the year ended 31 March 2004

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM OPERATING

ACTIVITIES

Profit before taxation . . . . . . . . . . . . . . 507,395 341,056 503,115 360,979Adjustments for:Interest/Income-in-suspense, net of recoveries 265,908 378,847 265,908 378,847Loan and financing loss and allowances, net

of recoveries . . . . . . . . . . . . . . . . . . 444,602 369,635 444,602 369,635Allowance on amount recoverable from

Danaharta . . . . . . . . . . . . . . . . . . . . 62,794 89,741 62,794 89,741Depreciation of property and equipment . . . 54,318 81,743 53,468 80,899Loss on sale of quoted investments — net . 8,273 6,415 8,273 6,415Transfer to profit equalisation reserve . . . . 46,976 3,655 46,976 3,655Accretion of discount less amortisation of

premium . . . . . . . . . . . . . . . . . . . . . (21,607) (25,532) (21,607) (25,532)Property and equipment written off . . . . . . 145 474 145 474Share of profits of associated company . . . (208) (52) — —Gross dividend income . . . . . . . . . . . . . (10,169) (4,069) (10,114) (4,068)Gain on sale of investment securities — net — (2,821) — (2,821)Writeback of allowance for diminution in

value of investments — net . . . . . . . . . (20,034) (34,588) (20,118) (34,588)Gain on disposal of property and equipment (1,134) (5) (1,134) (5)Gain on disposal of development properties — (50) — —Allowance for diminution in value of

foreclosed property . . . . . . . . . . . . . . 4,000 — 4,000 —Allowance for doubtful debts . . . . . . . . . 464 — 464 —General allowance for contingencies . . . . . 37,000 — 37,000 —

Operating Profit Before Working CapitalChanges . . . . . . . . . . . . . . . . . . . . . 1,378,723 1,204,449 1,373,772 1,223,631

(Increase)/Decrease In Operating Assets:Deposits and placements with financial

institutions . . . . . . . . . . . . . . . . . . . (636) 491,026 (632) 491,031Dealing securities. . . . . . . . . . . . . . . . . (164,105) (9,185) (164,105) (9,185)Loans, advances and financing. . . . . . . . . (2,107,604) (2,235,811) (2,105,359) (2,233,805)Other assets . . . . . . . . . . . . . . . . . . . . (21,419) (59,062) (26,365) (59,282)Statutory deposit with Bank Negara Malaysia (22,990) (3,752) (22,990) (3,752)Increase/(Decrease) In Operating Liabilities:Deposits from customers . . . . . . . . . . . . 802,599 (170,548) 802,540 (193,501)Deposits and placements of banks and other

financial institutions . . . . . . . . . . . . . . (45,729) 837,828 (45,729) 837,828Securities sold under repurchase agreements (30,479) 305,470 (30,479) 305,470Amount due to Cagamas Berhad . . . . . . . (343,323) (83,300) (343,323) (83,300)Other liabilities . . . . . . . . . . . . . . . . . . 137,196 60,458 142,745 61,103

Cash (Used in)/Generated From Operations . (417,767) 337,573 (419,925) 336,238Taxation paid . . . . . . . . . . . . . . . . . . . (22,010) (19,683) (20,859) (17,068)

Net Cash (Used in)/Generated FromOperating Activities . . . . . . . . . . . . . . (439,777) 317,890 (440,784) 319,170

F-140

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM INVESTING

ACTIVITIES

Proceeds from disposal of investment

securities — net . . . . . . . . . . . . . . . . 915,085 653,023 915,085 653,009

Net dividend received . . . . . . . . . . . . . . 8,899 3,137 8,859 3,136

Proceeds from disposal of property and

equipment . . . . . . . . . . . . . . . . . . . . 1,242 9 1,242 9

Vesting of assets and liabilities from AMFB

Holdings, net of cash acquired (Note a) . — (91,448) — (91,448)

Purchase of property and equipment . . . . . (46,283) (14,155) (46,250) (14,155)

Net Cash Generated From Investing Activities 878,943 550,566 878,936 550,551

CASH FLOWS FROM FINANCING

ACTIVITIES

Proceeds from issue of subordinated bonds . 200,000 — 200,000 —

Redemption of subordinated loan notes . . . (250,000) — (250,000) —

Proceeds from issue of shares . . . . . . . . . — 908,355 — 908,355

Proceeds from issue of subordinated

loan notes . . . . . . . . . . . . . . . . . . . . — 250,000 — 250,000

Net Cash (Used in)/Generated From

Financing Activities . . . . . . . . . . . . . . (50,000) 1,158,355 (50,000) 1,158,355

Net Increase In Cash And Cash Equivalents 389,166 2,026,811 388,152 2,028,076

Cash And Cash Equivalents At Beginning

Of Year . . . . . . . . . . . . . . . . . . . . . 2,665,601 638,790 2,664,406 636,330

Cash And Cash Equivalents At End

Of Year (Note b) . . . . . . . . . . . . . . . 3,054,767 2,665,601 3,052,558 2,664,406

F-141

Note a: Vesting of assets and liabilities from AMFB Holdings Berhad (‘‘AMFB Holdings’’)

The summary of the effects of the vesting of assets and liabilities from AMFB Holdings to the Company

on 15 June 2002, on the cash flows of the Group and the Company during the previous financial year were

as follows:

RM’000

Net assets vested over:

Cash and short-term funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,066,907

Deposits with financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,900

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,394,432

Amortisation of premium on investment securities . . . . . . . . . . . . . . . . . . . . . . (4,354)

Allowance for diminution in value of investment securities . . . . . . . . . . . . . . . . (78,433)

Loans, advances and financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,570,845

General allowance for bad and doubtful debts and financing . . . . . . . . . . . . . . . (256,572)

Specific allowance for bad and doubtful debts and financing . . . . . . . . . . . . . . . (490,249)

Interest-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (636,832)

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263,081

Investment in associated company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Statutory deposits with Bank Negara Malaysia . . . . . . . . . . . . . . . . . . . . . . . . 549,557

Property and equipment — Cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176,841

Property and equipment — Accumulated depreciation . . . . . . . . . . . . . . . . . . . (95,028)

Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,212,581)

Deposits of banks and other financial institutions . . . . . . . . . . . . . . . . . . . . . . (3,463,312)

Amount due to Cagamas Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,102,230)

Subordinated term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (180,000)

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (444,717)

Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,158,355

Purchase price paid:

Issue of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 908,355

Issue of subordinated loan notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000

1,158,355

Less: Cash and short term funds vested over . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,066,907)

Cash outflow on vesting of assets and liabilities, net of cash acquired . . . . . . . . . . . 91,448

Note b: Cash and Cash Equivalents

For the purpose of the cash flow statements, cash and cash equivalents consist of cash and short term

funds net of bank overdrafts. Cash and cash equivalents included in the cash flow statements comprise the

following balance sheets amounts:

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Cash and short term funds

(Note 4) . . . . . . . . . . . . . . . . 3,054,767 2,665,601 3,052,558 2,664,406

The accompanying Notes form an integral part of the Financial Statements.

F-142

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

NOTES TO THE FINANCIAL STATEMENTS

1. PRINCIPAL ACTIVITIES

The principal activities of the Company are the carrying on of the business of a licensed

finance company which also includes the provision of Islamic banking services.

The principal activities of the subsidiary companies are disclosed in Note 11.

There have been no significant changes in the nature of the activities of the Company and its

subsidiary companies during the financial year.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The financial statements of the Group and the Company have been approved by the Board of

Directors for issuance on 31 May 2004.

The financial statements of the Group and of the Company have been prepared in accordance

with the provisions of the Companies Act, 1965, the Banking and Financial Institutions Act, 1989,

Bank Negara Malaysia Guidelines and the applicable approved accounting standards of the

Malaysian Accounting Standards Board. The financial statements incorporate those activities

relating to the Islamic Banking Business undertaken by the Company.

The Islamic Banking Business refers generally to the acceptance of deposits and granting of

financing under the Syariah principles. The Islamic Banking Business transactions are accounted for

on the accrual basis in compliance with the revised Garis Panduan 8 Guidelines on Presentation of

Financial Statements for Financial Institutions issued by Bank Negara Malaysia. The state of affairs

as at 31 March 2004 and the results for the financial year ended on that date of the Islamic Banking

Business of the Company are shown in Note 48.

3. SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies adopted by the Group and the Company are consistent with

those adopted in the previous years except for the adoption of the following:

(a) New Malaysian Accounting Standards Board (‘‘MASB’’) Standards which became

effective in the current financial year:

(i) MASB 25, Income Taxes, which is applied retrospectively. Comparative figures have

been restated to reflect the effect of the change in accounting policy;

(ii) MASB 29, Employee Benefits, which is applied prospectively. The adoption does

not have any significant impact on the financial statements; and

(iii) MASB i — 1, Presentation of Financial Statements of Islamic Financial Institutions.

The adoption resulted in extended disclosures for the Company’s Islamic Banking

business.

(b) Bank Negara Malaysia’s Circular dated 4 July 2003 and Revised Circular dated 8 August

2003 on the accounting treatment of handling fees paid to motor vehicle dealers for hire

purchase loans, which has been adopted prospectively.

The adoption of these BNM circulars on handling fees resulted in the Company’s handling

fees paid to motor vehicle dealers for hire purchase loans and financing approved and

disbursed after 1 January 2004 being expensed off to income statements in the period in

which the handling fees are incurred. However, the Company has continued to capitalise

F-143

handling fees paid to motor vehicle dealers for hire purchase loans and financing

approved and disbursed prior to 1 January 2004, and amortise the amount capitalised to

the income statements over the tenor of the hire purchase loans using the ‘‘sum-of-digits’’

method. This change in accounting policy has been accounted for prospectively and has

resulted in an increase in handling fees charged to the income statements for the financial

year by RM18.2 million.

Basis of Accounting

The financial statements of the Group and of the Company have been prepared under the

historical cost convention unless otherwise indicated in the accounting policies below.

Basis of Consolidation

The financial statements of the Group include the financial statements of the Company

and all its subsidiary companies listed under Note 11 made up to the end of the financial year.

The Company adopts the acquisition method in preparing the consolidated financial

statements. Under the acquisition method, the excess of the cost of investments in the

subsidiary companies over the attributable share in the fair value of the net assets of the

subsidiary companies at the date of the acquisition is taken up as goodwill on consolidation.

The interest of minority shareholders is stated at the minority’s proportion of the fair values of

the assets and liabilities recognised.

The results of subsidiary companies acquired or disposed during the financial year are

included in the consolidated financial statements from the effective date of acquisition or up to

the effective date of disposal.

All significant intercompany transactions and balances have been eliminated on

consolidation.

Recognition of Interest and Financing Income

Interest and financing income is recognised on an accrual basis. Interest and financing

income on hire-purchase, block discounting and leasing transactions is recognised on the sum-

of-digits method. Interest and financing income on housing and term loans and financing is

recognised on a monthly rest basis.

Where an account is classified as non-performing, recognition of interest and financing

income is suspended with retroactive adjustments made to the date of first default. Thereafter,

interest on these accounts are recognised on a cash basis until such time as the accounts are no

longer classified as non-performing.

Customers’ accounts are classified as non-performing where repayments are in arrears for

more than six months, except for line of credit accounts, which are classified as non-

performing where repayments are in arrears for more than three months. The classification of

non-performing loans and financing and the policy on suspension of interest is in conformity

with Bank Negara Malaysia’s Guideline On Classification of Non-Performing Loans and

Allowance for Bad and Doubtful Debts.

Recognition of Fees and Other Income

Loan arrangement fees and commissions are recognised as income when all conditions

precedent are fulfilled.

Guarantee fees are recognised as income upon issuance and where the guarantee period is

longer than one year, over the duration of the guarantee period.

Other fees on a variety of services and facilities extended to customers are recognised on

inception of such transactions.

F-144

Dividends from dealing and investment securities are recognised when received.

Allowance for Bad and Doubtful Debts and Financing

Specific allowances are made for doubtful debts and financing which have been

individually reviewed and specifically identified as bad or doubtful.

In addition, a general allowance based on a percentage of the loan and financing

portfolio, net of interest-in-suspense and specific allowance, is also made to cover possible

losses which are not specifically identified.

An uncollectible loan and financing or portion of a loan and 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.

The allowance for non-performing loans and financing is in conformity with the minimum

requirements of Bank Negara Malaysia’s Guideline On Classification of Non-Performing Loans

and Allowance for Bad and Doubtful Debts.

Repurchase Agreements

Obligations on securities sold under repurchase agreements are securities which the Group

had sold from its portfolio with a commitment to repurchase at a future date. Such financing

transactions and the obligations to repurchase the securities are reflected as a liability in the

balance sheet, whilst the carrying values of the securities underlying these repurchase

agreements remain in the respective asset accounts.

Dealing Securities

Dealing securities are marketable securities that are acquired and held with the intention

of resale in the short term, and are stated at the lower of cost and market value on a portfolio

basis.

Transfers, if any, from dealing to investment securities are made at the lower of cost and

market value.

Investment Securities

Investment securities are securities that are acquired and held for yield or capital growth

or to meet minimum liquid assets requirement pursuant to Section 38 of the Banking and

Financial Institutions Act, 1989 and are usually held to maturity.

Malaysian Government Securities, Malaysian Government Investment Certificates,

Cagamas bonds and other government securities and other bank guaranteed private debt

securities are stated at cost adjusted for amortisation of premium or accretion of discount.

Quoted securities are stated at the lower of cost and market value on a portfolio basis.

Unquoted securities are stated at cost and allowance is made in the event of any permanent

diminution in value.

Transfers, if any, from investment securities to dealing securities are made at the lower of

carrying value and market value.

Investment in Subsidiary Companies

A subsidiary company is a company in which the Group has power to exercise control

over the financial and operating policies so as to obtain benefits from their activities.

Investments in subsidiary companies, which are eliminated on consolidation, are stated in

the Company’s financial statements at cost or directors’ valuation, and are written down when

the directors consider that there is an impairment loss that is other than temporary on the value

F-145

of such investments. The impairment loss is charged to the income statement unless it reverses

a previous revaluation in which case it is treated as a revaluation decrease. The directors’

valuation is arrived at after taking into account the underlying net tangible assets value of the

subsidiary companies and the surplus on revaluation is credited to the revaluation reserve

account.

Investment in Associated Companies

An associated company is a company in which the Group has a long term equity interest

of between 20% to 50% and where the Group has representation on the Board and is in a

position to exercise significant influence in its management.

Investments in associated companies are stated at cost and are written down when the

directors consider there is an impairment loss that is other than temporary on the value of such

investments in the Company’s financial statements. The impairment loss is charged to the

income statement. In the consolidated financial statements, the results of associated companies

are accounted for under the equity method whereby the Group’s share of post-acquisition

profits less losses of associated companies is included in the consolidated income statement and

the Group’s interest in associated companies is stated at cost plus adjustments to reflect

changes in the Group’s share of the net assets of the associated companies in the consolidated

balance sheet.

Property and Equipment and Depreciation

Property and equipment are stated at cost or valuation less accumulated depreciation and

impairment losses.

Gain or loss arising from disposal of an asset is determined as the difference between the

estimated net disposal proceeds and the carrying amount of the asset, and is recognised in the

income statements.

Freehold land and capital work in progress are not depreciated. Short term leasehold land

is amortised over the term of leases of between 3 to 49 years. Long term leasehold land is

amortised over the term of leases of between 50 to 800 years. Depreciation of other property

and equipment is calculated using the straight-line method at rates based on the estimated

useful lives of the various assets.

The annual depreciation rates for the various classes of property and equipment are as

follows:

Buildings . . . . . . . . . . . . . . . . . 2% or over the short term lease of between

3 to 49 years

Leasehold improvements . . . . . . . 10%–20%

Office equipment . . . . . . . . . . . . 10%–20%

Furniture and fittings . . . . . . . . . 10%–25%

Computer equipment and software . 20%–331/3%

Motor vehicles . . . . . . . . . . . . . 20%

Impairment of Assets

The carrying values of assets are reviewed for impairment when there is an indication that

the asset might be impaired. Impairment is measured by comparing the carrying values of the

assets with their recoverable amounts. The recoverable amount is the higher of net realisable

value and value in use, which is measured by reference to discounted future cash flows, if

applicable. Recoverable amounts are estimated for individual assets or, if it is not possible, for

the cash generating unit.

An impairment loss is charged to the income statements immediately, unless the asset is

carried at revalued amount. Any impairment loss of a revalued asset is treated as a revaluation

decrease to the extent of previously recognised revaluation surplus for the same asset.

F-146

Subsequent increase in the recoverable amount of an asset is treated as reversal of the

previous impairment loss and is recognised to the extent of the carrying amount of the asset

that would have been determined (net of amortisation and depreciation) had no impairment loss

been recognised. The reversal is recognised in the income statements immediately, unless the

asset is carried at revalued amount. A reversal of an impairment loss on a revalued asset is

credited directly to revaluation surplus. However, to the extent that an impairment loss on the

same revalued asset was previously recognised as an expense in the income statements, a

reversal of that impairment loss is recognised as income in the income statements.

Assets Purchased Under Lease

Assets purchased under lease which in substance transfer the risks and benefits of

ownership of the assets to the lessee are capitalised under property and equipment. The assets

and the corresponding lease obligations are recorded at the lower of the present value of the

minimum lease payments or the fair value of the leased assets at the beginning of the lease

terms.

Leases which do not meet such criteria are classified as operating leases and the related

rentals are charged to the income statements as incurred.

When an operating lease is terminated before the lease period has expired, any payment

required to be made to the lessor by way of penalty is recognised as an expense in the period

which termination takes place.

As at 31 March 2004, the Group and the Company do not have any assets purchased

under lease.

Trade and Other Receivables

Trade and other receivables are stated at book value as reduced by the appropriate

allowances for estimated irrecoverable amounts. Allowance for doubtful debts is made based on

estimates of possible losses which may arise from non-collection of certain receivable accounts.

Taxation

Tax on profit or loss for the financial year comprises current and deferred tax. Income tax

is recognised in the income statements except to the extent it relates to items recognised

directly in equity, in which case it is recognised in equity.

Current tax expense is determined according to the tax laws of each jurisdiction in which

the Group operates and includes all taxes based on the taxable profits.

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. In principle, deferred tax liabilities are recognised for all taxable temporary

differences and deferred tax assets are recognised for all deductible temporary differences and

unutilised tax losses to the extent it is probable that taxable profit will be available against

which the deductible temporary differences and unutilised tax losses can be utilised. Temporary

differences are not recognised for goodwill not deductible for tax purposes and the initial

recognition of assets and liabilities that at the time of 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.

Prior to the adoption of MASB 25 Income Taxes, the tax effects of transactions are

generally recognised, using the ‘liability’ method, in the year such transactions enter into the

determination of net income, regardless of when they are recognised for tax purposes.

However, where timing differences result in deferred tax debits, the tax effects are generally

recognised only when the realisation is reasonably assured. The changes in accounting policies

have been accounted for retrospectively and the effects of the changes are disclosed in Note 46.

F-147

Amount Recoverable from Danaharta

This relates to the loans sold to Danaharta where the total consideration is received in two

portions; upon the sale of the loans (initial consideration) and upon the recovery of the loans

(final consideration). The final consideration amount represents the Company’s predetermined

share of the surplus over the initial consideration upon recovery of the loans.

The difference between the carrying value of the loans and the initial consideration is

recognised as ‘Amounts Recoverable from Danaharta’ within the ‘Other Assets’ component of

the balance sheets. Allowances against these amounts are made to reflect the directors’

assessment of the realisable value of the final consideration as at the balance sheet date.

Foreclosed Properties

Foreclosed properties are stated at cost less allowance for diminution in value, if any, of

such properties.

Interest Rate Swap Contracts

The Company uses the interest rate swaps as a hedging instrument.

Interest income or interest expense associated with interest rate swaps is recognised over

the life of the swap agreement as a component of interest income or interest expense.

Profit Equalisation Reserve

The Profit Equalisation Reserve (‘‘PER’’) refers to the amount appropriated out of the

gross income in order to maintain a certain level of return for depositors. It is deducted from

the total gross income (in deriving the net gross income) as approved and endorsed by the

National Advisory Council for Islamic Banking and Takaful of Bank Negara Malaysia.

Provisions

Provisions are recognised when the Group or the Company has a present legal obligation

as a result of past events, when it is probable that an outflow of resources will be required to

settle the obligation, and when a reliable estimate of the amount can be made.

Employee Benefits

(i) Short-Term Benefits

Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are

accrued in the period in which the associated services are rendered by employees of the

Group.

(ii) Defined Contribution Plan

As required by law, companies in Malaysia make contributions to the state pension

scheme, the Employees Provident Fund (‘‘EPF’’). Such contributions are recognised as an

expense in the income statement as incurred. Once the contributions have been paid, the

Group has no further payment obligations.

Cash Flow Statement

The Group and the Company adopt the indirect method in the preparation of the cash flow

statements.

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Cash and Cash Equivalents

For the purpose of the cash flow statements, cash and cash equivalents consist of cash and

short-term funds.

4. CASH AND SHORT-TERM FUNDS

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Cash and balances with banks and other

financial institutions . . . . . . . . . . . 121,467 97,901 119,258 96,706

Money at call and deposits placements

maturing within one month . . . . . . 2,933,300 2,567,700 2,933,300 2,567,700

3,054,767 2,665,601 3,052,558 2,664,406

Deposits of the Group amounting to RM198,000 (RM194,000 in 2003) are pledged to certain

banks for banking facilities granted to the subsidiary companies.

Included in the above are interbank lending of RM2,933,300,000 (RM2,567,700,000 in 2003)

for the Group and the Company.

As at 31 March 2004, the net interbank borrowing and lending position of the Group and of the

Company are as follows:

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Interbank lending

Cash and short term funds . . . . . . . 2,933,300 2,567,700 2,933,300 2,567,700

Deposits with financial institutions

(Note 5) . . . . . . . . . . . . . . . . . 19,132 18,500 19,132 18,500

2,952,432 2,586,200 2,952,432 2,586,200

Interbank borrowing (Note 15). . . . . . (200) (110,550) (200) (110,550)

Net interbank lending . . . . . . . . . . . 2,952,232 2,475,650 2,952,232 2,475,650

5. DEPOSITS AND PLACEMENTS WITH FINANCIAL INSTITUTIONS

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Licensed banks . . . . . . . . . . . . . . . 98 94 — —

Bank Negara Malaysia. . . . . . . . . . . 19,132 18,500 19,132 18,500

19,230 18,594 19,132 18,500

Included in the above are interbank lending of RM19,132,000 (RM18,500,000 in 2003) for the

Group and the Company.

F-149

6. DEALING SECURITIES

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Quoted Securities in Malaysia

Shares. . . . . . . . . . . . . . . . . . . . 173,994 112,605 173,994 112,605

Warrants . . . . . . . . . . . . . . . . . . 331 156 331 156

Loan stocks . . . . . . . . . . . . . . . . 275 294 275 294

174,600 113,055 174,600 113,055

Unquoted Private Debt Securities in

Malaysia

Corporate bonds . . . . . . . . . . . . . 98,290 — 98,290 —

Total . . . . . . . . . . . . . . . . . . . . . 272,890 113,055 272,890 113,055

Less:

Allowance for diminution in value of

quoted securities . . . . . . . . . . . . . (16,831) (40,180) (16,831) (40,180)

Net . . . . . . . . . . . . . . . . . . . . . . 256,059 72,875 256,059 72,875

Market value:

Unquoted Private Debt Securities in

Malaysia Corporate bonds . . . . . . 98,325 — 98,325 —

Quoted Securities in Malaysia

Shares. . . . . . . . . . . . . . . . . . . . 157,090 71,823 157,090 71,823

Warrants . . . . . . . . . . . . . . . . . . 362 240 362 240

Loan stocks . . . . . . . . . . . . . . . . 317 812 317 812

F-150

7. INVESTMENT SECURITIES

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Money Market Securities

Malaysian Government Securities . . . 1,700 126,709 1,700 126,709

Malaysian Government Investment

Certificates . . . . . . . . . . . . . . . 145,319 92,814 145,319 92,814

Treasury bills . . . . . . . . . . . . . . . 311,799 589,940 311,799 589,940

BNM bills . . . . . . . . . . . . . . . . . 44,467 143,007 44,467 143,007

Negotiable certificate of deposits . . . 393,908 571,995 393,908 571,995

Islamic acceptance bills . . . . . . . . . 2,979 — 2,979 —

Cagamas notes . . . . . . . . . . . . . . — 38,897 — 38,897

Bankers acceptances . . . . . . . . . . . — 66,704 — 66,704

Danamodal bonds . . . . . . . . . . . . . — 69,733 — 69,733

Islamic Khazanah bonds. . . . . . . . . — 49,560 — 49,560

Islamic Negotiable certificate of

deposits . . . . . . . . . . . . . . . . . — 19,977 — 19,977

900,172 1,769,336 900,172 1,769,336

Quoted shares in Malaysia . . . . . . . 497 400 — —

Debt Equity Conversion Quoted in

Malaysia

Shares. . . . . . . . . . . . . . . . . . . . 170,960 39,678 170,960 39,678

Shares — with options . . . . . . . . . 41,520 41,520 41,520 41,520

Loan stocks — collateralised. . . . . . 355,499 346,026 355,499 346,026

Warrants . . . . . . . . . . . . . . . . . . 15 42 15 42

Corporate bonds . . . . . . . . . . . . . — 29,516 — 29,516

567,994 456,782 567,994 456,782

Unquoted Securities In Malaysia

Shares. . . . . . . . . . . . . . . . . . . . 36,431 36,431 36,014 36,014

Corporate bonds . . . . . . . . . . . . . 792 792 792 792

37,223 37,223 36,806 36,806

Unquoted Debt Equity Conversion In

Malaysia

Shares. . . . . . . . . . . . . . . . . . . . 125,816 44,969 125,816 44,969

Loan stocks . . . . . . . . . . . . . . . . 501,269 10,210 501,269 10,210

Corporate bonds — secured . . . . . . 121,518 103,014 121,518 103,014

748,603 158,193 748,603 158,193

Total . . . . . . . . . . . . . . . . . . . . . 2,254,489 2,421,934 2,253,575 2,421,117

Less:

Allowance for diminution in value of

— quoted securities . . . . . . . . . . . (205,275) (107,234) (204,849) (106,893)

— unquoted securities . . . . . . . . . . (145,323) (15,051) (145,124) (14,852)

Accretion of discount less amortisation

of premium . . . . . . . . . . . . . . . . 14,699 10,972 14,699 10,972

Net . . . . . . . . . . . . . . . . . . . . . . 1,918,590 2,310,621 1,918,301 2,310,344

F-151

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Market value:

Money Market Securities

Malaysian Government Securities . 1,872 118,122 1,872 118,122

Malaysian Government Investment

Certificates . . . . . . . . . . . . . 152,801 96,288 152,801 96,288

Treasury bills . . . . . . . . . . . . . 319,035 599,203 319,035 599,203

BNM bills . . . . . . . . . . . . . . . 44,817 144,163 44,817 144,163

Cagamas notes . . . . . . . . . . . . — 39,358 — 39,358

Danamodal bonds . . . . . . . . . . . — 74,330 — 74,330

Islamic Khazanah bonds. . . . . . . — 51,306 — 51,306

Quoted shares in Malaysia . . . . . . . 95 60 — —

Debt Equity Conversion Quoted In

Malaysia

Shares. . . . . . . . . . . . . . . . . . 79,196 14,240 79,196 14,240

Shares — with options . . . . . . . 23,840 21,296 23,840 21,296

Loan stocks — collateralised. . . . 374,110 287,098 374,110 287,098

Warrants . . . . . . . . . . . . . . . . 488 440 488 440

Corporate bonds . . . . . . . . . . . — 4,779 — 4,779

The maturity structure of money market instruments held for investment is as follows:

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Maturing within one year . . . . . . . . 865,759 1,674,616 865,759 1,674,616

One year to three years . . . . . . . . . 33,093 92,814 33,093 92,814

Three years to five years . . . . . . . . 1,320 586 1,320 586

Over five years . . . . . . . . . . . . . . — 1,320 — 1,320

900,172 1,769,336 900,172 1,769,336

Certain money market securities held for investment have been sold under repurchase

agreements for funding purposes and their carrying values remain in the respective asset accounts

while obligations to repurchase such securities at an agreed price on a specified future date are

accounted for as a liability as mentioned in Note 16.

F-152

8. LOANS, ADVANCES AND FINANCING

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Term loans and revolving credit

facilities . . . . . . . . . . . . . . . . . . 4,504,989 5,710,939 4,504,554 5,712,750

Housing loans . . . . . . . . . . . . . . . . 4,839,185 4,357,611 4,839,185 4,357,611

Hire-purchase . . . . . . . . . . . . . . . . 18,105,313 16,681,416 18,105,304 16,681,407

Lease receivables/Industrial hire-

purchase . . . . . . . . . . . . . . . . . . 1,322,722 1,681,565 1,322,409 1,681,252

Block discounting . . . . . . . . . . . . . 51,048 64,625 51,046 64,623

Staff loans (of which to Directors:

RM2,148,000; RM2,292,000 in 2003) 104,160 119,166 104,160 119,166

Line of credit . . . . . . . . . . . . . . . . 1,181,073 1,222,914 1,181,073 1,222,914

Other loans . . . . . . . . . . . . . . . . . 1,645,240 1,311,425 1,645,236 1,311,421

31,753,730 31,149,661 31,752,967 31,151,144

Unearned interest and unearned income (3,674,200) (3,420,756) (3,674,200) (3,420,756)

Gross loans, advances and financing . . 28,079,530 27,728,905 28,078,767 27,730,388

Allowance for bad and doubtful debts

and financing:

— Specific . . . . . . . . . . . . . . . . . (677,506) (989,277) (674,950) (986,721)

— General . . . . . . . . . . . . . . . . . (405,255) (388,705) (405,255) (388,705)

Interest/Income-in-suspense . . . . . . . . (947,905) (1,190,485) (941,425) (1,184,005)

26,048,864 25,160,438 26,057,137 25,170,957

(i) The maturity structure of loans, advances and financing is as follows:

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Maturing within one year . . . . . . . . . 8,813,851 9,404,813 8,813,088 9,406,296

One year to three years . . . . . . . . . . 8,445,974 8,061,537 8,445,974 8,061,537

Three years to five years . . . . . . . . . 5,222,211 4,844,000 5,222,211 4,844,000

Over five years . . . . . . . . . . . . . . . 5,597,494 5,418,555 5,597,494 5,418,555

28,079,530 27,728,905 28,078,767 27,730,388

F-153

(ii) Loans, advances and financing analysed by their economic purposes are as follows:

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Agriculture . . . . . . . . . . . . . . . 273,401 262,047 273,401 262,047

Mining and quarrying . . . . . . . . 33,511 37,380 33,511 37,380

Manufacturing . . . . . . . . . . . . . 742,257 830,075 742,257 830,075

Electricity, gas and water . . . . . . 11,507 11,737 11,507 11,737

Construction . . . . . . . . . . . . . . 1,776,356 2,446,872 1,776,356 2,446,872

Real estate . . . . . . . . . . . . . . . 319,434 412,212 319,434 412,212

Purchase of landed property

Residential . . . . . . . . . . . . . 5,073,287 4,639,237 5,073,287 4,639,237

Non-residential . . . . . . . . . . 1,450,322 1,662,696 1,458,596 1,673,216

General commerce . . . . . . . . . . 681,355 623,578 672,318 614,541

Transport, storage and

communication . . . . . . . . . . . 373,583 651,652 373,583 651,652

Finance, insurance and business

services . . . . . . . . . . . . . . . 312,900 357,698 312,900 357,698

Purchase of securities . . . . . . . . 652,792 771,305 652,792 771,305

Purchase of transport vehicles . . . 14,391,180 13,214,714 14,391,180 13,214,714

Consumption credit . . . . . . . . . . 1,674,165 1,425,335 1,674,165 1,425,335

Others. . . . . . . . . . . . . . . . . . 313,480 382,367 313,480 382,367

Gross loans, advances and

financing. . . . . . . . . . . . . . . 28,079,530 27,728,905 28,078,767 27,730,388

(iii) Movements in the non-performing loans and financing (including interest and income

receivables) are as follows:

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Gross

Balance at beginning of year. . . . 4,349,529 3,756,815 4,340,492 3,747,778

Non-performing during the year . . 1,599,089 1,354,384 1,599,089 1,354,384

Reclassification to performing loan (297,627) (709,302) (297,627) (709,302)

Amount recovered . . . . . . . . . . (490,210) (380,063) (490,210) (380,063)

Debt equity conversion . . . . . . . (53,770) (46,712) (53,770) (46,712)

Amount vested over from AMFB

Holdings . . . . . . . . . . . . . . . — 2,386,490 — 2,386,490

Amount written off. . . . . . . . . . (1,055,067) (2,012,083) (1,055,067) (2,012,083)

Balance at end of year . . . . . . . 4,051,944 4,349,529 4,042,907 4,340,492

Less:

Specific allowance . . . . . . . . . . (677,506) (989,277) (674,950) (986,721)

Interest/Income-in-suspense . . . . . (947,905) (1,190,485) (941,425) (1,184,005)

(1,625,411) (2,179,762) (1,616,375) (2,170,726)

Non-performing loans and

financing (net) . . . . . . . . . . . 2,426,533 2,169,767 2,426,532 2,169,766

Ratio of net non-performing loans

to loans, advances and financing 9.17% 8.49% 9.17% 8.49%

F-154

(iv) Movements in the allowance for bad and doubtful debts and financing and interest/

income-in-suspense accounts are as follows:

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

General Allowance

Balance at beginning of year. . 388,705 115,103 388,705 115,103

Allowance made during the year 16,550 17,030 16,550 17,030

Amount vested over from AMFB

Holdings . . . . . . . . . . . . . — 256,572 — 256,572

Balance at end of year . . . . . 405,255 388,705 405,255 388,705

% of total loans less specific

allowance and interest/income-

in-suspense . . . . . . . . . . . 1.53% 1.52% 1.53% 1.52%

Specific Allowance

Balance at beginning of year. . 989,277 1,810,190 986,721 1,807,634

Allowance made during the year 696,900 578,425 696,900 578,425

Amount written back in respect

of recoveries . . . . . . . . . . (268,848) (225,820) (268,848) (225,820)

Net charge to income statements 428,052 352,605 428,052 352,605

Debt equity conversion . . . . . (49,387) (25,000) (49,387) (25,000)

Amount vested over from AMFB

Holdings . . . . . . . . . . . . . — 490,249 — 490,249

Amount written off/Adjustment

to Asset Deficiency Account (690,436) (1,638,767) (690,436) (1,638,767)

Balance at end of year . . . . . 677,506 989,277 674,950 986,721

Interest/Income-in-suspense

Balance at beginning of year. . 1,190,485 557,233 1,184,005 550,753

Allowance made during the year 487,270 533,090 487,270 533,090

Amount written back in respect

of recoveries . . . . . . . . . . (221,362) (154,243) (221,362) (154,243)

Net charge to income statements 265,908 378,847 265,908 378,847

Debt equity conversion . . . . . (135,778) (5,551) (135,778) (5,551)

Amount vested over from AMFB

Holdings . . . . . . . . . . . . . — 636,832 — 636,832

Amount written off/Adjustment

to Asset Deficiency Account (372,710) (376,876) (372,710) (376,876)

Balance at end of year . . . . . 947,905 1,190,485 941,425 1,184,005

F-155

9. OTHER ASSETS

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Deferred assets . . . . . . . . . . . . . . . 72,022 71,137 72,022 71,137

Other receivables, deposits and

prepayments . . . . . . . . . . . . . . . . 196,358 170,127 199,938 168,962

Foreclosed properties net of allowance

for diminution in value of

RM10,000,000 (RM6,000,000

in 2003) . . . . . . . . . . . . . . . . . . 2,607 6,607 2,607 6,607

Amount recoverable from Danaharta . . — 67,497 — 67,497

270,987 315,368 274,567 314,203

The Group and Company

2004 2003

RM’000 RM’000

(i) Deferred Assets

Arising from takeover of Kewangan Usahasama Makmur

Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,184 61,184

Arising from takeover of Abrar Finance Berhad . . . . . . . . . 10,838 9,953

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . 72,022 71,137

In 1988, the Company took over the operations of Kewangan Usahasama Makmur Berhad

(‘‘KUMB’’), a deposit taking co-operative in Malaysia. The Government of Malaysia granted to

KUMB a future tax benefit amounting to RM434 million; subsequently adjusted to RM426.69

million upon finalisation of KUMB’s tax credit in consideration of the deficit in assets taken

over from the deposit taking co-operatives. The tax benefit is a fixed monetary sum and is not

dependent on any changes in tax rates.

The net tax benefit is shown as a deferred asset and the utilisation of the deferred tax

benefit is based on the receipt of notices of assessment and subsequent remission of the tax

liabilities by the relevant authority net of the amount payable to the tax authorities for purposes

of Section 108 tax credit.

Subsequent to the vesting of assets and liabilities from AMFB Holdings, the deferred

assets arising from the takeover of Abrar Finance Berhad were vested over to the Company.

This deferred assets arose when AMFB Holdings participated in a scheme approved by the

Minister of Finance and sanctioned by the High Court of Malaya, whereby certain assets and

liabilities of Abrar Finance Berhad (‘‘AFB’’), a licensed finance company incorporated in

Malaysia, were transferred with effect from 18 December 1998, to AMFB Holdings with

financial assistance from Bank Negara Malaysia (‘‘BNM’’).

The net asset deficiency representing the excess of liabilities over the assets transferred

from AFB arising from the scheme, is shown as deferred assets, and is reduced progressively

by net income derived from the utilisation of the deposit placed by BNM, as mentioned in Note

15, and net recoveries of defaulted loans of AFB computed based on a formula determined by

BNM.

(ii) Included under the gross amount of other receivables, deposits and prepayments of the

Group and Company are outstanding balances totalling RM6,185,000 (RM10,596,000 in

2003) and RM14,447,000 (RM18,112,000 in 2003) respectively owing by other related

companies.

F-156

(iii) Other receivables, deposits and prepayments are net of allowance for doubtful debts of the

Group and Company of RM4,796,000 (RM12,745,000 in 2003) and RM2,684,000

(RM2,220,000 in 2003) respectively.

The Group and Company

2004 2003

RM’000 RM’000

(iv) Amount recoverable from Danaharta

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . 67,497 157,120

Amount vested over from AMFB Holdings . . . . . . . . . . . — 1,606

Allowance made during the year . . . . . . . . . . . . . . . . . (62,794) (89,741)

Amount recovered . . . . . . . . . . . . . . . . . . . . . . . . . . (4,703) (1,488)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . — 67,497

10. STATUTORY DEPOSIT WITH BANK NEGARA MALAYSIA

The non-interest bearing statutory deposit is maintained with Bank Negara Malaysia in

compliance with Section 37(1)I of the Central Bank of Malaysia Act, 1958, the amounts of which

are determined as a set percentage of total eligible liabilities.

F-157

11. INVESTMENT IN SUBSIDIARY COMPANIES

The Company

2004 2003

RM’000 RM’000

Unquoted shares at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,280 41,280

Allowance for diminution in value . . . . . . . . . . . . . . . . . . . . (11,501) (11,501)

Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,779 29,779

The subsidiary companies, which are all incorporated in Malaysia, are as follows:

Name of Company Principal Activity

Effective Equity Interest

2004 2003

% %

MBf Nominees (Tempatan) Sdn. Bhd. Nominee company 100.0 100.0

MBf Information Services Sdn. Bhd. . Rental of computer equipment

and the provision of related

support services

100.0 100.0

AmProperty Holdings Sdn. Bhd. . . . . Property investment 100.0 100.0

MBf Equity Partners Sdn. Bhd. . . . . Venture capital 100.0 100.0

MBf Trustees Berhad . . . . . . . . . . Trustee services 60.0 60.0

Bougainvillaea Development Sdn.

Bhd. . . . . . . . . . . . . . . . . . . .

Property holding 100.0 100.0

Natprop Sdn. Bhd. . . . . . . . . . . . . Investment holding 100.0 100.0

Teras Oak Pembangunan Sdn. Bhd. . . Dormant 100.0 100.0

Komuda Credit & Leasing Sdn. Bhd. Dormant 100.0 100.0

MBf Property Trust Management

Berhad . . . . . . . . . . . . . . . . . .

Dormant 100.0 100.0

Everflow Credit & Leasing

Corporation Sdn. Bhd. . . . . . . . .

Dormant 100.0 100.0

Komewah Credit & Leasing Sdn. Bhd. Dormant 100.0 100.0

Li & Ho Sdn. Bhd. . . . . . . . . . . . Dormant 100.0 100.0

Malco Properties Sdn. Bhd. . . . . . . Dormant 51.0 51.0

Annling Sdn. Bhd. . . . . . . . . . . . . Dormant 100.0 100.0

MBf Nominees (Asing) Sdn. Bhd. . . Dormant 100.0 100.0

Lekir Development Sdn. Bhd. . . . . . Ceased operations 100.0 100.0

Crystal Land Sdn. Bhd. . . . . . . . . . Ceased operations 80.0 80.0

Horizon View Sdn. Bhd. . . . . . . . . Dormant —* 100.0

MBf Venture Partners Bhd.. . . . . . . Dormant —* 100.0

* These subsidiary companies have been struck-off from the Register of the Companies Commission of Malaysia

pursuant to Section 308 of the Companies Act, 1965.

F-158

12. INVESTMENT IN ASSOCIATED COMPANIES

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Unquoted shares, at cost . . . . . . . . . 100 100 150 150

Share of post-acquisition results,

net of tax . . . . . . . . . . . . . . . . . 150 15 — —

250 115 150 150

The associated companies, which are incorporated in Malaysia, are:

Principal Activity

AmTrustee Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trustee Services

MBf Trustees Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . . Trustee Services

The effective equity interests are as follows:

The Group The Company

Effective Equity Interest Effective Equity Interest

2004 2003 2004 2003

AmTrustee Berhad . . . . . . . . . . . . . 20% 20% 20% 20%

MBf Trustees Berhad . . . . . . . . . . . 60% 60% 20% 20%

The investment in MBf Trustees Berhad is classified as investment in subsidiary companies at

Group level through additional equity interest held by another subsidiary company.

As at 31 March 2004, the carrying value of the investment in associated companies is

represented by:

The Group

Effective Equity Interest

2004 2003

RM’000 RM’000

Group’s share of aggregate net tangible assets . . . . . . . . . . . . . 628 494

F-159

13. PROPERTY AND EQUIPMENT

The Group

Freehold

land and

building

Leasehold

land and

building

Leasehold

improvements

Office

equipment,

furniture

and fittings

Computer

equipment

and

software

Motor

vehicles Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

COST

At beginning of year. . . . 312,613 36,890 105,647 74,640 343,561 8,215 881,566

Additions . . . . . . . . . . . — — 10,479 7,395 27,860 549 46,283

Disposals . . . . . . . . . . . — — (144) (499) (541) (2,850) (4,034)

Write offs . . . . . . . . . . — — 31 (3) (176) — (148)

Reclassification/Transfer. . — — 1,022 1,093 (8,577) — (6,462)

At end of year . . . . . . . 312,613 36,890 117,035 82,626 362,127 5,914 917,205

ACCUMULATED

DEPRECIATION

At beginning of year. . . . 28,505 4,000 81,894 54,434 267,200 6,184 442,217

Current depreciation . . . . 5,127 787 9,449 6,633 31,519 803 54,318

Disposals . . . . . . . . . . . — — (104) (457) (536) (2,829) (3,926)

Write offs . . . . . . . . . . — — — (3) — — (3)

At end of year . . . . . . . 33,632 4,787 91,239 60,607 298,183 4,158 492,606

NET BOOK VALUE

As at 31.03.2004 . . . . . . 278,981 32,103 25,796 22,019 63,944 1,756 424,599

As at 31.03.2003 . . . . . . 284,108 32,890 23,753 20,206 76,361 2,031 439,349

Depreciation charge for the

year ended 31.03.2003 . 5,257 812 8,285 5,492 61,149 748 81,743

The Company

Freehold

land and

building

Leasehold

land and

building

Leasehold

improvements

Office

equipment,

furniture

and fittings

Computer

equipment

and

software

Motor

vehicles Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

COST

At beginning of year. . . . 263,848 26,420 105,647 74,633 343,561 8,215 822,324

Additions . . . . . . . . . . . — — 10,445 7,396 27,860 549 46,250

Disposals . . . . . . . . . . . — — (144) (499) (541) (2,850) (4,034)

Write offs . . . . . . . . . . — — 31 (3) (176) — (148)

Reclassification/Transfer. . — — 1,022 1,093 (8,577) — (6,462)

At end of year . . . . . . . 263,848 26,420 117,001 82,620 362,127 5,914 857,930

ACCUMULATED

DEPRECIATION

At beginning of year. . . . 21,952 2,257 81,894 54,428 267,200 6,184 433,915

Current depreciation . . . . 4,457 613 9,443 6,633 31,519 803 53,468

Disposals . . . . . . . . . . . — — (104) (457) (536) (2,829) (3,926)

Write offs . . . . . . . . . . — — — (3) — — (3)

At end of year . . . . . . . 26,409 2,870 91,233 60,601 298,183 4,158 483,454

NET BOOK VALUE

As at 31.03.2004 . . . . . . 237,439 23,550 25,768 22,019 63,944 1,756 374,476

As at 31.03.2003 . . . . . . 241,896 24,163 23,753 20,205 76,361 2,031 388,409

Depreciation charge for the

year ended 31.03.2003 . 4,623 602 8,285 5,492 61,149 748 80,899

F-160

(a) Details of leasehold land and buildings are as follows:

The Group

Long term

leasehold land

and buildings

Short term

leasehold land

and buildings Total

RM’000 RM’000 RM’000

Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,434 1,456 36,890

Accumulated Depreciation . . . . . . . . . . . . . (4,312) (475) (4,787)

31,122 981 32,103

The Company

Long term

leasehold land

and buildings

Short term

leasehold land

and buildings Total

RM’000 RM’000 RM’000

Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,165 255 26,420

Accumulated Depreciation . . . . . . . . . . . . . (2,663) (207) (2,870)

23,502 48 23,550

The long term leasehold properties for the Group and the Company are for lease

periods of 66–999 years and 85–855 years respectively and with unexpired lease periods

of 54–875 years and 63–788 years respectively.

The short term leasehold properties for the Group and the Company are for lease

periods of 20–99 years and 20 years respectively and with unexpired lease periods of

2–35 years and 2 years respectively.

(b) Included in the Net Book Value of Computer Equipment and Software is Capital Work-in-

Progress for the Group and Company of RM29,103,000 (RM23,545,000 in 2003).

(c) Details of fully depreciated property and equipment of the Group and the Company which

are still in use are as follows:

The Group and Company

Freehold

land and

building

Leasehold

improvements

Office

equipment,

furniture

and

fittings

Computer

equipment

and

software

Motor

vehicles Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Cost . . . . . . . . . . . . 123 54,711 36,394 201,300 2,179 294,707

F-161

14. DEPOSITS FROM CUSTOMERS

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Savings deposits . . . . . . . . . . . . . . 2,579,429 2,307,213 2,579,429 2,307,213Fixed/Investment deposits . . . . . . . . . 17,794,831 17,292,097 17,796,625 17,293,950Negotiable certificates of deposits . . . 37,533 9,884 37,533 9,884

20,411,793 19,609,194 20,413,587 19,611,047

(i) The maturity structure of deposits from customers is as follows:

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Due within six months . . . . . . . 15,130,704 14,420,259 15,132,498 14,422,112Six months to one year . . . . . . . 4,258,784 3,887,049 4,258,784 3,887,049One year to three years . . . . . . . 666,963 851,159 666,963 851,159Three years to five years . . . . . . 355,342 450,727 355,342 450,727

20,411,793 19,609,194 20,413,587 19,611,047

(ii) The deposits are sourced from the following types of customers:

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Business enterprises . . . . . . . . . 3,160,118 3,375,566 3,161,912 3,377,419Individuals . . . . . . . . . . . . . . . 14,911,651 14,014,153 14,911,651 14,014,153Others. . . . . . . . . . . . . . . . . . 2,340,024 2,219,475 2,340,024 2,219,475

20,411,793 19,609,194 20,413,587 19,611,047

15. DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Licensed banks . . . . . . . . . . . . . . . 1,060,804 918,782 1,060,804 918,782Licensed finance companies . . . . . . . — 10,000 — 10,000Non-banking institutions . . . . . . . . . 3,194,607 3,372,358 3,194,607 3,372,358Bank Negara Malaysia (‘‘BNM’’) . . . . 808,000 808,000 808,000 808,000

5,063,411 5,109,140 5,063,411 5,109,140

Included under deposits and placements of other financial institutions of the Group and of theCompany are the following:

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Negotiable instruments of deposits . . . 2,182,031 1,612,172 2,182,031 1,612,172Interbank borrowing (Note 4) . . . . . . 200 110,550 200 110,550

2,182,231 1,722,722 2,182,231 1,722,722

F-162

Deposits from BNM represent long-term deposits and interest-free loans placed with the Group

and the Company in connection with the transfer of certain assets and liabilities of Abrar Finance

Berhad and Kewangan Usahasama Makmur Berhad to the Company as mentioned in Note 9.

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Soft deposit . . . . . . . . . . . . . . . . . 135,000 135,000 135,000 135,000

Soft loan . . . . . . . . . . . . . . . . . . . 513,000 513,000 513,000 513,000

Commercial loan . . . . . . . . . . . . . . 160,000 160,000 160,000 160,000

808,000 808,000 808,000 808,000

Included above are soft deposit of RM135,000,000 (RM135,000,000 in 2003) and soft loan of

RM180,000,000 (RM180,000,000 in 2003) bearing interest of 1% (1% in 2003) per annum. The

remaining soft loan and the commercial loan are interest free. The soft loan of RM180,000,000

(RM180,000,000 in 2003) is repayable on 18 December 2008 or when the deferred assets relating to

AFB referred to in Note 9 are fully utilised, whichever is earlier. The remaining loans and soft

deposit are repayable when the deferred assets relating to KUMB referred to in Note 9 are fully

utilised.

16. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

Securities sold under repurchase agreements represent the obligations to repurchase these

securities sold as mentioned in Note 7.

17. AMOUNT DUE TO CAGAMAS BERHAD

Amount due to Cagamas Berhad represents the proceeds received from loans (excluding Islamic

financing) sold directly and indirectly to Cagamas Berhad with recourse to the Company. Under this

arrangement, the Company undertakes to administer the loans on behalf of Cagamas Berhad and to

buy back any loans which are regarded as defective based on prudential criteria.

18. OTHER LIABILITIES

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Provision for taxation . . . . . 253 508 — —

Lease deposits and advance

rentals . . . . . . . . . . . . . 42,005 48,139 42,005 48,139

Interest payable . . . . . . . . . 172,533 178,170 172,533 178,170

Other creditors and accruals . (i) 507,139 364,379 502,471 354,415

General allowance for

commitment and

contingencies . . . . . . . . . (ii) 52,000 15,000 52,000 15,000

Profit equalisation reserve . . 51,999 5,023 51,999 5,023

825,929 611,219 821,008 600,747

(i) Other creditors and accruals

Included under other creditors and accruals of the Group and of the Company are

outstanding balances totalling RM5,895,000 (RM22,100,000 in 2003) and RM6,420,000

(RM22,625,000 in 2003) respectively owing to other related companies.

F-163

(ii) General allowance for commitment and contingencies

The movements in general allowance for commitment and contingencies are as follows:

The Group and Company

2004 2003

RM’000 RM’000

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . 15,000 —

Allowance made during the year . . . . . . . . . . . . . . . . . 37,000 —

Amount vested over from AMFB Holdings . . . . . . . . . . . — 15,000

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . 52,000 15,000

19. SUBORDINATED TERM LOAN

The subordinated term loan is unsecured, subordinated to all other liabilities and obtained from

Danamodal Nasional Berhad (‘‘Danamodal’’), a company incorporated for the purpose of

recapitalising the local banking and financial institutions, to strengthen the Company’s capital base.

Pursuant to the acquisition of the Company by AMFB Holdings on 20 December 2001,

Danamodal has extended the loan for a further period of ten (10) years to be repaid on 20 December

2011. The loan bore interest at 6.5% per annum for the first five years and at 7.5% per annum or

1.0% above 3 months KLIBOR, whichever is higher, for the next five years. The interest is payable

on a half yearly basis.

On 28 October 2003, the Company entered into a Supplemental Facility Agreement with

Danamodal whereby the Subordinated term loan was novated to Astute Assets Berhad, a special

purpose vehicle. In accordance with the new terms of agreement, interest on the loan is charged at

6.5% per annum until 19 December 2006, 7.0% per annum from 20 December 2006 until 19

December 2007, and 7.5% per annum from 20 December 2007 until 19 December 2011.

20. SUBORDINATED LOAN NOTES

The subordinated loan notes were unsecured, subordinated to all other liabilities and issued to

AMFB Holdings on 14 August 2002 as settlement of part of the consideration due in respect of the

vesting of the assets and liabilities of AMFB Holdings to the Company. The loan notes were issued

for a period of ten years to be repaid on 14 August 2012 and bore interest at 7.0% per annum,

payable on a half yearly basis.

On 15 October 2003, the Company made an early settlement of the entire subordinated loan

notes.

21. REDEEMABLE UNSECURED SUBORDINATED BONDS

Pursuant to a Trust Deed dated 24 April 2003, the Company issued RM200,000,000 nominal

amount of Negotiable Interest-bearing Redeemable Unsecured Subordinated Bonds (‘‘Subordinated

Bonds’’) for the purpose of increasing the Company’s capital funds.

The salient features of the Subordinated Bonds are as follows:

(a) The Subordinated Bonds bear interest at 7.95% per annum for the first five years and

subsequently at 8.45% to 10.45% per annum. The interest is payable on a semi-annual

basis.

(b) The Subordinated Bonds are for a period of ten years maturing on 30 April 2013.

However, subject to the prior approval of Bank Negara Malaysia, the Company may

redeem the Subordinated Bonds on 30 April 2008 or on each anniversary date thereafter,

at nominal value together with interest accrued to the date of redemption.

F-164

22. MINORITY INTERESTS

Minority interests in the Group represent that part of the net results of operations, or of net

assets, of subsidiary companies attributable to shares owned, directly or indirectly other than by the

Company or subsidiary companies.

The movements in minority interests in subsidiary companies are as follows:

The Group

2004 2003

RM’000 RM’000

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . 113 119

Share in net results of subsidiary companies . . . . . . . . . . . . . . (12) (6)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 113

23. SHARE CAPITAL

The Group and Company

2004 2003

RM’000 RM’000

Authorised

Ordinary shares

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . 1,386,250 4,000,000

Capital reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (2,613,750)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . 1,386,250 1,386,250

8% Irredeemable Non-Cumulative Convertible Preference shares 2,500,000 2,500,000

3,886,250 3,886,250

Issued and fully paid

Ordinary shares

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . 528,402 2,613,750

Capital reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (2,613,750)

Issued during the year . . . . . . . . . . . . . . . . . . . . . . . . . — 528,402

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . 528,402 528,402

During the previous financial year, on 21 May 2002, the Company had undertaken a capital

reduction exercise to cancel the portion of its paid up capital which was lost or unrepresented by

available assets. The capital reduction exercise included the following:

(a) the cancellation and reduction in the authorized capital from RM6,500.0 million

comprising 8,000.0 million ordinary shares of RM0.50 each and 5,000 million

preference shares of RM0.50 each to RM3,886.2 million, comprising 2,772.5 million

ordinary shares of RM0.50 each and 5,000.0 million 8% irredeemable non-cumulative

convertible preference shares of RM0.50 each;

(b) the cancellation and reduction of the issued and paid up capital from RM2,613.7 million,

comprising 5,227.5 million ordinary shares of RM0.50 each, to RM2, comprising 4

ordinary shares of RM0.50 each; and

(c) the consolidation of the authorized and paid up capital of every two existing shares of

RM0.50 each to one share of RM1.00 each.

F-165

On 18 July 2002, the Company issued 528.4 million ordinary shares of RM1.00 each to AMFB

Holdings at RM1.71906 per share as settlement for part of the consideration due in respect of the

vesting of business from AMFB Holdings to the Company.

24. RESERVES

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Non-distributable Reserves:

Share premium . . . . . . . . . . . . . . . 379,953 379,953 379,953 379,953

Statutory reserve . . . . . . . . . . . . . . 483,070 214,382 483,070 214,382

Capital reserve . . . . . . . . . . . . . . . 237,845 392,045 237,845 392,045

Total non-distributable reserves . . . . . 1,100,868 986,380 1,100,868 986,380

Distributable Reserves:

Unappropriated profit . . . . . . . . . . . 857,216 430,718 849,257 426,369

1,958,084 1,417,098 1,950,125 1,412,749

Movements in reserves are shown in the statements of changes in equity on pages 14 and 15.

Share premium is used to record premium arising from new shares issued in the Company.

The statutory reserve is maintained in compliance with Section 36 of the Banking and Financial

Institutions Act, 1989 and is not distributable as cash dividends.

The capital reserve is in respect of the Deferred Tax Asset recognised on the Company’s

unabsorbed tax losses. Transfer from the capital reserve to unappropriated profit is effected upon the

utilisation of the unabsorbed losses against the taxable income of the Company.

Distributable reserves are those available for distribution by way of dividends. There is no tax

credit available under Section 108 of the Income Tax Act, 1967 to frank the payment of dividends

out of the Company’s distributable reserves as at 31 March 2004.

25. INTEREST INCOME

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Loans and advances . . . . . . . . . . . . 2,141,921 2,103,757 2,142,754 2,104,830

Money at call, deposits and placements

with financial institutions . . . . . . . 79,344 67,779 79,344 67,779

Dealing securities. . . . . . . . . . . . . . 892 — 892 —

Investment securities . . . . . . . . . . . . 33,239 28,627 33,239 28,627

Others. . . . . . . . . . . . . . . . . . . . . 23,583 17,630 23,583 17,630

2,278,979 2,217,793 2,279,812 2,218,866

Net interest suspended . . . . . . . . . . . (247,371) (341,495) (247,371) (341,495)

Accretion of discounts/(amortisation of

premium) . . . . . . . . . . . . . . . . . 16,755 20,631 16,755 20,631

2,048,363 1,896,929 2,049,196 1,898,002

F-166

26. INTEREST EXPENSE

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Deposits and placements . . . . . . . . . 698,816 673,102 698,898 673,444

Amounts due to Cagamas Berhad . . . . 147,186 141,599 147,186 141,599

Others. . . . . . . . . . . . . . . . . . . . . 112,990 85,555 112,975 85,614

958,992 900,256 959,059 900,657

27. LOAN AND FINANCING LOSS AND ALLOWANCES

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Allowance for bad and doubtful debts

and financing:

— specific allowance (net) . . . . . . . 428,052 352,605 428,052 352,605

— general allowance . . . . . . . . . . 16,550 17,030 16,550 17,030

Bad debts and financing recovered . . . (209,634) (90,651) (209,634) (113,308)

234,968 278,984 234,968 256,327

Allowance on amount recoverable from

Danaharta . . . . . . . . . . . . . . . . . 62,794 89,741 62,794 89,741

297,762 368,725 297,762 346,068

28. NON-INTEREST INCOME

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Fee Income:

Commissions. . . . . . . . . . . . . . . . 15,978 9,688 15,978 9,688Guarantee fees . . . . . . . . . . . . . . 999 1,181 999 1,181Other fee income . . . . . . . . . . . . . 11,908 10,770 11,908 10,767

28,885 21,639 28,885 21,636

Investment and Trading Income:

Net gain from disposal of investmentsecurities . . . . . . . . . . . . . . . . — 2,821 — 2,821

Loss from sale of shares quoted inMalaysia . . . . . . . . . . . . . . . . . (8,273) (6,415) (8,273) (6,415)

Gross dividends from investmentsecurities:Shares quoted in Malaysia . . . . . 3,091 3,474 3,091 3,473Unquoted shares . . . . . . . . . . . 7,078 595 7,023 595

1,896 475 1,841 474

F-167

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Other Income:

Gain on disposal of leased assets . . . 8 14 8 14

Rental income . . . . . . . . . . . . . . . 8,659 9,891 8,151 9,431

Gain on disposal of property and

equipment . . . . . . . . . . . . . . . . 1,134 5 1,134 5

Gain on disposal of development

properties . . . . . . . . . . . . . . . . — 50 — —

Other non-operating income . . . . . . 58 78 — 3

9,859 10,038 9,293 9,453

40,640 32,152 40,019 31,563

29. STAFF COSTS AND OVERHEADS

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Personnel/Staff costs . . . . . . . . . . . . 194,366 156,294 194,366 156,294

Establishment costs. . . . . . . . . . . . . 137,580 158,300 140,794 161,196

Marketing and communication expenses 148,418 74,032 148,418 74,032

Administration and general expenses . . 45,411 35,807 46,498 35,676

525,775 424,433 530,076 427,198

The above expenditure includes the following statutory disclosure:

Directors’ remuneration (Note 31) . . . 2,611 991 2,611 991

Rental of premises

— subsidiary companies . . . . . . . . — — 5,257 5,257

— others . . . . . . . . . . . . . . . . . . 17,534 16,827 17,534 16,827

Lease rental . . . . . . . . . . . . . . . . . 1,338 1,358 1,338 1,358

Depreciation of property and equipment

(Note 13) . . . . . . . . . . . . . . . . . 54,318 81,743 53,468 80,899

Auditors’ remuneration:

Statutory audit . . . . . . . . . . . . . . 316 316 300 300

Special audit. . . . . . . . . . . . . . . . 120 210 120 210

Property and equipment written off . . . 145 474 145 474

Allowance for diminution in value of

foreclosed property . . . . . . . . . . . 4,000 — 4,000 —

Allowance for doubtful debts . . . . . . 464 — 464 —

The total number of employees of the Group and of the Company as at 31 March 2004 was

5,220 (4,817 in 2003).

Staff costs include salaries, bonuses, contributions to employees’ provident fund and all other

staff related expenses. Contributions to employees’ provident fund of the Group and of the Company

amounted to RM19,046,000 (RM14,565,000 in 2003).

F-168

30. HOLDING AND ULTIMATE HOLDING COMPANIES AND SIGNIFICANT RELATED

PARTY TRANSACTIONS AND BALANCES

The holding and ultimate holding companies are AMFB Holdings Berhad and AMMB Holdings

Berhad respectively, both of which are incorporated in Malaysia.

During the financial year, the significant related party transactions and balances are as follows:

(a) The significant transactions and balances of the Company with its holding and ultimate

holding companies and related companies are as follows:

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Income

Holding companyInterest on fixed deposits

AMFB Holdings Berhad . . . . . — 137 — 137

Related companiesInterest on fixed deposits

AmMerchant Bank Berhad . . . 25,624 18,111 25,624 18,111

AmBank Berhad . . . . . . . . . 7,544 2,723 7,544 2,723

33,168 20,834 33,168 20,834

Interest on investment securities

AmMerchant Bank Berhad . . . 9,187 1,205 9,187 1,205

AmBank Berhad . . . . . . . . . 2,042 — 2,042 —

11,229 1,205 11,229 1,205

Interest on loans and advances

AmProperty Holdings Sdn Bhd — — 832 1,074

Arab-Malaysian Credit Berhad . 36 180 36 180

36 180 868 1,254

Other income

AmBank Berhad . . . . . . . . . — 53 — 53

Arab-Malaysian Credit Berhad . 350 391 350 391

AmSecurities Berhad . . . . . . . 435 239 435 239

AmAssurance Berhad . . . . . . 15,343 8,965 15,343 8,965

AmTrustee Berhad . . . . . . . . — 834 — 834

AmInvestment Services Berhad 1,070 — 1,070 —

17,198 10,482 17,198 10,482

F-169

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Expenditure

Ultimate holding companyInterest on deposits and placements

AMMB Holdings Berhad . . . . 270 450 270 450

Holding companyInterest on deposits and placements

AMFB Holdings Berhad . . . . . — 747 — 747

Interest on subordinated loan notes

AMFB Holdings Berhad . . . . . 9,445 11,027 9,445 11,027

Related companiesInterest on deposits and placements

AmMerchant Bank Berhad . . . 944 3,463 944 3,463

AmAssurance Berhad . . . . . . 7,029 5,677 7,029 5,677

AmBank Berhad . . . . . . . . . 1,119 104 1,119 104

AmProperty Trust Management

Berhad . . . . . . . . . . . . . . — 2 — 2

AmTrustee Berhad . . . . . . . . 12 16 12 16

AmSecurities Berhad . . . . . . . 9 47 9 47

AmFutures Sdn Bhd . . . . . . . 5 — 5 —

MBf Information Services Sdn

Bhd . . . . . . . . . . . . . . . . — — 42 34

MBf Nominees (Tempatan) Sdn

Bhd . . . . . . . . . . . . . . . . — — 1 1

MBf Trustees Berhad . . . . . . — — 8 8

AmProperty Holdings Sdn Bhd — — 2 2

Everflow Credit & Leasing

Corporation Sdn Bhd . . . . . — — — 2

Natprop Sdn Bhd . . . . . . . . . — — — 290

Komuda Credit & Leasing Sdn

Bhd . . . . . . . . . . . . . . . . — — — 3

Lekir Development Sdn Bhd . . — — — 3

Teras Oak Pembangunan Sdn

Bhd . . . . . . . . . . . . . . . . — — — 14

Bougainvillaea Development Sdn

Bhd . . . . . . . . . . . . . . . . — — 13 45

9,118 9,309 9,184 9,711

Other expenses

AmAssurance Berhad . . . . . . 1,892 812 1,892 812

Arab-Malaysian Credit Berhad . 1,314 648 1,314 648

AmInvestment Management Sdn

Bhd . . . . . . . . . . . . . . . . 81 — 81 —

AmProperty Trust Management

Berhad . . . . . . . . . . . . . . 1,951 477 1,951 477

AmProperty Holdings Sdn Bhd — — 4,150 4,150

Bougainvillaea Development Sdn

Bhd . . . . . . . . . . . . . . . . — — 1,106 1,106

5,238 1,937 10,494 7,193

F-170

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Amount due from

Related companiesLoans and advances

AmMerchant Bank Berhad . . . — 340 — 340

AmProperty Holdings Sdn Bhd — — 8,273 10,519

Arab-Malaysian Credit Berhad . — 4,179 — 4,179

— 4,519 8,273 15,038

Deposits and placements

AmMerchant Bank Berhad . . . 727,500 1,041,400 727,500 1,041,400

AmBank Berhad . . . . . . . . . — 225,000 — 225,000

727,500 1,266,400 727,500 1,266,400

Investment securities

AmMerchant Bank Berhad . . . 393,908 306,205 393,908 306,205

AmBank Berhad . . . . . . . . . — 57,326 — 57,326

393,908 363,531 393,908 363,531

Interest receivable

AmMerchant Bank Berhad . . . 1,174 1,096 1,174 1,096

AmBank Berhad . . . . . . . . . — 297 — 297

1,174 1,393 1,174 1,393

F-171

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Amount due to

Ultimate holding companyDeposits and placements

AMMB Holdings Berhad . . . . 2,560 7,175 2,560 7,175

Interest payable

AMMB Holdings Berhad . . . . 5 27 5 27

Holding companySubordinated loan notes

AMFB Holdings Berhad . . . . . — 250,000 — 250,000

Interest payable

AMFB Holdings Berhad . . . . . — 2,205 — 2,205

Related companiesDeposits and placements

AmMerchant Bank Berhad . . . 277,700 52,861 277,700 52,861

AmBank Berhad . . . . . . . . . 42,464 51,000 42,464 51,000

AmSecurities Berhad . . . . . . . — 6,400 — 6,400

AmAssurance Berhad . . . . . . 100,382 100,370 100,382 100,370

AmTrustee Berhad . . . . . . . . 100 808 100 808

MBf Information Services Sdn

Bhd . . . . . . . . . . . . . . . . — — 1,277 1,236

MBf Nominees (Tempatan) Sdn

Bhd . . . . . . . . . . . . . . . . — — 24 40

MBf Trustees Berhad . . . . . . — — 218 242

AmProperty Holdings Sdn Bhd — — — 69

Bougainvillaea Development Sdn

Bhd . . . . . . . . . . . . . . . . — — 275 267

420,646 211,439 422,440 213,293

Interest payable

AmMerchant Bank Berhad . . . — 3 — 3

AmBank Berhad . . . . . . . . . — 70 — 70

AmSecurities Berhad . . . . . . . — 12 — 12

AmAssurance Berhad . . . . . . 1,107 1,128 1,107 1,128

AmTrustee Berhad . . . . . . . . 1 — 1 —

1,108 1,213 1,108 1,213

F-172

(b) Directors related transactions

The significant non-banking transactions of the Group and the Company with companies

in which Tan Sri Dato’ Azman Hashim is deemed to have a substantial interest, are as follows:

Company Types of transactions 2004 2003

RM’000 RM’000

Expense

Blue Star Infotech (M) Sdn Bhd . . Computer maintenance and

consultancy services

1,520 1,222

Gamarapi Sdn Bhd . . . . . . . . . . . Computer maintenance and

consultancy services

2,094 258

Cyber Village Sdn Bhd . . . . . . . . Computer maintenance and

consultancy services

— 35

Conquest Marketing Sdn Bhd . . . . Advertising 707 2,795

Paragon Premiums Sdn Bhd . . . . . Advertising — 115

Arab-Malaysian Realty Sdn Bhd. . . Rental of premises and property

maintenance costs

261 256

Taifab Properties Sdn Bhd . . . . . . Rental of premises 193 142

Melawangi Sdn Bhd . . . . . . . . . . Rental of premises — 96

Aon Insurance Brokers (M) Sdn Bhd Insurance brokerage fees 3,010 —

Capital expenditure

Gamarapi Sdn Bhd . . . . . . . . . . . Purchase of computer hardware,

software and related

consultancy services

3,092 1,400

Blue Star Infotech (M) Sdn Bhd . . Purchase of computer hardware,

software and related

consultancy services

389 1,072

Infotech Project Sdn Bhd . . . . . . . Purchase of computer hardware,

software and related

consultancy services

412 516

The significant non-banking transactions of the Group and the Company with companies

in which Prof. Tan Sri Dato’ Dr. Mohd. Rashdan Haji Baba is deemed to have a substantial

interest, are as follows:

Company Types of transactions 2004 2003

RM’000 RM’000

Expense

Computer Systems Advisers (M)

Berhad . . . . . . . . . . . . . . . . .

Computer maintenance and

consultancy services

2,454 1,558

Capital expenditure

Computer Systems Advisers (M)

Berhad . . . . . . . . . . . . . . . . .

Purchase of computer hardware,

software and related

consultancy services

2,006 923

As at 31 March 2004 and 31 March 2003, there are no outstanding balances arising from

directors related transactions.

F-173

31. DIRECTORS’ REMUNERATION

Forms of remuneration in aggregate for all the Group’s and the Company’s directors charged to

the income statements for the financial year are as follows:

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Directors of the Company

Executive directors

Salaries and other remuneration . . . . 1,973 723 1,973 723

Benefits-in-kind . . . . . . . . . . . . . . 132 30 132 30

2,105 753 2,105 753

Non-executive directors

Other remuneration . . . . . . . . . . . . 506 238 506 238

506 238 506 238

Total directors’ remuneration. . . . . . . 2,611 991 2,611 991

The remuneration attributable to the Managing Director of the Company, including benefits-in-

kind during the financial year amounted to RM1,516,344 (RM505,864 in 2003).

32. TAXATION

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Estimated current tax payable . . . . . . (944) (1,285) — —

Share in taxation of associated company (73) (37) — —

Net transfer to deferred taxation

(Note 33) . . . . . . . . . . . . . . . . . 55,377 24,313 55,120 24,570

54,360 22,991 55,120 24,570

Over provision of current taxation in

respect of prior years . . . . . . . . . . 78 20 — —

Prior year tax expense in respect of

business vested over from AMFB

Holdings . . . . . . . . . . . . . . . . . . (20,859) — (20,859) —

Net tax credit . . . . . . . . . . . . . . . . 33,579 23,011 34,261 24,570

Taxation of the Group is in respect of estimated taxable income of certain subsidiary

companies. There is no tax charge for the Company for the current year and prior year due to the

utilisation of unabsorbed tax losses and capital allowances brought forward of RM911.6 million

(RM401.9 million in 2003) and RM10.6 million (29.4 million in 2003) respectively.

As at 31 March 2004, the Company has unabsorbed tax losses and unutilised capital allowances

amounting to approximately RM1,442.1 million (RM2,353.7 million in 2003) and RM123.3 million

(RM133.9 million in 2003) respectively, which can be used to offset future taxable profits subject to

agreement with the Inland Revenue Board.

F-174

The prior year taxation in respect of AMFB Holdings’ business has been vested over to the

Company pursuant to the Vesting Order of the High Court of Malaya dated 21 May 2002, whereby

all rights and liabilities accruing to, owed or incurred by AMFB Holdings in relation to its finance

company business have been transferred to and assumed by the Company with effect from 15 June

2002.

A reconciliation of income tax expense applicable to profit before taxation at the statutory

income tax rate to income tax expense at the effective income tax rate of the Group and of the

Company is as follows:

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Profit before taxation . . . . . . . . . . . 507,395 341,056 503,115 360,979

Taxation at Malaysian statutory tax rate

of 28% (28% as at 31 March 2003) . 142,025 95,496 140,872 101,074

Income not subject to tax. . . . . . . . . (2,357) (157) (1,639) (157)

Expenses not deductible for tax

purposes . . . . . . . . . . . . . . . . . . 15,255 10,235 14,930 3,078

Deferred tax asset not recognised in

prior years. . . . . . . . . . . . . . . . . (209,283) (128,565) (209,283) (128,565)

Tax credit for the year . . . . . . . . . . (54,360) (22,991) (55,120) (24,570)

33. DEFERRED TAX ASSET

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Balance at beginning of year

As previously reported . . . . . . . . . (537,022) — (537,279) —

Prior year adjustment (Note 46)* . . . (108,837) (32,229) (108,837) (32,229)

As restated . . . . . . . . . . . . . . . . . (645,859) (32,229) (646,116) (32,229)

Transfer from income statements . . . . (55,377) (24,313) (55,120) (24,570)

Amount vested over from AMFB

Holdings . . . . . . . . . . . . . . . . . . — (184,286) — (184,286)

Amount recognised as capital reserve in

respect of unabsorbed losses brought

forward . . . . . . . . . . . . . . . . . . — (500,845) — (500,845)

Amount reversed in respect of

temporary difference on interest

suspended on non-performing loans . — 167,654 — 167,654

Amount recognised on general

allowance vested over from AMFB

Holdings . . . . . . . . . . . . . . . . . . — (71,840) — (71,840)

Balance at end of year . . . . . . . . . . (701,236) (645,859) (701,236) (646,116)

* The prior year adjustment is in respect of temporary differences arising from general allowance for loans,

advances and financing.

F-175

The deferred tax (assets)/liabilities are in respect of the following temporary differences:

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Unabsorbed tax losses . . . . . . . . . . . (403,791) (520,647) (403,791) (520,647)Leasing temporary differences . . . . . . (15,691) 20,693 (15,691) 20,693Temporary differences betweendepreciation and tax allowances onproperty and equipment. . . . . . . . . 14,285 28,767 14,285 28,510

Temporary differences arising fromallowance for diminution in value offoreclosed properties . . . . . . . . . . (2,930) (1,680) (2,930) (1,680)

Temporary differences arising fromallowance on amount recoverablefrom Danaharta . . . . . . . . . . . . . . (76,929) (60,786) (76,929) (60,786)

Temporary difference arising fromallowance for diminution in value ofinvestments . . . . . . . . . . . . . . . . (92,265) (11,250) (92,265) (11,250)

Temporary difference arising fromgeneral allowance . . . . . . . . . . . . (113,471) (108,837) (113,471) (108,837)

Others. . . . . . . . . . . . . . . . . . . . . (10,444) 7,881 (10,444) 7,881

(701,236) (645,859) (701,236) (646,116)

34. EARNINGS PER SHARE

Basic

Basic earnings per share is calculated by dividing the net profit for the financial yearattributable to shareholders of the Group and of the Company by the weighted average numberof ordinary shares in issue during the financial year.

The Group The Company

2004 2003 2004 2003

RM’000/’000 RM’000/’000 RM’000/’000 RM’000/’000

Net profit attributable toshareholders of the Company . . 540,986 364,073 537,376 385,549

Number of ordinary shares atbeginning of year* . . . . . . . . 528,402 2,613,750 528,402 2,613,750

Effect of movement in ordinaryshares pursuant to:— Capital reduction** . . . . . — (2,255,702) — (2,255,702)— Issue of shares as

consideration for assetsvested over from AMFBHoldings . . . . . . . . . . . . — 419,826 — 419,826

Weighted average number ofordinary shares in issue . . . . . 528,402 777,874 528,402 777,874

Basic earnings per share (sen) . . . 102.38 46.80 101.70 49.56

There are no dilutive potential ordinary shares during the financial year.

* After taking into account the effect of share consolidation from RM0.50 to RM1.00 per share in the prior

year.

** The effect of capital reduction has not been adjusted to the period prior to the event.

F-176

35. COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Group and the Company make various commitments and

incur certain contingent liabilities with legal recourse to its customers. No material losses are

anticipated as a result of these transactions. The commitments and contingencies are not secured

against the Group’s and the Company’s assets.

The risk-weighted exposure of the Group and the Company is as follows:

2004 2003

The Group

Principal

Amount

Credit

Equivalent

Amount*

Principal

Amount

Credit

Equivalent

Amount*

RM’000 RM’000 RM’000 RM’000

Direct credit substitutes . . . . . . . . . . 81,045 81,045 113,183 113,183

Transaction-related contingent items . . 616 308 616 308

Unpaid portion of partly paid shares . . 250 250 250 250

Irrevocable commitments to extend

credit:

— maturing less than one year . . . . 2,880,399 — 2,928,375 —

— maturing more than one year . . . 568,697 284,349 588,778 294,389

Interest rate swap contracts:

— maturing within one year . . . . . 30,000 75 400,000 550

— maturing more than one year to

less than five years . . . . . . . . . 800,000 13,230 380,000 9,800

Total . . . . . . . . . . . . . . . . . . . . . 4,361,007 379,257 4,411,202 418,480

2004 2003

The Company

Principal

Amount

Credit

Equivalent

Amount*

Principal

Amount

Credit

Equivalent

Amount*

RM’000 RM’000 RM’000 RM’000

Direct credit substitutes . . . . . . . . . . 81,045 81,045 113,183 113,183

Transaction-related contingent items . . 616 308 616 308

Unpaid portion of partly paid shares . . 150 150 150 150

Irrevocable commitments to extend

credit:

— maturing less than one year . . . . 2,880,399 — 2,928,375 —

— maturing more than one year . . . 568,697 284,349 588,778 294,389

Interest rate swap contracts:

— maturing within one year . . . . . 30,000 75 400,000 550

— maturing more than one year to

less than five years . . . . . . . . . 800,000 13,230 380,000 9,800

Total . . . . . . . . . . . . . . . . . . . . 4,360,907 379,157 4,411,102 418,380

* The credit equivalent amount is arrived at using the credit conversion factor as per Bank Negara Malaysia

guidelines.

F-177

36. NET TANGIBLE ASSETS PER SHARE (RM)

Net tangible assets per share represent the balance sheet total assets value less total liabilities

and minority interests expressed as an amount per ordinary share.

Net tangible assets per share is calculated as follows:

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Total assets . . . . . . . . . . . . . . . . . 33,618,318 32,529,566 33,607,131 32,516,485

Less:

Total Liabilities . . . . . . . . . . . . . . 31,131,731 30,583,953 31,128,604 30,575,334

Minority interests . . . . . . . . . . . . . 101 113 — —

31,131,832 30,584,066 31,128,604 30,575,334

Net tangible assets . . . . . . . . . . . . . 2,486,486 1,945,500 2,478,527 1,941,151

Issued and fully paid up ordinary shares

of RM1.00 each . . . . . . . . . . . . . 528,402 528,402 528,402 528,402

Net tangible assets per share (RM) . . . 4.71 3.68 4.69 3.67

F-178

37. SEGMENT ANALYSIS

Analysis by activity

The Group

31 March 2004

Finance Others Elimination Consolidated

RM’000 RM’000 RM’000 RM’000

Revenue

External revenue . . . . . . . . . . . . . . 2,456,742 508 — 2,457,250

Inter-segment revenue . . . . . . . . . . . 832 5,257 (6,089) —

Total revenue . . . . . . . . . . . . . . . . 2,457,574 5,765 (6,089) 2,457,250

Results

Profit from operations . . . . . . . . . . . 503,115 4,107 (35) 507,187

Share of profits of associated company 208 208

Profit before tax . . . . . . . . . . . . . . 507,395

Taxation . . . . . . . . . . . . . . . . . . . 33,579

Profit after taxation . . . . . . . . . . . . 540,974

Other information

Capital additions . . . . . . . . . . . . . . 46,250 33 — 46,283

Depreciation . . . . . . . . . . . . . . . . . 53,468 814 36 54,318

Loan and financing loss and allowance

(net of recoveries) . . . . . . . . . . . . 234,968 — — 234,968

Allowance on amount recoverable from

Danaharta . . . . . . . . . . . . . . . . . 62,794 — — 62,794

Writeback of allowance for diminution

in value of investment securities . . . (20,118) 84 — (20,034)

Accretion of discounts less amortisation

of premium . . . . . . . . . . . . . . . . (21,607) — — (21,607)

Property and equipment written off . . . 145 — — 145

General allowance for contingencies . . 37,000 — — 37,000

Consolidated Balance Sheet

Assets

Segment assets . . . . . . . . . . . . . . . 33,606,981 90,573 (79,486) 33,618,068

Investment in associated companies. . . 150 — 100 250

Consolidated total assets . . . . . . . . . 33,618,318

Liabilities

Segment liabilities . . . . . . . . . . . . . 31,128,604 161,795 (158,668) 31,131,731

Consolidated total liabilities . . . . . . . 31,131,731

F-179

The Group

31 March 2003

Finance Others Elimination Consolidated

RM’000 RM’000 RM’000 RM’000

Revenue

External revenue . . . . . . . . . . . . . . 2,041,454 240 — 2,041,694

Inter-segment revenue . . . . . . . . . . . 1,074 5,257 (6,331) —

Total revenue . . . . . . . . . . . . . . . . 2,042,528 5,497 (6,331) 2,041,694

Results

Profit from operations . . . . . . . . . . . 360,979 2,754 (22,729) 341,004

Share of profits of associated company 52 52

Profit before tax . . . . . . . . . . . . . . 341,056

Taxation . . . . . . . . . . . . . . . . . . . 23,011

Profit after taxation . . . . . . . . . . . . 364,067

Other information

Capital additions . . . . . . . . . . . . . . 14,155 — — 14,155

Depreciation . . . . . . . . . . . . . . . . . 80,899 808 36 81,743

Loan and financing loss and allowance

(net of recoveries) . . . . . . . . . . . . 256,327 — 22,657 278,984

Allowance on amount recoverable from

Danaharta . . . . . . . . . . . . . . . . . 89,741 — — 89,741

Writeback of allowance for diminution

in value of investment securities . . . (34,588) — — (34,588)

Accretion of discounts less amortisation

of premium . . . . . . . . . . . . . . . . (25,532) — — (25,532)

Property and equipment written off . . . 474 — — 474

Consolidated Balance Sheet

Assets

Segment assets . . . . . . . . . . . . . . . 32,516,335 94,816 (81,700) 32,529,451

Investment in associated companies. . . 150 — (35) 115

Consolidated total assets . . . . . . . . . 32,529,566

Liabilities

Segment liabilities . . . . . . . . . . . . . 30,575,334 167,194 (158,575) 30,583,953

Consolidated total liabilities . . . . . . . 30,583,953

Turnover of the Group and the Company comprise interest income net of interest suspended,

fee income, investment and trading income and income from Islamic banking operations.

The financial information by geographical segment is not presented as the Group’s activities

are principally conducted in Malaysia.

F-180

38. CAPITAL COMMITMENTS

As at 31 March 2004, the Group and the Company have the following commitments:

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Authorised and contracted for:

Purchase of computer equipment and

software . . . . . . . . . . . . . . . . . 39,506 36,336 39,506 36,336

Leasehold improvements . . . . . . . . 6,805 1,786 6,805 1,786

Unpaid portion of partly paid-up

shares in associated companies . . . 150 250 150 150

46,461 38,372 46,461 38,272

Authorised and not contracted for:

Purchase of computer equipment and

software . . . . . . . . . . . . . . . . . — 1,263 — 1,263

— 1,263 — 1,263

39. LEASE COMMITMENTS

The Group and the Company have lease commitments in respect of rented premises and

equipment on hire, all of which are classified as operating leases. A summary of the non-cancellable

long-term commitments, net of sub-leases is as follows:

The Group The Company

2004 2003 2004 2003

RM’000 RM’000 RM’000 RM’000

Year ending

2004. . . . . . . . . . . . . . . . . . . . . . — 21,717 — 21,717

2005. . . . . . . . . . . . . . . . . . . . . . 21,330 18,945 21,330 18,945

2006. . . . . . . . . . . . . . . . . . . . . . 20,139 17,259 20,139 17,259

2007. . . . . . . . . . . . . . . . . . . . . . 19,534 15,860 19,534 15,860

2008 and thereafter . . . . . . . . . . . . 107,618 69,847 107,618 69,847

168,621 143,628 168,621 143,628

The lease commitments represent minimum rentals not adjusted for operating expenses which

the Company is obligated to pay. These amounts are insignificant in relation to the minimum lease

obligations. In the normal course of business, leases that expire will be renewed or replaced by

leases on other properties, thus it is anticipated that future annual minimum lease commitments will

not be less than rental expenses for the financial year.

F-181

40. CAPITAL ADEQUACY RATIO

Bank Negara Malaysia’s (‘‘BNM’’) guideline on capital adequacy requires the Company to

maintain an adequate level of capital to withstand any losses which may result from credit and other

risks associated with financing operations. The capital adequacy ratio is computed based on the

eligible capital in relation to the total risk-weighted assets as determined by BNM.

The risk weighted capital adequacy ratio of the Company of 11.24% (10.76% in 2003) exceeds

the minimum requirements of BNM.

The Company

2004 2003

RM’000 RM’000

Tier 1 capital

Paid-up share capital. . . . . . . . . . . . . . . . . . . . . . . . . . 528,402 528,402

Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379,953 379,953

Statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . 483,070 214,382

Deferred tax asset in respect of unabsorbed losses*. . . . . . . — 112,840

Unappropriated profit at end of year* . . . . . . . . . . . . . . . 402,498 188,930

Total tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,793,923 1,424,507

Tier 2 capital

General allowance for bad and doubtful debts and financing . 402,415 385,155

Subordinated term loan**/*** . . . . . . . . . . . . . . . . . . . . 581,710 680,000

Subordinated loan notes***. . . . . . . . . . . . . . . . . . . . . . — 250,000

Subordinated bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 —

Total tier 2 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,184,125 1,315,155

Total capital funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,978,048 2,739,662

Less: Investment in subsidiary companies . . . . . . . . . . . . . (29,779) (29,779)

Capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,948,269 2,709,883

* The amounts in prior year were calculated in accordance to a formula determined by Bank Negara Malaysia. In

the current year, the unappropriated profit included in the Tier-1 capital excludes the deferred tax asset that was

recognised by the Company and this is in accordance to the revised guideline issued by Bank Negara Malaysia in

August 2003.

** The amount in the current year comprise the subordinated term loan of RM680,000,000 from Astute Assets

Berhad (‘‘Astute’’) net off the Company’s dealing investment of RM98,290,000 in the redeemable secured asset-

backed bonds issued by Astute.

*** The amounts in prior year were not limited to 50% of Tier-1 capital as approved by Bank Negara Malaysia.

F-182

The Company

2004 2003

RM’000 RM’000

Notional risk-weighted assets:

Categories

0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,635,821 3,193,655

10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 57,376

20% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,662,809 2,496,368

50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,357,048 4,006,785

100% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,721,454 22,681,276

Total notional risk-weighted assets . . . . . . . . . . . . . . . . . 33,377,132 32,435,460

Total risk-weighted assets . . . . . . . . . . . . . . . . . . . . . . 26,232,540 25,189,680

Capital Ratios

Core capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.84% 5.65%

Risk-weighted capital ratio . . . . . . . . . . . . . . . . . . . . . . 11.24% 10.76%

The risk weighted capital adequacy ratio of the Group are as follows:

The Group

2004 2003

RM’000 RM’000

Tier 1 capital

Paid-up share capital. . . . . . . . . . . . . . . . . . . . . . . . . . 528,402 528,402

Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379,953 379,953

Statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . 483,070 214,382

Deferred tax asset in respect of unabsorbed losses*. . . . . . . — 112,840

Unappropriated profit at end of year* . . . . . . . . . . . . . . . 410,457 193,279

Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 113

Total tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,801,983 1,428,969

Tier 2 capital

General allowance for bad and doubtful debts and financing . 402,415 385,155

Subordinated term loan**/*** . . . . . . . . . . . . . . . . . . . . 581,710 680,000

Subordinated loan notes***. . . . . . . . . . . . . . . . . . . . . . — 250,000

Subordinated bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 —

Total tier 2 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,184,125 1,315,155

Capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,986,108 2,744,124

* The amounts in prior year were calculated in accordance to a formula determined by Bank Negara Malaysia. In

the current year, the unappropriated profit included in the Tier-1 capital excludes the deferred tax asset that was

recognised by the Company and this is in accordance to the revised guideline issued by Bank Negara Malaysia in

August 2003.

** The amount in the current year comprise the subordinated term loan of RM680,000,000 from Astute Assets

Berhad (‘‘Astute’’) net off the Company’s dealing investment of RM98,290,000 in the redeemable secured asset-

backed bonds issued by Astute.

*** The amounts in prior year were not limited to 50% of Tier-1 capital as approved by Bank Negara Malaysia.

F-183

The Group

2004 2003

RM’000 RM’000

Notional risk-weighted assets:

Categories

0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,635,821 3,193,655

10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 57,376

20% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,665,116 2,497,657

50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,357,048 4,006,785

100% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,760,113 22,722,957

Total notional risk-weighted assets . . . . . . . . . . . . . . . . . 33,418,098 32,478,430

Total risk-weighted assets . . . . . . . . . . . . . . . . . . . . . . 26,271,660 25,231,619

Capital Ratios

Core capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.86% 5.66%

Risk-weighted capital ratio . . . . . . . . . . . . . . . . . . . . . . 11.37% 10.87%

41. CONTINGENT LIABILITIES

By a Vesting Order of the High Court of Malaya dated 21 May 2002 pursuant to Section 50 of

the Banking And Financial Institutions Act, 1989, all rights and liabilities (including rights and

liabilities under and or in respect of any past, pending or future litigation) accruing to, owed or

incurred by AMFB Holdings in relation to its finance company business have been transferred to and

assumed by the Company with effect from 15 June 2002 and AMFB Holdings shall cease to be liable

in respect of such liabilities with effect therefrom. Therefore, the Company had assumed the rights

and liabilities in respect of the following three (3) legal suits relating to the Highland Towers

tragedy, whereby the plaintiffs had contended that AMFB Holdings caused or contributed to the

collapse of Block 1 and forced evacuation of Blocks 2 and 3 of the Highland Towers.

On 31 May 2004, the Company, entered into a Settlement Agreement with the plaintiffs in

respect of the legal suits in relation to the Highland Towers tragedy.

These legal suits are as follows:

(i) A suit dated 15 October 1994 was filed by six individuals against AMFB Holdings and

eight other defendants in relation to the collapse of a building in which AMFB Holdings

is sued in its capacity as owner of the land adjacent to the building and for the acts and

omissions of another company as alleged servant and/or agent of AMFB Holdings.

The claim against AMFB Holdings and eight other defendants based on negligence,

nuisance and breach of statutory duty is for general damages, special damages, exemplary

damages and/or aggravated damages. On 7 August 1998, the plaintiffs obtained an order

whereby this suit was consolidated with the suit referred to in (ii) below. This suit has

been adjourned sine die pending the disposal of the suit in (ii) below.

(ii) A suit dated 5 December 1996 was filed by seventy-three parties against AMFB Holdings

and nine other defendants in relation to two buildings in which AMFB Holdings is sued in

its capacity as owner of the land adjacent to the buildings. The claim against AMFB

Holdings and nine other defendants based on negligence, nuisance and breach of statutory

duty is for general damages, special damages, exemplary damages and/or aggravated

damages. Subsequently, judgement was delivered with partial liability of 30% apportioned

to AMFB Holdings.

F-184

On 3 December 2002, the Court of Appeal dismissed the appeal by AMFB Holdings

against the finding of liability by the High Court and had ordered that damages be

assessed. The Court of Appeal has also excluded certain items of damage claimed by the

plaintiffs.

On 2 January 2003, the Company filed an application for leave to appeal to the Federal

Court against the finding of the Court of Appeal. The application for leave to appeal

included an application for stay of the proceedings pertaining to the assessment of

damages by the High Court. The application for leave to appeal came up for hearing on 4

February 2004, but was adjourned for a period of 6 months pending settlement

negotiations with the plaintiffs in this suit as well as the plaintiffs in suit (i) above

and in suit (iii) below.

(iii) A suit dated 10 December 1996 was filed by sixty parties against AMFB Holdings and

nine other defendants in relation to the collapse of a building in which AMFB Holdings is

sued in its capacity as owner of the land adjacent to the building. The claim against

AMFB Holdings and nine other defendants based on negligence, nuisance and breach of

statutory duty is for general damages, special damages, exemplary and/or aggravated

damages. Defence has been filed on 27 February 1998 and the case is pending trial.

On 7 August 1998, the plaintiffs obtained an order whereby this suit was consolidated

with the suit referred to in (ii) above. This suit has been adjourned sine die pending the

disposal of the suit in (ii) above.

Pursuant to the out-of-court settlement and the Settlement Agreement, the Company agreed to

pay the plaintiffs a settlement sum of RM52 million in full and final settlement of the suits and

claims against AMFB Holdings, inclusive of costs, arising/or resulting whether directly or indirectly

from the suits. In return for this settlement amount, the plaintiffs shall, among others, release and

assign to the Company all their rights of action in the suits against Highland Properties Sdn Bhd (the

developer of Highland Towers) as well as all their rights and title to their individual apartment units

in Highland Towers and their rights to common property, unencumbered and free from claims of end

financiers.

The Company had made full provision for the settlement sum of RM52 million in its accounts

as at 31 March 2004.

42. SIGNIFICANT EVENTS

Significant events during the financial year are as follows:

(i) On 30 April 2003, the Company issued RM200 million nominal amount of Negotiable

Interest-Bearing Redeemable Unsecured Subordinated Bonds to increase its capital funds.

The subordinated bonds are issued for a period of ten years to be repaid on 30 April 2013

and bear interest varying from 7.95% to 10.45% per annum, payable on a half yearly

basis.

(ii) On 10 May 2003, the ultimate holding company, AMMB Holdings Berhad (‘‘AHB’’)

received the approval of Bank Negara Malaysia for AHB to commence negotiations with

EON Capital Berhad for a possible merger between the two banking groups. However, the

discussion was mutually terminated on 25 June 2003.

(iii) On 9 July 2003, AHB obtained the consent of Bank Negara Malaysia to commence

discussion with Commerce Asset Holding Berhad for the possible merger of the Company

with Bumiputera-Commerce Finance Berhad and AmBank Berhad with Bumiputera-

Commerce Bank Berhad. The negotiations were mutually terminated on 5 September

2003.

(iv) On 15 October 2003, the Company made an early redemption of the RM250 million

Subordinated Loan Notes to the holding company, AMFB Holdings.

F-185

(v) On 28 October 2003, the Company entered into a Supplemental Facility Agreement with

Danamodal Nasional Berhad (‘‘Danamodal’’), whereby the RM680 million Subordinated

Term Loan obtained from Danamodal was novated to Astute Assets Berhad.

The terms and conditions of the loan remain the same, except for interest payable on the

loan, which is charged at 6.5% per annum until 19 December 2006, 7.0% per annum from

20 December 2006 until 19 December 2007, and 7.5% per annum from 20 December 2007

until 19 December 2011.

(vi) On 25 February 2004, the Company entered into a conditional sale and purchase

agreement with MBf Corporation Berhad (‘‘MBf Corp’’) for the sale of its entire 100%

equity interest amounting to 1,000,000 ordinary shares of RM1.00 each in MBf Property

Trust Management Berhad (‘‘MBfPT’’) for a consideration of RM1.00.

The purchase consideration was arrived at on a willing-buyer and willing-seller basis after

taking into consideration the current financial position of MBfPT. The completion of the

disposal is pending approval by the relevant authorities.

(vii) Upon application to the Companies Commission of Malaysia (‘‘CCM’’), the following

subsidiary companies have been struck-off from the Register of the CCM and dissolved

pursuant to the powers conferred under Section 308 of the Companies Act, 1965 :

(a) Horizon View Sdn Bhd (‘‘HVSB’’) — Company No: 227779-D

(b) MBf Venture Partners Berhad (‘‘MBfVP’’) — Company No: 279706-A

Both HVSB and MBfVP have not commenced operations since incorporation on 28

October 1991 and 26 October 1993, respectively.

The present paid-up capital of HVSB and MBfVP are RM2 divided into 2 ordinary shares

of RM1.00 each, and RM1.00 divided into 2 ordinary shares of RM0.50 each,

respectively.

43. SUBSEQUENT EVENTS

There are no significant subsequent events for this financial year.

44. RISK MANAGEMENT POLICY

Risk management is about managing uncertainties such that deviations from the Group’s

intended objectives are kept within acceptable levels. Sustainable profitability forms the core

objectives of the Group’s risk management strategy.

Every risk assumed by the Group carries with it potential for gains as well as potential to erode

shareholders’ value. The Group’s risk management policy is to identify, capture and analyse these

risks at an early stage, continuously measure and monitor these risks and to set limits, policies and

procedures to control them to ensure sustainable risk-taking and sufficient returns.

The management approach towards the significant risks of the Group are enumerated below.

Market Risk Management

Market risk is the risk of loss from changes in the value of portfolios and financial

instruments caused by movements in market variables, such as interest rates, foreign exchange

rates and equity prices.

The primary objective of market risk management is to ensure that losses from market

risk can be promptly arrested and risk positions are sufficiently liquid so as to enable the

Group to reduce its position without incurring potential loss that is beyond the sustainability of

the Group.

F-186

The market risk of the Group’s trading and non-trading portfolio is managed separately

using value at risk approach to compute the market risk exposure of non-trading portfolio and

trading portfolio. Value at risk is a statistical measure that estimates the potential changes in

portfolio value that may occur brought about by daily changes in market rates over a specified

holding period at a specified confidence level under normal market condition. For the Group’s

trading portfolio, the Group’s value at risk measurement takes a more sophisticated form by

taking into account the correlation effects of various instruments in the portfolio.

The Group controls its market risk exposure of its trading and non-trading activities

primarily through a series of threshold limits. Stop loss, value at risk and position sensitivity

limits are the primary means of control governing the trading activities of the Group while

value at risk limits governs the non-trading positions.

To complement value at risk measurement, the Group also institutes a set of scenario

analysis under various potential market conditions such as shifts in currency rates, general

equity prices and interest rate movements to assess the changes in portfolio value.

F-187

The following table shows the interest rate sensitivity gap, by time bands, on which

interest rates of instruments are next repriced on a contractual basis or, if earlier, the dates on

which the instruments mature.

2004

The Group

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

interest

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term funds 2,933,300 — — — — — 121,467 3,054,767 2.77

Deposits and placements

with financial

institutions . . . . . . . — — 19,132 98 — — — 19,230 5.71

Dealing securities. . . . . — — — — — 98,290 157,769 256,059 5.25

Investment securities . . . 323,000 395,000 60,144 104,013 405,034 441,716 189,683 1,918,590 2.86

Loans, advances and

financing

— Performing . . . . . 6,665,597 716,842 1,140,905 2,102,712 11,572,764 1,828,768 — 24,027,588 8.38

— Non-performing* . — — — — — — 2,021,276 2,021,276 —

Other non-interest

sensitive balances . . . — — — — — — 2,320,808 2,320,808 —

TOTAL ASSETS . . . . . 9,921,897 1,111,842 1,220,181 2,206,823 11,977,798 2,368,774 4,811,003 33,618,318

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers 8,373,324 3,701,326 3,056,053 4,258,784 1,022,300 6 — 20,411,793 3.18

Deposits and placements

of banks and other

financial institutions . 837,398 708,005 661,499 1,146,777 801,732 908,000 — 5,063,411 2.82

Securities sold under

repurchase agreements 274,991 — — — — — — 274,991 2.78

Amount due to Cagamas

Berhad . . . . . . . . . 56,510 113,567 171,726 870,530 2,322,410 140,864 — 3,675,607 3.92

Subordinated term loan . — — — — 680,000 — — 680,000 6.50

Subordinated bonds. . . . — — — — — 200,000 — 200,000 7.95

Other non-interest

sensitive balances . . . — — — — — — 825,929 825,929 —

Total Liabilities . . . . . . 9,542,223 4,522,898 3,889,278 6,276,091 4,826,442 1,248,870 825,929 31,131,731

Minority interests . . . . . — — — — — — 101 101 —

Shareholder’s Funds . . . — — — — — — 2,486,486 2,486,486 —

TOTAL LIABILITIES

AND

SHAREHOLDER’S

FUNDS . . . . . . . . . 9,542,223 4,522,898 3,889,278 6,276,091 4,826,442 1,248,870 3,312,516 33,618,318

On-balance sheet interest

sensitivity gap . . . . . 379,674 (3,411,056) (2,669,097) (4,069,268) 7,151,356 1,119,904 1,498,487 —

Off-balance sheet interest

sensitivity gap . . . . . 350,000 480,000 — (30,000) (800,000) — — —

Total interest sensitivity

gap . . . . . . . . . . . 729,674 (2,931,056) (2,669,097) (4,099,268) 6,351,356 1,119,904 1,498,487 —

F-188

2003

The Group

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

interest

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term funds 2,567,700 — — — — — 97,901 2,665,601 2.83

Deposits and placements

with financial

institutions . . . . . . . — 18,500 — 94 — — — 18,594 2.96

Dealing securities. . . . . — — — — — — 72,875 72,875 —

Investment securities . . . 127,624 473,896 708,153 371,050 413,976 124,102 91,820 2,310,621 3.22

Loans, advances and

financing

— Performing . . . . . 7,640,703 528,346 1,001,626 1,756,026 10,703,147 1,749,529 — 23,379,377 9.05

— Non-performing* . — — — — — — 1,781,061 1,781,061 —

Other non-interest

sensitive balances . . . — — — — — — 2,301,437 2,301,437 —

TOTAL ASSETS . . . . . 10,336,027 1,020,742 1,709,779 2,127,170 11,117,123 1,873,631 4,345,094 32,529,566

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers 7,997,562 3,378,061 3,044,636 3,887,049 1,301,886 — — 19,609,194 3.44

Deposits and placements

of banks and other

financial institutions . 1,372,580 975,350 499,487 751,849 1,229,874 280,000 — 5,109,140 2.95

Securities sold under

repurchase agreements 305,470 — — — — — — 305,470 2.80

Amount due to Cagamas

Berhad . . . . . . . . . 186,816 373,314 440,884 748,742 2,269,174 — — 4,018,930 4.14

Subordinated term loan . — — — — 680,000 — — 680,000 6.50

Subordinated loan notes . — — — — — 250,000 — 250,000 7.00

Other non-interest

sensitive balances . . . — — — — — — 611,219 611,219 —

Total Liabilities . . . . . . 9,862,428 4,726,725 3,985,007 5,387,640 5,480,934 530,000 611,219 30,583,953

Minority interests . . . . . — — — — — — 113 113 —

Shareholder’s Funds . . . — — — — — — 1,945,500 1,945,500 —

TOTAL LIABILITIES

AND

SHAREHOLDER’S

FUNDS . . . . . . . . . 9,862,428 4,726,725 3,985,007 5,387,640 5,480,934 530,000 2,556,832 32,529,566

On-balance sheet interest

sensitivity gap . . . . . 473,599 (3,705,983) (2,275,228) (3,260,470) 5,636,189 1,343,631 1,788,262 —

Off-balance sheet interest

sensitivity gap . . . . . 500,000 280,000 (50,000) (350,000) (380,000) — — —

Total interest sensitivity

gap . . . . . . . . . . . 973,599 (3,425,983) (2,325,228) (3,610,470) 5,256,189 1,343,631 1,788,262 —

F-189

2004

The Company

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

interest

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term funds 2,933,300 — — — — — 119,258 3,052,558 2.77

Deposits and placements

with financial

institutions . . . . . . . — — 19,132 — — — — 19,132 5.71

Dealing securities. . . . . — — — — — 98,290 157,769 256,059 5.25

Investment securities . . . 323,000 395,000 60,144 104,013 405,034 441,716 189,394 1,918,301 2.86

Loans, advances and

financing

— Performing . . . . . 6,665,793 717,237 1,141,488 2,103,838 11,577,993 1,829,511 — 24,035,860 8.38

— Non-performing* . — — — — — — 2,021,277 2,021,277 —

Other non-interest

sensitive balances . . . — — — — — — 2,303,944 2,303,944 —

TOTAL ASSETS . . . . . 9,922,093 1,112,237 1,220,764 2,207,851 11,983,027 2,369,517 4,791,642 33,607,131

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers 8,375,118 3,701,326 3,056,053 4,258,784 1,022,300 6 — 20,413,587 3.18

Deposits and placements

of banks and other

financial institutions . 837,398 708,005 661,499 1,146,777 801,732 908,000 — 5,063,411 2.82

Securities sold under

repurchase agreements 274,991 — — — — — — 274,991 2.78

Amount due to Cagamas

Berhad . . . . . . . . . 56,510 113,567 171,726 870,530 2,322,410 140,864 — 3,675,607 3.92

Subordinated term loan . — — — — 680,000 — — 680,000 6.50

Subordinated bonds. . . . — — — — — 200,000 — 200,000 7.95

Other non-interest

sensitive balances . . . — — — — — — 821,008 821,008 —

Total Liabilities . . . . . . 9,544,017 4,522,898 3,889,278 6,276,091 4,826,442 1,248,870 821,008 31,128,604

Shareholder’s Funds . . . — — — — — — 2,478,527 2,478,527 —

TOTAL LIABILITIES

AND

SHAREHOLDER’S

FUNDS . . . . . . . . . 9,544,017 4,522,898 3,889,278 6,276,091 4,826,442 1,248,870 3,299,535 33,607,131

On-balance sheet interest

sensitivity gap . . . . . 378,076 (3,410,661) (2,668,514) (4,068,240) 7,156,585 1,120,647 1,492,107 —

Off-balance sheet interest

sensitivity gap . . . . . 350,000 480,000 — (30,000) (800,000) — — —

Total interest sensitivity

gap . . . . . . . . . . . 728,076 (2,930,661) (2,668,514) (4,098,240) 6,356,585 1,120,647 1,492,107 —

F-190

2003

The Company

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

interest

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term

funds . . . . . . . . . . 2,567,700 — — — — — 96,706 2,664,406 2.83

Deposits and placements

with financial

institutions . . . . . . . — 18,500 — — — — — 18,500 2.96

Dealing securities. . . . . — — — — — — 72,875 72,875 —

Investment securities . . . 127,624 473,896 708,153 371,050 413,976 124,102 91,543 2,310,344 3.22

Loans, advances and

financing

— Performing . . . . . 7,640,877 528,699 1,002,166 1,757,144 10,709,159 1,751,851 — 23,389,896 9.05

— Non-performing* . — — — — — — 1,781,061 1,781,061 —

Other non-interest

sensitive balances . . . — — — — — — 2,279,403 2,279,403 —

TOTAL ASSETS . . . . . 10,336,201 1,021,095 1,710,319 2,128,194 11,123,135 1,875,953 4,321,588 32,516,485

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers 7,999,415 3,378,061 3,044,636 3,887,049 1,301,886 — — 19,611,047 3.44

Deposits and placements

of banks and other

financial institutions . 1,372,580 975,350 499,487 751,849 1,229,874 280,000 — 5,109,140 2.95

Securities sold under

repurchase agreements 305,470 — — — — — — 305,470 2.80

Amount due to Cagamas

Berhad . . . . . . . . . 186,816 373,314 440,884 748,742 2,269,174 — — 4,018,930 4.14

Subordinated term loan . — — — — 680,000 — — 680,000 6.50

Subordinated loan notes . — — — — — 250,000 — 250,000 7.00

Other non-interest

sensitive balances . . . — — — — — — 600,747 600,747 —

Total Liabilities . . . . . . 9,864,281 4,726,725 3,985,007 5,387,640 5,480,934 530,000 600,747 30,575,334

Shareholder’s Funds . . . — — — — — — 1,941,151 1,941,151 —

TOTAL LIABILITIES

AND

SHAREHOLDER’S

FUNDS . . . . . . . . . 9,864,281 4,726,725 3,985,007 5,387,640 5,480,934 530,000 2,541,898 32,516,485

On-balance sheet interest

sensitivity gap . . . . . 471,920 (3,705,630) (2,274,688) (3,259,446) 5,642,201 1,345,953 1,779,690 —

Off-balance sheet interest

sensitivity gap . . . . . 500,000 280,000 (50,000) (350,000) (380,000) — — —

Total interest sensitivity

gap . . . . . . . . . . . 971,920 (3,425,630) (2,324,688) (3,609,446) 5,262,201 1,345,953 1,779,690 —

* This is arrived at after deducting the general allowance, specific allowance and interest/income-in-suspense from

gross non-performing loans outstanding.

F-191

Liquidity Risk

Liquidity risk is the risk that the organisation will not be able to fund its day-to-day

operations at a reasonable cost.

The primary objective of liquidity risk management framework is to ensure the

availability of sufficient funds at a reasonable cost to honour all financial commitments as it

comes due.

The secondary objective is to ensure an optimal funding structure and to balance the key

liquidity risk management objectives, which includes diversification of funding sources,

customer base, and maturity period.

The ongoing liquidity risk management at the Group is based on the following key

strategies:

. Management of cash-flow; an assessment of potential cash flow mismatches that may

arise over a period of one-year ahead and the maintenance of adequate cash and

liquefiable assets over and above the standard requirements of Bank Negara

Malaysia.

. Scenario analysis; a simulation on liquidity demands of new business, changes in

portfolio as well as stress scenarios based on historical experience of large

withdrawals.

. Diversification and stabilisation of liabilities through management of funding

sources, diversification of customer depositor base and inter-bank exposures.

In the event of actual liquidity crisis occurring, a Contingency Funding Plan provides a

formal process to identify a liquidity crisis and detailing responsibilities among the relevant

departments to ensure orderly execution of procedures to restore the liquidity position and

confidence in the Group.

F-192

The following table shows the maturity analysis of the Group’s and the Company’s assets

and liabilities based on contractual terms:

2004

The Group

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

specific

maturity Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . 3,054,767 — — — — — — 3,054,767

Deposits and placements with

financial institutions . . . . . . . . — — 19,132 98 — — — 19,230

Dealing securities. . . . . . . . . . . . — — — — — 98,290 157,769 256,059

Investment securities . . . . . . . . . . 323,000 395,000 60,144 104,013 405,034 441,716 189,683 1,918,590

Loans, advances and financing. . . . 2,618,840 1,219,111 1,689,733 3,245,711 12,247,582 5,027,887 — 26,048,864

Other assets . . . . . . . . . . . . . . . — — — — — — 270,987 270,987

Deferred tax asset . . . . . . . . . . . — — — — — — 701,236 701,236

Statutory deposit with Bank Negara

Malaysia . . . . . . . . . . . . . . . — — — — — — 923,736 923,736

Investment in associated companies. — — — — — — 250 250

Property and equipment . . . . . . . . — — — — — — 424,599 424,599

TOTAL ASSETS . . . . . . . . . . . . 5,996,607 1,614,111 1,769,009 3,349,822 12,652,616 5,567,893 2,668,260 33,618,318

LIABILITIES AND

SHAREHOLDER’S FUNDS

Deposits from customers . . . . . . . 8,373,324 3,701,326 3,056,053 4,258,784 1,022,300 6 — 20,411,793

Deposits and placements of banks

and other financial institutions . . 837,398 708,005 661,499 1,146,777 801,732 908,000 — 5,063,411

Securities sold under repurchase

agreements . . . . . . . . . . . . . . 274,991 — — — — — — 274,991

Amount due to Cagamas Berhad . . 56,510 113,567 171,726 870,530 2,322,410 140,864 — 3,675,607

Other liabilities . . . . . . . . . . . . . — — — — — — 825,929 825,929

Subordinated term loan . . . . . . . . — — — — — 680,000 — 680,000

Subordinated bonds. . . . . . . . . . . — — — — — 200,000 — 200,000

Total Liabilities . . . . . . . . . . . . . 9,542,223 4,522,898 3,889,278 6,276,091 4,146,442 1,928,870 825,929 31,131,731

Minority interests . . . . . . . . . . . . — — — — — — 101 101

Shareholder’s funds . . . . . . . . . . — — — — — — 2,486,486 2,486,486

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . 9,542,223 4,522,898 3,889,278 6,276,091 4,146,442 1,928,870 3,312,516 33,618,318

Net maturity mismatch . . . . . . . . (3,545,616) (2,908,787) (2,120,269) (2,926,269) 8,506,174 3,639,023 (644,256) —

F-193

2003

The Group

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

specific

maturity Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . 2,665,601 — — — — — — 2,665,601

Deposits and placements with

financial institutions . . . . . . . . — 18,500 — 94 — — — 18,594

Dealing securities. . . . . . . . . . . . — — — — — — 72,875 72,875

Investment securities . . . . . . . . . . 127,624 473,896 708,153 371,050 413,976 124,102 91,820 2,310,621

Loans, advances and financing. . . . 2,858,194 1,079,334 1,594,362 3,051,437 11,670,281 4,906,830 — 25,160,438

Other assets . . . . . . . . . . . . . . . — — — — — — 315,368 315,368

Deferred tax asset . . . . . . . . . . . — — — — — — 645,859 645,859

Statutory deposit with Bank Negara

Malaysia . . . . . . . . . . . . . . . — — — — — — 900,746 900,746

Investment in associated companies. — — — — — — 115 115

Property and equipment . . . . . . . . — — — — — — 439,349 439,349

TOTAL ASSETS . . . . . . . . . . . . 5,651,419 1,571,730 2,302,515 3,422,581 12,084,257 5,030,932 2,466,132 32,529,566

LIABILITIES AND

SHAREHOLDER’S FUNDS

Deposits from customers . . . . . . . 7,997,562 3,378,061 3,044,636 3,887,049 1,301,886 — — 19,609,194

Deposits and placements of banks

and other financial institutions . . 1,372,580 975,350 499,487 751,849 1,229,874 280,000 — 5,109,140

Securities sold under repurchase

agreements . . . . . . . . . . . . . . 305,470 — — — — — — 305,470

Amount due to Cagamas Berhad . . 186,816 373,314 440,884 748,742 2,269,174 — — 4,018,930

Other liabilities . . . . . . . . . . . . . — — — — — — 611,219 611,219

Subordinated term loan . . . . . . . . — — — — — 680,000 — 680,000

Subordinated loan notes . . . . . . . . — — — — — 250,000 — 250,000

Total Liabilities . . . . . . . . . . . . . 9,862,428 4,726,725 3,985,007 5,387,640 4,800,934 1,210,000 611,219 30,583,953

Minority interests . . . . . . . . . . . . — — — — — — 113 113

Shareholder’s funds . . . . . . . . . . — — — — — — 1,945,500 1,945,500

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . 9,862,428 4,726,725 3,985,007 5,387,640 4,800,934 1,210,000 2,556,832 32,529,566

Net maturity mismatch . . . . . . . . (4,211,009) (3,154,995) (1,682,492) (1,965,059) 7,283,323 3,820,932 (90,700) —

F-194

2004

The Company

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

specific

maturity Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . 3,052,558 — — — — — — 3,052,558

Deposits and placements with

financial institutions . . . . . . . . — — 19,132 — — — — 19,132

Dealing securities. . . . . . . . . . . . — — — — — 98,290 157,769 256,059

Investment securities . . . . . . . . . . 323,000 395,000 60,144 104,013 405,034 441,716 189,394 1,918,301

Loans, advances and financing. . . . 2,619,036 1,219,506 1,690,316 3,246,837 12,252,812 5,028,630 — 26,057,137

Other assets . . . . . . . . . . . . . . . — — — — — — 274,567 274,567

Deferred tax asset . . . . . . . . . . . — — — — — — 701,236 701,236

Statutory deposit with Bank Negara

Malaysia . . . . . . . . . . . . . . . — — — — — — 923,736 923,736

Investment in subsidiary companies. — — — — — — 29,779 29,779

Investment in associated companies. — — — — — — 150 150

Property and equipment . . . . . . . . 374,476 374,476

TOTAL ASSETS . . . . . . . . . . . . 5,994,594 1,614,506 1,769,592 3,350,850 12,657,846 5,568,636 2,651,107 33,607,131

LIABILITIES AND

SHAREHOLDER’S FUNDS

Deposits from customers . . . . . . . 8,375,118 3,701,326 3,056,053 4,258,784 1,022,300 6 — 20,413,587

Deposits and placements of banks

and other financial institutions . . 837,398 708,005 661,499 1,146,777 801,732 908,000 — 5,063,411

Securities sold under repurchase

agreements . . . . . . . . . . . . . . 274,991 — — — — — — 274,991

Amount due to Cagamas Berhad . . 56,510 113,567 171,726 870,530 2,322,410 140,864 — 3,675,607

Other liabilities . . . . . . . . . . . . . — — — — — — 821,008 821,008

Subordinated term loan . . . . . . . . — — — — — 680,000 — 680,000

Subordinated bonds. . . . . . . . . . . — — — — — 200,000 — 200,000

Total Liabilities . . . . . . . . . . . . . 9,544,017 4,522,898 3,889,278 6,276,091 4,146,442 1,928,870 821,008 31,128,604

Shareholder’s funds . . . . . . . . . . — — — — — — 2,478,527 2,478,527

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . 9,544,017 4,522,898 3,889,278 6,276,091 4,146,442 1,928,870 3,299,535 33,607,131

Net maturity mismatch . . . . . . . . (3,549,423) (2,908,392) (2,119,686) (2,925,241) 8,511,404 3,639,766 (648,428) —

F-195

2003

The Company

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

specific

maturity Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . 2,664,406 — — — — — — 2,664,406

Deposits and placements with

financial institutions . . . . . . . . — 18,500 — — — — — 18,500

Dealing securities. . . . . . . . . . . . — — — — — — 72,875 72,875

Investment securities . . . . . . . . . . 127,624 473,896 708,153 371,050 413,976 124,102 91,543 2,310,344

Loans, advances and financing. . . . 2,858,368 1,079,687 1,594,902 3,052,555 11,676,293 4,909,152 — 25,170,957

Other assets . . . . . . . . . . . . . . . — — — — — — 314,203 314,203

Deferred tax asset . . . . . . . . . . . — — — — — — 646,116 646,116

Statutory deposit with Bank Negara

Malaysia . . . . . . . . . . . . . . . — — — — — — 900,746 900,746

Investment in subsidiary companies. — — — — — — 29,779 29,779

Investment in associated companies. — — — — — — 150 150

Property and equipment . . . . . . . . — — — — — — 388,409 388,409

TOTAL ASSETS . . . . . . . . . . . . 5,650,398 1,572,083 2,303,055 3,423,605 12,090,269 5,033,254 2,443,821 32,516,485

LIABILITIES AND

SHAREHOLDER’S FUNDS

Deposits from customers . . . . . . . 7,999,415 3,378,061 3,044,636 3,887,049 1,301,886 — — 19,611,047

Deposits and placements of banks

and other financial institutions . . 1,372,580 975,350 499,487 751,849 1,229,874 280,000 — 5,109,140

Securities sold under repurchase

agreements . . . . . . . . . . . . . . 305,470 — — — — — — 305,470

Amount due to Cagamas Berhad . . 186,816 373,314 440,884 748,742 2,269,174 — — 4,018,930

Other liabilities . . . . . . . . . . . . . — — — — — — 600,747 600,747

Subordinated term loan . . . . . . . . — — — — — 680,000 — 680,000

Subordinated loan notes . . . . . . . . — — — — — 250,000 — 250,000

Total Liabilities . . . . . . . . . . . . . 9,864,281 4,726,725 3,985,007 5,387,640 4,800,934 1,210,000 600,747 30,575,334

Shareholder’s funds . . . . . . . . . . — — — — — — 1,941,151 1,941,151

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . 9,864,281 4,726,725 3,985,007 5,387,640 4,800,934 1,210,000 2,541,898 32,516,485

Net maturity mismatch . . . . . . . . (4,213,883) (3,154,642) (1,681,952) (1,964,035) 7,289,335 3,823,254 (98,077) —

Credit Risk Management

Credit risk is the risk of loss due to the inability or unwillingness of a counterparty to

meet its payment obligations. Exposure to credit risk arises primarily from lending and

guarantee activities and, to a lesser extent, pre-settlement and settlement exposures of sales and

trading activities.

The primary objective of the credit risk management framework is to ensure that exposure

to credit risk is always kept within its capability and financial capacity to withstand potential

future losses.

For non-retail credits, risk management begins with an assessment of the financial

standing of the borrower or counterparty using an internally developed credit rating model. The

model consists of quantitative and qualitative scores which are then translated into a rating

grade, which ranges from ‘AAA’ (lowest risk) to ‘C’ (highest risk). Credit risk is quantified

based on Expected Default Frequencies and Expected Losses on default from its portfolio of

loans and off-balance sheet credit commitments. Expected Default Frequencies are calibrated to

the internal rating model while Loan Loss Estimates are based on past portfolio default

experiences.

For retail credits, an in-house developed credit-scoring system to support the housing and

hire purchase applications is being used to complement the credit assessment process.

F-196

The Group’s lending activities are guided by internal credit policies and guidelines that

are approved by the Board of Directors. Within these policies, single customer limits restrict

total exposure allowed to corporate groups according to their level of creditworthiness, while

sector limits ensure that the Group’s total credit exposure to each economic sector is within

prudent thresholds.

Operational Risk Management

Operational risk is the potential loss from a breakdown in internal process, systems,

deficiencies in people and management or operational failure arising from external events. It is

increasingly recognised that operational risk is the single most widespread risk facing financial

institutions today.

Operational risk management is the discipline of systematically identifying the critical

potential points and causes of failure, assess the potential cost and to minimise the impact of

such risk through the initiation of risk mitigating measures and policies.

The Group minimises operational risk by putting in place appropriate policies, internal

controls and procedures as well as maintaining back-up procedures for key activities and

undertaking contingency planning. These are supported by independent reviews by the Group’s

Internal Audit team.

Legal and Regulatory Risk

The Group manages legal and regulatory risks to its business. Legal risk arises from the

potential that breaches of applicable laws and regulatory requirements, unenforceability of

contracts, lawsuits, or adverse judgement, may lead to the incurrence of losses, disrupt or

otherwise resulting in financial and reputational risk.

Legal risk is managed by internal legal counsel and where necessary, in consultation with

external legal counsel to ensure that legal risk is minimised.

Regulatory risk is managed through the implementation of measures and procedures

within the organisation to facilitate compliance with regulations. These include a compliance

monitoring and reporting process that requires identification of risk areas, prescription of

controls to minimise these risks, staff training and assessments, provision of advice and

disseminating of information.

Risk Management Policy on Financial Derivatives

Purpose of engaging in financial derivatives

Financial derivative instruments are contracts whose value is derived from one or more

underlying financial instruments or indices. They include swaps, forward rate agreements,

futures, options and combinations of these instruments. Derivatives are contracts that transfer

risks, mainly market risks. Financial derivatives are used by the Group to manage the Group’s

own market risk exposure. The Group’s involvement in financial derivatives is currently

focussed on interest rate swaps.

Interest rate swap transactions generally involve the exchange of fixed and floating

interest payment obligations without the exchange of the underlying principal amounts.

As part of the asset and liability exposure management, the Group uses derivatives to

manage the Group’s market risk exposure. As the value of these financial derivatives are

principally driven by interest rate factors, the Group uses them to reduce the overall interest

rate exposure of the Group. These are performed by entering into an exposure in derivatives

that produces opposite value movements vis-a-vis exposures generated by other non-derivative

activities of the Group. The Group manages these risks on a portfolio basis. Hence, exposures

on derivatives are aggregated or netted against similar exposures arising from other financial

instruments engaged by the Group.

F-197

Fair value of financial derivatives

The estimated fair values of the Group’s and the Company’s outstanding derivative

financial instruments are as below. These values are stand-alone without taking into account

their potential offsetting relationships with other non-derivatives exposures of the Group.

2004 2003

Principal

Amount Fair Value

Principal

Amount Fair Value

RM’000 RM’000 RM’000 RM’000

Interest rate related contracts:

Interest rate swaps . . . . . . . . 830,000 (5,048) 780,000 (10,190)

Risk associated with financial derivatives

As derivatives are contracts that transfer risks, they expose the holder to the same types

of market and credit risk as other financial instruments, and the Group manages these risks in a

consistent manner under the overall risk management framework.

The Group uses interest rate swaps as hedging instruments to offset exposures generated

by other non-derivative activities of the Group.

Credit risk of derivatives

Counterparty credit risk arises from the possibility that a counterparty may be unable to

meet the terms of the derivatives contract. Unlike conventional asset instruments, the Group’s

financial loss is not the entire contracted principal value of the derivatives, but rather a fraction

equivalent to the cost to replace the defaulted contract with another in the market. The cost of

replacement is equivalent to the difference between the original value of the derivatives at time

of contract with the defaulted counterparty and the current fair value of a similar substitute at

current market prices. The Group will only suffer a replacement cost if the contract carries a

fair value gain at time of default.

As at 31 March 2004, the Group has no counterparty credit risk as there were no

outstanding positive value contracts. This may vary over the life of the contracts, mainly as a

function of movement in market rates and time.

The Group limits its credit risk within a conservative framework by dealing with

creditworthy counterparties, setting credit limits on exposures to counterparties, and obtaining

collateral where appropriate.

45. FAIR VALUES OF FINANCIAL INSTRUMENTS

Financial instruments are contracts that gives rise to both a financial asset of one enterprise

and a financial liability or equity instrument of another enterprise. The fair value of a financial

instrument is the amount at which the instrument could be exchanged or settled between

knowledgeable and willing parties in an arm’s length transaction, other than a forced or

liquidated sale. The information presented herein represents best estimates of fair values of

financial instruments 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 number of methodologies and assumptions regarding risk characteristics of various financial

instruments, discount rates, estimates of future cash flows and other factors. Changes in the

assumptions could materially affect these estimates and the corresponding fair values.

In addition, fair value information for non-financial assets and liabilities such as investments in

subsidiary companies and taxation are excluded, as they do not fall within the scope of MASB 24,

which requires the fair value information to be disclosed.

F-198

The estimated fair values of the Group’s and the Company’s financial instruments are as

follows:

2004 2003

The Group

Carrying

Value Fair Value

Carrying

Value Fair Value

RM’000 RM’000 RM’000 RM’000

Financial Assets

Cash and short-term funds . . . . . . . . 3,054,767 3,054,767 2,665,601 2,665,601

Deposits and placements with financial

institutions . . . . . . . . . . . . . . . . 19,230 19,230 18,594 18,594

Dealing securities. . . . . . . . . . . . . . 256,059 256,093 72,875 72,875

Investment securities . . . . . . . . . . . . 1,918,590 2,085,517 2,310,621 2,357,669

Loans, advances and financing* . . . . . 26,454,119 28,099,722 25,549,143 27,542,012

Other financial assets . . . . . . . . . . . 198,965 198,965 176,734 176,734

31,901,730 33,714,294 30,793,568 32,833,485

Non-financial assets . . . . . . . . . . . . 1,716,588 1,716,588 1,735,998 1,735,998

TOTAL ASSETS . . . . . . . . . . . . . . 33,618,318 35,430,882 32,529,566 34,569,483

Financial Liabilities

Deposits from customers . . . . . . . . . 20,411,793 20,432,491 19,609,194 19,655,382

Deposits and placements of banks and

other financial institutions . . . . . . . 5,063,411 4,970,987 5,109,140 5,097,839

Securities sold under repurchase

agreements . . . . . . . . . . . . . . . . 274,991 274,991 305,470 305,470

Amount due to Cagamas Berhad . . . . 3,675,607 3,677,937 4,018,930 4,060,255

Subordinated term loan . . . . . . . . . . 680,000 778,997 680,000 810,480

Subordinated loan notes . . . . . . . . . . — — 250,000 296,470

Subordinated bonds. . . . . . . . . . . . . 200,000 231,976 — —

Other financial liabilities . . . . . . . . . 720,505 720,505 590,687 590,687

31,026,307 31,087,884 30,563,421 30,816,583

Non-Financial Liabilities

Other non-financial liabilities . . . . . . 105,424 105,424 20,532 20,532

Minority interests . . . . . . . . . . . . . . 101 101 113 113

Shareholder’s funds . . . . . . . . . . . . 2,486,486 2,486,486 1,945,500 1,945,500

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . . . 33,618,318 33,679,895 32,529,566 32,782,728

F-199

2004 2003

The Company

Carrying

Value Fair Value

Carrying

Value Fair Value

RM’000 RM’000 RM’000 RM’000

Financial Assets

Cash and short-term funds . . . . . . . . 3,052,558 3,052,558 2,664,406 2,664,406

Deposits and placements with financial

institutions . . . . . . . . . . . . . . . . 19,132 19,132 18,500 18,500

Dealing securities. . . . . . . . . . . . . . 256,059 256,093 72,875 72,875

Investment securities . . . . . . . . . . . . 1,918,301 2,083,850 2,310,344 2,356,054

Loans, advances and financing* . . . . . 26,462,392 28,108,950 25,559,662 27,554,146

Other financial assets . . . . . . . . . . . 202,545 202,545 175,569 175,569

31,910,987 33,723,128 30,801,356 32,841,550

Non-financial assets . . . . . . . . . . . . 1,696,144 1,696,144 1,715,129 1,715,129

TOTAL ASSETS . . . . . . . . . . . . . . 33,607,131 35,419,272 32,516,485 34,556,679

Financial Liabilities

Deposits from customers . . . . . . . . . 20,413,587 20,434,285 19,611,047 19,657,235

Deposits and placements of banks and

other financial institutions . . . . . . . 5,063,411 4,970,987 5,109,140 5,097,839

Securities sold under repurchase

agreements . . . . . . . . . . . . . . . . 274,991 274,991 305,470 305,470

Amount due to Cagamas Berhad . . . . 3,675,607 3,677,937 4,018,930 4,060,255

Subordinated term loan . . . . . . . . . . 680,000 778,997 680,000 810,480

Subordinated loan notes . . . . . . . . . . — — 250,000 296,470

Subordinated bonds. . . . . . . . . . . . . 200,000 231,976 — —

Other financial liabilities . . . . . . . . . 717,009 717,009 580,723 580,723

31,024,605 31,086,182 30,555,310 30,808,472

Non-Financial Liabilities

Other non-financial liabilities . . . . . . 103,999 103,999 20,024 20,024

Shareholder’s funds . . . . . . . . . . . . 2,478,527 2,478,527 1,941,151 1,941,151

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . . . 33,607,131 33,668,708 32,516,485 32,769,647

* The general allowance for both the Group and the Company amounting to RM405,255,000 (RM388,705,000 in 2003)

has been included under non-financial assets.

The fair value of derivatives financial instruments are shown in Note 44.

The fair value of contingent liabilities and undrawn credit facilities are not readily

ascertainable. These financial instruments are presently not sold or traded. They generate fees that

are in line with market prices for similar arrangements. The estimated fair value may be represented

by the present value of the fees expected to be received, less associated costs and potential loss that

may arise should these commitments crystallise. The Group assess that their respective fair values

are unlikely to be significant given that the overall level of fees involved is not significant and no

allowances is necessary to be made.

F-200

The following methods and assumptions were used to estimate the fair value of assets and

liabilities as at 31 March 2004 :

(a) Cash And Short-Term Funds

The carrying values are a reasonable estimate of the fair values because of negligible

credit risk, short-term nature or frequent repricing.

(b) Securities Purchased Under Repurchased Agreements And Deposits With Financial

Institutions

The fair values of securities purchased under repurchased agreements and deposits with

financial institutions with remaining maturities less than six months are estimated to

approximate their carrying values. For securities purchased under repurchase agreements and

deposits with financial institutions with maturities of more than six months, the fair value are

estimated based on discounted cash flows using the prevailing KLIBOR rates and interest rate

swap rates.

(c) Dealing And Investment Securities

The estimated fair value is based on quoted or observable market prices at the balance

sheet date. Where such quoted or observable market prices are not available, the fair value is

estimated using discounted cash flow or net tangible assets techniques. Where the discounted

cash flow technique is used, the estimated future cash flows are discounted using prevailing

KLIBOR rates and interest rate swap rates of similar instruments at the balance sheet date.

(d) Loans, Advances And Financing (‘‘Loans And Financing’’)

The fair value of variable rate loans and financing are estimated to approximate their

carrying values. For fixed rate loans and financing, the fair values are estimated based on

expected future cash flows of contractual instalment payments and discounted at prevailing

KLIBOR rates and interest rate swap rates. In respect of non-performing loans and financing,

the fair values are deemed to approximate the carrying value, net of interest in suspense and

specific allowance for bad and doubtful debts and financing.

(e) Deposits From Customers, Deposits Of Banks And Other Financial Institutions And

Securities Sold Under Repurchase Agreements

The fair value of deposits liabilities payable on demand (‘‘current and savings deposits’’)

or with remaining maturities of less than six months are estimated to approximate their

carrying values at balance sheet date. The fair value of term deposits, negotiable instrument of

deposits and securities sold under repurchase agreements with remaining maturities of more

than six months are estimated based on discounted cash flows using KLIBOR rates and interest

rate swap rates.

(f) Amount Due To Cagamas Berhad

The fair values for amount due to Cagamas Berhad are determined based on discounted

cash flows of future instalment payments at prevailing KLIBOR rates and interest rate swap

rates.

(g) Subordinated Term Loan, Subordinated Bonds And Subordinated Loan Notes

(‘‘Borrowings’’)

The fair value of borrowings with remaining maturities of less than six months are

estimated to approximate their carrying values at balance sheet date. The fair value of

borrowings with remaining maturities of more than six months are estimated based on

discounted cash flows using KLIBOR rates and interest rate swap rates.

F-201

(h) Interest Rate Swaps

The estimated fair value is based on the market price to enter into an offsetting contract

at balance sheet date.

The fair value of the other financial assets and other financial liabilities, which are

considered short term in nature, are estimated to be approximately their carrying value.

As assumptions were made regarding risk characteristics of the various financial

instruments, discount rates, future expected loss experience and other factors, changes in the

uncertainties and assumptions could materially affect these estimates and the resulting value

estimates.

46. PRIOR YEAR ADJUSTMENTS

During the financial year, the Group and the Company changed its accounting policy on

accounting for income taxes. Under MASB 25, Income Taxes, deferred tax liabilities are recognised

for all taxable temporary differences. In prior years, deferred tax liabilities were provided for on

account of timing differences only to the extent that a tax liability was expected to materialise in the

foreseeable future. In addition, the Group and the Company have commenced recognition of deferred

tax assets for all deductible temporary differences, when it is probable that sufficient taxable profit

will be available against which the deductible temporary differences can be utilised. In prior years,

deferred tax assets were not recognised unless the expected realisation was reasonably assured.

The accounting change has been accounted for retrospectively and the effects on prior years

have been taken up as prior year adjustments in the financial statements.

Accordingly, the following accounts in prior years have been restated to reflect the effects of

the accounting change:

The Group

As previously

stated Adjustments As restated

RM’000 RM’000 RM’000

As at 31 March 2002

Deferred tax asset . . . . . . . . . . . . . . . . . . . . . — 32,229 32,229

Unappropriated profit at end of period . . . . . . . . . (2,978,179) 32,229 (2,945,950)

For the financial year ended 31 March 2003

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,243 4,768 23,011

As at 31 March 2003

Deferred tax asset . . . . . . . . . . . . . . . . . . . . . 537,022 108,837 645,859

Unappropriated profit at end of year . . . . . . . . . . 321,881 108,837 430,718

F-202

The Company

As previously

stated Adjustments As restated

RM’000 RM’000 RM’000

As at 31 March 2002

Deferred tax asset . . . . . . . . . . . . . . . . . . . . . — 32,229 32,229

Unappropriated profit at end of period . . . . . . . . . (3,004,004) 32,229 (2,971,775)

For the financial year ended 31 March 2003

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,802 4,768 24,570

As at 31 March 2003

Deferred tax asset . . . . . . . . . . . . . . . . . . . . . 537,279 108,837 646,116

Unappropriated profit at end of year . . . . . . . . . . 317,532 108,837 426,369

47. COMPARATIVE FIGURES

The presentation and classification of items in the current year’s financial statements are

consistent with the previous financial year except for the following comparative figures, which have

been restated in order to conform with the current year’s presentation:

Balance Sheet

As at 31 March 2003

The Group The Company

As previously

reported As restated

As previously

reported As restated

RM’000 RM’000 RM’000 RM’000

Other Assets . . . . . . . . . . . . . . . . . 291,103 315,368 289,938 314,203

Other Liabilities . . . . . . . . . . . . . . 586,954 611,219 576,482 600,747

F-203

48. THE OPERATION OF ISLAMIC BANKING SCHEME

The state of affairs as at 31 March 2004 (10 Safar 1425 Hijrah) and the results for the financial

year ended on that date under the Islamic Banking Scheme are summarised as follows:

The Group and Company

2004 2003

Note RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . . . . . . . . . . . . . . (b) 71,472 40,218

Investment securities . . . . . . . . . . . . . . . . . . . . . . . (c) 155,379 167,085

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . (d) 5,166,510 2,155,638

Statutory deposit with Bank Negara Malaysia . . . . . . . 185,185 67,098

Property and equipment . . . . . . . . . . . . . . . . . . . . . 32 67

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,927 17,714

Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . (o) 35,054 9,290

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 5,657,559 2,457,110

LIABILITIES AND ISLAMIC BANKING FUND

Deposits from customers . . . . . . . . . . . . . . . . . . . . (e) 2,546,524 1,179,939

Deposits and placements of banks and other financial

institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . (f) 2,467,979 1,027,861

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . (g) 150,290 44,299

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 5,164,793 2,252,099

Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (h) 360,542 160,542

Unappropriated profit . . . . . . . . . . . . . . . . . . . . . . 132,224 44,469

Islamic Banking Fund . . . . . . . . . . . . . . . . . . . . . . 492,766 205,011

TOTAL LIABILITIES AND ISLAMIC BANKING

FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,657,559 2,457,110

COMMITMENTS AND CONTINGENCIES . . . . . . . . (q) 317,357 100,043

The accompanying Notes form an integral part of

the Islamic Banking Business Financial Statements.

F-204

Income Statements

For the year ended 31 March 2004

The Group and Company

2004 2003

Note RM’000 RM’000

Income derived from investment of depositors’ funds . (i) 345,571 110,822

Loan and financing loss and allowances . . . . . . . . . . . (j) (69,160) (25,785)

Transfer to profit equalisation reserve . . . . . . . . . . . . (46,976) (3,655)

Total attributable income . . . . . . . . . . . . . . . . . . . . 229,435 81,382

Income attributable to the depositors . . . . . . . . . . . . . (k) (112,998) (48,012)

Profit attributable to the Company . . . . . . . . . . . . . . 116,437 33,370

Income derived from Islamic Banking Funds . . . . . . . . (l) 32,082 11,594

Total net income . . . . . . . . . . . . . . . . . . . . . . . . . 148,519 44,964

Operating expenditure . . . . . . . . . . . . . . . . . . . . . . (m) (26,664) (1,975)

Profit before taxation . . . . . . . . . . . . . . . . . . . . . . 121,855 42,989

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (n) (34,100) (12,065)

Profit after taxation . . . . . . . . . . . . . . . . . . . . . . . 87,755 30,924

The accompanying Notes form an integral part of

the Islamic Banking Business Financial Statements.

F-205

Statements of Changes in Islamic Banking Fund

For the year ended 31 March 2004

The Group and Company

Capital

Unappro-

priated profit Total

RM’000 RM’000 RM’000

Balance as at 1 April 2002

As previously stated . . . . . . . . . . . . . . . . . . . . 10,000 6,390 16,390

Prior year adjustments . . . . . . . . . . . . . . . . . . . — 538 538

As restated . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 6,928 16,928

Increase in capital fund . . . . . . . . . . . . . . . . . . 150,542 — 150,542

Profit for the year . . . . . . . . . . . . . . . . . . . . . — 30,924 30,924

Deferred tax recognised on general allowance

vested over from AMFB Holdings . . . . . . . . . . — 6,617 6,617

Balance as at 31 March 2003 . . . . . . . . . . . . . 160,542 44,469 205,011

Balance as at 1 April 2003

As previously stated . . . . . . . . . . . . . . . . . . . . 160,542 35,179 195,721

Prior year adjustments . . . . . . . . . . . . . . . . . . . — 9,290 9,290

As restated . . . . . . . . . . . . . . . . . . . . . . . . . . 160,542 44,469 205,011

Increase in capital fund . . . . . . . . . . . . . . . . . . 200,000 — 200,000

Profit for the year . . . . . . . . . . . . . . . . . . . . . — 87,755 87,755

Balance as at 31 March 2004 . . . . . . . . . . . . . 360,542 132,224 492,766

F-206

Cash Flow Statements

For the year ended 31 March 2004

The Group and Company

2004 2003

RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,855 42,989

Adjustments for:

Income-in-suspense, net of recoveries . . . . . . . . . . . . . . . . . . 18,537 37,352

Loan and financing loss and allowances, net of recoveries . . . . . 72,842 27,933

Depreciation of property and equipment . . . . . . . . . . . . . . . . . 35 122

Transfer to profit equalisation reserve . . . . . . . . . . . . . . . . . . 46,976 3,655

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,852) (4,901)

Operating Profit Before Working Capital Changes. . . . . . . . . . . 255,393 107,150

(Increase)/Decrease In Operating Assets:

Loans, advances and financing. . . . . . . . . . . . . . . . . . . . . . . (3,102,251) (853,587)

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26,212) (15,144)

Statutory deposit with Bank Negara Malaysia . . . . . . . . . . . . . (118,087) (14,993)

Increase/(Decrease) In Operating Liabilities:

Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . . . . 1,366,585 442,695

Deposits and placements of banks and other financial institutions . 1,440,118 303,510

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (849) (12,966)

Net Cash Used in Operating Activities. . . . . . . . . . . . . . . . . . (185,303) (43,335)

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from disposal of investment securities — net. . . . . . . . 16,557 14,803

Vesting of assets and liabilities from AMFB Holdings, net of cash

acquired (Note a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (95,040)

Net Cash Generated From/(Used in) Investing Activities . . . . . . . 16,557 (80,237)

CASH FLOWS FROM FINANCING ACTIVITY

Increase in capital fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 150,542

Net Cash Generated From Financing Activity . . . . . . . . . . . . . 200,000 150,542

Net Increase In Cash And Cash Equivalents . . . . . . . . . . . . . . 31,254 26,970

Cash And Cash Equivalents At Beginning Of Year . . . . . . . . . . 40,218 13,248

Cash And Cash Equivalents At End Of Year (Note b) . . . . . . . . 71,472 40,218

F-207

Notes:

a. Vesting of assets and liabilities from AMFB Holdings

The summary of the effect of the vesting of assets and liabilities from AMFB Holdings to the Company on 15

June 2002, on the Islamic cash flows of the Company during the previous financial year are as follows:

RM’000

Net assets vested over:

Cash and short term funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,574

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,645

Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,361,063

General allowance for bad and doubtful financing . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,630)

Specific allowance for bad and doubtful financing . . . . . . . . . . . . . . . . . . . . . . . . . . (59,599)

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (36,751)

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,569

Statutory deposits with Bank Negara Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,465

Property and equipment — Cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 911

Property and equipment — Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . (723)

Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (546,661)

Deposits of banks and other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . (724,351)

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (35,898)

Purchase price paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,614

Less: Cash and short term funds vested over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,574)

Cash outflow on vesting of assets and liabilities, net of cash acquired . . . . . . . . . . . . . . 95,040

b: Cash and Cash Equivalents

For the purpose of the cash flow statements, cash and cash equivalents consist of cash and short term funds net

of bank overdrafts. Cash and cash equivalents included in the cash flow statements comprise the following balance

sheets amounts:

The Group and Company

2004 2003

RM’000 RM’000

Cash and short term funds (Note b) . . . . . . . . . . . . . . . . . . . . . . . . . 71,472 40,218

F-208

NOTES TO THE ISLAMIC BANKING SCHEME FINANCIAL STATEMENTS

(a) ISLAMIC BANKING OPERATIONS

Disclosure of Shariah Advisor

The Company’s Islamic Banking activities are subject to conformity with Shariah requirements and

confirmation by the Shariah Advisors, Dato’ Hj Md. Hashim bin Yahaya, Yang Amat Arif Dato’ Sheikh Ghazali

bin Hj Abdul Rahman and Associate Professor Dr Mohd Daud Bakar.

The role and authority of the Shariah Advisors is to advise and provide guidance on all matters with

respect to compliance with Shariah principles including product development, business, marketing and

operational implementation activities.

Zakat Obligations

The Group does not pay zakat on behalf of the shareholders or depositors.

(b) CASH AND SHORT TERM FUNDS

The Group and Company

2004 2003

RM’000 RM’000

Cash and bank balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272 218

Money at call and deposit placements maturing within one month . . . . . . . 71,200 40,000

71,472 40,218

(c) INVESTMENT SECURITIES

The Group and Company

2004 2003

RM’000 RM’000

Malaysian Government Investment Certificates . . . . . . . . . . . . . . . . . . . 145,319 92,814

Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 49,560

Islamic Negotiable certificate of deposits . . . . . . . . . . . . . . . . . . . . . . — 19,977

Islamic acceptance bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,979 —

148,298 162,351

Add:

Accretion of discount less amortisation of premium. . . . . . . . . . . . . . 7,081 4,734

155,379 167,085

Market value:

Malaysian Government Investment Certificates . . . . . . . . . . . . . . . . . . . 152,801 96,288

Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 51,306

F-209

(d) FINANCING ACTIVITIES

The Group and Company

2004 2003

RM’000 RM’000

Term financing and revolving credit facilities . . . . . . . . . . . . . . . . . . . 246,490 260,197

House financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419,085 269,899

Islamic hire-purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,160,157 2,248,249

Lease financing/Industrial hire-purchase . . . . . . . . . . . . . . . . . . . . . . . 457,146 80,092

Other financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570,172 91,045

6,853,050 2,949,482

Unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,474,527) (639,640)

Gross financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,378,523 2,309,842

Allowance for bad and doubtful financing:

— Specific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (58,247) (49,758)

— General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (80,276) (33,179)

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (73,490) (71,267)

5,166,510 2,155,638

Non-performing financing (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,897 68,818

Ratio of net non-performing financing . . . . . . . . . . . . . . . . . . . . . . . . 1.58% 3.14%

(i) Financing analysed by concepts are as follows:

The Group and Company

2004 2003

RM’000 RM’000

Al-Bai’ Bithaman Ajil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617,704 235,395

Al-Ijarah/Al-Ijarah Thumma Al-Bai’ . . . . . . . . . . . . . . . . . . . . . 4,534,832 1,847,795

Al-Musyarakah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225,987 226,652

5,378,523 2,309,842

(ii) The maturity structure of financing is as follows:

The Group and Company

2004 2003

RM’000 RM’000

Maturing within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,454,802 619,823

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,710,690 717,503

Three years to five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,360,758 584,826

Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 852,273 387,690

5,378,523 2,309,842

F-210

(iii) Financing analysed by their economic purposes are as follows:

The Group and Company

2004 2003

RM’000 RM’000

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,594 2,545

Mining and quarrying . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,941 1,043

Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,309 14,376

Electricity, gas and water . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,539 265

Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,668 93,430

Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,089 276

Purchase of landed property

Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,052 132,165

Non-residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,145 175,037

General commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,432 20,585

Transport, storage and communication . . . . . . . . . . . . . . . . . . . . 113,613 60,710

Finance, insurance and business services . . . . . . . . . . . . . . . . . . 14,122 6,551

Purchase of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,548 37,289

Purchase of transport vehicles . . . . . . . . . . . . . . . . . . . . . . . . . 3,962,298 1,707,235

Consumption credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368,339 23

Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,834 58,312

5,378,523 2,309,842

Financing analysed by type of customers are as follows:

Bank financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

Domestic non-bank financial institutions . . . . . . . . . . . . . . . . . . . 437 451

Business enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397,025 292,518

Small medium industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399,715 89,829

Local government and statutory authorities . . . . . . . . . . . . . . . . . 80 —

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,570,266 1,920,983

Other domestic entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,243 5,152

Foreign entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,757 909

5,378,523 2,309,842

(iv) Movements in the allowance for bad and doubtful financing and income-in-suspense accounts are as

follows:

The Group and Company

2004 2003

RM’000 RM’000

General Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . 33,179 1,923

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . 47,097 7,626

Amount vested over from AMFB Holdings . . . . . . . . . . . . . . . — 23,630

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,276 33,179

% of total financing less specific allowance and

income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.53% 1.52%

Specific Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . 49,758 862

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . 42,872 31,524

Amount written back in respect of recoveries . . . . . . . . . . . . . (17,127) (11,217)

Net charge to income statements . . . . . . . . . . . . . . . . . . . . . 25,745 20,307

Amount vested over from AMFB Holdings . . . . . . . . . . . . . . . — 59,599

Amount written off/Adjustment to Asset Deficiency Account . . . . (17,256) (31,010)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,247 49,758

F-211

The Group and Company

2004 2003

RM’000 RM’000

Income-in-suspense

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . 71,267 1,742

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . 30,442 42,055

Amount written back in respect of recoveries . . . . . . . . . . . . . (11,905) (4,703)

Net charge to income statements . . . . . . . . . . . . . . . . . . . . . 18,537 37,352

Amount vested over from AMFB Holdings . . . . . . . . . . . . . . . — 36,751

Amount written off/Adjustment to Asset Deficiency Account . . . . (16,314) (4,578)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,490 71,267

(e) DEPOSITS FROM CUSTOMERS

The Group and Company

2004 2003

RM’000 RM’000

Mudharabah fund

General investment deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,267,071 1,058,628

Non-Mudharabah fund

Saving deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241,921 111,427

Islamic negotiable certificates of deposits . . . . . . . . . . . . . . . . . . . . 37,532 9,884

2,546,524 1,179,939

The maturity structure of deposits is as follows:

The Group and Company

2004 2003

RM’000 RM’000

Due within six months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,223,787 976,300

Six months to one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193,211 98,515

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,860 35,211

Three years to five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,666 69,913

2,546,524 1,179,939

The deposits are sourced from the following customers:

The Group and Company

2004 2003

RM’000 RM’000

Business enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,235,147 675,147

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 626,427 236,616

Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 684,950 268,176

2,546,524 1,179,939

F-212

(f) DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS

The Group and Company

2004 2003

RM’000 RM’000

Mudharabah fund

Other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,160,682 640,949

Non-Mudharabah fund

Licensed banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457,506 69,111

Licensed finance companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159,530 159,581

Other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 690,261 158,220

2,467,979 1,027,861

Included under deposits and placements of licensed finance companies is an amount of RM159,530,000

(RM159,581,000 in 2003) due to Head Office.

(g) OTHER LIABILITIES

The Group and Company

2004 2003

RM’000 RM’000

Amount owing to Head Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,874 20,571

Lease deposits and advance rental . . . . . . . . . . . . . . . . . . . . . . . . . . 11,124 916

Provision for taxation and zakat . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,779

Dividends payable to depositors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,006 10,347

Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,287 5,663

Profit equalisation reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,999 5,023

150,290 44,299

(h) CAPITAL

The Group and Company

2004 2003

RM’000 RM’000

Allocated:

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,542 10,000

Increase during the year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000 200,542

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460,542 210,542

Utilised:

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,542 10,000

Increase during the year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 150,542

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360,542 160,542

(i) INCOME DERIVED FROM INVESTMENT OF DEPOSITORS’ FUNDS AND OTHERS

The Group and Company

2004 2003

RM’000 RM’000

Income derived from investment of:

(i) General investment deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 257,515 98,003

(ii) Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,056 12,819

345,571 110,822

F-213

(i) Income derived from investment of general investment deposits

The Group and Company

2004 2003

RM’000 RM’000

Finance income and hibah:

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253,176 97,802

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 43

Money at call and deposits with financial institutions . . . . . . . . . . 1,625 1,257

254,817 99,102

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,622) (5,722)

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,309 3,924

254,504 97,304

Fee and commission income:

Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 969 266

Other fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,042 433

3,011 699

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257,515 98,003

(ii) Income derived from investment of other funds

The Group and Company

2004 2003

RM’000 RM’000

Finance income and hibah:

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,798 42,996

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 6

Money at call and deposits with financial institutions . . . . . . . . . . 556 165

100,360 43,167

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,464) (30,953)

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,131 513

87,027 12,727

Fee and commission income:

Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331 35

Other fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 698 57

1,029 92

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,056 12,819

(j) FINANCING LOSS AND ALLOWANCES

The Group and Company

2004 2003

RM’000 RM’000

Allowance for bad and doubtful financing:

— Specific allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,745 20,307

— General allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,097 7,626

Bad debts and financing recovered . . . . . . . . . . . . . . . . . . . . . . . . . . (3,682) (2,148)

69,160 25,785

F-214

(k) INCOME ATTRIBUTABLE TO DEPOSITORS

The Group and Company

2004 2003

RM’000 RM’000

Mudharabah fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,346 37,794

Non-Mudharabah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,737 4,411

Special placement deposits by Head Office . . . . . . . . . . . . . . . . . . . . . 3,915 5,807

112,998 48,012

(l) INCOME DERIVED FROM INVESTMENT OF ISLAMIC BANKING CAPITAL FUNDS

The Group and Company

2004 2003

RM’000 RM’000

Finance income and hibah:

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,542 11,571

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 5

Money at call and deposits with financial institutions . . . . . . . . . . . . . . 202 149

31,746 11,725

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (451) (677)

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412 464

31,707 11,512

Fee and commission income:

Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 31

Other fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254 51

375 82

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,082 11,594

(m) OPERATING EXPENDITURE

The Group and Company

2004 2003

RM’000 RM’000

Personnel/Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 218

Establishment costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 300

Marketing and communication expenses . . . . . . . . . . . . . . . . . . . . . . . 25,330 971

Administration and general expenses . . . . . . . . . . . . . . . . . . . . . . . . . 1,298 486

26,664 1,975

(n) TAXATION

The Group and Company

2004 2003

RM’000 RM’000

Estimated current tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,864 14,200

Transfer to deferred tax asset (note o) . . . . . . . . . . . . . . . . . . . . . . . . (25,764) (2,135)

34,100 12,065

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(o) DEFERRED TAX ASSET

The Group and Company

2004 2003

RM’000 RM’000

Balance at beginning of year

— As previously reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

— Prior year adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,290 538

As restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,290 538

Transfer from income statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,764 2,135

Amount recognised on general allowance vested over from AMFB Holdings — 6,617

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,054 9,290

The deferred tax assets/(liabilities) are in respect of the following:

Temporary differences arising from general allowance for financing. . . . . . 22,477 9,290

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,983) —

Profit equalisation reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,560 —

35,054 9,290

(p) NET INCOME FROM ISLAMIC BANKING BUSINESS

For consolidation with the conventional operations, net income from Islamic Banking Business comprises the

following items:

The Group and Company

2004 2003

RM’000 RM’000

Income derived from investment of depositors’ fund . . . . . . . . . . . . . . . 345,571 110,822

Income attributable to depositors . . . . . . . . . . . . . . . . . . . . . . . . . . . (112,998) (48,012)

Income attributable to the Company . . . . . . . . . . . . . . . . . . . . . . . . . 232,573 62,810

Income derived from Islamic Banking Funds . . . . . . . . . . . . . . . . . . . . 32,082 11,594

264,655 74,404

(q) COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Group and the Company makes various commitments and incurs certain

contingent liabilities with legal recourse to its customers. No material losses are anticipated as a result of these

transactions. The commitments and contingencies are not secured against the Company’s assets.

The risk-weighted exposure of the Group and of the Company is as follows:

The Group and Company

2004 2003

Principal

Amount

Credit

Equivalent

Amount*

Principal

Amount

Credit

Equivalent

Amount*

RM’000 RM’000 RM’000 RM’000

Irrevocable commitments to extend credit:

— maturing less than one year . . . . . 277,301 — 58,845 —

— maturing more than one year. . . . . 40,056 20,028 41,198 20,599

Total . . . . . . . . . . . . . . . . . . . . . . . 317,357 20,028 100,043 20,599

* The credit equivalent amount is arrived at using the credit conversion factor as per Bank Negara Malaysia

guidelines.

F-216

(r) CAPITAL ADEQUACY RATIO

The capital adequacy ratio of the Islamic Banking Scheme of the Group and Company as at 31 March 2004 is

analysed as follows:

2004 2003

RM’000 RM’000

Tier 1 capital

Islamic Banking Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360,542 160,542

Retained profits* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,170 35,179

Total tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457,712 195,721

Tier 2 capital

General allowance for bad and doubtful debts . . . . . . . . . . . . . . . . . . . 80,276 33,179

Total tier 2 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,276 33,179

Capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 537,988 228,900

Total risk-weighted assets: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,225,580 2,177,402

Capital Ratios

Core capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.76% 8.99%

Risk-weighted capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.30% 10.51%

* The amount as at 31 March 2004 excludes deferred tax asset recognised todate.

F-217

(s) YIELD/PROFIT RATE RISK

The following table shows the profit sensitivity gap, by time bands, on which profit rates of instruments are next

repriced on a contractual basis or, if earlier, the dates on which the instruments mature.

2004

The Group

and Company

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

yield/

profit

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Deposits and placements

with banks and other

financial institutions . 71,200 — — — — — 272 71,472 2.80

Investment securities . . . 2,979 119,108 — — 33,292 — — 155,379 3.05

Financing

— Performing . . . . . 274,678 199,002 298,206 729,577 2,565,379 1,097,047 — 5,163,889 8.61

— Non-performing* . — — — — — — 2,621 2,621 —

Other non-interest

sensitive balances . . . — — — — — — 264,198 264,198 —

TOTAL ASSETS . . . . . 348,857 318,110 298,206 729,577 2,598,671 1,097,047 267,091 5,657,559

LIABILITIES AND

ISLAMIC BANKING

FUNDS

Deposits from customers 1,080,547 760,214 383,026 193,211 129,526 — — 2,546,524 2.93

Deposits and placements

of banks and other

financial institutions . 843,931 568,812 273,239 360,502 421,495 — — 2,467,979 3.03

Other non-interest

sensitive balances . . . — — — — — — 150,290 150,290 —

Total Liabilities . . . . . . 1,924,478 1,329,026 656,265 553,713 551,021 — 150,290 5,164,793

Islamic Banking Fund . . — — — — — — 492,766 492,766 —

TOTAL LIABILITIES

AND ISLAMIC

BANKING FUNDS . 1,924,478 1,329,026 656,265 553,713 551,021 — 643,056 5,657,559

On-balance sheet interest

sensitivity gap . . . . . (1,575,621) (1,010,916) (358,059) 175,864 2,047,650 1,097,047 (375,965) —

Off-balance sheet interest

sensitivity gap . . . . . — — — — — — — —

Total interest sensitivity

gap . . . . . . . . . . . (1,575,621) (1,010,916) (358,059) 175,864 2,047,650 1,097,047 (375,965) —

F-218

2003

The Group

and Company

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

yield/

profit

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Deposits and placements

with banks and other

financial institutions . 40,000 — — — — — 218 40,218 2.80

Investment securities . . . 19,977 16,887 14,781 19,544 95,896 — — 167,085 3.14

Financing

— Performing . . . . . 4,338 40,273 75,048 188,767 1,387,138 424,435 — 2,119,999 10.47

— Non-performing* . — — — — — — 35,639 35,639 —

Other non-interest

sensitive balances . . . — — — — — — 94,169 94,169 —

TOTAL ASSETS . . . . . 64,315 57,160 89,829 208,311 1,483,034 424,435 130,026 2,457,110

LIABILITIES AND

ISLAMIC BANKING

FUNDS

Deposits from customers 465,534 248,695 262,071 98,515 105,124 — — 1,179,939 2.43

Deposits and placements

of banks and other

financial institutions . 451,593 245,607 29,845 108,533 192,283 — — 1,027,861 2.80

Other non-interest

sensitive balances . . . — — — — — — 44,299 44,299 —

Total Liabilities . . . . . . 917,127 494,302 291,916 207,048 297,407 — 44,299 2,252,099

Islamic Banking Fund . . — — — — — — 205,011 205,011 —

TOTAL LIABILITIES

AND ISLAMIC

BANKING FUNDS . 917,127 494,302 291,916 207,048 297,407 — 249,310 2,457,110

On-balance sheet interest

sensitivity gap . . . . . (852,812) (437,142) (202,087) 1,263 1,185,627 424,435 (119,284) —

Off-balance sheet interest

sensitivity gap . . . . . — — — — — — — —

Total interest sensitivity

gap . . . . . . . . . . . (852,812) (437,142) (202,087) 1,263 1,185,627 424,435 (119,284) —

* This is arrived at after deducting the general allowance, specific allowance and interest/income-in-suspense from

gross non-performing loan outstanding.

F-219

(t) FAIR VALUE OF ISLAMIC BANKING OPERATIONS FINANCIAL INSTRUMENTS

The estimated fair values of the Group’s and Company’s Islamic Banking operations financial instruments are as

follows:

The Group and Company

2004 2003

Carrying

Value Fair Value

Carrying

Value Fair Value

RM’000 RM’000 RM’000 RM’000

Financial Assets

Deposits and placements with banks and

other financial institutions . . . . . . . . . 71,472 71,472 40,218 40,218

Investment securities . . . . . . . . . . . . . . 155,379 155,798 167,085 167,012

Financing activities* . . . . . . . . . . . . . . 5,246,786 5,872,080 2,188,817 2,518,657

Other financial assets . . . . . . . . . . . . . 43,927 43,927 17,714 17,714

5,517,564 6,143,277 2,413,834 2,743,601

Non-financial assets . . . . . . . . . . . . . . 139,995 139,995 43,276 43,276

TOTAL ASSETS . . . . . . . . . . . . . . . . 5,657,559 6,283,272 2,457,110 2,786,877

Financial Liabilities

Deposits from customers . . . . . . . . . . . 2,546,524 2,547,141 1,179,939 1,183,868

Deposits and placements of banks and other

financial institutions . . . . . . . . . . . . 2,467,979 2,468,862 1,027,861 1,028,701

Other financial liabilities . . . . . . . . . . . 98,291 98,291 39,276 39,276

5,112,794 5,114,294 2,247,076 2,251,845

Non-Financial Liabilities

Other non-financial liabilities . . . . . . . . 51,999 51,999 5,023 5,023

Shareholder’s funds . . . . . . . . . . . . . . 492,766 492,766 205,011 205,011

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . . . . . 5,657,559 5,659,059 2,457,110 2,461,879

* The general allowance for both the Group and the Company amounting to RM80,276,000 (RM33,179,000 in

2003) has been included under non-financial assets.

(u) PRIOR YEAR ADJUSTMENTS

The prior year adjustments relates to the change in accounting policies on adoption of MASB 25, Income Taxes

as mentioned on Note 46.

The change in accounting policies resulted from the adoption of MASB 25, Income Taxes, on the measurement

and recognition of deferred tax assets and/or liabilities which has been applied retrospectively has the following impact

on previous year results:

The Group and Company

As previously

reported

Effect of

change As restated

RM’000 RM’000 RM’000

As at 31 March 2002

Unappropriated profit at end of period . . . . . . . . . . . . . . 6,390 538 6,928

For the financial year ended 31 March 2003

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,200) 2,135 (12,065)

As at 31 March 2003

Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . — 9,290 9,290

Unappropriated profit at end of year . . . . . . . . . . . . . . . 35,179 9,290 44,469

F-220

(v) COMPARATIVE FIGURES

The comparative figures were extended to comply with the additional disclosure requirements of MASBi-1,

Presentation of Financial Statements of Islamic Financial Institutions, that are applicable for the financial year ended 31

March 2004.

49. GENERAL INFORMATION

The Company is a public limited liability company, incorporated in Malaysia.

The registered office and the principal place of business of the Company is located at 22nd

Floor, Bangunan AmBank Group, 55, Jalan Raja Chulan, 50200 Kuala Lumpur.

F-221

AmFinance Berhad

(Incorporated in Malaysia)

AUDITED FINANCIAL STATEMENTS

For the financial year ended 31 March 2004

STATEMENT BY DIRECTORS

The Directors of AmFinance Berhad, state that, in their opinion, the accompanying balance sheets

and statements of income, changes in equity and cash flows, are drawn up in accordance with the

provisions of the Companies Act, 1965 and the 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

as at 31 March 2004 and of the results and the cash flows of the Group and of the Company for the

financial year ended on that date.

Signed on behalf of the Board

in accordance with a resolution of the Directors

TAN SRI DATO’ AZMAN HASHIM

ChairmanMOHAMED AZMI MAHMOOD

Managing Director

Kuala Lumpur

31 May 2004

STATUTORY DECLARATION

I, YAP CHIN TUAN, being the Officer primarily responsible for the financial management of

AmFinance Berhad, do solemnly and sincerely declare that the accompanying balance sheets and

statements of income, changes in equity and cash flows, together with the notes thereto, are, in my

opinion, 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

abovenamed YAP CHIN TUAN at KUALA

LUMPUR this 31st day of May 2004.

Before me,

COMMISSIONER FOR OATHS

F-222

AmFINANCE BERHAD

DIRECTORS’ AND AUDITORS’

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2003

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

DIRECTORS’ REPORT

The directors have pleasure in submitting their report and the audited financial statements of

the Group and of the Company for the financial year ended 31 March 2003 which have been

prepared in accordance with the provisions of the Companies Act, 1965, the Banking and Financial

Institutions Act, 1989, and the applicable approved accounting standards in Malaysia.

PRINCIPAL ACTIVITIES

The principal activities of the Company are the carrying on of the business of a licensed

finance company which also includes the provision of Islamic banking services.

The principal activities of its subsidiary companies are disclosed in Note 10 to the Financial

Statements.

There have been no significant changes in the nature of the activities of the Company and its

subsidiary companies during the financial year.

FINANCIAL RESULTS

The Group The Company

RM’000 RM’000

Profit before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341,056 360,979

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,243 19,802

Profit before minority interests . . . . . . . . . . . . . . . . . . . . . . . 359,299 380,781

Minority shareholders’ interests in results of subsidiary companies . 6 —

Net profit attributable to shareholder of the Company . . . . . . . . . 359,305 380,781

BUSINESS PLAN AND STRATEGY

The Company’s corporate plan and strategy were formulated in line with AmBank Group’s

objective to remain a significant player in the financial services industry in the rapidly changing

financial landscape. Last year, we undertook several challenges, notably, the merger integration

exercise with AMFB Holdings Berhad (formerly known as Arab-Malaysian Finance Berhad),

expanding cross-selling and servicing initiatives of AmBank Group products at selected branches as

well as being part of the on-going AmBank Group Business Rationalisation Exercise.

The Company’s Strategic Business Directions are:

i. to consolidate the Company’s position as the premier finance company in Malaysia;

ii. to realize the full merger benefits, better economies of scale, rationalisation of operating

units and better channel reach;

iii. to leverage on AmBank Group’s image makeover through new brand and corporate

identity, aggressive market rollout and presence building;

iv. to be effective in recoveries and assets management by instituting proactive management

and recovery efforts;

v. to enhance overall credit risk and liquidity management;

F-223

vi. to focus on reorganizing its retail delivery channels and developing new consumer

financing products; and

vii. to continue to invest in technology and resources to improve customer service and

operational efficiency and cost controls to improve its earning capacity.

OUTLOOK FOR NEXT FINANCIAL YEAR

This year, the global economic outlook remains uncertain despite the end of the Iraqi war. The

growing threat of the Severe Acute Respiratory Syndrome (SARS) outbreak has created doubts for

any fast rebound in the region and world economy.

Given the extremely challenging world economic landscape, the primary driver for economic

growth this year is expected to come from domestic demand. The World Bank has revised its

original 2003 forecast growth rate for Malaysia to 4.2 per cent from its previous prediction of five

per cent, though it said the country’s economic fundamentals remain strong for the year.

Based on expectations of a modest expansion in the economy, we expect demand for consumer

financing to remain strong. Although both corporate and retail banking were previously our key

business focus areas, the Company has since been increasingly focused on the retail banking market.

In the coming year, the intense competition within the industry is expected to result in narrowing

interest margins. With the completion of the merger, the Company is targeting the enlarged customer

base for cross-selling and cross-servicing to increase its income. The profitability of the Company is

expected to improve over the next year.

ITEMS OF AN UNUSUAL NATURE

In the opinion of the directors, the results of the operations of the Group and of the Company

during the financial year have not been substantially affected by any item, transaction or event of a

material and unusual nature.

There has not arisen in the interval between the end of the financial year and the date of this

report any item, transaction or event of a material and unusual nature likely, in the opinion of the

directors, to affect substantially the results of the operations of the Group and of the Company for

the succeeding financial year.

STATUS OF CORPORATE EXERCISES

(i) On 21 May, 2002, the Company completed its capital reduction exercise to cancel the portion

of its paid-up capital which is lost or unrepresented by available assets. The capital reduction

was effected via the following:

. Cancellation of the Company’s authorised capital from RM6,500.0 million comprising

8,000.0 million ordinary shares of RM0.50 each and 5,000.0 million preference shares of

RM0.50 each to RM3,886.2 million, comprising 2,772.5 million ordinary shares of

RM0.50 each and 5,000.0 million 8% irredeemable non-cumulative convertible preference

shares of RM0.50 each; and

. Cancellation of the Company’s issued and paid up capital from RM2,613.7 million,

comprising 5,227.5 million ordinary shares of RM0.50 each, to RM2, comprising 4

ordinary shares of RM0.50 each; and

. Consolidation of the authorised and paid up capital of the Company from every two

existing shares of RM0.50 each to one share of RM1.00 each.

(ii) On 15 June 2002, the finance company business of the holding company, AMFB Holdings

Berhad (formerly known as Arab-Malaysian Finance Berhad) (‘‘AMFB Holdings’’) was merged

with that of the Company by way of a transfer of the assets and liabilities of AMFB Holdings

F-224

to the Company via a Vesting Order dated 21 May 2002 of the High Court of Malaya under

Section 50 of the Banking and Financial Institutions Act, 1989. The net book value of the

assets and liabilities transferred was RM1,158.4 million.

The consideration for this transfer of business was satisfied in the following manner:

. Issue of 528,402,118 new ordinary shares of RM1.00 each on 18 July 2002 by the

Company to AMFB Holdings at RM1.71906 per share; and

. Issue of RM250 million nominal amount of 10-year 7% Unsecured Subordinated Loan

Notes 2002/2012 by the Company to AMFB Holdings on 14 August 2002.

DIVIDENDS

No dividend has been paid or declared by the Company since the end of the previous financial

year. The directors do not recommend the payment of any dividend in respect of the current

financial year.

RESERVES AND ALLOWANCES

There were no material transfers to or from reserves, allowances or provisions during the

financial year other than those disclosed in the financial statements.

ISSUANCE OF SHARES AND DEBENTURES

During the financial year, the Company issued the following equity and debt instruments as

settlement of the consideration due in respect of the vesting of assets and liabilities by AMFB

Holdings to the Company:

. Issue of 528,402,118 new ordinary shares of RM1.00 each on 18 July 2002 by the

Company to AMFB Holdings at RM1.71906 per share; and

. Issue of RM250 million nominal amount of 10-year 7% Unsecured Subordinated Loan

Notes 2002/2012 by the Company to AMFB Holdings on 14 August 2002.

All the new ordinary shares issued rank pari passu with the then existing ordinary shares of the

Company.

SHARE OPTIONS

No options have been granted by the Company to any parties during the financial year to take

up unissued shares of the Company.

No shares have been issued during the financial year by virtue of the exercise of any option to

take up unissued shares of the Company. As at the end of the financial year, there were no unissued

shares of the Company under options.

BAD AND DOUBTFUL DEBTS AND 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

debts and financing and the making of allowances for doubtful debts and financing, and have

satisfied themselves that all known bad debts and financing had been written off and adequate

allowances had been made for doubtful debts and financing.

At the date of this report, the directors of the Company 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.

F-225

CURRENT ASSETS

Before the financial statements of the Group and of the Company were made out, the directors

took reasonable steps to ascertain that any current assets, other than debts and financing, which were

unlikely to be realised in the ordinary course of business, their values as shown in the accounting

records of the Group and of the Company have been written down to their estimated realisable

values.

At the date of this report, the directors are not aware of any circumstances which would render

the values attributed to the current assets in the financial statements of the Group and of the

Company 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 methods 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 which secures the liability of any other person; or

(b) any contingent liability 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 normal course of 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.

SUBSEQUENT EVENTS

The subsequent events are disclosed in Note 41 to the Financial Statements.

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.

DIRECTORS

The directors of the Company in office since the date of the last report and at the date of this

report are:

Tan Sri Dato’ Azman Hashim

Tun Mohammed Hanif Omar

Prof Tan Sri Dato’ Dr Mohd Rashdan Haji Baba

Dato’ Mohd Tahir Haji Abdul Rahim

Mohamed Azmi Mahmood

Cheah Tek Kuang

Mahdi Morad (appointed on 26 July 2002)

Dato’ Azlan Hashim (resigned on 21 May 2002)

In accordance with Article 96 of the Company’s Articles of Association, Tan Sri Dato’ Azman

Hashim and Tun Mohammed Hanif Omar retire from the Board at the forthcoming Annual General

Meeting, and being eligible, offer themselves for re-election.

F-226

Dato’ Mohd Tahir Haji Abdul Rahim retires pursuant to Section 129 of the Companies Act,

1965 at the forthcoming Annual General Meeting and offers himself for re-appointment to hold

office until the conclusion of the next Annual General Meeting.

In accordance with Article 90 of the Company’s Articles of Association, Mahdi Morad, who

was appointed to the Board since the date of the last report, retired in the last Annual General

Meeting held on 20 September 2002 and, being eligible, was duly re-elected at the said Annual

General Meeting.

DIRECTORS’ INTERESTS

The interests in shares, debentures and share options in the holding and ultimate holding

company and in related companies, of those who were directors at the end of the financial year as

recorded in the Register of Directors’ Shareholdings kept by the Company under Section 134 of the

Companies Act, 1965, are as follows:

DIRECT INTERESTS

In the holding company, AMFB Holdings Berhad

(formerly known as Arab-Malaysian Finance Berhad)

No. of ordinary shares of RM1.00 each

Shares

Balance at

1.4.2002/

Date of

Appointment

Bought/

ICULS

Conversion Sold

Balance at

31.3.2003

Tan Sri Dato’ Azman Hashim

— held directly . . . . . . . . . . . . . . . . . . 2,193,412 150,093 2,132,000 211,505

— held through nominees . . . . . . . . . . . . 522,985 — — 522,985

Dato’ Mohd Tahir Haji Abdul Rahim . . . . . . 13,407 1,626 — 15,033

Cheah Tek Kuang . . . . . . . . . . . . . . . . . . 38,000 — — 38,000

Mohamed Azmi Mahmood . . . . . . . . . . . . . 65,000 — 15,000 50,000

Mahdi Morad . . . . . . . . . . . . . . . . . . . . . 27,000 — — 27,000

Nominal amount of ICULS

7.5% Irredeemable Convertible Unsecured

Loan Stocks 1997/2002

Balance at

1.4.2002 Bought

Mandatory

Conversion Sold

Balance at

31.3.2003

Tan Sri Dato’ Azman Hashim . . . . 1,260,786 — 1,260,786 — —

Dato’ Mohd Tahir Haji Abdul

Rahim . . . . . . . . . . . . . . . . . 13,666 — 13,666 — —

In the ultimate holding company, AMMB Holdings Berhad

No. of ordinary shares of RM1.00 each

Shares

Balance at

1.4.2002/

Date of

Appointment

Bought/

ICULS

Conversion Sold

Balance at

31.3.2003

Tan Sri Dato’ Azman Hashim . . . . . . . . . . . 669,476 518,946 — 1,188,422

Prof Tan Sri Dato’ Dr Mohd Rashdan Haji Baba 120,000 5,381 — 125,381

Dato’ Mohd Tahir Haji Abdul Rahim . . . . . . 73,180 3,281 — 76,461

Cheah Tek Kuang . . . . . . . . . . . . . . . . . . 217,200 — — 217,200

Mohamed Azmi Mahmood . . . . . . . . . . . . . 200,000 — 120,000 80,000

Mahdi Morad . . . . . . . . . . . . . . . . . . . . . 9,000 — — 9,000

F-227

Nominal amount of ICULS

7.5% Irredeemable Convertible Unsecured

Loan Stocks 1997/2002

Balance at

1.4.2002 Bought

Mandatory

Conversion Sold

Balance at

31.3.2003

Tan Sri Dato’ Azman Hashim . . . . 5,786,255 — 5,786,255 — —

Prof Tan Sri Dato’ Dr Mohd

Rashdan Haji Baba . . . . . . . . . 60,000 — 60,000 — —

Dato’ Mohd Tahir Haji Abdul

Rahim . . . . . . . . . . . . . . . . . 36,590 — 36,590 — —

Nominal amount of Bonds Bonds

5% Redeemable Unsecured

1997/2002

Balance at

1.4.2002 Bought Sold Redeemed

Balance at

31.3.2003

Prof Tan Sri Dato’ Dr Mohd

Rashdan Haji Baba . . . . . . . . . 60,000 — — 60,000 —

Dato’ Mohd Tahir Haji Abdul

Rahim . . . . . . . . . . . . . . . . . 36,590 — — 36,590 —

No. of Warrants

Warrants 1997/2007

Balance at

1.4.2002 Bought Sold

Balance at

31.3.2003

Tan Sri Dato’ Azman Hashim . . . . . . . . . . . 2,035,964 — 2,035,964 —

Prof Tan Sri Dato’ Dr Mohd Rashdan Haji Baba 12,000 — — 12,000

Dato’ Mohd Tahir Haji Abdul Rahim . . . . . . 7,318 — — 7,318

No. of Warrants

Warrants 2003/2008

Balance at

1.4.2002 Allotment Sold

Balance at

31.3.2003

Tan Sri Dato’ Azman Hashim . . . . . . . . . . . — 149,000 — 149,000

Prof Tan Sri Dato’ Dr Mohd Rashdan Haji Baba — 16,000 — 16,000

Dato’ Mohd Tahir Haji Abdul Rahim . . . . . . — 9,557 — 9,557

Cheah Tek Kuang . . . . . . . . . . . . . . . . . . — 28,000 — 28,000

Mohamed Azmi Mahmood . . . . . . . . . . . . . — 9,750 — 9,750

No. of ordinary shares of RM1.00 each

Share Options

Balance at

1.4.2002/

Date of

Appointment Granted Exercised

Balance at

31.3.2003

Cheah Tek Kuang . . . . . . . . . . . . . . . . . . 140,000 — — 140,000

Mohamed Azmi Mahmood . . . . . . . . . . . . . 200,000 — — 200,000

Mahdi Morad . . . . . . . . . . . . . . . . . . . . . 104,000 20,000 — 124,000

F-228

DEEMED INTERESTS

In the holding company, AMFB Holdings Berhad

(formerly known as Arab-Malaysian Finance Berhad)

No. of ordinary shares of RM1.00 each

Shares Name of Company

Balance at

1.4.2002

Bought/

ICULS

Conversion Sold

Balance at

31.3.2003

Tan Sri Dato’ Azman

Hashim. . . . . . . . . . . .

AMDB Equipment

Trading Sdn Bhd

212,000 29,047 — 241,047

Dato’ Mohd Tahir Haji

Abdul Rahim . . . . . . . .

Bitaria Sdn Bhd 45,000 — — 45,000

7.5% Irredeemable

Convertible Unsecured

Loan Stocks 1997/2002

Nominal amount of ICULS

Name of Company

Balance at

1.4.2002 Bought

Mandatory

Conversion Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman Hashim .

AMDB

Equipment

Trading Sdn

Bhd

244,000 — 244,000 — —

In the ultimate holding company, AMMB Holdings Berhad

No. of ordinary shares of RM1.00 each

Shares Name of Company

Balance at

1.4.2002

Bought/ICULS

Conversion Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman Hashim .

Arab-Malaysian

Corporation

Berhad

322,833,398 25,315,152 4,264,000 343,884,550

AMDB Equipment

Trading Sdn Bhd

110,000 — — 110,000

Azman Hashim

Holdings Sdn Bhd

9,854,544 16,208,876 16,654,544 9,408,876

Slan Sdn Bhd 385,000 128,816 115,500 398,316

Ginagini Sdn Bhd — 19,130,749 1,800,000 17,330,749

7.5% Irredeemable

Convertible

Unsecured Loan

Stocks 1997/2002

Nominal amount of ICULS

Name of Company

Balance at

1.4.2002 Bought Converted Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman

Hashim. . . .

Arab-Malaysian

Corporation

Berhad

186,763,956 6,300,000 193,063,956 — —

Azman Hashim

Holdings Sdn

Bhd

5,103,272 — 5,103,272 — —

Slan Sdn Bhd 1,436,300 — 1,436,300 — —

F-229

5% Redeemable

Unsecured Bonds

1997/2002

Nominal amount of Bonds

Name of Company

Balance at

1.4.2002 Bought Sold Redeemed

Balance at

31.3.2003

Tan Sri Dato’

Azman

Hashim. . . .

Arab-Malaysian

Corporation

Berhad

19,378,498 — — 19,378,498 —

No. of Warrants

Warrants

1997/2007 Name of Company

Balance at

1.4.2002 Bought Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman Hashim . .

Arab-Malaysian

Corporation

Berhad

36,305,498 — 20,074,000 16,231,498

Indigenous Capital

Sdn Bhd

— 12,075,000 12,075,000 —

No. of Warrants

Warrants

2003/2008 Name of Company

Balance at

1.4.2002 Allotment Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman Hashim . .

Arab-Malaysian

Corporation

Berhad

— 45,594,942 — 45,594,942

AMDB Equipment

Trading Sdn Bhd

— 13,750 — 13,750

Azman Hashim

Holdings Sdn Bhd

— 2,026,109 — 2,026,109

Slan Sdn Bhd — 49,789 — 49,789

Ginagini Sdn Bhd — 2,391,734 — 2,391,734

In the related company, AmBank Berhad

No. of ordinary shares of RM1.00 each

Shares Name of Company

Balance at

1.4.2002 Bought Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman Hashim . .

Ginagini Sdn Bhd 54,484,375 — 54,484,375 —

Azman Hashim

Holdings Sdn Bhd

13,750,000 — 13,750,000 —

Interest Bearing

Irredeemable

Convertible Unsecured

Loan Stocks 1995/2005

Nominal amount of ICULS

Name of Company

Balance at

1.4.2002 Bought Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman Hashim . .

Azman Hashim

Holdings Sdn Bhd

20,000,000 — 20,000,000 —

F-230

Interest Bearing

Irredeemable

Convertible Unsecured

Loan Stocks 1996/2002

Nominal amount of ICULS

Name of Company

Balance at

1.4.2002 Bought Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman Hashim . .

Azman Hashim

Holdings Sdn Bhd

29,775,000 — 29,775,000 —

The share options in the ultimate holding company, which had an option period of five years

were granted pursuant to AMMB Holdings Berhad Employees’ Share Option Scheme II (‘‘AHB

Group ESOS’’) and the persons to whom the options are granted under the scheme have no right to

participate in any staff share option scheme of any other company in the Group.

By virtue of the directors’ shareholding in the holding and ultimate holding company, these

directors are deemed to have an interest in the shares of the Company and its related companies.

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no director of the Company has received or

become entitled to receive any benefit (other than a benefit included in the aggregate amount of

emoluments received or due and receivable by directors 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 the related party

transactions as shown in Note 28 to the Financial Statements.

Neither during nor at the end of the financial year, did there subsist any arrangements to which

the Company is a party whereby directors might acquire benefits by means of the acquisition of

shares in, or debentures of, the Company or any other body corporate.

HOLDING AND ULTIMATE HOLDING COMPANY

The directors regard AMFB Holdings Berhad (formerly known as Arab-Malaysian Finance

Berhad) and AMMB Holdings Berhad, both of which are incorporated in Malaysia, as the holding

company and the ultimate holding company respectively.

F-231

RATING BY EXTERNAL AGENCY

The Company was accorded a long term rating of A2 and short term rating of P1 by Rating

Agency Malaysia Berhad.

AUDITORS

The auditors, Messrs Deloitte KassimChan, have indicated their willingness to continue in

office.

Signed on behalf of the Board

in accordance with a resolution of the Directors,

TAN SRI DATO’ AZMAN HASHIM MOHAMED AZMI MAHMOOD

Chairman Managing Director

Kuala Lumpur

30 May 2003

Audited Financial Statements for the financial year ended 31 March 2003

F-232

This page is intentionally left blank

REPORT OF THE AUDITORS TO THE MEMBER OF

AmFinance Berhad

(Incorporated in Malaysia)

We have audited the accompanying balance sheets as at 31 March 2003 and the related

statements of income, changes in equity and cash flows for the financial year then ended. These

financial statements are the responsibility of the Company’s directors. Our responsibility is to

express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the approved standards on auditing in Malaysia.

These standards require that we plan and perform the audit to obtain reasonable assurance about

whether the financial statements are free of material misstatement. An audit includes examining, on

a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit

also includes assessing the accounting principles used and significant estimates made by the

directors, as well as evaluating the overall financial statements presentation. We believe that 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 Sub-section (19) of Section 169 of the Act and the

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 as at 31 March 2003 and of the

results and the cash flows of the Group and of the Company for the financial year

ended on that date; and

(ii) the matters required by Section 169 of the Act to be dealt with in the financial

statements and consolidated financial statements; and

(b) the accounting and other records and the registers required by the Act to be kept by the

Company and by the subsidiary companies have been properly kept in accordance with the

provisions of the Act.

We are satisfied that the financial statements of the subsidiary companies that have been

consolidated with the financial statements of the Company 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 as required by us for these purposes.

F-233

Our auditors’ reports on the financial statements of the subsidiary companies were not subject

to any qualification and did not include any comment made under Sub-section (3) of Section 174 of

the Act.

The financial statements of the Group and the Company for the preceding financial period were

audited by another firm of auditors and are presented here merely for comparative purposes.

DELOITTE KASSIMCHAN

AF 0080

Chartered Accountants

ROSITA TAN

1874/9/04 (J)

Partner

Petaling Jaya

30 May 2003

F-234

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

BALANCE SHEETS

As at 31 March 2003

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

Note RM’000 RM’000 RM’000 RM’000

ASSETSCash and short-term funds . 4 2,665,601 638,790 2,664,406 636,330Deposits and placements

with financial institutions 5 18,594 408,720 18,500 408,631Investment securities . . . . . 6 2,383,496 1,599,158 2,383,219 1,598,867Loans, advances and

financing. . . . . . . . . . . 7 25,160,438 7,545,921 25,170,957 7,558,446Other assets . . . . . . . . . . 8 828,125 245,890 827,217 244,555Statutory deposit with Bank

Negara Malaysia . . . . . . 9 900,746 347,437 900,746 347,437Investment in subsidiary

companies . . . . . . . . . . 10 — — 29,779 29,779Investment in associated

companies . . . . . . . . . . 11 115 — 150 50Property and equipment . . . 12 439,349 425,222 388,409 373,438

TOTAL ASSETS . . . . . . . 32,396,464 11,211,138 32,383,383 11,197,533

LIABILITIES ANDSHAREHOLDER’SFUNDS

Deposits from customers . . 13 19,609,194 9,567,161 19,611,047 9,591,967Deposits and placements of

banks and other financialinstitutions . . . . . . . . . 14 5,109,140 628,000 5,109,140 628,000

Securities sold underrepurchase agreements . . 15 305,470 — 305,470 —

Amount due to CagamasBerhad . . . . . . . . . . . . 16 4,018,930 — 4,018,930 —

Other liabilities . . . . . . . . 17 586,954 267,700 576,482 255,233Subordinated term loan . . . 18 680,000 680,000 680,000 680,000Subordinated loan notes . . . 19 250,000 — 250,000 —

Total Liabilities . . . . . . . . 30,559,688 11,142,861 30,551,069 11,155,200

Minority interests . . . . . . . 20 113 119 — —

Share capital. . . . . . . . . . 21 528,402 2,613,750 528,402 2,613,750Reserves . . . . . . . . . . . . 22 1,308,261 (2,545,592) 1,303,912 (2,571,417)

Shareholder’s Funds . . . . . 1,836,663 68,158 1,832,314 42,333

TOTAL LIABILITIESAND SHAREHOLDER’SFUNDS . . . . . . . . . . . 32,396,464 11,211,138 32,383,383 11,197,533

COMMITMENTS ANDCONTINGENCIES . . . . 33 4,411,202 1,108,269 4,411,102 1,108,169

NET TANGIBLE ASSETSPER SHARE (RM) . . . . 34 3.48 0.01 3.47 0.01

The accompanying Notes form an integral part of the Financial Statements.

F-235

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

INCOME STATEMENTS

For the year ended 31 March 2003

The Group The Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

Note RM’000 RM’000 RM’000 RM’000

Interest income . . . . . . . . 23 1,896,929 1,058,309 1,898,002 1,059,775

Interest expense . . . . . . . . 24 (900,256) (525,530) (900,657) (507,299)

Net interest income . . . . . 996,673 532,779 997,345 552,476

Income from Islamic

Banking Scheme . . . . . . 42 74,404 8,726 74,404 8,726

1,071,077 541,505 1,071,749 561,202

Loan and financing loss and

allowances. . . . . . . . . . 25 (368,725) (311,638) (346,068) (284,904)

702,352 229,867 725,681 276,298

Non-interest income . . . . . 26 32,152 190,111 31,563 100,570

Writeback/(Allowance) for

diminution in value of

investment securities . . . 34,588 (8,434) 34,588 (8,434)

Transfer to profit

equalisation reserve . . . . (3,655) — (3,655) —

765,437 411,544 788,177 368,434

Staff costs and overheads . . 27 (424,433) (341,767) (427,198) (340,243)

Profit before share in results

of associated company

and taxation . . . . . . . . . 341,004 69,777 360,979 28,191

Share of profits in

associated company . . . . 52 — — —

Profit before taxation . . . 341,056 69,777 360,979 28,191

Taxation . . . . . . . . . . . . 30 18,243 (5,756) 19,802 (386)

Profit before minority

interests . . . . . . . . . . . 359,299 64,021 380,781 27,805

Minority shareholders’

interests in results of

subsidiary companies . . . 6 1,123 — —

Net profit attributable to

shareholder of the

Company . . . . . . . . . . 359,305 65,144 380,781 27,805

Basic earnings per ordinary

share (sen) . . . . . . . . . 32 46.19 4.17 48.95 1.78

The accompanying Notes form an integral part of the Financial Statements.

F-236

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

STATEMENTS OF CHANGES IN EQUITY

For the year ended 31 March 2003

Non-distributable Distributable

The Group

Share

Capital

Share

Premium

Statutory

Reserve

Capital

Reserve

(Accumulated

loss)/Unappro-

priated Profit Total

Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Balance as of

1 January 2001 . . . . 2,613,750 — 418,684 — (3,029,420) 3,014

Profit for the year . . . . — — — — 65,144 65,144

Transfer to statutory

reserve. . . . . . . . . . 22 — — 13,903 — (13,903) —

Balance as of

31 March 2002 . . . . 2,613,750 — 432,587 — (2,978,179) 68,158

Capital reduction . . . . . (2,613,750) — (408,595) — 3,022,345 —

Issue of ordinary shares . 528,402 379,953 — — — 908,355

Recognition of deferred

tax asset against

capital reserve . . . . . — — — 500,845 — 500,845

Profit for the year . . . . — — — — 359,305 359,305

Transfer to statutory

reserve. . . . . . . . . . — — 190,390 — (190,390) —

Transfer from capital

reserve to

unappropriated profit . — — — (108,800) 108,800 —

Balance as of

31 March 2003 . . . . 528,402 379,953 214,382 392,045 321,881 1,836,663

Non-distributable Distributable

The Company

Share

Capital

Share

Premium

Statutory

Reserve

Capital

Reserve

(Accumulated

loss)/Unappro-

priated Profit Total

Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Balance as of

1 January 2001 . . . . 2,613,750 — 418,684 — (3,017,906) 14,528

Profit for the year . . . . — — — — 27,805 27,805

Transfer to statutory

reserve. . . . . . . . . . 22 — — 13,903 — (13,903) —

Balance as of

31 March 2002 . . . . 2,613,750 — 432,587 — (3,004,004) 42,333

Capital reduction . . . . . (2,613,750) — (408,595) — 3,022,345 —

Issue of ordinary shares . 528,402 379,953 — — — 908,355

Recognition of deferred

tax asset against

capital reserve . . . . . — — — 500,845 — 500,845

Profit for the year . . . . — — — — 380,781 380,781

Transfer to statutory

reserve. . . . . . . . . . — — 190,390 — (190,390) —

Transfer from capital

reserve to

unappropriated profit . — — — (108,800) 108,800 —

Balance as of

31 March 2003 . . . . 528,402 379,953 214,382 392,045 317,532 1,832,314

The accompanying Notes form an integral part of the Financial Statements.

F-237

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

CASH FLOW STATEMENTS

For the year ended 31 March 2003

The Group The Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM

OPERATING ACTIVITIES

Profit before taxation . . . . . . . . . 341,056 69,777 360,979 28,191

Adjustments for:

Interest/Income-in-suspense, net of

recoveries . . . . . . . . . . . . . . . 378,847 162,152 378,847 162,152

Loan and financing loss and

allowances, net of recoveries . . . 369,635 250,457 369,635 250,457

Allowance for value impairment on

amount recoverable from

Danaharta . . . . . . . . . . . . . . . 89,741 120,324 89,741 120,324

Depreciation of property and

equipment . . . . . . . . . . . . . . . 81,743 97,522 80,899 95,728

Loss/(Gain) on sale of quoted

investments — net . . . . . . . . . . 6,415 (1,991) 6,415 (1,991)

Transfer to profit equalisation

reserve . . . . . . . . . . . . . . . . . 3,655 — 3,655 —

(Accretion of discount)/amortisation

of premium . . . . . . . . . . . . . . (25,587) (53,474) (25,587) (53,474)

Property and equipment written off . 474 71 474 70

Share of profits of associated

company . . . . . . . . . . . . . . . . (52) — — —

Gross dividend income . . . . . . . . (4,069) (1,601) (4,068) (1,542)

Gain on sale of investment securities

— net . . . . . . . . . . . . . . . . . (2,821) (50,821) (2,821) (50,821)

(Writeback of allowance)/Allowance

for diminution in value of

investment securities . . . . . . . . (34,588) 8,434 (34,588) 8,434

Gain on disposal of property and

equipment . . . . . . . . . . . . . . . (5) (630) (5) (630)

Allowance for diminution in value of

land and development expenditure — 627 — 581

Allowance for diminution in value of

investment in subsidiary

companies . . . . . . . . . . . . . . . — — — 700

Bad debts written off . . . . . . . . . — 830 — —

Gain on disposal of development

properties . . . . . . . . . . . . . . . (50) (1,162) — (1,162)

Gain on disposal of subsidiary

companies . . . . . . . . . . . . . . . — (74,756) — (8,423)

Operating Profit Before Working

Capital Changes . . . . . . . . . . . 1,204,394 525,759 1,223,576 548,594

F-238

The Group The Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000 RM’000 RM’000

Operating Profit Before Working

Capital Changes . . . . . . . . . . . 1,204,394 525,759 1,223,576 548,594

(Increase)/Decrease In Operating

Assets:

Deposits and placements with

financial institutions . . . . . . . . . 491,026 (179,422) 491,031 (181,631)

Dealing securities. . . . . . . . . . . . — 170,836 — 168,727

Loans, advances and financing. . . . (2,235,811) (637,419) (2,233,805) (601,827)

Other assets . . . . . . . . . . . . . . . (59,062) (12,082) (59,282) 30,153

Statutory deposit with Bank Negara

Malaysia . . . . . . . . . . . . . . . . (3,752) 3,005 (3,752) 3,005

Increase/(Decrease) In Operating

Liabilities:

Deposits from customers . . . . . . . (170,548) 765,544 (193,501) 781,538

Deposits and placements of banks

and other financial institutions . . 837,828 (246,200) 837,828 (246,200)

Securities sold under repurchase

agreements . . . . . . . . . . . . . . 305,470 — 305,470 —

Amount due to Cagamas Berhad . . (83,300) — (83,300) —

Other liabilities . . . . . . . . . . . . . 60,458 (71,255) 61,103 (183,743)

Cash Generated From Operations . . 346,703 318,766 345,368 318,616

Taxation paid . . . . . . . . . . . . . . (19,683) (4,517) (17,068) —

Net Cash Generated From Operating

Activities . . . . . . . . . . . . . . . 327,020 314,249 328,300 318,616

F-239

The Group The Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM

INVESTING ACTIVITIES

Proceeds from disposal of

investment securities — net . . . . 643,893 96,384 643,879 96,384

Net dividend received . . . . . . . . . 3,137 1,200 3,136 1,156

Proceeds from disposal of property

and equipment . . . . . . . . . . . . 9 1,625 9 1,622

Vesting of assets and liabilities from

AMFB Holdings, net of cash

acquired (Note a) . . . . . . . . . . (91,448) — (91,448) —

Purchase of property and equipment (14,155) (14,297) (14,155) (13,541)

Proceeds from disposal of

development properties . . . . . . . — 3,880 — 3,880

Disposal of subsidiary companies,

net of cash disposed . . . . . . . . — 10,979 — 8,933

Net Cash From Investing Activities. 541,436 99,771 541,421 98,434

CASH FLOWS FROM

FINANCING ACTIVITIES

Proceeds from issue of shares . . . . 908,355 — 908,355 —

Proceeds from issue of subordinated

loan notes . . . . . . . . . . . . . . . 250,000 — 250,000 —

Net Cash From Financing Activities 1,158,355 — 1,158,355 —

Net Increase In Cash And Cash

Equivalents . . . . . . . . . . . . . . 2,026,811 414,020 2,028,076 417,050

Cash And Cash Equivalents At

Beginning Of Year . . . . . . . . . 638,790 224,770 636,330 219,280

Cash And Cash Equivalents At End

Of Year (Note b) . . . . . . . . . . 2,665,601 638,790 2,664,406 636,330

F-240

Note a: Vesting of assets and liabilities from AMFB Holdings Berhad (formerly known as Arab-Malaysian Finance

Berhad) (‘‘AMFB Holdings’’)

The summary of the effect of the vesting of assets and liabilities from AMFB Holdings to the Company on 15 June

2002, on the cash flows of the Group and the Company are as follows:

RM’000

Net assets vested over:

Cash and short-term funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,066,907

Deposits with financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,900

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,394,432

Amortisation of premium on investment securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,354)

Allowance for diminution in value of investment securities . . . . . . . . . . . . . . . . . . . . . . (78,433)

Loans, advances and financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,570,845

General allowance for bad and doubtful debts and financing . . . . . . . . . . . . . . . . . . . . . (256,572)

Specific allowance for bad and doubtful debts and financing . . . . . . . . . . . . . . . . . . . . . (490,249)

Interest-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (636,832)

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263,081

Investment in associated company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Statutory deposits with Bank Negara Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549,557

Property and equipment — Cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176,841

Property and equipment — Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . (95,028)

Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,212,581)

Deposits of banks and other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,463,312)

Amount due to Cagamas Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,102,230)

Subordinated term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (180,000)

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (444,717)

Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,158,355

Purchase price paid:

Issue of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 908,355

Issue of subordinated loan notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000

1,158,355

Less: Cash and short term funds vested over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,066,907)

Cash outflow on vesting of assets and liabilities, net of cash acquired . . . . . . . . . . . . . . . 91,448

Note b: Cash and Cash Equivalents

For the purpose of the cash flow statements, cash and cash equivalents consist of cash and short term funds net of

bank overdrafts. Cash and cash equivalents included in the cash flow statements comprise the following balance

sheet amounts:

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Cash and short term funds (Note 4) 2,665,601 638,790 2,664,406 636,330

The accompanying Notes form an integral part of the Financial Statements.

F-241

AmFinance Berhad

(Incorporated in Malaysia)

And Its Subsidiary Companies

NOTES TO THE FINANCIAL STATEMENTS

1. PRINCIPAL ACTIVITIES

The principal activities of the Company are the carrying on of the business of a licensed

finance company which also includes the provision of Islamic banking services.

The principal activities of the subsidiary companies are disclosed in Note 10.

There have been no significant changes in the nature of the activities of the Company and its

subsidiary companies during the financial year.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The financial statements of the Group and of the Company have been prepared in accordance

with the provisions of the Companies Act, 1965, the Banking and Financial Institutions Act, 1989,

Bank Negara Malaysia Guidelines and the applicable approved accounting standards of the

Malaysian Accounting Standards Board. The financial statements incorporate those activities

relating to the Islamic Banking Business undertaken by the Company.

The Islamic Banking Business refers generally to the acceptance of deposits and granting of

financing under the Syariah principles. The Islamic Banking Business transactions are accounted for

on the accrual basis in compliance with the revised Garis Panduan 8 Guidelines on Presentation of

Financial Statements for Financial Institutions issued by Bank Negara Malaysia. The state of affairs

as at 31 March 2003 and the results for the financial year ended on that date of the Islamic Banking

Business of the Company are shown in Note 42.

3. SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies adopted by the Group and the Company are consistent with

those adopted in the previous years except for the adoption of the following new Malaysian

Accounting Standards (‘‘MASB’’) which is effective in the current financial year.

(i) MASB 19, Events After the Balance Sheet Date which is applied retrospectively. The

adoption does not have any impact on the financial statements.

(ii) MASB 20, Provisions, Contingent Liabilities and Contingent assets which is applied

retrospectively. Comparative figures have not been restated and no prior year adjustment

is required as there is no impact on the financial statements.

(iii) MASB 21, Business Combination which is applied retrospectively. The adoption does not

have any impact on the financial statements.

(iv) MASB 22, Segmental reporting which is applied retrospectively. The adoption resulted in

new disclosure format as set out in Note 35.

(v) MASB 23, Impairment of assets which is applied prospectively. The adoption does not

have any impact on the financial statements.

(vi) MASB 24, Financial Instruments — Presentation and Disclosure which has been adopted

prospectively. The adoption resulted in new disclosure format as set out in Notes 43 & 44

and the classification of financial instruments as liabilities or equity in the balance sheets.

F-242

(a) Basis of Accounting

The financial statements of the Group and of the Company have been prepared under the

historical cost convention unless otherwise indicated in the accounting policies below.

(b) Basis of Consolidation

The financial statements of the Group include the financial statements of the Company

and all its subsidiary companies listed under Note 10 made up to the end of the financial year.

The Company adopts the acquisition method in preparing the consolidated financial

statements. Under the acquisition method, the excess of the cost of investments in the

subsidiary companies over the attributable share in the fair value of the net assets of the

subsidiary companies at the date of the acquisition is taken up as goodwill on consolidation.

The interest of minority shareholders is stated at the minority’s proportion of the fair values of

the assets and liabilities recognised.

The results of subsidiary companies acquired or disposed during the financial year are

included in the consolidated financial statements from the effective date of acquisition or up to

the effective date of disposal.

All significant intercompany transactions and balances have been eliminated on

consolidation.

(c) Recognition of Interest and Financing Income

Interest and financing income is recognised on an accrual basis. Interest and financing

income on hire-purchase, block discounting and leasing transactions is recognised on the sum-

of-digits method. Interest and financing income on housing and term loans and financing is

recognised on a monthly rest basis.

Where an account is classified as non-performing, recognition of interest and financing

income is suspended with retroactive adjustments made to the date of first default. Thereafter,

interest on these accounts are recognised on a cash basis until such time as the accounts are no

longer classified as non-performing.

Customers’ accounts are classified as non-performing where repayments are in arrears for

more than six months, except for credit card accounts, which are classified as non-performing

where repayments are in arrears for more than three months. The classification of non-

performing loans and financing and the policy on suspension of interest is in conformity with

Bank Negara Malaysia’s Guideline On Classification of Non-Performing Loans and Allowance

for Bad and Doubtful Debts.

(d) Recognition of Fees and Other Income

Loan arrangement fees and commissions are recognised as income when all conditions

precedent are fulfilled.

Guarantee fees are recognised as income upon issuance and where the guarantee period is

longer than one year, over the duration of the guarantee period.

Other fees on a variety of services and facilities extended to customers are recognised on

inception of such transactions.

Dividends from dealing and investment securities are recognised when received.

(e) Allowance for Bad and Doubtful Debts and Financing

Specific allowances are made for doubtful debts and financing which have been

individually reviewed and specifically identified as bad or doubtful.

F-243

In addition, a general allowance based on a percentage of the loan and financing

portfolio, net of interest-in-suspense and specific allowance, is also made to cover possible

losses which are not specifically identified.

An uncollectible loan and financing or portion of a loan and 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.

The allowance for non-performing loans and financing is in conformity with the minimum

requirements of Bank Negara Malaysia’s Guideline On Classification of Non-Performing Loans

and Allowance for Bad and Doubtful Debts.

(f) Repurchase Agreements

Obligations on securities sold under repurchase agreements are securities which the Group

had sold from its portfolio with a commitment to repurchase at a future date. Such financing

transactions and the obligations to repurchase the securities are reflected as a liability in the

balance sheet, whilst the carrying values of the securities underlying these repurchase

agreements remain in the respective asset accounts.

(g) Dealing Securities

Dealing securities are marketable securities that are acquired and held with the intention

of resale in the short term, and are stated at the lower of cost and market value on a portfolio

basis.

Transfers, if any, from dealing to investment securities are made at the lower of cost and

market value.

As at 31 March 2003, the Group and Company do not have any dealing securities.

(h) Investment Securities

Investment securities are securities that are acquired and held for yield or capital growth

or to meet minimum liquid assets requirement pursuant to Section 38 of the Banking and

Financial Institutions Act, 1989 and are usually held to maturity.

Malaysian Government Securities, Malaysian Government Investment Certificates,

Cagamas bonds and other government securities and other bank guaranteed private debt

securities are stated at cost adjusted for amortisation of premium or accretion of discount.

Quoted securities are stated at the lower of cost and market value on a portfolio basis.

Unquoted securities are stated at cost and allowance is made in the event of any permanent

diminution in value.

Transfers, if any, from investment securities to dealing securities are made at the lower of

carrying value and market value.

(i) Investment in Subsidiary Company

A subsidiary company is a company in which the Group has power to exercise control

over the financial and operating policies so as to obtain benefits from their activities.

Investments in subsidiary companies, which are eliminated on consolidation, are stated in

the Company’s financial statements at cost or directors’ valuation, and are written down when

the directors consider that there is an impairment loss that is other than temporary on the value

of such investments. The impairment loss is charged to the income statement unless it reverses

a previous revaluation in which case it is treated as a revaluation decrease. The directors’

valuation is arrived at after taking into account the underlying net tangible assets value of the

subsidiary companies and the surplus on revaluation is credited to the revaluation reserve

account.

F-244

(j) Investment in Associated Company

An associated company is a company in which the Group has a long term equity interest

of between 20% to 50% and where the Group has representation on the Board and is in a

position to exercise significant influence in its management.

Investments in associated companies are stated at cost and are written down when the

directors consider there is an impairment loss that is other than temporary on the value of such

investments in the Company’s financial statements. The impairment loss is charged to the

income statement. In the consolidated financial statements, the results of associated companies

are accounted for under the equity method whereby the Group’s share of post-acquisition

profits less losses of associated companies is included in the consolidated income statement and

the Group’s interest in associated companies is stated at cost plus adjustments to reflect

changes in the Group’s share of the net assets of the associated companies in the consolidated

balance sheet.

(k) Property and Equipment and Depreciation

Property and equipment are stated at cost or valuation less accumulated depreciation and

impairment losses.

Gains or losses arising from disposal of an asset is determined as the difference between

the estimated net disposal proceeds and the carrying amount of the asset, and is recognised in

the income statements.

Freehold land and capital work in progress are not depreciated. Short term leasehold land

is amortised over the term of leases of between 3 to 49 years. Long term leasehold land is

amortised over the term of leases of between 50 to 800 years. Depreciation of other property

and equipment is calculated using the straight-line method at rates based on the estimated

useful lives of the various assets.

The annual depreciation rates for the various classes of property and equipment are as

follows:

Buildings . . . . . . . . . . . . . . . . . . 2% or over the short term lease of

between 3 to 49 years

Leasehold improvements . . . . . . . . 10%–20%

Office equipment . . . . . . . . . . . . . 10%–20%

Furniture and fittings . . . . . . . . . . 10%–25%

Computer equipment and software . . 20%–331/3%

Motor vehicles . . . . . . . . . . . . . . 20%

(l) Impairment of Assets

The carrying values of assets are reviewed for impairment when there is an indication that

the asset might be impaired. Impairment is measured by comparing the carrying values of the

assets with their recoverable amounts. The recoverable amount is the higher of net realisable

value and value in use, which is measured by reference to discounted future cash flows, if

applicable. Recoverable amounts are estimated for individual assets or, if it is not possible, for

the cash generating unit.

An impairment loss is charged to the income statements immediately, unless the asset is

carried at revalued amount. Any impairment loss of a revalued asset is treated as a revaluation

decrease to the extent of previously recognised revaluation surplus for the same asset.

Subsequent increase in the recoverable amount of an asset is treated as reversal of the

previous impairment loss and is recognised to the extent of the carrying amount of the asset

that would have been determined (net of amortisation and depreciation) had no impairment loss

been recognised. The reversal is recognised in the income statements immediately, unless the

asset is carried at revalued amount. A reversal of an impairment loss on a revalued asset is

F-245

credited directly to revaluation surplus. However, to the extent that an impairment loss on the

same revalued asset was previously recognised as an expense in the income statements, a

reversal of that impairment loss is recognised as income in the income statements.

(m) Assets Purchased Under Lease

Assets purchased under lease which in substance transfer the risks and benefits of

ownership of the assets to the lessee are capitalised under property and equipment. The assets

and the corresponding lease obligations are recorded at the lower of the present value of the

minimum lease payments or the fair value of the leased assets at the beginning of the lease

terms.

Leases which do not meet such criteria are classified as operating leases and the related

rentals are charged to the income statements as incurred.

When an operating lease is terminated before the lease period has expired, any payment

required to be made to the lessor by way of penalty is recognised as an expense in the period

which termination takes place.

As at 31 March 2003, the Group and the Company do not have any assets purchased

under lease.

(n) Trade and Other Receivables

Trade and other receivables are stated at book value as reduced by the appropriate

allowances for estimated irrecoverable amounts. Allowance for doubtful debts is made based on

estimates of possible losses which may arise from non-collection of certain receivable accounts.

(o) Deferred Taxation

The tax effects of transactions are recognised, using the ‘liability’ method, in the year

such transactions enter into the determination of net income, regardless of when they are

recognised for tax purposes. However, where timing differences result in deferred tax debits,

the tax effects are recognised only where there is a reasonable expectation of realisation.

(p) Amount Recoverable from Danaharta

This relates to the loans sold to Danaharta where the total consideration is received in two

portions; upon the sale of the loans (initial consideration) and upon the recovery of the loans

(final consideration). The final consideration amount represents the Group’s and the Company’s

predetermined share of the surplus over the initial consideration upon recovery of the loans.

The difference between the carrying value of the loans and the initial consideration is

recognised as ‘Amounts Recoverable from Danaharta’ within the ‘Other Assets’ component of

the balance sheet. Allowances against these amounts are made to reflect the directors’

assessment of the realisable value of the final consideration as at the balance sheet date.

(q) Foreclosed Properties

Foreclosed properties are stated at cost less allowance for diminution in value, if any, of

such properties.

(r) Interest Rate Swap Contracts

The Company uses the interest rate swaps as a hedging instrument.

Interest income or interest expense associated with interest rate swaps is recognised over

the life of the swap agreement as a component of interest income or interest expense.

F-246

(s) Profit Equalisation Reserve

The Profit Equalisation Reserve (‘‘PER’’) refers to the amount appropriated out of the

gross income in order to maintain a certain level of return for depositors. It is deducted from

the total gross income (in deriving the net gross income) as approved and endorsed by the

National Advisory Council for Islamic Banking and Takaful of Bank Negara Malaysia.

(t) Provisions

Provisions are recognised when the Group or the Company has a present legal obligation

as a result of past events, when it is probable that an outflow of resources will be required to

settle the obligation, and when a reliable estimate of the amount can be made.

(u) Cash Flow Statement

The Group and the Company adopt the indirect method in the preparation of the cash flow

statements.

(v) Cash and Cash Equivalents

For the purpose of the cash flow statements, cash and cash equivalents consist of cash and

short-term funds.

4. CASH AND SHORT-TERM FUNDS

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Cash and balances with banks and other

financial institutions . . . . . . . . . . . . 97,901 81,110 96,706 78,650

Money at call and deposits placements

maturing within one month . . . . . . . 2,567,700 557,680 2,567,700 557,680

2,665,601 638,790 2,664,406 636,330

Deposits of the Group amounting to RM194,000 (RM189,000 in 2002) are pledged to certain

banks for banking facilities granted to the subsidiary companies.

Included in the above are interbank lending of RM2,567,700,000 (RM532,680,000 in 2002) for

the Group and the Company.

As at 31 March 2003, the net interbank borrowing and lending position of the Group and of the

Company are as follows:

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Interbank lending

Cash and short term funds . . . . . . . . 2,567,700 532,680 2,567,700 532,680

Deposits with financial institutions

(Note 5) . . . . . . . . . . . . . . . . . . 18,500 383,500 18,500 383,500

2,586,200 916,180 2,586,200 916,180

Interbank borrowing (Note 14). . . . . . . (110,550) — (110,550) —

Net interbank lending . . . . . . . . . . . . 2,475,650 916,180 2,475,650 916,180

F-247

5. DEPOSITS AND PLACEMENTS WITH FINANCIAL INSTITUTIONS

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Licensed banks . . . . . . . . . . . . . . . . 94 220 — 131

Licensed finance companies . . . . . . . . — 25,000 — 25,000

Bank Negara Malaysia. . . . . . . . . . . . 18,500 383,500 18,500 383,500

18,594 408,720 18,500 408,631

Included in the above are interbank lending of RM18,500,000 (RM383,500,000 in 2002) for the

Group and the Company.

F-248

6. INVESTMENT SECURITIES

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Money Market Securities

Malaysian Government Securities . . . . . . 126,709 — 126,709 —

Malaysian Government Investment

Certificates . . . . . . . . . . . . . . . . . . 92,814 62,956 92,814 62,956

Treasury bills . . . . . . . . . . . . . . . . . . 589,940 178,388 589,940 178,388

BNM bills . . . . . . . . . . . . . . . . . . . . 143,007 768,681 143,007 768,681

Cagamas notes . . . . . . . . . . . . . . . . . 38,897 267,604 38,897 267,604

Bankers acceptances . . . . . . . . . . . . . . 66,704 59,396 66,704 59,396

Danamodal bonds . . . . . . . . . . . . . . . . 69,733 — 69,733 —

Islamic Khazanah bonds. . . . . . . . . . . . 49,560 — 49,560 —

Negotiable certificate of deposits . . . . . . 571,995 — 571,995 —

Islamic Negotiable certificate of deposits . 19,977 — 19,977 —

1,769,336 1,337,025 1,769,336 1,337,025

Quoted Securities in Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . 113,005 83,525 112,605 83,125

Warrants . . . . . . . . . . . . . . . . . . . . . 156 101 156 101

Loan stocks . . . . . . . . . . . . . . . . . . . 294 — 294 —

113,455 83,626 113,055 83,226

Debt Equity Conversion Quoted in Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . 39,678 216 39,678 216

Shares — with options . . . . . . . . . . . . 41,520 — 41,520 —

Loan stocks — collateralised. . . . . . . . . 346,026 135,694 346,026 135,694

Corporate bonds . . . . . . . . . . . . . . . . 29,516 28,940 29,516 28,940

Warrants . . . . . . . . . . . . . . . . . . . . . 42 — 42 —

456,782 164,850 456,782 164,850

Unquoted Securities In Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . 36,431 22,414 36,014 21,998

Corporate bonds . . . . . . . . . . . . . . . . 792 583 792 583

37,223 22,997 36,806 22,581

Unquoted Debt Equity Conversion In

Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . 44,969 1,125 44,969 1,125

Loan stocks . . . . . . . . . . . . . . . . . . . 10,210 1,294 10,210 1,294

Corporate bonds — secured . . . . . . . . . 103,014 72,133 103,014 72,133

158,193 74,552 158,193 74,552

Total . . . . . . . . . . . . . . . . . . . . . . . . 2,534,989 1,683,050 2,534,172 1,682,234

Less:

Allowance for diminution in value of

— quoted securities . . . . . . . . . . . . . . (147,414) (81,740) (147,073) (81,415)

— unquoted securities . . . . . . . . . . . . . (15,051) (6,315) (14,852) (6,115)

Amortisation of premium less accretion of

discount . . . . . . . . . . . . . . . . . . . . . 10,972 4,163 10,972 4,163

Net . . . . . . . . . . . . . . . . . . . . . . . . . 2,383,496 1,599,158 2,383,219 1,598,867

F-249

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Market value:

Money Market Securities

Malaysian Government Securities . . . . . 118,122 — 118,122 —

Malaysian Government Investment

Certificates . . . . . . . . . . . . . . . . . 96,288 63,381 96,288 63,381

Treasury bills . . . . . . . . . . . . . . . . . 599,203 178,723 599,203 178,723

BNM bills . . . . . . . . . . . . . . . . . . . 144,163 771,017 144,163 771,017

Cagamas notes . . . . . . . . . . . . . . . . 39,358 268,610 39,358 268,610

Danamodal bonds . . . . . . . . . . . . . . . 74,330 — 74,330 —

Islamic Khazanah bonds. . . . . . . . . . . 51,306 — 51,306 —

Quoted Securities in Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . 71,883 37,267 71,823 37,184

Warrants . . . . . . . . . . . . . . . . . . . . 240 137 240 137

Loan stocks . . . . . . . . . . . . . . . . . . 812 — 812 —

Debt Equity Conversion Quoted In

Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . 14,240 261 14,240 261

Shares — with options . . . . . . . . . . . 21,296 — 21,296 —

Loan stocks — collateralised. . . . . . . . 287,098 130,056 287,098 130,056

Corporate bonds . . . . . . . . . . . . . . . 4,779 7,146 4,779 7,146

Warrants . . . . . . . . . . . . . . . . . . . . 440 — 440 —

The maturity structure of money market instruments held for investment is as follows:

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Maturing within one year . . . . . . . . . . . 1,674,616 1,274,069 1,674,616 1,274,069

One year to three years . . . . . . . . . . . . 92,814 62,956 92,814 62,956

Three years to five years . . . . . . . . . . . 586 — 586 —

Over five years . . . . . . . . . . . . . . . . . 1,320 — 1,320 —

1,769,336 1,337,025 1,769,336 1,337,025

Certain money market securities held for investment have been sold under repurchase

agreements for funding purposes and their carrying values remain in the respective asset accounts

while obligations to repurchase such securities at an agreed price on a specified future date are

accounted for as a liability as mentioned in Note 15.

F-250

7. LOANS, ADVANCES AND FINANCING

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Term loans and revolving credit

facilities . . . . . . . . . . . . . . . . . . 5,710,939 2,567,839 5,712,750 2,571,656

Housing loans . . . . . . . . . . . . . . . . 4,357,611 1,970,187 4,357,611 1,970,187

Hire-purchase . . . . . . . . . . . . . . . . 16,681,416 3,720,272 16,681,407 3,720,262

Lease receivables/Industrial hire-

purchase . . . . . . . . . . . . . . . . . . 1,681,565 1,100,480 1,681,252 1,100,166

Block discounting . . . . . . . . . . . . . 64,625 9,282 64,623 9,282

Staff loans (of which to Directors:

RM2,292,000; Nil in 2002) . . . . . . 119,166 57,926 119,166 57,926

Line of credit . . . . . . . . . . . . . . . . 1,222,914 1,215,050 1,222,914 1,215,050

Other loans . . . . . . . . . . . . . . . . . 1,311,425 82,765 1,311,421 82,761

31,149,661 10,723,801 31,151,144 10,727,290

Unearned interest and unearned income (3,420,756) (695,354) (3,420,756) (695,354)

Gross loans, advances and financing . . 27,728,905 10,028,447 27,730,388 10,031,936

Allowance for bad and doubtful debts

and financing:

— Specific . . . . . . . . . . . . . . . . . (989,277) (1,810,190) (986,721) (1,807,634)

— General . . . . . . . . . . . . . . . . . (388,705) (115,103) (388,705) (115,103)

Interest/Income-in-suspense . . . . . . . . (1,190,485) (557,233) (1,184,005) (550,753)

25,160,438 7,545,921 25,170,957 7,558,446

(i) The maturity structure of loans, advances and financing is as follows:

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Maturing within one year . . . . . . 9,404,813 4,184,374 9,406,296 4,187,863

One year to three years . . . . . . . 8,061,537 780,060 8,061,537 780,060

Three years to five years . . . . . . 4,844,000 1,373,147 4,844,000 1,373,147

Over five years . . . . . . . . . . . . 5,418,555 3,690,866 5,418,555 3,690,866

27,728,905 10,028,447 27,730,388 10,031,936

F-251

(ii) Loans, advances and financing analysed by their economic purposes are as follows:

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Agriculture . . . . . . . . . . . . . . . 262,047 111,660 262,047 111,660

Mining and quarrying . . . . . . . . 37,380 35,322 37,380 35,322

Manufacturing . . . . . . . . . . . . . 830,075 395,695 830,075 395,695

Electricity, gas and water . . . . . . 11,737 5,385 11,737 5,385

Construction . . . . . . . . . . . . . . 2,446,872 433,558 2,446,872 433,558

Real estate . . . . . . . . . . . . . . . 412,212 525,401 412,212 525,401

Purchase of landed property

Residential . . . . . . . . . . . . . 4,639,237 2,020,494 4,639,237 2,020,494

Non-residential . . . . . . . . . . 1,662,696 707,702 1,673,216 720,227

General commerce . . . . . . . . . . 623,578 633,293 614,541 624,256

Transport, storage and

communication . . . . . . . . . . . 651,652 428,582 651,652 428,582

Finance, insurance and business

services . . . . . . . . . . . . . . . 357,698 257,448 357,698 257,448

Purchase of securities . . . . . . . . 771,305 525,691 771,305 525,691

Purchase of transport vehicles . . . 13,214,714 2,417,699 13,214,714 2,417,699

Consumption credit . . . . . . . . . . 1,229,135 1,219,464 1,229,135 1,219,464

Others. . . . . . . . . . . . . . . . . . 578,567 311,053 578,567 311,054

Gross loans, advances and

financing. . . . . . . . . . . . . . . 27,728,905 10,028,447 27,730,388 10,031,936

(iii) Movements in the non-performing loans and financing (including interest and income

receivables) are as follows:

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Gross

Balance at beginning of year. . . . 3,756,815 3,460,448 3,747,778 3,451,411

Non-performing during the year . . 1,354,384 1,099,258 1,354,384 1,099,258

Amount repurchased from

Danaharta . . . . . . . . . . . . . . — 156,669 — 156,669

Reclassification to performing loan (709,302) (325,306) (709,302) (325,306)

Amount recovered . . . . . . . . . . (380,063) (498,728) (380,063) (498,728)

Debt equity conversion . . . . . . . (46,712) — (46,712) —

Amount vested over from AMFB

Holdings . . . . . . . . . . . . . . . 2,386,490 — 2,386,490 —

Amount written off. . . . . . . . . . (2,012,083) (135,526) (2,012,083) (135,526)

Balance at end of year . . . . . . . 4,349,529 3,756,815 4,340,492 3,747,778

Less:

Specific allowance . . . . . . . . . . (989,277) (1,810,190) (986,721) (1,807,634)

Interest/Income-in-suspense . . . . . (1,190,485) (557,233) (1,184,005) (550,753)

(2,179,762) (2,367,423) (2,170,726) (2,358,387)

Non-performing loans and

financing (net) . . . . . . . . . . . 2,169,767 1,389,392 2,169,766 1,389,391

Ratio of net non-performing loans

to loans, advances and financing 8.49% 18.14% 8.49% 18.11%

F-252

(iv) Movements in the allowance for bad and doubtful debts and financing and interest/

income-in-suspense accounts are as follows:

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

General Allowance

Balance at beginning of year. . 115,103 112,222 115,103 112,222

Allowance made during the year 17,030 2,881 17,030 2,881

Amount vested over from AMFB

Holdings . . . . . . . . . . . . . 256,572 — 256,572 —

Balance at end of year . . . . . 388,705 115,103 388,705 115,103

% of total loans less specific

allowance and interest/income-

in-suspense . . . . . . . . . . . 1.52% 1.50% 1.52% 1.50%

Specific Allowance

Balance at beginning of year. . 1,810,190 1,623,341 1,807,634 1,620,785

Allowance made during the year 578,425 420,573 578,425 420,573

Amount written back in respect

of recoveries . . . . . . . . . . (225,820) (172,997) (225,820) (172,997)

Net charge to income statements 352,605 247,576 352,605 247,576

Debt equity conversion . . . . . (25,000) — (25,000) —

Amount vested over from AMFB

Holdings . . . . . . . . . . . . . 490,249 — 490,249 —

Amount written off/Adjustment

to Asset Deficiency Account (1,638,767) (60,727) (1,638,767) (60,727)

Balance at end of year . . . . . 989,277 1,810,190 986,721 1,807,634

Interest/Income-in-Suspense

Balance at beginning of year. . 557,233 469,880 550,753 463,400

Allowance made during the year 533,090 274,959 533,090 274,959

Amount written back in respect

of recoveries . . . . . . . . . . (154,243) (112,807) (154,243) (112,807)

Net charge to income statements 378,847 162,152 378,847 162,152

Debt equity conversion . . . . . (5,551) — (5,551) —

Amount vested over from AMFB

Holdings . . . . . . . . . . . . . 636,832 — 636,832 —

Amount written off/Adjustment

to Asset Deficiency Account (376,876) (74,799) (376,876) (74,799)

Balance at end of year . . . . . 1,190,485 557,233 1,184,005 550,753

F-253

8. OTHER ASSETS

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Deferred assets . . . . . . . . . . . . . . . 71,137 61,184 71,137 61,184

Other receivables, deposits and

prepayments . . . . . . . . . . . . . . . . 145,862 27,586 144,697 26,251

Foreclosed properties net of allowance

for diminution in value of

RM6,000,000 (Nil in 2002) . . . . . . 6,607 — 6,607 —

Deferred taxation (Note 31) . . . . . . . 537,022 — 537,279 —

Amount recoverable from Danaharta . . 67,497 157,120 67,497 157,120

828,125 245,890 827,217 244,555

(i) Deferred Assets

The Group and Company

31.03.2003 31.03.2002

RM’000 RM’000

Arising from takeover of Kewangan Usahasama Makmur

Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,184 61,184

Vested over from AMFB Holdings, arising from takeover of

Abrar Finance Berhad. . . . . . . . . . . . . . . . . . . . . . . . 9,953 —

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . 71,137 61,184

In 1988, the Company took over the operations of Kewangan Usahasama Makmur Berhad

(‘‘KUMB’’), a deposit taking co-operative in Malaysia. The Government of Malaysia

granted to KUMB a future tax benefit amounting to RM434 million; subsequently adjusted

to RM426.69 million upon finalisation of KUMB’s tax credit in consideration of the

deficit in assets taken over from the deposit taking co-operatives. The tax benefit is a

fixed monetary sum and is not dependent on any changes in tax rates.

The net tax benefit is shown as a deferred asset and the utilisation of the deferred tax

benefit is based on the receipt of notices of assessment and subsequent remission of the

tax liabilities by the relevant authority net of the amount payable to the tax authorities for

purposes of Section 108 tax credit.

Subsequent to the vesting of assets and liabilities from AMFB Holdings, the deferred

assets arising from the takeover of Abrar Finance Berhad were vested over to the

Company. This deferred assets arose when AMFB Holdings participated in a scheme

approved by the Minister of Finance and sanctioned by the High Court of Malaya,

whereby certain assets and liabilities of Abrar Finance Berhad (‘‘AFB’’), a licensed

finance company incorporated in Malaysia, were transferred with effect from 18

December 1998, to AMFB Holdings with financial assistance from Bank Negara

Malaysia (‘‘BNM’’).

The net asset deficiency representing the excess of liabilities over the assets transferred

from AFB arising from the scheme, is shown as deferred assets, and is reduced

progressively by net income derived from the utilisation of the deposit placed by BNM, as

mentioned in Note 14, and net recoveries of defaulted loans of AFB computed based on a

formula determined by BNM.

F-254

(ii) Included under the gross amount of other receivables, deposits and prepayments of the

Group and Company are outstanding balances totalling RM10,596,000 (Nil in 2002) and

RM18,112,000 (RM7,302,000 in 2002) respectively owing by other related companies.

(iii) Other receivables, deposits and prepayments are net of allowance for doubtful debts of the

Group and Company of RM12,745,000 (RM12,746,000 in 2002) and RM2,220,000

(RM2,220,000 in 2002) respectively.

(iv) Amount recoverable from Danaharta

The Group and Company

31.03.2003 31.03.2002

RM’000 RM’000

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . 157,120 310,904

Amount vested over from AMFB Holdings . . . . . . . . . . . . 1,606 —

Allowance made during the year . . . . . . . . . . . . . . . . . . (89,741) (120,324)

Amount reversed in the year . . . . . . . . . . . . . . . . . . . . . — (31,606)

Amount recovered . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,488) (1,854)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . 67,497 157,120

9. STATUTORY DEPOSIT WITH BANK NEGARA MALAYSIA

The non-interest bearing statutory deposit is maintained with Bank Negara Malaysia in

compliance with Section 37(1)(c) of the Central Bank of Malaysia Act, 1958, the amounts of which

are determined as a set percentage of total eligible liabilities.

10. INVESTMENT IN SUBSIDIARY COMPANIES

The Company

31.03.2003 31.03.2002

RM’000 RM’000

Unquoted shares at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,280 41,280

Allowance for diminution in value . . . . . . . . . . . . . . . . . . . . (11,501) (11,501)

Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,779 29,779

F-255

The subsidiary companies, which are all incorporated in Malaysia, are as follows:

Effective Equity Interest

Name of Company Principal Activity 31.03.2003 31.03.2002

% %

MBf Nominees (Tempatan) Sdn. Bhd. . . Nominee company 100.0 100.0

MBf Information Services Sdn. Bhd. . . . Rental of computer

equipment and the

provision of related

support services

100.0 100.0

AmProperty Holdings Sdn. Bhd. (formerly

known as MBf Property Holdings Sdn.

Bhd.) . . . . . . . . . . . . . . . . . . . . .

Property investment 100.0 100.0

MBf Equity Partners Sdn. Bhd. . . . . . . Venture capital 100.0 100.0

MBf Trustees Berhad . . . . . . . . . . . . Trustee services 60.0 60.0

Bougainvillaea Development Sdn. Bhd. . Property holding 100.0 100.0

Natprop Sdn. Bhd. . . . . . . . . . . . . . . Investment holding 100.0 100.0

Teras Oak Pembangunan Sdn. Bhd. . . . . Dormant 100.0 100.0

Komuda Credit & Leasing Sdn. Bhd. . . Dormant 100.0 100.0

MBf Property Trust Management Berhad Dormant 100.0 100.0

Everflow Credit & Leasing Corporation

Sdn. Bhd. . . . . . . . . . . . . . . . . . .

Dormant 100.0 100.0

Komewah Credit & Leasing Sdn. Bhd.. . Dormant 100.0 100.0

Li & Ho Sdn. Bhd. . . . . . . . . . . . . . Dormant 100.0 100.0

Malco Properties Sdn. Bhd. . . . . . . . . Dormant 51.0 51.0

Annling Sdn. Bhd. . . . . . . . . . . . . . . Dormant 100.0 100.0

MBf Nominees (Asing) Sdn. Bhd. . . . . Dormant 100.0 100.0

Lekir Development Sdn. Bhd. . . . . . . . Ceased operations 100.0 100.0

Crystal Land Sdn. Bhd. . . . . . . . . . . . Ceased operations 80.0 80.0

Horizon View Sdn. Bhd. . . . . . . . . . . Dormant 100.0 100.0

MBf Venture Partners Bhd.. . . . . . . . . Dormant 100.0 100.0

11. INVESTMENT IN ASSOCIATED COMPANIES

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Unquoted shares, at cost . . . . . . . . . . . . 100 — 150 50

Share of post-acquisition results, net of tax. 15 — — —

115 — 150 50

The associated companies, which are incorporated in Malaysia, are:

Principal Activity

AmTrustee Berhad (formerly known as Arab-Malaysian Trustee Berhad) . . Trustee Services

MBf Trustees Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trustee Services

The effective equity interests are as follows:

The Group The Company

Effective Equity Interest Effective Equity Interest

31.03.2003 31.03.2002 31.03.2003 31.03.2002

AmTrustee Berhad . . . . . . . . . . . . . . . . 20% — 20% —

MBf Trustees Berhad . . . . . . . . . . . . . . 60% 60% 20% 20%

F-256

The investment in MBf Trustees Berhad is classified as investment in subsidiary companies at

Group level through additional equity interest held by another subsidiary company.

As at 31 March 2003, the carrying value of the investment in associated companies is

represented by:

The Group

Effective Equity Interest

31.03.2003 31.03.2002

RM’000 RM’000

Group’s share of aggregate net tangible assets . . . . . . . . . . . . . 494 —

12. PROPERTY AND EQUIPMENT

The Group

Freehold

land and

building

Leasehold

land and

building

Leasehold

improvements

Office

equipment,

furniture

and fittings

Computer

equipment

and

software

Motor

vehicles Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

COST

At beginning of year. . 321,486 27,894 77,555 34,093 230,428 2,198 693,654

Additions . . . . . . . . . 54 — 3,972 2,752 6,483 894 14,155

Vested over from

AMFB Holdings . . . 69 — 24,488 33,189 113,972 5,123 176,841

Disposals . . . . . . . . . — — — (126) — — (126)

Write offs . . . . . . . . — — (1,128) (206) (269) — (1,603)

Reclassification/

Transfer . . . . . . . . (8,996) 8,996 760 4,938 (7,053) — (1,355)

At end of year . . . . . 312,613 36,890 105,647 74,640 343,561 8,215 881,566

ACCUMULATED

DEPRECIATION

At beginning of year. . 22,972 3,454 52,991 22,873 164,300 1,842 268,432

Current depreciation . . 5,257 812 8,285 5,492 61,149 748 81,743

Vested over from

AMFB Holdings . . . 10 — 21,541 26,420 43,463 3,594 95,028

Disposals . . . . . . . . . — — — (122) — — (122)

Write offs . . . . . . . . — — (923) (202) (4) — (1,129)

Reclassification/

Transfer . . . . . . . . (21) 21 — (27) (1,708) — (1,735)

At end of year . . . . . 28,218 4,287 81,894 54,434 267,200 6,184 442,217

NET BOOK VALUE

As at 31.03.2003 . . . . 284,395 32,603 23,753 20,206 76,361 2,031 439,349

As at 31.03.2002 . . . . 298,514 24,440 24,564 11,220 66,128 356 425,222

Depreciation charge for

the year ended

31.03.2002. . . . . . . 1,350 6,625 9,962 3,393 75,498 694 97,522

F-257

The Company

Freehold

land and

building

Leasehold

land and

building

Leasehold

improvements

Office

equipment,

furniture

and fittings

Computer

equipment

and

software

Motor

vehicles Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

COST

At beginning of year. . 272,508 17,637 77,555 34,086 230,428 2,198 634,412

Additions . . . . . . . . . 54 — 3,972 2,752 6,483 894 14,155

Vested over from

AMFB Holdings . . . 69 — 24,488 33,189 113,972 5,123 176,841

Disposals . . . . . . . . . — — — (126) — — (126)

Write offs . . . . . . . . — — (1,128) (206) (269) — (1,603)

Reclassification/

Transfer . . . . . . . . (8,783) 8,783 760 4,938 (7,053) — (1,355)

At end of year . . . . . 263,848 26,420 105,647 74,633 343,561 8,215 822,324

ACCUMULATED

DEPRECIATION

At beginning of year. . 17,319 1,655 52,991 22,867 164,300 1,842 260,974

Current depreciation . . 4,623 602 8,285 5,492 61,149 748 80,899

Vested over from

AMFB Holdings . . . 10 — 21,541 26,420 43,463 3,594 95,028

Disposals . . . . . . . . . — — — (122) — — (122)

Write offs . . . . . . . . — — (923) (202) (4) — (1,129)

Reclassification/

Transfer . . . . . . . . — — — (27) (1,708) — (1,735)

At end of year . . . . . 21,952 2,257 81,894 54,428 267,200 6,184 433,915

NET BOOK VALUE

As at 31.03.2003 . . . . 241,896 24,163 23,753 20,205 76,361 2,031 388,409

As at 31.03.2002 . . . . 255,189 15,982 24,564 11,219 66,128 356 373,438

Depreciation charge for

the year ended

31.03.2002. . . . . . . 5,830 1,089 9,962 3,163 74,990 694 95,728

(a) Details of leasehold land and buildings are as follows:

The Group

Long term

leasehold land

and buildings

Short term

leasehold land

and buildings Total

RM’000 RM’000 RM’000

Cost . . . . . . . . . . . . . . . . . . . . . . . 35,434 1,456 36,890

Accumulated Depreciation . . . . . . . . . (3,849) (438) (4,287)

31,585 1,018 32,603

F-258

The Company

Long term

leasehold land

and buildings

Short term

leasehold land

and buildings Total

RM’000 RM’000 RM’000

Cost . . . . . . . . . . . . . . . . . . . . . . . 26,165 255 26,420

Accumulated Depreciation . . . . . . . . . (2,063) (194) (2,257)

24,102 61 24,163

The long term leasehold properties for the Group and the Company are for lease periods

of 66-999 years and 85-855 years respectively and with unexpired lease periods of 55-876

years and 64-789 years respectively.

The short term leasehold properties for the Group and the Company are for lease periods

of 20-99 years and 20 years respectively and with unexpired lease periods of 3-36 years

and 3 years respectively.

(b) Included in the Net Book Value of Computer Equipment and Software is Capital Work-in-

Progress for the Group and Company of RM23,545,000 (RM3,012,000 in 2002).

(c) Details of fully depreciated property and equipment of the Group and the Company which

are still in use are as follows:

The Group

and Company

Freehold

land and

building

Leasehold

improvements

Office

equipment,

furniture

and fittings

Computer

equipment

and

software

Motor

vehicles Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Cost . . . . . . . 123 20,390 22,585 162,826 4,030 209,954

13. DEPOSITS FROM CUSTOMERS

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Savings deposits . . . . . . . . . . . . . . 2,307,213 1,278,052 2,307,213 1,278,052

Fixed/Investment deposits . . . . . . . . . 17,292,097 8,079,109 17,293,950 8,103,915

Negotiable certificates of deposits . . . 9,884 210,000 9,884 210,000

19,609,194 9,567,161 19,611,047 9,591,967

(i) The maturity structure of deposits from customers is as follows:

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Due within six months . . . . . . . 14,420,259 6,757,062 14,422,112 6,781,868

Six months to one year . . . . . . . 3,887,049 1,841,470 3,887,049 1,841,470

One year to three years . . . . . . . 851,159 923,533 851,159 923,533

Three years to five years . . . . . . 450,727 45,096 450,727 45,096

19,609,194 9,567,161 19,611,047 9,591,967

F-259

(ii) The deposits are sourced from the following types of customers:

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Business enterprises . . . . . . . . . 3,375,566 1,649,299 3,377,419 1,674,105

Individuals . . . . . . . . . . . . . . . 14,014,153 7,482,997 14,014,153 7,482,997

Others. . . . . . . . . . . . . . . . . . 2,219,475 434,865 2,219,475 434,865

19,609,194 9,567,161 19,611,047 9,591,967

14. DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Licensed banks . . . . . . . . . . . . . . . 918,782 — 918,782 —

Licensed finance companies . . . . . . . 10,000 — 10,000 —

Non-banking institutions . . . . . . . . . 3,372,358 — 3,372,358 —

Bank Negara Malaysia (‘‘BNM’’) . . . . 808,000 628,000 808,000 628,000

5,109,140 628,000 5,109,140 628,000

Included under deposits and placements of other financial institutions of the Group and of the

Company are the following:

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Negotiable instruments of deposits . . . 1,612,172 — 1,612,172 —

Interbank borrowing (Note 4) . . . . . . 110,550 — 110,550 —

1,722,722 — 1,722,722 —

Deposits from BNM represent long-term deposits and interest-free loans placed with the Group

and the Company in connection with the transfer of certain assets and liabilities of Abrar Finance

Berhad and Kewangan Usahasama Makmur Berhad to the Company as mentioned in Note 8.

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Soft deposit . . . . . . . . . . . . . . . . . 135,000 135,000 135,000 135,000

Soft loan . . . . . . . . . . . . . . . . . . . 513,000 333,000 513,000 333,000

Commercial loan . . . . . . . . . . . . . . 160,000 160,000 160,000 160,000

808,000 628,000 808,000 628,000

Included above are soft deposit of RM135,000,000 (RM135,000,000 in 2002) and soft loan of

RM180,000,000 (Nil in 2002) bearing interest of 1% (1% in 2002) per annum. The remaining soft

loan and the commercial loan are interest free. The soft loan of RM180,000,000 (Nil in 2002) is

repayable on 18 December 2008. The remaining loans and soft deposit are repayable when the

deferred assets referred to in Note 8 are fully utilised.

F-260

15. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

Securities sold under repurchase agreements represent the obligations to repurchase these

securities sold as mentioned in Note 6.

16. AMOUNT DUE TO CAGAMAS BERHAD

Amount due to Cagamas Berhad represents the proceeds received from loans (excluding Islamic

financing) sold directly and indirectly to Cagamas Berhad with recourse to the Company. Under this

arrangement, the Company undertakes to administer the loans on behalf of Cagamas Berhad and to

buy back any loans which are regarded as defective based on prudential criteria.

17. OTHER LIABILITIES

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Provision for taxation . . . . . . . . . . 508 10,370 — 8,512

Lease deposits and advance rentals . . 48,139 194 48,139 194

Interest payable . . . . . . . . . . . . . . 178,170 91,102 178,170 91,102

Other creditors and accruals . . . . . . (i) 340,113 166,034 330,149 155,425

General allowance for commitment

and contingencies . . . . . . . . . . . (ii) 15,000 — 15,000 —

Profit equalisation reserve . . . . . . . 5,024 — 5,024 —

586,954 267,700 576,482 255,233

(i) Other creditors and accruals

Included under other creditors and accruals of the Group and of the Company are

outstanding balances totalling RM22,100,000 (Nil in 2002) and RM22,625,000 (RM77,000 in

2002) respectively owing to other related companies.

(ii) General allowance for commitment and contingencies

The movements in general allowance for commitment and contingencies are as follows:

The Group and Company

31.03.2003 31.03.2002

RM’000 RM’000

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . — —

Amount vested over from AMFB Holdings . . . . . . . . . . . . 15,000 —

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . 15,000 —

18. SUBORDINATED TERM LOAN

The subordinated term loan is unsecured, subordinated to all other liabilities and obtained from

Danamodal Nasional Berhad, a company incorporated for the purpose of recapitalising the local

banking and financial institutions, to strengthen the Company’s capital base.

Pursuant to the acquisition of the Company by AMFB Holdings on 20 December 2001,

Danamodal Nasional Berhad has extended the loan for a further period of ten (10) years to be repaid

on 20 December 2011. The loan bears interest at 6.5% per annum for the first five years and at 7.5%

per annum or 1.0% above 3 months KLIBOR, whichever is higher, for the next five years. The

interest is payable on a half yearly basis.

F-261

19. SUBORDINATED LOAN NOTES

The subordinated loan notes are unsecured, subordinated to all other liabilities and issued to

AMFB Holdings on 14 August 2002 as settlement of part of the consideration due in respect of the

vesting of the assets and liabilities of AMFB Holdings to the Company. The loan notes are issued

for a period of ten years to be repaid on 14 August 2012 and bear interest at 7.0% per annum,

payable on a half yearly basis.

20. MINORITY INTERESTS

Minority interests in the Group represent that part of the net results of operations, or of net

assets, of subsidiary companies attributable to shares owned, directly or indirectly other than by the

Company or subsidiary companies.

The movements in minority interests in subsidiary companies are as follows:

The Group

31.03.2003 31.03.2002

RM’000 RM’000

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . 119 4,803

Share in net results of subsidiary companies . . . . . . . . . . . . . . (6) (1,123)

Disposal of subsidiary company . . . . . . . . . . . . . . . . . . . . . . — (3,450)

Reversal of minority interests in relation to companies

with negative shareholders’ funds . . . . . . . . . . . . . . . . . . . — (111)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 119

F-262

21. SHARE CAPITAL

The Group and the Company

31.03.2003 31.03.2002

RM’000 RM’000

Authorised

Ordinary shares

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . 4,000,000 4,000,000

Capital reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,613,750) —

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . 1,386,250 4,000,000

8% Irredeemable Non-Cumulative Convertible

Preference shares . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 2,500,000

3,886,250 6,500,000

Issued and fully paid

Ordinary shares

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . 2,613,750 1,375,750

Conversion from preference shares . . . . . . . . . . . . . . . . — 1,238,000

Capital reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,613,750) —

Issued during the year . . . . . . . . . . . . . . . . . . . . . . . . 528,402 —

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . 528,402 2,613,750

8% Irredeemable Non-Cumulative Convertible

Preference shares

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . — 1,238,000

Conversion to ordinary shares . . . . . . . . . . . . . . . . . . . — (1,238,000)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . — —

528,402 2,613,750

On 21 May 2002, the Company had undertaken a capital reduction exercise to cancel the

portion of its paid up capital which is lost or unrepresented by available assets. The capital reduction

exercise included the following:

(a) the cancellation and reduction in the authorised capital from RM6,500.0 million

comprising 8,000.0 million ordinary shares of RM0.50 each and 5,000 million

preference shares of RM0.50 each to RM3,886.2 million, comprising 2,772.5 million

ordinary shares of RM0.50 each and 5,000.0 million 8% irredeemable non-cumulative

convertible preference shares of RM0.50 each;

(b) the cancellation and reduction of the issued and paid up capital from RM2,613.7 million,

comprising 5,227.5 million ordinary shares of RM0.50 each, to RM2, comprising 4

ordinary shares of RM0.50 each; and

(c) the consolidation of the authorised and paid up capital of every two existing shares of

RM0.50 each to one share of RM1.00 each.

On 18 July 2002, the Company issued 528.4 million ordinary shares of RM1.00 each to AMFB

Holdings at RM1.71906 per share as settlement for part of the consideration due in respect of the

vesting of business from AMFB Holdings to the Company.

F-263

22. RESERVES

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Non-distributable Reserves:

Share premium . . . . . . . . . . . . . . . 379,953 — 379,953 —

Statutory reserve . . . . . . . . . . . . . . 214,382 432,587 214,382 432,587

Capital reserve . . . . . . . . . . . . . . . 392,045 — 392,045 —

Total non-distributable reserves . . . . . 986,380 432,587 986,380 432,587

Distributable Reserves:

Unappropriated profit/(Accumulated

loss) . . . . . . . . . . . . . . . . . . . . 321,881 (2,978,179) 317,532 (3,004,004)

1,308,261 (2,545,592) 1,303,912 (2,571,417)

Movements in reserves are shown in the statements of changes in equity.

Share premium is used to record premium arising from new shares issued in the Company.

The statutory reserve is maintained in compliance with Section 36 of the Banking and Financial

Institutions Act, 1989 and is not distributable as cash dividends.

The capital reserve is in respect of the Deferred Tax Asset recognised on the Company’s

unabsorbed tax losses. Transfer from the capital reserve to unappropriated profit is effected upon the

utilisation of the unabsorbed losses against the taxable income of the Company.

Distributable reserves are those available for distribution by way of dividends. There is no tax

credit available under Section 108 of the Income Tax Act, 1967 to frank the payment of dividends

out of the Company’s distributable reserves as at 31 March 2003.

23. INTEREST INCOME

The Group The Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000 RM’000 RM’000

Loans and advances . . . . . . . . . . . . 2,103,757 1,123,188 2,104,830 1,124,834

Money at call, deposits and placements

with financial institutions . . . . . . . 67,779 3,248 67,779 3,068

Dealing securities. . . . . . . . . . . . . . — 8,436 — 8,436

Investment securities . . . . . . . . . . . . 28,627 20,234 28,627 20,234

Others. . . . . . . . . . . . . . . . . . . . . 17,630 15,332 17,630 15,332

2,217,793 1,170,438 2,218,866 1,171,904

Net interest suspended . . . . . . . . . . . (341,495) (161,492) (341,495) (161,492)

Accretion of discounts/(amortisation of

premium) . . . . . . . . . . . . . . . . . 20,631 49,363 20,631 49,363

1,896,929 1,058,309 1,898,002 1,059,775

F-264

24. INTEREST EXPENSE

The Group The Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000 RM’000 RM’000

Deposits and placements . . . . . . . . . 673,102 441,428 673,444 442,096

Amounts due to Cagamas Berhad . . . . 141,599 1,734 141,599 1,734

Others. . . . . . . . . . . . . . . . . . . . . 85,555 82,368 85,614 63,469

900,256 525,530 900,657 507,299

25. LOAN AND FINANCING LOSS AND ALLOWANCES

The Group The Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000 RM’000 RM’000

Allowance for bad and doubtful debts

and financing:

— specific allowance (net) . . . . . . . 352,605 247,576 352,605 247,576

— general allowance . . . . . . . . . . 17,030 2,881 17,030 2,881

Bad debts and financing recovered . . . (90,651) (59,143) (113,308) (85,877)

278,984 191,314 256,327 164,580

Allowance for value impairment on

amount recoverable from Danaharta . 89,741 120,324 89,741 120,324

368,725 311,638 346,068 284,904

F-265

26. NON-INTEREST INCOME

The Group The Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000 RM’000 RM’000

Fee Income:

Commissions. . . . . . . . . . . . . . . . 9,688 4,417 9,688 4,431

Guarantee fees . . . . . . . . . . . . . . 1,181 21 1,181 21

Other fee income . . . . . . . . . . . . . 10,770 7,376 10,767 2,244

21,639 11,814 21,636 6,696

Investment and Trading Income:

Net loss from disposal of dealing

securities . . . . . . . . . . . . . . . . — (11,954) — (11,954)

Net gain from disposal of investment

securities . . . . . . . . . . . . . . . . 2,821 62,775 2,821 62,775

Net allowance for diminution in value

of subsidiary company . . . . . . . . — — — (700)

(Loss)/Gain from sale of shares

quoted in Malaysia . . . . . . . . . . (6,415) 1,991 (6,415) 1,991

Gain from disposal of subsidiary

companies . . . . . . . . . . . . . . . . — 74,756 — 8,423

Gross dividends from investment

securities:

Shares quoted in Malaysia . . . . . 3,474 1,547 3,473 1,542

Unquoted shares . . . . . . . . . . . 595 54 595 —

475 129,169 474 62,077

Other Income:

Gain on disposal of leased assets . . . 14 — 14 —

Rental income . . . . . . . . . . . . . . . 9,891 17,961 9,431 17,383

Gain on disposal of property and

equipment . . . . . . . . . . . . . . . . 5 630 5 630

Gain on disposal of development

properties . . . . . . . . . . . . . . . . 50 1,162 — 1,162

Net bad debts recovered . . . . . . . . — 12,233 — —

Other non-operating income . . . . . . 78 17,142 3 12,622

10,038 49,128 9,453 31,797

32,152 190,111 31,563 100,570

27. STAFF COSTS AND OVERHEADS

The Group The Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000 RM’000 RM’000

Personnel/Staff costs . . . . . . . . . . . . 156,294 127,699 156,294 124,848

Establishment costs. . . . . . . . . . . . . 158,300 143,741 161,196 147,996

Marketing expenses . . . . . . . . . . . . 50,708 28,097 50,708 27,635

Administration and general expenses . . 59,131 42,230 59,000 39,764

424,433 341,767 427,198 340,243

F-266

The above expenditure includes the following statutory disclosure:

The Group The Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000 RM’000 RM’000

Directors’ remuneration (Note 29) . . . 991 660 991 326

Rental of premises

— subsidiary companies . . . . . . . . — — 5,257 6,848

— others . . . . . . . . . . . . . . . . . . 16,827 20,326 16,827 20,165

Lease rental . . . . . . . . . . . . . . . . . 1,358 301 1,358 301

Depreciation of property and equipment

(Note 12) . . . . . . . . . . . . . . . . . 81,743 97,522 80,899 95,728

Auditors’ remuneration:

Statutory audit . . . . . . . . . . . . . . 316 229 300 200

Special audit. . . . . . . . . . . . . . . . 210 13 210 13

Property and equipment written off . . . 474 71 474 70

Bad debts written off . . . . . . . . . . . — 830 — —

Allowance for diminution in value of

land and development expenditure . . — 627 — 581

The total number of employees of the Group and of the Company as at 31 March 2003 was

4,817 (2,848 in 2002).

F-267

28. HOLDING AND ULTIMATE HOLDING COMPANIES AND SIGNIFICANT RELATED

PARTY TRANSACTIONS AND BALANCES

The holding and ultimate holding companies are AMFB Holdings Berhad (formerly known as

Arab-Malaysian Finance Berhad) and AMMB Holdings Berhad respectively, both of which are

incorporated in Malaysia.

During the financial year, the significant related party transactions and balances are as follows:

(a) The significant transactions and balances of the Company with its holding and ultimate

holding companies and related companies are as follows:

The Group The Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000 RM’000 RM’000

Income

Holding companyInterest on fixed deposits

AMFB Holdings Berhad . . . . . 137 449 137 449

Related companiesInterest on fixed deposits

AmMerchant Bank Berhad . . . 18,111 59 18,111 59

AmBank Berhad . . . . . . . . . 2,723 21 2,723 21

20,834 80 20,834 80

Interest on investment securities

AmMerchant Bank Berhad . . . 1,205 — 1,205 —

Interest on loans and advances

AmProperty Holdings Sdn Bhd — — 1,074 1,645

Arab-Malaysian Credit Berhad . 180 — 180 —

180 — 1,254 1,645

Other income

AmBank Berhad . . . . . . . . . 53 — 53 —

Arab-Malaysian Credit Berhad . 391 — 391 —

AmSecurities Berhad . . . . . . . 239 — 239 —

AmAssurance Berhad . . . . . . 8,965 — 8,965 —

AmTrustee Berhad . . . . . . . . 834 — 834 —

10,482 — 10,482 —

F-268

The Group The Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000 RM’000 RM’000

Expenditure

Ultimate holding companyInterest on deposits and placements

AMMB Holdings Berhad . . . . 450 — 450 —

Holding companyInterest on deposits and placements

AMFB Holdings Berhad . . . . . 747 — 747 —

Interest on subordinated loan notes

AMFB Holdings Berhad . . . . . 11,027 — 11,027 —

Related companiesInterest on deposits and placements

AmMerchant Bank Berhad . . . 3,463 763 3,463 763

AmAssurance Berhad . . . . . . 5,677 — 5,677 —

AmBank Berhad . . . . . . . . . 104 — 104 —

AmProperty Trust Management

Berhad . . . . . . . . . . . . . . 2 — 2 —

AmTrustee Berhad . . . . . . . . 16 — 16 —

AmSecurities Berhad . . . . . . . 47 — 47 —

MBf Information Services

Sdn Bhd . . . . . . . . . . . . . — — 34 —

MBf Nominees (Tempatan)

Sdn Bhd . . . . . . . . . . . . . — — 1 —

MBf Trustees Berhad . . . . . . — — 8 —

AmProperty Holdings Sdn Bhd — — 2 —

Everflow Credit & Leasing

Corporation Sdn Bhd . . . . . — — 2 —

Natprop Sdn Bhd . . . . . . . . . — — 290 —

Komuda Credit & Leasing

Sdn Bhd . . . . . . . . . . . . . — — 3 —

Lekir Development Sdn Bhd . . — — 3 —

Teras Oak Pembangunan

Sdn Bhd . . . . . . . . . . . . . — — 14 —

Bougainvillaea Development

Sdn Bhd . . . . . . . . . . . . . — — 45 —

9,309 763 9,711 763

Other expenses

AmAssurance Berhad . . . . . . 812 664 812 664

Arab-Malaysian Credit Berhad . 648 — 648 —

AmProperty Trust Management

Berhad . . . . . . . . . . . . . . 477 — 477 —

AmProperty Holdings Sdn Bhd — — 4,150 5,201

Bougainvillaea Development

Sdn Bhd . . . . . . . . . . . . . — — 1,106 1,624

1,937 664 7,193 7,489

F-269

The Group The Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000 RM’000 RM’000

Amount due from

Holding companyDeposits and placements

AMFB Holdings Berhad . . . . . — 42,980 — 42,980

Related companiesLoans and advances

AmMerchant Bank Berhad . . . 340 — 340 —

AmProperty Holdings Sdn Bhd — — 10,519 —

Arab-Malaysian Credit Berhad . 4,179 — 4,179 —

4,519 — 15,038 —

Deposits and placements

AmMerchant Bank Berhad . . . 1,041,400 — 1,041,400 —

AmBank Berhad . . . . . . . . . 225,000 — 225,000 —

1,266,400 — 1,266,400 —

Investment securities

AmMerchant Bank Berhad . . . 306,205 — 306,205 —

AmBank Berhad . . . . . . . . . 57,326 — 57,326 —

363,531 — 363,531 —

Interest receivable

AmMerchant Bank Berhad . . . 1,096 — 1,096 —

AmBank Berhad . . . . . . . . . 297 — 297 —

1,393 — 1,393 —

F-270

The Group The Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000 RM’000 RM’000

Amount due to

Ultimate holding companyDeposits and placements

AMMB Holdings Berhad . . . . 7,175 — 7,175 —

Interest payable

AMMB Holdings Berhad . . . . 27 — 27 —

Holding companySubordinated loan notes

AMFB Holdings Berhad . . . . . 250,000 — 250,000 —

Interest payable

AMFB Holdings Berhad . . . . . 2,205 — 2,205 —

Related companiesDeposits and placements

AmMerchant Bank Berhad . . . 52,861 100,000 52,861 100,000

AmBank Berhad . . . . . . . . . 51,000 — 51,000 —

AmSecurities Berhad . . . . . . . 6,400 — 6,400 —

AmAssurance Berhad . . . . . . 100,370 — 100,370 —

AmTrustee Berhad . . . . . . . . 808 — 808 —

MBf Information Services

Sdn Bhd . . . . . . . . . . . . . — — 1,236 —

MBf Nominees (Tempatan)

Sdn Bhd . . . . . . . . . . . . . — — 40 —

MBf Trustees Berhad . . . . . . — — 242 —

AmProperty Holdings Sdn Bhd — — 69 —

Bougainvillaea Development

Sdn Bhd . . . . . . . . . . . . . — — 267 —

211,439 100,000 213,293 100,000

Interest payable

AmMerchant Bank Berhad . . . 3 — 3 —

AmBank Berhad . . . . . . . . . 70 — 70 —

AmSecurities Berhad . . . . . . . 12 — 12 —

AmAssurance Berhad . . . . . . 1,128 — 1,128 —

1,213 — 1,213 —

F-271

(b) Directors related transactions

The Group The Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000 RM’000 RM’000

ExpensesComputer maintenance. . . . . . . . 3,073 684 3,073 684

Advertising. . . . . . . . . . . . . . . 2,910 — 2,910 —

Rental of premises . . . . . . . . . . 415 — 415 —

6,398 684 6,398 684

Capital ExpenditurePurchase of computers . . . . . . . . 3,911 — 3,911 —

The directors related transactions are:

1. The agreement for maintenance of mainframe related applications with Bluestar

Infotech (Malaysia) Sdn Bhd, a wholly-owned subsidiary company of Arab-

Malaysian Corporation Berhad (‘‘AMCORP’’) for the provision of information

technology services in relation to the maintenance, design, development and

customisation of the Company’s existing mainframe related banking software

applications. The contract was originally entered into by AMFB Holdings, but this

has since been vested over to the Company during the business merger. Tan Sri

Dato’ Azman Hashim is deemed to have an interest by virtue of his shareholding in

AMCORP.

2. The supply of IT related products and services from two subsidiary companies of

AMCORP, Infotech Project Sdn Bhd (‘‘IPSB’’) and Gamarapi Sdn Bhd (‘‘GSB’’), in

relation to the merger integration exercise between AMFB Holdings and the

Company. This contract includes the supply of supporting system software for

servers, tellers and back office support PC’s and computer hardware for training

centres, and the supply of IT installation services. The contract was originally

entered into by AMFB Holdings, but this has since been vested over to the Company

during the business merger. Tan Sri Dato’ Azman Hashim is deemed to have an

interest by virtue of his shareholding in AMCORP.

3. The supply of IT software and support services from two subsidiary companies of

AMCORP, IPSB and GSB. The contract is inclusive of purchase of software and the

installation as well as relocation of IT equipment for the hubs rationalisation in

connection with the merger integration between AMFB Holdings and the Company.

The contract was originally entered into by AMFB Holdings, but this has since been

vested over to the Company during the business merger. Tan Sri Dato’ Azman

Hashim is deemed to have an interest by virtue of his shareholding in AMCORP.

4. The supply of IT software and hardware equipment and provision of IT consultancy

related services by Computer System Advisers (M) Sdn Bhd (‘‘CSA’’). The

transaction with CSA is deemed to be a related party transaction by virtue of the

common directorship of Prof. Tan Sri Dato’ Dr. Mohd. Rashdan bin Haji Baba in

both CSA and the Company.

5. The provision of advertising services by Conquest Marketing and Communications

(M) Sdn Bhd (formerly known as Dialog Marketing Communications Sdn Bhd)

(‘‘CMCSB’’). CMCSB was commissioned to look into a corporate advertising

campaign as well as to develop a corporate identity manual for various companies

within the AmBank Group. CMCSB is an associated company of AMDB Berhad.

F-272

Tan Sri Dato’ Azman Hashim, the Chairman of AMDB Berhad, is deemed to have an

interest by virtue of his shareholding in Arab-Malaysian Corporation Berhad which

has substantial interest in AMDB Berhad.

The above transactions have been entered into in the normal course of business and have

been established under terms and conditions not materially different from those arranged with

independent third parties.

29. DIRECTORS’ REMUNERATION

Forms of remuneration in aggregate for all the Group’s and the Company’s directors charged to

the income statements for the financial year are as follows:

The Group The Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000 RM’000 RM’000

Directors of the CompanyExecutive directors

Salaries and other remuneration . . . . . 661 59 661 59

Bonuses. . . . . . . . . . . . . . . . . . . . 62 25 62 25

Benefits-in-kind . . . . . . . . . . . . . . . 30 1 30 1

753 85 753 85

Non-executive directors

Fees . . . . . . . . . . . . . . . . . . . . . . — 72 — 72

Other remuneration . . . . . . . . . . . . . 238 144 238 144

Benefits-in-kind . . . . . . . . . . . . . . . — 25 — 25

238 241 238 241

Directors of the subsidiary companiesExecutive directors

Salaries and other remuneration . . . . . — 241 — —

Bonuses. . . . . . . . . . . . . . . . . . . . — 25 — —

Benefits-in-kind . . . . . . . . . . . . . . . — 11 — —

— 277 — —

Non-executive directors

Fees . . . . . . . . . . . . . . . . . . . . . . — 41 — —

Other remuneration . . . . . . . . . . . . . — 16 — —

— 57 — —

Total directors’ remuneration. . . . . . . . 991 660 991 326

The remuneration attributable to the Managing Director of the Company, including benefits-in-

kind during the financial year amounted to RM505,864 (Nil in 2002).

F-273

30. TAXATION

The Group The Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000 RM’000 RM’000

Estimated current tax payable . . . . . . . (1,285) (3,110) — (386)

Share in taxation of associated company (37) — — —

Net transfer to deferred taxation (Note 31) 19,545 216 19,802 —

18,223 (2,894) 19,802 (386)

Over/(under) provision of current taxation

in respect of prior years . . . . . . . . . 20 (2,862) — —

Tax credit/(charge) . . . . . . . . . . . . . . 18,243 (5,756) 19,802 (386)

Taxation of the Group is in respect of estimated taxable income of certain subsidiaries. There

is no tax charge for the Company for the current year due to the utilisation of unabsorbed tax losses

and capital allowances brought forward of RM401.9 million and RM29.4 million respectively. The

tax charge in respect of the Group and the Company in the prior year was in respect of taxable

income of certain subsidiaries and dividend income received respectively.

As at 31 March 2003, the Company has unabsorbed tax losses and unutilised capital allowances

amounting to approximately RM2,417.2 million (RM2,819.1 million in 2002) and RM133.3 million

(RM173.4 million in 2002) respectively, which can be used to offset future taxable profits subject to

agreement with the Inland Revenue Board.

31. DEFERRED TAXATION

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Balance at beginning of year. . . . . . . . — 274 — —

Transfer from income statement . . . . . . (19,545) (216) (19,802) —

Amount vested over from AMFB Holdings (184,286) — (184,286) —

Amount recognised as capital reserve in

respect of unabsorbed losses brought

forward . . . . . . . . . . . . . . . . . . . (500,845) — (500,845) —

Amount reversed in respect of timing

difference on interest suspended on

non-performing loans . . . . . . . . . . . 167,654 — 167,654 —

Deconsolidation due to disposal of a

subsidiary . . . . . . . . . . . . . . . . . . — (58) — —

Balance at end of year (Note 8) . . . . . (537,022) — (537,279) —

F-274

The deferred tax (assets)/liabilities are in respect of the following timing differences:

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Unabsorbed tax losses . . . . . . . . . . . . (520,647) — (520,647) —Leasing timing differences . . . . . . . . . 20,693 — 20,693 —Timing differences between depreciationand tax allowances on property andequipment . . . . . . . . . . . . . . . . . . 28,767 — 28,510 —

Timing differences arising from allowancefor diminution in value of foreclosedproperties . . . . . . . . . . . . . . . . . . (1,680) — (1,680) —

Timing differences arising from allowancefor value impairment on amountrecoverable from Danaharta . . . . . . . (60,786) — (60,786) —

Timing difference arising from allowancefor diminution in value of investments (11,250) — (11,250) —

Others. . . . . . . . . . . . . . . . . . . . . . 7,881 — 7,881 —

(537,022) — (537,279) —

32. EARNINGS PER SHARE

Basic

Basic earnings per share is calculated by dividing the net profit for the financial yearattributable to shareholders of the Group and of the Company by the weighted average numberof ordinary shares in issue during the financial year.

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000/’000 RM’000/’000 RM’000/’000 RM’000/’000

Net profit attributable to shareholdersof the Company . . . . . . . . . . . 359,305 65,144 380,781 27,805

Number of ordinary shares atbeginning of year* . . . . . . . . . 2,613,750 1,375,750 2,613,750 1,375,750

Effect of movement in ordinaryshares:— Issue of shares pursuant to

conversion of preferenceshares. . . . . . . . . . . . . . . — 185,020 — 185,020

— Capital reduction** . . . . . . . (2,255,702) — (2,255,702) —— Issue of shares as consideration

for assets vested over fromAMFB Holdings . . . . . . . . 419,826 — 419,826 —

Weighted average number of ordinaryshares in issue . . . . . . . . . . . . 777,874 1,560,770 777,874 1,560,770

Basic earnings per share (sen) . . . . 46.19 4.17 48.95 1.78

There are no dilutive potential ordinary shares during the financial year.

* After taking into account the effect of share consolidation from RM0.50 to RM1.00 per share

** The effect of capital reduction has not been adjusted to the period prior to the event

F-275

33. COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Group and the Company makes various commitments and

incurs certain contingent liabilities with legal recourse to its customers. No material losses are

anticipated as a result of these transactions. The commitments and contingencies are not secured

against the Group’s and the Company’s assets.

The risk-weighted exposure of the Group and the Company is as follows:

31.03.2003 31.03.2002

The Group

Principal

Amount

Credit

Equivalent

Amount*

Principal

Amount

Credit

Equivalent

Amount*

RM’000 RM’000 RM’000 RM’000

Direct credit substitutes . . . . . . . . . . . . 113,183 113,183 1,327 1,327

Transaction-related contingent items . . . . 616 308 — —

Unpaid portion of partly paid shares . . . . 250 250 150 150

Irrevocable commitments to extend credit:

— maturing less than one year . . . . . . 2,928,375 — 895,221 —

— maturing more than one year . . . . . 588,778 294,389 211,571 105,786

Interest rate swap contracts:

— maturing within one year . . . . . . . . 400,000 550 — —

— maturing more than one year

to less than five years . . . . . . . . 380,000 9,800 — —

Total . . . . . . . . . . . . . . . . . . . . . . . 4,411,202 418,480 1,108,269 107,263

31.03.2003 31.03.2002

The Company

Principal

Amount

Credit

Equivalent

Amount*

Principal

Amount

Credit

Equivalent

Amount*

RM’000 RM’000 RM’000 RM’000

Direct credit substitutes . . . . . . . . . . . . 113,183 113,183 1,327 1,327

Transaction-related contingent items . . . . 616 308 — —

Unpaid portion of partly paid shares . . . . 150 150 50 50

Irrevocable commitments to extend credit:

— maturing less than one year . . . . . . 2,928,375 — 895,221 —

— maturing more than one year . . . . . 588,778 294,389 211,571 105,786

Interest rate swap contracts:

— maturing within one year . . . . . . . . 400,000 550 — —

— maturing more than one year

to less than five years . . . . . . . . 380,000 9,800 — —

Total . . . . . . . . . . . . . . . . . . . . . . . 4,411,102 418,380 1,108,169 107,163

* The credit equivalent amount is arrived at using the credit conversion factor as per Bank Negara Malaysia

guidelines.

F-276

34. NET TANGIBLE ASSETS PER SHARE (RM)

Net tangible assets per share represent the balance sheet total assets value less total liabilities

and minority interests expressed as an amount per ordinary share.

Net tangible assets per share is calculated as follows:

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Total assets . . . . . . . . . . . . . . . . . . . 32,396,464 11,211,138 32,383,383 11,197,533

Less:

Total Liabilities . . . . . . . . . . . . . . . . 30,559,688 11,142,861 30,551,069 11,155,200

Minority interests . . . . . . . . . . . . . . . 113 119 — —

30,559,801 11,142,980 30,551,069 11,155,200

Net tangible assets . . . . . . . . . . . . . . . 1,836,663 68,158 1,832,314 42,333

Issued and fully paid up ordinary shares of

RM1.00/RM.050 each . . . . . . . . . . . . 528,402 5,227,500 528,402 5,227,500

Net tangible assets per share (RM) . . . . . 3.48 0.01 3.47 0.01

F-277

35. SEGMENT ANALYSIS

Analysis by activity

The Group

31 March 2003

Finance Others Elimination Consolidated

RM’000 RM’000 RM’000 RM’000

Revenue

External revenue . . . . . . . . . . . . . . . . 2,046,490 240 — 2,046,730

Inter-segment revenue . . . . . . . . . . . . . 1,074 5,257 (6,331) —

Total revenue . . . . . . . . . . . . . . . . . . 2,047,564 5,497 (6,331) 2,046,730

Results

Profit from operations . . . . . . . . . . . . . 360,979 2,754 (22,729) 341,004

Share of profits of associated company . . 52 52

Profit before tax . . . . . . . . . . . . . . . . 341,056

Taxation . . . . . . . . . . . . . . . . . . . . . 18,243

Profit after taxation . . . . . . . . . . . . . . 359,299

Other information

Capital additions . . . . . . . . . . . . . . . . 14,155 — — 14,155

Depreciation . . . . . . . . . . . . . . . . . . . 80,899 808 36 81,743

Loan and financing loss and allowance

(net of recoveries) . . . . . . . . . . . . . . 256,327 — 22,657 278,984

Allowance for value impairment on amount

recoverable from Danaharta . . . . . . . . 89,741 — — 89,741

Writeback of allowance for diminution

in value of investment securities . . . . . (34,588) — — (34,588)

Amortisation of premium less accretion

of discounts . . . . . . . . . . . . . . . . . . (20,631) — — (20,631)

Property and equipment written off . . . . . 474 — — 474

Consolidated Balance Sheet

Assets

Segment assets . . . . . . . . . . . . . . . . . 32,383,233 94,816 (81,700) 32,396,349

Investment in associated companies. . . . . 150 — (35) 115

Consolidated total assets . . . . . . . . . . . 32,396,464

Liabilities

Segment liabilities . . . . . . . . . . . . . . . 30,551,069 167,194 (158,575) 30,559,688

Consolidated total liabilities . . . . . . . . . 30,559,688

F-278

The Group

31 March 2002

Finance Others Elimination Consolidated

RM’000 RM’000 RM’000 RM’000

Revenue

External revenue . . . . . . . . . . . . . . . . 1,141,769 5,709 — 1,147,478

Inter-segment revenue . . . . . . . . . . . . . 1,659 7,173 (8,832) —

Total revenue . . . . . . . . . . . . . . . . . . 1,143,428 12,882 (8,832) 1,147,478

Results

Profit from operations . . . . . . . . . . . . . 28,191 28,390 13,196 69,777

Share of profits of associated company . . —

Profit before tax . . . . . . . . . . . . . . . . 69,777

Taxation . . . . . . . . . . . . . . . . . . . . . (5,756)

Profit after taxation . . . . . . . . . . . . . . 64,021

Other information

Capital additions . . . . . . . . . . . . . . . . 13,541 756 — 14,297

Depreciation . . . . . . . . . . . . . . . . . . . 95,728 1,749 45 97,522

Loan and financing loss and allowance

(net of recoveries) . . . . . . . . . . . . . . 164,580 — 26,734 191,314

Allowance for value impairment on amount

recoverable from Danaharta . . . . . . . . 120,324 — — 120,324

Allowance for diminution in value of

investment securities . . . . . . . . . . . . 8,434 — — 8,434

Amortisation of premium less accretion

of discounts . . . . . . . . . . . . . . . . . . (49,363) — — (49,363)

Property and equipment written off . . . . . 70 1 — 71

Allowance for diminution in value of land

and development expenditure . . . . . . . 581 46 — 627

Allowance for diminution in value of

investment in subsidiaries . . . . . . . . . 700 — (700) —

Bad debts written off . . . . . . . . . . . . . — 830 — 830

Consolidated Balance Sheet

Assets

Segment assets . . . . . . . . . . . . . . . . . 11,197,533 138,958 (125,353) 11,211,138

Investment in associated companies. . . . . 50 — (50) —

Consolidated total assets . . . . . . . . . . . 11,211,138

Liabilities

Segment liabilities . . . . . . . . . . . . . . . 11,155,200 212,920 (225,259) 11,142,861

Consolidated total liabilities . . . . . . . . . 11,142,861

Turnover of the Group and the Company comprise interest income net of interest

suspended but before amortisation of premiums less accretion of discounts, fee income,

investment and trading income and income from Islamic banking operations.

The financial information by geographical segment is not presented as the Group’s

activities are principally conducted in Malaysia.

F-279

36. CAPITAL COMMITMENTS

As at 31 March 2003, the Group and the Company have the following commitments:

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Authorised and contracted for:

Purchase of computer equipment and

software . . . . . . . . . . . . . . . . . . . . 36,336 4,272 36,336 4,272

Leasehold improvements . . . . . . . . . . . 1,786 1,140 1,786 1,140

Unpaid portion of partly paid-up shares

in associated companies . . . . . . . . . . 250 150 150 50

38,372 5,562 38,272 5,462

Authorised and not contracted for:

Purchase of computer equipment and

software . . . . . . . . . . . . . . . . . . . . 1,263 6,012 1,263 6,012

Leasehold improvements . . . . . . . . . . . — 282 — 282

1,263 6,294 1,263 6,294

37. LEASE COMMITMENTS

The Group and the Company have lease commitments in respect of rented premises and

equipment on hire, all of which are classified as operating leases. A summary of the non-cancellable

long-term commitments, net of sub-leases is as follows:

The Group The Company

31.03.2003 31.03.2002 31.03.2003 31.03.2002

RM’000 RM’000 RM’000 RM’000

Year ending

2004. . . . . . . . . . . . . . . . . . . . . . . . . 21,717 14,082 21,717 14,082

2005. . . . . . . . . . . . . . . . . . . . . . . . . 18,945 14,192 18,945 14,192

2006. . . . . . . . . . . . . . . . . . . . . . . . . 17,259 10,989 17,259 10,989

2007 and thereafter . . . . . . . . . . . . . . . 85,707 35,506 85,707 35,506

143,628 74,769 143,628 74,769

The lease commitments represent minimum rentals not adjusted for operating expenses which

the Company is obligated to pay. These amounts are insignificant in relation to the minimum lease

obligations. In the normal course of business, leases that expire will be renewed or replaced by

leases on other properties, thus it is anticipated that future annual minimum lease commitments will

not be less than rental expenses for the financial year.

38. CAPITAL ADEQUACY RATIO

Bank Negara Malaysia’s (‘‘BNM’’) guideline on capital adequacy requires the Company to

maintain an adequate level of capital to withstand any losses which may result from credit and other

risks associated with financing operations. The capital adequacy ratio is computed based on the

eligible capital in relation to the total risk-weighted assets as determined by BNM.

F-280

The risk weighted capital adequacy ratio of the Company of 10.76% (9.43% in 2002) exceeds

the minimum requirements of BNM.

The Company

31.03.2003 31.03.2002

RM’000 RM’000

Tier 1 capital

Paid-up share capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . 528,402 2,613,750

Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379,953 —

Statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,382 432,587

Deferred tax asset in respect of unabsorbed losses*. . . . . . . . . 112,840 —

Unappropriated profit at end of year* . . . . . . . . . . . . . . . . . 188,930 (3,004,004)

Total tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,424,507 42,333

Tier 2 capital

General allowance for bad and doubtful debts and financing** . . 385,155 42,333

Subordinated term loan*** . . . . . . . . . . . . . . . . . . . . . . . . 680,000 680,000

Subordinated loan notes***. . . . . . . . . . . . . . . . . . . . . . . . 250,000 —

Total tier 2 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,315,155 722,333

Total capital funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,739,662 764,666

Less: Investment in subsidiary companies . . . . . . . . . . . . . . . (29,779) (29,779)

Capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,709,883 734,887

* Calculated in accordance to a formula determined by Bank Negara Malaysia.

** Amount in previous year was limited to amount of Tier-1 capital.

*** Not limited to 50% of Tier-1 capital as approved by Bank Negara Malaysia.

The Company

31.03.2003 31.03.2002

RM’000 RM’000

Notional risk-weighted assets:

Categories

0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,193,655 1,451,901

10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,376 269,796

20% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,496,368 1,109,373

50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,006,785 1,888,502

100% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,681,276 6,602,481

Total notional risk-weighted assets . . . . . . . . . . . . . . . . . . . 32,435,460 11,322,053

Total risk-weighted assets . . . . . . . . . . . . . . . . . . . . . . . . 25,189,680 7,795,586

Capital Ratios

Core capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.65% 0.54%

Risk-weighted capital ratio . . . . . . . . . . . . . . . . . . . . . . . . 10.76% 9.43%

F-281

The risk weighted capital adequacy ratio of the Group are as follows:

The Group

31.03.2003 31.03.2002

RM’000 RM’000

Tier 1 capital

Paid-up share capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . 528,402 2,613,750

Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379,953 —

Statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,382 432,587

Deferred tax asset in respect of unabsorbed losses*. . . . . . . . . 112,840 —

Unappropriated profit at end of year* . . . . . . . . . . . . . . . . . 193,279 (2,978,179)

Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 119

Total tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,428,969 68,277

Tier 2 capital

General allowance for bad and doubtful debts and financing** . . 385,155 68,277

Subordinated term loan*** . . . . . . . . . . . . . . . . . . . . . . . . 680,000 680,000

Subordinated loan notes***. . . . . . . . . . . . . . . . . . . . . . . . 250,000 —

Total tier 2 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,315,155 748,277

Capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,744,124 816,554

* Calculated in accordance to a formula determined by Bank Negara Malaysia.

** Amount in previous year was limited to amount of Tier-1 capital.

*** Not limited to 50% of Tier-1 capital as approved by Bank Negara Malaysia.

The Group

31.03.2003 31.03.2002

RM’000 RM’000

Notional risk-weighted assets:

Categories

0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,193,655 1,451,901

10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,376 269,796

20% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,497,657 1,111,921

50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,006,785 1,888,502

100% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,722,957 6,643,862

Total notional risk-weighted assets . . . . . . . . . . . . . . . . . . . 32,478,430 11,365,982

Total risk-weighted assets . . . . . . . . . . . . . . . . . . . . . . . . 25,231,619 7,837,477

Capital Ratios

Core capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.66% 0.87%

Risk-weighted capital ratio . . . . . . . . . . . . . . . . . . . . . . . . 10.87% 10.42%

F-282

39. CONTINGENT LIABILITIES

(i) A suit dated 15 October 1994 was filed by six individuals against AMFB Holdings and

eight other defendants in relation to the collapse of a building in which AMFB Holdings

is sued in its capacity as owner of the land adjacent to the building and for the acts and

omissions of another company as alleged servant and/or agent of AMFB Holdings.

The claim against AMFB Holdings and eight other defendants based on negligence,

nuisance and breach of statutory duty is for general damages, special damages, exemplary

damages and/or aggravated damages. The amount of damages claimed is yet to be

quantified, but may exceed RM10.0 million. Defence has been filed and the case is

pending trial.

On 7 August 1998, the plaintiffs obtained an order whereby this suit was consolidated

with the suit referred to in (ii) below. This suit has been adjourned sine die pending the

disposal of the suit in (ii) below.

In view of the decision in suit (ii) below, the directors are of the opinion that the appeal,

if leave is granted, would have a bearing on the outcome insofar as this suit is concerned.

The loss, if any, is not determinable at this point of time.

(ii) A suit dated 5 December 1996 was filed by seventy-three parties against AMFB Holdings

and nine other defendants in relation to two buildings in which AMFB Holdings is sued in

its capacity as owner of the land adjacent to the buildings. The claim against AMFB

Holdings and nine other defendants based on negligence, nuisance and breach of statutory

duty is for general damages, special damages, exemplary damages and/or aggravated

damages. The amount of damages claimed is yet to be quantified, but may exceed RM10.0

million.

Subsequently, judgement was delivered with partial liability of 30% apportioned to AMFB

Holdings. The Court has yet to assess the damages.

Based on legal advice, AMFB Holdings has filed its appeal accordingly.

On 3 December 2002, the Court of Appeal dismissed the appeal by AMFB Holdings

against the finding of liability by the High Court and has now ordered that damages be

assessed. However, no date has yet been fixed for the assessment of damages. The Court

of Appeal has also excluded certain items of damage claimed by the plaintiffs.

On 2 January 2003, the Company filed an application for leave to appeal to the Federal

Court against the finding of the Court of Appeal. The application for leave to appeal

included an application for stay of the proceedings pertaining to the assessment of

damages by the High Court. Based on legal advice, the application for leave to appeal has

good prospects of success.

(iii) A suit dated 10 December 1996 was filed by sixty parties against AMFB Holdings and

nine other defendants in relation to the collapse of a building in which AMFB Holdings is

sued in its capacity as owner of the land adjacent to the building. The claim against

AMFB Holdings and nine other defendants based on negligence, nuisance and breach of

statutory duty is for general damages, special damages, exemplary and/or aggravated

damages. The amount of damages claimed is yet to be quantified, but may exceed RM

10.0 million. Defence has been filed on 27 February 1998 and the case is pending trial.

On 7 August 1998, the plaintiffs obtained an order whereby this suit was consolidated

with the suit referred to in (ii) above. This suit has been adjourned sine die pending the

disposal of the suit in (ii) above.

In view of the decision in suit (ii) above, the directors are of the opinion that the appeal,

if leave is granted, would have a bearing on the outcome insofar as this suit is concerned.

The loss, if any, is not determinable at this point of time.

F-283

Note: By a Vesting Order of the High Court of Malaya dated 21 May 2002 pursuant to Section 50 of the

Banking and Financial Institutions Act, 1989, all rights and liabilities (including rights and liabilities

under and or in respect of any past, pending or future litigation) accruing to, owed or incurred by AMFB

Holdings in relation to its finance company business have been transferred to and assumed by the

Company with effect from 15 June 2002 and AMFB Holdings shall cease to be liable in respect of such

liabilities with effect therefrom. Therefore, the rights and liabilities in respect of the abovementioned

suits have been assumed by the Company.

40. SIGNIFICANT EVENTS

On 15 June 2002, the finance company business of AMFB Holdings was merged with that of

the Company by way of a vesting of the assets and liabilities of AMFB Holdings to the Company via

a Vesting Order of the High Court of Malaya under Section 50 of the Banking and Financial

Institutions Act, 1989. The net book value of the assets and liabilities vested over was RM1,158.4

million. The consideration for this vesting of business was satisfied by the issue of subordinated loan

notes of RM250.0 million by the Company, with the remaining value satisfied by the issue of new

ordinary shares of RM1.00 each in the Company.

On 18 July 2002, the Company issued 528,402,118 ordinary shares of RM1.00 each to AMFB

Holdings at RM1.71906 per share and on 14 August 2002, the Company issued the subordinated loan

notes of RM250.0 million to AMFB Holdings as settlement of the consideration due in respect of the

above vesting of business from AMFB Holdings to the Company.

41. SUBSEQUENT EVENTS

(i) On 30 April 2003, the Company issued RM200 million amount of Negotiable Interest-

Bearing Redeemable Unsecured Subordinated Bonds to increase its capital funds. The

subordinated bonds are issued for a period of ten years to be repaid on 30 April 2013 and

bear interest varying from 7.95% to 10.45% per annum, payable on a half yearly basis.

(ii) Subsequent to the balance sheet date, the ultimate holding company, AMMB Holdings

Berhad (‘‘AHB’’) has received the approval of Bank Negara Malaysia for AHB to

commence negotiations with EON Capital Berhad for a possible merger between the two

banking groups in line with the recommendations of the Financial Sector Master Plan.

F-284

42. THE OPERATION OF ISLAMIC BANKING SCHEME

The state of affairs as at 31 March 2003 and the results for the financial year ended on that

date under the Islamic Banking Scheme are summarised as follows:

The Group and Company

31.03.2003 31.03.2002

Note RM’000 RM’000

ASSETS

Deposits and placements with banks and other financial

institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . (a) 40,218 13,248

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . (b) 167,085 63,342

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . (c) 2,155,638 126,253

Statutory deposit with Bank Negara Malaysia . . . . . . . . 67,098 7,640

Property and equipment . . . . . . . . . . . . . . . . . . . . . . 67 1

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,714 1

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 2,447,820 210,485

LIABILITIES AND ISLAMIC BANKING FUND

Deposits from customers . . . . . . . . . . . . . . . . . . . . . (d) 1,179,939 190,583

Deposits and placements of banks and other financial

institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . (e) 1,027,861 —

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . (f) 44,299 3,512

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,252,099 194,095

Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (g) 160,542 10,000

Unappropriated profit . . . . . . . . . . . . . . . . . . . . . . . 35,179 6,390

Islamic Banking Fund . . . . . . . . . . . . . . . . . . . . . . . 195,721 16,390

TOTAL LIABILITIES AND ISLAMIC BANKING FUND 2,447,820 210,485

COMMITMENTS AND CONTINGENCIES . . . . . . . . . (m) 100,043 6,769

F-285

Income Statements

For the year ended 31 March 2003

The Group and Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

Note RM’000 RM’000

Financing income . . . . . . . . . . . . . . . . . . . . . . . . . (h) 121,543 14,697

Non-operating income . . . . . . . . . . . . . . . . . . . . . . (i) 873 1,076

122,416 15,773

Dividends attributable to depositors. . . . . . . . . . . . . . (j) (48,012) (7,047)

Net income from Islamic Banking Scheme . . . . . . . . . 74,404 8,726

Financing loss and allowances . . . . . . . . . . . . . . . . . (k) (25,785) (1,625)

Transfer to profit equalisation reserve . . . . . . . . . . . . (3,655) —

44,964 7,101

Operating expenditure . . . . . . . . . . . . . . . . . . . . . . (l) (1,975) (747)

Profit before taxation . . . . . . . . . . . . . . . . . . . . . . 42,989 6,354

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,200) —

Profit after taxation . . . . . . . . . . . . . . . . . . . . . . . 28,789 6,354

F-286

NOTES TO THE ISLAMIC BANKING SCHEME FINANCIAL STATEMENTS

(a) DEPOSITS AND PLACEMENTS WITH BANKS AND OTHER FINANCIAL INSTITUTIONS

The Group and Company

31.03.2003 31.03.2002

RM’000 RM’000

Licensed finance companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 13,242

Licensed banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,182 —

Bank Negara Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 6

40,218 13,248

(b) INVESTMENT SECURITIES

The Group and Company

31.03.2003 31.03.2002

RM’000 RM’000

Malaysian Government Investment Certificates . . . . . . . . . . . . . . . . . . . . 92,814 62,956

Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,560 —

Islamic Negotiable certificate of deposits . . . . . . . . . . . . . . . . . . . . . . . 19,977 —

162,351 62,956

Less: Amortisation of premium less accretion of discount . . . . . . . . . . . . . 4,734 386

167,085 63,342

Market value:

Malaysian Government Investment Certificates . . . . . . . . . . . . . . . . . . . . 96,288 63,381

Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,306 —

(c) FINANCING ACTIVITIES

The Group and Company

31.03.2003 31.03.2002

RM’000 RM’000

Term financing and revolving credit facilities . . . . . . . . . . . . . . . . . . . . 260,197 12,795

House financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269,899 19,988

Islamic hire-purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,248,249 127,237

Lease financing/Industrial hire-purchase . . . . . . . . . . . . . . . . . . . . . . . . 80,092 519

Other financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,045 —

2,949,482 160,539

Unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (639,640) (29,759)

Gross financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,309,842 130,780

Allowance for bad and doubtful financing:

— Specific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (49,758) (862)

— General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,179) (1,923)

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (71,267) (1,742)

2,155,638 126,253

Non-performing financing (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,818 9,310

Ratio of net non-performing financing . . . . . . . . . . . . . . . . . . . . . . . . . 3.14% 7.26%

F-287

(i) Financing analysed by concepts are as follows:

The Group and Company

31.03.2003 31.03.2002

RM’000 RM’000

Al-Bai’ Bithaman Ajil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235,395 32,783

Al-Ijarah/Al-Ijarah Thumma Al-Bai’ . . . . . . . . . . . . . . . . . . . . . . 1,847,795 97,997

Al-Musyarakah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226,652 —

2,309,842 130,780

(ii) The maturity structure of financing is as follows:

The Group and Company

31.03.2003 31.03.2002

RM’000 RM’000

Maturing within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 619,823 4,846

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 717,503 4,630

Three years to five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584,826 27,091

Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387,690 94,213

2,309,842 130,780

(iii) Financing analysed by their economic purposes are as follows:

The Group and Company

31.03.2003 31.03.2002

RM’000 RM’000

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,545 156

Mining and quarrying . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,043 —

Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,376 643

Electricity, gas and water . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265 —

Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,430 —

Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276 266

Purchase of landed property

Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,165 20,406

Non-residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175,037 12,245

General commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,585 —

Transport, storage and communication . . . . . . . . . . . . . . . . . . . . . 60,710 —

Finance, insurance and business services . . . . . . . . . . . . . . . . . . . 6,551 —

Purchase of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,289 —

Purchase of transport vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . 1,707,235 94,370

Consumption credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 —

Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,312 2,694

2,309,842 130,780

F-288

(iv) Movements in the allowance for bad and doubtful financing and income-in-suspense accounts are as

follows:

The Group and Company

31.03.2003 31.03.2002

RM’000 RM’000

General Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . 1,923 565

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . . 7,626 1,358

Amount vested over from AMFB Holdings . . . . . . . . . . . . . . . . 23,630 —

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,179 1,923

% of total financing less specific allowance and income-in-suspense 1.52% 1.50%

Specific Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . 862 595

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . . 31,524 411

Amount written back in respect of recoveries . . . . . . . . . . . . . . (11,217) (144)

Net charge to income statements . . . . . . . . . . . . . . . . . . . . . . 20,307 267

Amount vested over from AMFB Holdings . . . . . . . . . . . . . . . . 59,599 —

Amount written off/Adjustment to Asset Deficiency Account . . . . . (31,010) —

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,758 862

Income-in-suspense

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . 1,742 1,082

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . . 42,055 903

Amount written back in respect of recoveries . . . . . . . . . . . . . . (4,703) (243)

Net charge to income statements . . . . . . . . . . . . . . . . . . . . . . 37,352 660

Amount vested over from AMFB Holdings . . . . . . . . . . . . . . . . 36,751 —

Amount written off/Adjustment to Asset Deficiency Account . . . . . (4,578) —

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,267 1,742

(d) DEPOSITS FROM CUSTOMERS

The Group and Company

31.03.2003 31.03.2002

RM’000 RM’000

Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,427 33,194

General Investment deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,058,628 157,389

Islamic negotiable certificates of deposits . . . . . . . . . . . . . . . . . . . . . . . 9,884 —

1,179,939 190,583

The maturity structure of deposits is as follows:

The Group and Company

31.03.2003 31.03.2002

RM’000 RM’000

Due within six months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 976,300 153,774

Six months to one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,515 25,538

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,211 10,106

Three years to five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,913 1,165

1,179,939 190,583

F-289

The deposits are sourced from the following customers:

The Group and Company

31.03.2003 31.03.2002

RM’000 RM’000

Financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 6,037

Business enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675,147 83,337

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236,616 47,432

Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268,176 53,777

1,179,939 190,583

(e) DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS

The Group and Company

31.03.2003 31.03.2002

RM’000 RM’000

Licensed banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,111 —

Licensed finance companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159,581 —

Non-banking institutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 799,169 —

1,027,861 —

Included under deposits and placements of licensed finance companies is an amount of RM159,581,000 (Nil in

2002) due to Head Office.

(f) OTHER LIABILITIES

The Group and Company

31.03.2003 31.03.2002

RM’000 RM’000

Amount owing to Head Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,571 —

Lease deposits and advance rental . . . . . . . . . . . . . . . . . . . . . . . . . . . 916 —

Provision for taxation and zakat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,779 650

Dividends payable to depositors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,347 1,678

Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,662 1,184

Profit equalisation reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,024 —

44,299 3,512

(g) CAPITAL

The Group and Company

31.03.2003 31.03.2002

RM’000 RM’000

Allocated:

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 5,000

Increase during the year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,542 5,000

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,542 10,000

Utilised:

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 5,000

Increase during the year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,542 5,000

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,542 10,000

F-290

(h) FINANCING INCOME

The Group and Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000

Income derived from financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,369 11,055

Income derived from investment securities . . . . . . . . . . . . . . . . . . . . . 4,955 4,111

Income derived from deposits and placements with financial institutions . . . 1,571 191

158,895 15,357

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (37,352) (660)

121,543 14,697

(i) NON-OPERATING INCOME

The Group and Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000

Fees on financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 873 55

Profit on disposal of investment securities . . . . . . . . . . . . . . . . . . . . . — 1,021

873 1,076

(j) DIVIDENDS ATTRIBUTABLE TO DEPOSITORS

The Group and Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000

Deposits and placements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,205 7,047

Head Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,807 —

48,012 7,047

(k) FINANCING LOSS AND ALLOWANCES

The Group and Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000

Allowance for bad and doubtful financing:

— Specific allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,307 267

— General allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,626 1,358

Bad debts and financing recovered . . . . . . . . . . . . . . . . . . . . . . . . . . (2,148) —

25,785 1,625

(l) OPERATING EXPENDITURE

The Group and Company

01.04.2002 to

31.03.2003

01.01.2001 to

31.03.2002

RM’000 RM’000

Personnel/Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 517

Establishment costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300 88

Marketing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 949 17

Administration and general expenses . . . . . . . . . . . . . . . . . . . . . . . . . 508 125

1,975 747

F-291

(m) COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Group and the Company makes various commitments and incurs certain

contingent liabilities with legal recourse to its customers. No material losses are anticipated as a result of these

transactions. The commitments and contingencies are not secured against the Company’s assets.

The risk-weighted exposure of the Group and of the Company is as follows:

The Group and Company

31.03.2003 31.03.2002

Principal

Amount

Credit

Equivalent

Amount*

Principal

Amount

Credit

Equivalent

Amount*

RM’000 RM’000 RM’000 RM’000

Irrevocable commitments to extend credit:

— maturing less than one year . . . . . . . . . . 58,845 — — —

— maturing more than one year. . . . . . . . . . 41,198 20,599 6,769 3,385

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,043 20,599 6,769 3,385

* The credit equivalent amount is arrived at using the credit conversion factor as per Bank Negara Malaysia

guidelines.

(n) CAPITAL ADEQUACY RATIO

The capital adequacy ratio of the Islamic Banking Scheme of the Company as at 31 March 2003 is analysed as

follows:

31.03.2003 31.03.2002

RM’000 RM’000

Tier 1 capital

Islamic Banking Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,542 10,000

Retained profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,179 6,390

Total tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,721 16,390

Tier 2 capital

General allowance for bad and doubtful debts . . . . . . . . . . . . . . . . . . . . 33,179 1,923

Total tier 2 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,179 1,923

Capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228,900 18,313

Total risk-weighted assets: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,177,402 122,403

Capital Ratios

Core capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.99% 13.39%

Risk-weighted capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.51% 14.96%

F-292

43. RISK MANAGEMENT POLICY

Risk management is about managing uncertainties such that deviations from the Group’s

intended objectives are kept within acceptable levels. Sustainable profitability forms the core

objectives of the Group’s risk management strategy.

Every risk assumed by the Group carries with it potential for gains as well as potential to erode

shareholders’ value. The Group’s risk management policy is to identify, capture and analyse these

risks at an early stage, continuously measure and monitor these risks and to set limits, policies and

procedures to control them to ensure sustainable risk-taking and sufficient returns.

The management approach towards the significant risks of the Group are enumerated below.

Market Risk Management

Market risk is the risk of loss from changes in the value of portfolios and financial

instruments caused by movements in market variables, such as interest rates and foreign

exchange rates and equity prices.

The primary objective of market risk management is to ensure that losses from market

risk can be promptly arrested and risk positions are sufficiently liquid so as to enable the

Group to reduce its position without incurring potential loss that is beyond the sustainability of

the Group.

The market risk of the Group’s trading and non-trading portfolio is managed separately

using value at risk approach to compute the market risk exposure of non-trading portfolio and

trading portfolio. Value at risk is a statistical measure that estimates the potential changes in

portfolio value that may occur brought about by daily changes in market rates over a specified

holding period at a specified confidence level under normal market condition.

The Group controls its market risk exposure of its trading and non-trading activities

primarily through a series of threshold limits. Stop loss and value at risk limits are the primary

means of control governing the trading activities of the Group while value at risk limits

governs the non-trading positions.

To complement value at risk measurement, the Group also institutes a set of scenario

analysis under various potential market conditions such as severe shifts in currency rates,

parallel interest risk movements and yield curve shifts to assess the changes in portfolio value.

F-293

The following table shows the interest rate sensitivity gap, by time bands, on which

interest rates of instruments are next repriced on a contractual basis or, if earlier, the dates on

which the instruments mature.

2003

The Group

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

interest

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term funds . . 2,567,700 — — — — — 97,901 2,665,601 2.83

Deposits and placements with

financial institutions . . . — 18,500 — 94 — — — 18,594 2.96

Investment securities . . . . . 127,624 473,896 708,153 371,050 413,976 124,102 164,695 2,383,496 3.22

Loans, advances and

financing . . . . . . . . . 7,640,703 528,346 1,001,626 1,756,026 10,703,147 1,749,529 1,781,061 25,160,438 9.05

Other non-interest sensitive

balances . . . . . . . . . . — — — — — — 2,168,335 2,168,335

TOTAL ASSETS . . . . . . . 10,336,027 1,020,742 1,709,779 2,127,170 11,117,123 1,873,631 4,211,992 32,396,464

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers . . . 7,997,562 3,378,061 3,044,636 3,887,049 1,301,886 — — 19,609,194 3.44

Deposits and placements of

banks and other financial

institutions . . . . . . . . 1,372,580 975,350 499,487 751,849 1,229,874 280,000 — 5,109,140 2.95

Securities sold under

repurchase agreements . . . 305,470 — — — — — — 305,470 2.80

Amount due to Cagamas

Berhad . . . . . . . . . . 186,816 373,314 440,884 748,742 2,269,174 — — 4,018,930 4.14

Subordinated term loan . . . . — — — — 680,000 — — 680,000 6.50

Subordinated loan notes . . . — — — — — 250,000 — 250,000 7.00

Other non-interest sensitive

balances . . . . . . . . . . — — — — — — 586,954 586,954

Total Liabilities . . . . . . . 9,862,428 4,726,725 3,985,007 5,387,640 5,480,934 530,000 586,954 30,559,688

Minority interests . . . . . . . — — — — — — 113 113

Shareholder’s Funds . . . . . — — — — — — 1,836,663 1,836,663

TOTAL LIABILITIES AND

SHAREHOLDER’S

FUNDS . . . . . . . . . . 9,862,428 4,726,725 3,985,007 5,387,640 5,480,934 530,000 2,423,730 32,396,464

On-balance sheet interest

sensitivity gap . . . . . . 473,599 (3,705,983) (2,275,228) (3,260,470) 5,636,189 1,343,631 1,788,262 —

Off-balance sheet interest

sensitivity gap . . . . . . 500,000 280,000 (50,000) (350,000) (380,000) — — —

Total interest sensitivity gap . 973,599 (3,425,983) (2,325,228) (3,610,470) 5,256,189 1,343,631 1,788,262 —

F-294

2003

The Company

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

interest

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term funds . . 2,567,700 — — — — — 96,706 2,664,406 2.83

Deposits and placements with

financial institutions . . . — 18,500 — — — — — 18,500 2.96

Investment securities . . . . . 127,624 473,896 708,153 371,050 413,976 124,102 164,418 2,383,219 3.22

Loans, advances and

financing . . . . . . . . . 7,640,877 528,699 1,002,166 1,757,144 10,709,159 1,751,851 1,781,061 25,170,957 9.05

Other non-interest sensitive

balances . . . . . . . . . . — — — — — — 2,146,301 2,146,301

TOTAL ASSETS . . . . . . . 10,336,201 1,021,095 1,710,319 2,128,194 11,123,135 1,875,953 4,188,486 32,383,383

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers . . . 7,999,415 3,378,061 3,044,636 3,887,049 1,301,886 — — 19,611,047 3.44

Deposits and placements of

banks and other financial

institutions . . . . . . . . 1,372,580 975,350 499,487 751,849 1,229,874 280,000 — 5,109,140 2.95

Securities sold under

repurchase agreements . . . 305,470 — — — — — — 305,470 2.80

Amount due to Cagamas

Berhad . . . . . . . . . . 186,816 373,314 440,884 748,742 2,269,174 — — 4,018,930 4.14

Subordinated term loan . . . . — — — — 680,000 — — 680,000 6.50

Subordinated loan notes . . . — — — — — 250,000 — 250,000 7.00

Other non-interest sensitive

balances . . . . . . . . . . — — — — — — 576,482 576,482

Total Liabilities . . . . . . . 9,864,281 4,726,725 3,985,007 5,387,640 5,480,934 530,000 576,482 30,551,069

Shareholder’s Funds . . . . . — — — — — — 1,832,314 1,832,314

TOTAL LIABILITIES AND

SHAREHOLDER’S

FUNDS . . . . . . . . . . 9,864,281 4,726,725 3,985,007 5,387,640 5,480,934 530,000 2,408,796 32,383,383

On-balance sheet interest

sensitivity gap . . . . . . 471,920 (3,705,630) (2,274,688) (3,259,446) 5,642,201 1,345,953 1,779,690 —

Off-balance sheet interest

sensitivity gap . . . . . . 500,000 280,000 (50,000) (350,000) (380,000) — — —

Total interest sensitivity gap . 971,920 (3,425,630) (2,324,688) (3,609,446) 5,262,201 1,345,953 1,779,690 —

Liquidity Risk

Liquidity risk is the risk that the organisation will not be able to fund its day-to-day

operations at a reasonable cost.

The primary objective of liquidity risk management framework is to ensure the

availability of sufficient funds at a reasonable cost to honour all financial commitments as it

comes due.

The secondary objective is to ensure an optimal funding structure and to balance the key

liquidity risk management objectives, which includes diversification of funding sources,

customer base, and maturity period.

F-295

The ongoing liquidity risk management at the Group is based on the following key

strategies:

. Management of cash-flow; an assessment of potential cash flow mismatches that may

arise over a period of one-year ahead and the maintenance of adequate cash and

liquefiable assets over and above the standard requirements of Bank Negara

Malaysia.

. Scenario analysis; a simulation on liquidity demands of new business, changes in

portfolio as well as stress scenarios based on historical experience of large

withdrawals.

. Diversification and stabilisation of liabilities through management of funding

sources, diversification of customer depositor base and inter-bank exposures.

In the event of actual liquidity crisis occurring, a Contingency Funding Plan provides a

formal process to identify a liquidity crisis and detailing responsibilities among the relevant

departments to ensure orderly execution of procedures to restore the liquidity position and

confidence in the Group.

F-296

The following table shows the maturity analysis of the Group’s and the Company’s assets

and liabilities based on contractual terms:

2003

The Group

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

specific

maturity Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . 2,665,601 — — — — — — 2,665,601

Deposits and placements with financial

institutions . . . . . . . . . . . . — 18,500 — 94 — — — 18,594

Investment securities . . . . . . . . . 127,624 473,896 708,153 371,050 413,976 124,102 164,695 2,383,496

Loans, advances and financing . . . . 2,858,194 1,079,334 1,594,362 3,051,437 11,670,281 4,906,830 — 25,160,438

Other assets . . . . . . . . . . . . . — — — — — — 828,125 828,125

Statutory deposit with Bank Negara

Malaysia . . . . . . . . . . . . . — — — — — — 900,746 900,746

Investment in associated companies . — — — — — — 115 115

Property and equipment . . . . . . . — — — — — — 439,349 439,349

TOTAL ASSETS . . . . . . . . . . . 5,651,419 1,571,730 2,302,515 3,422,581 12,084,257 5,030,932 2,333,030 32,396,464

LIABILITIES AND

SHAREHOLDER’S FUNDS

Deposits from customers . . . . . . . 7,997,562 3,378,061 3,044,636 3,887,049 1,301,886 — — 19,609,194

Deposits and placements of banks and

other financial institutions . . . . 1,372,580 975,350 499,487 751,849 1,229,874 280,000 — 5,109,140

Securities sold under repurchase

agreements . . . . . . . . . . . . 305,470 — — — — — — 305,470

Amount due to Cagamas Berhad . . . 132,124 273,717 328,934 607,603 2,676,552 — — 4,018,930

Other liabilities. . . . . . . . . . . . — — — — — — 586,954 586,954

Subordinated term loan . . . . . . . . — — — — — 680,000 — 680,000

Subordinated loan notes . . . . . . . — — — — — 250,000 — 250,000

Total Liabilities . . . . . . . . . . . 9,807,736 4,627,128 3,873,057 5,246,501 5,208,312 1,210,000 586,954 30,559,688

Minority interests . . . . . . . . . . . — — — — — — 113 113

Shareholder’s funds . . . . . . . . . . — — — — — — 1,836,663 1,836,663

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . 9,807,736 4,627,128 3,873,057 5,246,501 5,208,312 1,210,000 2,423,730 32,396,464

Net maturity mismatch . . . . . . . . (4,156,317) (3,055,398) (1,570,542) (1,823,920) 6,875,945 3,820,932 (90,700) —

F-297

2003

The Company

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

specific

maturity Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . 2,664,406 — — — — — — 2,664,406

Deposits and placements with financial

institutions . . . . . . . . . . . . — 18,500 — — — — — 18,500

Investment securities . . . . . . . . . 127,624 473,896 708,153 371,050 413,976 124,102 164,418 2,383,219

Loans, advances and financing . . . . 2,858,368 1,079,687 1,594,902 3,052,555 11,676,293 4,909,152 — 25,170,957

Other assets . . . . . . . . . . . . . — — — — — — 827,217 827,217

Statutory deposit with Bank Negara

Malaysia . . . . . . . . . . . . . — — — — — — 900,746 900,746

Investment in subsidiary companies . — — — — — — 29,779 29,779

Investment in associated companies . — — — — — — 150 150

Property and equipment . . . . . . . — — — — — — 388,409 388,409

TOTAL ASSETS . . . . . . . . . . . 5,650,398 1,572,083 2,303,055 3,423,605 12,090,269 5,033,254 2,310,719 32,383,383

LIABILITIES AND

SHAREHOLDER’S FUNDS

Deposits from customers . . . . . . . 7,999,415 3,378,061 3,044,636 3,887,049 1,301,886 — — 19,611,047

Deposits and placements of banks and

other financial institutions . . . . 1,372,580 975,350 499,487 751,849 1,229,874 280,000 — 5,109,140

Securities sold under repurchase

agreements . . . . . . . . . . . . 305,470 — — — — — — 305,470

Amount due to Cagamas Berhad . . . 132,124 273,717 328,934 607,603 2,676,552 — — 4,018,930

Other liabilities. . . . . . . . . . . . — — — — — — 576,482 576,482

Subordinated term loan . . . . . . . . — — — — — 680,000 — 680,000

Subordinated loan notes . . . . . . . — — — — — 250,000 — 250,000

Total Liabilities . . . . . . . . . . . 9,809,589 4,627,128 3,873,057 5,246,501 5,208,312 1,210,000 576,482 30,551,069

Shareholder’s funds . . . . . . . . . . — — — — — — 1,832,314 1,832,314

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . 9,809,589 4,627,128 3,873,057 5,246,501 5,208,312 1,210,000 2,408,796 32,383,383

Net maturity mismatch . . . . . . . . (4,159,191) (3,055,045) (1,570,002) (1,822,896) 6,881,957 3,823,254 (98,077) —

Credit Risk Management

Credit risk is the risk of loss due to the inability or unwillingness of a counterparty to

meet its payment obligations. Exposure to credit risk arises primarily from lending and

guarantee activities and, to a lesser extent, pre-settlement and settlement exposures of sales and

trading activities.

The primary objective of the credit risk management framework is to ensure that exposure

to credit risk is always kept within its capability and financial capacity to withstand potential

future losses.

For non-retail credits, risk management begins with an assessment of the financial

standing of the borrower or counterparty using an internally developed credit rating model. The

model consists of quantitative and qualitative scores which are then translated into a rating

grade, which ranges from ‘AAA’ (lowest risk) to ‘C’ (highest risk). Credit risk is quantified

based on Expected Default Frequencies and Expected Losses on default from its portfolio of

loans and off-balance sheet credit commitments. Expected Default Frequencies are calibrated to

the internal rating model while Loan Loss Estimates are based on past portfolio default

experiences.

F-298

For retail credits, an in-house developed credit-scoring system to support the housing and

hire purchase applications is being used to complement the credit assessment process.

The Group’s lending activities are guided by internal credit policies and guidelines that

are approved by the Board of Directors. Within these policies, single customer limits restrict

total exposure allowed to corporate groups according to their level of creditworthiness, while

sector limits ensure that the Group’s total credit exposure to each economic sector is within

prudent thresholds.

Operational Risk Management

Operational risk is the potential loss from a breakdown in internal process, systems,

deficiencies in people and management or operational failure arising from external events. It is

increasingly recognised that operational risk is the single most widespread risk facing financial

institutions today.

Operational risk management is the discipline of systematically identifying the critical

potential points and causes of failure, assess the potential cost and to minimise the impact of

such risk through the initiation of risk mitigating measures and policies.

The Group minimises operational risk by putting in place appropriate policies, internal

controls and procedures as well as maintaining back-up procedures for key activities and

undertaking contingency planning. These are supported by independent reviews by the Group’s

Internal Audit team.

Legal and Regulatory Risk

The Group manages legal and regulatory risks to its business. These are the risk of

breaches of applicable laws and regulatory requirements, breaches of obligations of fidelity,

unenforceability of counterparty obligations, and inappropriate documentation of contractual

obligations.

Legal risk is minimised through consultation with the internal and external legal counsel

and the use of industry standard agreements for financial products.

Regulatory risk is managed through the implementation of measures and procedures

within the organization to facilitate compliance with regulations. These include a compliance

monitoring and reporting process that requires identification of risk areas, prescription of

controls to minimize these risks, staff training and assessments, provision of advice and

disseminating of information.

Risk Management Policy on Financial Derivatives

Purpose of engaging in financial derivatives

Financial derivative instruments are contracts whose value is derived from one or more

underlying financial instruments or indices. They include swaps, forward rate agreements,

futures, options and combinations of these instruments. Derivatives are contracts that transfer

risks, mainly market risks. Financial derivatives are used by the Group to manage the Group’s

own market risk exposure. The Group’s involvement in financial derivatives is currently

focussed on interest rate swaps.

Interest rate swap transactions generally involve the exchange of fixed and floating

interest payment obligations without the exchange of the underlying principal amounts.

As part of the asset and liability exposure management, the Group uses derivatives to

manage the Group’s market risk exposure. As the value of these financial derivatives are

principally driven by interest rate factors, the Group uses them to reduce the overall interest

rate exposure of the Group. These are performed by entering into an exposure in derivatives

that produces opposite value movements vis-a-vis exposures generated by other non-derivative

F-299

activities of the Group. The Group manages these risks on a portfolio basis. Hence, exposures

on derivatives are aggregated or netted against similar exposures arising from other financial

instruments engaged by the Group.

Fair value of financial derivatives

The estimated fair values of the Group’s and the Company’s outstanding derivative

financial instruments are as below. These values are stand-alone without taking into account

their potential offsetting relationships with other non-derivatives exposures of the Group.

2003

Principal

Amount Fair Value

RM’000 RM’000

Interest rate related contracts:

Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . 780,000 (10,190)

Risk associated with financial derivatives

As derivatives are contracts that transfer risks, they expose the holder to the same types

of market and credit risk as other financial instruments, and the Group manages these risks in a

consistent manner under the overall risk management framework.

The Group uses interest rate swaps as hedging instruments to offset exposures generated

by other non-derivative activities of the Group.

Credit risk of derivatives

Counterparty credit risk arises from the possibility that a counterparty may be unable to

meet the terms of the derivatives contract. Unlike conventional asset instruments, the Group’s

financial loss is not the entire contracted principal value of the derivatives, but rather a fraction

equivalent to the cost to replace the defaulted contract with another in the market. The cost of

replacement is equivalent to the difference between the original value of the derivatives at time

of contract with the defaulted counterparty and the current fair value of a similar substitute at

current market prices. The Group will only suffer a replacement cost if the contract carries a

fair value gain at time of default.

As at 31 March 2003, the Group has no counterparty credit risk as there were no

outstanding positive value contracts. This may vary over the life of the contracts, mainly as a

function of movement in market rates and time.

The Group limits its credit risk within a conservative framework by dealing with

creditworthy counterparties, setting credit limits on exposures to counterparties, and obtaining

collateral where appropriate.

44. FAIR VALUES OF FINANCIAL INSTRUMENTS

Financial instruments are contracts that gives rise to both a financial asset of one enterprise

and a financial liability or equity instrument of another enterprise. The fair value of a financial

instrument is the amount at which the instrument could be exchanged or settled between

knowledgeable and willing parties in an arm’s length transaction, other than a forced or

liquidated sale. The information presented herein represents best estimates of fair values of

financial instruments 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 number of methodologies and assumptions regarding risk characteristics of various financial

instruments, discount rates, estimates of future cash flows and other factors. Changes in the

assumptions could materially affect these estimates and the corresponding fair values.

F-300

In addition, fair value information for non-financial assets and liabilities such as investments in

subsidiary companies and taxation are excluded, as they do not fall within the scope of MASB 24,

which requires the fair value information to be disclosed.

The estimated fair values of the Group’s and the Company’s financial instruments are as

follows:

2003

The Group

Carrying

Value Fair Value

RM’000 RM’000

Financial Assets

Cash and short-term funds . . . . . . . . . . . . . . . . . . . . . . . . 2,665,601 2,665,601

Deposits and placements with financial institutions . . . . . . . . . 18,594 18,594

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,383,496 2,430,544

Loans, advances and financing* . . . . . . . . . . . . . . . . . . . . . 25,549,143 27,542,012

Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,469 152,469

30,769,303 32,809,220

Non-financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,627,161 1,627,161

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,396,464 34,436,381

Financial Liabilities

Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . . . 19,609,194 19,655,382

Deposits and placements of banks and other financial institutions 5,109,140 5,097,839

Securities sold under repurchase agreements . . . . . . . . . . . . . 305,470 305,470

Amount due to Cagamas Berhad . . . . . . . . . . . . . . . . . . . . 4,018,930 4,060,255

Subordinated term loan . . . . . . . . . . . . . . . . . . . . . . . . . . 680,000 810,480

Subordinated loan notes . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000 296,470

Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 566,422 566,422

30,539,156 30,792,318

Non-Financial Liabilities

Other non-financial liabilities . . . . . . . . . . . . . . . . . . . . . . 20,532 20,532

Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 113

Shareholder’s funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,836,663 1,836,663

TOTAL LIABILITIES AND SHAREHOLDER’S FUNDS . . . . 32,396,464 32,649,626

F-301

2003

The Company

Carrying

Value Fair Value

RM’000 RM’000

Financial Assets

Cash and short-term funds . . . . . . . . . . . . . . . . . . . . . . . . 2,664,406 2,664,406

Deposits and placements with financial institutions . . . . . . . . . 18,500 18,500

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,383,219 2,428,929

Loans, advances and financing* . . . . . . . . . . . . . . . . . . . . . 25,559,662 27,554,146

Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,304 151,304

30,777,091 32,817,285

Non-financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,606,292 1,606,292

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,383,383 34,423,577

Financial Liabilities

Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . . . 19,611,047 19,657,235

Deposits and placements of banks and other financial institutions 5,109,140 5,097,839

Securities sold under repurchase agreements . . . . . . . . . . . . . 305,470 305,470

Amount due to Cagamas Berhad . . . . . . . . . . . . . . . . . . . . 4,018,930 4,060,255

Subordinated term loan . . . . . . . . . . . . . . . . . . . . . . . . . . 680,000 810,480

Subordinated loan notes . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000 296,470

Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 556,458 556,458

30,531,045 30,784,207

Non-Financial Liabilities

Other non-financial liabilities . . . . . . . . . . . . . . . . . . . . . . 20,024 20,024

Shareholder’s funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,832,314 1,832,314

TOTAL LIABILITIES AND SHAREHOLDER’S FUNDS . . . . 32,383,383 32,636,545

* The general allowance for both the Group and the Company amounting to RM388,705,000 has been included under

non-financial assets.

The fair value of derivatives financial instruments are shown in Note 43.

The fair value of contingent liabilities and undrawn credit facilities are not readily

ascertainable. These financial instruments are presently not sold or traded. They generate fees that

are in line with market prices for similar arrangements. The estimated fair value may be represented

by the present value of the fees expected to be received, less associated costs and potential loss that

may arise should these commitments capitalized. The Group assess that their respective fair values

are unlikely to be significant given that the overall level of fees involved is not significant and no

allowances is necessary to be made.

F-302

The following methods and assumptions were used to estimate the fair value of assets and

liabilities as at 31 March 2003 :

(a) Cash And Short-Term Funds

The carrying values are a reasonable estimate of the fair values because of negligible

credit risk, short-term nature or frequent repricing.

(b) Securities Purchased Under Repurchased Agreements And Deposits With Financial

Institutions

The fair values of securities purchased under repurchased agreements and deposits with

financial institutions with remaining maturities less than six months are estimated to

approximate their carrying values. For securities purchased under repurchased agreements

and deposits with financial institutions with maturities of more than six months, the fair value

are estimated based on discounted cash flows using the prevailing KLIBOR rates and interest

rate swap rates.

(c) Dealing And Investment Securities

The estimated fair value is based on quoted or observable market prices at the balance

sheet date. Where such quoted or observable market prices are not available, the fair value is

estimated using discounted cash flow or net tangible assets techniques. Where discounted cash

flow technique is used, the estimated future cash flows are discounted using prevailing

KLIBOR rates and interest rate swap rates of similar instruments at the balance sheet date.

(d) Loans, Advances And Financing (‘‘Loans And Financing’’)

The fair value of variable rate loans and financing are estimated to approximate their

carrying values. For fixed rate loans and financing, the fair values are estimated based on

expected future cash flows of contractual instalment payments and discounted at prevailing

KLIBOR rates and interest rate swap rates. In respect of non-performing loans and financing,

the fair values are deemed to approximate the carrying value, net of interest in suspense and

specific allowance for bad and doubtful debts and financing.

(e) Deposits From Customers, Deposits Of Banks And Other Financial Institutions And

Securities Sold Under Repurchase Agreements

The fair value of deposits liabilities payable on demand (‘‘current and savings deposits’’)

or with remaining maturities of less than six months are estimated to approximate their

carrying values at balance sheet date. The fair value of term deposits, negotiable instrument of

deposits and securities sold under repurchase agreements with remaining maturities of more

than six months are estimated based on discounted cash flows using KLIBOR rates and interest

rate swap rates.

(f) Amount Due To Cagamas Berhad

The fair values for amount due to Cagamas Berhad are determined based on discounted

cash flows of future instalments payments at prevailing KLIBOR rates and interest rate swap

rates.

(g) Subordinated Term Loan And Subordinated Loan Notes (‘‘Borrowings’’)

The fair value of borrowings with remaining maturities of less than six months are

estimated to approximate their carrying values at balance sheet date. The fair value of

borrowings with remaining maturities of more than six months are estimated based on

discounted cash flows using KLIBOR rates and interest rate swap rates.

F-303

(h) Interest Rate Swaps

The estimated fair value is based on the market price to enter into an offsetting contract

at balance sheet date.

The fair value of the other financial assets and other financial liabilities, which are

considered short term in nature, are estimated to be approximately their carrying value.

As assumptions were made regarding risk characteristics of the various financial

instruments, discount rates, future expected loss experience and other factors, changes in the

uncertainties and assumptions could materially affect these estimates and the resulting value

estimates.

45. GENERAL INFORMATION

The Company is a public limited liability company, incorporated in Malaysia.

The registered office and the principal place of business of the Company is located at Level 30,

Bangunan AmFinance, No. 8, Jalan Yap Kwan Seng, 50450 Kuala Lumpur.

F-304

AMFINANCE BERHAD

(Incorporated in Malaysia)

AUDITED FINANCIAL STATEMENTS

For the financial year ended 31 March 2003

STATEMENT BY DIRECTORS

The Directors of AmFinance Berhad, state that, in their opinion, the accompanying balance sheets

and statements of income, changes in equity and cash flows, are drawn up in accordance with the

provisions of the Companies Act, 1965 and the 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

as at 31 March 2003 and of the results and the cash flows of the Group and of the Company for the

financial year ended on that date.

Signed on behalf of the Board

in accordance with a resolution of the Directors

TAN SRI DATO’ AZMAN HASHIM

ChairmanMOHAMED AZMI MAHMOOD

Managing Director

Kuala Lumpur

30 May 2003

STATUTORY DECLARATION

I, YAP CHIN TUAN, being the Officer primarily responsible for the financial management of

AmFinance Berhad, do solemnly and sincerely declare that the accompanying balance sheets and

statements of income, changes in equity and cash flows, together with the notes thereto, are, in my

opinion, 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

abovenamed YAP CHIN TUAN at KUALA

LUMPUR this 30th day of May 2003.

Before me,

DATO NG MANN CHEONG

COMMISSIONER FOR OATHS

F-305

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AmBANK BERHAD

DIRECTORS’ AND AUDITORS’

REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2005

AmBank Berhad

(Incorporated in Malaysia)

DIRECTORS’ REPORT

The directors present their report together with the audited financial statements of AmBank

Berhad (‘‘the Bank’’) for the financial year ended 31 March 2005.

PRINCIPAL ACTIVITIES

The Bank is principally engaged in the business of commercial banking and other related

financial services which includes the provision of Islamic banking services.

There has been no significant change in the nature of the principal activities of the Bank during

the financial year.

FINANCIAL RESULTS

RM’000

Net loss for the year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (137,654)

BUSINESS PLAN AND STRATEGY FOR CURRENT FINANCIAL YEAR

The Bank’s vision remains that of becoming the premier retail and commercial financial

services provider and therefore the Bank will continue to work towards completing the eventual

legal merger of the Bank with AmFinance Berhad (‘‘AmFinance’’) which will allow all of

AmFinance branches to be converted to commercial banking branches and therefore be able to offer

the full range of commercial banking products and services.

The completion of the merger between the Bank and AmFinance will also enable the Bank to

lower its funding costs by increasing its demand deposit base by leveraging on its approximately 170

branches nationwide that will be able to offer commercial banking services. This branch network

will also allow the Bank increased access to the small and medium-sized enterprises segment more

effectively as all the branches will be able to offer trade financing and cash management services.

The Bank will also be rolling out initiatives to increase its non-interest income stream so as not

to be reliant on interest income alone which can be vulnerable to the volatility of short term interest

rate movements. This can be achieved by leveraging on the merged bank’s branch network and

electronic delivery channels to market non-banking products such as investment and insurance

products.

OUTLOOK FOR NEXT FINANCIAL YEAR

Malaysia’s economic growth is expected to moderate from 7.1% for 2004 to around 6% for

2005. The moderation in economic growth can be primarily attributed to the volatility of crude

petroleum prices that has heightened uncertainties in the sustainability of economic growth globally

which in turn have weakened external demand for Malaysian goods. The overall growth in the

economy in 2005 would be supported largely by sustained domestic demand with the main

contribution to growth coming from the private sector.

Despite lower external demand for Malaysian goods, the manufacturing sector is still expected

to be the main growth engine for the Malaysian economy with higher value-added production

playing a more prominent role in the manufacturing sector. The services sector, the second engine of

growth, is also expected to expand in line with the expansion of trade and tourism activities,

communications and financial services.

F-306

However, a moderating economy coupled with ample liquidity in the banking system will

further suppress the profitability of the banking industry’s traditional lending business. Although

inflationary pressures are picking up, it is unlikely interest rates will rise appreciably in the short

term. Therefore, the banking sector as a whole will continue to experience downward pressure on

lending margins.

The Bank is targeting to complete its legal merger with AmFinance Berhad by the first quarter

of the financial year ending 31 March 2006. With the recent modifications to the Banking and

Financial Institutions Act, 1989 to enable a single entity to hold both bank and finance company

licenses, the Bank is committed to having the enlarged branch network offer a full range of

commercial banking services.

Despite the competition and narrowing of interest spreads, the Bank is confident that it is well

positioned to improve on its performance.

SIGNIFICANT AND SUBSEQUENT EVENTS

(a) During the financial year, the Bank increased its paid-up share capital from RM708,593,750 to

RM761,718,750 through the issuance of:

(i) 31,250,000 new ordinary shares of RM1.00 each by way of a renounceable rights issue

allotted to the Bank’s holding company, AMMB Holdings Berhad (‘‘AHB’’), on the basis

of 40 new ordinary shares for every 907 existing ordinary shares held, at an issue price of

RM1.60 per ordinary share for a cash consideration of RM50,000,000; and

(ii) 21,875,000 new ordinary shares of RM1.00 each by way of a non-renounceable rights

issue allotted to the Bank’s holding company, AHB, at an issue price of RM1.60 per

ordinary share for a cash consideration of RM35,000,000.

The new ordinary shares issued rank pari passu with the then existing ordinary shares of the

Bank and the funds were used for capital purposes.

(b) Acquisition by the Bank of 14,062,000 ordinary shares of RM1.00 each representing 14.062%

of the issued and paid-up share capital of a related company, AmAssurance Berhad

(‘‘AmAssurance’’) from ABH Holdings Sdn Bhd (‘‘ABH’’) for a cash consideration of

RM44,589,000.

ABH, a company in which Dato’ Azlan Hashim, a director of AHB, is a substantial

shareholder, had a 34.06% interest in AmAssurance. Dato’ Azlan Hashim is a brother of Tan

Sri Dato’ Azman Hashim, a substantial shareholder of AHB.

(c) Subsequent to the balance sheet date, the Bank’s holding company, AHB proposed a

rationalisation exercise which involves the following proposals:

(i) Proposed Acquisition by AMFB Holdings Berhad (‘‘AMFB’’)

The Proposed Acquisition by AMFB involves the acquisition by AMFB of the entire

equity interest in the Bank, comprising 761,718,750 ordinary shares, from AHB for a

purchase consideration based on the carrying value of AHB’s investment in the Bank as at

the date of completion of the Proposed Acquisition by AMFB. The Purchase

Consideration is proposed to be satisfied by the issuance of new shares in AMFB to

AHB at an issue price to be determined based on the unaudited net tangible assets

(‘‘NTA’’) per share of AMFB as at the completion date.

Upon completion of the Proposed Acquisition by AMFB, the Bank will become a wholly-

owned subsidiary of AMFB.

F-307

(ii) Proposed AmBank Acquisition by AmFinance

Upon completion of the Proposed Acquisition by AMFB, AmFinance proposes to acquire

the entire equity interest in the Bank comprising 761,718,750 shares from AMFB for a

purchase consideration based on the NTA of the Bank after adjusting for certain non-

transferable assets as at the date of completion of the Proposed AmBank Acquisition by

AmFinance. The Purchase Consideration is proposed to be satisfied by the issuance of

new shares in AmFinance to AMFB at an issue price to be determined based on the

unaudited NTA per Share of AmFinance as at the completion date.

(iii) Proposed Business Merger

Upon completion of the Proposed AmBank Acquisition by AmFinance, the finance

company business of AmFinance and the commercial banking business of the Bank will

be merged by way of a transfer of the Bank’s assets and liabilities (save for certain non-

transferable assets) to AmFinance via a vesting order under Section 50 of the Banking and

Financial Institutions Act, 1989.

The Proposed Business Merger is conditional on the completion of the Proposed AmBank

Acquisition by AmFinance which is in turn conditional upon completion of the Proposed Acquisition

by AMFB.

The Proposed Acquisition by AMFB, Proposed AmBank Acquisition By AmFinance and

Proposed Business Merger are subject to the approvals from Securities Commission (‘‘SC’’), Minister

of Finance, Bank Negara Malaysia (‘‘BNM’’) and other relevant authorities.

ITEMS OF AN UNUSUAL NATURE

In the opinion of the directors, the results of operations of the Bank for the financial year have

not been substantially affected by any item, transaction or event of a material and unusual nature.

There has not arisen in the interval between the end of the financial year and the date of this

report any item, transaction or event of a material and unusual nature likely, in the opinion of the

directors, to affect substantially the results of operations of the Bank for the current financial year in

which this report is made.

DIVIDENDS

No dividend has been paid or declared by the Bank since the end of the previous financial year.

The directors do not recommend the payment of any dividend in respect of the current financial

year.

RESERVES AND ALLOWANCES

There were no material transfers to or from reserves or allowances during the financial year

other than those disclosed in the financial statements.

BAD AND DOUBTFUL DEBTS AND FINANCING

Before the income statement and balance sheet of the Bank were made out, the directors took

reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts

and financing and the making of allowances for doubtful debts and financing and have satisfied

themselves that all known bad debts and financing had been written off and adequate allowance had

been made for doubtful debts and financing.

At the date of this report, the directors are not aware of any circumstances that would render

the amount written off for bad debts and financing or the amount of allowance for doubtful debts

and financing in the Bank inadequate to any substantial extent.

F-308

CURRENT ASSETS

Before the income statement and balance sheet of the Bank were made out, the directors took

reasonable steps to ascertain that any current assets, other than debts and financing, which were

unlikely to be realised in the ordinary course of business, their values as shown in the accounting

records of the Bank, have been written down to their estimated realisable values.

At the date of this report, the directors are not aware of any circumstances which would render

the values attributed to the current assets in the financial statements of the Bank 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 methods of valuation of assets or liabilities in the Bank’s

financial statements 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 Bank which has arisen since the end of the financial year

and which secures the liabilities of any other person; or

(b) any contingent liability in respect of the Bank that has arisen since the end of the

financial year, other than those incurred in the normal course of business.

No contingent or other liability of the Bank has become enforceable, or is likely to become

enforceable within the period of twelve months after the end of the financial year which, in the

opinion of the directors, will or may substantially affect the ability of the Bank to meet its

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 Bank that would render any amount stated in the

financial statements misleading.

SHARE OPTIONS

No options have been granted by the Bank to any parties during the financial year to take up

unissued shares of the Bank.

No shares have been issued during the financial year by virtue of the exercise of any option to

take up unissued shares of the Bank. As at the end of the financial year, there were no unissued

shares of the Bank under options.

DIRECTORS

The directors who served on the Board since the date of the last report and at the date of this

report are:

Tan Sri Dato’ Azman Hashim

Prof. Tan Sri Dato’ Dr. Mohd Rashdan bin Haji Baba

Tan Sri Datuk Clifford Francis Herbert

Dato’ James Lim Cheng Poh (appointed on 15 June 2004)

Datuk Oh Chong Peng (appointed on 1 July 2004 and resigned on 31 March 2005)

Tan Kheng Soon

Cheah Tek Kuang

Mohamed Azmi Mahmood

F-309

In accordance with Article 87 of the Bank’s Articles of Association, Prof. Tan Sri Dato’ Dr.

Mohd Rashdan bin Haji Baba and Tan Kheng Soon retire at the forthcoming Annual General

Meeting and, being eligible, offer themselves for re-election.

DIRECTORS’ INTERESTS

The interests in shares and share options in the holding company and related companies of

those who were directors at the end of the financial year as recorded in the Register of Directors’

Shareholdings kept by the Bank under Section 134 of the Companies Act, 1965, are as follows:

DIRECT INTERESTS

In the holding company, AMMB Holdings Berhad (‘‘AHB’’)

No. of ordinary shares of RM1.00 each

Shares

Balance at

1.4.2004

Bought/

Converted

from Share

options

* Share

Exchange Sold

Balance at

31.3.2005

Tan Sri Dato’ Azman Hashim . . . . . . — — 675,490 — 675,490

Prof. Tan Sri Dato’ Dr. Mohd Rashdan

Haji Baba . . . . . . . . . . . . . . . . . 226,071 — — — 226,071

Tan Kheng Soon . . . . . . . . . . . . . . 18,000 — — — 18,000

Cheah Tek Kuang . . . . . . . . . . . . . 485,800 — 38,000 500,000 23,800

Mohamed Azmi Mahmood . . . . . . . . 143,200 329,924 50,000 323,100 200,024

No. of Warrants

Warrants 1997/2007

Balance at

1.4.2004 Bought

Sold/

Exercised

Balance at

31.3.2005

Prof. Tan Sri Dato’ Dr. Mohd Rashdan Haji Baba 19,795 — — 19,795

Warrants 2003/2008

Tan Sri Dato’ Azman Hashim . . . . . . . . . . . . . 245,793 — 245,793 —

Cheah Tek Kuang . . . . . . . . . . . . . . . . . . . . 46,189 — — 46,189

Mohamed Azmi Mahmood . . . . . . . . . . . . . . . 16,083 — — 16,083

No. of ordinary shares of RM1.00 each

Share options

Balance at

1.4.2004 Granted Exercised Expired

Balance at

31.3.2005

Mohamed Azmi Mahmood . . . . . . . . 329,924 — 329,924 — —

F-310

In a related company, AMFB Holdings Berhad

No. of ordinary shares of RM1.00 each

Shares

Balance at

1.4.2004 Bought Sold

* Share

Exchange

Balance at

31.3.2005

Tan Sri Dato’ Azman Hashim

— Held directly . . . . . . . . . . . . 211,505 — — 211,505 —

— Held through nominees . . . . . . 522,985 — 59,000 463,985 —

Cheah Tek Kuang . . . . . . . . . . . . . 38,000 — — 38,000 —

Mohamed Azmi Mahmood . . . . . . . . 50,000 — — 50,000 —

* Arising from the exchange of shares on the basis of one (1) new AHB share for every one (1) existing AMFB share held by

AMFB shareholders other than AHB.

In a related company, AmInvestment Group Berhad

No. of Renounceable Rights of RM1.00 each

Renounceable Rights

Balance at

1.4.2004

^^Rights/

Allocation

Eligible

Employees/

Directors Bought Sold

Balance at

31.3.2005

Tan Sri Dato’ Azman Hashim . . — 118,954,848 — — — 118,954,848

Prof. Tan Sri Dato’ Dr. Mohd

Rashdan Haji Baba . . . . . . . — 51,824 150,000 — — 201,824

Tan Sri Datuk Clifford Francis

Herbert . . . . . . . . . . . . . . — — 50,000 — — 50,000

Dato’ James Lim Cheng Poh . . . — — 30,000 — — 30,000

Datuk Oh Chong Peng. . . . . . . — — 30,000 — — 30,000

Tan Kheng Soon . . . . . . . . . . — 4,126 30,000 — — 34,126

Cheah Tek Kuang . . . . . . . . . — 120,075 2,500,000 — — 2,620,075

Mohamed Azmi Mahmood . . . . — 66,461 30,000 — — 96,461

DEEMED INTERESTS

In the holding company, AMMB Holdings Berhad

No. of ordinary shares of RM1.00 each

Shares Name of Company

Balance at

1.4.2004 Bought

* Share

Exchange Sold

Balance at

31.3.2005

Tan Sri Dato’

Azman Hashim

Azman Hashim Holdings

Sdn Bhd

5,713,905 — — 4,800,000 913,905

Arab-Malaysian Corporation

Berhad

605,826,825 94,425,596 — 42,000,000 658,252,421

AMDB Equipment Trading

Sdn Bhd

198,000 — 241,047 — 439,047

Ginagini Sdn Bhd 12,184,809 — — 12,184,809 —

Regal Genius Sdn Bhd 21,750,000 7,740,000 — — 29,490,000

* Arising from the exchange of share on the basis of one (1) new AHB share for every one (1) existing AMFB share held by

AMFB shareholders other than AHB.

^^ Arising from the restricted offer for sale by AmInvestment Group Berhad to entitled shareholders pursuant to the listing

of AmInvestment Group Berhad on the Main Board of Bursa Malaysia Securities Berhad.

F-311

No. of Warrants

Warrants 2003/2008 Name of Company

Balance at

1.4.2004 Bought

Sold/

Exercised

Balance at

31.3.2005

Tan Sri Dato’

Azman Hashim .

Arab-Malaysian

Corporation Berhad

75,214,328 — 69,260,231 5,954,097

AMDB Equipment

Trading Sdn Bhd

22,682 — — 22,682

Azman Hashim Holdings

Sdn Bhd

3,342,309 — 3,342,309 —

Slan Sdn Bhd 82,132 — 82,132 —

Ginagini Sdn Bhd 3,945,451 — 3,945,451 —

Indigenous Capital Sdn

Bhd

280,435 — 280,435 —

Regal Genius Sdn Bhd 2,989,936 — — 2,989,936

Corporateview Sdn Bhd — 31,658,738 — 31,658,738

In a related company, AMFB Holdings Berhad

No. of ordinary shares of RM1.00 each

Shares Name of Company

Balance at

1.4.2004 Bought Sold

* Share

Exchange

Balance at

31.3.2005

Tan Sri Dato’

Azman Hashim .

AMDB Equipment

Trading Sdn Bhd

241,047 — — 241,047 —

* Arising from the exchange of share on the basis of one (1) new AHB share for every one (1) existing AMFB share held by

AMFB shareholders other than AHB.

In a related company, AmInvestment Group Berhad

No. of Renounceable Rights of RM1.00 each

Renounceable Rights Name of Company

Balance at

1.4.2004

Rights/

Allocation Bought Sold

Balance at

31.3.2005

Tan Sri Dato’ Azman

Hashim . . . . . . .

Arab-Malaysian

Corporation Berhad

— 150,896,688 — — 150,896,688

AMDB Equipment

Trading Sdn Bhd

— 100,646 — — 100,646

Azman Hashim Holdings

Sdn Bhd

— 209,502 — — 209,502

Regal Genius Sdn Bhd — 6,760,238 — — 6,760,238

The share options in the ultimate holding company, which had an option period of five years

were granted pursuant to AMMB Holdings Berhad Employees’ Share Option Scheme II (‘‘AHB

Group ESOS’’) and the persons to whom the options are granted under the scheme have no right to

participate in any staff share option scheme of any other company in the Group.

By virtue of the directors’ shareholding in the holding company, these directors are deemed to

have an interest in the shares of the Bank and its related companies.

Other than as disclosed, none of the directors in office at the end of the financial year had any

interest in shares in the Bank or its related companies during the financial year.

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no director of the Bank has received or become

entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments

received or due and receivable by directors shown in the financial statements, or the fixed salary of

full-time employees of the Bank) by reason of a contract made by the Bank or a related corporation

F-312

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 related party transactions as shown in Note 26

to the Financial Statements.

Neither during nor at the end of the financial year was the Bank a party to any arrangement

whose object is to enable the directors to acquire benefits by means of the acquisition of shares in,

or debentures of, the Bank or any other body corporate, other than AHB Group ESOS and the

restricted offer for sale by AMMB Holdings Berhad to its shareholders and AmInvestment Group

Berhad to eligible employees and directors pursuant to the listing of AmInvestment Group Berhad on

the Main Board of Bursa Malaysia Securities Berhad, as disclosed.

ULTIMATE HOLDING COMPANY

The directors regard AMMB Holdings Berhad, a company incorporated in Malaysia, as both the

holding company and the ultimate holding company.

AUDITORS

The auditors, Ernst & Young, have indicated their willingness to continue in office.

Signed on behalf of the Board

in accordance with a resolution of the Directors,

TAN SRI DATO’ AZMAN HASHIM DATO’ JAMES LIM CHENG POH

Chairman Managing Director

Kuala Lumpur,

16 May 2005

F-313

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REPORT OF THE AUDITORS TO THE MEMBER OF

AmBank Berhad

(Incorporated in Malaysia)

We have audited the financial statements set out on pages F-315 to F-378. These financial

statements are the responsibility of the Bank’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 applicable Approved Standards on Auditing in

Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance

about whether the financial statements are free of material misstatement. An audit includes

examining, on a test basis, evidence supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the accounting principles used and significant estimates

made by the directors, as well as evaluating the overall presentation of the financial statements. We

believe that 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, Bank Negara Malaysia Guidelines and applicable MASB Approved

Accounting Standards in Malaysia so as to give a true and fair view of:

(i) the financial position of the Bank as at 31 March 2005 and of the results and the

cash flows of the Bank for the financial year ended on that date; and

(ii) the matters required by Section 169 of the Act to be dealt with in the financial

statements; and

(b) the accounting and other records and the registers required by the Act to be kept by the

Bank have been properly kept in accordance with the provisions of the Act.

ERNST & YOUNG

AF 0039

Chartered Accountants

GLADYS LEONG

1902/04/06 (J)

Partner

Kuala Lumpur,

16 May 2005

F-314

AmBank Berhad

(Incorporated in Malaysia)

BALANCE SHEET

As at 31 March 2005

2005 2004

Note RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . . . . . . . . . . . . . 4 2,223,797 1,710,302

Deposits and placements with financial institutions . . . 5 22,100 22,048

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . 6 196,672 233,183

Investment securities . . . . . . . . . . . . . . . . . . . . . . 7 983,998 1,135,398

Loans, advances and financing. . . . . . . . . . . . . . . . 8 8,357,676 7,210,642

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . 29 291,597 252,773

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 158,419 59,446

Statutory deposit with Bank Negara Malaysia . . . . . . 10 312,653 291,687

Property and equipment . . . . . . . . . . . . . . . . . . . . 11 32,399 32,241

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 12,579,311 10,947,720

LIABILITIES AND SHAREHOLDER’S FUNDS

Deposits from customers . . . . . . . . . . . . . . . . . . . 12 6,889,986 6,680,253

Deposits and placements of banks and other financial

institutions . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3,648,851 2,508,651

Securities sold under repurchase agreements . . . . . . . 14 70,736 4,722

Bills and acceptances payable . . . . . . . . . . . . . . . . 15 515,752 264,595

Amount due to Cagamas Berhad . . . . . . . . . . . . . . 16 197,927 238,149

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 17 239,131 181,768

Subordinated term loan . . . . . . . . . . . . . . . . . . . . 18 460,000 460,000

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 12,022,383 10,338,138

Share capital. . . . . . . . . . . . . . . . . . . . . . . . . . . 19 761,719 708,594

Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 (204,791) (99,012)

Shareholder’s Funds . . . . . . . . . . . . . . . . . . . . . . 556,928 609,582

TOTAL LIABILITIES AND SHAREHOLDER’S

FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,579,311 10,947,720

COMMITMENTS AND CONTINGENCIES . . . . . . . 31 6,770,004 4,858,478

NET TANGIBLE ASSETS PER SHARE (RM) . . . . 32 0.73 0.86

The accompanying Notes form an integral part of the Financial Statements.

F-315

AmBank Berhad

(Incorporated in Malaysia)

INCOME STATEMENT

For the financial year ended 31 March 2005

2005 2004

Note RM’000 RM’000

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . 21 488,382 460,335

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (279,557) (298,234)

Net interest income . . . . . . . . . . . . . . . . . . . . . . . 208,825 162,101

Income from Islamic banking operations . . . . . . . . . . 40 24,899 20,114

Non-interest income . . . . . . . . . . . . . . . . . . . . . . . 23 77,959 44,376

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311,683 226,591

Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . 24 (219,897) (170,791)

Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . 91,786 55,800

Allowance for losses on loans and financing . . . . . . . . 25 (267,339) (346,551)

Write-back of allowance for diminution in value of

investment securities . . . . . . . . . . . . . . . . . . . . . 9,476 30,692

Transfer to profit equalisation reserve . . . . . . . . . . . . 40 (10,401) (1,864)

Loss before taxation . . . . . . . . . . . . . . . . . . . . . . (176,478) (261,923)

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 38,824 84,370

Net loss for the year . . . . . . . . . . . . . . . . . . . . . . (137,654) (177,553)

Basic loss per ordinary share (sen) . . . . . . . . . . . . . 30 (18.86) (32.09)

The accompanying Notes form an integral part of the Financial Statements.

F-316

AmBank Berhad

(Incorporated in Malaysia)

STATEMENT OF CHANGES IN EQUITY

For the financial year ended 31 March 2005

Non-distributable reserves

Share

Capital

Share

Premium

Statutory

Reserve

Capital

Reserve

Accumulated

Losses Total

Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Balance as at 1 April 2003

As previously reported . . . 505,469 223,281 95,642 461 (360,352) 464,501

Prior year adjustment . . . . 38 — — — — (2,366) (2,366)

As restated . . . . . . . . . . . 505,469 223,281 95,642 461 (362,718) 462,135

Shares issued during the year

pursuant to the rights issue 19 203,125 121,875 — — — 325,000

Loss for the year . . . . . . . — — — — (177,553) (177,553)

Balance as at 31 March 2004 708,594 345,156 95,642 461 (540,271) 609,582

Balance as at 1 April 2004

As previously reported . . . 708,594 345,156 95,642 461 (532,583) 617,270

Prior year adjustment . . . . 38 — — — — (7,688) (7,688)

As restated . . . . . . . . . . . 708,594 345,156 95,642 461 (540,271) 609,582

Shares issued during the year

pursuant to rights issue . 19 53,125 31,875 — — — 85,000

Loss for the year . . . . . . . — — — — (137,654) (137,654)

Balance as at 31 March 2005 761,719 377,031 95,642 461 (677,925) 556,928

The accompanying Notes form an integral part of the Financial Statements.

F-317

AmBank Berhad

(Incorporated in Malaysia)

CASH FLOW STATEMENT

For the financial year ended 31 March 2005

2005 2004

RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIESLoss before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (176,478) (261,923)Adjustments for:

Interest/Income-in-suspense, net of recoveries . . . . . . . . . . . . 70,451 72,688Loan and financing loss and allowances, net of recoveries . . . . 342,494 408,084Allowance on amount recoverable from Danaharta . . . . . . . . . — 13,479Depreciation of property and equipment . . . . . . . . . . . . . . . . 7,984 7,476Transfer to profit equalisation reserve . . . . . . . . . . . . . . . . . 10,401 1,864Accretion of discount less amortisation of premium. . . . . . . . . (12,468) (12,691)Loss on disposal of investment and dealing securities — net . . . 1,414 12,815(Gain)/Loss on disposal of property and equipment . . . . . . . . . (405) 68Write-back of allowance for diminution in value of dealing andinvestment securities . . . . . . . . . . . . . . . . . . . . . . . . . . (9,476) (30,692)

Operating Profit Before Working Capital Changes. . . . . . . . . . . 233,917 211,168(Increase)/Decrease In Operating Assets:

Deposits and placements with financial institutions . . . . . . . . . (52) 207,952Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,487 (23,314)Loans, advances and financing. . . . . . . . . . . . . . . . . . . . . . (1,559,979) (467,301)Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (98,973) (34,931)Statutory deposit with Bank Negara Malaysia . . . . . . . . . . . . (20,966) 2,270

Increase/(Decrease) In Operating Liabilities:Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . . . 209,733 184,897Deposits and placements of banks and other financial institutions 1,140,200 (19,640)Securities sold under repurchase agreements . . . . . . . . . . . . . 66,014 (7,885)Bills and acceptances payable . . . . . . . . . . . . . . . . . . . . . . 251,157 75,087Amount due to Cagamas Berhad . . . . . . . . . . . . . . . . . . . . (40,222) (109,995)Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,962 67,500

Net Cash Generated From Operating Activities . . . . . . . . . . . . 249,278 85,808

CASH FLOWS FROM INVESTING ACTIVITIESProceeds from disposal of property and equipment . . . . . . . . . . 405 326Sale/(Purchase) of investment securities — net . . . . . . . . . . . . 186,954 (288,207)Purchase of property and equipment . . . . . . . . . . . . . . . . . . . (8,142) (6,632)

Net Cash Generated From/(Used In) Investing Activities. . . . . . . 179,217 (294,513)

CASH FLOW FROM FINANCING ACTIVITIESRepayment of Subordinated Term Loan . . . . . . . . . . . . . . . . . — (75,000)Repayment of Exchangeable Subordinated Capital Loan . . . . . . . — (460,000)Draw down of Subordinated Term Loan . . . . . . . . . . . . . . . . . — 460,000Proceeds from shares pursuant to rights issue . . . . . . . . . . . . . 85,000 325,000

Net Cash Generated From Financing Activities . . . . . . . . . . . . 85,000 250,000

Net Increase In Cash and Cash Equivalents. . . . . . . . . . . . . . . 513,495 41,295Cash and Cash Equivalents At Beginning Of Year . . . . . . . . . . 1,710,302 1,669,007

Cash and Cash Equivalents At End Of Year . . . . . . . . . . . . . . 2,223,797 1,710,302

Note: Cash and cash equivalents consist of cash and short-term funds as shown in Note 4 to the Financial Statements.

The accompanying Notes form an integral part of the Financial Statements.

F-318

AmBank Berhad

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS

31 March 2005

1. PRINCIPAL ACTIVITIES

The principal activities of the Bank are the carrying on of the business of a commercial bank

and the provision of other related financial services which also includes the provision of Islamic

banking services.

There has been no significant change in the nature of the principal activities of the Bank during

the financial year.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The financial statements of the Bank have been approved by the Board of Directors for

issuance on 4 May 2005.

The financial statements of the Bank have been prepared in accordance with the provisions of

the Companies Act, 1965, the Banking and Financial Institutions Act, 1989, Bank Negara Malaysia

Guidelines and the applicable MASB Approved Accounting Standards in Malaysia. The financial

statements incorporate those activities relating to the Islamic Banking Business undertaken by the

Bank.

Islamic Banking Business refers generally to the acceptance of deposits and granting of

financing under the Shariah principles. The Islamic Banking Business transactions are accounted for

on an accrual basis in compliance with the revised Garis Panduan 8 Guidelines on Presentation of

Financial Statements for Financial Institutions issued by Bank Negara Malaysia. The state of affairs

as at 31 March 2005 and the results for the year ended on that date of the Islamic Banking Business

of the Bank are shown in Note 40.

3. SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies adopted by the Bank are consistent with those adopted in the

previous years except for the adoption of the 3-month classification for non-performing loans from

the previous 6-month classification which has been adopted retrospectively. The effects of adopting

the 3-month classification for non-performing loans on the Bank’s unappropriated profits are

reflected as prior year adjustments in the statement of changes in equity and is disclosed in Note 38

to the financial statements. The change in accounting policy has resulted in a decrease in interest

income credited to the income statements for the financial year by RM3.9 million.

(a) Basis of Accounting

The financial statements of the Bank have been prepared under the historical cost

convention unless otherwise indicated in the accounting policies below.

(b) Interest and Financing Income and Expense Recognition

Interest income is recognised in the income statement for all interest bearing assets on an

accrual basis. Interest income includes the amortisation of premium or accretion of discount.

Interest and financing income on dealing and investment securities are recognised on an

effective yield basis.

While it is the Bank’s policy to recognise interest and financing income on the accrual

basis, interest and financing income on non-performing accounts is not recognised as income

and is suspended unless received in cash or realisation in cash is assured.

F-319

An account is classified as non-performing where repayment is in arrears for more than

three months and after maturity dates for trade bills, bankers’ acceptances and trust receipts.

Prior to this financial year, customers’ accounts, other than trade bills, bankers’

acceptances and trust receipts, were deemed to be non-performing when repayments were in

arrears for more than six months. The change in accounting policy has been accounted for

retrospectively and the effect of this change is disclosed in Note 38.

The classification of non-performing loans and financing is in conformity with Bank

Negara Malaysia’s Guideline on Classification of Non-Performing Loans and Provision for Bad

and Doubtful Debts.

Interest expense and attributable income on deposits and borrowings (pertaining to

activities relating to Islamic Banking Business) of the Bank are accrued on a straight-line basis.

(c) Recognition of Fees and Other Income

Loan arrangement and participation fees and commissions are recognised as income when

all conditions precedent are fulfilled.

Guarantee fees are recognised as income upon issuance and where the guarantee period is

longer than one year, over the duration of the guarantee period.

Other fees on a variety of services and facilities extended to customers are recognised on

inception of such transactions.

Dividends from dealing and investment securities are recognised when the right to receive

payment is established.

Profit and losses on disposal of investments are taken to the income statement. On

disposal of such investments, the difference between the net disposal proceeds and their

carrying amounts are taken to the income statements.

(d) Allowance for Bad and Doubtful Debts and Financing

Based on management’s evaluation of the portfolio of loans, advances and financing,

specific allowances for doubtful debts and financing are made when the collectibility of

receivables becomes uncertain. In evaluating collectibility, management considers several

factors such as the borrower’s financial position, cash flow projections, management, quality of

collateral or guarantee supporting the receivables as well as prevailing and anticipated

economic conditions.

A general allowance based on set percentages of the net increase in receivables 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.

An uncollectible loan and financing or portion of a loan and financing classified as bad is

written off after taking into consideration the realisable value of collateral, if any, when in the

judgement of management, there is no prospect of recovery.

(e) Repurchase Agreements

Securities purchased under resale agreements are securities which the Bank had purchased

with commitments to resell at future dates. The commitments to resell the securities are

reflected as assets on the balance sheet.

F-320

Conversely, obligations on securities sold under repurchase agreements are securities

which the Bank had sold from its portfolio, with commitments to repurchase at future dates for

funding purposes. The carrying values of the securities underlying these repurchase agreements

remain in the respective asset accounts while the obligations to repurchase such securities at

agreed prices on a specified future dates are accounted for as a liability on the balance sheet.

(f) Dealing Securities

Dealing securities are marketable securities that are acquired and held with the intention

of resale in the short term and are stated at the lower of cost and market value on a portfolio

basis. On disposal of dealing securities, the differences between the net disposal proceeds and

their carrying amounts are charged or credited to the income statement.

Transfers, if any, from dealing to investment securities are made at the lower of cost and

market value.

(g) Investment Securities

Investment securities are securities that are acquired and held for yield or capital growth

or to meet minimum liquid assets requirement pursuant to Section 38 of the Banking and

Financial Institutions Act, 1989 and are usually held to maturity.

Malaysian Government Securities, Malaysian Government Investment Certificates,

Cagamas bonds and other government securities and other bank guaranteed private debt

securities are stated at cost adjusted for amortisation of premium or accretion of discount.

Quoted securities are stated at the lower of cost and market value on a portfolio basis.

Unquoted securities are stated at cost and allowance is made in the event of any permanent

diminution in value.

On disposal of investment securities, the differences between the net disposal proceeds

and their carrying amounts are charged or credited to the income statement.

Transfers, if any, from investment securities to dealing securities are made at the lower of

carrying value and market value.

(h) Property and Equipment and Depreciation

Property and equipment are stated at cost less accumulated depreciation and any

impairment losses. The policy for the recognition and measurement of impairment losses is in

accordance with the policy on impairment of assets.

Gain or loss arising from disposal of an asset is determined as the difference between the

estimated net disposal proceeds and the carrying amount of the asset, and is recognised in the

income statement.

Depreciation of property and equipment, except for work-in-progress which is not

depreciated, is calculated using the straight-line method at rates based on the estimated useful

lives of the various assets.

The annual depreciation rates for the various classes of property and equipment are as

follows:

Leasehold improvements . . . . . . . . . . 12.5%

Office equipment, furniture and fittings . 10.0%–25.0%

Computer equipment and software . . . . 20.0%

Motor vehicles . . . . . . . . . . . . . . . . 25.0%

F-321

(i) Impairment of Assets

The carrying values of assets are reviewed for impairment when there is an indication that

the asset might be impaired. Impairment is measured by comparing the carrying values of the

assets with their recoverable amounts. The recoverable amount is the higher of net realisable

value and value in use, which is measured by reference to discounted future cash flows. An

impairment loss is charged to the income statement immediately.

Subsequent increase in the recoverable amount of an asset is treated as reversal of the

previous impairment loss and is recognised to the extent of the carrying amount of the asset

that would have been determined (net of amortisation and depreciation) had no impairment loss

been recognised. The reversal is recognised in the income statement immediately.

(j) Trade and Other Receivables

Trade and other receivables are stated at book value as reduced by the appropriate

allowances for estimated irrecoverable amounts. Allowance for doubtful debts is made based on

estimates of possible losses which may arise from non-collection of certain receivable accounts.

(k) Income Tax

Income tax on profit or loss for the financial year comprises current and deferred tax.

Income tax is recognised in the income statement except to the extent it relates to items

recognised directly in equity, in which case it is recognised in equity.

Current tax expense is determined according to the tax laws of each jurisdiction in which

the Bank operates and includes all taxes based on the taxable profits.

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. In principle, deferred tax liabilities are recognised for all taxable temporary

differences and deferred tax assets are recognised for all deductible temporary differences and

unutilised tax losses to the extent it is probable that taxable profit will be available against

which the deductible temporary differences and unutilised tax losses can be utilised. Temporary

differences are not recognised for goodwill not deductible for tax purposes and the initial

recognition of assets and liabilities that at the time of 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 substantively enacted at the balance sheet date.

(l) Amount Recoverable from Pengurusan Danaharta Nasional Berhad (‘‘Danaharta’’)

This relates to the loans sold to Danaharta where the total consideration is received in two

portions; upon the sale of the loans (initial consideration) and upon the recovery of the loans

(final consideration). The final consideration amount represents the Bank’s predetermined share

of the surplus over the initial consideration upon recovery of the loans.

The difference between the carrying value of the loans and the initial consideration is

recognised as ‘‘Amount recoverable from Danaharta’’ within the ‘‘Other Assets’’ component of

the balance sheet. Allowances against these amounts are made to reflect the Directors’

assessment on the realisable value of the final consideration as at balance sheet date. The

amount recoverable from Danaharta was fully provided as at 31 March 2004.

(m) Foreclosed Properties

Foreclosed properties are those acquired in full or partial satisfaction of debts and are

stated at cost less impairment losses in value, if any, of such properties.

F-322

(n) Forward Exchange Contracts

Unmatured forward exchange contracts are valued at forward rates prevailing at balance

sheet date, applicable to their respective dates of maturity, and resultant gains and losses are

recognised in the income statement.

(o) Interest Rate Swaps, Futures and Forward Rate Contracts

The Bank acts as an intermediary with counter parties who wish to swap their interest

obligations. The Bank also uses interest rate swaps, futures and forward rate contracts in its

trading activities and in overall interest rate risk management.

Interest income or interest expense associated with interest rate swaps that qualify as

hedges is recognised over the life of the swap agreement as a component of interest income or

interest expense. Gains or losses on interest rate futures, forward rate contracts that qualify as

hedges are generally deferred and amortised over the life of the hedged assets or liabilities as

adjustments to interest income or interest expense.

Gains and losses on interest rate swaps, futures and forward rate contracts that do not

qualify as hedges are recognised in the current year using the mark-to-market method and are

shown in the income statement as trading gain or loss from derivatives.

(p) Interest-Bearing Instruments

These are interest-bearing loans and bonds with remaining maturity of more than one

year, and are recognised as liabilities based on the proceeds received. The interest is

recognised on a straight line accrual basis.

(q) Financial Instruments

Financial instruments are recognised in balance sheet when the Company has become a

party to the contractual provisions of the instrument.

Financial instruments are classified as liabilities or equity in accordance with the

substance of the contractual arrangement. Interest, dividends and gains and losses relating to

financial instruments classified as liabilities, is reported as expense or income. Distributions to

holders of financial instruments classified as equity are charged directly to equity. Financial

instruments are offset when the Company has a legally enforceable right to offset and intends

to settle either on a net basis or to realise the asset and settle the liability simultaneously.

(r) Equity Instruments

Ordinary shares are classified as equity. Dividends on ordinary shares are recognised as

equity in the year in which they are declared.

The transaction costs of equity are accounted for as deduction from equity, net of tax.

Equity transaction costs comprise only those incremental external costs directly attributable to

the equity transaction which would otherwise have been avoided.

(s) Profit Equalisation Reserve (‘‘PER’’)

PER refers to the amount appropriated, under the Islamic Banking Business, out of the

total gross income in order to maintain a certain level of return for depositors. PER is deducted

from the total gross income (in deriving the net gross income) as approved and endorsed by the

National Advisory Council for Islamic Banking and Takaful of Bank Negara Malaysia. The

PER is generally deducted at a rate that does not exceed the maximum amount of 15% of total

gross income of each financial year and is maintained up to the maximum of 30% of total

Islamic Banking Capital Fund.

F-323

(t) Foreign Exchange

Transactions in foreign currencies are converted into Ringgit Malaysia at the rates of

exchange prevailing at transaction dates or, if covered by foreign exchange contracts, at

contracted rates. Where settlement has not taken place at balance sheet date, translation into

Ringgit Malaysia is at the approximate exchange rates prevailing at that date or at contracted

rates. All foreign exchange gains or losses are taken up in the income statement.

(u) Provision for Commitments and Contingencies

Based on management’s evaluation of the guarantees given on behalf of customers,

specific provisions for commitments and contingencies are made when in the event of call or

potential liability and there is a shortfall in the security value supporting these guarantees.

(v) Employee Benefits

(i) Short-term Benefits

Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary

benefits are accrued in the period in which the associated services are rendered by

employees of the Bank.

(ii) Defined Contribution Plan

As required by law, companies in Malaysia make contributions to the state pension

scheme, the Employees Provident Fund (‘‘EPF’’). Such contributions are recognised as an

expense in the income statement as incurred. Once the contributions have been paid, the

Bank has no further payment obligations.

(w) Bills and Acceptances Payable

Bills and acceptances payable represent the Bank’s own bills and acceptances

rediscounted and outstanding in the market.

(x) Provisions

Provisions are recognised when the Bank has a present legal obligation as a result of past

events, when it is probable that an outflow of resources embodying economic benefits will be

required to settle the obligation, and when a reliable estimate of the amount can be made.

(y) Operating Revenue

Operating revenue of the Bank comprises net interest and financing income after interest

and income suspended or recovered but before amortisation of premiums less accretion of

discounts, fee income, net trading income from money market securities, gross dividend income

from quoted and unquoted investments and income from Islamic Banking Business before

income attributable to depositors.

(z) Cash Flow Statement

The Bank adopts the indirect method in the preparation of the cash flow statement.

(aa) Cash and Cash Equivalents

For the purpose of the cash flow statement, cash and cash equivalents consist of cash on

hand and deposits at call which have an insignificant risk of changes in value.

F-324

4. CASH AND SHORT-TERM FUNDS

2005 2004

RM’000 RM’000

Cash and balances with banks and other financial institutions 68,097 93,302

Money at call and deposits placements maturing within one

month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,155,700 1,617,000

2,223,797 1,710,302

Included in the above are interbank lending of RM2,155,700,000 (2004 : RM1,617,000,000).

As at 31 March 2005, the net interbank lending position of the Bank is detailed as follows:

2005 2004

RM’000 RM’000

Interbank lending:

Cash and short term funds . . . . . . . . . . . . . . . . . . . . . 2,155,700 1,617,000

Deposits with financial institutions (Note 5) . . . . . . . . . . 22,100 19,000

2,177,800 1,636,000

Interbank borrowing (Note 13). . . . . . . . . . . . . . . . . . . . (177,860) (76,473)

Net interbank lending . . . . . . . . . . . . . . . . . . . . . . . . . 1,999,940 1,559,527

5. DEPOSITS AND PLACEMENTS WITH FINANCIAL INSTITUTIONS

2005 2004

RM’000 RM’000

Licensed banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,100 22,048

Included in the above are interbank lending of RM22,100,000 (2004 : RM19,000,000).

6. DEALING SECURITIES

2005 2004

RM’000 RM’000

Quoted Securities In Malaysia

— Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,461 36,206

Unquoted Securities In Malaysia

— Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . 192,494 209,597

210,955 245,803

Allowance for diminution in value of investments. . . . . . . . (14,283) (12,620)

Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196,672 233,183

Market value:

Quoted Securities in Malaysia — Shares . . . . . . . . . . . . 14,298 36,105

Unquoted Securities in Malaysia — Corporate bonds . . . . . 182,374 197,078

F-325

7. INVESTMENT SECURITIES

2005 2004

RM’000 RM’000

Money Market Securities

Malaysian Government Securities . . . . . . . . . . . . . . . . . — 41,508

Malaysian Government Investment Certificates . . . . . . . . . 45,011 45,163

BNM bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 59,322

Danaharta bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . — 7,000

Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . 26,648 82,491

Negotiable Certificates of Deposits . . . . . . . . . . . . . . . . 20,105 5,053

Bankers’ acceptances . . . . . . . . . . . . . . . . . . . . . . . . — 4,472

Negotiable Islamic debt certificates . . . . . . . . . . . . . . . . 224,005 237,658

315,769 482,667

Quoted Securities Outside Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419 419

Debt Equity Conversion — Quoted In Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,957 90,249

Shares — with options . . . . . . . . . . . . . . . . . . . . . . . 32,556 32,556

Loan stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,215 41,243

Loan stocks — collateralised. . . . . . . . . . . . . . . . . . . . 99,505 85,710

246,233 249,758

Unquoted Securities In Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,454 4,864

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . 158,346 158,346

Unquoted Securities Outside Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 36

207,813 163,246

Debt Equity Conversion — Unquoted

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,270 138,480

Loan stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275,964 181,503

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,704 103,344

404,938 423,327

1,175,172 1,319,417

Accretion of discount less amortisation of premium. . . . . . . 2,572 9,368

Allowance for diminution in value of investments. . . . . . . . (193,746) (193,387)

Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 983,998 1,135,398

F-326

2005 2004

RM’000 RM’000

Market value:

Money market securitiesMalaysian Government Securities . . . . . . . . . . . . . . . . . — 40,211Malaysian Government Investment Certificates . . . . . . . . . 46,561 49,729BNM bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 59,756Danaharta bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . — 8,798Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . 28,786 87,231Negotiable Certificates of Deposits . . . . . . . . . . . . . . . . 20,105 5,053Negotiable Islamic debt certificates . . . . . . . . . . . . . . . . 225,600 237,658

Debt Equity Conversion — Quoted In MalaysiaShares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,506 26,388Shares — with options . . . . . . . . . . . . . . . . . . . . . . . 18,379 18,694Loan stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,994 35,779Loan stocks — collateralised. . . . . . . . . . . . . . . . . . . . 62,655 51,855

The maturity structure of money market securities held for investments are as follows:

2005 2004

RM’000 RM’000

Maturing within one year . . . . . . . . . . . . . . . . . . . . . . . 135,831 248,214

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . 179,938 234,453

315,769 482,667

Certain money market securities held for investment have been sold under repurchase

agreements for funding purposes and their carrying values remain in the respective asset accounts

while obligations to repurchase such securities at an agreed price on a specified future date are

accounted for as a liability as mentioned in Note 14.

8. LOANS, ADVANCES AND FINANCING

2005 2004

RM’000 RM’000

Term loans and revolving credits . . . . . . . . . . . . . . . . . . 6,676,193 6,311,784Overdrafts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 865,731 771,613Claims on customers under acceptance credits . . . . . . . . . . 810,748 375,666Credit cards receivables . . . . . . . . . . . . . . . . . . . . . . . . 555,183 362,046Trust receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212,910 84,186Bills receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,963 56,457Factoring receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 38,384 30,851Staff loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,974 32,813

Gross loans, advances and financing . . . . . . . . . . . . . . . . 9,262,086 8,025,416Less: Islamic financing sold to Cagamas Berhad with recourse (3,293) (3,508)

9,258,793 8,021,908

Allowances for bad and doubtful debts and financing— Specific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (475,323) (466,902)— General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (127,287) (110,918)

Interest/Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . (298,507) (233,446)

8,357,676 7,210,642

F-327

Claims on customers under acceptance credits represent own acceptances created and

discounted. Own acceptances discounted and held in hand by the Bank as at 31 March 2005

amounted to RM254,909,000 (2004 : RM85,920,000).

Loans, advances and financing analysed by type of customer are as follows:

2005 2004

RM’000 RM’000

Domestic non-bank financial institutions

— Stockbroking companies . . . . . . . . . . . . . . . . . . . . . 34,783 39,591

— Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279,093 305,310

Domestic business enterprises

— Small medium enterprises . . . . . . . . . . . . . . . . . . . . 1,056,685 898,707

— Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,678,155 3,677,693

Government and statutory bodies . . . . . . . . . . . . . . . . . . 21,197 21,207

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,175,894 3,062,800

Other domestic entities . . . . . . . . . . . . . . . . . . . . . . . . 1,224 1,425

Foreign entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,762 15,175

9,258,793 8,021,908

The maturity structure of loans, advances and financing is as follows:

2005 2004

RM’000 RM’000

Maturing within one year . . . . . . . . . . . . . . . . . . . . . . . 4,304,200 3,520,011

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . 496,845 596,074

Three years to five years . . . . . . . . . . . . . . . . . . . . . . . 399,253 612,106

Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,058,495 3,293,717

9,258,793 8,021,908

Loans, advances and financing analysed by their economic purposes are as follows:

2005 2004

RM’000 RM’000

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158,443 144,117

Mining and quarrying . . . . . . . . . . . . . . . . . . . . . . . . . 13,002 12,370

Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 916,745 794,604

Electricity, gas and water . . . . . . . . . . . . . . . . . . . . . . . 251,722 213,454

Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 794,029 845,141

Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 536,406 549,771

Purchase of landed property:

Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,959,690 2,043,129

Non-residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680,921 741,602

General commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . 721,110 411,495

Transport, storage and communication . . . . . . . . . . . . . . . 100,434 292,160

Finance, insurance and business services . . . . . . . . . . . . . 802,748 818,744

Purchase of securities . . . . . . . . . . . . . . . . . . . . . . . . . 395,525 438,858

Consumption credits . . . . . . . . . . . . . . . . . . . . . . . . . . 555,183 362,046

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376,128 357,925

Gross loans, advances and financing . . . . . . . . . . . . . . . . 9,262,086 8,025,416

Less: Islamic financing sold to Cagamas Berhad with recourse (3,293) (3,508)

9,258,793 8,021,908

F-328

Movements in non-performing loans and financing (including interest and income receivables)

are as follows:

2005 2004

RM’000 RM’000

Gross

At 1 April, as previously reported . . . . . . . . . . . . . . . . 1,698,397 1,723,395

Prior year adjustments (Note 38) . . . . . . . . . . . . . . . . . 927,919 165,063

As restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,626,316 1,888,458

Non-performing during the year . . . . . . . . . . . . . . . . . . 80,759 1,324,267

Reclassification to performing loan . . . . . . . . . . . . . . . . (231,041) (205,907)

Amount recovered . . . . . . . . . . . . . . . . . . . . . . . . . . (82,710) (154,194)

Debt equity conversion . . . . . . . . . . . . . . . . . . . . . . . — (50,913)

Amount written off. . . . . . . . . . . . . . . . . . . . . . . . . . (27,109) (175,395)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . 2,366,215 2,626,316

Less:

Specific allowance . . . . . . . . . . . . . . . . . . . . . . . . . . (475,323) (466,902)

Interest/Income-in-suspense . . . . . . . . . . . . . . . . . . . . . (298,507) (233,446)

(773,830) (700,348)

Non-performing loans and financing (net) . . . . . . . . . . . . . 1,592,385 1,925,968

Ratio of net non-performing loans to loans, advances

and financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.76% 26.29%

During the financial year, for loans in arrears of more than 7 years, the Bank has not assigned

any value for the property collaterals.

F-329

Movements in the allowance for bad and doubtful debts and financing and interest/income-in-

suspense accounts are as follows:

2005 2004

RM’000 RM’000

General Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . 110,918 110,863

Allowance made during the year . . . . . . . . . . . . . . . . . . 16,369 55

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . 127,287 110,918

As a % of total loans less specific allowance and

interest/income-in-suspense. . . . . . . . . . . . . . . . . . . . . 1.50% 1.51%

Specific Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . 466,902 194,278

Allowance made during the year . . . . . . . . . . . . . . . . . . 370,362 501,534

Amount written back in respect of recoveries . . . . . . . . . . (44,237) (93,505)

Net charge to income statement . . . . . . . . . . . . . . . . . . . 326,125 408,029

Debt equity conversion . . . . . . . . . . . . . . . . . . . . . . . . (1,005) (6,780)

Amount written off. . . . . . . . . . . . . . . . . . . . . . . . . . . (316,699) (128,625)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . 475,323 466,902

Interest/Income-in-Suspense

At 1 April, as previously reported . . . . . . . . . . . . . . . . . 222,768 246,463

Prior year adjustments (Note 38) . . . . . . . . . . . . . . . . . . 10,678 3,286

As restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233,446 249,749

Allowance made during the year . . . . . . . . . . . . . . . . . . 117,820 148,106

Amount written back in respect of recoveries . . . . . . . . . . (47,369) (75,418)

Net charge to income statement . . . . . . . . . . . . . . . . . . . 70,451 72,688

Debt equity conversion . . . . . . . . . . . . . . . . . . . . . . . . (185) (42,252)

Amount written off. . . . . . . . . . . . . . . . . . . . . . . . . . . (5,205) (46,739)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . 298,507 233,446

F-330

9. OTHER ASSETS

2005 2004

RM’000 RM’000

Other receivables, deposits and prepayments . . . . . . . . . . . 138,766 48,820

Interest receivable on treasury assets . . . . . . . . . . . . . . . . 16,628 10,626

Foreclosed properties net of impairment losses

of RM3,995,000 (2004 : RM2,415,000) . . . . . . . . . . . . . 3,025 —

158,419 59,446

Amount recoverable from Danaharta

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . — 10,353

Addition during the year . . . . . . . . . . . . . . . . . . . . . . . — 3,126

Allowance made during the year (Note 25) . . . . . . . . . . . . — (13,479)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . — —

10. STATUTORY DEPOSIT WITH BANK NEGARA MALAYSIA

The non-interest bearing statutory deposit is maintained with Bank Negara Malaysia in

compliance with Section 37(1)(c) of the Central Bank of Malaysia Act, 1958 (revised 1994), the

amounts of which are determined as a set percentage of total eligible liabilities.

F-331

11. PROPERTY AND EQUIPMENT

Leasehold

improvements

Office

equipment,

furniture

and fittings

Computer

equipment

and

software

Motor

vehicles

Work in

progress Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Cost

At beginning of year. 18,665 12,333 51,347 2,042 13,519 97,906

Additions . . . . . . . . 1,756 426 4,261 147 1,552 8,142

Disposals . . . . . . . . — (9) — (920) — (929)

Reclassification/

Transfer . . . . . . . 805 — 4,263 — (5,068) —

At end of year . . . . 21,226 12,750 59,871 1,269 10,003 105,119

Accumulated

Depreciation

At beginning of year. 13,885 9,451 40,658 1,671 — 65,665

Current depreciation . 1,865 1,163 4,810 146 — 7,984

Disposals . . . . . . . . — (9) — (920) — (929)

At end of year . . . . 15,750 10,605 45,468 897 — 72,720

Net Book Value

As at 31.3.2005 . . . . 5,476 2,145 14,403 372 10,003 32,399

As at 31.3.2004 . . . . 4,780 2,882 10,689 371 13,519 32,241

Details as at 1.4.2003

Cost . . . . . . . . . . . 19,271 11,364 50,015 1,781 10,139 92,570

Accumulated

Depreciation . . . . 12,385 8,433 36,585 1,688 — 59,091

Depreciation charge

for 2004 . . . . . . . 2,219 1,018 4,095 144 — 7,476

Details of fully depreciated property and equipment of the Bank, which are still in use are as

follows:

Leasehold

improvements

Office

equipment,

furniture

and fittings

Computer

equipment

and

software

Motor

vehicles Total

RM’000 RM’000 RM’000 RM’000 RM’000

Cost . . . . . . . . . . . . . . . . . . 8,010 5,599 27,638 613 41,860

F-332

12. DEPOSITS FROM CUSTOMERS

2005 2004

RM’000 RM’000

Current accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,334,289 1,173,848

Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190,114 163,516

Fixed/Investment deposits . . . . . . . . . . . . . . . . . . . . . . . 5,290,347 5,342,889

Negotiable certificates of deposits . . . . . . . . . . . . . . . . . 75,236 —

6,889,986 6,680,253

The maturity structure of deposits from customers is as follows:

2005 2004

RM’000 RM’000

Due within six months . . . . . . . . . . . . . . . . . . . . . . . . 6,070,491 5,924,114

Six months to one year . . . . . . . . . . . . . . . . . . . . . . . . 650,693 652,442

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . 80,094 63,667

Over three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,708 40,030

6,889,986 6,680,253

The deposits are sourced from the following types of customer:

2005 2004

RM’000 RM’000

Government and statutory bodies . . . . . . . . . . . . . . . . . . 1,066,639 1,312,510

Business enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . 3,897,551 3,677,013

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,840,562 1,623,943

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,234 66,787

6,889,986 6,680,253

13. DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS

2005 2004

RM’000 RM’000

Licensed banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 572,501 846,995

Licensed finance companies . . . . . . . . . . . . . . . . . . . . . 289,748 116,822

Licensed merchant banks . . . . . . . . . . . . . . . . . . . . . . . 793,298 285,714

Other financial institutions . . . . . . . . . . . . . . . . . . . . . . 1,993,304 1,259,120

3,648,851 2,508,651

Included under deposits and placements of other financial institutions of the Bank are the

following:

2005 2004

RM’000 RM’000

Negotiable certificates of deposits . . . . . . . . . . . . . . . . . 1,854,599 1,278,099

Interbank borrowings (Note 4) . . . . . . . . . . . . . . . . . . . . 177,860 76,473

F-333

14. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

Securities sold under repurchase agreements represent the obligations to repurchase these

securities sold as mentioned in Note 7.

15. BILLS AND ACCEPTANCES PAYABLE

Bills and acceptances payable represent the Bank’s own bills and acceptances rediscounted and

outstanding in the market.

16. AMOUNT DUE TO CAGAMAS BERHAD

Amount due to Cagamas Berhad represents the proceeds received from loans (excluding Islamic

financing) sold directly or indirectly to Cagamas Berhad with recourse to the Bank. Under this

arrangement, the Bank undertakes to administer the loans on behalf of Cagamas Berhad and to buy

back any loans which are regarded as defective based on prudential criteria.

17. OTHER LIABILITIES

2005 2004

RM’000 RM’000

Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,350 43,803

Other creditors and accruals . . . . . . . . . . . . . . . . . . . . . 178,068 135,653

Profit equalisation reserve . . . . . . . . . . . . . . . . . . . . . . 12,713 2,312

239,131 181,768

18. SUBORDINATED TERM LOAN

The subordinated term loan represents an unsecured loan obtained from a related company,

AmMerchant Bank Berhad for the purpose of supplementing the Bank’s capital adequacy position

and it is subordinated to all other liabilities. The term loan is repayable in a lump sum at the end of

ten (10) years from the date of drawdown and interest is charged at a rate of 6.875% per annum for

the first 5 years and 7.00% to 9.00% per annum or 3% per annum plus yield of 5-year Malaysian

Government Securities, whichever is the higher for the next 5 years. The term loan was drawndown

on 30 September 2003. The Bank has obtained approval from Bank Negara Malaysia for full

inclusion of this subordinated term loan into the capital base of the Bank up to 30 June 2005, or the

completion of the proposed merger between the Bank and the Finance company whichever is earlier.

19. SHARE CAPITAL

2005 2004

RM’000 RM’000

Authorised:

Ordinary shares of RM1 each

Balance at beginning and at end of year . . . . . . . . . . 2,000,000 2,000,000

Issued and paid-up:

Ordinary shares of RM1 each:

Balance at beginning of year. . . . . . . . . . . . . . . . . . 708,594 505,469

Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,125 203,125

Balance at end of year . . . . . . . . . . . . . . . . . . . . . 761,719 708,594

F-334

During the financial year, the Bank increased its paid-up share capital from RM708,593,750 to

RM761,718,750 through the issuance of:

(i) 31,250,000 new ordinary shares of RM1.00 each by way of a renounceable rights issue

allotted to the Bank’s holding company, AMMB Holdings Berhad (‘‘AHB’’), on the basis

of 40 new ordinary shares for every 907 existing ordinary shares held, at an issue price of

RM1.60 per ordinary share for cash consideration of RM50,000,000; and

(ii) 21,875,000 new ordinary shares of RM1.00 each by way of a non-renounceable rights

issue allotted to the Bank’s holding company, AHB, at an issue price of RM1.60 per

ordinary share for cash consideration of RM35,000,000.

The resulting share premium amounting to RM18,750,000 and RM13,125,000 respectively were

credited to the share premium account as shown in the Statement of changes in equity.

The new ordinary shares issued rank pari passu with the then existing ordinary shares of the

Bank and the funds were used for capital purposes.

20. RESERVES

2005 2004

RM’000 RM’000

Non-distributable Reserves:

Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377,031 345,156

Statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,642 95,642

Capital reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 461

Total non-distributable reserves . . . . . . . . . . . . . . . . . . . 473,134 441,259

Accumulated losses. . . . . . . . . . . . . . . . . . . . . . . . . . . (677,925) (540,271)

Total reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (204,791) (99,012)

Movement in reserves are shown in the Statement of changes in equity.

Share premium is used to record premium arising from new shares issued in the Bank.

The statutory reserve is maintained in compliance with Section 36 of the Banking and Financial

Institutions Act, 1989 and is not distributable as cash dividends.

21. INTEREST INCOME

2005 2004

RM’000 RM’000

Loans and advances . . . . . . . . . . . . . . . . . . . . . . . . . . 415,968 410,680

Money at call, deposits and placements with financial

institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,008 63,298

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,095 4,023

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . 37,773 18,922

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 —

540,879 496,923

Net interest suspended . . . . . . . . . . . . . . . . . . . . . . . . . (52,734) (42,568)

Accretion of discounts less amortisation of premium . . . . . . 237 5,980

488,382 460,335

F-335

22. INTEREST EXPENSE

2005 2004

RM’000 RM’000

Deposits and placements . . . . . . . . . . . . . . . . . . . . . . . 239,804 251,393

Amount due to Cagamas Berhad . . . . . . . . . . . . . . . . . . 7,993 10,856

Exchangeable Subordinated Capital Loan . . . . . . . . . . . . . — 17,297

Subordinated term loan . . . . . . . . . . . . . . . . . . . . . . . . 31,712 18,688

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 —

279,557 298,234

23. NON-INTEREST INCOME

2005 2004

RM’000 RM’000

Fee income:

Fees on loans and advances . . . . . . . . . . . . . . . . . . . . 49,062 37,680

Brokerage fees and commissions . . . . . . . . . . . . . . . . . 14,908 10,559

Guarantee fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,978 4,742

Other fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,954 3,560

72,902 56,541

Investment and dealing income:

Net (loss)/gain from disposal of dealing securities . . . . . . (2,994) 2,143

Net gain/(loss) from disposal of investment securities . . . . 1,276 (17,940)

Gross dividend from investment securities:

Quoted shares in Malaysia . . . . . . . . . . . . . . . . . . . 2,735 1,098

Unquoted shares in Malaysia . . . . . . . . . . . . . . . . . . 28 270

1,045 (14,429)

Other income:

Foreign exchange gain — realised . . . . . . . . . . . . . . . . 2,651 2,269

Rental Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 63

Gain/(loss) on disposal of property and equipment . . . . . . 405 (68)

Amount recovered from Danaharta . . . . . . . . . . . . . . . . 803 —

4,012 2,264

77,959 44,376

24. OPERATING EXPENSES

2005 2004

RM’000 RM’000

Personnel/Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . 88,093 80,062

Establishment costs. . . . . . . . . . . . . . . . . . . . . . . . . . . 40,928 32,832

Marketing and communication expenses . . . . . . . . . . . . . . 56,612 34,848

Administration and general expenses . . . . . . . . . . . . . . . . 34,264 23,049

219,897 170,791

F-336

The above expenditure includes the following statutory disclosures:

2005 2004

RM’000 RM’000

Directors’ remuneration (Note 27) . . . . . . . . . . . . . . . . . 1,104 1,436

Rental of premises . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,937 9,798

Depreciation of property and equipment (Note 11) . . . . . . . 7,984 7,476

Auditors’ remuneration

— Statutory audit . . . . . . . . . . . . . . . . . . . . . . . . . . 100 100

— Half yearly review . . . . . . . . . . . . . . . . . . . . . . . . 40 40

Hire of equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 633

Allowance for doubtful debts . . . . . . . . . . . . . . . . . . . . 3,963 —

The number of employees of the Bank as at 31 March 2005 was 1,430 (2004 : 1,443).

Staff cost include salaries, bonuses, contributions to employees’ provident fund and all other

staff related expenses. Contributions to employees’ provident fund of the Bank amounted to

RM10,239,000 (2004 : RM8,537,000).

25. ALLOWANCE FOR LOSSES ON LOANS AND FINANCING

2005 2004

RM’000 RM’000

Allowance for bad and doubtful debts and financing:

Specific allowance

— made in the financial year . . . . . . . . . . . . . . . . . 370,362 501,534

— written back . . . . . . . . . . . . . . . . . . . . . . . . . . (44,237) (93,505)

General allowance made in the financial year . . . . . . . . . 16,369 55

Bad debts and financing recovered . . . . . . . . . . . . . . . . . (75,155) (75,012)

267,339 333,072

Allowance on amount recoverable from Danaharta . . . . . . . — 13,479

267,339 346,551

F-337

26. SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES

The Bank is a subsidiary of AMMB Holdings Berhad, a company incorporated in Malaysia,

which is also the ultimate holding company.

During the financial year, the significant related party transactions and balances are as follows:

(a) The significant transactions and balances of the Bank with its holding company and

related companies are as follows:

2005 2004

RM’000 RM’000

Income

Related CompaniesInterest on deposits and placements

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . 5,181 13,104

AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . . 578 1,119

AMMB International (L) Ltd . . . . . . . . . . . . . . . . 7 —

5,766 14,223

Interest on investment securities

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . 1,253 1,287

AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . . 1,425 450

2,678 1,737

Interest on loans and advances

Arab-Malaysian Credit Berhad . . . . . . . . . . . . . . . 7,502 8,847

Other income

AmAssurance Berhad . . . . . . . . . . . . . . . . . . . . 3,580 2,859

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . 35 —

3,615 2,859

F-338

2005 2004

RM’000 RM’000

Expenditure

Holding companyInterest on deposits and placementsAMMB Holdings Berhad . . . . . . . . . . . . . . . . . . 1,632 783

Related companiesInterest on deposits and placementsAmMerchant Bank Berhad . . . . . . . . . . . . . . . . . 12,393 5,503AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . . 3,187 9,630AMMB International (L) Ltd . . . . . . . . . . . . . . . . 618 303AMMB Consultant Sdn Bhd . . . . . . . . . . . . . . . . 17 —AMMB Labuan (L) Ltd . . . . . . . . . . . . . . . . . . . 3 —AmProperty Trust Management Berhad . . . . . . . . . 55 —AMFB Holdings Berhad . . . . . . . . . . . . . . . . . . . 88 —AmSecurities Sdn Bhd. . . . . . . . . . . . . . . . . . . . 43 —AMSEC Nominees (Tempatan) Sdn Bhd . . . . . . . . . 17 —AMSEC Nominees (Asing) Sdn Bhd . . . . . . . . . . . 5 —AmResearch Sdn Bhd . . . . . . . . . . . . . . . . . . . . 25 —AMMB Hong Kong Ltd . . . . . . . . . . . . . . . . . . . 62 —AmSecurities Holding Sdn Bhd . . . . . . . . . . . . . . 7 —

16,520 15,436

Interest on subordinated term loanAmMerchant Bank Berhad . . . . . . . . . . . . . . . . . 31,712 15,856

Other expensesAmAssurance Berhad . . . . . . . . . . . . . . . . . . . . 470 —Arab-Malaysian Credit Berhad . . . . . . . . . . . . . . . 292 583AmProperty Trust Management Berhad . . . . . . . . . 392 29AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . 3 —

1,157 612

Amount due from

Related companiesLoans and advancesArab-Malaysian Credit Berhad . . . . . . . . . . . . . . . 147,795 158,985

Cash and short-term fundsAmMerchant Bank Berhad . . . . . . . . . . . . . . . . . 19,000 119,000AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . . — 200

19,000 119,200

Deposits and placementsAmMerchant Bank Berhad . . . . . . . . . . . . . . . . . — 19,000

Investment securitiesAmMerchant Bank Berhad . . . . . . . . . . . . . . . . . 20,105 5,053AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . . — 42,264

20,105 47,317

Interest receivableAmMerchant Bank Berhad . . . . . . . . . . . . . . . . . 246 280

F-339

2005 2004

RM’000 RM’000

Amount due to

Holding companyDeposits and placements

AMMB Holdings Berhad . . . . . . . . . . . . . . . . . . — 56,379

Interest Payable

AMMB Holdings Berhad . . . . . . . . . . . . . . . . . . — 143

Related companiesDeposits and placements

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . 724,044 92,803

AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . . 99,700 9,901

AMMB International (L) Ltd . . . . . . . . . . . . . . . . 340 473

AmProperty Trust Management Berhad . . . . . . . . . 2,414 2,225

AMMB Hong Kong Ltd . . . . . . . . . . . . . . . . . . . 3,063 746

AmSecurities Holding Sdn Bhd . . . . . . . . . . . . . . 41 959

AMSEC Nominees (Tempatan) Sdn Bhd . . . . . . . . . 638 520

AmResearch Sdn Bhd . . . . . . . . . . . . . . . . . . . . 1,712 400

AMMB Labuan (L) Ltd . . . . . . . . . . . . . . . . . . . — 112

AMSEC Nominees (Asing) Sdn Bhd . . . . . . . . . . . 231 86

AMMB Consultant Sdn Bhd . . . . . . . . . . . . . . . . 650 500

AMFB Holdings Berhad . . . . . . . . . . . . . . . . . . . 480 —

AM Nominees (Tempatan) Sdn Bhd . . . . . . . . . . . 13 —

AM Nominees (Asing) Sdn Bhd . . . . . . . . . . . . . . 10 —

833,336 108,725

Subordinated term loan

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . 460,000 460,000

Interest Payable

AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . . 225 7

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . 363 87

AMMB Consultant Sdn Bhd . . . . . . . . . . . . . . . . 2 —

AmProperty Trust Management Berhad . . . . . . . . . 6 —

AMFB Holdings Berhad . . . . . . . . . . . . . . . . . . . 1 —

AmResearch Sdn Bhd . . . . . . . . . . . . . . . . . . . . 2 —

AMMB Hong Kong Ltd . . . . . . . . . . . . . . . . . . . 1 —

600 94

F-340

(b) Director’s related transactions

The significant non-banking transactions of the Bank with companies in which Tan Sri

Dato’ Azman Hashim is deemed to have a substantial interest, are as follows:

Company Types of transactions 2005 2004

RM’000 RM’000

Expenses

Dion Realties Sdn Bhd . . . . . Rental of premises 3,602 3,317

Troosts Sdn Bhd . . . . . . . . . Rental of premises 309 266

Medan Delima Sdn Bhd . . . . . Rental of premises 83 199

MCM Systems Sdn Bhd . . . . . Computer maintenance and

consultancy services

661 —

Modular Corp. (M) Sdn Bhd . . EMV card personalization and

fulfillment services

3,633 —

Dion Realties Sdn Bhd . . . . . Rental of car park and other

charges

239 —

Infotech Project Sdn Bhd . . . . Computer maintenance and

consultancy services

— 252

Cyber Village Sdn Bhd . . . . . Computer maintenance and

consultancy services

— 21

Capital Expenditure

Computer Systems Advisers

(M) Berhad . . . . . . . . . . .

Purchase of computer hardware,

software and related

consultancy services

572 —

MCM Consulting Sdn Bhd . . . Purchase of computer hardware

and related consultancy

services

204 —

Gamarapi Sdn Bhd . . . . . . . . Purchase of computer hardware,

software and related

consultancy services

— 1,741

The directors are of the opinion that all the transactions above have been entered into in

the normal course of business and have been established on terms and conditions that are not

materially different from those obtainable in transactions with unrelated parties.

F-341

27. DIRECTORS’ REMUNERATION

Forms of remuneration in aggregate for all the Bank’s directors charged to the income

statement for the year are as follows:

2005 2004

RM’000 RM’000

Executive Directors:

Salaries and other remuneration . . . . . . . . . . . . . . . . . . 553 945

Benefits-in-kind . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 81

584 1,026

Non-Executive Directors

Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 178

Other remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . 379 313

Benefits-in-kind . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4

551 495

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,135 1,521

Total (excluding benefits-in-kind) . . . . . . . . . . . . . . . . . . 1,104 1,436

The remuneration attributable to the Managing Director of the Bank, including benefits-in-kind

during the financial period amounted to RM584,000 (2004 : RM844,000).

Directors’ fees for directors who are executives of companies of the Group are paid to their

respective companies.

28. TAXATION

Taxation consists of the following:

2005 2004

RM’000 RM’000

Net transfer from deferred taxation (Note 29) . . . . . . . . . . 38,824 84,370

No provision for estimated tax payable is made in the financial statements of the Bank for 2005

and 2004 as the Bank incurred losses for both financial year.

As at 31 March 2005, the Bank has unutilised tax losses amounting to approximately RM534.4

million (2004 : RM159.0 million) which can be used to offset against future taxable income subject

to the agreement by the Inland Revenue Board.

F-342

A reconciliation of income tax credit applicable to loss before taxation at the statutory income

tax rate to income tax credit at the effective income tax rate of the Bank is as follows:

2005 2004

RM’000 RM’000

Loss before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . (176,478) (261,923)

Taxation at Malaysian statutory tax rate of 28% (2004 : 28%) (49,414) (73,339)

Expenses not deductible for tax purposes . . . . . . . . . . . . . 10,590 826

Deferred tax asset under-recognized in prior years . . . . . . . — (11,857)

Tax credit for the year . . . . . . . . . . . . . . . . . . . . . . . . (38,824) (84,370)

29. DEFERRED TAX ASSETS

2005 2004

RM’000 RM’000

Balance at beginning of year

As previously reported . . . . . . . . . . . . . . . . . . . . . . . . 249,783 167,483

Prior year adjustments (Note 38) . . . . . . . . . . . . . . . . . . 2,990 920

As restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252,773 168,403

Transfer to income statement (Note 28) . . . . . . . . . . . . . . 38,824 84,370

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . 291,597 252,773

Deferred tax assets/(liabilities) are in respect of the following temporary differences:

2005 2004

RM’000 RM’000

Unabsorbed tax losses

As previously reported . . . . . . . . . . . . . . . . . . . . . . . — 117,337

Prior year adjustment (Note 38) . . . . . . . . . . . . . . . . . . — 2,990

As restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 120,327

Current year unabsorbed tax losses . . . . . . . . . . . . . . . . . 149,621 —

Temporary differences between depreciation and tax allowances

on property and equipment . . . . . . . . . . . . . . . . . . . . (2,301) (2,067)

Temporary differences arising from allowance on amount

recoverable from Danaharta . . . . . . . . . . . . . . . . . . . . 40,184 40,409

Temporary differences arising from allowance for diminution in

value of investment and dealing securities . . . . . . . . . . . 58,247 57,682

General allowance for bad and doubtful debts and financing . 35,640 31,057

Interest suspended on non-performing loans. . . . . . . . . . . . 7,452 7,452

Profit equalisation reserve . . . . . . . . . . . . . . . . . . . . . . 3,560 648

Accretion of discount less amortisation of premium. . . . . . . (720) (2,623)

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (86) (112)

291,597 252,773

F-343

30. BASIC LOSS PER ORDINARY SHARE (SEN)

Basic loss per share is calculated by dividing the net loss for the financial year attributable to

shareholder of the Bank by the weighted average number of ordinary shares in issue during the

financial year.

2005 2004

RM’000 RM’000

Net loss attributable to shareholder of the Bank . . . . . . . . . (137,654) (177,553)

Number of ordinary shares at beginning of the year . . . . . . 708,594 505,469

Effect of ordinary shares issued pursuant to rights issue . . . . 21,267 47,729

Weighted average number of ordinary shares in issue . . . . . 729,861 553,198

Basic loss per share (Sen) . . . . . . . . . . . . . . . . . . . . . . (18.86) (32.09)

There are no dilutive potential ordinary shares during the financial years.

31. COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Bank makes various commitments and incurs certain

contingent liabilities with legal recourse to its customers. No material losses are anticipated as a

result of these transactions. The commitments and contingencies are not secured against the Bank’s

assets.

The risk-weighted exposures of the Bank is as follows:

2005 2004

Principal

Amount

Credit

Equivalent

Amount*

Risk

Weighted

Amount

Principal

Amount

Credit

Equivalent

Amount*

Risk

Weighted

Amount

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Direct credit substitutes . . . 284,788 284,788 251,206 246,743 246,743 203,857

Forward exchange contracts 1,098,396 11,189 5,595 134,854 1,084 542

Transaction-related

contingent items . . . . . . 196,288 98,144 98,144 184,159 92,080 92,080

Obligations under

underwriting agreements . 140,000 70,000 70,000 95,000 47,500 47,500

Irrevocable commitments to

extend credit:

— maturing less than one

year . . . . . . . . . . . . 3,493,463 — — 2,992,314 — —

— maturing more than one

year . . . . . . . . . . . . 1,345,894 672,947 672,947 1,054,290 527,145 527,145

Short-term self-liquidating

trade-related contingencies 169,910 33,982 12,878 133,052 26,610 4,740

Islamic financing sold to

Cagamas Berhad with

recourse . . . . . . . . . . . 3,293 3,293 1,646 3,508 3,508 1,754

Interest rate swap contract

— maturing more than one

year to less than five

years . . . . . . . . . . . 6,200 124 25 — — —

Others. . . . . . . . . . . . . . 31,772 — — 14,558 — —

6,770,004 1,174,467 1,112,441 4,858,478 944,670 877,618

* The credit equivalent amount is arrived at using the credit conversion factor as per Bank Negara Guidelines.

F-344

The Bank is contingently liable in respect of Islamic financing sold to Cagamas Berhad on the

condition that the Bank undertakes to administer the loans on behalf of Cagamas Berhad and to buy

back any loans which are regarded as defective based on prudent criteria.

32. NET TANGIBLE ASSETS PER SHARE (RM)

Net tangible assets per share represent the balance sheet’s total assets value less total liabilities

expressed as an amount per ordinary share.

Net tangible assets per share is calculated as follows:

2005 2004

RM’000 RM’000

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,579,311 10,947,720

Less:

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,022,383 10,338,138

Net Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 556,928 609,582

Issued and fully paid-up ordinary shares of RM1.00 each . . . 761,719 708,594

Net tangible assets per share (RM) . . . . . . . . . . . . . . . . . 0.73 0.86

33. CAPITAL COMMITMENT

2005 2004

RM’000 RM’000

Authorised but not contracted for

Purchase of computer equipment and software . . . . . . . . . 11,310 3,468

34. LEASE COMMITMENTS

The Bank has lease commitments in respect of rented premises, which are classified as

operating leases. A summary of non-cancellable long-term commitments, net of sub-leases is as

follows:

2005 2004

RM’000 RM’000

Year ending

2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 8,996

2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,578 6,687

2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,772 23,213

2008 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . 16,544 0

24,894 38,896

The lease commitments represent minimum rentals and are not adjusted for operating expenses

which the Bank is obligated to pay. These amounts are insignificant in relation to the minimum lease

obligations. In the normal course of business, leases that expire will be renewed or replaced by

leases on other properties, thus it is anticipated that future annual minimum lease commitments will

not be less than rental expenses for the year.

F-345

35. CAPITAL ADEQUACY RATIO

Bank Negara Malaysia’s (‘‘BNM’’) guideline on capital adequacy requires the Bank to maintain

adequate level of capital to withstand any losses which may result from credit and other risks

associated with financing operations. The capital adequacy ratio is computed based on the eligible

capital in relation to the total risk weighted assets as determined by BNM.

The risk weighted capital adequacy ratio of the Bank of 9.46% (2004 : 11.86%) exceeds the

minimum requirements of BNM.

2005 2004

RM’000 RM’000

Year ending

Tier 1 capital

Paid-up share capital. . . . . . . . . . . . . . . . . . . . . . . . . . 761,719 708,594

Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377,031 345,156

Statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,642 95,642

Capital reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 461

Accumulated losses at end of year* . . . . . . . . . . . . . . . . (969,522) (782,366)

Total tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 265,331 367,487

Tier 2 capital

General allowances for bad and doubtful debts and financing. 127,287 110,918

Subordinated term loan** . . . . . . . . . . . . . . . . . . . . . . . 460,000 460,000

Total tier 2 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 587,287 570,918

Capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 852,618 938,405

* Amount as at 31 March 2005 excludes deferred tax assets recognized to-date.

** Not limited to 50% of Tier-1 capital as approved by Bank Negara Malaysia.

2005 2004

Principal Risk-Weighted Principal Risk-Weighted

RM’000 RM’000 RM’000 RM’000

Notional risk-weighted assets:

Categories

0%. . . . . . . . . . . . . . . . . . 2,836,362 — 2,342,393 —

10% . . . . . . . . . . . . . . . . . 56,000 5,600 — —

20% . . . . . . . . . . . . . . . . . 448,079 89,616 548,576 109,715

50% . . . . . . . . . . . . . . . . . 2,658,824 1,329,412 2,139,575 1,069,788

100% . . . . . . . . . . . . . . . . 7,585,688 7,585,688 6,736,138 6,736,138

13,584,953 9,010,316 11,766,682 7,915,641

Capital Ratios:

Core capital ratio . . . . . . . . . 2.94% 4.64%

Risk-weighted capital ratio . . . 9.46% 11.86%

The comparative ratios are not adjusted for the prior year adjustments.

F-346

36. RISK MANAGEMENT POLICY

Risk management is about managing uncertainties such that deviations from the Bank’s

intended objectives are kept within acceptable levels. Sustainable profitability forms the core

objectives of the Bank’s risk management strategy.

Every risk assumed by the Bank carries with it potential for gains as well as potential to erode

shareholders’ value. The Bank’s risk management policy is to identify, capture and analyse these

risks at an early stage, continuously measure and monitor these risks and to set limits, policies and

procedures to control them to ensure sustainable risk-taking and sufficient returns.

The management approach towards the significant risks of the Bank is enumerated below.

Market Risk Management

Market risk is the risk of loss from changes in the value of portfolios and financial

instruments caused by movements in market variables, such as interest rates, foreign exchange

rates and equity prices.

The primary objective of market risk management is to ensure that losses from market

risk can be promptly arrested and risk positions are sufficiently liquid so as to enable the Bank

to reduce its position without incurring potential loss that is beyond the sustainability of the

Bank.

The market risk of the Bank’s trading and non-trading portfolio is managed separately

using value at risk approach to compute the market risk exposure of non-trading portfolio and

trading portfolio. Value at risk is a statistical measure that estimates the potential changes in

portfolio value that may occur brought about by daily changes in market rates over a specified

holding period at a specified confidence level under normal market condition. For the Bank’s

trading portfolio, the Bank’s value at risk measurement takes a more sophisticated form by

taking into account the correlation effects of various instruments in the portfolio.

The Bank controls its market risk exposure of its trading and non-trading activities

primarily through a series of threshold limits. Stop loss, value at risk and position sensitivity

limits are the primary means of control governing the trading activities of the Bank while value

at risk limits governs the non-trading positions.

To complement value at risk measurement, the Bank also institutes a set of scenario

analysis under various potential market conditions such as shifts in currency rates, general

equity prices and interest rate movements to assess the changes in portfolio value.

F-347

The following table shows the interest rate sensitivity gap, by time bands, on which

interest rates of instruments are next repriced on a contractual basis or, if earlier, the dates on

which the instruments mature.

2005

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

interest

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term

funds . . . . . . . . . . 1,995,039 — — — — — 228,758 2,223,797 2.8

Deposits and placements

with financial

institutions . . . . . . . — — — — — — 22,100 22,100 2.8

Dealing securities. . . . . — — 10,103 10,219 76,074 36,970 63,306 196,672 5.9

Investment securities . . . 10,087 46,614 — 22,181 461,891 443,225 983,998 3.2

Loans, advances and

financing

— Performing . . . . . 4,120,844 274,147 220,822 1,725 326,171 1,080,131 868,738 6,892,578 6.8

— Non-performing* . — — — — — — 1,465,098 1,465,098

Other non-interest

sensitive balances . . . — — — — — — 795,068 795,068

TOTAL ASSETS . . . . . 6,115,883 284,234 277,539 11,944 424,426 1,578,992 3,886,293 12,579,311

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers 2,790,719 1,538,908 584,793 619,476 168,294 — 1,187,796 6,889,986 2.5

Deposits and placements

of banks and other

financial institutions . 742,727 679,141 543,026 289,136 33,522 — 1,361,299 3,648,851 2.9

Securities sold under

repurchase agreements 70,736 — — — — — — 70,736 2.6

Bills and acceptances

payables. . . . . . . . . 127,238 238,952 106,108 — — — 43,454 515,752

Amount due to Cagamas

Berhad . . . . . . . . . 1,667 3,349 5,066 10,284 177,561 — — 197,927 4.1

Subordinated term loan . — — — — — 460,000 — 460,000 6.9

Other non-interest

sensitive balances . . . — — — — — — 239,131 239,131

Total Liabilities . . . . . . 3,733,087 2,460,350 1,238,993 918,896 379,377 460,000 2,831,680 12,022,383

Shareholder’s funds . . . — — — — — — 556,928 556,928

TOTAL LIABILITIES

AND

SHAREHOLDER’S

FUNDS . . . . . . . . . 3,733,087 2,460,350 1,238,993 918,896 379,377 460,000 3,388,608 12,579,311

On-balance sheet interest

sensitivity gap . . . . . 2,382,796 (2,176,116) (961,454) (906,952) 45,049 1,118,992 497,685 —

Off-balance sheet interest

sensitivity gap . . . . . — — — — — — — —

Total interest sensitivity

gap. . . . . . . . . . . . 2,382,796 (2,176,116) (961,454) (906,952) 45,049 1,118,992 497,685 —

* This is arrived at after deducting the general allowance, specific allowance and interest/income-in-suspense from

gross non-performing loans outstanding.

F-348

2004

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

interest

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term

funds . . . . . . . . . . 1,573,174 — — — — — 137,128 1,710,302 3.0

Deposits and placements

with financial

institutions . . . . . . . — — 22,048 — — — — 22,048 3.0

Dealing securities. . . . . — — — — 47,815 100,843 84,525 233,183 4.6

Investment securities . . . — 106,240 — 7,422 63,748 399,111 558,877 1,135,398 3.4

Loans, advances and

financing

— Performing . . . . . 4,227,978 138,924 79,190 214,292 292,915 129,953 312,340 5,395,592 6.9

— Non-performing* . — — — — — — 1,815,050 1,815,050

Other non-interest

sensitive balances . . . — — — — — — 636,147 636,147

TOTAL ASSETS . . . . . 5,801,152 245,164 101,238 221,714 404,478 629,907 3,544,067 10,947,720

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers 3,133,874 1,054,121 697,353 608,246 103,301 — 1,083,358 6,680,253 2.7

Deposits and placements

of banks and other

financial institutions . 674,581 231,750 559,147 216,807 46,013 — 780,353 2,508,651 3.2

Securities sold under

repurchase

agreements . . . . . . . 4,722 — — — — — — 4,722 2.7

Bills and acceptances

payables. . . . . . . . . 82,066 124,276 58,102 — — — 151 264,595

Amount due to Cagamas

Berhad . . . . . . . . . 1,752 3,523 5,328 10,815 216,731 — — 238,149 4.0

Subordinated term loan . — — — — — 460,000 — 460,000 6.9

Other non-interest

sensitive balances . . . — — — — — — 181,768 181,768

Total Liabilities . . . . . . 3,896,995 1,413,670 1,319,930 835,868 366,045 460,000 2,045,630 10,338,138

Shareholder’s funds . . . — — — — — — 609,582 609,582

TOTAL LIABILITIES

AND

SHAREHOLDER’S

FUNDS . . . . . . . . . 3,896,995 1,413,670 1,319,930 835,868 366,045 460,000 2,655,212 10,947,720

On-balance sheet interest

sensitivity gap . . . . . 1,904,157 (1,168,506) (1,218,692) (614,154) 38,433 169,907 888,855 —

Off-balance sheet

interest sensitivity

gap. . . . . . . . . . . . — — — — — — — —

Total interest sensitivity

gap. . . . . . . . . . . . 1,904,157 (1,168,506) (1,218,692) (614,154) 38,433 169,907 888,855 —

* This is arrived at after deducting the general allowance, specific allowance and interest/income-in-suspense from

gross non-performing loans outstanding.

F-349

Liquidity Risk

Liquidity risk is the risk that the organisation will not be able to fund its day-to-day

operations at a reasonable cost.

The primary objective of liquidity risk management framework is to ensure the

availability of sufficient funds at a reasonable cost to honour all financial commitments as it

comes due.

The secondary objective is to ensure an optimal funding structure and to balance the key

liquidity risk management objectives, which includes diversification of funding sources,

customer base, and maturity period.

The ongoing liquidity risk management at the Bank is based on the following key

strategies:

. Management of cash flow; an assessment of potential cash flow mismatches that may

arise over a period of one-year ahead and the maintenance of adequate cash and

liquefiable assets over and above the standard requirements of Bank Negara

Malaysia.

. Scenario analysis; a simulation on liquidity demands of new business, changes in

portfolio as well as stress scenarios based on historical experience of large

withdrawals.

. Diversification and stabilisation of liabilities through management of funding

sources, diversification of customer depositor base and inter-bank exposures.

In the event of actual liquidity crisis occurring, a Contingency Funding Plan provides a

formal process to identify a liquidity crisis and detailing responsibilities among the relevant

departments to ensure orderly execution of procedures to restore the liquidity position and

confidence in the Bank.

F-350

The following table shows the maturity analysis of the Bank’s assets and liabilities based

on contractual terms:

2005

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

specific

maturity Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term

funds. . . . . . . . . . 2,223,797 — — — — — — 2,223,797

Deposits and

placements with

financial institutions — 22,100 — — — — — 22,100

Dealing securities. . . . 14,297 — 10,103 10,219 119,105 42,948 — 196,672

Investment securities . . — 10,087 46,614 120,969 219,392 463,260 123,676 983,998

Loans, advances and

financing . . . . . . . 2,646,728 655,649 312,831 329,397 1,333,810 3,079,261 — 8,357,676

Other assets . . . . . . . — — — — — — 450,016 450,016

Statutory deposit with

Bank Negara

Malaysia . . . . . . . — — — — — — 312,653 312,653

Property and equipment — — — — — — 32,399 32,399

TOTAL ASSETS . . . . 4,884,822 687,836 369,548 460,585 1,672,307 3,585,469 918,744 12,579,311

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from

customers . . . . . . . 3,890,441 1,580,049 600,001 650,693 168,802 — — 6,889,986

Deposits and

placements of banks

and other financial

institutions . . . . . . 1,208,523 1,331,214 666,976 381,988 60,150 — — 3,648,851

Securities sold under

repurchase

agreements . . . . . . 70,736 — — — — — — 70,736

Bills and acceptances

payables . . . . . . . . 134,051 253,965 127,736 — — — — 515,752

Amount due to Cagamas

Berhad. . . . . . . . . 1,667 3,349 5,066 10,284 177,561 — — 197,927

Other liabilities . . . . . — — — — — — 239,131 239,131

Subordinated term loan — — — — — 460,000 — 460,000

Total Liabilities . . . . . 5,305,418 3,168,577 1,399,779 1,042,965 406,513 460,000 239,131 12,022,383

Shareholder’s funds . . — — — — — — 556,928 556,928

TOTAL LIABILITIES

AND

SHAREHOLDER’S

FUNDS . . . . . . . . 5,305,418 3,168,577 1,399,779 1,042,965 406,513 460,000 796,059 12,579,311

Net maturity mismatch (420,596) (2,480,741) (1,030,231) (582,380) 1,265,794 3,125,469 122,685 —

F-351

2004

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

specific

maturity Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term

funds. . . . . . . . . . 1,710,302 — — — — — — 1,710,302

Deposits and

placements with

financial institutions — — 22,048 — — — — 22,048

Dealing securities. . . . 36,105 — — — 63,792 133,286 — 233,183

Investment securities . . 14,474 175,783 58,081 7,422 319,407 400,885 159,346 1,135,398

Loans, advances and

financing . . . . . . . 2,001,110 478,949 252,102 319,616 1,343,426 2,815,439 — 7,210,642

Other assets . . . . . . . — — — — — — 312,219 312,219

Statutory deposit with

Bank Negara

Malaysia . . . . . . . — — — — — — 291,687 291,687

Property and equipment — — — — — — 32,241 32,241

TOTAL ASSETS . . . . 3,761,991 654,732 332,231 327,038 1,726,625 3,349,610 795,493 10,947,720

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from

customers . . . . . . . 4,113,897 1,095,136 715,081 652,442 103,697 — — 6,680,253

Deposits and

placements of banks

and other financial

institutions . . . . . . 836,619 363,531 608,464 654,024 46,013 — — 2,508,651

Securities sold under

repurchase

agreements . . . . . . 4,722 — — — — — — 4,722

Bills and acceptances

payables . . . . . . . . 82,066 124,276 58,253 — — — — 264,595

Amount due to Cagamas

Berhad. . . . . . . . . 1,752 3,523 5,328 10,815 216,731 — — 238,149

Other liabilities . . . . . — — — — — — 181,768 181,768

Subordinated term loan — — — — — 460,000 — 460,000

Total Liabilities . . . . . 5,039,056 1,586,466 1,387,126 1,317,281 366,441 460,000 181,768 10,338,138

Shareholder’s funds . . — — — — — — 609,582 609,582

TOTAL LIABILITIES

AND

SHAREHOLDER’S

FUNDS . . . . . . . . 5,039,056 1,586,466 1,387,126 1,317,281 366,441 460,000 791,350 10,947,720

Net maturity mismatch (1,277,065) (931,734) (1,054,895) (990,243) 1,360,184 2,889,610 4,143 —

Credit Risk Management

Credit risk is the risk of loss due to the inability or unwillingness of a counterparty to

meet its payment obligations. Exposure to credit risk arises primarily from lending and

guarantee activities and, to a lesser extent, pre-settlement and settlement exposures of sales and

trading activities.

The primary objective of the credit risk management framework is to ensure that exposure

to credit risk is always kept within its capability and financial capacity to withstand potential

future losses.

F-352

For non-retail credits, risk measurement begins with an assessment of the financial

standing of the borrower or counterparty using an internally developed credit rating model. The

model consists of quantitative and qualitative scores which are then translated into a rating

grade, which ranges from ‘‘AAA’’ (lowest risk) to ‘‘C’’ (highest risk).

Credit risk is quantified based on Expected Default Frequencies and Expected Losses on

default from its portfolio of loans and off-balance sheet credit commitments. Expected Default

Frequencies are calibrated to the internal rating model while Loan Loss Estimates are based on

past portfolio default experiences.

For retail credits, an in-house developed credit-scoring system to support the housing

applications is being used to complement the credit assessment process.

The Bank’s lending activities are guided by internal credit policies and guidelines that are

approved by the Board of Directors. Within these policies, single customer limits restrict total

exposure allowed to corporate groups according to their level of creditworthiness, while sector

limits ensure that the Bank’s total credit exposure to each economic sector is within prudent

thresholds.

Operational Risk Management

Operational risk is the potential loss from a breakdown in internal process, systems,

deficiencies in people and management or operational failure arising from external events. It is

increasingly recognised that operational risk is the single most widespread risk facing financial

institutions today.

Operational risk management is the discipline of systematically identifying the critical

potential points and causes of failure, assess the potential cost and to minimise the impact of

such risk through the initiation of risk mitigating measures and policies.

The Bank minimises operational risk by putting in place appropriate policies, internal

controls and procedures as well as maintaining back-up procedures for key activities and

undertaking contingency planning. These are supported by independent reviews by the Group

Internal Audit team.

Legal and Regulatory Risk

The Bank manages legal and regulatory risks to its business. Legal risk arises from the

potential that breaches of applicable laws and regulatory requirements, unenforceability of

contracts, lawsuits, or adverse judgement, may lead to the incurrence of losses, disrupt or

otherwise resulting in financial and reputational risk.

Legal risk is managed by internal legal counsel and where necessary, in consultation with

external legal counsel to ensure that legal risk is minimised.

Regulatory risk is managed through the implementation of measures and procedures

within the organisation to facilitate compliance with regulations. These include a compliance

monitoring and reporting process that requires identification of risk areas, prescription of

controls to minimise these risks, staff training and assessments, provision of advice and

dissemination of information.

Risk Management Policy on Financial Derivatives

Purpose of engaging in financial derivatives

Financial derivative instruments are contracts whose value is derived from one or more

underlying financial instruments or indices. They include swaps, forward rate agreements,

futures, options and combinations of these instruments. Derivatives are contracts that transfer

risks, mainly market risks. Financial derivatives is one of the financial instruments engaged by

F-353

the Bank both for revenue purposes as well as to manage the Bank’s own market risk exposure.

The Bank’s involvement in financial derivatives is currently focused on foreign exchange rate

derivatives.

The principal exchange rate contracts used are forward foreign exchange contracts.

Forward foreign exchange contracts are agreements to buy or sell a specified quantity of

foreign currency on a specified future date at an agreed rate.

For revenue purposes, the Bank maintains trading positions in these instruments and

engages in transactions with customers to satisfy their needs in managing their foreign

exchange rate exposures. Derivative transactions generate income for the Bank from the buy-

sell spreads. The Bank also takes conservative exposures, within acceptable limits, to carry an

inventory of these instruments in order to provide market liquidity and to earn potential gains

on fluctuations in the value of these instruments.

As part of the asset and liability exposure management, the Bank uses derivatives to

manage the Bank’s market risk exposure. As the value of these financial derivatives are

principally driven by foreign exchange rate factors, the Bank uses them to reduce the overall

foreign exchange rate exposures of the Bank. These are performed by entering into an exposure

in derivatives that produces opposite value movements vis-a-vis exposures generated by other

non-derivative activities of the Bank. The Bank manages these risks on a portfolio basis.

Hence, exposures on derivatives are aggregated or netted against similar exposures arising from

other financial instruments engaged by the Bank.

Fair value of financial derivatives

The estimated fair values of the Bank’s outstanding derivative financial instruments are as

below. These values are stand-alone without taking into account their potential offsetting

relationships with other non-derivatives exposures of the Bank.

2005 2004

Principal

Amount Fair Value

Principal

Amount Fair Value

RM’000 RM’000 RM’000 RM’000

Forward exchange contracts . . . . . . . 1,098,396 11,189 134,854 1,084

Risk associated with financial derivatives

As derivatives are contracts that transfer risks, they expose the holder to the same types

of market and credit risks as other financial instruments, and the Bank manages these risks in a

consistent manner under the overall risk management framework.

Market risk of derivatives used for trading purposes

Market risk arising from the above foreign exchange-related derivatives contracts

measures the potential losses to the value of these contracts due to changes in market rates/

prices. Exposure to market risk may be reduced through offsetting on and off-balance sheet

positions. As at 31 March 2005, the net open position of the Bank was RM25,847,000 (2004 :

RM4,446,000).

The use of these instruments to hedge underlying exposures arising from funding or for

fixed income instruments acquired for investment purposes are not included in the market risk

numbers above.

Credit risk of derivatives

Counterparty credit risk arises from the possibility that a counterparty may be unable to

meet the terms of the derivatives contract. Unlike conventional asset instruments, the Bank’s

financial loss is not the entire contracted principal value of the derivatives, but rather a fraction

F-354

equivalent to the cost to replace the defaulted contract with another in the market. The cost of

replacement is equivalent to the difference between the original value of the derivatives at time

of contract with the defaulted counterparty and the current fair value of a similar substitute at

current market prices. The Bank will only suffer a replacement cost if the contract carries a fair

value gain at time of default.

As at 31 March 2005, the amounts of counterparty credit risk, measured in terms of the

cost to replace the positive value contracts of the Bank, was RM11,189,000 (2004 :

RM1,084,000). This amount will increase or decrease over the life of the contracts, mainly

as a function of movement in market rates and time.

The Bank limits its credit risk within a conservative framework by dealing with

creditworthy counterparties, setting credit limits on exposures to counterparties, and obtaining

collateral where appropriate.

37. FAIR VALUES OF FINANCIAL INSTRUMENTS

Financial instruments are contracts that gives rise to both a financial asset of one enterprise

and a financial liability or equity instrument of another enterprise. The fair value of a financial

instrument is the amount at which the instrument could be exchanged or settled between

knowledgeable and willing parties in an arm’s length transaction, other than a forced or

liquidated sale. The information presented herein represents best estimates of fair values of

financial instruments 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 number of methodologies and assumptions regarding risk characteristics of various financial

instruments, discount rates, estimates of future cash flows and other factors. Changes in the

assumptions could materially affect these estimates and the corresponding fair values.

In addition, fair value information for non-financial assets and liabilities such as taxation are

excluded, as they do not fall within the scope of MASB 24, which requires the fair value

information to be disclosed.

The estimated fair values of the Bank’s financial instruments are as follows:

2005 2004

Carrying

Value Fair Value

Carrying

Value Fair Value

RM’000 RM’000 RM’000 RM’000

Financial Assets

Cash and short-term funds . . . . . . . . 2,223,797 2,223,797 1,710,302 1,710,302

Deposits and placements with financial

institutions . . . . . . . . . . . . . . . . 22,100 22,100 22,048 22,048

Dealing securities. . . . . . . . . . . . . . 196,672 196,672 233,183 233,183

Investment securities . . . . . . . . . . . . 983,998 993,297 1,135,398 1,098,988

Loans, advances and financing* . . . . . 8,484,963 8,484,963 7,321,560 7,344,246

Other financial assets . . . . . . . . . . . 158,419 158,419 59,446 59,446

12,069,949 12,079,248 10,481,937 10,468,213

Non-financial assets . . . . . . . . . . . . 509,362 509,362 465,783 465,783

TOTAL ASSETS . . . . . . . . . . . . . . 12,579,311 12,588,610 10,947,720 10,933,996

F-355

2005 2004

Carrying

Value Fair Value

Carrying

Value Fair Value

RM’000 RM’000 RM’000 RM’000

Financial Liabilities

Deposits from customers . . . . . . . . . 6,889,986 6,908,692 6,680,253 6,698,922

Deposits and placements of banks and

other financial institutions . . . . . . . 3,648,851 3,651,427 2,508,651 2,512,705

Securities sold under repurchase

agreements . . . . . . . . . . . . . . . . 70,736 70,736 4,722 4,722

Bills and acceptances payable . . . . . . 515,752 515,752 264,595 264,595

Amount due to Cagamas Berhad . . . . 197,927 197,746 238,149 237,895

Subordinated term loan . . . . . . . . . . 460,000 465,977 460,000 500,400

Other financial liabilities . . . . . . . . . 226,418 226,418 179,456 179,456

12,009,670 12,036,748 10,335,826 10,398,695

Non-Financial Liabilities

Other non-financial liabilities . . . . . . 12,713 12,713 2,312 2,312

Shareholder’s funds . . . . . . . . . . . . 556,928 556,928 609,582 609,582

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . . . 12,579,311 12,606,389 10,947,720 11,010,589

* The general allowance for the Bank amounting to RM127,287,000 (2004 : RM110,918,000) has been included under

non-financial assets.

The fair value of the other financial assets and other financial liabilities, which are considered

short term in nature, are estimated to be approximately their carrying value.

The fair value of derivative financial instruments are shown in Note 36.

The fair value of contingent liabilities and undrawn credit facilities are not readily

ascertainable. These financial instruments are presently not sold or traded. They generate fees that

are in line with market prices for similar arrangements. The estimated fair value may be represented

by the present value of the fees expected to be received, less associated costs and potential loss that

may arise should these commitments crystallise. The Bank assess that their respective fair values are

unlikely to be significant given that the overall level of fees involved is not significant and no

allowance is necessary to be made.

The following methods and assumptions were used to estimate the fair value of assets and

liabilities as at 31 March 2005 :

(a) Cash And Short-Term Funds

The carrying values are a reasonable estimate of the fair values because of negligible

credit risk, short-term nature or frequent repricing.

(b) Securities Purchased Under Repurchased Agreements And Deposits With Financial

Institutions

The fair values of securities purchased under repurchased agreements and deposits with

financial institutions with remaining maturities less than six months are estimated to

approximate their carrying values. For securities purchased under repurchased agreements

and deposits with financial institutions with maturities of more than six months, the fair value

are estimated based on discounted cash flows using the prevailing KLIBOR rates and interest

rate swap rates.

F-356

(c) Dealing And Investment Securities

The estimated fair value is based on quoted or observable market prices at the balance

sheet date. Where such quoted or observable market prices are not available, the fair value is

estimated using discounted cash flow or net tangible assets techniques. Where the discounted

cash flow technique is used, the estimated future cash flows are discounted using prevailing

KLIBOR rates and interest rate swap rates of similar instruments at the balance sheet date.

(d) Loans, Advances And Financing (‘‘Loans And Financing’’)

The fair value of variable rate loans and financing are estimated to approximate their

carrying values. For fixed rate loans and financing, the fair values are estimated based on

expected future cash flows of contractual instalment payments and discounted at prevailing

indicative rates adjusted for credit risk. In respect of non-performing loans and financing, the

fair values are deemed to approximate the carrying values, net of interest in suspense and

specific allowance for bad and doubtful debts and financing.

(e) Deposits From Customers, Deposits Of Banks And Other Financial Institutions And

Securities Sold Under Repurchase Agreements

The fair value of deposits liabilities payable on demand (‘‘current and savings deposits’’)

or with remaining maturities of less than six months are estimated to approximate their

carrying values at balance sheet date. The fair values of term deposits, negotiable instrument of

deposits and securities sold under repurchase agreements with remaining maturities of more

than six months are estimated based on discounted cash flows using KLIBOR rates and interest

rate swap rates.

(f) Bills And Acceptances Payables

The carrying values are a reasonable estimate of their fair values because of their short-

term nature.

(g) Amount Due To Cagamas Berhad

The fair values for amount due to Cagamas Berhad are determined based on discounted

cash flows of future instalment payments at prevailing rates quoted by Cagamas Berhad as at

balance sheet date.

(h) Subordinated Term Loans

The fair value of borrowings with remaining maturities of less than six months are

estimated to approximate their carrying values at balance sheet date. The fair value of

borrowings with remaining maturities of more than six months are estimated based on

discounted cash flows using market indicative rates of instruments with similar risk profile at

balance sheet date.

(i) Forward Exchange Contracts

The estimated fair value is based on the market price to enter into an offsetting contract

at balance sheet date.

As assumptions were made regarding risk characteristics of the various financial

instruments, discount rates, future expected loss experience and other factors, changes in the

uncertainties and assumptions could materially affect these estimates and the resulting value

estimates.

F-357

38. PRIOR YEAR ADJUSTMENTS

During the financial year, the Bank changed its accounting policy on the 3-month classification

for non-performing loans from the previous 6-month classification. The change in accounting

policies has been accounted for retrospectively and has the following impact on previous financial

year’s results and comparative figures as follows:

As previously

reported Adjustments As restated

RM’000 RM’000 RM’000

Balance Sheet

As at 31 March 2004

Non-performing loans . . . . . . . . . . . . . . . . . . . 1,698,397 927,919 2,626,316

Interest/income-in-suspense . . . . . . . . . . . . . . . . 222,768 10,678 233,446

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . 249,783 2,990 252,773

Accumulated losses at end of year . . . . . . . . . . . (532,583) (7,688) (540,271)

As at 31 March 2003

Non-performing loans . . . . . . . . . . . . . . . . . . . 1,723,395 165,063 1,888,458

Interest/income-in-suspense . . . . . . . . . . . . . . . . 246,463 3,286 249,749

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . 167,483 920 168,403

Accumulated losses at end of year . . . . . . . . . . . (360,352) (2,366) (362,718)

Income Statement

Financial year ended 31 March 2004

Interest/income suspended. . . . . . . . . . . . . . . . . 35,386 7,182 42,568

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,300 2,070 84,370

Loss after taxation . . . . . . . . . . . . . . . . . . . . . (172,231) (5,322) (177,553)

39. SIGNIFICANT AND SUBSEQUENT EVENTS

(a) During the financial year, the Bank increased its paid-up share capital from

RM708,593,750 to RM761,718,750 through the issuance of:

(i) 31,250,000 new ordinary shares of RM1.00 each by way of a renounceable rights

issue allotted to the Bank’s holding company, AMMB Holdings Berhad (‘‘AHB’’), on

the basis of 40 new ordinary shares for every 907 existing ordinary shares held, at

an issue price of RM1.60 per ordinary share for cash consideration of

RM50,000,000; and

(ii) 21,875,000 new ordinary shares of RM1.00 each by way of a non-renounceable

rights issue allotted to the Bank’s holding company, AHB, at an issue price of

RM1.60 per ordinary share for cash consideration of RM35,000,000.

The new ordinary shares issued rank pari passu with the then existing ordinary shares of

the Bank and the funds were used for capital purposes.

(b) Acquisition by the Bank of 14,062,000 ordinary shares of RM1.00 each representing

14.062% of the issued and paid-up share capital of a related company, AmAssurance

Berhad (‘‘AmAssurance’’) from ABH Holdings Sdn Bhd (‘‘ABH’’) for a cash

consideration of RM44,589,000.

ABH, a company in which Dato’ Azlan Hashim, a director of AMMB Holdings Berhad

(‘‘AHB’’), is a substantial shareholder, had a 34.06% interest in AmAssurance. Dato’ Azlan

Hashim is a brother of Tan Sri Dato’ Azman Hashim, a substantial shareholder of AHB.

F-358

(c) Subsequent to the balance sheet date, (‘‘AHB’’) proposed a rationalisation exercise which

involves the following proposals:

(i) Proposed Acquisition by the AMFB Holdings Berhad (‘‘AMFB’’)

The Proposed Acquisition by AMFB involves the acquisition by AMFB of the entire

equity interest in the Bank, comprising 761,718,750 ordinary shares, from AHB for a

purchase consideration based on the carrying value of AHB’s investment in the Bank as at

the date of completion of the Proposed Acquisition by AMFB. The Purchase

Consideration is proposed to be satisfied by the issuance of new shares in AMFB to

AHB at an issue price to be determined based on the unaudited net tangible assets

(‘‘NTA’’) per share of AMFB as at the completion date.

Upon completion of the Proposed Acquisition by AMFB, the Bank will become a

wholly-owned subsidiary of AMFB.

(ii) Proposed AmBank Acquisition by AmFinance

Upon completion of the Proposed Acquisition by AMFB, AmFinance proposes to

acquire the entire equity interest in the Bank comprising 761,718,750 shares from AMFB

for a purchase consideration based on the NTA of the Bank after adjusting for certain

non-transferable assets as at the date of completion of the Proposed AmBank Acquisition

by AmFinance. The Purchase Consideration is proposed to be satisfied by the issuance of

new shares in AmFinance to AMFB at an issue price to be determined based on the

unaudited NTA per Share of AmFinance as at the completion date.

(iii) Proposed Business Merger

Upon completion of the Proposed AmBank Acquisition by AmFinance, the finance

company business of AmFinance and the commercial banking business of the Bank will

be merged by way of a transfer of the Bank’s assets and liabilities (save for certain non-

transferable assets) to AmFinance via a vesting order under Section 50 of the Banking and

Financial Institutions Act, 1989.

The Proposed Business Merger is conditional on the completion of the Proposed AmBank

Acquisition by AmFinance which is in turn conditional upon completion of the Proposed

Acquisition by AMFB.

The Proposed Acquisition by AMFB, Proposed AmBank Acquisition By AmFinance and

Proposed Business Merger are subject to the approvals from Securities Commission (‘‘SC’’),

Minister of Finance, Bank Negara Malaysia (‘‘BNM’’) and other relevant authorities.

F-359

40. ISLAMIC BANKING OPERATIONS

The state of affairs as at 31 March 2005 (20 Safar 1426 Hijrah) and the results for the financial

year ended on that date under the Islamic Banking operations are summarised as follows:

2005 2004

Note RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . . . . . . . . . . . . . . (b) 201,883 88,079

Deposits and placements with financial institutions . . . . (c) 22,100 —

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . . (d) 49,009 48,420

Investment securities . . . . . . . . . . . . . . . . . . . . . . . (e) 319,549 399,531

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . (f) 912,559 765,946

Statutory deposit with Bank Negara Malaysia . . . . . . . 26,243 13,965

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . (g) 1,460 1,530

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . (r) 28,270 11,554

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 1,561,073 1,329,025

LIABILITIES AND ISLAMIC BANKING FUND

Deposits from customers . . . . . . . . . . . . . . . . . . . . (h) 303,684 328,320

Deposits and placements of banks and other financial

institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . (i) 1,108,020 767,990

Bills and acceptances payable . . . . . . . . . . . . . . . . . 43,454 151

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . (j) 40,267 143,930

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 1,495,425 1,240,391

Capital funds . . . . . . . . . . . . . . . . . . . . . . . . . . . (k) 75,000 55,000

Unappropriated profit . . . . . . . . . . . . . . . . . . . . . . (9,352) 33,634

Islamic Banking Fund . . . . . . . . . . . . . . . . . . . . . . 65,648 88,634

TOTAL LIABILITIES AND ISLAMIC BANKING

FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,561,073 1,329,025

COMMITMENTS AND CONTINGENCIES . . . . . . . . (s) 833,026 457,070

The accompanying Notes form an integral part of

the Islamic Banking operations Financial Statements.

F-360

Income Statement

For the financial year ended 31 March 2005 (20 Safar 1426 Hijrah)

2005 2004

Note RM’000 RM’000

Income derived from investment of depositors’ funds and

others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (l) 59,957 48,747

Allowance for losses on financing . . . . . . . . . . . . . . (m) (72,578) (31,001)

Writeback of/(allowance for) diminution in value of

investment securities . . . . . . . . . . . . . . . . . . . . . 703 (1,889)

Transfer to profit equalisation reserve . . . . . . . . . . . . (j) (10,401) (1,864)

Total attributable income . . . . . . . . . . . . . . . . . . . . (22,319) 13,993

Income attributable to the depositors . . . . . . . . . . . . . (n) (39,464) (33,285)

Loss attributable to the Bank . . . . . . . . . . . . . . . . . (61,783) (19,292)

Income derived from Islamic Banking Fund . . . . . . . . (o) 4,406 4,652

(57,377) (14,640)

Operating expenditure . . . . . . . . . . . . . . . . . . . . . . (p) (2,325) (8,539)

Loss before taxation . . . . . . . . . . . . . . . . . . . . . . . (59,702) (23,179)

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (q) 16,716 6,460

Net Loss after taxation . . . . . . . . . . . . . . . . . . . . . (42,986) (16,719)

The accompanying Notes form an integral part of

the Islamic Banking operations Financial Statements.

F-361

Statement of Changes in Islamic Banking Funds

For the financial year ended 31 March 2005 (20 Safar 1426 Hijrah)

Non-distributable Distributable

Capital Funds

Unappropriated

Profit Total

RM’000 RM’000 RM’000

Balance as at

1 April 2003

As previously reported . . . . . . . . . . . . . . . 20,000 50,553 70,553

Prior year adjustments . . . . . . . . . . . . . . . . — (200) (200)

As restated . . . . . . . . . . . . . . . . . . . . . . . 20,000 50,353 70,353

Funds allocated from Head Office . . . . . . . . 35,000 — 35,000

Loss for the year . . . . . . . . . . . . . . . . . . . — (16,719) (16,719)

Balance as at

31 March 2004 . . . . . . . . . . . . . . . . . . . . 55,000 33,634 88,634

Balance as at

1 April 2004

As previously reported . . . . . . . . . . . . . . . 55,000 33,984 88,984

Prior year adjustments . . . . . . . . . . . . . . . . — (350) (350)

As restated . . . . . . . . . . . . . . . . . . . . . . . 55,000 33,634 88,634

Funds allocated from Head Office . . . . . . . . 20,000 — 20,000

Loss for the year . . . . . . . . . . . . . . . . . . . — (42,986) (42,986)

Balance as at

31 March 2005 . . . . . . . . . . . . . . . . . . . . 75,000 (9,352) 65,648

The accompanying Notes form an integral part of

the Islamic Banking operations Financial Statements.

F-362

Cash Flow Statement

For the financial year ended 31 March 2005 (20 Safar 1426 Hijrah)

2005 2004

RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Loss before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (59,702) (23,179)

Adjustments for:

Income-in-suspense, net of recoveries . . . . . . . . . . . . . . . . 17,717 30,120

Financing loss and allowances, net of recoveries . . . . . . . . . 73,586 31,145

Transfer to profit equalisation reserve . . . . . . . . . . . . . . . . 10,401 1,864

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . (12,231) (6,711)

Loss on disposal of investment securities — net. . . . . . . . . . 304 2,982

(Write-back)/Allowance for diminution in value of investment

securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (703) 1,889

Operating Profit Before Working Capital Changes. . . . . . . . . . . 29,372 38,110

(Increase)/Decrease In Operating Assets:

Deposits and placements with financial institutions . . . . . . . . . . (22,100) —

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 (52,279)

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . (237,916) (152,124)

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 1,257

Statutory deposit with Bank Negara Malaysia . . . . . . . . . . . (12,278) 3,595

Increase/(Decrease) In Operating Liabilities:

Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . . (24,636) 7,804

Deposits and placements of banks and other financial institutions 340,030 190,136

Securities sold under repurchase agreements . . . . . . . . . . . . —

Bills and acceptances payable . . . . . . . . . . . . . . . . . . . . . 43,303 60

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (114,064) 122,938

Net Cash Generated From Operating Activities . . . . . . . . . . . . 1,875 159,497

CASH FLOWS FROM INVESTING ACTIVITIES

Sale/(Purchase) of investment securities — net . . . . . . . . . . . . 91,929 (219,525)

Net Cash Generated From/(Used In) Investing Activities. . . . . . . 91,929 (219,525)

CASH FLOW FROM FINANCING ACTIVITY

Funds allotted from head office . . . . . . . . . . . . . . . . . . . . . . 20,000 35,000

Net Cash Generated From Financing Activity . . . . . . . . . . . . . 20,000 35,000

Net Increase/(Decrease) In Cash and Cash Equivalents . . . . . . . . 113,804 (25,028)

Cash and Cash Equivalents At Beginning Of Year . . . . . . . . . . 88,079 113,107

Cash and Cash Equivalents At End Of Year . . . . . . . . . . . . . . 201,883 88,079

Note:

Cash and cash equivalents consist of cash and short-term funds as shown in Note (b) to the Financial Statements.

F-363

NOTES TO THE ISLAMIC BANKING OPERATIONS FINANCIAL STATEMENTS

31 March 2005

(a) Islamic banking operations

Disclosure of Shariah Advisor

The Bank’s Islamic banking activities are subject to conformity with Shariah requirements and confirmation by

the Shariah Advisors, Dato’ Hj Md. Hashim bin Yahaya, Yang Amat Arif Dato’ Sheikh Ghazali bin Hj Abdul Rahman

and Associate Professor Dr Mohd Daud Bakar.

The role and authority of the Shariah Advisor is to advise and provide guidance on all matters with respect to

compliance with Shariah principles including product development, business, marketing and operational implementation

activities.

Zakat Obligations

The Bank does not pay zakat on behalf of the shareholders or depositors.

(b) Cash and short-term funds

2005 2004

RM’000 RM’000

Cash and balances with banks and other financial institutions . . . . . . . . . . 8,983 8,679

Money at call and deposit placements maturing within one month . . . . . . . . 192,900 79,400

201,883 88,079

(c) Deposits and placements with financial institutions

2005 2004

RM’000 RM’000

Bank Negara Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,100 —

(d) Dealing securities

2005 2004

RM’000 RM’000

Unquoted Securities In Malaysia

— Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,290 51,290

Allowance for diminution in value of investments . . . . . . . . . . . . . . . . . . (2,281) (2,870)

49,009 48,420

F-364

(e) Investment securities

2005 2004

RM’000 RM’000

Money Market Securities

Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,648 82,491

Malaysian Government Investment Certificates . . . . . . . . . . . . . . . . . . 45,011 45,163

Negotiable Islamic debt certificates . . . . . . . . . . . . . . . . . . . . . . . . . 224,005 237,658

Bankers’ acceptances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4,472

295,664 369,784

Unquoted Debt Equity Conversion In Malaysia Shares . . . . . . . . . . . . . . . 10,381 10,494

Unquoted Private Debt Securities In Malaysia Corporate bonds. . . . . . . . . . 21,031 21,031

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327,076 401,309

Less:

Allowance for diminution in value of investments . . . . . . . . . . . . . . . . . . (10,381) (10,494)

Accretion of discount less amortisation of premium. . . . . . . . . . . . . . . . . 2,854 8,716

Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319,549 399,531

Market value:

Money Market Securities

Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,786 87,231

Malaysian Government Investment Certificates . . . . . . . . . . . . . . . . . . 46,561 49,729

Negotiable Islamic debt certificates . . . . . . . . . . . . . . . . . . . . . . . . . 235,000 255,000

The maturity structure of money market securities held for investment are as follows:

Maturing within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,726 135,331

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,938 234,453

295,664 369,784

F-365

(f) Financing activities

2005 2004

RM’000 RM’000

Term financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 563,067 628,391

House financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176,436 151,510

Credit cards receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212,024 74,752

Bills financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,023 39,383

Trust receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,629 1,646

Gross financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,129,179 895,682

Islamic financing sold to Cagamas Berhad with recourse . . . . . . . . . . . . . (3,293) (3,508)

1,125,886 892,174

Allowances for bad and doubtful financing:

— Specific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (90,343) (21,556)

— General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,947) (11,804)

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (109,037) (92,868)

912,559 765,946

(i) Financing analysed by concepts are as follows:

Al-Bai’ Bithaman Ajil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555,736 577,069

Al-Musyarakah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,569 173,200

Al Bai’ In’nah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211,899 73,533

Al-Murabahah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,849 67,251

Al-Istina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,833 1,121

1,125,886 892,174

(ii) The maturity structure of financing is as follows:

Maturing within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 857,203 611,662

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,130 87,216

Three years to five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,846 17,840

Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186,707 175,456

1,125,886 892,174

(iii) Financing analysed by their economic purposes are as follows:

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,318 126,861

Mining and quarrying . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 825 765

Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,568 18,895

Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,409 17,824

Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,649 147,314

Purchase of landed property:

Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176,262 147,794

Non-residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,005 44,013

General commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,327 23,737

Transport, storage and communication . . . . . . . . . . . . . . . . . . . . . 21,288 14,095

Finance, insurance and business services . . . . . . . . . . . . . . . . . . . 259,754 249,674

Purchase of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,745 8,021

Consumption credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212,024 74,752

Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,005 21,937

1,129,179 895,682

Islamic financing sold to Cagamas Berhad with recourse . . . . . . . . . (3,293) (3,508)

1,125,886 892,174

F-366

2005 2004

RM’000 RM’000

(iv) Gross financing analysed by type of customers are as follows:

Domestic non-bank financial institutions . . . . . . . . . . . . . . . . . . . . 261 273

Domestic business enterprises

— Small medium enterprises . . . . . . . . . . . . . . . . . . . . . . . . . 405,969 351,156

— Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,985 283,209

Local government and statutory authorities . . . . . . . . . . . . . . . . . . 21,197 21,207

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397,300 236,150

Foreign entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174 179

1,125,886 892,174

(v) Movements in non-performing financing (including income receivables)

are as follows:

Gross

At 1 April, as previously reported . . . . . . . . . . . . . . . . . . . . . 185,010 186,247

Prior year adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394,825 13,253

As restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579,835 199,500

Non-performing during the year . . . . . . . . . . . . . . . . . . . . . . . 70,232 432,999

Reclassification to performing financing . . . . . . . . . . . . . . . . . . (382,615) (29,980)

Amount recovered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,332) (9,074)

Amount written off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,946) (13,610)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258,174 579,835

Less:

Specific allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (90,343) (21,556)

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (109,037) (92,868)

(199,380) (114,424)

Non-performing financing (net) . . . . . . . . . . . . . . . . . . . . . . . 58,794 465,411

Ratio of net non-performing financing . . . . . . . . . . . . . . . . . . . 6.32% 59.57%

(vi) Movements in the allowance for bad and doubtful financing and income-

in-suspense accounts are as follows:

General Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . 11,804 10,411

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . . . . 2,143 1,393

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,947 11,804

% of total financing less specific allowance and income-in-suspense . . 1.50% 1.51%

F-367

2005 2004

RM’000 RM’000

Specific Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . 21,556 5,072

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . . . . 75,557 34,517

Amount written back in respect of recoveries . . . . . . . . . . . . . . . . (4,114) (4,765)

Net charge to income statement . . . . . . . . . . . . . . . . . . . . . . . . . 71,443 29,752

Reclassification from conventional . . . . . . . . . . . . . . . . . . . . . . . 29 (1)

Amount written off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,685) (13,267)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,343 21,556

Income-in-suspense

At 1 April, as previously reported . . . . . . . . . . . . . . . . . . . . . . . 92,380 62,813

Prior year adjustments (Note x) . . . . . . . . . . . . . . . . . . . . . . . . . 488 278

As restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,868 63,091

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . . . . 19,936 34,430

Amount written back in respect of recoveries . . . . . . . . . . . . . . . . (2,219) (4,310)

Net charge to income statement . . . . . . . . . . . . . . . . . . . . . . . . . 17,717 30,120

Reclassification to conventional . . . . . . . . . . . . . . . . . . . . . . . . . (1,287) —

Amount written off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (261) (343)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,037 92,868

(g) Other assets

Other assets are represented by other receivables, deposits and prepayments.

(h) Deposits from customers

2005 2004

RM’000 RM’000

Mudharabah Fund

General Investment deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157,968 229,185

Non-Mudharabah Fund

Current accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,869 70,395

Saving deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,847 28,740

303,684 328,320

The maturity structure of deposits is as follows:

Due within six months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271,959 283,728

Six months to one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,217 44,196

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 508 375

Three to five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 21

303,684 328,320

The deposits are sourced from the following customers:

Government and statutory bodies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,980 84,795

Business enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,281 178,001

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,746 64,165

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,677 1,359

303,684 328,320

F-368

(i) Deposits and placements of banks and other financial institutions

2005 2004

RM’000 RM’000

Mudharabah Fund

Other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,930 1,203

Non-Mudharabah Fund

Licensed banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460,200 388,274

Licensed finance companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,990 20,130

Licensed merchant banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,759 146,439

Other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522,141 211,944

1,108,020 767,990

(j) Other liabilities

2005 2004

RM’000 RM’000

Amount owing to Head Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,300 135,740

Dividends payable to depositors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,556 3,374

Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,698 2,504

Profit equalisation reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,713 2,312

40,267 143,930

The movements in profit equalisation reserve are as follows:

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,312 448

Amount arising during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,401 1,864

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,713 2,312

(k) Capital funds

2005 2004

RM’000 RM’000

Allocated:

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000 20,000

Increase during the year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 70,000

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000 90,000

Utilised:

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,000 20,000

Increase during the year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 35,000

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000 55,000

(l) Income derived from investment of depositors’ funds and others

2005 2004

RM’000 RM’000

Income derived from investment of:

(i) General investment deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,177 15,789

(ii) Other funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,780 32,958

59,957 48,747

F-369

(i) Income derived from investment of general investment deposits

2005 2004

RM’000 RM’000

Finance income and hibah:

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,494 9,618

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,043 2,298

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 291

Money at call and deposits with financial institutions . . . . . . . . . 384 615

7,116 12,822

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (708) (200)

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,054 1,440

8,462 14,062

Other dealing income:

Net gain from sale of dealing securities . . . . . . . . . . . . . . . . . . 3 212

Other operating income:

Net gain from sale of investment securities . . . . . . . . . . . . . . . . 48 428

Fee and commission income:

Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 99

Other fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,586 988

1,664 1,087

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,177 15,789

(ii) Income derived from investment of other funds

2005 2004

RM’000 RM’000

Finance income and hibah:

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,110 41,673

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,716 7,625

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 882 965

Money at call and deposits with financial institutions . . . . . . . . . 1,735 2,041

49,443 52,304

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,703) (29,851)

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,288 4,776

42,028 27,229

Other dealing income:

Net gain from sale of dealing securities . . . . . . . . . . . . . . . . . . 15 704

Other operating income:

Net gain from sale of investment securities . . . . . . . . . . . . . . . . 216 1,418

Fee and commission income:

Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354 327

Other fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,167 3,280

7,521 3,607

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,780 32,958

F-370

(m) Allowances for losses on financing

2005 2004

RM’000 RM’000

Allowance for bad and doubtful financing:

Specific allowance

— made in the financial year . . . . . . . . . . . . . . . . . . . . . . . . . . 75,557 34,517

— written back . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,114) (4,765)

General allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,143 1,393

Bad debts and financing recovered . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,008) (144)

72,578 31,001

(n) Income attributable to depositors

2005 2004

RM’000 RM’000

Mudharabah fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,929 5,584

Non-Mudharabah fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,535 27,701

39,464 33,285

(o) Income derived from Islamic banking funds

2005 2004

RM’000 RM’000

Finance income and hibah:

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,379 3,309

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452 —

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 100

Money at call and deposits with financial institutions . . . . . . . . . . . . . 166 212

3,081 3,621

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (306) (69)

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 889 495

3,664 4,047

Other dealing income:

Net gain from sale of dealing securities . . . . . . . . . . . . . . . . . . . . . . 1 73

Other operating income:

Net gain from sale of investment securities . . . . . . . . . . . . . . . . . . . . 21 147

Fee and commission income:

Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 34

Other fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 686 351

720 385

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,406 4,652

F-371

(p) Operating expenditure

2005 2004

RM’000 RM’000

Personnel/Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4,003

Establishment costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 1,641

Marketing and communication expenses . . . . . . . . . . . . . . . . . . . . . . . . 2,125 1,742

Administration and general expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 173 1,153

2,325 8,539

(q) Taxation

2005 2004

RM’000 RM’000

Estimated current tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (2,101)

Transfer from deferred tax assets (Note r) . . . . . . . . . . . . . . . . . . . . . . 16,716 8,561

16,716 6,460

(r) Deferred taxation

2005 2004

RM’000 RM’000

Balance at beginning of year

As previously reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,416 2,915

Prior year adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 78

As restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,554 2,993

Transfer to income statement (Note q) . . . . . . . . . . . . . . . . . . . . . . . . . 16,716 8,561

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,270 11,554

The deferred tax credits/(debits) are in respect of the following:

Unabsorbed tax losses

As previously reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 6,162

Prior year adjustments (Note x) . . . . . . . . . . . . . . . . . . . . . . . . . . . — 138

As restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 6,300

Current year unabsorbed tax losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,059 —

Temporary differences arising from general allowance for financing. . . . . . . 3,905 3,305

Allowance for diminution in value of investments . . . . . . . . . . . . . . . . . . 3,545 3,742

Profit equalization reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,560 648

Accretion of discount on investments . . . . . . . . . . . . . . . . . . . . . . . . . (799) (2,441)

28,270 11,554

F-372

(s) Commitments and contingencies

In the normal course of business, the Bank makes various commitments and incurs certain contingent liabilities with

legal recourse to its customers. No material losses are anticipated as a result of these transactions. The commitments and

contingencies are not secured against the Bank’s assets.

Risk weighted exposures of the Bank are as follows:

2005 2004

Principal

Amount

Credit

Equivalent

Amount*

Risk

Weighted

Amount

Principal

Amount

Credit

Equivalent

Amount*

Risk

Weighted

Amount

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Islamic underwriting facilities . . . . . . 120,000 60,000 60,000 95,000 47,500 47,500

Irrevocable commitments to extend

credit:

maturing less than one year . . . . . . . 602,386 — — 250,805 — —

maturing more than one year. . . . . . . 24,225 12,113 12,113 57,497 28,749 28,749

Al-Kafalah guarantees . . . . . . . . . . . 41,191 41,191 35,278 22,925 22,925 22,925

Transaction-related contingent items . . 22,227 11,113 11,113 20,399 10,200 10,200

Islamic financing sold to Cagamas

Berhad with recourse . . . . . . . . . . 3,293 3,293 1,646 3,508 3,508 1,754

Short-term self liquidating trade-related

contingencies . . . . . . . . . . . . . . . 19,660 3,932 3,828 6,936 1,387 1,387

Others. . . . . . . . . . . . . . . . . . . . . 44 — — — — —

Total . . . . . . . . . . . . . . . . . . . . . 833,026 131,642 123,978 457,070 114,269 112,515

The credit equivalent amount is arrived at using the credit conversion factor as per Bank Negara Malaysia Guidelines.

The Bank is contingently liable in respect of financing sold to Cagamas Berhad on the condition that the Bank

undertakes to administer the financing on behalf of Cagamas Berhad and to buy back any financing which are regarded as

defective based on prudent criteria.

F-373

(t) Yield/profit rate risk

The following table shows the profit rate sensitivity gap, by time bands, on which profit rates of instruments are next

repriced on a contractual basis or, if earlier, the dates on which the instruments mature.

2005

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

yield/

profit rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term

funds. . . . . . . . . . 196,157 — — — — — 5,726 201,883 1.7

Deposits and placements

with financial

institutions . . . . . . — 22,100 — — — — — 22,100 1.7

Dealing securities. . . . — — — — 43,031 5,978 — 49,009 6.0

Investment securities . . — — — 121,405 196,775 1,369 — 319,549 3.6

Financing activities

— Performing . . . . . 339,383 114,349 35,370 193 219,123 159,294 — 868,738 6.2

— Non-performing* . — — — — — — 44,847 43,821

Other non-interest

sensitive balances . . — — — — — — 55,973 55,973

TOTAL ASSETS . . . . 535,540 136,449 35,370 121,598 458,929 166,641 105,546 1,561,073

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers 111,742 41,141 15,208 31,217 508 — 103,868 303,684 2.4

Deposits and placements

of banks and other

financial institutions 201,338 652,073 123,950 92,852 26,628 — 11,179 1,108,020 3.1

Bills and acceptances

payables . . . . . . . . 6,813 15,013 21,628 — — — — 43,454

Other non-interest

sensitive balances . . — — — — — — 40,267 40,267

Total Liabilities . . . . . 319,893 708,227 160,786 124,069 27,136 — 155,314 1,495,425

Shareholder’s funds . . — — — — — — 65,648 65,648

TOTAL LIABILITIES

AND

SHAREHOLDER’S

FUNDS . . . . . . . . 319,893 708,227 160,786 124,069 27,136 — 220,962 1,561,073

On-balance sheet interest

sensitivity gap . . . . 215,647 (571,778) (125,416) (2,471) 431,793 167,667 (115,442) —

Off-balance sheet

interest sensitivity

gap . . . . . . . . . . . — — — — — — — —

Total interest sensitivity

gap . . . . . . . . . . . 215,647 (571,778) (125,416) (2,471) 431,793 167,667 (115,442) —

This is arrived at after deducting the general allowance, specific allowance and income-in-suspense from gross non-

performing loans outstanding.

F-374

2004

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

yield/

profit rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term

funds. . . . . . . . . . 81,748 — — — — — 6,331 88,079 2.5

Dealing securities. . . . — — — — 15,977 32,443 — 48,420 6.7

Investment securities . . 14,474 69,543 58,081 — 255,659 1,774 — 399,531 3.5

Financing activities

— Performing . . . . . 38,598 4,238 4,236 140,351 55,757 69,159 — 312,339 5.4

— Non-performing* . — — — — — — 453,607 453,607

Other non-interest

sensitive balances . . — — — — — — 27,049 27,049

TOTAL ASSETS . . . . 134,820 73,781 62,317 140,351 327,393 103,376 486,987 1,329,025

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers 154,590 41,015 17,728 44,196 396 — 70,395 328,320 2.2

Deposits and placements

of banks and other

financial institutions 629 131,781 49,317 437,217 131,662 16,455 929 767,990 3.8

Bills and acceptances

payables . . . . . . . . — — 151 — — — — 151

Other non-interest

sensitive balances . . — — — — — — 143,930 143,930

Total Liabilities . . . . . 155,219 172,796 67,196 481,413 132,058 16,455 215,254 1,240,391

Shareholder’s funds . . — — — — — — 88,634 88,634

TOTAL LIABILITIES

AND

SHAREHOLDER’S

FUNDS . . . . . . . . 155,219 172,796 67,196 481,413 132,058 16,455 303,888 1,329,025

On-balance sheet interest

sensitivity gap . . . . (20,399) (99,015) (4,879) (341,062) 195,335 86,921 183,099 —

Off-balance sheet

interest sensitivity

gap . . . . . . . . . . . — — — — — — — —

Total interest sensitivity

gap . . . . . . . . . . . (20,399) (99,015) (4,879) (341,062) 195,335 86,921 183,099 —

This is arrived at after deducting the general allowance, specific allowance and income-in-suspense from gross non-

performing loans outstanding.

F-375

(u) Fair value of Islamic banking operations financial instruments

The estimated fair values of the Bank’s Islamic Banking operations financial instruments are as follows:

2005 2004

Carrying Value Fair Value Carrying Value Fair Value

RM’000 RM’000 RM’000 RM’000

Financial Assets

Cash and short-term funds . . . . . . . 201,883 201,883 88,079 88,079

Deposits and placements with financial

institutions . . . . . . . . . . . . . . . 22,100 22,100

Dealing securities. . . . . . . . . . . . . 49,009 49,009 48,420 48,420

Investment securities . . . . . . . . . . . 319,549 321,084 399,531 401,791

Financing activities* . . . . . . . . . . . 926,506 926,506 777,750 783,182

Other financial assets . . . . . . . . . . 1,460 1,460 1,530 1,530

1,520,507 1,522,042 1,315,310 1,234,923

Non-financial assets . . . . . . . . . . . 40,566 40,566 13,715 13,715

TOTAL ASSETS . . . . . . . . . . . . . 1,561,073 1,562,608 1,329,025 1,248,638

Financial Liabilities

Deposits from customers . . . . . . . . 303,684 304,288 328,320 328,620

Deposits and placements of banks and

other financial institutions . . . . . . 1,108,020 1,109,682 767,990 774,861

Bills and acceptances payable . . . . . 43,454 43,454 151 151

Other financial liabilities . . . . . . . . 27,554 27,554 141,618 141,618

1,482,712 1,484,978 1,238,079 1,245,250

Non-Financial Liabilities

Other non-financial liabilities . . . . . 12,713 12,713 2,312 2,312

Shareholder’s funds . . . . . . . . . . . 65,648 65,648 88,634 88,634

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . . 1,561,073 1,563,339 1,329,025 1,336,196

The general provision for the Islamic Banking operations amounting to RM13,947,000 (2004 : RM11,804,000) has been

included under non-financial assets.

(v) Net income from Islamic banking business

For consolidation with the conventional operations, net income from Islamic Banking Business comprises the following

items:

2005 2004

RM’000 RM’000

Income derived from investment of depositors’ fund . . . . . . . . . . . . . . . . 59,957 48,747

Less: Income attributable to depositors . . . . . . . . . . . . . . . . . . . . . . . . (39,464) (33,285)

Income attributable to the Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,493 15,462

Income derived from Islamic Banking Funds . . . . . . . . . . . . . . . . . . . . . 4,406 4,652

24,899 20,114

F-376

(w) Capital adequacy ratio

The capital adequacy ratio of the Islamic Banking Scheme of the Bank as at 31 March 2005 is analysed as follows:

2005 2004

RM’000 RM’000

Tier 1 capital

Islamic Banking Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000 55,000

Unappropriated profits* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (37,622) 22,568

Total tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,378 77,568

Tier 2 capital

General allowance for bad and doubtful debts . . . . . . . . . . . . . . . . . . . . 13,947 11,804

Total tier 2 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,947 11,804

Capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,325 89,372

Amount as at 31 March 2005 excludes deferred tax assets recognised to-date.

2005 2004

Principal Risk-Weighted Principal Risk-Weighted

RM’000 RM’000 RM’000 RM’000

Notional risk-weighted assets:

Categories

0%. . . . . . . . . . . . . . . . . . . . . . 347,835 — 220,718 —

10% . . . . . . . . . . . . . . . . . . . . . — — — —

20% . . . . . . . . . . . . . . . . . . . . . 227,800 45,560 263,744 52,749

50% . . . . . . . . . . . . . . . . . . . . . 139,474 69,737 149,916 74,959

100% . . . . . . . . . . . . . . . . . . . . 967,101 967,101 810,153 810,153

1,682,210 1,082,398 1,444,531 937,861

Capital Ratios:

Core capital ratio . . . . . . . . . . . . . 3.45% 8.27%

Risk-weighted capital ratio . . . . . . . 4.74% 9.53%

The capital adequacy ratios of the Bank’s Islamic operations as at 31 March 2005 are below the minimum requirements

as stipulated by Bank Negara Malaysia. However in view of the proposed business merger between AmFinance Berhad and the

Bank as outlined under note 39, the capital adequacy ratios of the combined Islamic operations exceeds BNM’s capital

adequacy requirements.

The comparative ratios are not adjusted for the prior year adjustment.

F-377

(x) Prior year adjustments

As explained in Note 38 above, certain comparative figures have been adjusted as a result of the change in accounting

policy in respect of the 3-month classification for non-performing loans from the previous 6-month classification.

As previously

reported Adjustments As restated

RM’000 RM’000 RM’000

Balance Sheet

As at 31 March 2004

Non-performing loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185,010 394,825 579,835

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,380 488 92,868

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,416 138 11,554

Unappropriated profit at end of year . . . . . . . . . . . . . . . . . . . 33,984 (350) 33,634

As at 31 March 2003

Non-performing loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186,247 13,253 199,500

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,813 278 63,091

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,915 78 2,993

Unappropriated profit at end of year . . . . . . . . . . . . . . . . . . . 50,553 (200) 50,353

Income Statement

Financial year ended 31 March 2004

Income suspended . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,910 210 30,120

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,400 60 6,460

Loss after taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,569) (150) (16,719)

41. GENERAL INFORMATION

The Bank is a public limited liability company incorporated and domiciled in Malaysia. The

principal place of business is located at Level 18, Menara Dion, Jalan Sultan Ismail, 50250 Kuala

Lumpur.

42. COMPARATIVES

The comparative figures have been audited by a firm of chartered accountants other than Ernst

& Young.

F-378

AmBank Berhad

(Incorporated in Malaysia)

AUDITED FINANCIAL STATEMENTS

For the financial year ended 31 March 2005

STATEMENT BY DIRECTORS

The directors of AmBank Berhad, state that, in their opinion, the accompanying financial

statements as set out on pages F-315 to F-378 are drawn up in accordance with the provisions of the

Companies Act, 1965 and the applicable MASB Approved Accounting Standards in Malaysia so as

to give a true and fair view of the financial position of the Bank as at 31 March 2005 and of the

results and the cash flows of the Bank for the year ended on that date.

Signed on behalf of the Board

in accordance with a resolution of the Directors,

TAN SRI DATO’ AZMAN HASHIM

ChairmanDATO’ JAMES LIM CHENG POH

Managing Director

Kuala Lumpur,

16 May 2005

STATUTORY DECLARATION

I, LIM HOCK AUN, being the Officer primarily responsible for the financial management of

AmBank Berhad, do solemnly and sincerely declare that the accompanying financial statements as

set out on pages F-315 to F-378 are, in my opinion, 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

abovenamed LIM HOCK AUN at KUALA

LUMPUR this 16 day of May, 2005.

Before me,

COMMISSIONER FOR OATHS

F-379

AmBANK BERHAD

DIRECTORS’ AND AUDITORS’

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2004

AmBank Berhad

(Incorporated in Malaysia)

DIRECTORS’ REPORT

The directors have pleasure in presenting their report together with the audited financial

statements of AmBank Berhad for the financial year ended 31 March 2004 which have been

prepared in accordance with the provisions of the Companies Act, 1965, the Banking and Financial

Institutions Act, 1989 and the applicable approved accounting standards in Malaysia.

PRINCIPAL ACTIVITIES

The Bank is principally engaged in the business of commercial banking and other related

financial services which includes the provision of Islamic banking services.

There has been no significant change in the nature of the principal activities of the Bank during

the financial year.

FINANCIAL RESULTS

The results of operations of the Bank for the financial year are as follows:

RM’000

Loss before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (254,531)

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,300

Loss after taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (172,231)

Transfer to statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Net loss for the year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (172,231)

BUSINESS PLAN AND STRATEGY FOR CURRENT FINANCIAL YEAR

The Bank’s corporate plan and strategy were formulated in line with AmBank Group’s

objective to remain a significant player in the financial services industry in the rapidly changing

financial landscape. The Bank focused on rebuilding its balance sheet and on the merger of its

business and operations with AmFinance Berhad (‘‘AmFinance’’), the AmBank Group’s finance

company, in preparation for the proposed legal merger between the Bank and AmFinance. To this

end, the Bank has rolled out 40 commercial banking windows at AmFinance premises with another

28 targeted for roll-out by mid 2004.

The Bank’s Strategic Business Directions are:

i. To consolidate the Bank’s position as a premier commercial bank in Malaysia;

ii. To develop a customer focused sales and service oriented culture, increase market share

in core products and deepen customer relationship;

iii. To be effective in recoveries and asset management by instituting proactive management

and recovery efforts

iv. To improve asset quality through continuous improvement in credit risk management

capabilities and implementation.

v. To focus on reorganising its delivery channels and developing new products and services;

and

F-380

vi. To continue to invest in human resources and technology to improve customer service and

operational efficiency and cost controls to improve its earning capacity.

OUTLOOK FOR NEXT FINANCIAL YEAR

The global economic outlook for 2004 is increasingly positive, with a strong economic upturn

witnessed in the second half of 2003. The Malaysian economy expanded by 5.2% in 2003, exceeding

earlier projections, despite the dampening effect of the Severe Acute Respiratory Syndrome (SARS)

and geopolitical concerns in the earlier half of the year.

Growth momentum is expected to pick up in 2004 as a result of rebounding corporate

investments, sustained consumption, improving external trade and accommodative fiscal and

monetary policies by Bank Negara Malaysia (‘‘BNM’’). The positive outlook for year 2004 has

led to the upward revision of GDP growth forecast of 5.5% to 6.0% by BNM. In addition to an

already improving economy, the resounding endorsement of the ruling coalition in the election in

March 2004 removed any uncertainty in the Malaysian political climate.

The banking sector, which remained resilient and well capitalised in 2003, is expected to

strengthen further in year 2004. Strong growth in consumer financing is expected to continue with

corporate lending picking up significantly compared with year 2003.

SIGNIFICANT EVENTS

(i) On 10 May 2003, the ultimate holding company, AMMB Holdings Berhad (‘‘AHB’’) received

the approval of Bank Negara Malaysia (‘‘BNM’’) for AHB to commence negotiations with EON

Capital Berhad for a possible merger between the two banking groups. However, the discussion

was mutually terminated on 25 June 2003.

(ii) On 9 July 2003, AHB obtained the consent of BNM to commence discussion with Commerce

Asset-Holding Berhad for the possible merger of the Bank with Bumiputra-Commerce Bank

Berhad and AmFinance Berhad with Bumiputra-Commerce Finance Berhad. Subsequently on 5

September 2003, the negotiations were mutually terminated.

(iii) On 6 January 2004, the Bank increased its paid-up share capital from RM505,468,750 to

RM708,593,750 through the issuance of 203,125,000 new ordinary shares of RM1.00 each by

way of a renounceable rights issue allotted to the Bank’s holding company, AMMB Holdings

Berhad (‘‘AHB’’), on the basis of 520 new ordinary shares for every 1,294 existing ordinary

shares held, at an issue price of RM1.60 per ordinary share.

ITEMS OF AN UNUSUAL NATURE

In the opinion of the directors, the results of operations of the Bank for the financial year have

not been substantially affected by any item, transaction or event of a material and unusual nature

other than the change in accounting policy as disclosed in Note 40 in the financial statements.

There has not arisen in the interval between the end of the financial year and the date of this

report any item, transaction or event of a material and unusual nature likely, in the opinion of the

directors, to affect substantially the results of operations of the Bank for the current financial year in

which this report is made.

DIVIDENDS

No dividend has been paid or declared by the Bank since the end of the previous financial year.

The directors do not recommend the payment of any dividend in respect of the current financial

year.

RESERVES AND ALLOWANCES

There were no material transfers to or from reserves or allowances during the financial year

other than those disclosed in the financial statements.

F-381

BAD AND DOUBTFUL DEBTS AND FINANCING

Before the income statement and balance sheet of the Bank were made out, the directors took

reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts

and financing and the making of allowances for doubtful debts and financing and have satisfied

themselves that all known bad debts and financing had been written off and adequate allowance had

been made for doubtful debts and financing.

At the date of this report, the directors are not aware of any circumstances that would render

the amount written off for bad debts and financing or the amount of allowance for doubtful debts

and financing in the Bank inadequate to any substantial extent.

CURRENT ASSETS

Before the income statement and balance sheet of the Bank were made out, the directors took

reasonable steps to ascertain that any current assets, other than debts and financing, which were

unlikely to be realised in the ordinary course of business, their values as shown in the accounting

records of the Bank, have been written down to their estimated realisable values.

At the date of this report, the directors are not aware of any circumstances which would render

the values attributed to the current assets in the financial statements of the Bank 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 methods of valuation of assets or liabilities in the Bank’s

financial statements 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 Bank which has arisen since the end of the financial year

and which secures the liabilities of any other person; or

(b) any contingent liability in respect of the Bank that has arisen since the end of the

financial year, other than those incurred in the normal course of business

No contingent or other liability of the Bank has become enforceable, or is likely to become

enforceable within the period of twelve months after the end of the financial year which, in the

opinion of the directors, will or may substantially affect the ability of the Bank to meet its

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 Bank, that would render any amount stated in

the financial statements misleading.

SHARE OPTIONS

No options have been granted by the Bank to any parties during the financial year to take up

unissued shares of the Bank.

No shares have been issued during the financial year by virtue of the exercise of any option to

take up unissued shares of the Bank. As at the end of the financial year, there were no unissued

shares of the Bank under options.

F-382

DIRECTORS

The directors who served on the Board since the date of the last report are:

Tan Sri Dato’ Azman Hashim

Prof. Tan Sri Dato’ Dr. Mohd Rashdan bin Haji Baba

Tan Sri Datuk Clifford Francis Herbert (appointed on 16 April 2004)

Tan Kheng Soon

Cheah Tek Kuang

Mohamed Azmi Mahmood

Dato’ Azlan Hashim (resigned on 19 December 2003)

Dato’ Mohd Tahir Haji Abdul Rahim (resigned on 19 December 2003)

Kung Beng Hong (resigned on 1 December 2003)

Mohamed Sultan Haji Sickander (resigned on 2 October 2003)

Dr. Raja Lope Raja Shahrome (resigned on 1 October 2003)

Dato’ Hashim Saad (resigned on 1 October 2003)

In accordance with Article 87 of the Bank’s Articles of Association, Tan Sri Dato’ Azman

Hashim retires at the forthcoming Annual General Meeting and, being eligible, offers himself for re-

election.

In accordance with Article 95 of the Bank’s Articles of Association, Tan Sri Datuk Clifford

Francis Herbert who was appointed to the Board since the last Annual General Meeting, retires and,

being eligible, offers himself for re-election.

DIRECTORS’ INTERESTS

The interests in shares and share options in the holding company and in related companies of

those who were directors at the end of the financial year as recorded in the Register of Directors’

Shareholdings kept by the Bank under Section 134 of the Companies Act, 1965, are as follows:

DIRECT INTERESTS

In the holding company,

AMMB Holdings Berhad

No. of ordinary shares of RM1.00 each

Shares

Balance at

1.4.2003 Bought

Bonus and

Rights Issue Sold

Balance at

31.3.2004

Tan Sri Dato’ Azman Hashim . . . . 1,188,422 — 594,211 1,782,633 —

Prof. Tan Sri Dato’ Dr. Mohd

Rashdan Haji Baba . . . . . . . . . 125,381 — 100,690 — 226,071

Tan Kheng Soon . . . . . . . . . . . . 10,000 — 8,000 — 18,000

Cheah Tek Kuang . . . . . . . . . . . 217,200 140,000 178,600 50,000 485,800

Mohamed Azmi Mahmood . . . . . . 80,000 — 63,200 — 143,200

F-383

In the holding company,

AMMB Holdings Berhad

No. of Warrants

Warrants 1997/2007

Balance at

1.4.2003 Bought

Adjustment for

Bonus and

Rights Issue Sold

Balance at

31.3.2004

Prof. Tan Sri Dato’ Dr. Mohd.

Rashdan Haji Baba . . . . . . . 12,000 — 7,795 — 19,795

No. of Warrants

Warrants 2003/2008

Balance at

1.4.2003 Bought

Adjustment for

Bonus and

Rights Issue Sold

Balance at

31.3.2004

Tan Sri Dato’ Azman Hashim . . 149,000 — 96,793 — 245,793

Prof. Tan Sri Dato’ Dr. Mohd

Rashdan Haji Baba . . . . . . . 16,000 — — 16,000 —

Cheah Tek Kuang . . . . . . . . . 28,000 — 18,189 — 46,189

Mohamed Azmi Mahmood . . . . 9,750 — 6,333 — 16,083

DIRECT INTERESTS

In the holding company,

AMMB Holdings Berhad

No. of ordinary shares of RM1.00 each

Share options

Balance at

1.4.2003 Granted Exercised

Adjustment for

Bonus and

Rights Issue

Balance at

31.3.2004

Cheah Tek Kuang . . . . . . . . . 140,000 — 140,000 — —

Mohamed Azmi Mahmood . . . . 200,000 — — 129,924 329,924

In the related company,

AMFB Holdings Berhad

No. of ordinary shares of RM1.00 each

Shares

Balance at

1.4.2003 Bought Sold

Balance at

31.3.2004

Tan Sri Dato’ Azman Hashim

— Held directly . . . . . . . . . . . . . . . . . 211,505 — — 211,505

— Held through nominees . . . . . . . . . . . 522,985 — — 522,985

Cheah Tek Kuang . . . . . . . . . . . . . . . . . 38,000 — — 38,000

Mohamed Azmi Mahmood . . . . . . . . . . . . 50,000 — — 50,000

F-384

DEEMED INTERESTS

In the holding company,

AMMB Holdings Berhad

No. of ordinary shares of RM1.00 each

Shares Name of Company

Balance at

1.4.2003 Bought

Bonus and

Rights Issue Sold

Balance at

31.3.2004

Tan Sri Dato’

Azman Hashim . .

Azman Hashim Holdings

Sdn. Bhd.

9,408,876 — 6,918,343 10,613,314 5,713,905

Arab-Malaysian

Corporation Berhad

343,884,550 — 275,107,640 13,165,365 605,826,825

AMDB Equipment

Trading Sdn. Bhd.

110,000 — 88,000 — 198,000

Slan Sdn. Bhd. 398,316 — 199,158 597,474 —

Ginagini Sdn. Bhd. 17,330,749 — 7,525,374 12,671,314 12,184,809

Regal Genius Sdn. Bhd. — 14,500,000 11,600,000 4,350,000 21,750,000

No. of Warrants

Warrants 1997/2007 Name of Company

Balance at

1.4.2003 Bought Sold

Balance at

31.3.2004

Tan Sri Dato’

Azman Hashim . .

Arab-Malaysian

Corporation Berhad 16,231,498 — 16,231,498 —

DEEMED INTERESTS

In the holding company,

AMMB Holdings Berhad

No. of Warrants

Warrants 2003/2008 Name of Company

Balance at

1.4.2003 Bought

Adjustment

for Bonus and

Rights Issue Sold

Balance at

31.3.2004

Tan Sri Dato’

Azman Hashim . .

Arab-Malaysian

Corporation Berhad

45,594,942 — 29,619,386 — 75,214,328

AMDB Equipment

Trading Sdn. Bhd.

13,750 — 8,932 — 22,682

Azman Hashim Holdings

Sdn. Bhd.

2,026,109 — 1,316,200 — 3,342,309

Slan Sdn. Bhd. 49,789 — 32,343 — 82,132

Ginagini Sdn. Bhd. 2,391,734 — 1,553,717 — 3,945,451

Indigemous Capital Sdn.

Bhd.

— 170,000 110,435 — 280,435

Regal Genius Sdn. Bhd. — 1,812,500 1,177,436 — 2,989,936

In the related company,

AMFB Holdings Berhad

No. of ordinary shares of RM1.00 each

Shares Name of Company

Balance at

1.4.2003 Bought Sold

Balance at

31.3.2004

Tan Sri Dato’

Azman Hashim . .

AMDB Equipment

Trading Sdn. Bhd. 241,047 — — 241,047

F-385

The share options in the holding company, which had an option period of five calendar years,

were granted pursuant to AMMB Holdings Berhad Employees’ Share Option Scheme II (‘‘Scheme’’)

and the persons to whom the options are granted under the Scheme have no right to participate in

any staff share option scheme of any other company within the Group.

By virtue of their shareholdings as mentioned above, the above directors are deemed to have an

interest in the shares of the Bank and its related companies.

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no director of the Bank has received or become

entitled to receive any benefit (other than the benefits included in the aggregate amount of

emoluments received or due and receivable by directors shown in the financial statements, or the

fixed salary of full-time employees of the Bank) by reason of a contract made by the Bank 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 related party

transactions as shown in Note 28 to the Financial Statements.

Neither during nor at the end of the financial year was the Bank a party to any arrangement

whose object is to enable the directors to acquire benefits by means of the acquisition of shares in,

or debentures of, the Bank or any other body corporate.

ULTIMATE HOLDING COMPANY

The directors regard AMMB Holdings Berhad, a company incorporated in Malaysia, as both the

holding company and the ultimate holding company.

AUDITORS

The auditors, Messrs Deloitte KassimChan, have indicated that they would not be seeking re-

appointment as auditors at the forthcoming Annual General Meeting of the Bank.

Signed on behalf of the Board

in accordance with a resolution of the Directors,

TAN SRI DATO’ AZMAN HASHIM CHEAH TEK KUANG

Kuala Lumpur,

31 May, 2004

Audited Financial Statements for the financial year ended 31 March 2004

F-386

REPORT OF THE AUDITORS TO THE MEMBER

AmBank Berhad

(Incorporated in Malaysia)

We have audited the accompanying balance sheet as at 31 March 2004 and the related

statements of income, changes in equity and cash flows for the financial year then ended. These

financial statements are the responsibility of the Bank’s directors. Our responsibility is to express an

opinion on these financial statements based on our audit.

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 reasonable assurance about whether

the financial statements are free of material misstatement. An audit includes examining, on a test

basis, evidence supporting the amounts and disclosures in the financial statements. An audit also

includes assessing the accounting principles used and significant estimates made by the directors, as

well as evaluating the overall financial statements presentation. We believe that 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 Sub-section (19) of Section 169 of the Act, and the

applicable approved accounting standards in Malaysia so as to give a true and fair view

of:

(i) the state of affairs of the Bank as at 31 March 2004 and of the results and the cash

flows of the Bank for the financial year ended on that date; and

(ii) the matters required by Section 169 of the Act to be dealt with in the financial

statements; and

(b) the accounting and other records and the registers required by the Act to be kept by the

Bank have been properly kept in accordance with the provisions of the Act.

DELOITTE KASSIMCHAN

AF 0080

Chartered Accountants

ROSITA TAN

1874/9/04 (J)

Partner

Petaling Jaya

31 May, 2004

F-387

AmBank Berhad

(Incorporated in Malaysia)

BALANCE SHEET

As at 31 March 2004

2004 2003

Note RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . . . . . . . . . . . . . . . . . . 4 1,710,302 1,669,007

Deposits and placements with financial institutions . . . . . . . . 5 22,048 230,000

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 233,183 218,775

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1,135,398 807,717

Loans, advances and financing. . . . . . . . . . . . . . . . . . . . . 8 7,221,320 7,227,399

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 249,783 167,483

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 59,446 37,994

Statutory deposit with Bank Negara Malaysia . . . . . . . . . . . 10 291,687 293,957

Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . 11 32,241 33,479

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,955,408 10,685,811

LIABILITIES AND SHAREHOLDER’S FUNDS

Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . . 12 6,680,253 6,495,356

Deposits and placements of banks and other financial institutions 13 2,508,651 2,528,291

Securities sold under repurchase agreements . . . . . . . . . . . . 14 4,722 12,607

Bills and acceptances payable . . . . . . . . . . . . . . . . . . . . . 15 264,595 189,508

Amount due to Cagamas Berhad . . . . . . . . . . . . . . . . . . . 16 238,149 348,144

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 181,768 112,404

Subordinated term loan . . . . . . . . . . . . . . . . . . . . . . . . . 18 460,000 75,000

Exchangeable Subordinated Capital Loan . . . . . . . . . . . . . . 19 — 460,000

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,338,138 10,221,310

Irredeemable Convertible Unsecured Loan Stocks . . . . . . . . . 20 — —

Share capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 708,594 505,469

Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (91,324) (40,968)

Shareholder’s Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 617,270 464,501

TOTAL LIABILITIES AND SHAREHOLDER’S FUNDS . . . 10,955,408 10,685,811

COMMITMENTS AND CONTINGENCIES . . . . . . . . . . . . 33 4,858,478 4,403,504

NET TANGIBLE ASSETS PER SHARE (RM) . . . . . . . . . 34 0.87 0.92

The accompanying Notes form an integral part of the Financial Statements.

F-388

AmBank Berhad

(Incorporated in Malaysia)

INCOME STATEMENT

For the financial year ended 31 March 2004

2004 2003

Note RM’000 RM’000

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 467,517 456,032

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 (298,234) (274,726)

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . 169,283 181,306

Income from Islamic Banking operations . . . . . . . . . . . . . . 42 20,324 14,898

189,607 196,204

Loan and financing loss and allowances . . . . . . . . . . . . . . . 25 (346,551) (132,248)

(156,944) 63,956

Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 44,376 35,237

Write-back of allowance for diminution in value of investment

securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,692 10,348

Transfer to profit equalisation reserve . . . . . . . . . . . . . . . . (1,864) (448)

(83,740) 109,093

Staff costs and overheads . . . . . . . . . . . . . . . . . . . . . . . . 27 (170,791) (142,868)

Loss before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . (254,531) (33,775)

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 82,300 13,637

Loss after taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . (172,231) (20,138)

Transfer to statutory reserve . . . . . . . . . . . . . . . . . . . . . . — —

Net loss for the year . . . . . . . . . . . . . . . . . . . . . . . . . . (172,231) (20,138)

Basic loss per ordinary share (sen) . . . . . . . . . . . . . . . . . 32 (31.13) (4.81)

The accompanying Notes form an integral part of the Financial Statements.

F-389

AmBank Berhad

(Incorporated in Malaysia)

STATEMENT OF CHANGES IN EQUITY

For the financial year ended 31 March 2004

Non-distributable reserves

Share

Capital

Share

Premium

Statutory

Reserve

Capital

Reserve

Accumulated

Losses Total

Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Balance as at

1 April 2002

As previously

reported . . . . 435,547 181,328 95,642 461 (371,617) 341,361

Prior year

adjustment . . . 40 — — — — 33,905 33,905

As restated . . . . 435,547 181,328 95,642 461 (337,712) 375,266

Shares issued during

the year pursuant

to the conversion

of ICULS . . . . . 21 69,922 41,953 — — — 111,875

Loss for the year . . — — — — (20,138) (20,138)

Reclassification:

Interest on ICULS 20 — — — — (2,502) (2,502)

Balance as at

31 March 2003 . 505,469 223,281 95,642 461 (360,352) 464,501

Balance as at

1 April 2003

As previously

reported . . . . 505,469 223,281 95,642 461 (391,394) 433,459

Prior year

adjustment . . . 40 — — — — 31,042 31,042

As restated . . . . 505,469 223,281 95,642 461 (360,352) 464,501

Shares issued during

the year pursuant

to rights issue . . 21 203,125 121,875 — — — 325,000

Loss for the year . . — — — — (172,231) (172,231)

Balance as at

31 March 2004 . 708,594 345,156 95,642 461 (532,583) 617,270

The accompanying Notes form an integral part of the Financial Statements.

F-390

AmBank Berhad

(Incorporated in Malaysia)

CASH FLOW STATEMENT

For the financial year ended 31 March 2004

2004 2003

RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Loss before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (254,531) (33,775)

Adjustments for:

Interest/Income-in-suspense, net of recoveries . . . . . . . . . . . . . . 65,296 156,956

Loan and financing loss and allowances, net of recoveries . . . . . . 408,084 158,471

Allowance on amount recoverable from Danaharta . . . . . . . . . . . 13,479 28,271

Depreciation of property and equipment . . . . . . . . . . . . . . . . . . 7,476 8,968

Transfer to profit equalisation reserve . . . . . . . . . . . . . . . . . . . 1,864 448

Accretion of discount less amortisation of premium. . . . . . . . . . . (12,691) (6,178)

Loss on disposal of investment securities — net. . . . . . . . . . . . . 12,815 8,876

Loss/(Gain) on disposal of property and equipment . . . . . . . . . . . 68 (235)

Write-back of allowance for diminution in value of dealing and

investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,692) (10,348)

Operating Profit Before Working Capital Changes. . . . . . . . . . . . . 211,168 311,454

(Increase)/Decrease In Operating Assets:

Deposits and placements with financial institutions . . . . . . . . . . . 207,952 (172,500)

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,314) (218,939)

Loans, advances and financing. . . . . . . . . . . . . . . . . . . . . . . . (467,301) (328,991)

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34,931) (5,199)

Statutory deposit with Bank Negara Malaysia . . . . . . . . . . . . . . 2,270 (12,925)

Increase/(Decrease) In Operating Liabilities:

Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . 184,897 7,898

Deposits and placements of banks and other financial institutions . . (19,640) 1,049,151

Securities sold under repurchase agreements . . . . . . . . . . . . . . . (7,885) 12,607

Bills and acceptances payable . . . . . . . . . . . . . . . . . . . . . . . . 75,087 66,682

Amount due to Cagamas Berhad . . . . . . . . . . . . . . . . . . . . . . (109,995) (105,131)

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,500 (12,118)

Net Cash Generated From Operating Activities . . . . . . . . . . . . . . 85,808 591,989

F-391

2004 2003

RM’000 RM’000

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from disposal of property and equipment . . . . . . . . . . . . 326 235

Purchase of investment securities — net . . . . . . . . . . . . . . . . . . (288,207) (184,118)

Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . (6,632) (6,331)

Net Cash Used In Investing Activities . . . . . . . . . . . . . . . . . . . . (294,513) (190,214)

CASH FLOW FROM FINANCING ACTIVITIES

Repayment of Subordinated term loan . . . . . . . . . . . . . . . . . . . . (75,000) —

Repayment of Exchangeable Subordinated Capital Loan . . . . . . . . . (460,000) —

Draw down of Subordinated term loan . . . . . . . . . . . . . . . . . . . . 460,000 —

Proceeds from shares pursuant to rights issue . . . . . . . . . . . . . . . 325,000 —

Interest on Irredeemable Convertible Unsecured Loan Stocks . . . . . . — (2,502)

Net Cash Generated From/(Used In) Financing Activities . . . . . . . . 250,000 (2,502)

Net Increase In Cash and Cash Equivalents. . . . . . . . . . . . . . . . . 41,295 399,273

Cash and Cash Equivalents At Beginning Of Year . . . . . . . . . . . . 1,669,007 1,269,734

Cash and Cash Equivalents At End Of Year . . . . . . . . . . . . . . . . 1,710,302 1,669,007

Note: Cash and cash equivalents consist of cash and short-term funds as shown in Note 4 to the Financial Statements.

The accompanying Notes form an integral part of the Financial Statements.

F-392

AmBank Berhad

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS

1. PRINCIPAL ACTIVITIES

The principal activities of the Bank are the carrying on of the business of a commercial bank

and the provision of other related financial services, which also includes the provision of Islamic

banking services.

There has been no significant change in the nature of the principal activities of the Bank during

the financial year.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The financial statements of the Bank have been approved by the Board of Directors for

issuance on 31 May 2004.

The Financial Statements of the Bank have been prepared in accordance with the provisions of

the Companies Act, 1965, the Banking and Financial Institutions Act, 1989, Bank Negara Malaysia

Guidelines and the applicable approved accounting standards of the Malaysian Accounting Standards

Board. The financial statements incorporate those activities relating to the Islamic Banking Business

undertaken by the Bank.

Islamic Banking Business refers generally to the acceptance of deposits and granting of

financing under the Syariah principles. The Islamic Banking Business transactions are accounted for

on an accrual basis in compliance with the revised Garis Panduan 8 Guidelines on Presentation of

Financial Statements for Financial Institutions issued by Bank Negara Malaysia. The state of affairs

as at 31 March 2004 and the results for the year ended on that date of the Islamic Banking Business

of the Bank are shown in Note 42.

3. SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies adopted by the Bank are consistent with those adopted in the

previous years except for the adoption of the following new Malaysian Accounting Standards Board

(‘‘MASB’’) standards which became effective in the current financial year.

(i) MASB 25, Income Taxes which is applied retrospectively. Comparative figures have been

restated to reflect the effect of the change in accounting policy.

(ii) MASB 29, Employee Benefits, which is applied prospectively. The adoption does not

have any significant impact on the financial statements.

(iii) MASB i-1, Presentation of financial statements of Islamic Financial Institutions. The

adoption resulted in extended disclosures for the Bank’s Islamic Banking business.

(a) Basis of Accounting

The financial statements of the Bank have been prepared under the historical cost

convention.

(b) Recognition of Interest and Financing Income

Interest and financing income is recognised on an accrual basis. Interest and financing

income on housing and term loans and financing is recognised on a monthly rest basis.

F-393

Where an account is classified as non-performing, recognition of interest and financing

income is suspended with retroactive adjustments made to the date of first default. Thereafter,

interest on these accounts is recognised on a cash basis until such time as the accounts are no

longer classified as non-performing.

Customers’ accounts are classified as non-performing where repayments are in arrears for

six months, except for credit card accounts, which are classified as non-performing where

repayments are in arrears for more than three months and one month after maturity date for

trade bills, bankers’ acceptances and trust receipts. The classification of non-performing loans

and financing and the policy on suspension of interest is in conformity with Bank Negara

Malaysia’s Guidelines On Classification of Non-Performing Loans and Allowance for Bad and

Doubtful Debts.

(c) Recognition of Fees and Other Income

Loan arrangement and participation fees and commissions are recognised as income when

all conditions precedent are fulfilled.

Guarantee fees are recognised as income upon issuance and where the guarantee period is

longer than one year, over the duration of the guarantee period.

Other fees on a variety of services and facilities extended to customers are recognised on

inception of such transactions.

Dividends from dealing and investment securities are recognised when received.

(d) Allowance for Bad and Doubtful Debts and Financing

Specific allowances are made for doubtful debts and financing which have been

individually reviewed and specifically identified as bad or doubtful.

In addition, a general allowance based on a percentage of the loan and financing

portfolio, net of interest-in-suspense and specific allowance, is also made to cover possible

losses which are not specifically identified.

An uncollectible loan and financing or portion of a loan and 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.

The allowance for non-performing loans and financing is in conformity with the minimum

requirements of Bank Negara Malaysia’s Guideline On Classification of Non-Performing Loans

and Allowance for Bad and Doubtful Debts

(e) Repurchase Agreements

Obligations on securities sold under repurchase agreements are securities which the Bank

had sold from its portfolio, with a commitment to repurchase at future dates. Such financing

transactions and the obligations to repurchase the securities are reflected as a liability in the

balance sheet, whilst the carrying values of the securities underlying these repurchase

agreements remain in the respective asset accounts.

(f) Dealing Securities

Dealing securities are marketable securities that are acquired and held with the intention

of resale in the short term and are stated at the lower of cost and market value on a portfolio

basis.

Transfers, if any, from dealing to investment securities are made at the lower of cost and

market value.

F-394

(g) Investment Securities

Investment securities are securities that are acquired and held for yield or capital growth

or to meet minimum liquid assets requirement pursuant to Section 38 of the Banking and

Financial Institutions Act, 1989 and are usually held to maturity.

Malaysian Government Securities, Malaysian Government Investment Certificates,

Cagamas bonds and other government securities and other bank guaranteed private debt

securities are stated at cost adjusted for amortisation of premium or accretion of discount.

Quoted securities are stated at the lower of cost and market value on a portfolio basis.

Unquoted securities are stated at cost and allowance is made in the event of any permanent

diminution in value.

Transfers, if any, from investment securities to dealing securities are made at the lower of

carrying value and market value.

(h) Property and Equipment and Depreciation

Property and equipment are stated at cost less accumulated depreciation and impairment

losses.

Gain or loss arising from disposal of an asset is determined as the difference between the

estimated net disposal proceeds and the carrying amount of the asset, and is recognised in the

income statement.

Depreciation of property and equipment, except for work-in-progress which is not

depreciated, is calculated using the straight-line method at rates based on the estimated useful

lives of the various assets.

The annual depreciation rates for the various classes of property and equipment are as

follows:

Leasehold improvements . . . . . . . . . . 12.5%

Office equipment, furniture and fittings . 10.0% to 25.0%

Computer equipment and software . . . . 20.0%

Motor vehicles . . . . . . . . . . . . . . . . 25.0%

(i) Impairment of Assets

The carrying values of assets are reviewed for impairment when there is an indication that

the asset might be impaired. Impairment is measured by comparing the carrying values of the

assets with their recoverable amounts. The recoverable amount is the higher of net realisable

value and value in use, which is measured by reference to discounted future cash flows, if

applicable. Recoverable amounts are estimated for individual assets or, if it is not possible, for

the cash generating unit.

An impairment loss is charged to the income statement immediately, unless the asset is

carried at revalued amount. Any impairment loss of a revalued asset is treated as a revaluation

decrease to the extent of previously recognised revaluation surplus for the same asset.

Subsequent increase in the recoverable amount of an asset is treated as reversal of the

previous impairment loss and is recognised to the extent of the carrying amount of the asset

that would have been determined (net of amortisation and depreciation) had no impairment loss

been recognised. The reversal is recognised in the income statement immediately, unless the

asset is carried at revalued amount. A reversal of an impairment loss on a revalued asset is

credited directly to revaluation surplus. However, to the extent that an impairment loss on the

same revalued asset was previously recognised as an expense in the income statement, a

reversal of that impairment loss is recognised as income in the income statement.

F-395

(j) Trade and Other Receivables

Trade and other receivables are stated at book value as reduced by the appropriate

allowances for estimated irrecoverable amounts. Allowance for doubtful debts is made based on

estimates of possible losses which may arise from non-collection of certain receivable accounts.

(k) Income Taxes

Tax on profit or loss for the financial year comprises current and deferred tax. Income tax

is recognised in the income statement except to the extent it relates to items recognised directly

in equity, in which case it is recognised in equity.

Current tax expense is determined according to the tax laws of each jurisdiction in which

the Bank operates and includes all taxes based on the taxable profits.

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. In principle, deferred tax liabilities are recognised for all taxable temporary

differences and deferred tax assets are recognised for all deductible temporary differences and

unutilised tax losses to the extent it is probable that taxable profit will be available against

which the deductible temporary differences and unutilised tax losses can be utilised. Temporary

differences are not recognised for goodwill not deductible for tax purposes and the initial

recognition of assets and liabilities that at the time of 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.

Prior to the adoption of MASB 25 Income Taxes, the tax effects of transactions are

generally recognised, using the ‘liability’ method, in the year such transactions enter into the

determination of net income, regardless of when they are recognised for tax purposes.

However, where timing differences result in deferred tax debits, the tax effects are generally

recognised only when the realisation is reasonably assured. The changes in accounting policies

have been accounted for retrospectively and the effects of the changes are disclosed in Note 40.

(l) Amount Recoverable from Danaharta

This relates to the loans sold to Danaharta where the total consideration is received in two

portions; upon the sale of the loans (initial consideration) and upon the recovery of the loans

(final consideration). The final consideration amount represents the Bank’s predetermined share

of the surplus over the initial consideration upon recovery of the loans.

The difference between the carrying value of the loans and the initial consideration is

recognised as ‘‘Amount recoverable from Danaharta’’ within the ‘‘Other Assets’’ component of

the balance sheet. Allowances against these amounts are made to reflect the Directors’

assessment of the realisable value of the final consideration as at balance sheet date.

(m) Foreclosed Properties

Foreclosed properties are stated at cost less allowance for diminution in value, if any, of

such properties.

(n) Forward Exchange Contracts

Immature forward exchange contracts are valued at forward rates as at balance sheet date,

applicable to their respective dates of maturity, and unrealised losses and gains are recognised

in the income statement for the financial year.

F-396

(o) Interest Rate Swaps, Futures, Options and Forward Rate Contracts

The Bank acts as an intermediary with counter parties who wish to swap their interest

obligations. The Bank also uses interest rate swaps, futures, options, and forward rate contracts

in its trading activities and in overall interest rate risk management.

Interest income or interest expense associated with interest rate swaps that qualify as

hedges is recognised over the life of the swap agreement as a component of interest income or

interest expense. Gains or losses on interest rate futures, forward and option contracts that

qualify as hedges are generally deferred and amortised over the life of the hedged assets or

liabilities as adjustments to interest income or interest expense.

Gains and losses on interest rate swaps, futures, options and forward rate agreements that

do not qualify as hedges are recognised using the mark-to-market method and is shown as

trading gain or loss from derivatives.

(p) Profit Equalisation Reserve

The profit Equalisation Reserve (‘‘PER’’) refers to the amount appropriated out of the

total gross income in order to maintain a certain level of return for depositors. It is deducted

from the total gross income (in deriving the net gross income) as approved and endorsed by the

National Advisory Council for Islamic Banking and Takaful of Bank Negara Malaysia.

(q) Foreign Exchange

Transactions in foreign currencies are converted into Ringgit Malaysia at the rates of

exchange prevailing at transaction dates or, if covered by foreign exchange contracts, at

contracted rates. Where settlement has not taken place at balance sheet date, translation into

Ringgit Malaysia is at the approximate exchange rates prevailing at that date or at contracted

rates. All foreign exchange gains or losses are taken up in the income statement.

(r) Provision for Commitments and Contingencies

Based on management’s evaluation of the guarantees given on behalf of customers,

specific provisions for commitments and contingencies are made when in the event of call or

potential liability and there is a shortfall in the security value supporting these guarantees.

(s) Employee Benefits

(i) Short-Term Benefits

Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary

benefits are accrued in the period in which the associated services are rendered by

employees of the Bank.

(ii) Defined Contribution Plan

As required by law, companies in Malaysia make contributions to the state pension

scheme, the Employees Provident Fund (‘‘EPF’’). Such contributions are recognised as an

expense in the income statement as incurred. Once the contribution have been paid, the

Bank has no further payment obligations.

The changes in accounting policies have been accounted for prospectively and have no

significant impact on the financial statements.

(t) Bills and Acceptances Payable

Bills and acceptances payable represent the Bank’s own bills and acceptances

rediscounted and outstanding in the market.

F-397

(u) Provisions

Provisions are recognised when the Bank has a present legal obligation as a result of past

events, when it is probable that an outflow of resources will be required to settle the

obligation, and when a reliable estimate of the amount can be made.

(v) Cash Flow Statement

The Bank adopts the indirect method in the preparation of the cash flow statement.

(w) Cash and Cash Equivalents

For the purpose of the cash flow statement, cash and cash equivalents consist of cash and

short-term funds.

4. CASH AND SHORT-TERM FUNDS

2004 2003

RM’000 RM’000

Cash and balances with banks and other financial institutions . . . 93,302 74,287

Money at call and deposits placements maturing within one month 1,617,000 1,594,720

1,710,302 1,669,007

Included in the above are interbank lending of RM1,617,000,000 (RM1,594,720,000 in 2003).

As at 31 March 2004, the net interbank lending position of the Bank is detailed as follows:

2004 2003

RM’000 RM’000

Interbank lending:

Cash and short term funds . . . . . . . . . . . . . . . . . . . . . . . . 1,617,000 1,594,720

Deposits with financial institutions (Note 5) . . . . . . . . . . . . . 19,000 230,000

1,636,000 1,824,720

Interbank borrowing (Note 13). . . . . . . . . . . . . . . . . . . . . . . (76,473) (347,495)

Net interbank lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,559,527 1,477,225

5. DEPOSITS AND PLACEMENTS WITH FINANCIAL INSTITUTIONS

2004 2003

RM’000 RM’000

Licensed banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,048 180,000

Licensed finance companies . . . . . . . . . . . . . . . . . . . . . . . . — 50,000

22,048 230,000

Included in the above are interbank lending of RM19,000,000 (RM230,000,000 in 2003).

F-398

6. DEALING SECURITIES

2004 2003

RM’000 RM’000

Quoted Securities In Malaysia

— Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,206 29,078

Unquoted Securities In Malaysia

— Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209,597 190,279

245,803 219,357

Allowance for diminution in value of investment . . . . . . . . . . . (12,620) (582)

Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233,183 218,775

Market value:

Quoted Securities in Malaysia — Shares . . . . . . . . . . . . . . . 36,105 28,496

7. INVESTMENT SECURITIES

2004 2003

RM’000 RM’000

Money Market Securities

Malaysian Government Securities . . . . . . . . . . . . . . . . . . . . 41,508 41,508

Malaysian Government Investment Certificates . . . . . . . . . . . . 45,163 45,163

Bank Negara Malaysia bills . . . . . . . . . . . . . . . . . . . . . . . 59,322 198,782

Danaharta bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000 7,000

Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . . . . 82,491 82,491

Negotiable Certificates of Deposits . . . . . . . . . . . . . . . . . . . 5,053 15,050

Bankers’ acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,472 2

Negotiable Islamic debt certificate . . . . . . . . . . . . . . . . . . . 237,658 —

482,667 389,996

Quoted Securities Outside Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419 1,255

Quoted Debt Equity Conversion In Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,249 53,125

Shares — with options . . . . . . . . . . . . . . . . . . . . . . . . . . 32,556 32,556

Loan stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,243 23,465

Loan stocks — collateralised. . . . . . . . . . . . . . . . . . . . . . . 85,710 96,253

249,758 205,399

Unquoted Securities In Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,864 4,864

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 67

Unquoted Securities Outside Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 36

4,967 4,967

F-399

2004 2003

RM’000 RM’000

Unquoted Debt Equity Conversion In Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,480 114,469

Loan stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181,503 26,680

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,344 120,761

423,327 261,910

Unquoted Private Debt Securities In Malaysia

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158,279 82,701

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,319,417 946,228

Allowance for diminution in value of investment . . . . . . . . . . . (193,387) (144,895)

Accretion of discount less amortisation of premium. . . . . . . . . . 9,368 6,384

Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,135,398 807,717

Market value:

Money market securities

Malaysian Government Securities . . . . . . . . . . . . . . . . . . . . 40,211 41,120

Malaysian Government Investment Certificates . . . . . . . . . . . . 49,729 48,341

Bank Negara Malaysia bills . . . . . . . . . . . . . . . . . . . . . . . 59,756 199,738

Danaharta bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,798 8,529

Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . . . . 87,231 84,894

Negotiable Certificates of Deposits . . . . . . . . . . . . . . . . . . . 5,053 15,050

Negotiable Islamic debt certificate . . . . . . . . . . . . . . . . . . . 237,658 —

Quoted Securities Outside Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 821

Quoted Debt Equity Conversion In Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,388 11,997

Shares — with options . . . . . . . . . . . . . . . . . . . . . . . . . . 18,694 16,698

Loan stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,779 18,580

Loan stocks — collateralised. . . . . . . . . . . . . . . . . . . . . . . 51,855 56,789

The maturity structure of money market securities held for investments are as follows:

2004 2003

RM’000 RM’000

Maturing within one year . . . . . . . . . . . . . . . . . . . . . . . . . . 248,214 213,834

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . 234,453 162,989

Three years to five years . . . . . . . . . . . . . . . . . . . . . . . . . . — 13,173

482,667 389,996

Certain money market securities held for investment have been sold under repurchase

agreements for funding purposes and their carrying values remain in the respective asset accounts

while obligations to repurchase such securities at an agreed price on a specified future date are

accounted for as a liability as mentioned in Note 14.

F-400

8. LOANS, ADVANCES AND FINANCING

2004 2003

RM’000 RM’000

Term loans:

Fixed rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 781,696 509,005

Floating rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,530,088 5,595,028

Overdrafts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 771,613 730,822

Claims on customers under acceptance credits . . . . . . . . . . . . . 375,666 251,225

Credit cards receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . 362,046 218,252

Trust receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,186 205,503

Bills receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,457 193,776

Factoring receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,851 50,889

Staff loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,813 28,191

8,025,416 7,782,691

Unearned interest and unearned income . . . . . . . . . . . . . . . . . — (5)

Gross loans, advances and financing . . . . . . . . . . . . . . . . . . . 8,025,416 7,782,686

Less: Islamic financing sold to Cagamas Berhad . . . . . . . . . . . (3,508) (3,683)

8,021,908 7,779,003

Allowances for bad and doubtful debts and financing

— Specific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (466,902) (194,278)

— General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (110,918) (110,863)

Interest/Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . (222,768) (246,463)

7,221,320 7,227,399

Claims on customers under acceptance credits represent own acceptances created and

discounted. Own acceptances discounted and held in hand by the Bank as at 31 March 2004

amounted to RM85,920,000 (RM25,561,000 in 2003).

The maturity structure of loans, advances and financing is as follows:

2004 2003

RM’000 RM’000

Maturing within one year . . . . . . . . . . . . . . . . . . . . . . . . . . 3,520,011 3,208,830

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . 596,074 1,077,768

Three years to five years . . . . . . . . . . . . . . . . . . . . . . . . . . 612,106 684,647

Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,293,717 2,807,758

8,021,908 7,779,003

F-401

Loans, advances and financing analysed by their economic purposes are as follows:

2004 2003

RM’000 RM’000

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144,117 143,583

Mining and quarrying . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,370 12,937

Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 794,604 799,368

Electricity, gas and water . . . . . . . . . . . . . . . . . . . . . . . . . . 213,454 198,064

Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 845,141 847,584

Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549,771 523,122

Purchase of landed property:

Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,043,129 1,473,002

Non-residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 741,602 848,330

General commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411,495 423,736

Transport, storage and communication . . . . . . . . . . . . . . . . . . 292,160 171,910

Finance, insurance and business services . . . . . . . . . . . . . . . . 818,744 1,131,654

Purchase of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 438,858 530,842

Consumption credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362,046 218,252

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357,925 460,302

Gross loans, advances and financing . . . . . . . . . . . . . . . . . . . 8,025,416 7,782,686

Less: Islamic financing sold to Cagamas Berhad . . . . . . . . . . . (3,508) (3,683)

8,021,908 7,779,003

Movements in non-performing loans and financing (including interest and income receivables)

are as follows:

2004 2003

RM’000 RM’000

Gross

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . 1,723,395 1,874,643

Non-performing during the year . . . . . . . . . . . . . . . . . . . . . 561,411 773,278

Reclassification to performing loan . . . . . . . . . . . . . . . . . . . (205,907) (285,050)

Amount recovered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (154,194) (237,599)

Debt equity conversion . . . . . . . . . . . . . . . . . . . . . . . . . . (50,913) (223,571)

Amount written off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (175,395) (190,827)

Amount vested over from related company . . . . . . . . . . . . . . — 12,521

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . 1,698,397 1,723,395

Less:

Specific allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (466,902) (194,278)

Interest/Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . (222,768) (246,463)

(689,670) (440,741)

Non-performing loans and financing (net) . . . . . . . . . . . . . . . . 1,008,727 1,282,654

Ratio of net non-performing loans to loans, advances and financing 13.75% 17.47%

F-402

Movements in the allowance for bad and doubtful debts and financing and interest/income-in-

suspense accounts are as follows:

2004 2003

RM’000 RM’000

General Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . 110,863 121,090Allowance made during the year (Note 25) . . . . . . . . . . . . . . . 55 —Transfer to Specific Allowance . . . . . . . . . . . . . . . . . . . . . . — (10,227)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,918 110,863

As a % of total loans less specific allowance and interest/income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.51% 1.51%

Specific Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . 194,278 159,324

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . 501,534 199,013Amount written back in respect of recoveries . . . . . . . . . . . . . (93,505) (40,542)

Net charge to income statement (Note 25) . . . . . . . . . . . . . . . 408,029 158,471Debt equity conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,780) (29,769)Amount written off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (128,625) (113,497)Amount vested over from related company . . . . . . . . . . . . . . . — 9,522Transfer from General Allowance . . . . . . . . . . . . . . . . . . . . . — 10,227

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . 466,902 194,278

Interest/Income-in-Suspense

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . 246,463 199,729

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . 140,714 256,707Amount written back in respect of recoveries . . . . . . . . . . . . . (75,418) (99,751)

Net charge to income statement . . . . . . . . . . . . . . . . . . . . . . 65,296 156,956Debt equity conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . (42,252) (28,080)Amount written off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (46,739) (83,403)Amount vested over from related company . . . . . . . . . . . . . . . — 1,261

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . 222,768 246,463

9. OTHER ASSETS

2004 2003

RM’000 RM’000

Other receivables, deposits and prepayments . . . . . . . . . . . . . . 48,820 16,915Interest receivables on treasury assets . . . . . . . . . . . . . . . . . . 10,626 10,726Amount recoverable from Danaharta . . . . . . . . . . . . . . . . . . . — 10,353Foreclosed properties net of allowance for diminution in value ofRM2,415,000 (RM2,415,000 in 2003) . . . . . . . . . . . . . . . . . — —

59,446 37,994

F-403

2004 2003

RM’000 RM’000

Amount recoverable from Danaharta

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . 10,353 38,624

Addition during the year . . . . . . . . . . . . . . . . . . . . . . . . . . 3,126 —

Allowance made during the year (Note 25) . . . . . . . . . . . . . . . (13,479) (28,271)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . — 10,353

10. STATUTORY DEPOSIT WITH BANK NEGARA MALAYSIA

The non-interest bearing statutory deposit is maintained with Bank Negara Malaysia in

compliance with Section 37(1)(c) of the Central Bank of Malaysia Act, 1958, the amounts of which

are determined as a set percentages of total eligible liabilities.

11. PROPERTY AND EQUIPMENT

Leasehold

improve-

ments

Office

equipment,

furniture

and fittings

Computer

equipment

and

software

Motor

vehicles

Work in

progress Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

COST

At beginning of year. . 19,271 11,364 50,015 1,781 10,139 92,570

Additions . . . . . . . . . 196 969 1,665 422 3,380 6,632

Disposals . . . . . . . . . (802) — (333) (161) — (1,296)

At end of year . . . . . 18,665 12,333 51,347 2,042 13,519 97,906

ACCUMULATED

DEPRECIATION

At beginning of year. . 12,385 8,433 36,585 1,688 — 59,091

Current depreciation . . 2,219 1,018 4,095 144 — 7,476

Disposals . . . . . . . . . (719) — (22) (161) — (902)

At end of year . . . . . 13,885 9,451 40,658 1,671 — 65,665

NET BOOK VALUE

As at 31.3.2004 . . . . . 4,780 2,882 10,689 371 13,519 32,241

As at 31.3.2003 . . . . . 6,886 2,931 13,430 93 10,139 33,479

Depreciation charge for

2003 . . . . . . . . . . 2,328 988 5,545 107 — 8,968

F-404

12. DEPOSITS FROM CUSTOMERS

2004 2003

RM’000 RM’000

Current accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,173,848 900,446

Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163,516 137,760

Fixed/Investment deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 5,342,889 5,380,223

Negotiable certificates of deposits . . . . . . . . . . . . . . . . . . . . — 76,927

6,680,253 6,495,356

The maturity structure of deposits from customers is as follows:

2004 2003

RM’000 RM’000

Due within six months . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,924,114 5,490,447

Six months to one year . . . . . . . . . . . . . . . . . . . . . . . . . . . 652,442 773,539

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,667 184,513

Over three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,030 46,857

6,680,253 6,495,356

The deposits are sourced from the following types of customer:

2004 2003

RM’000 RM’000

Business enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,677,013 4,046,091

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,623,943 1,492,924

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,379,297 956,341

6,680,253 6,495,356

13. DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS

2004 2003

RM’000 RM’000

Licensed banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,132,709 1,095,754

Licensed finance companies . . . . . . . . . . . . . . . . . . . . . . . . 116,822 301,699

Other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . 1,259,120 1,130,838

2,508,651 2,528,291

Included under deposits and placements of other financial institutions of the Bank are the

following:

2004 2003

RM’000 RM’000

Negotiable certificates of deposits . . . . . . . . . . . . . . . . . . . . 1,278,099 1,195,723

Interbank borrowings (Note 4) . . . . . . . . . . . . . . . . . . . . . . . 76,473 347,495

14. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

Securities sold under repurchase agreements represent the obligations to repurchase these

securities sold as mentioned in Note 7.

F-405

15. BILLS AND ACCEPTANCES PAYABLE

Bills and acceptances payable represent our own bills and acceptances rediscounted and

outstanding in the market.

16. AMOUNT DUE TO CAGAMAS BERHAD

Amount due to Cagamas Berhad represents the proceeds received from loans (excluding Islamic

financing) sold directly or indirectly to Cagamas Berhad with recourse to the Bank. Under this

arrangement, the Bank undertakes to administer the loans on behalf of Cagamas Berhad and to buy

back any loans which are regarded as defective based on prudential criteria.

17. OTHER LIABILITIES

2004 2003

RM’000 RM’000

Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,803 42,354

Other creditors and accruals . . . . . . . . . . . . . . . . . . . . . . . . 135,653 69,602

Profit equalisation reserve . . . . . . . . . . . . . . . . . . . . . . . . . 2,312 448

181,768 112,404

18. SUBORDINATED TERM LOAN

The subordinated term loan of RM460 million as at 31 March 2004 represents an unsecured

loan obtained from AmMerchant Bank Berhad for the purpose of supplementing the Bank’s capital

adequacy position and it is subordinated to all other liabilities. The term loan is repayable in a lump

sum at the end of ten (10) years from the date of drawdown and interest is charged at a rate of

6.875% per annum for the first 5 years and 7.00% to 9.00% per annum or 3% per annum plus yield

of 5-year Malaysian Government Securities, whichever is the higher for the next 5 years. The term

loan was drawndown on 30 September 2003. The Bank has obtained approval from Bank Negara

Malaysia for full inclusion of this subordinated term loan into the capital base of the Bank for a

period of 12 months from the drawdown date.

The subordinated term loan of RM75 million as at 31 March 2003 represents an unsecured loan

obtained from Employees Provident Fund Board for the purpose of supplementing the Bank’s capital

adequacy position and it was subordinated to all other liabilities. The term loan was repayable in a

lump sum at the end of ten (10) years from the date of drawdown and interest was charged at a rate

of 8.5% per annum for the first 5 years and 8.75% to 9.50% per annum for the next 5 years. The

term loan was drawndown on 21 August 1995. The Bank obtained approval from Bank Negara

Malaysia for inclusion of the subordinated term loan into the capital base of the Bank and the

amount included as capital base was amortised over 5 years commencing August 2000. The Bank has

fully repaid this subordinated term loan on 22 August 2003, ahead of the maturity date.

19. EXCHANGEABLE SUBORDINATED CAPITAL LOAN

The Exchangeable Subordinated Capital Loan (ESCL) as at 31 March 2003 represents an

unsecured loan totalling RM800 million obtained from Danamodal Nasional Berhad (Danamodal) to

strengthen the capital base of the Bank. The ESCL bears interest at 7.5% per annum.

On 31 May 2000, the Bank has partially repaid RM340 million of the ESCL and on 30

September 2003, the Bank fully repaid the balance of RM460 million of the ESCL.

F-406

20. IRREDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS (ICULS)

2004 2003

RM’000 RM’000

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . — 111,875

Conversion during the year . . . . . . . . . . . . . . . . . . . . . . . . . — (111,875)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

On 30 September 2002, both the ICULS 1996/2002 and ICULS 1995/2005 were converted into

69,921,875 new ordinary shares of RM1.00 each credited as fully paid on the basis of one (1) new

ordinary share in exchange for RM1.60 nominal amount of ICULS tendered as mentioned in Note

21.

With the adoption of MASB 24 : Financial Instruments — Disclosure and Presentation in the

previous financial year, the interest expense on ICULS 1995/2005 and ICULS 1996/2002 incurred in

previous financial year was reflected as part of the changes in equity in the statement of changes in

equity.

21. SHARE CAPITAL

2004 2003

RM’000 RM’000

Authorised:

Ordinary shares of RM1 each

Balance at beginning and at end of year . . . . . . . . . . . . . . 2,000,000 2,000,000

Issued and paid-up:

Ordinary shares of RM1 each:

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . 505,469 435,547

Right Issue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,125 —

Conversion from ICULS 1996/2002 . . . . . . . . . . . . . . . . . . — 57,422

Conversion from ICULS 1995/2005 . . . . . . . . . . . . . . . . . . — 12,500

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . 708,594 505,469

During the financial year, the Bank increased its paid-up share capital from RM505,468,750 to

RM708,593,750 through the issuance of 203,125,000 new ordinary shares of RM1.00 each by way of

a renounceable rights issue allotted to the Bank’s holding company, AMMB Holdings Berhad

(‘‘AHB’’), on the basis of 520 new ordinary shares for every 1,294 existing ordinary shares held, at

an issue price of RM1.60 per ordinary share. The resulting share premium amounting to

RM121,875,000 was credited to share premium account as shown in statement of changes in equity.

On 30 September 2002, the issued and fully paid-up share capital of the Bank was increased

from 435,546,875 ordinary shares of RM1.00 each to 505,468,750 ordinary shares of RM1.00 each

by the issue of 69,921,875 new ordinary shares of RM1.00 each arising from the conversion of

RM91,875,000 nominal amount of Irredeemable Convertible Unsecured Loan Stocks (ICULS) 1996/

2002 and RM20,000,000 nominal amount of ICULS 1995/2005, both on the basis of one new

ordinary share of RM1.00 each for every RM1.60 nominal amount of ICULS. The resulting share

premium totalling RM41,953,125 was credited to share premium account as shown in statement of

changes in equity.

The new ordinary shares issued rank pari passu with the then existing ordinary shares of the

Bank.

F-407

22. RESERVES

2004 2003

RM’000 RM’000

Non-distributable Reserves:

Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345,156 223,281

Statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,642 95,642

Capital reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 461

Total non-distributable reserves . . . . . . . . . . . . . . . . . . . . . . 441,259 319,384

Distributable reserves:

Accumulated losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (532,583) (360,352)

Total reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (91,324) (40,968)

Movement in reserves are shown in the statement of changes in equity.

Share premium is used to record premium arising from new shares issued in the Bank.

The statutory reserve is maintained in compliance with Section 36 of the Banking and Financial

Institutions Act, 1989 and is not distributable as cash dividends.

23. INTEREST INCOME

2004 2003

RM’000 RM’000

Loans and advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410,680 502,650

Money at call, deposits and placements with financial institutions . 63,298 34,169

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,023 837

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,549 8,450

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,373 7,556

496,923 553,662

Net interest suspended . . . . . . . . . . . . . . . . . . . . . . . . . . . . (35,386) (100,273)

Accretion of discounts less amortisation of premium . . . . . . . . . 5,980 2,643

467,517 456,032

24. INTEREST EXPENSE

2004 2003

RM’000 RM’000

Deposits and placements . . . . . . . . . . . . . . . . . . . . . . . . . . 251,393 213,567

Amount due to Cagamas Berhad . . . . . . . . . . . . . . . . . . . . . 10,856 19,983

Exchangeable Subordinated Capital Loan . . . . . . . . . . . . . . . . 17,297 34,500

Subordinated term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,688 6,676

298,234 274,726

F-408

25. LOAN AND FINANCING LOSS AND ALLOWANCES

2004 2003

RM’000 RM’000

Allowance for bad and doubtful debts and financing:

— specific allowance (net) . . . . . . . . . . . . . . . . . . . . . . . 408,029 158,471

— general allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 —

Bad debts and financing recovered . . . . . . . . . . . . . . . . . . . . (75,012) (54,494)

333,072 103,977

Allowance on amount recoverable from Danaharta . . . . . . . . . . 13,479 28,271

346,551 132,248

26. NON-INTEREST INCOME

2004 2003

RM’000 RM’000

Fee income:

Fees on loans and advances . . . . . . . . . . . . . . . . . . . . . . . 37,680 24,386

Brokerage fees and commissions . . . . . . . . . . . . . . . . . . . . 10,559 8,451

Guarantee fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,742 3,977

Other fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,560 3,489

56,541 40,303

Investment and Trading income:

Net gain from disposal of dealing securities . . . . . . . . . . . . . 2,143 2,049

Net loss from disposal of investment securities . . . . . . . . . . . (17,940) (13,293)

Gross dividend from investment securities:

Quoted shares in Malaysia . . . . . . . . . . . . . . . . . . . . . . . 1,098 1,942

Unquoted shares in Malaysia . . . . . . . . . . . . . . . . . . . . . . 270 108

(14,429) (9,194)

Other income:

Foreign exchange profit . . . . . . . . . . . . . . . . . . . . . . . . . . 2,269 3,893

Rental Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 —

(Loss)/Gain on disposal of property and equipment . . . . . . . . . (68) 235

2,264 4,128

44,376 35,237

27. STAFF COSTS AND OVERHEADS

2004 2003

RM’000 RM’000

Personnel/Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,062 61,909

Establishment costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,832 34,069

Marketing and communication expenses . . . . . . . . . . . . . . . . . 34,848 18,555

Administration and general expenses . . . . . . . . . . . . . . . . . . . 23,049 28,335

170,791 142,868

F-409

The above expenditure includes the following statutory disclosures:

2004 2003

RM’000 RM’000

Directors’ remuneration (Note 29) . . . . . . . . . . . . . . . . . . . . 1,521 1,640

Rental of premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,798 9,552

Depreciation of property and equipment (Note 11) . . . . . . . . . . 7,476 8,968

Auditors’ remuneration

— Statutory audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 100

— Special audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 70

— Underprovision in previous years . . . . . . . . . . . . . . . . . — 77

Hire of equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 633 458

Professional fees paid to related companies . . . . . . . . . . . . . . . 1,634 4,768

The number of employees of the Bank as at 31 March 2004 was 1,443 (1,304 in 2003).

Staff cost include salaries, bonuses, contributions to employees’ provident fund and all other

staff related expenses. Contributions to employees’ provident fund of the Bank amounted to

RM8,537,000 (RM6,183,000 in 2003).

28. SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES

The Bank is a subsidiary of AMMB Holdings Berhad, a company incorporated in Malaysia,

which is also the ultimate holding company.

During the financial year, the significant related party transactions and balances are as follows:

(a) The significant transactions and balances of the Bank with its holding company and

related companies are as follows:

2004 2003

RM’000 RM’000

Income

Related CompaniesInterest on deposits and placements

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . . . . . 13,104 5,289

AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . 1,119 106

14,223 5,395

Interest on investment securities

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . . . . . 1,287 53

AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . 450 —

1,737 53

Interest on loans and advances

Arab-Malaysian Credit Berhad . . . . . . . . . . . . . . . . . . . 8,847 9,520

24,807 14,968

F-410

2004 2003

RM’000 RM’000

Expenditure

Holding companyInterest on deposits and placements

AMMB Holdings Berhad . . . . . . . . . . . . . . . . . . . . . . 783 548

Related companiesInterest on deposits and placements

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . . . . . 5,503 2,598

AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . 9,630 —

AMMB International (L) Ltd . . . . . . . . . . . . . . . . . . . . 303 —

AmAssurance Berhad . . . . . . . . . . . . . . . . . . . . . . . . — 476

AmEquities Sdn Bhd. . . . . . . . . . . . . . . . . . . . . . . . . — 211

AmSecurities Sdn Bhd. . . . . . . . . . . . . . . . . . . . . . . . — 125

15,436 3,410

Interest on subordinated term loan

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . . . . . 15,856 —

32,075 3,958

Amount due from

Related companiesLoans and advances

Arab-Malaysian Credit Berhad . . . . . . . . . . . . . . . . . . . 158,985 166,017

Cash and short-term funds

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . . . . . 119,000 193,000

AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . 200 51,000

119,200 244,000

Deposits and placements

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . . . . . 19,000 180,000

Investment securities

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . . . . . 5,053 15,050

AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . 42,264 —

47,317 15,050

Interest receivable

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . . . . . 280 1,026

AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . — 70

280 1,096

F-411

2004 2003

RM’000 RM’000

Amount due to

Holding companyDeposits and placements

AMMB Holdings Berhad . . . . . . . . . . . . . . . . . . . . . . 56,379 —

Interest Payable

AMMB Holdings Berhad . . . . . . . . . . . . . . . . . . . . . . 143 —

Related companiesDeposits and placements

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . . . . . 92,803 341,305

AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . 9,901 225,000

AMMB International (L) Ltd . . . . . . . . . . . . . . . . . . . . 473 17,615

AmProperty Trust Management Berhad . . . . . . . . . . . . . 2,225 1,511

AMMB Hong Kong Ltd . . . . . . . . . . . . . . . . . . . . . . . 746 1,184

AmSecurities Holding Sdn Bhd . . . . . . . . . . . . . . . . . . 959 789

AMSEC Nominees (Tempatan) Sdn Bhd . . . . . . . . . . . . . 520 504

AmResearch Sdn Bhd . . . . . . . . . . . . . . . . . . . . . . . . 400 400

AMMB Labuan (L) Ltd . . . . . . . . . . . . . . . . . . . . . . . 112 226

AMSEC Nominees (Asing) Sdn Bhd . . . . . . . . . . . . . . . 86 83

AmConsultant Sdn Bhd . . . . . . . . . . . . . . . . . . . . . . . 500 50

AmSecurities Sdn Bhd. . . . . . . . . . . . . . . . . . . . . . . . — 11,203

AmAssurance Berhad . . . . . . . . . . . . . . . . . . . . . . . . — 2,787

AmEquities Sdn Bhd. . . . . . . . . . . . . . . . . . . . . . . . . — 2,700

108,725 605,357

Subordinated term loan

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . . . . . 460,000 —

Interest Payable

AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . . . . . . 7 297

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . . . . . . 87 122

AmAssurance Berhad . . . . . . . . . . . . . . . . . . . . . . . . — 5

94 424

F-412

(b) Director’s related transactions

The significant non-banking transactions of the Bank with companies in which Tan Sri

Dato’ Azman Hashim is deemed to have a substantial interest, are as follows:

Company Types of transactions 2004 2003

RM’000 RM’000

Expenses

Dion Realties Sdn Bhd . . . Rental of premises 3,317 3,629Troosts Sdn Bhd . . . . . . . Rental of premises 266 271Medan Delima Sdn Bhd . . . Rental of premises 199 200Infotech Project Sdn Bhd . . Computer maintenance and

consultancy services252 —

Cyber Village Sdn Bhd . . . Computer maintenance andconsultancy services

21 53

Capital Expenditure

Gamarapi Sdn Bhd . . . . . . Purchase of computer hardware,software and relatedconsultancy services

1,741 1,129

On 27 February 2004, the Bank has entered into an agreement with Modular Corp SdnBhd (‘‘Modular’’) whereby Modular will:

(a) Provide 262,500 EMV card replacements for a cash consideration of RM2,992,000;and

(b) Provide EMV chip card personalization and fulfillment services for a cashconsideration of RM656,000.

The Agreement is expected to be completed in 1 year. The Agreement has been enteredinto in the ordinary course of business, the terms agreed are at arms length and are thosegenerally adopted in the market.

As at 31 March 2004 and 31 March 2003, there are no outstanding balances arising fromdirectors related transactions.

29. DIRECTORS’ REMUNERATION

Forms of remuneration in aggregate for all the Bank’s directors charged to the incomestatement for the year are as follows:

2004 2003

RM’000 RM’000

Executive Directors:Salaries and other remuneration . . . . . . . . . . . . . . . . . . . . . 945 1,056Benefits-in-kind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 82

1,026 1,138

Non-Executive DirectorsFees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 218Other remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313 269Benefits-in-kind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 15

495 502

Total directors’ remuneration. . . . . . . . . . . . . . . . . . . . . . . . 1,521 1,640

F-413

30. TAXATION

Taxation consists of the following:

2004 2003

RM’000 RM’000

Net transfer from deferred taxation (Note 31) . . . . . . . . . . . . . 82,300 13,637

No provision for estimated tax payable is made in the financial statements of the Bank for 2004

and 2003 as the Bank incurred losses for both financial year.

As at 31 March 2004, the Bank has unutilised tax losses amounting to approximately RM159.0

million (RM194.4 million in 2003) which can be used to offset against future taxable income subject

to the agreement by the Inland Revenue Board.

A reconciliation of income tax credit applicable to loss before taxation at the statutory income

tax rate to income tax (credit)/expense at the effective income tax rate of the Bank is as follows:

2004 2003

RM’000 RM’000

Loss before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (254,531) (33,775)

Taxation at Malaysian statutory tax rate of 28% (28% as at 31

March 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (71,269) (9,457)

Expenses not deductible for tax purposes . . . . . . . . . . . . . . . . 826 (817)

Tax incentive on loan growth . . . . . . . . . . . . . . . . . . . . . . . — (3,363)

Deferred tax asset under-recognized in prior years . . . . . . . . . . (11,857) —

Tax credit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . (82,300) (13,637)

31. DEFERRED TAXATION

2004 2003

RM’000 RM’000

Balance at beginning of year

As previously reported . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,441 119,941

Prior year adjustment (Note 40) . . . . . . . . . . . . . . . . . . . . . . 31,042 33,905*

As restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167,483 153,846

Transfer to income statement (Note 30) . . . . . . . . . . . . . . . . . 82,300 13,637

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . 249,783 167,483

* The prior year adjustment is in respect of temporary differences arising from general allowance for loans, advances

and financing.

F-414

Deferred tax assets/(liabilities) are in respect of the following timing differences:

2004 2003

RM’000 RM’000

Unabsorbed tax losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,537 54,442

Timing differences between depreciation and tax allowances on

property and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . (2,067) (2,732)

Timing differences arising from allowance on amount recoverable

from Danaharta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,409 36,635

Timing differences arising from allowance for diminution in value of

investment and dealing securities . . . . . . . . . . . . . . . . . . . . 57,682 28,876

General allowance for bad and doubtful debts and financing . . . . 31,057 31,042

Specific allowance for bad and doubtful debts and financing . . . . 72,800 14,000

Interest suspended on non-performing loans. . . . . . . . . . . . . . . 7,452 7,452

Profit equalisation reserve . . . . . . . . . . . . . . . . . . . . . . . . . 648 126

Accretion of discount less amortisation of premium. . . . . . . . . . (2,623) (1,747)

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (112) (611)

249,783 167,483

32. EARNINGS PER ORDINARY SHARE (SEN)

Basic

Basic loss per share is calculated by dividing the net loss for the financial year

attributable to shareholder of the Bank by the weighted average number of ordinary shares in

issue during the financial year.

2004 2003

RM’000 RM’000

Net loss attributable to shareholder of the Bank . . . . . . . . . (172,231) (20,138)

Less: Interest on ICULS . . . . . . . . . . . . . . . . . . . . . . . — (2,502)

Net loss attributable to shareholder of the Bank after interest

on ICULS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (172,231) (22,640)

Number of ordinary shares at beginning of the year . . . . . . 505,469 435,547

Effect of ordinary shares issued pursuant to:

— conversion of ICULS . . . . . . . . . . . . . . . . . . . . . . — 35,057

— rights issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,729 —

Weighted average number of ordinary shares in issue . . . . . 553,198 470,604

Basic loss per share (Sen) . . . . . . . . . . . . . . . . . . . . . . (31.13) (4.81)

There are no dilutive potential ordinary shares during the financial years.

F-415

33. COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Bank makes various commitments and incurs certain

contingent liabilities with legal recourse to its customers. No material losses are anticipated as a

result of these transactions. The commitments and contingencies are not secured against the Bank’s

assets.

The risk-weighted exposures of the Bank is as follows:

2004 2003

Principal

Amount

Credit

Equivalent

Amount*

Principal

Amount

Credit

Equivalent

Amount*

RM’000 RM’000 RM’000 RM’000

Direct credit substitutes . . . . . . . . . . . . 246,743 246,743 230,331 230,331

Forward exchange contracts . . . . . . . . . 134,854 1,084 206,115 1,089

Transaction-related contingent items . . . . 184,159 92,080 191,191 95,595

Obligations under underwriting agreements 95,000 47,500 115,000 57,500

Irrevocable commitments to extend credit:

— maturing less than one year . . . . . . 2,992,314 — 2,689,737 —

— maturing more than one year . . . . . 1,054,290 527,145 788,061 394,031

Short-term self-liquidating trade-related

contingencies . . . . . . . . . . . . . . . . . 133,052 26,610 107,788 21,558

Islamic financing sold to Cagamas Berhad

with recourse . . . . . . . . . . . . . . . . . 3,508 3,508 3,683 3,683

Others. . . . . . . . . . . . . . . . . . . . . . . 14,558 — 71,598 —

4,858,478 944,670 4,403,504 803,787

* The credit equivalent amount is arrived at using the credit conversion factor as per Bank Negara Guidelines.

The Bank is contingently liable in respect of Islamic financing sold to Cagamas Berhad on the

condition that the Bank undertakes to administer the loans on behalf of Cagamas Berhad and to buy

back any loans which are regarded as defective based on prudent criteria.

34. NET TANGIBLE ASSETS PER SHARE (RM)

Net tangible assets per share represent the balance sheet’s total assets value less total liabilities

expressed as an amount per ordinary share.

Net tangible assets per share is calculated as follows:

2004 2003

RM’000 RM’000

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,955,408 10,685,811

Less:

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,338,138 10,221,310

Net Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 617,270 464,501

Issued and fully paid-up ordinary shares of RM1.00 each . . . 708,594 505,469

Net tangible assets per share (RM) . . . . . . . . . . . . . . . . . 0.87 0.92

F-416

35. CAPITAL COMMITMENTS

As at 31 March 2004, the Bank has the following commitments:

2004 2003

RM’000 RM’000

Authorised but not contracted for Purchase of computer equipment

and software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,468 708

36. LEASE COMMITMENTS

The Bank has lease commitments in respect of rented premises, which are classified as

operating leases. A summary of non-cancellable long-term commitments, net of sub-leases is as

follows:

2004 2003

RM’000 RM’000

Year ending

2004. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 6,172

2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,996 2,347

2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,687 922

2007 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,213 —

38,896 9,441

The lease commitments represent minimum rentals and are not adjusted for operating expenses

which the Bank is obligated to pay. These amounts are insignificant in relation to the minimum lease

obligations. In the normal course of business, leases that expire will be renewed or replaced by

leases on other properties, thus it is anticipated that future annual minimum lease commitments will

not be less than rental expenses for the year.

37. CAPITAL ADEQUACY RATIO

Bank Negara Malaysia’s (BNM) guideline on capital adequacy requires the Bank to maintain

adequate level of capital to withstand any losses which may result from credit and other risks

associated with financing operations. The capital adequacy ratio is computed based on the eligible

capital in relation to the total risk weighted assets as determined by BNM.

F-417

The risk weighted capital adequacy ratio of the Bank of 11.96% (12.91% in 2003) exceeds the

minimum requirements of BNM

2004 2003

RM’000 RM’000

Tier 1 capital

Paid-up share capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . 708,594 505,469

Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345,156 223,281

Statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,642 95,642

Capital reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 461

Accumulated losses at end of year* . . . . . . . . . . . . . . . . . . (782,366) (391,394)

Total tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367,487 433,459

Tier 2 capital

General allowances for bad and doubtful debts and financing. . . 110,918 110,863

Exchangeable Subordinated Capital Loan (ESCL) . . . . . . . . . . — 460,000**

Subordinated term loan . . . . . . . . . . . . . . . . . . . . . . . . . . 460,000** 30,000

Total tier 2 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570,918 600,863

Capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 938,405 1,034,322

* Amount as at 31 March 2004 excludes deferred tax assets recognized to-date.

** Not limited to 50% of Tier-1 capital as approved by Bank Negara Malaysia.

Notional risk-weighted assets:

2004 2003

RM’000 RM’000

Categories

0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,342,393 1,880,212

10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

20% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 548,576 939,398

50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,139,575 1,573,581

100% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,736,138 7,036,191

Total notional risk-weighted assets . . . . . . . . . . . . . . . . . 11,766,682 11,429,382

Total risk-weighted assets . . . . . . . . . . . . . . . . . . . . . . 7,915,641 8,010,862

Capital Ratios:

Core capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.64% 5.41%

Risk-weighted capital ratio . . . . . . . . . . . . . . . . . . . . . 11.86% 12.91%

38. RISK MANAGEMENT POLICY

Risk management is about managing uncertainties such that deviations from the Bank’s

intended objectives are kept within acceptable levels. Sustainable profitability forms the core

objectives of the Bank’s risk management strategy.

F-418

Every risk assumed by the Bank carries with it potential for gains as well as potential to erode

shareholders’ value. The Bank’s risk management policy is to identify, capture and analyse these

risks at an early stage, continuously measure and monitor these risks and to set limits, policies and

procedures to control them to ensure sustainable risk-taking and sufficient returns.

The management approach towards the significant risks of the Bank is enumerated below.

Market Risk Management

Market risk is the risk of loss from changes in the value of portfolios and financial

instruments caused by movements in market variables, such as interest rates, foreign exchange

rates and equity prices.

The primary objective of market risk management is to ensure that losses from market

risk can be promptly arrested and risk positions are sufficiently liquid so as to enable the Bank

to reduce its position without incurring potential loss that is beyond the sustainability of the

Bank.

The market risk of the Bank’s trading and non-trading portfolio is managed separately

using value at risk approach to compute the market risk exposure of non-trading portfolio and

trading portfolio. Value at risk is a statistical measure that estimates the potential changes in

portfolio value that may occur brought about by daily changes in market rates over a specified

holding period at a specified confidence level under normal market condition. For the Bank’s

trading portfolio, the Bank’s value at risk measurement takes a more sophisticated form by

taking into account the correlation effects of various instruments in the portfolio.

The Bank controls its market risk exposure of its trading and non-trading activities

primarily through a series of threshold limits. Stop loss, value at risk and position sensitivity

limits are the primary means of control governing the trading activities of the Bank while value

at risk limits governs the non-trading positions.

To complement value at risk measurement, the Bank also institutes a set of scenario

analysis under various potential market conditions such as shifts in currency rates, general

equity prices and interest rate movements to assess the changes in portfolio value.

F-419

The following table shows the interest rate sensitivity gap, by time bands, on which

interest rates of instruments are next repriced on a contractual basis or, if earlier, the dates on

which the instruments mature.

2004

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

interest

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term funds . . 1,654,922 — — — — — 55,380 1,710,302 3.0

Deposits and placements with

financial institutions . . . . — — 22,048 — — — — 22,048 3.0

Dealing securities. . . . . . . . — — — — 63,792 133,286 36,105 233,183 4.6

Investment securities . . . . . . 14,474 175,783 58,081 7,422 319,407 400,885 159,346 1,135,398 3.4

Loans, advances and

financing

— Performing . . . . . . . 5,194,494 143,162 83,426 354,644 348,672 199,113 — 6,323,511 6.9

— Non-performing* . . . — — — — — — 897,809 897,809

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 633,157 633,157

TOTAL ASSETS. . . . . . . . 6,863,890 318,945 163,555 362,066 731,871 733,284 1,781,797 10,955,408

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers . . . 3,288,464 1,095,136 715,081 652,442 103,697 — 825,433 6,680,253 2.7

Deposits and placements of

banks and other financial

institutions . . . . . . . . . . 675,210 363,531 608,464 654,024 46,013 — 161,409 2,508,651 3.2

Securities sold under

repurchase agreements . . . 4,722 — — — — — — 4,722 2.7

Bills and acceptances

payables . . . . . . . . . . . 82,066 124,276 58,253 — — — — 264,595

Amount due to Cagamas

Berhad . . . . . . . . . . . . 1,752 3,523 5,328 10,815 216,731 — — 238,149 4.0

Subordinated term loan . . . . — — — — 460,000 — — 460,000 6.9

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 181,768 181,768

Total Liabilities . . . . . . . . . 4,052,214 1,586,466 1,387,126 1,317,281 826,441 — 1,168,610 10,338,138

Shareholder’s funds . . . . . . — — — — — — 617,270 617,270

TOTAL LIABILITIES AND

SHAREHOLDER’S

FUNDS . . . . . . . . . . . . 4,052,214 1,586,466 1,387,126 1,317,281 826,441 — 1,785,880 10,955,408

On-balance sheet interest

sensitivity gap . . . . . . . . 2,811,676 (1,267,521) (1,223,571) (955,215) (94,570) 733,284 (4,083) —

Off-balance sheet interest

sensitivity gap . . . . . . . . — — — — — — — —

Total interest sensitivity gap . 2,811,676 (1,267,521) (1,223,571) (955,215) (94,570) 733,284 (4,083) —

* This is arrived at after deducting the general allowance, specific allowance and interest/income-in-suspense from gross

non-performing loans outstanding.

F-420

2003

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

interest

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term funds . . 1,611,857 — — — — — 57,150 1,669,007 2.8

Deposits and placements with

financial institutions . . . . — 100,000 130,000 — — — — 230,000 3.1

Dealing securities. . . . . . . . — — — — 46,502 143,777 28,496 218,775 5.3

Investment securities . . . . . . 199,952 15,572 — — 247,053 212,428 132,712 807,717 3.3

Loans, advances and

financing

— Performing . . . . . . . 5,265,116 80,235 71,229 61,404 523,983 53,641 — 6,055,608 7.4

— Non-performing* . . . — — — — — — 1,171,791 1,171,791

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 532,913 532,913

TOTAL ASSETS. . . . . . . . 7,076,925 195,807 201,229 61,404 817,538 409,846 1,923,062 10,685,811

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers . . . 3,119,188 1,326,492 534,418 773,539 231,370 — 510,349 6,495,356 2.9

Deposits and placements of

banks and other financial

institutions . . . . . . . . . . 968,974 631,268 605,965 192,649 129,435 — — 2,528,291 3.3

Securities sold under

repurchase agreements . . . 12,607 — — — — — — 12,607 2.5

Bills and acceptances

payables . . . . . . . . . . . 89,131 70,313 30,064 — — — — 189,508

Amount due to Cagamas

Berhad . . . . . . . . . . . . 2,091 82,082 108,072 12,868 143,031 — — 348,144 4.4

Subordinated term loan . . . . — — — — 75,000 — — 75,000 9.0

Exchangeable Subordinated

Capital Loan . . . . . . . . . — — 460,000 — — — — 460,000 7.5

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 112,404 112,404

Total Liabilities . . . . . . . . . 4,191,991 2,110,155 1,738,519 979,056 578,836 — 622,753 10,221,310

Shareholder’s funds . . . . . . — — — — — — 464,501 464,501

TOTAL LIABILITIES AND

SHAREHOLDER’S

FUNDS . . . . . . . . . . . . 4,191,991 2,110,155 1,738,519 979,056 578,836 — 1,087,254 10,685,811

On-balance sheet interest

sensitivity gap . . . . . . . . 2,884,934 (1,914,348) (1,537,290) (917,652) 238,702 409,846 835,808 —

Off-balance sheet interest

sensitivity gap . . . . . . . . — — — — — — — —

Total interest sensitivity gap . 2,884,934 (1,914,348) (1,537,290) (917,652) 238,702 409,846 835,808 —

* This is arrived at after deducting the general allowance, specific allowance and interest/income-in-suspense from gross

non-performing loans outstanding.

Liquidity Risk

Liquidity risk is the risk that the organisation will not be able to fund its day-to-day

operations at a reasonable cost.

The primary objective of liquidity risk management framework is to ensure the

availability of sufficient funds at a reasonable cost to honour all financial commitments as it

comes due.

The secondary objective is to ensure an optimal funding structure and to balance the key

liquidity risk management objectives, which includes diversification of funding sources,

customer base, and maturity period.

F-421

The ongoing liquidity risk management at the Bank is based on the following key

strategies:

. Management of cash-flow; an assessment of potential cash flow mismatches that may

arise over a period of one-year ahead and the maintenance of adequate cash and

liquefiable assets over and above the standard requirements of Bank Negara Malaysia.

. Scenario analysis; a simulation on liquidity demands of new business, changes in portfolio

as well as stress scenarios based on historical experience of large withdrawals.

. Diversification and stabilisation of liabilities through management of funding sources,

diversification of customer depositor base and inter-bank exposures.

In the event of actual liquidity crisis occurring, a Contingency Funding Plan provides a

formal process to identify a liquidity crisis and detailing responsibilities among the relevant

departments to ensure orderly execution of procedures to restore the liquidity position and

confidence in the Bank.

The following table shows the maturity analysis of the Bank’s assets and liabilities based

on contractual terms:

2004

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

specific

maturity Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . . . . 1,710,302 — — — — — — 1,710,302

Deposits and placements with financial

institutions . . . . . . . . . . . . . . . . . — — 22,048 — — — — 22,048

Dealing securities. . . . . . . . . . . . . . . 36,105 — — — 63,792 133,286 — 233,183

Investment securities . . . . . . . . . . . . . 14,474 175,783 58,081 7,422 319,407 400,885 159,346 1,135,398

Loans, advances and financing. . . . . . . 2,001,110 478,949 252,102 319,616 1,343,426 2,826,117 — 7,221,320

Other assets . . . . . . . . . . . . . . . . . . — — — — — — 309,229 309,229

Statutory deposit with Bank Negara

Malaysia . . . . . . . . . . . . . . . . . . — — — — — — 291,687 291,687

Property and equipment . . . . . . . . . . . — — — — — — 32,241 32,241

TOTAL ASSETS. . . . . . . . . . . . . . . 3,761,991 654,732 332,231 327,038 1,726,625 3,360,288 792,503 10,955,408

LIABILITIES AND SHAREHOLDER’S

FUNDS

Deposits from customers . . . . . . . . . . 4,113,897 1,095,136 715,081 652,442 103,697 — — 6,680,253

Deposits and placements of banks and

other financial institutions . . . . . . . 836,619 363,531 608,464 654,024 46,013 — — 2,508,651

Securities sold under repurchase

agreements . . . . . . . . . . . . . . . . . 4,722 — — — — — — 4,722

Bills and acceptances payables . . . . . . 82,066 124,276 58,253 — — — — 264,595

Amount due to Cagamas Berhad . . . . . 1,752 3,523 5,328 10,815 216,731 — — 238,149

Other liabilities . . . . . . . . . . . . . . . . — — — — — — 181,768 181,768

Subordinated term loan . . . . . . . . . . . — — — — — 460,000 — 460,000

Total Liabilities . . . . . . . . . . . . . . . . 5,039,056 1,586,466 1,387,126 1,317,281 366,441 460,000 181,768 10,338,138

Shareholder’s funds . . . . . . . . . . . . . — — — — — — 617,270 617,270

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . . . . 5,039,056 1,586,466 1,387,126 1,317,281 366,441 460,000 799,038 10,955,408

Net maturity mismatch . . . . . . . . . . . (1,277,065) (931,734) (1,054,895) (990,243) 1,360,184 2,900,288 (6,535) —

F-422

2003

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

specific

maturity Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . . . . 1,669,007 — — — — — — 1,669,007

Deposits and placements with financial

institutions . . . . . . . . . . . . . . . . . — 100,000 130,000 — — — — 230,000

Dealing securities. . . . . . . . . . . . . . . 28,496 — — — 46,502 143,777 — 218,775

Investment securities . . . . . . . . . . . . . 199,952 15,572 — — 247,053 212,428 132,712 807,717

Loans, advances and financing. . . . . . . 2,100,276 364,672 332,168 413,547 1,509,727 2,507,009 — 7,227,399

Other assets . . . . . . . . . . . . . . . . . . — — — — — — 174,435 174,435

Deferred tax assets . . . . . . . . . . . . . . — — — — — — 31,042 31,042

Statutory deposit with Bank Negara

Malaysia . . . . . . . . . . . . . . . . . . — — — — — — 293,957 293,957

Property and equipment . . . . . . . . . . . — — — — — — 33,479 33,479

TOTAL ASSETS. . . . . . . . . . . . . . . 3,997,731 480,244 462,168 413,547 1,803,282 2,863,214 665,625 10,685,811

LIABILITIES AND SHAREHOLDER’S

FUNDS

Deposits from customers . . . . . . . . . . 3,629,537 1,326,492 534,418 773,539 231,370 — — 6,495,356

Deposits and placements of banks and

other financial institutions . . . . . . . 968,974 631,268 605,965 192,649 129,435 — — 2,528,291

Securities sold under repurchase

agreements . . . . . . . . . . . . . . . . . 12,607 — — — — — — 12,607

Bills and acceptances payables . . . . . . 89,131 70,313 30,064 — — — — 189,508

Amount due to Cagamas Berhad . . . . . 2,091 82,082 108,072 12,868 143,031 — — 348,144

Other liabilities . . . . . . . . . . . . . . . . — — — — — — 112,404 112,404

Subordinated term loan . . . . . . . . . . . — — — — 75,000 — — 75,000

Exchangeable Subordinated Capital Loan — — 460,000 — — — — 460,000

Total Liabilities . . . . . . . . . . . . . . . . 4,702,340 2,110,155 1,738,519 979,056 578,836 — 112,404 10,221,310

Shareholder’s funds . . . . . . . . . . . . . — — — — — — 464,501 464,501

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . . . . 4,702,340 2,110,155 1,738,519 979,056 578,836 — 576,905 10,685,811

Net maturity mismatch . . . . . . . . . . . (704,609) (1,629,911) (1,276,351) (565,509) 1,224,446 2,863,214 88,720 —

Credit Risk Management

Credit risk is the risk of loss due to the inability or unwillingness of a counterparty to

meet its payment obligations. Exposure to credit risk arises primarily from lending and

guarantee activities and, to a lesser extent, pre-settlement and settlement exposures of sales and

trading activities.

The primary objective of the credit risk management framework is to ensure that exposure

to credit risk is always kept within its capability and financial capacity to withstand potential

future losses.

For non-retail credits, risk measurement begins with an assessment of the financial

standing of the borrower or counterparty using an internally developed credit rating model. The

model consists of quantitative and qualitative scores which are then translated into a rating

grade, which ranges from ‘‘AAA’’ (lowest risk) to ‘‘C’’ (highest risk).

Credit risk is quantified based on Expected Default Frequencies and Expected Losses on

default from its portfolio of loans and off-balance sheet credit commitments. Expected Default

Frequencies are calibrated to the internal rating model while Loan Loss Estimates are based on

past portfolio default experiences.

For retail credits, an in-house developed credit-scoring system to support the housing

applications is being used to complement the credit assessment process.

F-423

The Bank’s lending activities are guided by internal credit policies and guidelines that are

approved by the Board of Directors. Within these policies, single customer limits restrict total

exposure allowed to corporate groups according to their level of creditworthiness, while sector

limits ensure that the Bank’s total credit exposure to each economic sector is within prudent

thresholds.

Operational Risk Management

Operational risk is the potential loss from a breakdown in internal process, systems,

deficiencies in people and management or operational failure arising from external events. It is

increasingly recognised that operational risk is the single most widespread risk facing financial

institutions today.

Operational risk management is the discipline of systematically identifying the critical

potential points and causes of failure, assess the potential cost and to minimise the impact of

such risk through the initiation of risk mitigating measures and policies.

The Bank minimises operational risk by putting in place appropriate policies, internal

controls and procedures as well as maintaining back-up procedures for key activities and

undertaking contingency planning. These are supported by independent reviews by the Bank’s

Internal Audit team.

Legal and Regulatory Risk

The Bank manages legal and regulatory risks to its business. Legal risk arises from the

potential that breaches of applicable laws and regulatory requirements, unenforceability of

contracts, lawsuits, or adverse judgement, may lead to the incurrence of losses, disrupt or

otherwise resulting in financial and reputational risk.

Legal risk is managed by internal legal counsel and where necessary, in consultation with

external legal counsel to ensure that legal risk minimised.

Regulatory risk is managed through the implementation of measures and procedures

within the organisation to facilitate compliance with regulations. These include a compliance

monitoring and reporting process that requires identification of risk areas, prescription of

controls to minimise these risks, staff training and assessments, provision of advice and

disseminating of information.

Risk Management Policy on Financial Derivatives

Purpose of engaging in financial derivatives

Financial derivative instruments are contracts whose value is derived from one or more

underlying financial instruments or indices. They include swaps, forward rate agreements,

futures, options and combinations of these instruments. Derivatives are contracts that transfer

risks, mainly market risks. Financial derivatives is one of the financial instruments engaged by

the Bank both for revenue purposes as well as to manage the Bank’s own market risk exposure.

The Bank’s involvement in financial derivatives is currently focused on foreign exchange rate

derivatives.

The principal exchange rate contracts used are forward foreign exchange contracts.

Forward foreign exchange contracts are agreements to buy or sell a specified quantity of

foreign currency on a specified future date at an agreed rate.

For revenue purposes, the Bank maintains trading positions in these instruments and

engages in transactions with customers to satisfy their needs in managing their foreign

exchange rate exposures. Derivative transactions generate income for the Bank from the buy-

sell spreads. The Bank also takes conservative exposures, within acceptable limits, to carry an

inventory of these instruments in order to provide market liquidity and to earn potential gains

on fluctuations in the value of these instruments.

F-424

As part of the asset and liability exposure management, the Bank uses derivatives to

manage the Bank’s market risk exposure. As the value of these financial derivatives are

principally driven by foreign exchange rate factors, the Bank uses them to reduce the overall

foreign exchange rate exposures of the Bank. These are performed by entering into an exposure

in derivatives that produces opposite value movements vis-a-vis exposures generated by other

non-derivative activities of the Bank. The Bank manages these risks on a portfolio basis.

Hence, exposures on derivatives are aggregated or netted against similar exposures arising from

other financial instruments engaged by the Bank.

Fair value of financial derivatives

The estimated fair values of the Bank’s outstanding derivative financial instruments are as

below. These values are stand-alone without taking into account their potential offsetting

relationships with other non-derivatives exposures of the Bank.

2004 2003

Principal

Amount Fair Value

Principal

Amount Fair Value

RM’000 RM’000 RM’000 RM’000

Forward exchange contracts . . . . . . 134,854 1,084 206,115 1,089

Risk associated with financial derivatives

As derivatives are contracts that transfer risks, they expose the holder to the same types

of market and credit risks as other financial instruments, and the Bank manages these risks in a

consistent manner under the overall risk management framework.

Market risk of derivatives used for trading purposes

Market risk arising from the above foreign exchange-related derivatives contracts

measures the potential losses to the value of these contracts due to changes in market rates/

prices. Exposure to market risk may be reduced through offsetting on and off-balance sheet

positions. As at 31 March 2004, the net open position of the Bank was RM4,446,000

(RM5,351,000 in 2003).

The use of these instruments to hedge underlying exposures arising from funding or for

fixed income instruments acquired for investment purposes are not included in the market risk

numbers above.

Credit risk of derivatives

Counterparty credit risk arises from the possibility that a counterparty may be unable to

meet the terms of the derivatives contract. Unlike conventional asset instruments, the Bank’s

financial loss is not the entire contracted principal value of the derivatives, but rather a fraction

equivalent to the cost to replace the defaulted contract with another in the market. The cost of

replacement is equivalent to the difference between the original value of the derivatives at time

of contract with the defaulted counterparty and the current fair value of a similar substitute at

current market prices. The Bank will only suffer a replacement cost if the contract carries a fair

value gain at time of default.

As at 31 March 2004, the amounts of counterparty credit risk, measured in terms of the

cost to replace the positive value contracts of the Bank, was RM1,084,000 (RM1,089,000 as at

31 March 2003). This amount will increase or decrease over the life of the contracts, mainly as

a function of movement in market rates and time.

The Bank limits its credit risk within a conservative framework by dealing with

creditworthy counterparties, setting credit limits on exposures to counterparties, and obtaining

collateral where appropriate.

F-425

39. FAIR VALUES OF FINANCIAL INSTRUMENTS

Financial instruments are contracts that gives rise to both a financial asset of one enterprise

and a financial liability or equity instrument of another enterprise. The fair value of a financial

instrument is the amount at which the instrument could be exchanged or settled between

knowledgeable and willing parties in an arm’s length transaction, other than a forced or

liquidated sale. The information presented herein represents best estimates of fair values of

financial instruments 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 number of methodologies and assumptions regarding risk characteristics of various financial

instruments, discount rates, estimates of future cash flows and other factors. Changes in the

assumptions could materially affect these estimates and the corresponding fair values.

In addition, fair value information for non-financial assets and liabilities such as investments in

subsidiary companies and taxation are excluded, as they do not fall within the scope of MASB 24,

which requires the fair value information to be disclosed.

The estimated fair values of the Bank’s financial instruments are as follows:

2004 2003

Carrying

Value Fair Value

Carrying

Value Fair Value

RM’000 RM’000 RM’000 RM’000

Financial Assets

Cash and short-term funds . . . . . . . . . . . 1,710,302 1,710,302 1,669,007 1,669,007

Deposits and placements with financial

institutions . . . . . . . . . . . . . . . . . . . 22,048 22,048 230,000 230,000

Dealing securities. . . . . . . . . . . . . . . . . 233,183 233,183 218,775 218,418

Investment securities . . . . . . . . . . . . . . . 1,135,398 1,098,988 807,717 907,366

Loans, advances and financing* . . . . . . . . 7,332,238 7,354,924 7,338,262 7,389,719

Other financial assets . . . . . . . . . . . . . . 59,446 59,446 27,641 27,641

10,492,615 10,478,891 10,291,402 10,442,151

Non-financial assets . . . . . . . . . . . . . . . 462,793 462,793 394,409 394,409

TOTAL ASSETS . . . . . . . . . . . . . . . . . 10,955,408 10,941,684 10,685,811 10,836,560

F-426

2004 2003

Carrying

Value Fair Value

Carrying

Value Fair Value

RM’000 RM’000 RM’000 RM’000

Financial Liabilities

Deposits from customers . . . . . . . . . . . . 6,680,253 6,698,922 6,495,356 6,501,410

Deposits and placements of banks and other

financial institutions . . . . . . . . . . . . . . 2,508,651 2,512,705 2,528,291 2,532,847

Securities sold under repurchase agreements 4,722 4,722 12,607 12,607

Bills and acceptances payable . . . . . . . . . 264,595 264,595 189,508 189,508

Amount due to Cagamas Berhad . . . . . . . 238,149 237,895 348,144 381,485

Subordinated term loan . . . . . . . . . . . . . 460,000 500,400 75,000 86,032

Exchangeable Subordinated Capital Loan . . — — 460,000 470,099

Other financial liabilities . . . . . . . . . . . . 179,456 179,456 111,956 111,956

10,335,826 10,398,695 10,220,862 10,285,944

Non-Financial Liabilities

Other non-financial liabilities . . . . . . . . . 2,312 2,312 448 448

Shareholder’s funds . . . . . . . . . . . . . . . 617,270 617,270 464,501 464,501

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . . . . . . 10,955,408 11,018,277 10,685,811 10,750,893

* The general allowance for the Bank amounting to RM110,918,000 (RM110,863,000 in 2003) has been included

under non-financial assets.

The fair value of the other financial assets and other financial liabilities, which are considered

short term in nature, are estimated to be approximately their carrying value.

The fair value of derivative financial instruments are shown in Note 38.

The fair value of contingent liabilities and undrawn credit facilities are not readily

ascertainable. These financial instruments are presently not sold or traded. They generate fees that

are in line with market prices for similar arrangements. The estimated fair value may be represented

by the present value of the fees expected to be received, less associated costs and potential loss that

may arise should these commitments crystalise. The Bank assess that their respective fair values are

unlikely to be significant given that the overall level of fees involved is not significant and no

allowance is necessary to be made.

The following methods and assumptions were used to estimate the fair value of assets and

liabilities as at 31 March 2004 :

(a) Cash and Short-Term Funds

The carrying values are a reasonable estimate of the fair values because of negligible

credit risk, short-term nature or frequent repricing.

(b) Securities Purchased Under Repurchased Agreements and Deposits With Financial

Institutions

The fair values of securities purchased under repurchased agreements and deposits with

financial institutions with remaining maturities less than six months are estimated to

approximate their carrying values. For securities purchased under repurchased agreements

and deposits with financial institutions with maturities of more than six months, the fair value

are estimated based on discounted cash flows using the prevailing KLIBOR rates and interest

rate swap rates.

F-427

(c) Dealing and Investment Securities

The estimated fair value is based on quoted or observable market prices at the balance

sheet date. Where such quoted or observable market prices are not available, the fair value is

estimated using discounted cash flow or net tangible assets techniques. Where the discounted

cash flow technique is used, the estimated future cash flows are discounted using prevailing

KLIBOR rates and interest rate swap rates of similar instruments at the balance sheet date.

(d) Loans, Advances and Financing (‘‘Loans and Financing’’)

The fair value of variable rate loans and financing are estimated to approximate their

carrying values. For fixed rate loans and financing, the fair values are estimated based on

expected future cash flows of contractual instalment payments and discounted at prevailing

KLIBOR rates and interest rate swap rates. In respect of non-performing loans and financing,

the fair values are deemed to approximate the carrying values, net of interest in suspense and

specific allowance for bad and doubtful debts and financing.

(e) Deposits From Customers, Deposits of Banks and Other Financial Institutions and

Securities Sold Under Repurchase Agreements

The fair value of deposits liabilities payable on demand (‘‘current and savings deposits’’)

or with remaining maturities of less than six months are estimated to approximate their

carrying values at balance sheet date. The fair values of term deposits, negotiable instrument of

deposits and securities sold under repurchase agreements with remaining maturities of more

than six months are estimated based on discounted cash flows using KLIBOR rates and interest

rate swap rates.

(f) Bills and Acceptances Payables

The carrying values are a reasonable estimate of their fair values because of their short-

term nature.

(g) Amount Due to Cagamas Berhad

The fair values for amount due to Cagamas Berhad are determined based on discounted

cash flows of future instalment payments at prevailing KLIBOR rates and interest rate swap

rates.

(h) Subordinated Term Loans and Exchangeable Subordinated Capital Loan

(‘‘Borrowings’’)

The fair value of borrowings with remaining maturities of less than six months are

estimated to approximate their carrying values at balance sheet date. The fair value of

borrowings with remaining maturities of more than six months are estimated based on

discounted cash flows using KLIBOR rates and interest rate swap rates.

(i) Forward Exchange Contracts

The estimated fair value is based on the market price to enter into an offsetting contract

at balance sheet date.

As assumptions were made regarding risk characteristics of the various financial

instruments, discount rates, future expected loss experience and other factors, changes in the

uncertainties and assumptions could materially affect these estimates and the resulting value

estimates.

F-428

40. PRIOR YEAR ADJUSTMENTS

During the financial year, the Bank changed its accounting policy on accounting for income

taxes. Under MASB Standard 25, deferred tax liabilities are recognised for all taxable temporary

differences. In prior years, deferred tax liabilities were provided for on account of timing differences

only to the extent that a tax liability was expected to materialise in the foreseeable future. In

addition, the Bank has commenced recognition of deferred tax assets for all deductible temporary

differences, when it is probable that sufficient taxable profit will be available against which the

deductible temporary differences can be utilised. In prior years, deferred tax assets were not

recognised unless the expected realisation was reasonable assured.

The accounting change has been accounted for retrospectively and the effects on prior years

have been taken up as a prior year adjustment in the financial statements.

Accordingly, the following accounts in prior years have been restated to reflect the effects of

the accounting change:

As previously

stated Adjustments As restated

RM’000 RM’000 RM’000

Balance Sheet

As at 31 March 2003

Accumulated losses at end of period . . . . . . . . . . . (391,394) 31,042 (360,352)

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . 136,441 31,042 167,483

As at 1 April 2002

Accumulated losses at end of period . . . . . . . . . . . (371,617) 33,905 (337,712)

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . 119,941 33,905 153,846

Income Statement

Financial year ended 31 March 2003

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,500 (2,863) 13,637

Loss after taxation . . . . . . . . . . . . . . . . . . . . . . (17,275) (2,863) (20,138)

41. SIGNIFICANT EVENTS

(i) On 10 May 2003, the ultimate holding company, AMMB Holdings Berhad (‘‘AHB’’)

received the approval of Bank Negara Malaysia (‘‘BNM’’) for AHB to commence

negotiations with EON Capital Berhad for a possible merger between the two banking

groups. However, the discussion was mutually terminated on 25 June 2003.

(ii) On 9 July 2003, AHB obtained the consent of BNM to commence discussion with

Commerce Asset-Holding Berhad for the possible merger of the Bank with Bumiputra-

Commerce Bank Berhad and AmFinance Berhad with Bumiputra-Commerce Finance

Berhad. Subsequently on 5 September 2003, the negotiations were mutually terminated.

(iii) On 6 January 2004, the Bank increased its paid-up share capital from RM505,468,750 to

RM708,593,750 through the issuance of 203,125,000 new ordinary shares of RM1.00 each

by way of a renounceable rights issue allotted to the Bank’s holding company, AMMB

Holdings Berhad (‘‘AHB’’), on the basis of 520 new ordinary shares for every 1,294

existing ordinary shares held, at an issue price of RM1.60 per ordinary share.

F-429

42. ISLAMIC BANKING OPERATIONS

The state of affairs as at 31 March 2004 (10 Safar 1425 Hijrah) and the results for the financial

year ended on that date under the Islamic Banking operations are summarised as follows:

2004 2003

Note RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . . . . . . . . . . . . . . (b) 88,079 113,107

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . . (c) 48,420 —

Investment securities . . . . . . . . . . . . . . . . . . . . . . . (d) 399,531 174,307

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . (e) 766,434 675,365

Statutory deposit with Bank Negara Malaysia . . . . . . . 13,965 17,560

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . (f) 1,530 2,787

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . (q) 11,416 2,915

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 1,329,375 986,041

LIABILITIES AND ISLAMIC BANKING FUND

Deposits from customers . . . . . . . . . . . . . . . . . . . . (g) 328,320 320,516

Deposits and placements of banks and other financial

institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . (h) 767,990 577,854

Bills and acceptances payable . . . . . . . . . . . . . . . . . 151 91

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . (i) 143,930 17,027

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 1,240,391 915,488

Capital funds . . . . . . . . . . . . . . . . . . . . . . . . . . . (j) 55,000 20,000

Unappropriated profit . . . . . . . . . . . . . . . . . . . . . . 33,984 50,553

Islamic Banking Fund . . . . . . . . . . . . . . . . . . . . . . 88,984 70,553

TOTAL LIABILITIES AND ISLAMIC BANKING

FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,329,375 986,041

COMMITMENTS AND CONTINGENCIES . . . . . . . . (r) 457,070 339,337

The accompanying Notes form an integral part of

the Islamic Baking operations Financial Statements.

F-430

Income Statement

For the Financial Year Ended 31 March 2004 (10 Safar 1425 Hijrah)

2004 2003

Note RM’000 RM’000

Income derived from investment of depositors’ funds and

others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (k) 48,956 41,444

Financing loss and allowances . . . . . . . . . . . . . . . . . (l) (31,001) (4,902)

Allowance for diminution in value of investment

securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,889) —

Transfer to profit equalisation reserve . . . . . . . . . . . . (1,864) (448)

Total attributable income . . . . . . . . . . . . . . . . . . . . 14,202 36,094

Income attributable to the depositors . . . . . . . . . . . . . (m) (33,285) (32,504)

(Loss)/Profit attributable to the Bank. . . . . . . . . . . . . (19,083) 3,590

Income derived from Islamic Banking Funds . . . . . . . . (n) 4,653 5,958

Total net (loss)/income . . . . . . . . . . . . . . . . . . . . . (14,430) 9,548

Operating expenditure . . . . . . . . . . . . . . . . . . . . . . (o) (8,539) (7,143)

(Loss)/Profit before taxation . . . . . . . . . . . . . . . . . . (22,969) 2,405

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (p) 6,400 (676)

(Loss)/Profit after taxation . . . . . . . . . . . . . . . . . . . (16,569) 1,729

The accompanying Notes form an integral part of

the Islamic Banking operations Financial Statements.

F-431

Statement of Changes in Islamic Banking Funds

For the Financial Year Ended 31 March 2004 (10 Safar 1425 Hijrah)

Non-distributable Distributable

Capital Funds

Unappropriated

Profit Total

Note RM’000 RM’000 RM’000

Balance as at 1 April 2002

— As previously reported . . . . 20,000 46,193 66,193

— Prior year adjustment . . . . . — 2,631 2,631

— As restated . . . . . . . . . . . 20,000 48,824 68,824

Profit for the year . . . . . . . . . . . — 1,729 1,729

As at 31 March 2003 . . . . . . . . . 20,000 50,553 70,553

Balance as at 1 April 2003

— As previously reported . . . . 20,000 47,638 67,638

— Prior year adjustment . . . . . — 2,915 2,915

— As restated . . . . . . . . . . . 20,000 50,553 70,553

Funds allocated from Head Office . 35,000 — 35,000

Loss for the year . . . . . . . . . . . . — (16,569) (16,569)

As at 31 March 2004 . . . . . . . . . 55,000 33,984 88,984

The accompanying Notes form an integral part of

the Islamic Banking operations Financial Statements.

F-432

Cash Flow Statement

For the Financial Year Ended 31 March 2004 (10 Safar 1425 Hijrah)

2004 2003

RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

(Loss)/Profit before taxation . . . . . . . . . . . . . . . . . . . . . . . . (22,969) 2,405

Adjustments for:

Income-in-suspense, net of recoveries . . . . . . . . . . . . . . . . . 29,910 56,683

Financing loss and allowances, net of recoveries . . . . . . . . . . 31,145 6,074

Transfer to profit equalisation reserve . . . . . . . . . . . . . . . . . 1,864 448

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,711) (3,535)

Loss on disposal of investment securities — net. . . . . . . . . . . 2,982 2,368

Allowance for diminution in value of investment securities . . . . 1,889 —

Operating Profit Before Working Capital Changes. . . . . . . . . . . 38,110 64,443

(Increase)/Decrease In Operating Assets:

Deposits and placements with financial institutions . . . . . . . . . — —

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (52,279) —

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (152,124) (181,893)

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,257 3,449

Statutory deposit with Bank Negara Malaysia . . . . . . . . . . . . 3,595 14,289

Increase/(Decrease) In Operating Liabilities:

Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . . . 7,804 (488,008)

Deposits and placements of banks and other financial institutions 190,136 401,935

Securities sold under repurchase agreements . . . . . . . . . . . . . — —

Bills and acceptances payable . . . . . . . . . . . . . . . . . . . . . . 60 91

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,938 (31,681)

Net Cash Generated From/(Used In) Operating Activities . . . . . . 159,497 (217,375)

CASH FLOW FROM INVESTING ACTIVITIES

(Purchase)/Sale of Investment securities — net . . . . . . . . . . . . (219,525) 46,613

Net Cash (Used In)/Generated From Investing Activities. . . . . . . (219,525) 46,613

CASH FLOW FROM FINANCING ACTIVITY

Funds allotted from head office . . . . . . . . . . . . . . . . . . . . . . 35,000 —

Net Cash Generated From Financing Activity . . . . . . . . . . . . . 35,000 —

Net Decrease In Cash and Cash Equivalents . . . . . . . . . . . . . . (25,028) (170,762)

Cash and Cash Equivalents At Beginning Of Year . . . . . . . . . . 113,107 283,869

Cash and Cash Equivalents At End Of Year . . . . . . . . . . . . . . 88,079 113,107

Note: Cash and cash equivalents consist of cash and short-term funds as shown in Note (b) to the Financial

Statements.

F-433

NOTES TO THE ISLAMIC BANKING OPERATIONS FINANCIAL STATEMENTS

(a) ISLAMIC BANKING OPERATIONS

Disclosure of Shariah Advisor

The Bank’s Islamic banking activities are subject to conformity with Shariah requirements and

confirmation by the Shariah Advisor, Dato’ Hj Md. Hashim bin Yahaya, Yang Amat Arif Dato’ Sheikh

Ghazali bin Hj Abdul Rahman and Associate Professor Dr Mohd Daud Bakar.

The role and authority of the Shariah Advisor is to advise and provide guidance on all matters with

respect to compliance with Shariah principles including product development, business, marketing and

operational implementation activities.

Zakat Obligations

The Bank does not pay zakat on behalf of the shareholders or depositors.

(b) CASH AND SHORT-TERM FUNDS

2004 2003

RM’000 RM’000

Cash and balances with banks and other financial institutions . . . . . . . . . . 8,679 10,694

Money at call and deposit placements maturing within one month . . . . . . . . 79,400 102,413

88,079 113,107

(c) DEALING SECURITIES

2004 2003

RM’000 RM’000

Unquoted Securities In Malaysia

— Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,290 —

Allowance for diminution in value of investment . . . . . . . . . . . . . . . . . . (2,870) —

Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,420 —

(d) INVESTMENT SECURITIES

2004 2003

RM’000 RM’000

Money Market Securities:

Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,491 82,491

Malaysian Government Investment Certificates . . . . . . . . . . . . . . . . . . 45,163 45,163

Negotiable Islamic debt certificates . . . . . . . . . . . . . . . . . . . . . . . . . 237,658 —

Bankers’ acceptances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,472 2

369,784 127,656

Unquoted Debt Equity Conversion In Malaysia Shares . . . . . . . . . . . . . . . 10,494 11,476

Unquoted Private Debt Securities In Malaysia Corporate bonds. . . . . . . . . . 21,031 42,118

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401,309 181,250

Less:

Allowance for diminution in value of investment . . . . . . . . . . . . . . . . . . (10,494) (11,476)

Accretion of discount less amortisation of premium. . . . . . . . . . . . . . . . . 8,716 4,533

Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399,531 174,307

Market value:

Money Market Securities:

Islamic Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,231 84,894

Malaysian Government Investment Certificates . . . . . . . . . . . . . . . . . . 49,729 48,341

Negotiable Islamic debt certificates . . . . . . . . . . . . . . . . . . . . . . . . . 255,000 —

F-434

The maturity structure of money market securities held for investment are as follows:

2004 2003

RM’000 RM’000

Maturing within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,331 2

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234,453 101,006

Three years to five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 13,475

Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 13,173

369,784 127,656

(e) FINANCING ACTIVITIES

2004 2003

RM’000 RM’000

Term financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 628,391 610,652

House financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,510 89,941

Credit cards receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,752 35,012

Bills financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,383 20,497

Trust receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,646 1,242

Gross financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 895,682 757,344

Islamic financing sold to Cagamas Berhad . . . . . . . . . . . . . . . . . . . . . . (3,508) (3,683)

892,174 753,661

Allowances for bad and doubtful financing:

— Specific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,556) (5,072)

— General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,804) (10,411)

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (92,380) (62,813)

766,434 675,365

(i) Financing analysed by concepts are as follows:

2004 2003

RM’000 RM’000

Al-Bai’ Bithaman Ajil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577,069 493,526

Al-Musyarakah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,200 182,568

Al Bai’ In’nah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,533 33,401

Al-Murabahah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,251 42,899

Al-Istina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,121 1,267

892,174 753,661

(ii) The maturity structure of financing is as follows:

2004 2003

RM’000 RM’000

Maturing within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 611,662 169,681

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,216 446,446

Three years to five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,840 21,021

Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175,456 116,513

892,174 753,661

F-435

(iii) Financing analysed by their economic purposes are as follows:

2004 2003

RM’000 RM’000

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,861 120,988

Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,895 4,906

Electricity, gas and water . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 782

Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,824 9,151

Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,314 145,814

Purchase of landed property:

Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,794 86,457

Non-residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,013 52,353

Transport, storage and communication . . . . . . . . . . . . . . . . . . . . . 14,095 17,287

Finance, insurance and business services . . . . . . . . . . . . . . . . . . . 249,674 256,944

Purchase of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,021 9,742

Consumption credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,752 35,012

Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,439 17,908

895,682 757,344

Islamic financing sold to Cagamas Berhad . . . . . . . . . . . . . . . . . . (3,508) (3,683)

892,174 753,661

(iv) Gross financing analysed by type of customers are as follows:

2004 2003

RM’000 RM’000

Domestic non-bank financial institutions . . . . . . . . . . . . . . . . . . . . 273 286

Business enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283,209 281,788

Small and medium size industries . . . . . . . . . . . . . . . . . . . . . . . . 351,156 331,951

Local government and statutory authorities . . . . . . . . . . . . . . . . . . 21,207 7,650

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236,150 131,802

Foreign entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 184

892,174 753,661

(v) Movements in non-performing financing (including income receivables) are as follows:

2004 2003

RM’000 RM’000

Gross

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . 186,247 156,566

Non-performing during the year . . . . . . . . . . . . . . . . . . . . . . . 51,427 38,809

Reclassification to performing loan . . . . . . . . . . . . . . . . . . . . . (29,980) (7,181)

Amount recovered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,074) (1,040)

Amount written off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,610) (907)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185,010 186,247

Less:

Specific allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,556) (5,072)

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (92,380) (62,813)

(113,936) (67,885)

Non-performing financing (net) . . . . . . . . . . . . . . . . . . . . . . . . . 71,074 118,362

Ratio of net non-performing financing . . . . . . . . . . . . . . . . . . . 9.09% 17.17%

F-436

(vi) Movements in the allowance for bad and doubtful financing and income-in-suspense accounts are as

follows:

2004 2003

RM’000 RM’000

General Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . 10,411 9,396

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . . . . 1,393 1,015

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,804 10,411

% of total financing less specific allowance and income-in-suspense . . 1.51% 1.52%

Specific Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . 5,072 184

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . . . . 34,517 5,327

Amount written back in respect of recoveries . . . . . . . . . . . . . . . . (4,765) (268)

Net charge to income statement . . . . . . . . . . . . . . . . . . . . . . . . . 29,752 5,059

Reclassification from conventional . . . . . . . . . . . . . . . . . . . . . . . (1) 14

Amount written off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,267) (185)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,556 5,072

Income-in-suspense

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . 62,813 3,007

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . . . . 34,220 62,545

Amount written back in respect of recoveries . . . . . . . . . . . . . . . . (4,310) (5,862)

Net charge to income statement . . . . . . . . . . . . . . . . . . . . . . . . . 29,910 56,683

Reclassification from conventional . . . . . . . . . . . . . . . . . . . . . . . — 2

Amount written off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (343) 3,121

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,380 62,813

(f) OTHER ASSETS

Other assets are represented by other receivables, deposits and prepayments.

(g) DEPOSITS FROM CUSTOMERS

2004 2003

RM’000 RM’000

Mudharabah Fund

General Investment deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229,185 266,486

Non-Mudharabah Fund

Current accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,395 36,502

Saving deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,740 17,528

328,320 320,516

F-437

The maturity structure of deposits is as follows:

2004 2003

RM’000 RM’000

Due within six months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283,728 270,065

Six months to one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,196 50,246

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375 160

Three to five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 45

328,320 320,516

The deposits are sourced from the following customers:

2004 2003

RM’000 RM’000

Business enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,001 148,604

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,165 34,121

Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,154 137,791

328,320 320,516

(h) DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS

2004 2003

RM’000 RM’000

Mudarabah Fund

Other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,203 13,914

Non-Mudarabah Fund

Licensed banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388,274 396,970

Licensed finance companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,130 328

Licensed merchant banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,439 94,380

Other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211,944 72,262

767,990 577,854

(i) OTHER LIABILITIES

2004 2003

RM’000 RM’000

Amount owing to Head Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,740 6,899

Dividends payable to depositors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,374 6,527

Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,504 3,153

Profit equalisation reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,312 448

143,930 17,027

The movements in profit equalisation reserve are as follows:

2004 2003

RM’000 RM’000

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448 —

Allowance made during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,864 448

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,312 448

F-438

(j) CAPITAL FUNDS

2004 2003

RM’000 RM’000

Allocated:

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000

Increase during the year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000 —

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000 20,000

Utilised:

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000

Increase during the year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000 —

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,000 20,000

(k) INCOME DERIVED FROM INVESTMENT OF DEPOSITORS’ FUNDS AND OTHERS

2004 2003

RM’000 RM’000

Income derived from investment of:

(I) General investment deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,790 24,812

(II) Other funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,166 16,632

48,956 41,444

(I) Income derived from investment of general investment deposits

2004 2003

RM’000 RM’000

Finance income and hibah:

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,618 37,025

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,298 —

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291 1,951

Money at call and deposits with financial institutions . . . . . . . . . 615 2,349

12,822 41,325

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (199) (21,693)

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,440 1,899

14,063 21,531

Other dealing income:

Net gain from sale of dealing securities . . . . . . . . . . . . . . . . . . . . 212 24

Other operating income:

Net gain from sale of investment securities . . . . . . . . . . . . . . . . . . 428 1,458

Fee and commission income:

Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 111

Other fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 988 1,688

1,087 1,799

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,790 24,812

F-439

(II) Income derived from investment of other funds

2004 2003

RM’000 RM’000

Finance income and hibah:

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,673 40,240

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,625 —

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 965 1,165

Money at call and deposits with financial institutions . . . . . . . . . 2,041 1,403

52,304 42,808

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (29,643) (29,271)

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,776 1,135

27,437 14,672

Other dealing income:

Net gain from sale of dealing securities . . . . . . . . . . . . . . . . . . . . 704 15

Other operating income:

Net gain from sale of investment securities . . . . . . . . . . . . . . . . . . 1,418 871

Fee and commission income:

Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 66

Other fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,280 1,008

3,607 1,074

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,166 16,632

(l) FINANCING LOSS AND ALLOWANCES

2004 2003

RM’000 RM’000

Allowance for bad and doubtful financing:

— Specific allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,752 5,059

— General allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,393 1,015

Bad debts and financing recovered . . . . . . . . . . . . . . . . . . . . . . . . . . . (144) (1,172)

31,001 4,902

(m) INCOME ATTRIBUTABLE TO DEPOSITORS

2004 2003

RM’000 RM’000

Mudharabah fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,584 17,333

Non-Mudharabah fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,701 15,171

33,285 32,504

F-440

(n) INCOME DERIVED FROM ISLAMIC BANKING FUNDS

2004 2003

RM’000 RM’000

Finance income and hibah:

Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,309 9,761

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 514

Money at call and deposits with financial institutions . . . . . . . . . . . . . 212 619

3,621 10,894

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (68) (5,719)

Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495 501

4,048 5,676

Other dealing income:

Net gain from sale of dealing securities . . . . . . . . . . . . . . . . . . . . . . 73 —

Other operating income:

Net gain from sale of investment securities . . . . . . . . . . . . . . . . . . . . 147 —

Fee and commission income:

Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 29

Other fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351 253

385 282

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,653 5,958

(o) OPERATING EXPENDITURE

2004 2003

RM’000 RM’000

Personnel (staff) costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,003 3,095

Establishment costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,641 1,704

Marketing and communication expenses . . . . . . . . . . . . . . . . . . . . . . . . 1,742 465

Administration and general expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 1,153 1,879

8,539 7,143

(p) TAXATION

2004 2003

RM’000 RM’000

Estimated current tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,101) (960)

Transfer to deferred tax assets (Note o) . . . . . . . . . . . . . . . . . . . . . . . . 8,501 284

6,400 (676)

(q) DEFERRED TAXATION

2004 2003

RM’000 RM’000

Balance at beginning of year

— As previously reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

— prior year adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,915 2,631

— As restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,915 2,631

Transfer from income statement (Note n) . . . . . . . . . . . . . . . . . . . . . . . 8,501 284

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,416 2,915

F-441

The deferred tax credits/(debits) are in respect of the following:

2004 2003

RM’000 RM’000

Timing differences arising from general allowance for financing . . . . . . . . . 3,305 2,915

Allowance for diminution in value of investments . . . . . . . . . . . . . . . . . . 3,742 —

Profit equalization reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 648 —

Accretion of discount on investments . . . . . . . . . . . . . . . . . . . . . . . . . (2,441) —

Unabsorbed tax losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,162 —

11,416 2,915

(r) COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Bank makes various commitments and incurs certain contingent liabilities

with legal recourse to its customers. No material losses are anticipated as a result of these transactions. The

commitments and contingencies are not secured against the Bank’s assets.

Risk weighted exposures of the Bank are as follows:

2004 2003

Principal

Amount

Credit

Equivalent

Amount*

Principal

Amount

Credit

Equivalent

Amount*

RM’000 RM’000 RM’000 RM’000

Islamic underwriting facilities . . . . . . . . . 95,000 47,500 115,000 57,500

Irrevocable commitments to extend credit:

— maturing less than one year . . . . . . . 250,805 — 93,259 —

— maturing more than one year . . . . . . 57,497 28,749 82,546 41,273

Al-Kafalah guarantees . . . . . . . . . . . . . . 22,925 22,925 23,003 23,003

Transaction-related contingent items . . . . . 20,399 10,200 20,943 10,472

Islamic financing sold to Cagamas Berhad . 3,508 3,508 3,683 3,683

Short-term self liquidating trade- related

contingencies . . . . . . . . . . . . . . . . . . 6,936 1,387 903 181

Total . . . . . . . . . . . . . . . . . . . . . . . . 457,070 114,269 339,337 136,112

* The credit equivalent amount is arrived at using the credit conversion factor as per Bank Negara Malaysia

Guidelines.

The Bank is contingently liable in respect of financing sold to Cagamas Berhad on the condition that the Bank

undertakes to administer the financing on behalf of Cagamas Berhad and to buy back any financing which are regarded

as defective based on prudent criteria.

F-442

(s) YIELD/PROFIT RATE RISK

The following table shows the profit rate sensitivity gap, by time bands, on which profit rates of instruments are

next repriced on a contractual basis or, if earlier, the dates on which the instruments mature.

2004

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

yield/

profit

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term funds 81,748 — — — — — 6,331 88,079 2.5

Dealing securities. . . . . — — — — 15,977 32,443 — 48,420 6.7

Investment securities . . . 14,474 69,543 58,081 — 255,659 1,774 — 399,531 3.5

Financing activities

— Performing . . . . 91,232 9,536 9,531 315,798 125,455 155,612 — 707,164 5.4

— Non-performing* — — — — — — 59,270 59,270

Other non-interest

sensitive balances . . . — — — — — — 26,911 26,911

TOTAL ASSETS . . . . . 187,454 79,079 67,612 315,798 397,091 189,829 92,512 1,329,375

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers 154,590 41,015 17,728 44,196 396 — 70,395 328,320 2.2

Deposits and placements

of banks and other

financial institutions . 629 131,781 49,317 437,217 131,662 16,455 929 767,990 3.8

Bills and acceptances

payables . . . . . . . . — — 151 — — — — 151

Other non-interest

sensitive balances . . . — — — — — — 143,930 143,930

Total Liabilities . . . . . . 155,219 172,796 67,196 481,413 132,058 16,455 215,254 1,240,391

Shareholder’s funds . . . — — — — — — 88,984 88,984

TOTAL LIABILITIES

AND

SHAREHOLDER’S

FUNDS . . . . . . . . . 155,219 172,796 67,196 481,413 132,058 16,455 304,238 1,329,375

On-balance sheet interest

sensitivity gap . . . . . 32,235 (93,717) 416 (165,615) 265,033 173,374 (211,726) —

Off-balance sheet interest

sensitivity gap . . . . . — — — — — — — —

Total interest sensitivity

gap . . . . . . . . . . . 32,235 (93,717) 416 (165,615) 265,033 173,374 (211,726) —

* This is arrived at after deducting the general allowance, specific allowance and income-in-suspense from gross non-performing loans

outstanding.

F-443

2003

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

yield/

profit

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term funds 102,413 — — — — — 10,694 113,107 2.8

Investment securities . . . 2 516 — — 153,143 20,646 — 174,307 3.2

Financing activities

— Performing . . . . 81,034 4,524 754 754 451,693 28,655 — 567,414 9.4

— Non-performing* — — — — — — 107,951 107,951

Other non-interest

sensitive balances . . . — — — — — — 23,262 23,262

TOTAL ASSETS . . . . . 183,449 5,040 754 754 604,836 49,301 141,907 986,041

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers 153,367 62,394 17,801 50,246 205 — 36,503 320,516 2.6

Deposits and placements

of banks and other

financial institutions . 4,740 13,635 4,875 55,420 499,184 — — 577,854 4.3

Bills and acceptances

payables . . . . . . . . 53 33 5 — — — — 91

Other non-interest

sensitive balances . . . — — — — — — 17,027 17,027

Total Liabilities . . . . . . 158,160 76,062 22,681 105,666 499,389 — 53,530 915,488

Shareholder’s funds . . . — — — — — — 70,553 70,553

TOTAL LIABILITIES

AND

SHAREHOLDER’S

FUNDS . . . . . . . . . 158,160 76,062 22,681 105,666 499,389 — 124,083 986,041

On-balance sheet interest

sensitivity gap . . . . . 25,289 (71,022) (21,927) (104,912) 105,447 49,301 17,824 —

Off-balance sheet interest

sensitivity gap . . . . . — — — — — — — —

Total interest sensitivity

gap . . . . . . . . . . . 25,289 (71,022) (21,927) (104,912) 105,447 49,301 17,824 —

* This is arrived at after deducting the general allowance, specific allowance and income-in-suspense from gross non-performing loans

outstanding.

F-444

(t) FAIR VALUE OF ISLAMIC BANKING OPERATIONS FINANCIAL INSTRUMENTS

The estimated fair values of the Bank’s Islamic Banking operations financial instruments are as follows:

2004 2003

Carrying Value Fair Value Carrying Value Fair Value

RM’000 RM’000 RM’000 RM’000

Financial Assets

Cash and short-term funds . . . . . . . . . . . . . . . 88,079 88,079 113,107 113,107

Dealing securities. . . . . . . . . . . . . . . . . . . . . 48,420 48,420 — —

Investment securities . . . . . . . . . . . . . . . . . . . 399,531 401,791 174,307 183,023

Financing activities* . . . . . . . . . . . . . . . . . . . 778,238 783,670 685,776 740,916

Other financial assets . . . . . . . . . . . . . . . . . . 1,530 1,530 2,787 2,787

1,315,798 1,323,490 975,977 1,039,833

Non-financial assets . . . . . . . . . . . . . . . . . . . 13,577 13,577 10,064 10,064

TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . 1,329,375 1,337,067 986,041 1,049,897

Financial Liabilities

Deposits from customers . . . . . . . . . . . . . . . . 328,320 328,620 320,516 322,256

Deposits and placements of banks and other

financial institutions . . . . . . . . . . . . . . . . . 767,990 774,861 577,854 591,665

Bills and acceptances payable . . . . . . . . . . . . . 151 151 91 91

Other financial liabilities . . . . . . . . . . . . . . . . 141,618 141,618 16,579 16,579

1,238,079 1,245,250 915,040 930,591

Non-Financial Liabilities

Other non-financial liabilities . . . . . . . . . . . . . 2,312 2,312 448 448

Shareholder’s funds . . . . . . . . . . . . . . . . . . . 88,984 88,984 70,553 70,553

TOTAL LIABILITIES AND SHAREHOLDER’S

FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . 1,329,375 1,336,546 986,041 1,001,592

* The general provision for the Islamic Banking operations amounting to RM11,804,000 (RM10,411,000 in 2003) has been

included under non-financial assets.

(u) NET INCOME FROM ISLAMIC BANKING BUSINESS

For consolidation with the conventional operations, net income from Islamic Banking Business comprises the following items:

2004 2003

RM’000 RM’000

Income derived from investment of depositors’ fund . . . . . . . . . . . . . . . . . . . . . . . 48,956 41,444

Less: Income attributable to depositors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,285) (32,504)

Income attributable to the Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,671 8,940

Income derived from Islamic Banking Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,653 5,958

20,324 14,898

F-445

(v) CAPITAL ADEQUACY RATIO

The capital adequacy ratio of the Islamic Banking Scheme of the Bank as at 31 March 2004 is analysed as follows:

2004 2003

RM’000 RM’000

Tier 1 capital

Islamic Banking Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,000 20,000

(Accumulated loss)/Unappropriated profits* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,568 47,638

Total tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,568 67,638

Tier 2 capital

General allowance for bad and doubtful debts . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,804 10,411

Total tier 2 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,804 10,411

Capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,372 78,049

Total risk-weighted assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 937,861 856,192

Capital Ratios

Core capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.27% 7.90%

Risk-weighted capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.53% 9.12%

* Amount as at 31 March 2004 excludes deferred tax assets recognised to-date.

The disclosure of the capital adequacy ratios of the Bank’s Islamic Banking operations as set out above is in accordance with the

Bank Negara Malaysia’s circular dated 19 November 2001 on ‘Pematuhan Nisbah Modal Berwajaran Risiko bagi Portfolio Perbankan

Islam’ which took effect from January 2002 onwards.

(w) PRIOR YEAR ADJUSTMENTS

The prior year adjustments relate to the change in accounting policies on adoption of MASB 25, Income Taxes as mentioned in

Note 40.

The change in accounting policies resulted from the adoption of MASB 25, Income Taxes, on the measurement and recognition

of deferred tax assets and/or liabilities which has been applied retrospectively has the following impact on previous year results:

As previously

reported Effect of change As restated

RM’000 RM’000 RM’000

Balance Sheet

As at 31 March 2003

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,915 2,915

Unappropriated profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,638 2,915 50,553

As at 1 April 2002

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,631 2,631

Unappropriated profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,193 2,631 48,824

Income Statement

Financial year ended 31 March 2003

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (960) 284 (676)

Profit after taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,445 284 1,729

F-446

43. COMPARATIVE FIGURES

The comparative figures were extended to comply with the additional disclosures requirements

of MASB i-1, Presentation of Financial Statements of Islamic Financial Institutions and MASB 25,

Income Taxes, that are applicable for the financial year ended 31 March, 2004.

44. GENERAL INFORMATION

The registered office of the Bank is located at 22nd Floor Bangunan AmBank Group, 55 Jalan

Raja Chulan, 50200 Kuala Lumpur while the principal place of business is located at Level 18

Menara Dion, Jalan Sultan Ismail, 50250 Kuala Lumpur.

F-447

AmBank Berhad

(Incorporated in Malaysia)

AUDITED FINANCIAL STATEMENTS

For the financial year ended 31 March 2004

STATEMENT BY DIRECTORS

The directors of AmBank Berhad, state that, in their opinion, the accompanying balance sheet and

the related statements of income, changes in equity and cash flows, are drawn up in accordance with

the provisions of the Companies Act, 1965 and the applicable approved accounting standards in

Malaysia so as to give a true and fair view of the state of affairs of the Bank as at 31 March 2004

and of the results and the cash flows of the Bank for the year ended on that date.

Signed on behalf of the Board

in accordance with a resolution of the Directors,

TAN SRI DATO’ AZMAN HASHIM

ChairmanCHEAH TEK KUANG

Director

Kuala Lumpur,

31 May, 2004

STATUTORY DECLARATION

I, YAP CHIN TUAN, being the Officer primarily responsible for the financial management of

AmBank Berhad, do solemnly and sincerely declare that the accompanying balance sheet and the

related statements of income, changes in equity and cash flows, together with the notes thereto, are,

in my opinion, 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 YAP CHIN TUAN

at KUALA LUMPUR this 31st day of May, 2004.

Before me,

COMMISSIONER FOR OATHS

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AmBANK BERHAD

DIRECTORS’ AND AUDITORS’

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2003

AmBank Berhad

(formerly known as ARAB-MALAYSIAN BANK BERHAD)

(Incorporated in Malaysia)

DIRECTORS’ REPORT

The directors have pleasure in presenting their reports together with the audited financial

statements of AmBank Berhad (formerly known as ARAB-MALAYSIAN BANK BERHAD) for the

financial year ended 31 March 2003 which have been prepared in accordance with the provisions of

the Companies Act, 1965, the Banking and Financial Institutions Act, 1989 and the applicable

approved accounting standards in Malaysia.

CHANGE OF NAME

On 15 June 2002, the Bank changed its name from Arab-Malaysian Bank Berhad to AmBank

Berhad.

PRINCIPAL ACTIVITIES

The Bank is principally engaged in the business of commercial banking and other related

financial services which includes the provision of Islamic banking services.

There has been no significant change in the nature of the principal activities of the Bank during

the financial year.

FINANCIAL RESULTS

The results of operations of the Bank for the financial year are as follows:

RM’000

Loss before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,775)

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,500

Loss after taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,275)

Transfer to statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Net loss for the year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,275)

BUSINESS PLAN AND STRATEGY

The Bank’s corporate plan and strategy were formulated in line with AmBank Group’s

objective to remain a significant player in the financial services industry in the rapidly changing

financial landscape.

The Bank’s Strategic Business Directions are:

i. To consolidate the Bank’s position as a strong commercial bank in Malaysia;

ii. To leverage on AmBank Group’s image makeover through new brand and corporate

identity, aggressive market rollout and presence building;

iii. To be effective in recoveries and assets management by instituting proactive management

and recovery efforts;

iv. To enhance overall credit risk and liquidity management;

v. To focus on reorganising its retail delivery channels and developing new products and

services; and

F-449

vi. To continue to invest in technology and resources to improve customer service and

operational efficiency and cost controls to improve its earning capacity.

OUTLOOK FOR NEXT FINANCIAL YEAR

This year, the global economic outlook remains uncertain despite the end of the Iraqi war. The

growing threat of the Severe Acute Respiratory Syndrome (SARS) outbreak has created doubts for

any fast rebound in the region and world economy.

Given the extremely challenging world economic landscape, the primary driver for economic

growth this year is expected to come from domestic demand. The World Bank has revised its

original 2003 forecast growth rate for Malaysia to 4.2 per cent from its previous prediction of 5 per

cent, though it said the country’s economic fundamentals remain strong for the year.

Based on expectations of a modest expansion in the economy, we expect demand for consumer

financing to remain strong. Demand for business loans is expected to remain moderate given the

increased usage of private debt securities as a viable alternative source of funding for large

corporations.

The Bank will focus on growing quality business and consumer loans and continue to

proactively manage its asset quality. Additionally, emphasis is placed on increasing fee based

income and reorganising its retail delivery channels through cross-servicing and cross-selling

activities within the AmBank Group.

ITEMS OF AN UNUSUAL NATURE

In the opinion of the directors, the results of operations of the Bank for the financial year have

not been substantially affected by any item, transaction or event of a material and unusual nature.

There has not arisen in the interval between the end of the financial year and the date of this

report any item, transaction or event of a material and unusual nature likely, in the opinion of the

directors, to affect substantially the results of operations of the Bank for the succeeding financial

year.

DIVIDENDS

No dividend has been paid or declared by the Bank since the end of the previous financial year.

The directors do not recommend the payment of any dividend in respect of the current financial

year.

RESERVES AND ALLOWANCES

There were no material transfers to or from reserves or allowances during the financial year

other than those disclosed in the financial statements.

BAD AND DOUBTFUL DEBTS AND FINANCING

Before the income statement and balance sheet of the Bank were made out, the directors took

reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts

and financing and the making of allowances for doubtful debts and financing and have satisfied

themselves that all known bad debts and financing had been written off and adequate allowance had

been made for doubtful debts and financing.

At the date of this report, the directors are not aware of any circumstances that would render

the amount written off for bad debts and financing or the amount of allowance for doubtful debts

and financing in the Bank inadequate to any substantial extent.

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CURRENT ASSETS

Before the income statement of the Bank were made out, the directors took reasonable steps toascertain that any current assets, other than debts and financing, which were unlikely to be realisedin the ordinary course of business, their values as shown in the accounting records of the Bank, havebeen written down to their estimated realisable values.

At the date of this report, the directors are not aware of any circumstances which would renderthe values attributed to the current assets in the financial statements of the Bank misleading.

VALUATION METHODS

At the date of this report, the directors are not aware of any circumstances which have arisenwhich render adherence to the existing methods of valuation of assets or liabilities in the Bank’sfinancial statements 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 Bank which has arisen since the end of the financial yearand secures the liabilities of any other person; or

(b) any contingent liability in respect of the Bank that has arisen since the end of thefinancial year other than those incurred in the normal course of business.

No contingent or other liability of the Bank has become enforceable, or is likely to becomeenforceable within the period of twelve months after the end of the financial year which, in theopinion of the directors, will or may substantially affect the ability of the Bank to meet itsobligations 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 dealtwith in this report or the financial statements of the Bank, that would render any amount stated inthe financial statements misleading.

SHARE OPTIONS

No options have been granted by the Bank to any parties during the financial year to take upunissued shares of the Bank.

No shares have been issued during the financial year by virtue of the exercise of any option totake up unissued shares of the Bank. As at the end of the financial year, there were no unissuedshares of the Bank under options.

DIRECTORS

The directors who served on the Board since the date of the last report are:

Tan Sri Dato’ Azman HashimTan Kheng SoonDato’ Azlan HashimProf. Tan Sri Dato’ Dr. Mohd. Rashdan Haji BabaDato’ Mohd. Tahir Haji Abdul RahimKung Beng Hong (appointed on 3.6.2002)Dr. Raja Lope Raja ShahromeCheah Tek KuangDato’ Hashim SaadMohamed Sultan Haji SickanderMohamed Azmi MahmoodAtsushi Kobayashi (resigned on 4.7.2002)

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In accordance with Article 87 of the Bank’s Articles of Association, Dato’ Azlan Hashim and

Mr. Cheah Tek Kuang retire at the forthcoming Annual General Meeting and, being eligible, offer

themselves for re-election.

Pursuant to Section 129 of the Companies Act, 1965, Dato’ Mohd Tahir Haji Abdul Rahim,

being above seventy years of age, retires at the forthcoming Annual General Meeting and, offers

himself for re-appointment to hold office until the conclusion of the next Annual General Meeting.

DIRECTORS’ INTERESTS

The interests in shares, debentures and share options of the Bank and of the related companies

of those who were directors at the end of the financial year as recorded in the Register of Directors’

Shareholdings kept by the Bank under Section 134 of the Companies Act, 1965, are as follows:

DEEMED INTERESTS

In the Bank

No. of ordinary shares of RM1.00 each

Shares Name of Company

Balance at

1.4.2002 Bought Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman Hashim . . . . . . . .

Ginagini Sdn.

Bhd.

54,484,375 — 54,484,375 —

Azman Hashim

Holdings

Sdn. Bhd.

13,750,000 — 13,750,000 —

Nominal amount of ICULS

Interest Bearing ICULS 1995/2005 Name of Company

Balance at

1.4.2002 Bought Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman Hashim . . . . . . .

Azman Hashim

Holdings

Sdn. Bhd.

20,000,000 — 20,000,000 —

Nominal amount of ICULS

Interest Bearing ICULS 1996/2002 Name of Company

Balance at

1.4.2002 Bought Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman Hashim . . . . . . . .

Azman Hashim

Holdings

Sdn. Bhd.

29,775,000 — 29,775,000 —

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DIRECT INTERESTS

In the holding company,

AMMB Holdings Berhad

No. of ordinary shares of RM1.00 each

Shares

Balance at

1.4.2002

Bought/

ICULS

Conversion Sold

Balance at

31.3.2003

Tan Sri Dato’ Azman Hashim . . . . . . . . . . . 669,476 518,946 — 1,188,422

Tan Kheng Soon . . . . . . . . . . . . . . . . . . . 10,000 — — 10,000

Prof. Tan Sri Dato’ Dr. Mohd.

Rashdan Haji Baba . . . . . . . . . . . . . . . . 120,000 5,381 — 125,381

Cheah Tek Kuang . . . . . . . . . . . . . . . . . . 217,200 — — 217,200

Dato’ Mohd. Tahir Haji Abdul Rahim . . . . . . 73,180 3,281 — 76,461

Mohamed Azmi Mahmood . . . . . . . . . . . . . 200,000 — 120,000 80,000

Nominal amount of ICULS

7.5% ICULS 1997/2002

Balance at

1.4.2002 Bought

Mandatory

Conversion Sold

Balance at

31.3.2003

Tan Sri Dato’ Azman Hashim . . . . 5,786,255 — 5,786,255 — —

Prof. Tan Sri Dato’ Dr. Mohd.

Rashdan Haji Baba . . . . . . . . . 60,000 — 60,000 — —

Dato’ Mohd. Tahir Haji Abdul

Rahim . . . . . . . . . . . . . . . . . 36,590 — 36,590 — —

Nominal amount of Bonds

5% Redeemable Unsecured

Bonds 1997/2002

Balance at

1.4.2002 Bought Redeemed Sold

Balance at

31.3.2003

Prof. Tan Sri Dato’ Dr. Mohd.

Rashdan Haji Baba . . . . . . . . . 60,000 — 60,000 — —

Dato’ Mohd. Tahir Haji Abdul

Rahim . . . . . . . . . . . . . . . . . 36,590 — 36,590 — —

DIRECT INTERESTS

In the holding company,

AMMB Holdings Berhad

No. of Warrants

Warrants 1997/2007

Balance at

1.4.2002 Bought Sold

Balance at

31.3.2003

Tan Sri Dato’ Azman Hashim . . . . . . . . . . . 2,035,964 — 2,035,964 —

Prof. Tan Sri Dato’ Dr. Mohd.

Rashdan Haji Baba . . . . . . . . . . . . . . . . 12,000 — — 12,000

Dato’ Mohd. Tahir Haji Abdul Rahim . . . . . . 7,318 — — 7,318

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No. of Warrants

Warrants 2003/2008

Balance at

1.4.2002 Allotment Sold

Balance at

31.3.2003

Tan Sri Dato’ Azman Hashim . . . . . . . . . . . — 149,000 — 149,000

Prof. Tan Sri Dato’ Dr. Mohd.

Rashdan Haji Baba . . . . . . . . . . . . . . . . — 16,000 — 16,000

Dato’ Mohd. Tahir Haji Abdul Rahim . . . . . . — 9,557 — 9,557

Cheah Tek Kuang . . . . . . . . . . . . . . . . . . 28,000 — 28,000

Mohamed Azmi Mahmood . . . . . . . . . . . . . — 9,750 — 9,750

No. of ordinary shares of RM1.00 each

Share options

Balance at

1.4.2002 Granted Exercised

Balance at

31.3.2003

Cheah Tek Kuang . . . . . . . . . . . . . . . . . . 140,000 — — 140,000

Mohamed Azmi Mahmood . . . . . . . . . . . . . 200,000 — — 200,000

DIRECT INTERESTS

In the related company,

AMFB Holdings Berhad

(formerly known as Arab-Malaysian Finance Berhad)

No. of ordinary shares of RM1.00 each

Shares

Balance at

1.4.2002

Bought/

ICULS

Conversion Sold

Balance at

31.3.2003

Tan Sri Dato’ Azman Hashim

— Held directly . . . . . . . . . . . . . . . . . 2,193,412 150,093 2,132,000 211,505

— Held through nominees . . . . . . . . . . . 522,985 — — 522,985

Dato’ Azlan Hashim . . . . . . . . . . . . . . . . . 90,000 5,952 — 95,952

Cheah Tek Kuang . . . . . . . . . . . . . . . . . . 38,000 — — 38,000

Dato’ Mohd. Tahir Haji Abdul Rahim . . . . . . 13,407 1,626 — 15,033

Dr. Raja Lope Raja Shahrome . . . . . . . . . . . 2,000 — — 2,000

Mohamed Azmi Mahmood . . . . . . . . . . . . . 65,000 — 15,000 50,000

Nominal amount of ICULS

7.5% ICULS 1997/2002

Balance at

1.4.2002 Bought

Mandatory

Conversion Sold

Balance at

31.3.2003

Tan Sri Dato’ Azman Hashim . . . . 1,260,786 — 1,260,786 — —

Dato’ Azlan Hashim . . . . . . . . . . 50,000 — 50,000 — —

Dato’ Mohd. Tahir Haji

Abdul Rahim . . . . . . . . . . . . . 13,666 — 13,666 — —

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DEEMED INTERESTS

In the holding company,

AMMB Holdings Berhad

No. of ordinary shares of RM1.00 each

Shares Name of Company

Balance at

1.4.2002

Bought/ICULS

Conversion Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman Hashim . . .

Azman Hashim

Holdings

Sdn. Bhd.

9,854,544 16,208,876 16,654,544 9,408,876

Arab-Malaysian

Corporation

Berhad

322,833,398 25,315,152 4,264,000 343,884,550

AMDB

Equipment

Trading Sdn.

Bhd.

110,000 — — 110,000

Slan Sdn. Bhd. 385,000 128,816 115,500 398,316

Ginagini Sdn.

Bhd.

— 19,130,749 1,800,000 17,330,749

Nominal amount of ICULS

7.5% ICULS 1997/2002 Name of Company

Balance at

1.4.2002 Bought

Mandatory

Conversion Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman Hashim . . . . . .

Azman Hashim

Holdings Sdn.

Bhd.

5,103,272 — 5,103,272 — —

Arab-Malaysian

Corporation

Berhad

186,763,956 6,300,000 193,063,956 — —

Slan Sdn. Bhd. 1,436,300 — 1,436,300 — —

Nominal amount of Bonds

5% Redeemable Unsecured

Bonds 1997/2002 Name of Company

Balance at

1.4.2002 Bought Redeemed Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman Hashim . . . . . .

Arab-Malaysian

Corporation

Berhad

19,378,498 — 19,378,498 — —

No. of Warrants

Warrants 1997/2007 Name of Company

Balance at

1.4.2002 Bought Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman Hashim . . . . . . . .

Arab-Malaysian

Corporation

Berhad

36,305,498 — 20,074,000 16,231,498

Indigenous

Capital Sdn.

Bhd.

— 12,075,000 12,075,000 —

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No. of Warrants

Warrants 2003/2008 Name of Company

Balance at

1.4.2002 Allotment Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman Hashim . . . . .

Arab-Malaysian

Corporation

Berhad

— 45,594,942 — 45,594,942

AMDB Equipment

Trading Sdn. Bhd.

— 13,750 — 13,750

Azman Hashim

Holdings Sdn.

Bhd.

— 2,026,109 — 2,026,109

Slan Sdn. Bhd. — 49,789 — 49,789

Ginagini Sdn. Bhd. — 2,391,734 — 2,391,734

DEEMED INTERESTS

In the related company,

AMFB Holdings Berhad

(formerly known as Arab-Malaysian Finance Berhad)

No. of ordinary shares of RM1.00 each

Shares Name of Company

Balance at

1.4.2002

Bought/

ICULS

Conversion Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman Hashim . . . . .

AMDB Equipment

Trading Sdn. Bhd.

212,000 29,047 — 241,047

Dato’ Mohd. Tahir Haji

Abdul Rahim . . . . . .

Bitaria Sdn. Bhd. 45,000 — — 45,000

Nominal amount of ICULS

7.5% ICULS 1997/2002 Name of Company

Balance at

1.4.2002 Bought

Mandatory

Conversion Sold

Balance at

31.3.2003

Tan Sri Dato’

Azman Hashim . . . .

AMDB

Equipment

Trading Sdn.

Bhd.

244,000 — 244,000 — —

DEEMED INTERESTS

In the related company,

AmAssurance Berhad

(formerly known as Arab-Malaysian Assurance Berhad)

No. of ordinary shares of RM1.00 each

Shares Name of Company

Balance at

1.4.2002 Bought Sold

Balance at

31.3.2003

Dato’ Azlan Hashim . . . ABH Holdings

Sdn. Bhd.

34,062,000 — — 34,062,000

The share options in the holding company, which had an option period of five calendar years,

were granted pursuant to AMMB Holdings Berhad Employees’ Share Option Scheme II (‘‘Scheme’’)

and the persons to whom the options are granted under the Scheme have no right to participate in

any staff share option scheme of any other company within the Group.

By virtue of their shareholdings as mentioned above, the above directors are deemed to have an

interest in the shares of the Bank and its related companies.

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DIRECTORS’ BENEFITS

Since the end of the previous financial year, no director of the Bank has received or become

entitled to receive any benefit (other than the benefits included in the aggregate amount of

emoluments received or due and receivable by directors shown in the financial statements, or the

fixed salary of full-time employees of the Bank) by reason of a contract made by the Bank 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 related party

transactions as shown in Note 28 to the Financial Statements.

Neither during nor at the end of the financial year was the Bank a party to any arrangement

whose object is to enable the directors to acquire benefits by means of the acquisition of shares in,

or debentures of, the Bank or any other body corporate.

ULTIMATE HOLDING COMPANY

The directors regard AMMB Holdings Berhad, a company incorporated in Malaysia, as both the

holding company and the ultimate holding company.

RATINGS BY EXTERNAL AGENCY

Fitch IBCA, Duff & Phelps accorded long term and short term ratings of BB-(stable)/B for the

Bank.

AUDITORS

The auditors, Messrs Deloitte KassimChan, have indicated their willingness to continue in

office.

Signed on behalf of the Board

in accordance with a resolution of the Directors,

TAN SRI DATO’ AZMAN HASHIM

ChairmanKUNG BENG HONG

Managing Director

Kuala Lumpur,

30 May, 2003

Audited Financial Statements for the financial year ended 31 March 2003

F-457

REPORT OF THE AUDITORS TO THE MEMBER OF

AmBank Berhad

(formerly known as ARAB-MALAYSIAN BANK BERHAD)

(Incorporated in Malaysia)

We have audited the accompanying balance sheet as at 31 March 2003 and the related

statements of income, changes in equity and cash flows for the financial year then ended. These

financial statements are the responsibility of the Bank’s directors. Our responsibility is to express an

opinion on these financial statements based on our audit.

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 reasonable assurance about whether

the financial statements are free of material misstatement. An audit includes examining, on a test

basis, evidence supporting the amounts and disclosures in the financial statements. An audit also

includes assessing the accounting principles used and significant estimates made by the directors, as

well as evaluating the overall financial statements presentation. We believe that 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 Sub-section (19) of Section 169 of the Act, and the

applicable approved accounting standards in Malaysia so as to give a true and fair view

of:

(i) the state of affairs of the Bank as at 31 March 2003 and of the results and the cash

flows of the Bank for the financial year ended on that date; and

(ii) the matters required by Section 169 of the Act to be dealt with in the financial

statements; and

(b) the accounting and other records and the registers required by the Act to be kept by the

Bank have been properly kept in accordance with the provisions of the Act.

DELOITTE KASSIMCHAN

AF 0080

Chartered Accountants

ROSITA TAN

1874/9/04 (J)

Partner

Petaling Jaya

30 May, 2003

F-458

AmBank Berhad

(formerly known as ARAB-MALAYSIAN BANK BERHAD)

(Incorporated in Malaysia)

BALANCE SHEET

As at 31 March 2003

2003 2002

Note RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . . . . . . . . . . . . . . . . . . 4 1,669,007 1,269,734

Deposits and placements with financial institutions . . . . . . . . 5 230,000 57,500

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 218,775 325

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 807,717 615,460

Loans, advances and financing. . . . . . . . . . . . . . . . . . . . . 8 7,227,399 7,213,835

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 174,435 181,007

Statutory deposit with Bank Negara Malaysia . . . . . . . . . . . 10 293,957 281,032

Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . 11 33,479 36,116

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,654,769 9,655,009

LIABILITIES AND SHAREHOLDER’S FUNDS

Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . . 12 6,495,356 6,487,458

Deposits and placements of banks and other financial institutions 13 2,528,291 1,479,140

Obligation on securities sold under repurchase agreements . . . 14 12,607 —

Bills and acceptances payable . . . . . . . . . . . . . . . . . . . . . 15 189,508 122,826

Amount due to Cagamas Berhad . . . . . . . . . . . . . . . . . . . 16 348,144 453,275

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 112,404 124,074

Subordinated term loan . . . . . . . . . . . . . . . . . . . . . . . . . 18 75,000 75,000

Exchangeable Subordinated Capital Loan . . . . . . . . . . . . . . 19 460,000 460,000

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,221,310 9,201,773

Irredeemable Convertible Unsecured Loan Stocks . . . . . . . . . 20 — 111,875

Share capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 505,469 435,547

Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (72,010) (94,186)

Shareholder’s Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 433,459 341,361

TOTAL LIABILITIES AND SHAREHOLDER’S FUNDS . . . 10,654,769 9,655,009

COMMITMENTS AND CONTINGENCIES . . . . . . . . . . . . 33 4,403,504 4,190,909

NET TANGIBLE ASSETS PER SHARE (RM) . . . . . . . . . 34 0.86 0.78

The accompanying Notes form an integral part of the Financial Statements.

F-459

AmBank Berhad

(formerly known as ARAB-MALAYSIAN BANK BERHAD)

(Incorporated in Malaysia)

INCOME STATEMENT

For the year ended 31 March 2003

2003 2002

Note RM’000 RM’000

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 456,032 482,092

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 (274,726) (311,786)

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . 181,306 170,306

Income from Islamic Banking operations . . . . . . . . . . . . . . 38 14,898 17,407

196,204 187,713

Loan and financing loss and allowance . . . . . . . . . . . . . . . 25 (132,248) (106,327)

63,956 81,386

Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 35,237 55,483

Write-back of allowance for diminution in value of securities . 10,348 7,732

Transfer to profit equalisation reserve . . . . . . . . . . . . . . . . (448) —

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,093 144,601

Non-interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 27 (142,868) (121,743)

(LOSS)/PROFIT BEFORE TAXATION . . . . . . . . . . . . . . (33,775) 22,858

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 16,500 (3,500)

(LOSS)/PROFIT AFTER TAXATION . . . . . . . . . . . . . . . (17,275) 19,358

Transfer to statutory reserve . . . . . . . . . . . . . . . . . . . . . . 22 — (9,679)

NET (LOSS)/PROFIT FOR THE YEAR . . . . . . . . . . . . . (17,275) 9,679

(LOSS)/EARNINGS PER ORDINARY SHARE (SEN)

— Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 (4.20) 4.44

The accompanying Notes form an integral part of the Financial Statements.

F-460

AmBank Berhad

(formerly known as ARAB-MALAYSIAN BANK BERHAD)

(Incorporated in Malaysia)

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2003

Non-distributable reserves

Note

Share

Capital

Share

Premium

Capital

Reserve

Statutory

Reserve

Accumulated

Losses Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Balance as at

1 April 2001. . . . . . . . 435,547 181,328 461 85,963 (381,296) 322,003

Profit for the year . . . . — — — — 19,358 19,358

Transferred to statutory

reserve. . . . . . . . . . 22 — — — 9,679 (9,679) —

Balance as at 31 March

2002 . . . . . . . . . . . 435,547 181,328 461 95,642 (371,617) 341,361

Shares issued during the

year pursuant to the

conversion of ICULS . 21 & 22 69,922 41,953 — — — 111,875

Loss for the year . . . . . — — — — (17,275) (17,275)

Transferred to statutory

reserve. . . . . . . . . . 22 — — — — — —

Reclassification:

Interest on ICULS . . 20 (2,502) (2,502)

Balance as at 31 March

2003 . . . . . . . . . . . 505,469 223,281 461 95,642 (391,394) 433,459

The accompanying Notes form an integral part of the Financial Statements.

F-461

AmBank Berhad

(formerly known as ARAB-MALAYSIAN BANK BERHAD)

(Incorporated in Malaysia)

CASH FLOW STATEMENT

For the year ended 31 March 2003

2003 2002

RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

(Loss)/Profit before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . (33,775) 22,858

Adjustments for the following items:

Allowance for bad and doubtful debts and financing . . . . . . . . . . 158,471 155,494

Interest-in-suspense, net of recoveries . . . . . . . . . . . . . . . . . . . 156,956 179,886

Allowance for impairment on amounts recoverable from Pengurusan

Danaharta Nasional Berhad . . . . . . . . . . . . . . . . . . . . . . . . 28,271 28,260

Depreciation of property and equipment . . . . . . . . . . . . . . . . . . 8,968 8,390

Loss/(Gain) on disposal of investment securities . . . . . . . . . . . . . 8,876 (27,030)

Transfer to profit equalisation reserve . . . . . . . . . . . . . . . . . . . 448 —

Gain on disposal of property and equipment . . . . . . . . . . . . . . . (235) (6)

Amortisation of premium less accretion of discount on investment

securities — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,178) (4,853)

Write-back of allowance for diminution in value of securities . . . . (10,348) (7,732)

Property and equipment written-off . . . . . . . . . . . . . . . . . . . . . — 213

Operating Profit Before Working Capital Changes. . . . . . . . . . . . . 311,454 355,480

(Increase)/Decrease In Operating Assets:

Deposits with financial institutions . . . . . . . . . . . . . . . . . . . . . (172,500) 4,800

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (218,939) 11,368

Loans, advances and financing. . . . . . . . . . . . . . . . . . . . . . . . (328,991) 329,374

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,199) 33,276

Statutory deposit with Bank Negara Malaysia . . . . . . . . . . . . . . (12,925) 46,698

Increase/(Decrease) In Operating Liabilities:

Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,898 (66,382)

Deposits of banks and other financial institutions . . . . . . . . . . . . 1,049,151 (1,128,967)

Obligation on securities sold under repurchase agreements . . . . . . 12,607 (93,827)

Bills and acceptances payable . . . . . . . . . . . . . . . . . . . . . . . . 66,682 (105,405)

Loan sold to Cagamas Berhad . . . . . . . . . . . . . . . . . . . . . . . . (105,131) 71,167

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,118) (3,820)

Cash From/(Used In) Operations . . . . . . . . . . . . . . . . . . . . . . . 591,989 (546,238)

Taxation paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (3,341)

Net Cash From/(Used In) Operating Activities . . . . . . . . . . . . . . . 591,989 (549,579)

F-462

2003 2002

RM’000 RM’000

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from disposal of property and equipment . . . . . . . . . . . . 235 380

(Additions)/Disposal of investment securities — net . . . . . . . . . . . (184,118) 775,609

Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . (6,331) (22,691)

Net Cash (Used In)/Generated From Investing Activities. . . . . . . . . (190,214) 753,298

CASH FLOW FROM FINANCING ACTIVITY

Interest on Irredeemable Convertible Unsecured Loan Stocks . . . . . . (2,502) —

Net Cash (Used In)/Generated From Financing Activity . . . . . . . . . (2,502) —

NET INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . 399,273 203,719

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . 1,269,734 1,066,015

CASH AND CASH EQUIVALENTS AT END OF YEAR (See note) 1,669,007 1,269,734

Note: Cash and cash equivalents consist of cash and short-term funds as shown in Note 4 to the Financial Statements.

The accompanying Notes form an integral part of the Financial Statements.

F-463

AmBank Berhad

(formerly known as ARAB-MALAYSIAN BANK BERHAD)

(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS

1. PRINCIPAL ACTIVITIES

The Bank is principally engaged in the business of commercial banking and other related

financial services which includes the provision of Islamic banking services.

There has been no significant change in the nature of the principal activities of the Bank during

the financial year.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The Financial Statements of the Bank have been prepared in accordance with the provisions of

the Companies Act, 1965, the Banking and Financial Institutions Act, 1989, Bank Negara Malaysia

Guidelines and the applicable approved accounting standards of the Malaysian Accounting Standards

Board. The financial statements also incorporate those activities relating to Islamic Banking

operations which have been undertaken by the Bank.

Islamic Banking operations refers generally to the acceptance of deposits and granting of

financing under the Syariah principles. The state of affairs and the results of operations under the

Islamic Banking Business of the Bank are shown in Note 38.

3. SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies adopted by the Bank are consistent with those adopted in the

previous years except for the adoption of the following new Accounting Standards issued by the

Malaysian Accounting Standards Board (‘‘MASB’’) which are effective in the current financial year.

(i) MASB 19, Events After the Balance Sheet Date which is applied retrospectively. The

adoption does not have any impact on the financial statements.

(ii) MASB 20, Provisions, Contingent Liabilities and Contingent Assets which is applied

retrospectively. Comparatives figures have not been restated and no prior year adjustment

is required as there is no impact on the financial statements.

(iii) MASB 21, Business Combination which is applied retrospectively. The adoption does not

have any impact on the financial statements.

(iv) MASB 22, Segmental Reporting which is applied retrospectively. The adoption does not

have any impact on the financial statements.

(v) MASB 23, Impairment of Assets which is applied prospectively. The adoption does not

have any impact on the financial statements.

(vi) MASB 24, Financial Instruments — Presentation and Disclosure which has been adopted

prospectively. The adoption resulted in new disclosure format as set out in Note 39 to 40.

(a) Basis of Accounting

The financial statements of the Bank have been prepared under the historical cost

convention.

(b) Dealing Securities

Dealing securities are marketable securities that are acquired and held with the intention

of resale in the short term.

F-464

Money market securities and quoted securities are stated at the lower of cost and market

value on a portfolio basis.

Transfers, if any, from dealing to investment securities are made at the lower of cost and

market value.

(c) Investment Securities

Investment securities are securities that are acquired and held for yield or capital growth

or to meet minimum liquid assets requirement pursuant to Section 38 of the Banking and

Financial Institutions Act, 1989, and are usually held to maturity.

Malaysian Government Securities, Malaysian Government Investment Certificates,

Cagamas bonds and other government securities and bank guaranteed private debt securities

are stated at cost adjusted for amortisation of premium and accretion of discount. Other private

debt securities are stated at lower of cost and market value on a portfolio basis.

Other investment securities are stated at cost and allowance is made in the event of any

permanent diminution in value.

Transfers, if any, between investment and dealing securities are made at lower of carrying

value and market value.

(d) Amount Recoverable from Pengurusan Danaharta Nasional Berhad (‘‘Danaharta’’)

This relates to loans sold to Danaharta where the total consideration is received in two

portions; upon the sale of the loans (initial consideration) and upon the recovery of the loans

(final consideration). The final consideration amount represents the Bank’s predetermined share

of the surplus over the initial consideration upon recovery of the loans.

The difference between the carrying value of the loans and the initial consideration is

recognised as ‘‘Amount recoverable from Danaharta’’ within the ‘‘Other Assets’’ component of

the balance sheet. Allowance against this amount is made to reflect the Directors’ assessment

of the realisable value of the final consideration as at balance sheet date.

(e) Foreclosed Properties

Foreclosed properties are stated at cost less allowance for diminution in value, if any, of

such properties.

(f) Property and Equipment and Depreciation

Property and equipment are stated at cost less accumulated depreciation and impairment

losses.

Gains or losses arising from disposal of an asset is determined as the difference between

the estimated net disposal proceeds and the carrying amount of the asset, and is recognised in

the income statement.

F-465

Depreciation of property and equipment, except for work-in-progress which is not

depreciated, is calculated using the straight-line method at rates based on the estimated useful

lives of the various assets. The annual depreciation rates for the various classes of property and

equipment are as follows:

Leasehold improvements . . . . . . . . . . 12.5%

Furniture, fixtures and office equipment . 10.0% to 25.0%

Computer equipment and software . . . . 20.0%

Motor vehicles . . . . . . . . . . . . . . . . 25.0%

(g) Impairment of Assets

The carrying values of assets are reviewed for impairment when there is an indication that

the asset might be impaired. Impairment is measured by comparing the carrying values of the

assets with their recoverable amounts. The recoverable amount is the higher of net realisable

value and value in use, which is measured by reference to discounted future cash flows, if

applicable. Recoverable amounts are estimated for individual assets or, if it is not possible, for

the cash generating unit.

An impairment loss is charged to the income statement immediately, unless the asset is

carried at revalued amount. Any impairment loss of a revalued asset is treated as a revaluation

decrease to the extent of previously recognised revaluation surplus for the same asset.

Subsequent increase in the recoverable amount of an asset is treated as reversal of the

previous impairment loss and is recognised to the extent of the carrying amount of the asset

that would have been determined (net of amortisation and depreciation) had no impairment loss

been recognised. The reversal is recognised in the income statement immediately, unless the

asset is carried at revalued amount. A reversal of an impairment loss on a revalued asset is

credited directly to revaluation surplus. However, to the extent that an impairment loss on the

same revalued asset was previously recognised as an expense in the income statement, a

reversal of that impairment loss is recognised as income in the income statement.

(h) Trade and Other Receivables

Trade and other receivables are stated at book value as reduced by the appropriate

allowances for estimated irrecoverable amounts. Allowance for doubtful debts is made based on

estimates of possible losses which may arise from non-collection of certain receivable accounts.

(i) Bills and Acceptances Payable

Bills and acceptances payable represent the Bank’s own bills and acceptances re-

discounted and outstanding in the market.

(j) Repurchase Agreements

Obligations on securities sold under repurchase agreements are securities which the Bank

had sold from its portfolio, with a commitment to repurchase at future dates for funding

purposes. The carrying values of the securities underlying these repurchase agreements remain

in the respective asset accounts while the obligations to repurchase such securities at an agreed

price on a specified future date are agreed and accounted for as a liability in the balance sheet.

(k) Forward Exchange Contracts

Immature forward exchange contracts are valued at forward rates as at balance sheet date,

applicable to their respective dates of maturity, and unrealised losses and gains are recognised

in the income statement for the financial year.

F-466

(l) Interest Rate Swaps, Futures, Options and Forward Rate Contracts

The Bank acts as an intermediary with counter parties who wish to swap their interest

obligations. The Bank also uses interest rate swaps, futures, options, and forward rate contracts

in its trading activities and in overall interest rate risk management.

Interest income or interest expense associated with interest rate swaps that qualify as

hedges is recognised over the life of the swap agreement as a component of interest income or

interest expense. Gains and losses on interest rate futures, forward, and option contracts that

qualify as hedges are generally deferred and amortised over the life of the hedged assets or

liabilities as adjustments to interest income or interest expense.

Gains and losses on interest rate swaps, futures, options and forward rate agreements that

do not qualify as hedges are recognised using the mark-to-market method and is shown as

trading gain or loss from derivatives.

(m) Interest and Financing Income Recognition

Interest and financing income is recognised on an accrual basis. Interest and financing

income on term loans is recognised by reference to rest periods which are either monthly or

yearly.

Where an account is classified as non-performing, recognition of interest and financing

income is suspended with retroactive adjustments made to the date of first default. Thereafter,

interest on these accounts are recognised on a cash basis until such time as the accounts are no

longer classified as non-performing.

Customers’ accounts are classified as non-performing where repayments are in arrears for

six months or more for loans and overdrafts, three months after maturity date for credit cards

and one month after maturity date for trade bills, bankers’ acceptances and trust receipts.

Classification of non-performing loans and financing and the policy on suspension of

interest is in conformity with Bank Negara Malaysia’s Guidelines on the classification of non-

performing loans, and allowance for sub-standard, bad and doubtful debts, BNM/GP3.

(n) Fees and Other Income Recognition

Loan arrangement and participation fees and commissions are recognised as income upon

execution of contracts.

Guarantee fees are recognised as income upon issuance and, where the guarantee periods

are longer than one year, over the duration of the guarantee periods.

Dividends from dealing and investment securities are recognised when received.

(o) Allowance for Bad and Doubtful Debts and Financing

Specific allowances are made for doubtful debts and financing which have been

individually reviewed and specifically identified as bad or doubtful.

In addition, a general allowance based on a percentage of the loan and financing

portfolio, net of interest-in-suspense and specific allowance, is also made to cover possible

losses which are not specifically identified.

An uncollectible loan and financing or portion of a loan and 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.

F-467

The allowance for non-performing loans and financing is in conformity with the minimum

requirements of Bank Negara Malaysia’s Guideline On Classification of Non-Performing Loans

and Provision for Bad and Doubtful Debts.

(p) Foreign Exchange

Transactions in foreign currencies are converted into Ringgit Malaysia at the rates of

exchange prevailing at transaction dates or, if covered by foreign exchange contracts, at

contracted rates. Where settlement has not taken place at balance sheet date, translation into

Ringgit Malaysia is at the approximate exchange rates prevailing at that date or at contracted

rates. All foreign exchange gains or losses are taken up in the income statement.

(q) Provisions

Provisions are recognised when the Bank has a present legal obligation as a result of past

events, when it is probable that an outflow of resources will be required to settle the

obligation, and when a reliable estimate of the amount can be made.

(r) Deferred Taxation

The tax effects of transactions are recognised, using the ‘‘liability’’ method, in the year

such transactions enter into the determination of net income, regardless of when they are

recognised for tax purposes. However, where timing differences result in deferred tax debits,

the tax effects are recognised only when there is a reasonable expectation of realisation.

(s) Profit Equalisation Reserve (‘‘PER’’)

PER refers to the amount appropriated out of the total gross income in order to maintain a

certain level of return for depositors. PER is deducted from the total gross income (in deriving

the net gross income) as approved and endorsed by the National Advisory Council for Islamic

banking and takaful of Bank Negara Malaysia.

(t) Cash Flow Statement

The Bank adopts the indirect method in the preparation of the cash flow statement.

(u) Cash and Cash Equivalents

For the purpose of the cash flow statement, cash and cash equivalents consist of cash and

short-term funds.

4. CASH AND SHORT-TERM FUNDS

2003 2002

RM’000 RM’000

Cash and bank balances . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,287 58,584

Money at call, deposits and placements maturing within one month:

Licensed banks:

Related companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193,000 19,000

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,286,900 680,000

Licensed finance companies:

Related companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,000 —

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 145,000

Other financial institutions . . . . . . . . . . . . . . . . . . . . . . . 43,820 367,150

1,669,007 1,269,734

Included in the above are interbank lending of RM1,594,720,000 (RM408,150,000 in 2002).

F-468

As at 31 March 2003, the net interbank lending position of the Bank is detailed as follows:

2003 2002

RM’000 RM’000

Interbank lending:

Cash and short term funds . . . . . . . . . . . . . . . . . . . . . . 1,594,720 408,150

Deposits with financial institutions (Note 5) . . . . . . . . . . . 230,000 —

1,824,720 408,150

Interbank borrowing (Note 13). . . . . . . . . . . . . . . . . . . . . . (347,495) (83,839)

Net interbank lending . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,477,225 324,311

5. DEPOSITS AND PLACEMENTS WITH FINANCIAL INSTITUTIONS

2003 2002

RM’000 RM’000

Licensed banks:

Related companies . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,000 —

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

Licensed finance companies . . . . . . . . . . . . . . . . . . . . . . . 50,000 —

Other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . — 57,500

230,000 57,500

Included in the above are interbank lending of RM230,000,000 (RM nil in 2002).

6. DEALING SECURITIES

2003 2002

RM’000 RM’000

Shares in corporations quoted in Malaysia . . . . . . . . . . . . . . 29,078 418

Unquoted Corporate Bonds of companies incorporated in Malaysia 190,279 —

219,357 418

Allowance for diminution in value of investment . . . . . . . . . . (582) (93)

Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218,775 325

Market value:

Shares in corporations quoted in Malaysia . . . . . . . . . . . . 28,496 362

F-469

7. INVESTMENT SECURITIES

2003 2002

RM’000 RM’000

Money Market Securities:

Bank Negara Malaysia bills . . . . . . . . . . . . . . . . . . . . . 198,782 —

Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,491 —

Malaysian Government Investment Certificates . . . . . . . . . . 45,163 45,163

Malaysian Government Securities . . . . . . . . . . . . . . . . . . 41,508 182,146

Negotiable Instrument of Deposits . . . . . . . . . . . . . . . . . 15,050 —

Danaharta bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000 7,000

Bankers’ acceptances . . . . . . . . . . . . . . . . . . . . . . . . . 2 11,187

KLIA bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 44,076

389,996 289,572

Securities quoted outside Malaysia — Shares. . . . . . . . . . . . . 1,255 1,255

Quoted Debt Conversion Equity in Malaysia:

Shares — with options . . . . . . . . . . . . . . . . . . . . . . . . 32,556 32,556

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,125 33,729

Loan stocks — collateralised. . . . . . . . . . . . . . . . . . . . . 96,253 107,621

Loan stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,465 6,783

205,399 180,689

Unquoted Debt Conversion Equity in Malaysia:

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,469 15,046

Loan stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,680 79,381

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,761 —

261,910 94,427

Unquoted Securities of companies incorporated:

In Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,864 3,650

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 67

Outside Malaysia

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 36

4,967 3,753

Unquoted Private Debt Securities of companies incorporated in

Malaysia — Corporate bonds . . . . . . . . . . . . . . . . . . . . . 82,701 96,756

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 946,228 666,452

Allowance for diminution in value of investment . . . . . . . . . . (144,895) (44,562)

Amortisation of premium less accretion of discount — net . . . . 6,384 (6,430)

Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807,717 615,460

F-470

Market value:

2003 2002

RM’000 RM’000

Money market securities:

Bank Negara Malaysia Bills . . . . . . . . . . . . . . . . . . . . . 199,738 —

Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,894 —

Malaysian Government Investment Certificates . . . . . . . . . . 48,341 46,620

Malaysian Government Securities . . . . . . . . . . . . . . . . . . 41,120 176,068

Danaharta bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,529 8,119

KLIA bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 44,588

Securities quoted outside Malaysia — Shares. . . . . . . . . . . . . 821 1,102

Quoted Debt Conversion Equity in Malaysia:

Shares — with options . . . . . . . . . . . . . . . . . . . . . . . . 16,698 18,273

Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,997 10,936

Loan stocks — collateralised. . . . . . . . . . . . . . . . . . . . . 56,789 64,034

Loan stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,580 3,788

The maturity structure of money market securities held for investments are as follows:

Maturing within one year . . . . . . . . . . . . . . . . . . . . . . . . . 213,834 193,333

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . 162,989 77,974

Three years to five years . . . . . . . . . . . . . . . . . . . . . . . . . 13,173 7,000

Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 11,265

389,996 289,572

Certain money market securities held have been sold under repurchase agreements for funding

purposes. The carrying value of the securities underlying these repurchase agreements remain in the

respective asset accounts while the obligations to repurchase such securities at an agreed price on a

specified future date are accounted for as a liability as mentioned in Note 14.

F-471

8. LOANS, ADVANCES AND FINANCING

2003 2002

RM’000 RM’000

Term loans:

Fixed rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713,250 572,661

Floating rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,595,207 5,731,888

Overdrafts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 730,643 776,689

Claims on customers under acceptance credits . . . . . . . . . . . . 235,744 264,374

Credit/Charge cards receivables . . . . . . . . . . . . . . . . . . . . . 218,252 187,906

Bills receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,859 128,930

Trust receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,656 8,149

Factoring receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,889 —

Staff loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,191 29,173

7,782,691 7,699,770

Less : Unearned interest and income . . . . . . . . . . . . . . . . . . (5) (1,948)

Gross loans, advances and financing . . . . . . . . . . . . . . . . . . 7,782,686 7,697,822

Less: Islamic financing sold to Cagamas Berhad . . . . . . . . . . (3,683) (3,844)

7,779,003 7,693,978

Allowances for bad and doubtful debts and financing:

— Specific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (194,278) (159,324)

— General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (110,863) (121,090)

Interest/Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . (246,463) (199,729)

Net loans, advances and financing . . . . . . . . . . . . . . . . . . . 7,227,399 7,213,835

Claims on customers under acceptance credits represent own acceptances created and

discounted. Own acceptances discounted and held in hand by the Bank as at 31 March 2003

amounted to RM25,561,000 (RM24,690,000 in 2002).

The maturity structure of loans, advances and financing are as follows:

2003 2002

RM’000 RM’000

Maturing within one year . . . . . . . . . . . . . . . . . . . . . . . . . 3,208,830 3,245,448

One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . 1,077,768 416,400

Three years to five years . . . . . . . . . . . . . . . . . . . . . . . . . 684,647 1,083,682

Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,807,758 2,948,448

7,779,003 7,693,978

F-472

Loans, advances and financing analysed by their economic purposes are as follows:

2003 2002

RM’000 % RM’000 %

Agriculture . . . . . . . . . . . . . 143,583 1.9 120,682 1.6Mining and quarrying . . . . . . 12,937 0.2 14,568 0.2Manufacturing . . . . . . . . . . . 799,368 10.3 862,934 11.2Electricity, gas and water . . . . 198,064 2.6 180,197 2.3Construction . . . . . . . . . . . . 847,584 10.9 950,704 12.4Real estate . . . . . . . . . . . . . 523,122 6.7 529,533 6.9Purchase of landed property:Residential . . . . . . . . . . . 1,473,002 18.9 1,161,623 15.1Non-residential . . . . . . . . 848,330 10.9 903,445 11.7

General commerce . . . . . . . . 423,736 5.4 396,828 5.2Transport, storage andcommunication . . . . . . . . . 171,910 2.2 179,696 2.3

Finance, insurance and businessservices . . . . . . . . . . . . . 1,131,654 14.5 1,200,792 15.6

Purchase of securities . . . . . . 530,842 6.8 533,390 6.9Consumption credits . . . . . . . 218,252 2.8 196,009 2.5Others. . . . . . . . . . . . . . . . 460,302 5.9 467,421 6.1

Gross loans, advances andfinancing. . . . . . . . . . . . . 7,782,686 100.0 7,697,822 100.0

Less: Islamic financing sold toCagamas Berhad. . . . . . (3,683) (3,844)

7,779,003 7,693,978

Movements in non-performing loans and financing (NPLs), including interest and incomereceivables, are as follows:

2003 2002

RM’000 RM’000

NPLs — grossBalance at beginning of year. . . . . . . . . . . . . . . . . . . . . 1,874,643 1,796,658Non-performing during the year . . . . . . . . . . . . . . . . . . . 773,278 1,431,430Reclassification to performing loan . . . . . . . . . . . . . . . . . (285,050) (699,760)Amount written off. . . . . . . . . . . . . . . . . . . . . . . . . . . (190,827) (383,850)Amount vested over from related company . . . . . . . . . . . . 12,521 —Amount recovered . . . . . . . . . . . . . . . . . . . . . . . . . . . (237,599) (185,826)Debt equity conversion . . . . . . . . . . . . . . . . . . . . . . . . (223,571) (84,009)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . 1,723,395 1,874,643

Less:Specific allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . (194,278) (159,324)Interest/Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . (246,463) (199,729)

NPLs — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,282,654 1,515,590

Total loans and advances less specific allowance and interest/income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,338,262 7,334,925

Islamic financing sold to Cagamas Berhad . . . . . . . . . . . . . . 3,683 3,844

7,341,945 7,338,769

Ratio of net non-performing loans to loans, advances andfinancing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.47% 20.65%

F-473

Movements in the general and specific allowances for bad and doubtful debts and financing and

interest/income-in-suspense accounts are as follows:

2003 2002

RM’000 RM’000

General Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . 121,090 128,133Write-back during the year (Note 25) . . . . . . . . . . . . . . . . . — (7,043)Transfer to Specific Allowance . . . . . . . . . . . . . . . . . . . . . (10,227) —

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . 110,863 121,090

% of total loans less specific allowance and interest/income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.51% 1.65%

Specific Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . 159,324 192,399

Allowance made during the year . . . . . . . . . . . . . . . . . . . . 199,013 220,973Amount written back in respect of recoveries . . . . . . . . . . . . (40,542) (58,436)Net charge to income statement (Note 25) . . . . . . . . . . . . . . 158,471 162,537Amount written off — net . . . . . . . . . . . . . . . . . . . . . . . . (113,497) (192,765)Amount vested over from related company . . . . . . . . . . . . . . 9,522 —Debt equity conversion . . . . . . . . . . . . . . . . . . . . . . . . . . (29,769) (2,847)Transfer from General Allowance . . . . . . . . . . . . . . . . . . . . 10,227 —

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . 194,278 159,324

Interest/Income-in-Suspense

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . 199,729 246,726

Allowance made during the year . . . . . . . . . . . . . . . . . . . . 256,707 274,912Amount written back in respect of recoveries . . . . . . . . . . . . (99,751) (95,027)Net charge to income statement . . . . . . . . . . . . . . . . . . . . . 156,956 179,885Amount written off — net . . . . . . . . . . . . . . . . . . . . . . . . (83,403) (220,706)Amount vested over from related company . . . . . . . . . . . . . . 1,261 —Debt equity conversion . . . . . . . . . . . . . . . . . . . . . . . . . . (28,080) (6,176)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . 246,463 199,729

9. OTHER ASSETS

Other assets consist of the following:

2003 2002

RM’000 RM’000

Deferred tax assets (Note 31) . . . . . . . . . . . . . . . . . . . . . . 136,441 119,941Other receivables, deposits and prepayments . . . . . . . . . . . . . 16,915 12,726Interest receivables on treasury assets . . . . . . . . . . . . . . . . . 10,726 9,716Amount recoverable from Danaharta . . . . . . . . . . . . . . . . . . 10,353 38,624Foreclosed properties net of allowance for diminution in value ofRM2,415,000 (Nil in 2002) . . . . . . . . . . . . . . . . . . . . . . — —

174,435 181,007

Amount recoverable from Danaharta

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . 38,624 66,818Allowance made during the year (Note 25) . . . . . . . . . . . . . . (28,271) (28,260)Amount recovered — net . . . . . . . . . . . . . . . . . . . . . . . . . — 66

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . 10,353 38,624

F-474

10. STATUTORY DEPOSIT WITH BANK NEGARA MALAYSIA

The non-interest bearing statutory deposit is maintained with Bank Negara Malaysia in

compliance with Section 37(1)(c) of the Central Bank of Malaysia Act, 1958, the amounts of which

are determined as set percentages of total eligible liabilities.

11. PROPERTY AND EQUIPMENT

Leasehold

improve-

ments

Furniture,

fixtures and

office

equipment

Computer

equipment

and

software

Motor

vehicles

Work in

progress Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

COST

At beginning of year. . 18,785 11,122 48,347 2,260 6,291 86,805Additions/Transfer in . 486 242 1,668 87 3,848 6,331Disposals/Transfer out . — — — (566) — (566)

At end of year . . . . . 19,271 11,364 50,015 1,781 10,139 92,570

ACCUMULATED

DEPRECIATION

At beginning of year. . 10,057 7,445 31,040 2,147 — 50,689Current depreciation . . 2,328 988 5,545 107 — 8,968Disposals . . . . . . . . . — — — (566) — (566)

At end of year . . . . . 12,385 8,433 36,585 1,688 — 59,091

NET BOOK VALUE

As at 31.3.2003 . . . . . 6,886 2,931 13,430 93 10,139 33,479

As at 31.3.2002 . . . . . 8,728 3,677 17,307 113 6,291 36,116

Depreciation charge for2002 . . . . . . . . . . 2,062 954 5,187 187 — 8,390

12. DEPOSITS FROM CUSTOMERS

2003 2002

RM’000 RM’000

Fixed deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,380,223 5,387,591Current accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900,446 968,122Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,760 131,745Negotiable instrument of deposits . . . . . . . . . . . . . . . . . . . . 76,927 —

6,495,356 6,487,458

F-475

Maturity structure of deposits from customers are as follows:

2003 2002

RM’000 RM’000

Due within six months . . . . . . . . . . . . . . . . . . . . . . . . . . 5,490,447 5,662,356Six months to one year . . . . . . . . . . . . . . . . . . . . . . . . . . 773,539 556,599One year to three years . . . . . . . . . . . . . . . . . . . . . . . . . . 184,513 241,812Over three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,857 26,691

6,495,356 6,487,458

The deposits are sourced from the following types of customer:

2003 2002

RM’000 RM’000

DueBusiness enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,046,091 3,820,906Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,492,924 1,486,608Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 956,341 1,179,944

6,495,356 6,487,458

13. DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS

2003 2002

RM’000 RM’000

Licensed banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,095,754 330,135

Licensed finance companies . . . . . . . . . . . . . . . . . . . . . . . 301,699 37,631

Other financial institutions . . . . . . . . . . . . . . . . . . . . . . . . 1,130,838 1,111,374

2,528,291 1,479,140

Included under deposits of banks and other financial institutions are the following:

2003 2002

RM’000 RM’000

Negotiable instrument of deposits . . . . . . . . . . . . . . . . . . . . 1,195,723 591,475

Interbank borrowings (Note 4) . . . . . . . . . . . . . . . . . . . . . . 347,495 83,839

14. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

Securities sold under repurchase agreements represent the obligations to repurchase these

securities sold as mentioned in Note 7.

15. BILLS AND ACCEPTANCES PAYABLE

Bills and acceptances payable represent our own bills and acceptances rediscounted and

outstanding in the market.

16. AMOUNT DUE TO CAGAMAS BERHAD

Amount due to Cagamas Berhad represents the proceeds received from loans (excluding Islamic

financing) sold directly and indirectly to Cagamas Berhad with recourse to the Bank. Under this

arrangement, the Bank undertakes to administer the loans on behalf of Cagamas Berhad and to buy

back any loans which are regarded as defective based on prudential criteria.

F-476

17. OTHER LIABILITIES

2003 2002

RM’000 RM’000

Other payables and accruals . . . . . . . . . . . . . . . . . . . . . . . 69,602 75,331

Interest payable on deposits and borrowings . . . . . . . . . . . . . 42,354 48,743

Profit equalisation reserve . . . . . . . . . . . . . . . . . . . . . . . . 448 —

112,404 124,074

18. SUBORDINATED TERM LOAN

The subordinated term loan represents an unsecured loan obtained from Employees Provident

Fund Board for the purpose of supplementing the Bank’s capital adequacy position and it is

subordinated to all other liabilities. The term loan is repayable in a lump sum at the end of ten (10)

years from the date of drawdown and interest is charged at a rate of 8.5% per annum for the first 5

years and 8.75% to 9.50% per annum for the next 5 years. The term loan was drawndown on 21

August 1995.

The Bank has obtained approval from Bank Negara Malaysia for inclusion of the subordinated

term loan into the capital base of the Bank. However, the amount included as capital base will be

amortised over 5 years commencing August 2000.

19. EXCHANGEABLE SUBORDINATED CAPITAL LOAN

The Exchangeable Subordinated Capital Loan (ESCL) represents an unsecured loan totalling

RM800 million obtained from Danamodal Nasional Berhad (Danamodal) to strengthen the capital

base of the Bank. The ESCL bears interest at 7.5% per annum.

In accordance with the ESCL facility agreement, the outstanding ESCL would be replaced with

the Bank’s RM200 million nominal amount of 10% Unsecured Convertible Exchangeable

Subordinated Bonds 1999/2009 and RM600 million 8% Irredeemable Non-Cumulative Convertible

Exchangeable Preference Shares of RM1.00 each. On 31 May 2000, the Bank has partially repaid

RM340 million of the ESCL.

The Bank has obtained approval from Bank Negara Malaysia for inclusion of the entire amount

of ESCL into the capital base of the Bank.

On 7 June 2001, the Bank obtained approval from Bank Negara Malaysia to extend the ESCL

facility to 30 September 2003.

20. IRREDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS (ICULS)

2003 2002

RM’000 RM’000

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . 111,875 111,875

Conversion during the year . . . . . . . . . . . . . . . . . . . . . . . . (111,875) —

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . — 111,875

On 30 September 2002, both the ICULS 1996/2002 and ICULS 1995/2005 were converted into

69,921,875 new ordinary shares of RM1.00 each credited as fully paid on the basis of one (1) new

ordinary share in exchange for RM1.60 nominal amount of ICULS tendered as mentioned in Note

21.

With the adoption of MASB 24 : Financial Instruments — Disclosure and Presentation in the

current financial year, the interest expense on ICULS 1995/2005 and ICULS 1996/2002 is now

reflected as part of the changes in equity in the statement of changes in equity.

F-477

21. SHARE CAPITAL

2003 2002

RM’000 RM’000

Authorised:Ordinary shares of RM1 each

Balance at beginning and at end of year . . . . . . . . . . . . 2,000,000 2,000,000

Issued and paid-up:Ordinary shares of RM1 each:

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . 435,547 435,547Issued during the year pursuant to the conversion of ICULS

1996/2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,422 —Issued during the year pursuant to the conversion of ICULS

1995/2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,500 —

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . 505,469 435,547

On 30 September 2002, the issued and fully paid-up share capital of the Bank was increasedfrom 435,546,875 ordinary shares of RM1.00 each to 505,468,750 ordinary shares of RM1.00 eachby the issue of 69,921,875 new ordinary shares of RM1.00 each arising from the conversion ofRM91,875,000 nominal amount of Irredeemable Convertible Unsecured Loan Stocks (ICULS) 1996/2002 and RM20,000,000 nominal amount of ICULS 1995/2005, both on the basis of one newordinary share of RM1.00 each for every RM1.60 nominal amount of ICULS. The resulting sharepremium totalling RM41,953,125 was credited to share premium account as shown in Note 22. Thenew ordinary shares issued rank pari passu with the then existing ordinary shares of the Bank.

22. RESERVES

2003 2002

RM’000 RM’000

Non-distributable reserves:Capital reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 461Statutory reserve:

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . 95,642 85,963Transfer from income statement . . . . . . . . . . . . . . . . . . — 9,679

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . 95,642 95,642

Share premium:

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . 181,328 181,328Arising from the conversions of Irredeemable Convertible

Unsecured Loan Stocks 1996/2002 and 1995/2005 (Note 20and Note 21) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,953 —

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . 223,281 181,328

Total non-distributable reserves . . . . . . . . . . . . . . . . . . . . . 319,384 277,431

Distributable reserves:Accumulated losses. . . . . . . . . . . . . . . . . . . . . . . . . . . (391,394) (371,617)

Total reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (72,010) (94,186)

Movement in reserves are shown in the statement of changes in equity.

Share premium is used to record premium arising from new shares issued in the Bank.

The statutory reserve is maintained in compliance with Section 36 of the Banking and FinancialInstitutions Act, 1989 and is not distributable as cash dividends.

F-478

23. INTEREST INCOME

2003 2002

RM’000 RM’000

Loans, advances and financing. . . . . . . . . . . . . . . . . . . . 510,206 611,206

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . 9,287 22,148

Money at call and deposit placements with financial institutions 34,169 30,114

Gross interest income . . . . . . . . . . . . . . . . . . . . . . . . . 553,662 663,468

Accretion of discounts less amortisation of premium — net. . 2,643 751

Total before interest suspension . . . . . . . . . . . . . . . . . . . 556,305 664,219

Interest suspended . . . . . . . . . . . . . . . . . . . . . . . . . . . (194,162) (266,547)

Interest recovered. . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,889 84,420

Net interest suspended . . . . . . . . . . . . . . . . . . . . . . . . . (100,273) (182,127)

Total after interest suspension . . . . . . . . . . . . . . . . . . . . 456,032 482,092

24. INTEREST EXPENSE

2003 2002

RM’000 RM’000

Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . 207,581 198,709

Interest on Exchangeable Subordinated Capital Loan . . . . . . 34,500 34,500

Deposits and placements of banks and other financial

institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,969 63,948

Interest on subordinated term loan . . . . . . . . . . . . . . . . . 6,676 6,567

Interest on Irredeemable Convertible Unsecured Loan Stocks . — 8,062

274,726 311,786

25. LOAN AND FINANCING LOSS AND ALLOWANCE

2003 2002

RM’000 RM’000

Allowances for bad and doubtful debts and financing:

Specific allowance — net (Note 8) . . . . . . . . . . . . . . . . 158,471 162,537

General allowance (Note 8) . . . . . . . . . . . . . . . . . . . . — (7,043)

158,471 155,494

Bad debts and financing recovered . . . . . . . . . . . . . . . . . (54,494) (77,427)

Allowance for impairment on amount recoverable from

Danaharta (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . 28,271 28,260

Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,248 106,327

F-479

26. NON-INTEREST INCOME

2003 2002

RM’000 RM’000

Fee income:

Fees on loans and advances . . . . . . . . . . . . . . . . . . . . 24,386 19,674

Brokerage fees and commissions . . . . . . . . . . . . . . . . . 8,451 10,037

Guarantee fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,977 4,484

Other fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,489 1,077

40,303 35,272

Investment and trading income:

Gross dividend income from:

Quoted investment in Malaysia . . . . . . . . . . . . . . . . 1,942 384

Unquoted investment in Malaysia . . . . . . . . . . . . . . . 108 975

Net income from trading of investment securities . . . . . . . (11,244) 16,831

Net loss from trading of dealing securities . . . . . . . . . . . — (1,792)

(9,194) 16,398

Other income:

Realised foreign exchange profit . . . . . . . . . . . . . . . . . 3,893 3,813

Gain on disposal of property and equipment . . . . . . . . . . 235 —

4,128 3,813

35,237 55,483

27. NON-INTEREST EXPENSES

2003 2002

RM’000 RM’000

Personnel/Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . 61,909 61,176

Establishment costs. . . . . . . . . . . . . . . . . . . . . . . . . . . 34,069 33,205

Administration and general expenses . . . . . . . . . . . . . . . . 28,335 13,529

Marketing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 18,555 13,833

142,868 121,743

The above expenditure includes the following statutory

disclosures:

Rental of premises . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,552 9,875

Depreciation of property and equipment (Note 11) . . . . . . . 8,968 8,390

Professional fees paid to related companies . . . . . . . . . . . . 4,768 6,905

Directors’ remuneration (Note 29) . . . . . . . . . . . . . . . . . 1,640 1,420

Hire of equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 458 465

Auditors’ remuneration

— Statutory audit . . . . . . . . . . . . . . . . . . . . . . . . . . 100 100

— Special audit. . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 70

— Underprovision in previous years . . . . . . . . . . . . . . . 77 —

The number of employees of the Bank as at 31 March 2003 was 1,304 (1,216 in 2002).

F-480

28. SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES

The Bank is a subsidiary of AMMB Holdings Berhad, a company incorporated in Malaysia,

which is also the ultimate holding company.

During the financial year, the significant related party transactions and balances are as follows:

(a) Transactions and balances with related companies:

2003 2002

RM’000 RM’000

Amount due from related companies

Short-term funds

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . 193,000 19,000

AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . 51,000 —

244,000 19,000

Deposits and placements

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . 180,000 —

Investment securities

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . 15,050 —

Loans, advances and financing

Arab-Malaysian Credit Berhad . . . . . . . . . . . . . . 166,017 169,090

Interest receivable

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . 1,026 —

AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . 70 —

1,096 —

Amount due to

Holding company

Deposits and placements

AMMB Holdings Berhad . . . . . . . . . . . . . . . . — 38,634

Interest bearing Irredeemable Convertible

Unsecured Loan Stocks (ICULS) — at cost

AMMB Holdings Berhad . . . . . . . . . . . . . . . . — 61,500

— 100,134

F-481

2003 2002

RM’000 RM’000

Related companies

Deposits and placements

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . 341,305 —

AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . 225,000 —

AMMB International (L) Ltd . . . . . . . . . . . . . . . 17,615 —

AmSecurities Sdn Bhd. . . . . . . . . . . . . . . . . . . 11,203 —

AmAssurance Berhad . . . . . . . . . . . . . . . . . . . 2,787 4,539

AmEquities Sdn Bhd. . . . . . . . . . . . . . . . . . . . 2,700 2,000

AmProperty Trust Management Berhad . . . . . . . . 1,511 1,412

AMMB Hong Kong Ltd . . . . . . . . . . . . . . . . . . 1,184 —

AmSecurities Holding Sdn Bhd . . . . . . . . . . . . . 789 242

AMSEC Nominees (Tempatan) Sdn Bhd . . . . . . . . 504 382

AmResearch Sdn Bhd . . . . . . . . . . . . . . . . . . . 400 —

AMMB Labuan (L) Ltd . . . . . . . . . . . . . . . . . . 226 111

AMSEC Nominees (Asing) Sdn Bhd . . . . . . . . . . 83 81

AmConsultant Sdn Bhd . . . . . . . . . . . . . . . . . . 50 500

605,357 9,267

Interest Payable

AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . 297 —

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . 122 293

AmAssurance Berhad . . . . . . . . . . . . . . . . . . . 5 135

424 428

Income

Related Companies

Interest on investment securities

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . 53 —

Interest on loans, advances and financing

Arab-Malaysian Credit Berhad . . . . . . . . . . . . . . 9,520 9,676

Interest on deposits and placements

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . 5,289 1,742

AmFinance Berhad . . . . . . . . . . . . . . . . . . . . . 106 —

AMMB International (L) Ltd . . . . . . . . . . . . . . . — 664

5,395 2,406

F-482

2003 2002

RM’000 RM’000

Expense

Holding company

Interest on deposits and placements

AMMB Holdings Berhad . . . . . . . . . . . . . . . . . 548 1,594

Interest on ICULS

AMMB Holdings Berhad . . . . . . . . . . . . . . . . . — 4,530

548 6,124

Related company

Interest on deposits and placements

AmMerchant Bank Berhad . . . . . . . . . . . . . . . . 2,598 2,270

AmAssurance Berhad . . . . . . . . . . . . . . . . . . . 476 1,758

AmEquities Sdn Bhd. . . . . . . . . . . . . . . . . . . . 211 184

AmSecurities Sdn Bhd. . . . . . . . . . . . . . . . . . . 125 134

AMMB International (L) Ltd . . . . . . . . . . . . . . . — 52

3,410 4,398

The directors of the Bank are of the opinion that the above transactions have been entered

in the normal course of business and have been established under terms that are no more

favourable than those arranged with independent third parties.

(b) Director’s related transactions

2003 2002

RM’000 RM’000

Expenditure

Rental of premises . . . . . . . . . . . . . . . . . . . . . . . . 4,100 3,898

Computer equipment and software . . . . . . . . . . . . . . 1,182 7,874

The directors related transactions are:

i. On 31 July 2001, the Bank entered into a software licence and development

agreement with Gamarapi Sdn Bhd (‘‘GSB’’), a subsidiary of Arab-Malaysian

Corporation Berhad (‘‘AMCORP’’) for the Internet banking project whereby GSB

will:

. Grant to the Bank a non-exclusive, non-transferable and perpetual licence to

use Licensed Program; and

. Develop for and licence to the Bank, licensed materials and/or system in

accordance with the terms and conditions contained in the Agreement.

The aggregate contract value for professional services for the development of the

licensed material is RM6,333,340.

ii. The Bank has also on 9 September 2001, entered into a consultancy and

development agreement with Cyber Village Sdn Bhd (‘‘CV’’), an associated

company of AMCORP for Arab-Malaysian Banking Group Corporate Website

Restructuring project whereby CV will:

. Design and develop for the Bank, a corporate website; and

F-483

. Manage the Project.

The aggregate contract value for professional services for the development of the

website is RM250,000.

iii. The lease of office space in a building owned by a property trust in which the Arab-

Malaysian Development Berhad (‘‘AMDB’’) Group has substantial interest. Tan Sri

Dato’ Azman Hashim is deemed to have an interest by virtue of his shareholding in

AMCORP which has a substantial interest in AMDB; and

iv. The Bank has also entered into a tenancy agreement with a company in which Troost

Sdn Bhd has a substantial interest. Tan Sri Dato’ Azman Hashim is deemed to have

an interest by virtue of his shareholding in Troost Sdn. Bhd.

The directors are of the opinion that the above transactions have been entered into in the

normal course of business and have been established under terms that are no more favourable

than those arranged with independent third parties.

29. DIRECTORS’ REMUNERATION

Forms of remuneration in aggregate for all directors charged to the income statement for the

year are as follows:

2003 2002

RM’000 RM’000

Executive Directors:

Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720 257

Bonuses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190 275

Other remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 160

Benefits-in-kind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 31

Gratuity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 194

1,138 917

Non-Executive Directors

Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 223

Other remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . 269 252

Benefits-in-kind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 28

502 503

Total Directors’ Remuneration (Note 27) . . . . . . . . . . . . . 1,640 1,420

The remuneration attributable to the Managing Director of the Bank, including benefits-in-kind

during the financial year amounted to RM811,000 (RM566,000 in 2002).

30. TAXATION

Taxation consists of the following:

2003 2002

RM’000 RM’000

Over provision of Malaysian income tax in prior years . . . . — 59

Transfer from/(to) deferred tax (Note 31) . . . . . . . . . . . . . 16,500 (3,559)

Tax credit/(charge) . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,500 (3,500)

F-484

No provision for estimated tax payable is made in the financial statements of the Bank for 2003

and 2002 due to the utilisation of carryforward tax losses of about RM78 million (RM28 million in

2002) to fully set-off the business income which will otherwise be taxable.

As at 31 March 2003, the unutilised tax losses which are available for set-off against future

taxable income amounted to approximately RM242 million (RM320 million in 2002) subject to the

agreement by the Inland Revenue Board.

31. DEFERRED TAX

Included in other assets are deferred tax assets as follows:

2003 2002

RM’000 RM’000

Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . 119,941 123,500

Transfer to/(from) income statement (Note 30) . . . . . . . . . . 16,500 (3,559)

Balance at end of year (Note 9) . . . . . . . . . . . . . . . . . . 136,441 119,941

Deferred tax assets are in respect of the following timing differences:

Deferred Tax Assets/(Liabilities)

2003 2002

RM’000 RM’000

Unutilised tax losses . . . . . . . . . . . . . . . . . . . . . . . . . . 67,831 87,884

Allowance for impairment on amount recoverable from

Danaharta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,635 29,966

Allowance for diminution in value of investments. . . . . . . . 28,876 2,165

Interest suspended on non-performing loans. . . . . . . . . . . . 7,452 7,452

Timing differences between book depreciation and tax

allowances on property and equipment . . . . . . . . . . . . . (2,732) (2,392)

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,621) (5,134)

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . 136,441 119,941

32. EARNINGS PER ORDINARY SHARE (SEN)

(a) Basic earnings per share

Basic earnings per share is calculated by dividing the net profit attributable to shareholder

of the Bank less interest on Irredeemable Convertible Unsecured Loan Stocks (ICULS) by the

weighted average number of ordinary shares in issue during the financial year.

2003 2002

RM’000 RM’000

Net (loss)/profit attributable to shareholder of the Bank

after adjusting for interest on ICULS . . . . . . . . . . . (19,777) 19,358

Number of ordinary shares at beginning of year . . . . . . 435,547 435,547

Effect of ordinary shares issued pursuant to the

conversions of ICULS . . . . . . . . . . . . . . . . . . . . 35,057 —

Weighted average number of ordinary shares in issue . . 470,604 435,547

Basic (loss)/earnings per share (Sen) . . . . . . . . . . . . . (4.20) 4.44

F-485

(b) Fully diluted earnings per share

The fully diluted earnings per share is not calculated for the current financial year as at

31 March 2003 since there is no instrument held with dilutive potential.

The fully diluted earnings per share for the previous year is calculated by dividing the

adjusted profit after taxation over the adjusted weighted average number of ordinary shares in

issue and issuable during the financial year.

The Bank has two categories of dilutive potential of ordinary shares as follows:

(i) ICULS 1996/2002 of RM91,875,000

(ii) ICULS 1995/2005 of RM20,000,000

The basis for the maximum number of ordinary shares of RM1.00 each to be issued on the

conversions of ICULS 1996/2002 and ICULS 1995/2005 and their respective prices are

mentioned in Note 20.

2003 2002

RM’000 RM’000

Net profit attributable to shareholders of the Bank . . . . — 19,358

Adjusted after tax effect of interest saving on ICULS . . — 5,805

Adjusted profit after taxation . . . . . . . . . . . . . . . . . — 25,163

Weighted average number of ordinary shares in issue as in

(a) above . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 435,547

Adjusted for:

ICULS 1996/2002 . . . . . . . . . . . . . . . . . . . . . . — 57,422

ICULS 1995/2005 . . . . . . . . . . . . . . . . . . . . . . — 12,500

Adjusted weighted average number of ordinary shares in

issue and issuable . . . . . . . . . . . . . . . . . . . . . — 505,469

Fully diluted earnings per share (Sen) . . . . . . . . . . — 4.98

The adjusted profit after taxation of RM25,163,000 for the financial year ended 31 March

2002 has been arrived at after adding back interest (net of tax) of RM5,805,000 on the nominal

amount of 91,875,000 ICULS 1996/2002 and 20,000,000 ICULS 1995/2005 deemed to be fully

converted at beginning of financial year.

The adjusted weighted average number of ordinary shares in issue and issuable for the

financial year ended 31 March 2002 has been arrived at based on the assumption that both the

ICULS 1996/2002 and ICULS 1995/2005 are converted to ordinary shares at the beginning of

the financial year.

The assumed conversion of the ICULS in the previous financial year would result in an

anti dilution of the basic earnings per share.

F-486

33. COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Bank makes various commitments and incurs certain

contingent liabilities with legal recourse to its customers. No material losses are anticipated as a

result of these transactions.

Risk weighted exposures of the Bank are as follows:

2003 2002

Principal

Amount

Credit

Equivalent

Amount*

Principal

Amount

Credit

Equivalent

Amount*

RM’000 RM’000 RM’000 RM’000

Irrevocable commitments to

extend credit maturing:

Within one year. . . . . . . . 2,689,737 — 2,185,248 —

More than one year . . . . . 788,061 394,031 1,137,105 568,553

Direct credit substitutes . . . . . 230,331 230,331 337,936 337,936

Forward exchange contracts . . 206,115 1,089 69,629 898

Transaction-related contingent

items . . . . . . . . . . . . . . . 191,191 95,595 158,256 79,128

Obligations under underwriting

agreements . . . . . . . . . . . 115,000 57,500 149,000 74,500

Short-term self-liquidating

trade-related contingencies . . 107,788 21,558 129,518 25,904

SPI financing sold to Cagamas

Berhad with recourse . . . . . 3,683 3,683 3,844 3,844

Others. . . . . . . . . . . . . . . . 71,598 — 20,373 —

4,403,504 803,787 4,190,909 1,090,763

* The credit equivalent amount is arrived at using the credit conversion factor as per Bank Negara Guidelines.

The Bank is contingently liable in respect of SPI financing sold to Cagamas Berhad on the

condition that the Bank undertakes to administer the loans on behalf of Cagamas Berhad and to buy

back any loans which are regarded as defective based on prudent criteria.

F-487

34. NET TANGIBLE ASSETS PER SHARE (RM)

Net tangible assets per share represent the balance sheet’s total assets value less total

liabilities, Irredeemable Convertible Unsecured Loan Stocks (ICULS) 1996/2002 and ICULS 1995/

2005 expressed as an amount per ordinary share.

Net tangible assets per share is calculated as follows:

2003 2002

RM’000 RM’000

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,654,769 9,655,009

Less:

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,221,310 9,201,773

ICULS 1996/2002 . . . . . . . . . . . . . . . . . . . . . . . . . . — 91,875

ICULS 1995/2005 . . . . . . . . . . . . . . . . . . . . . . . . . . — 20,000

10,221,310 9,313,648

Net Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 433,459 341,361

Issued and fully paid-up ordinary shares of RM1.00 each . . . 505,469 435,547

Net tangible assets per share (RM) . . . . . . . . . . . . . . . . . 0.86 0.78

35. CAPITAL COMMITMENTS

2003 2002

RM’000 RM’000

Capital expenditure in respect of the purchase of office

equipment and computer software and hardware:

Authorised but not contracted for . . . . . . . . . . . . . . . . . 708 352

36. LEASE COMMITMENTS

The Bank has lease commitments in respect of rented premises, which are classified as

operating leases. A summary of non-cancellable long-term commitments is as follows:

2003 2002

RM’000 RM’000

12 months ending 31 March:

2003. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 8,251

2004. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,172 6,101

2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,347 6,991

2006 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . 922 —

9,441 21,343

The lease commitments represent minimum rentals and are not adjusted for operating expenses

which the Bank is obligated to pay. These amounts are insignificant in relation to the minimum lease

obligations. In the normal course of business, leases that expire will be renewed or replaced by

leases on other properties, thus it is anticipated that future annual minimum lease commitments will

not be less than rental expenses for the year.

F-488

37. CAPITAL ADEQUACY RATIO

Bank Negara Malaysia’s (‘BNM’) guideline on capital adequacy requires the Bank to maintain

adequate level of capital to withstand any losses which may result from credit and other risks

associated with financing operations. The capital adequacy ratio is computed based on the eligible

capital in relation to the total risk weighted assets as determined by BNM.

The capital adequacy ratio of the Bank as at 31 March 2003 are as follows:

2003 2002

RM’000 RM’000

Tier 1 capital

Paid-up share capital. . . . . . . . . . . . . . . . . . . . . . . . . . 505,469 435,547

Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223,281 181,328

Statutory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,642 95,642

Capital reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 461

Accumulated losses at end of year . . . . . . . . . . . . . . . . . (391,394) (371,617)

Total tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . 433,459 341,361

Tier 2 capital

Irredeemable Convertible Unsecured Loan Stocks 1996/2002

and 1995/2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 111,875

Exchangeable Subordinated Capital Loan (ESCL) . . . . . . . . 460,000 460,000

Subordinated term loan . . . . . . . . . . . . . . . . . . . . . . . . 30,000 45,000

General allowances for bad and doubtful debts and financing. 110,863 121,090

Total tier 2 capital . . . . . . . . . . . . . . . . . . . . . . . . . . 600,863 737,965

Capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,034,322 1,079,326

Notional risk-weighted assets:

Categories

0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,880,212 1,056,510

10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 60,150

20% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 939,398 988,243

50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,573,581 1,302,618

100% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,036,191 7,313,883

Total notional risk-weighted assets . . . . . . . . . . . . . . . . . 11,429,382 10,721,404

Total risk-weighted assets . . . . . . . . . . . . . . . . . . . . . . 8,010,862 8,168,855

Capital Ratios:

Core capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.41% 4.18%

Risk-weighted capital ratio . . . . . . . . . . . . . . . . . . . . . 12.91% 13.21%

Bank Negara Malaysia has approved for the Bank to treat the ESCL as Tier 2 capital. The said

amount is allowed to exceed Tier 1 capital funds and is exempted from the 50% restriction of

subordinated term loans over Tier 1 capital funds.

F-489

38. THE OPERATION OF ISLAMIC BANKING (SPI)

Balance Sheet

As at 31 March 2003

2003 2002

Note RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . . . . . . . . . . . . . . (a) 113,107 283,869

Investment securities . . . . . . . . . . . . . . . . . . . . . . . (b) 174,307 219,753

Loans, advances and financing — net . . . . . . . . . . . . (c) 675,365 556,229

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . (d) 2,787 6,236

Statutory deposit with Bank Negara Malaysia . . . . . . . 17,560 31,849

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 983,126 1,097,936

LIABILITIES AND ISLAMIC BANKING FUND

Deposits from customers . . . . . . . . . . . . . . . . . . . . (e) 320,516 808,524

Deposits of banks and other financial institutions . . . . . (f) 577,854 175,919

Bills and acceptances payable . . . . . . . . . . . . . . . . . 91 —

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . (g) 17,027 47,300

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 915,488 1,031,743

Capital fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000

Unappropriated profit . . . . . . . . . . . . . . . . . . . . . . 47,638 46,193

Islamic Banking Fund . . . . . . . . . . . . . . . . . . . . . . 67,638 66,193

TOTAL LIABILITIES AND ISLAMIC BANKING

FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 983,126 1,097,936

COMMITMENTS AND CONTINGENCIES . . . . . . . . (h) 339,337 264,038

F-490

The accompanying Notes form an integral part of the Financial Statements.

Income Statement

For the year ended 31 March 2003

2003 2002

Note RM’000 RM’000

Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (i) 71,581 15,166

(Income-in-suspense)/Write-back. . . . . . . . . . . . . . . . (c) (56,683) 2,241

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,898 17,407

General allowance (made)/write-back for bad and doubtful

debts and financing . . . . . . . . . . . . . . . . . . . . . . (c) (1,015) 119

Specific allowance made for bad and doubtful debts and

financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (c) (5,059) (4,951)

Bad debts and financing recovered . . . . . . . . . . . . . . 1,172 9,281

9,996 21,856

Transfer to profit equalisation reserve . . . . . . . . . . . . (448) —

Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . (j) (7,143) (6,087)

Profit before taxation . . . . . . . . . . . . . . . . . . . . . . 2,405 15,769

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (960) (4,000)

Profit after taxation . . . . . . . . . . . . . . . . . . . . . . . 1,445 11,769

Unappropriated profit at beginning of year . . . . . . . . . 46,193 34,424

Unappropriated profit at end of year . . . . . . . . . . . . . 47,638 46,193

The accompanying Notes form an integral part of the Financial Statements.

F-491

(a) Cash and short-term funds

2003 2002

RM’000 RM’000

Cash and bank balances with banks and other financial

institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,694 8,169

Money at call and deposit placements maturing within one

month:

Licensed banks . . . . . . . . . . . . . . . . . . . . . . . . 102,413 132,000

Licensed finance companies . . . . . . . . . . . . . . . . — 55,000

Other financial institutions . . . . . . . . . . . . . . . . . — 88,700

113,107 283,869

(b) Investment securities

2003 2002

RM’000 RM’000

Money Market Securities:

Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . . 82,491 —

Malaysian Government Investment Certificates . . . . . 45,163 45,163

Bankers’ acceptances . . . . . . . . . . . . . . . . . . . . 2 —

KLIA bonds . . . . . . . . . . . . . . . . . . . . . . . . . . — 44,076

127,656 89,239

Unquoted Debt Conversion Equity of companies

incorporated in Malaysia — Shares . . . . . . . . . . . . 11,476 11,476

Unquoted Private Debt Securities of companies

incorporated in Malaysia — Corporate bonds . . . . . . 42,118 127,733

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181,250 228,448

Allowance for diminution in value of investment . . . . . (11,476) (8,588)

Accretion of discount less amortisation of premium — net 4,533 (107)

Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174,307 219,753

2003 2002

RM’000 RM’000

Market value:

Money Market Securities:

Khazanah bonds. . . . . . . . . . . . . . . . . . . . . . . . 84,894 —

Malaysian Government Investment Certificates . . . . . 48,341 46,620

KLIA bonds . . . . . . . . . . . . . . . . . . . . . . . . . . — 44,588

The maturity structure of money market securities held for investment is as follows:

2003 2002

RM’000 RM’000

Maturing within one year . . . . . . . . . . . . . . . . . . . . 2 —

One year to three years . . . . . . . . . . . . . . . . . . . . . 101,006 77,974

Three years to five years . . . . . . . . . . . . . . . . . . . . 13,475 —

Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . 13,173 11,265

127,656 89,239

F-492

(c) Loans, advances and financing

2003 2002

RM’000 RM’000

Term financing . . . . . . . . . . . . . . . . . . . . . . . . . . 610,652 521,527

House financing. . . . . . . . . . . . . . . . . . . . . . . . . . 89,941 39,205

Credit cards receivable . . . . . . . . . . . . . . . . . . . . . 35,012 8,511

Bills financing . . . . . . . . . . . . . . . . . . . . . . . . . . 20,497 3,154

Trust receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,242 263

Gross loans, advances and financing . . . . . . . . . . . . . 757,344 572,660

Less: SPI financing sold to Cagamas Berhad . . . . . . . . (3,683) (3,844)

753,661 568,816

Allowances for bad and doubtful debts and financing:

Specific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,072) (184)

General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,411) (9,396)

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . . . (62,813) (3,007)

Net loans, advances and financing . . . . . . . . . . . . . . 675,365 556,229

Loans, advances and financing analysed by concepts are as follows:

2003 2002

RM’000 RM’000

Al-Bai’ Bithaman Ajil . . . . . . . . . . . . . . . . . . . . . . 493,526 380,477

Al-Musyarakah . . . . . . . . . . . . . . . . . . . . . . . . . . 182,568 177,393

Al Bai’ In’nah . . . . . . . . . . . . . . . . . . . . . . . . . . 33,401 6,172

Al-Murabahah . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,899 4,466

Al-Istina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,267 308

753,661 568,816

The maturity structure of loans, advances and financing are as follows:

2003 2002

RM’000 RM’000

Maturing within one year . . . . . . . . . . . . . . . . . . . . 169,681 107,887

One year to three years . . . . . . . . . . . . . . . . . . . . . 446,446 10,112

Three years to five years . . . . . . . . . . . . . . . . . . . . 21,021 378,171

Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . 116,513 72,646

753,661 568,816

F-493

Loans, advances and financing analysed by their economic purposes are as follows:

2003 2002

RM’000 % RM’000 %

Agriculture . . . . . . . . . . . . . . . . . . . . 120,988 16.0 104,510 18.2

Manufacturing . . . . . . . . . . . . . . . . . . 4,906 0.6 2,947 0.5

Construction . . . . . . . . . . . . . . . . . . . 9,151 1.2 20,733 3.6

Real estate . . . . . . . . . . . . . . . . . . . . 145,814 19.3 125,175 21.9

Purchase of landed property:

Residential . . . . . . . . . . . . . . . . . . 86,457 11.4 12,855 2.2

Non-residential . . . . . . . . . . . . . . . 52,353 6.9 66,466 11.6

Transport, storage and communication . . . 17,287 2.3 18,764 3.3

Finance, insurance and business services . 256,944 33.9 200,475 35.0

Purchase of securities . . . . . . . . . . . . . 9,742 1.3 11,446 2.0

Consumption credits . . . . . . . . . . . . . . 35,012 4.6 8,511 1.5

Others. . . . . . . . . . . . . . . . . . . . . . . 18,690 2.5 778 0.1

Gross loans, advances and financing . . . . 757,344 100.0 572,660 100.0

Less: Islamic financing sold to Cagamas

Berhad. . . . . . . . . . . . . . . . . . . (3,683) (3,844)

753,661 568,816

Movements in non-performing loans and financing (NPLs), including income receivables,

are as follows:

2003 2002

RM’000 RM’000

NPLs-gross

Balance at beginning of year. . . . . . . . . . . . . . . . 156,566 173,597

Non-performing during the year . . . . . . . . . . . . . . 38,809 85,712

Amount recovered . . . . . . . . . . . . . . . . . . . . . . (8,221) (65,993)

Amount written off. . . . . . . . . . . . . . . . . . . . . . (907) (36,750)

Balance at end of year . . . . . . . . . . . . . . . . . . . 186,247 156,566

Less:

Specific allowance . . . . . . . . . . . . . . . . . . . . . . (5,072) (184)

Income-in-suspense . . . . . . . . . . . . . . . . . . . . . . (62,813) (3,007)

NPLs — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,362 153,375

Total loans, advances and financing less specific

allowance and income-in-suspense . . . . . . . . . . . . . 685,776 565,625

Islamic financing sold to Cagamas Berhad . . . . . . . . . 3,683 3,844

689,459 569,469

Ratio of net non-performing loans to loans, advances and

financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.17% 26.93%

F-494

Movements in the general and specific allowances for bad and doubtful debts and

financing and income-in-suspense accounts are as follows:

2003 2002

RM’000 RM’000

General Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . 9,396 9,515

Allowance made/(write-back) during the year. . . . . . . . 1,015 (119)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . 10,411 9,396

% of total loans less specific allowance and interest/

income-in-suspense . . . . . . . . . . . . . . . . . . . . . . 1.52% 1.66%

Specific Allowance

Balance at beginning of year. . . . . . . . . . . . . . . . . . 184 190

Allowance made during the year . . . . . . . . . . . . . . . 5,327 5,034

Amount written back in respect of recoveries . . . . . . . (268) (83)

Net charge to income statement . . . . . . . . . . . . . . . . 5,059 4,951

Reclassification from conventional . . . . . . . . . . . . . . 14 —

Amount written off. . . . . . . . . . . . . . . . . . . . . . . . (185) (4,957)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . 5,072 184

Income-in-suspense

Balance at beginning of year. . . . . . . . . . . . . . . . . . 3,007 26,046

Allowance made during the year . . . . . . . . . . . . . . . 62,545 8,365

Amount written back in respect of recoveries . . . . . . . (5,862) (10,606)

Net charge/(credit) to income statement . . . . . . . . . . . 56,683 (2,241)

Reclassification from conventional . . . . . . . . . . . . . . 2 —

Amount written off. . . . . . . . . . . . . . . . . . . . . . . . 3,121 (20,798)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . 62,813 3,007

(d) Other assets

Other assets are represented by other receivables, deposits and prepayments.

(e) Deposits from customers

2003 2002

RM’000 RM’000

Al-Mudharabah general investment deposits . . . . . . . . . 266,486 772,022

Al-Wadiah current accounts . . . . . . . . . . . . . . . . . . 36,502 22,723

Al-Wadiah saving deposits . . . . . . . . . . . . . . . . . . . 17,528 13,779

320,516 808,524

F-495

Maturity structures of deposits from customers are as follows:

2003 2002

RM’000 RM’000

Due within six months . . . . . . . . . . . . . . . . . . . . . 270,065 723,885

Six months to one year . . . . . . . . . . . . . . . . . . . . . 50,246 84,333

One year to three years . . . . . . . . . . . . . . . . . . . . . 160 306

Three to five years . . . . . . . . . . . . . . . . . . . . . . . . 45 —

320,516 808,524

The deposits are sourced from the following types of customer:

2003 2002

RM’000 RM’000

Business enterprises . . . . . . . . . . . . . . . . . . . . . . . 148,604 509,398

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,121 26,895

Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,791 272,231

320,516 808,524

(f) Deposits of Banks and other financial institutions

2003 2002

RM’000 RM’000

Licensed banks . . . . . . . . . . . . . . . . . . . . . . . . . . 491,350 87,200

Licensed finance companies . . . . . . . . . . . . . . . . . . 328 312

Other financial institutions . . . . . . . . . . . . . . . . . . . 86,176 88,407

577,854 175,919

(g) Other liabilities

2003 2002

RM’000 RM’000

Amount due to Head Office . . . . . . . . . . . . . . . . . . 6,899 43,496

Dividends payable to depositors . . . . . . . . . . . . . . . . 6,527 3,368

Profit equalisation reserves . . . . . . . . . . . . . . . . . . . 448 —

Other payables and accruals . . . . . . . . . . . . . . . . . . 3,153 436

17,027 47,300

(h) Commitments and contingencies

In the normal course of business, the Islamic Banking Operations of the Bank make

various commitments and incur certain contingent liabilities with legal recourse to its

customers. No material losses are anticipated as a result of these transactions.

F-496

Risk weighted exposures of the Bank are as follows:

2003 2002

Principal

Amount

Credit

Equivalent

Amount*

Principal

Amount

Credit

Equivalent

Amount*

RM’000 RM’000 RM’000 RM’000

Islamic underwriting facilities . . . . . . 115,000 57,500 120,000 60,000

Irrevocable commitment to extend credit

maturing:

Within one year. . . . . . . . . . . . . . 93,259 — 68,580 —

More than one year . . . . . . . . . . . 82,546 41,273 55,793 27,896

Al-Kafalah guarantees . . . . . . . . . . . 23,003 23,003 6,269 6,269

Transaction-related contingent items . . 20,943 10,472 7,986 3,993

Islamic financing sold to Cagamas

Berhad . . . . . . . . . . . . . . . . . . . 3,683 3,683 3,844 3,844

Short-term self liquidating trade-related

contingencies . . . . . . . . . . . . . . . 903 181 1,566 313

339,337 136,112 264,038 102,315

* The credit equivalent amount is arrived at using the credit conversion factor as per Bank Negara Malaysia

Guidelines.

The Bank is contingently liable in respect of financing sold to Cagamas Berhad on the

condition that the Bank undertakes to administer the financing on behalf of Cagamas Berhad

and to buy back any financing which are regarded as defective based on prudent criteria.

(i) Income from SPI operations

2003 2002

RM’000 RM’000

Income derived from investment of depositors’ funds. . . 101,717 14,677

Income attributable to depositors:

Other customers. . . . . . . . . . . . . . . . . . . . . . . . (27,022) (34,407)

Banks and other financial institutions . . . . . . . . . . (5,482) (1,722)

Income/(loss) attributable to the Bank . . . . . . . . . . . . 69,213 (21,452)

Income derived from Islamic Banking Funds . . . . . . . . 2,368 36,618

Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,581 15,166

F-497

Details of the income derived from investment of depositors’ funds and funds allocated

from Head Office are as follows:

2003

Depositors’

Funds

Islamic

Banking Funds

RM’000 RM’000

Income from financing* . . . . . . . . . . . . . . . . . . . . . 98,562 —

Net trading income from money market securities:

Investment securities . . . . . . . . . . . . . . . . . . . . . — 2,368

Gain from sale of quoted investments . . . . . . . . . . — —

— 2,368

Fee income:

Guarantee fees . . . . . . . . . . . . . . . . . . . . . . . . 1,169 —

Other fee income . . . . . . . . . . . . . . . . . . . . . . . 1,986 —

3,155 —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,717 2,368

2002

Depositors’

Funds

Islamic

Banking Funds

RM’000 RM’000

Income from financing* . . . . . . . . . . . . . . . . . . . . . 4,478 36,078

Net trading income from money market securities:

Investment securities . . . . . . . . . . . . . . . . . . . . . 10,199 —

Gain from sale of quoted investments . . . . . . . . . . — —

10,199 —

Fee income:

Guarantee fees written back . . . . . . . . . . . . . . . . — 95

Other fee income . . . . . . . . . . . . . . . . . . . . . . . — 445

— 540

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,677 36,618

* Included in the income from financing is accretion of discounts on investment securities amounting to

RM3,535,000 (RM4,102,000 in 2002).

F-498

(j) Non-Interest expense

2003 2002

RM’000 RM’000

Personnel/staff costs . . . . . . . . . . . . . . . . . . . . . . . 3,095 3,059

Administration and general expenses . . . . . . . . . . . . . 1,879 1,080

Establishment costs. . . . . . . . . . . . . . . . . . . . . . . . 1,704 1,556

Marketing and communication expenses . . . . . . . . . . . 465 392

7,143 6,087

(k) Capital adequacy ratio : Islamic Banking Operations

The capital adequacy ratios in respect of the Islamic Banking operations of the Bank as at

31 March 2003 are as follows:

2003 2002

RM’000 RM’000

Tier 1 capital

Islamic Banking Fund . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000

Unappropriated profit . . . . . . . . . . . . . . . . . . . . . . 47,638 46,193

Total tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . 67,638 66,193

Tier 2 capital

General allowance for bad and doubtful debts and

financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,411 9,396

Total tier 2 capital . . . . . . . . . . . . . . . . . . . . . . . 10,411 9,396

Capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,049 75,589

Notional risk-weighted assets:

Categories

0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,615 129,954

10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 43,700

20% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,860 187,188

50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,252 34,713

100% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 792,694 698,427

Total notional risk-weighted assets . . . . . . . . . . . . . . 1,145,421 1,093,982

Total risk-weighted assets . . . . . . . . . . . . . . . . . . . 856,192 757,591

Capital Ratios:

Core capital ratio . . . . . . . . . . . . . . . . . . . . . . . 7.90% 8.74%

Risk-weighted capital ratio . . . . . . . . . . . . . . . . . 9.12% 9.98%

The disclosure of the capital adequacy ratios of the Bank’s Islamic Banking operations as

set out above is in accordance with the Bank Negara Malaysia’s circular dated 19 November

2001 on ‘Pematuhan Nisbah Modal Berwajaran Risiko bagi Portfolio Perbankan Islam’ which

take effect from January 2002 onwards.

F-499

39. RISK MANAGEMENT POLICY

Risk management is about managing uncertainties such that deviations from the Bank’s

intended objectives are kept within acceptable levels. Sustainable profitability forms the core

objectives of the Bank’s risk management strategy.

Every risk assumed by the Bank carries with it potential for gains as well as potential to erode

shareholders’ value. The Bank’s risk management policy is to identify, capture and analyse these

risks at an early stage, continuously measure and monitor these risks and to set limits, policies and

procedures to control them to ensure sustainable risk-taking and sufficient returns.

The management approach towards the significant risks of the Bank are enumerated below.

Market risk management

Market risk is the risk of loss from changes in the value of portfolios and financial

instruments caused by movements in market variables, such as interest rates, foreign exchange

rates and equity prices.

The primary objective of market risk management is to ensure that losses from market

risk can be promptly arrested and risk positions are sufficiently liquid so as to enable the Bank

to reduce its position without incurring potential loss that is beyond the sustainability of the

Bank.

The market risk of the Bank’s trading and non-trading portfolio is managed separately

using value-at-risk approach to compute the market risk exposure of non-trading portfolio and

trading portfolio. Value at risk is a statistical measure that estimates the potential changes in

portfolio value that may occur brought about by daily changes in market rates over a specified

holding period at a specified confidence level under normal market condition. For the Bank’s

trading portfolio, the Bank’s value at risk measurement takes a more sophisticated form by

taking into account the correlation effects of various instruments in the portfolio.

The Bank controls its market risk exposure of its trading and non-trading activities

primarily through a series of threshold limits. Stop loss and value at risk limits are the primary

means of control governing the trading activities of the Bank while value at risk limits governs

the non-trading positions.

To complement value at risk measurement, the Bank also institutes a set of scenario

analysis under various potential market conditions such as severe shifts in currency rates,

parallel interest risk movements and yield curve shifts to assess the changes in portfolio value.

F-500

The following table shows the interest rate sensitivity gap, by time bands, on which

interest rates of instruments are next repriced on a contractual basis or, if earlier, the dates on

which the instruments mature.

2003

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

interest

sensitive Total

Effective

interest

rate

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

ASSETS

Cash and short-term funds . . 1,611,857 — — — — — 57,150 1,669,007 2.8

Deposits and placements with

financial institutions . . . . — 100,000 130,000 — — — — 230,000 3.1

Dealing securities. . . . . . . . — — — — 46,502 143,777 28,496 218,775 5.3

Investment securities . . . . . . 199,952 15,572 — — 247,053 212,428 132,712 807,717 3.3

Loans, advances and

financing . . . . . . . . . . . 5,265,116 80,235 71,229 61,404 523,983 53,641 1,171,791 7,227,399 7.4

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 501,871 501,871

TOTAL ASSETS. . . . . . . . 7,076,925 195,807 201,229 61,404 817,538 409,846 1,892,020 10,654,769

LIABILITIES AND

SHAREHOLDER’S

FUNDS

Deposits from customers . . . 3,119,188 1,326,492 534,418 773,539 231,370 — 510,349 6,495,356 2.9

Deposits and placements of

banks and other financial

institutions . . . . . . . . . . 968,974 631,268 605,965 192,649 129,435 — — 2,528,291 3.3

Securities sold under

repurchase agreements . . . 12,607 — — — — — — 12,607 2.5

Bills and acceptances

payables . . . . . . . . . . . 89,131 70,313 30,064 — — — — 189,508

Amount due to Cagamas

Berhad . . . . . . . . . . . . 2,091 82,082 108,072 12,868 143,031 — — 348,144 4.4

Subordinated term loan . . . . — — — — 75,000 — — 75,000 9.0

Exchangeable Subordinated

Capital Loan . . . . . . . . . — — 460,000 — — — — 460,000 7.5

Other non-interest sensitive

balances . . . . . . . . . . . — — — — — — 112,404 112,404

Total Liabilities . . . . . . . . . 4,191,991 2,110,155 1,738,519 979,056 578,836 — 622,753 10,221,310

Shareholder’s funds . . . . . . — — — — — — 433,459 433,459

TOTAL LIABILITIES AND

SHAREHOLDER’S

FUNDS . . . . . . . . . . . . 4,191,991 2,110,155 1,738,519 979,056 578,836 — 1,056,212 10,654,769

On-balance sheet interest

sensitivity gap . . . . . . . . 2,884,934 (1,914,348) (1,537,290) (917,652) 238,702 409,846 835,808 —

Off-balance sheet interest

sensitivity gap . . . . . . . . — — — — — — — —

Total interest sensitivity gap . 2,884,934 (1,914,348) (1,537,290) (917,652) 238,702 409,846 835,808 —

Liquidity risk

Liquidity risk is the risk that the organisation will not be able to fund its day-to-day

operations at a reasonable cost.

The primary objective of liquidity risk management framework is to ensure the

availability of sufficient funds at a reasonable cost to honour all financial commitments as it

comes due.

The secondary objective is to ensure an optimal funding structure and to balance the key

liquidity risk management objectives, which includes diversification of funding sources,

customer base, and maturity period.

F-501

The ongoing liquidity risk management at the Bank is based on the following key

strategies:

. Management of cash-flow; an assessment of potential cash flow mismatches that may

arise over a period of one-year ahead and the maintenance of adequate cash and

liquefiable assets over and above the standard requirements of Bank Negara

Malaysia.

. Scenario analysis; a simulation on liquidity demands of new business, changes in

portfolio as well as stress scenarios based on historical experience of large

withdrawals.

. Diversification and stabilisation of liabilities through management of funding

sources, diversification of customer depositor base and inter-bank exposures.

In the event of actual liquidity crisis occurring, a Contingency Funding Plan provides a

formal process to identify a liquidity crisis and detailing responsibilities among the relevant

departments to ensure orderly execution of procedures to restore the liquidity position and

confidence in the Bank.

The following table shows the maturity analysis of the Bank’s assets and liabilities.

Up to 1

month

>1 to 3

months

>3 to 6

months

>6 to 12

months

>1 to 5

years

Over 5

years

Non-

specific

maturity Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

ASSETS

Cash and short-term funds . . . . . . . . . 1,669,007 — — — — — — 1,669,007

Deposits and placements with financial

institutions . . . . . . . . . . . . . . . . . — 100,000 130,000 — — — — 230,000

Dealing securities. . . . . . . . . . . . . . . 28,496 — — — 46,502 143,777 — 218,775

Investment securities . . . . . . . . . . . . . 199,952 15,572 — — 247,053 212,428 132,712 807,717

Loans, advances and financing. . . . . . . 2,100,276 364,672 332,168 413,547 1,509,727 2,507,009 — 7,227,399

Other assets . . . . . . . . . . . . . . . . . . — — — — — — 174,435 174,435

Statutory deposit with Bank Negara

Malaysia . . . . . . . . . . . . . . . . . . — — — — — — 293,957 293,957

Property and equipment . . . . . . . . . . . — — — — — — 33,479 33,479

TOTAL ASSETS. . . . . . . . . . . . . . . 3,997,731 480,244 462,168 413,547 1,803,282 2,863,214 634,583 10,654,769

LIABILITIES AND SHAREHOLDER’S

FUNDS

Deposits from customers . . . . . . . . . . 3,629,537 1,326,492 534,418 773,539 231,370 — — 6,495,356

Deposits and placements of banks and

other financial institutions . . . . . . . 968,974 631,268 605,965 192,649 129,435 — — 2,528,291

Securities sold under repurchase

agreements . . . . . . . . . . . . . . . . . 12,607 — — — — — — 12,607

Bills and acceptances payables . . . . . . 89,131 70,313 30,064 — — — — 189,508

Amount due to Cagamas Berhad . . . . . 2,091 82,082 108,072 12,868 143,031 — — 348,144

Other liabilities . . . . . . . . . . . . . . . . — — — — — — 112,404 112,404

Subordinated term loan . . . . . . . . . . . — — — — 75,000 — — 75,000

Exchangeable Subordinated Capital Loan — — 460,000 — — — — 460,000

Total Liabilities . . . . . . . . . . . . . . . . 4,702,340 2,110,155 1,738,519 979,056 578,836 — 112,404 10,221,310

Shareholder’s funds . . . . . . . . . . . . . — — — — — — 433,459 433,459

TOTAL LIABILITIES AND

SHAREHOLDER’S FUNDS . . . . . . 4,702,340 2,110,155 1,738,519 979,056 578,836 — 545,863 10,654,769

Net maturity mismatch . . . . . . . . . . . (704,609) (1,629,911) (1,276,351) (565,509) 1,224,446 2,863,214 88,720 —

F-502

Credit risk management

Credit risk is the risk of loss due to the inability or unwillingness of a counterparty to

meet its payment obligations. Exposure to credit risk arises primarily from lending and

guarantee activities and, to a lesser extent, pre-settlement and settlement exposures of sales and

trading activities.

The primary objective of the credit risk management framework is to ensure that exposure

to credit risk is always kept within its capability and financial capacity to withstand potential

future losses.

For non-retail credits, risk measurement begins with an assessment of the financial

standing of the borrower or counterparty using an internally developed credit rating model. The

model consists of quantitative and qualitative scores which are then translated into rating

grade, which ranges from ‘‘AAA’’ (lowest risk) to ‘‘C’’ (highest risk).

Credit risk is quantified based on Expected Default Frequencies and Expected Losses on

default from its portfolio of loans and off-balance sheet credit commitments. Expected Default

Frequencies are calibrated to the internal rating model while Loan Loss Estimates are based on

past portfolio default experiences.

For retail credits, an in-house developed credit-scoring system to support the housing

applications is being used to complement the credit assessment process.

The Bank’s lending activities are guided by internal credit policies and guidelines that are

approved by the Board of Directors. Within these policies, single customer limits restrict total

exposure allowed to corporate groups according to their level of creditworthiness, while sector

limits ensure that the Bank’s total credit exposure to each economic sector is within prudent

thresholds.

Operational risk management

Operational risk is the potential loss from a breakdown in internal process, systems,

deficiencies in people and management or operational failure arising from external events. It is

increasingly recognised that operational risk is the single most widespread risk facing financial

institutions today.

Operational risk management is the discipline of systematically identifying the critical

potential points and causes of failure, assess the potential cost and to minimise the impact of

such risk through the initiation of risk mitigating measures and policies.

The Bank minimises operational risk by putting in place appropriate policies, internal

controls and procedures as well as maintaining back-up procedures for key activities and

undertaking contingency planning. These are supported by independent reviews by the Bank’s

Internal Audit team.

Legal and regulatory risk

The Bank manages legal and regulatory risks to its business. These are the risk of

breaches of applicable laws and regulatory requirements, breaches of obligations of fidelity,

unenforceability of counterparty obligations, and inappropriate documentation of contractual

obligations.

Legal risk is minimised through consultation with the internal and external legal counsel

and the use of industry standard agreements for financial products.

F-503

Regulatory risk is managed through the implementation of measures and procedures

within the organisation to facilitate compliance with regulations. These include a compliance

monitoring and reporting process that requires identification of risk areas, prescription of

controls to minimise these risks, staff training and assessments, provision of advice and

disseminating of information.

Risk management policy on financial derivatives

Purpose of engaging in financial derivatives

Financial derivative instruments are contracts whose value is derived from one or more

underlying financial instruments or indices. They include swaps, forward rate agreements,

futures, options and combinations of these instruments. Derivatives are contracts that transfer

risks, mainly market risks. Financial derivatives is one of the financial instruments engaged by

the Bank both for revenue purposes as well as to manage the Bank’s own market risk exposure.

The Bank’s involvement in financial derivatives is currently focused on foreign exchange rate

derivatives.

The principal exchange rate contracts used are forward foreign exchange contracts.

Forward foreign exchange contracts are agreements to buy or sell a specified quantity of

foreign currency on a specified future date at an agreed rate.

For revenue purposes, the Bank maintains trading positions in these instruments and

engages in transactions with customers to satisfy their needs in managing their foreign

exchange rate exposures. Derivative transactions generate income for the Bank from the buy-

sell spreads. The Bank also takes conservative exposures, within acceptable limits, to carry an

inventory of these instruments in order to provide market liquidity and to earn potential gains

on fluctuations in the value of these instruments.

As part of the asset and liability exposure management, the Bank uses derivatives to

manage the Bank’s market risk exposure. As the value of these financial derivatives are

principally driven by foreign exchange rate factors, the Bank uses them to reduce the overall

foreign exchange rate exposures of the Bank. These are performed by entering into an exposure

in derivatives that produces opposite value movements vis-a-vis exposures generated by other

non-derivative activities of the Bank. The Bank manages these risks on a portfolio basis.

Hence, exposures on derivatives are aggregated or netted against similar exposures arising from

other financial instruments engaged by the Bank.

Fair value of financial derivatives

The estimated fair values of the Bank’s outstanding derivative financial instruments are as

below. These values are stand-alone without taking into account their potential offsetting

relationships with other non-derivatives exposures of the Bank.

2003

Principal

Amount Fair Value

RM’000 RM’000

Forward exchange contracts . . . . . . . . . . . . . . . . . . 206,115 1,089

Risk associated with financial derivatives

As derivatives are contracts that transfer risks, they expose the holder to the same types

of market and credit risks as other financial instruments, and the Bank manages these risks in a

consistent manner under the overall risk management framework.

F-504

Market risk of derivatives used for trading purposes

Market risk arising from the above foreign exchange-related derivatives contracts

measures the potential losses to the value of these contracts due to changes in market rates/

prices. Exposure to market risk may be reduced through offsetting on and off-balance sheet

positions. As at 31 March 2003, the net open position of the Bank was RM5,351,000

(RM26,330,000 in 2002).

The use of these instruments to hedge underlying exposures arising from funding or for

fixed income instruments acquired for investment purposes are not included in the market risk

numbers above.

Credit risk of derivatives

Counterparty credit risk arises from the possibility that a counterparty may be unable to

meet the terms of the derivatives contract. Unlike conventional asset instruments, the Bank’s

financial loss is not the entire contracted principal value of the derivatives, but rather a fraction

equivalent to the cost to replace the defaulted contract with another in the market. The cost of

replacement is equivalent to the difference between the original value of the derivatives at time

of contract with the defaulted counterparty and the current fair value of a similar substitute at

current market prices. The Bank will only suffer a replacement cost if the contract carries a fair

value gain at time of default.

As at 31 March 2003, the amounts of counterparty credit risk, measured in terms of the

cost to replace the positive value contracts of the Bank, was RM1,089,000 (RM898,000 as at

31 March 2002). This amount will increase or decrease over the life of the contracts, mainly as

a function of movement in market rates and time.

The Bank limits its credit risk within a conservative framework by dealing with

creditworthy counterparties, setting credit limits on exposures to counterparties, and obtaining

collateral where appropriate.

40. FAIR VALUES OF FINANCIAL INSTRUMENTS

Financial instruments are contracts that gives rise to both a financial asset of one enterprise

and a financial liability or equity instrument of another enterprise. The fair value of a financial

instrument is the amount at which the instrument could be exchanged or settled between

knowledgeable and willing parties in an arm’s length transaction, other than a forced or

liquidated sale. The information presented herein represents best estimates of fair values of

financial instruments 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 number of methodologies and assumptions regarding risk characteristics of various financial

instruments, discount rates, estimates of future cash flows and other factors. Changes in the

assumptions could materially affect these estimates and the corresponding fair values.

In addition, fair value information for non-financial assets and liabilities such as investments in

subsidiary companies and taxation are excluded, as they do not fall within the scope of MASB 24,

which requires the fair value information to be disclosed.

F-505

The estimated fair values of the Bank’s financial instruments are as follows:

2003

Carrying Value Fair Value

RM’000 RM’000

Cash and short-term funds . . . . . . . . . . . . . . . . . . . . . . 1,669,007 1,669,007

Deposits and placements with financial institutions . . . . . . . 230,000 230,000

Dealing securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 218,775 218,418

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . 807,717 907,366

Loans, advances and financing* . . . . . . . . . . . . . . . . . . . 7,338,262 7,389,719

Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . 27,641 27,641

10,291,402 10,442,151

Non-financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . 363,367 363,367

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,654,769 10,805,518

2003

Carrying Value Fair Value

RM’000 RM’000

Financial Liabilities

Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . 6,495,356 6,501,410

Deposits and placements of banks and other financial

institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,528,291 2,532,847

Securities sold under repurchase agreements . . . . . . . . . . . 12,607 12,607

Bills and acceptances payable . . . . . . . . . . . . . . . . . . . . 189,508 189,508

Amount due to Cagamas Berhad . . . . . . . . . . . . . . . . . . 348,144 381,485

Subordinated term loan . . . . . . . . . . . . . . . . . . . . . . . . 75,000 86,032

Exchangeable Subordinated Capital Loan . . . . . . . . . . . . . 460,000 470,099

Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . 111,956 111,956

10,220,862 10,285,944

Non-Financial Liabilities

Other non-financial liabilities . . . . . . . . . . . . . . . . . . . . 448 448

Shareholder’s funds . . . . . . . . . . . . . . . . . . . . . . . . . . 433,459 433,459

TOTAL LIABILITIES AND SHAREHOLDER’S FUNDS . . 10,654,769 10,719,851

* The general allowance for the Bank amounting to RM110,863,000 has been included under non-financial assets.

The fair value of the other financial assets and other financial liabilities, which are considered

short term in nature, are estimated to be approximately their carrying value.

The fair value of derivative financial instruments are shown in Note 39.

The fair value of contingent liabilities and undrawn credit facilities are not readily

ascertainable. These financial instruments are presently not sold or traded. They generate fees that

are in line with market prices for similar arrangements. The estimated fair value may be represented

by the present value of the fees expected to be received, less associated costs and potential loss that

may arise should these commitments capitalised. The Bank assess that their respective fair values are

unlikely to be significant given that the overall level of fees involved is not significant and no

allowances is necessary to be made.

F-506

The following methods and assumptions were used to estimate the fair value of assets and

liabilities as at 31 March 2003 :

(a) Cash And Short-Term Funds

The carrying values are a reasonable estimate of the fair values because of negligible

credit risk, short-term nature or frequent repricing.

(b) Securities Purchased Under Repurchased Agreements And Deposits With Financial

Institutions

The fair values of securities purchased under repurchased agreements and deposits with

financial institutions with remaining maturities less than six months are estimated to

approximate their carrying values. For securities purchased under repurchased agreements

and deposits with financial institutions with maturities of more than six months, the fair value

are estimated based on discounted cash flows using the prevailing KLIBOR rates and interest

rate swap rates.

(c) Dealing And Investment Securities

The estimated fair value is based on quoted or observable market prices at the balance

sheet date. Where such quoted or observable market prices are not available, the fair value is

estimated using discounted cash flow or net tangible assets techniques. Where discounted cash

flow technique is used, the estimated future cash flows are discounted using prevailing

KLIBOR rates and interest rate swap rates of similar instruments at the balance sheet date.

(d) Loans, Advances And Financing (Loans And Financing)

The fair value of variable rate loans and financing are estimated to approximate their

carrying values. For fixed rate loans and financing, the fair values are estimated based on

expected future cash flows of contractual instalment payments and discounted at prevailing

KLIBOR rates and interest rate swap rates. In respect of non-performing loans and financing,

the fair values are deemed to approximate the carrying values, net of interest in suspense and

specific allowance for bad and doubtful debts and financing.

(e) Deposits From Customers, Deposits Of Banks And Other Financial Institutions And

Securities Sold Under Repurchase Agreements

The fair value of deposits liabilities payable on demand (current and savings deposits) or

with remaining maturities of less than six months are estimated to approximate their carrying

values at balance sheet date. The fair values of term deposits, negotiable instrument of deposits

and securities sold under repurchase agreements with remaining maturities of more than six

months are estimated based on discounted cash flows using KLIBOR rates and interest rate

swap rates.

(f) Bills And Acceptances Payables

The carrying values are a reasonable estimate of their fair values because of their short-

term nature.

(g) Amount Due To Cagamas Berhad

The fair values for amount due to Cagamas Berhad are determined based on discounted

cash flows of future instalment payments at prevailing KLIBOR rates and interest rate swap

rates.

F-507

(h) Subordinated Term Loans and Exchangeable Subordinated Capital Loan

(Borrowings)

The fair value of borrowings with remaining maturities of less than six months are

estimated to approximate their carrying values at balance sheet date. The fair value of

borrowings with remaining maturities of more than six months are estimated based on

discounted cash flows using KLIBOR rates.

(i) Forward Exchange Contracts

The estimated fair value is based on the market price to enter into an offsetting contract

at balance sheet date.

As assumptions were made regarding risk characteristics of the various financial

instruments, discount rates, future expected loss experience and other factors, changes in the

uncertainties and assumptions could materially affect these estimates and the resulting value

estimates.

41. CHANGE OF NAME

On 15 June 2002, the Bank changed its name from Arab-Malaysian Bank Berhad to AmBank

Berhad.

42. SUBSEQUENT EVENT

Subsequent to the balance sheet date, the ultimate holding company, AMMB Holdings Berhad

(‘‘AHB’’) received the approval of Bank Negara Malaysia for AHB to commence negotiations with

EON Capital Berhad for a possible merger between the two banking groups in line with the

recommendations of the Financial Sector Master Plan.

43. GENERAL INFORMATION

The registered office of the Bank is located at 22nd Floor Bangunan AmBank Group, 55 Jalan

Raja Chulan, 50200 Kuala Lumpur while the principal place of business is located at Level 18

Menara Dion, Jalan Sultan Ismail, 50250 Kuala Lumpur.

F-508

AmBank Berhad

(formerly known as ARAB-MALAYSIAN BANK BERHAD)

(Incorporated in Malaysia)

AUDITED FINANCIAL STATEMENTS

For the financial year ended 31 March 2003

STATEMENT BY DIRECTORS

The directors of AmBank Berhad (formerly known as ARAB-MALAYSIAN BANK BERHAD),

state that, in their opinion, the accompanying balance sheet and the related statements of income,

cash flows and changes in equity, are drawn up in accordance with the provisions of the Companies

Act, 1965 and the applicable approved accounting standards in Malaysia so as to give a true and fair

view of the state of affairs of the Bank as at 31 March 2003 and of the results and the cash flows of

the Bank for the year ended on that date.

Signed on behalf of the Board

in accordance with a resolution of the Directors,

TAN SRI DATO’ AZMAN HASHIM

ChairmanKUNG BENG HONG

Managing Director

Kuala Lumpur,

30 May, 2003

STATUTORY DECLARATION

I, YAP CHIN TUAN, being the Officer primarily responsible for the financial management of

AmBank Berhad (formerly known as ARAB-MALAYSIAN BANK BERHAD), do solemnly and

sincerely declare that the accompanying balance sheet and the related statements of income, cash

flows and changes in equity are, in my opinion, 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

abovenamed YAP CHIN TUAN at KUALA

LUMPUR this 30th day of May, 2003.

Before me,

COMMISSIONER FOR OATHS

F-509

REGISTERED OFFICE OF THE ISSUER

Unit 3(1), Main Office Tower

Financial Park Labuan

Jalan Merdeka,

87000 Labuan

F.T. Labuan,

Malaysia

REGISTERED OFFICE OF THE BANK

22nd Floor, Bangunan AmBank Group

55 Jalan Raja Chulan,

50200 Kuala Lumpur,

Malaysia

PRINCIPAL PAYING AGENT AND TRANSFER AGENT

Citibank, N.A., London Branch

21st Floor, Citigroup Centre

Canada Square, Canary Wharf

London E14 5LB

United Kingdom

REGISTRAR

Citigroup Global Markets Deutschland AG & Co. KGaA

Reuterweg 16

60323 Frankfurt

Germany

LEGAL ADVISORS TO THE ISSUER AND THE BANK

as to Malaysian law

Adnan Sundra & Low

Level 11, Menara Olympia

No. 8 Jalan Raja Chulan

50200 Kuala Lumpur

Malaysia

LEGAL ADVISORS TO THE MANAGERS

as to English law as to Malaysian law

Linklaters Allen & Gledhill

One Marina Boulevard #28-00

Singapore 018989

Kadir, Andri & Partners

8th Floor, Menara Safuan

80 Jalan Ampang

50450 Kuala Lumpur

Malaysia

AUDITORS OF THE BANK

Ernst & Young

Level 23A Menara Milenium

Jalan Damanlela

Pusat Bandar Damansara

50490 Kuala Lumpur

Malaysia

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