RATIONALE The creative use of the Tangram, a mind boggling puzzle, o�ers a myriad of possible con�gurations, serves as an analogy in de�ning prudent and innovative strategies of MBSB in sustaining growth and pro�ts while continuing to enhance its services and products.

TAKING MBSB TO THE NEXT LEVEL

CORPORATEFACILITIES

MORTGAGEPRODUCTS

DEPOSITORYPRODUCTS

PERSONALFINANCING

INSIDE Notice of Annual General MeetingNotice of Dividend Entitlement and PaymentCorporate Information

Directors’, CEO’s & Syariah Council’s Pro�le

Chairman’s StatementManagement TeamCorporate Highlights

Statement of Corporate GovernanceFinancial HighlightsCSR InitiativesStatement on Internal ControlReport of the Audit & Risk Management CommitteeAnalysis of ShareholdingsSchedule of Properties Branch Network

Financial StatementsProxy Form

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7

152024

2733353739424445

47

Grow Your Business with Us

Your Investment is Our Priority

Let Us Assist in Ful�lling Your Financial Needs

Build Your Dream Home with MBSB

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002

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NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT THE 40TH ANNUAL GENERAL MEETING of the Company will be held at Ballroom 1, 1st Floor, Sime Darby Convention Centre, 1A Jalan Bukit Kiara 1, 60000 Kuala Lumpur on Thursday, 29 April 2010 at 11.00 a.m. for the following purposes:

1. To receive and adopt the Audited Financial Statements of the Company and of the Group for the year ended 31 December 2009 and Reports of the Directors and Auditors thereon.

2. To declare a � rst and � nal dividend of 4% less 25% income tax for the � nancial year ended 31 December 2009.

3. To approve payment of Directors’ Fees amounting to RM420,833 for the � nancial year ended 31 December 2009.

4. To re-elect the following Directors who retire in accordance with Article 86 of the Company’s Articles of Association and who being eligible offer themselves for re-election:- (i) Datuk Abdullah bin Haji Kuntom (ii) Puan Cindy Tan Ler Chin

5. To re-elect the following Director who retire in accordance with Article 78 of the Company’s Articles of Association and who being eligible offer himself for re-election:- (i) Encik Jasmy bin Ismail

6. To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorise the Directors to determine their remuneration.

7. To transact any other ordinary business of which due notice shall have been given.

BY ORDER OF THE BOARD KOH AI HOON (MAICSA 7006997) TONG LEE MEE (MAICSA 7053445) COMPANY SECRETARIES

Kuala Lumpur 7 April 2010

Notes:- A member entitled to attend and vote at the abovementioned meeting may appoint a proxy to attend and vote on his behalf and such proxy need not be a member of the Company. The instrument appointing such a proxy must be deposited at the Registered O¢ ce of the Company, 11th Floor, Wisma MBSB, 48 Jalan Dungun, Damansara Heights, 50490 Kuala Lumpur, not less than 48 hours before the meeting.

In the case of a Corporate Body, the proxy appointed must be in accordance with its Memorandum and Articles of Association and the instrument appointing a proxy shall be given under the Company’s Common Seal or under the hand of an o¢ cer or attorney duly authorised.

Resolution 1

Resolution 2

Resolution 3

Resolution 4Resolution 5

Resolution 6

Resolution 7

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NOTICE OF ANNUAL GENERAL MEETING (cont’d.)

STATEMENT ACCOMPANYING THE NOTICE OF ANNUAL GENERAL MEETING PURSUANT TO PARAGRAPH 8.27(2) OF THE MAIN MARKET LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD 1. Directors who are standing for re-election at the 40th Annual General Meeting of the Company to be held at Ballroom 1, 1st Floor, Sime Darby Convention Centre, 1A Jalan Bukit Kiara 1, 60000 Kuala Lumpur on Thursday, 29 April 2010 at 11.00 a.m. are as follows:- i. Datuk Abdullah bin Haji Kuntom ii. Puan Cindy Tan Ler Chin iii. Encik Jasmy bin Ismail

2. The details of the above Directors who are standing for re-election at the 40th Annual General Meeting are disclosed under the Directors’ Pro� le on pages 8 to 12 of this Annual Report.

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NOTICE OF DIVIDENDENTITLEMENT AND PAYMENT

NOTICE IS HEREBY GIVEN THAT subject to the approval of Members at the Annual General Meeting to be held on 29 April 2010, a first and final dividend of 4% less 25% income tax in respect of the � nancial year ended 31 December 2009, will be paid on 27 May 2010 to Depositors whose name appear in the Record of Depositors on 6 May 2010.

A Depositor shall qualify for entitlement to the dividend only in respect of:-

a) Shares deposited into the Depositor’s securities account before 12.30 p.m. on 4 May 2010 in respect of securities exempted from mandatory deposit;

b) Shares transferred into the Depositor’s securities account before 4.00 p.m. on 6 May 2010 in respect of transfers; and

c) Shares bought on Bursa Malaysia Securities Berhad (the Exchange) on a cum entitlement basis according to the Rules of the Exchange.

BY ORDER OF THE BOARD

KOH AI HOON (MAICSA 7006997)TONG LEE MEE (MAICSA 7053445)COMPANY SECRETARIES

Kuala Lumpur7 April 2010

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Chairman YBhg Tan Sri Abdul Halim bin Ali

Board of Directors YBhg Datuk Abdullah bin Haji Kuntom Syed Zaid bin Syed Ja ̈ar Albar Encik Lau Tiang Hua Puan Cindy Tan Ler Chin Encik Khalid bin Haji Sufat Encik Aw Hong Boo Encik Jasmy bin Ismail

Syariah Council Associate Professor Syed Mohd Ghazali Wafa bin Syed Adwam Wafa Professor Dato’ Dr. Mohd. Ali bin Haji Baharum Ustaz Omar bin Johari

Chief Executive O� cer Encik Ahmad Zaini bin Othman

Company Secretaries Cik Koh Ai Hoon (MAICSA 7006997) Puan Tong Lee Mee (MAICSA 7053445) Registrar MIDF Consultancy & Corporate Services Sdn Bhd (11324-H) Level 8, Menara MIDF, 82, Jalan Raja Chulan 50200 Kuala Lumpur Tel: 03-2173 8888 Fax: 03-2173 8677

Auditors Ernst & Young Chartered Accountants

Bankers Malayan Banking Berhad A¢ n Bank Berhad EON Bank Berhad Bank Islam Malaysia Berhad

Registered O� ce 11th Floor, Wisma MBSB 48 Jalan Dungun, Damansara Heights 50490 Kuala Lumpur Tel: 03-2095 4000 Fax: 03-2095 4260 Website: www.mbsb.com.my

Stock Exchange Listing Bursa Malaysia Securities Berhad (Listed since 14 March 1972)

CORPORATE INFORMATION

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DIRECTORS’,CEO’S & SYARIAHCOUNCIL’S PROFILE

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YBhg Tan Sri Abdul Halim bin Ali, a Malaysian, aged 66, was appointed as the Chairman of MBSB on June 22, 2001. He is also the Chairman of the Executive Committee of MBSB.

He received his early education at the Sultan Abdul Hamid College, Alor Setar. In 1959 he continued his studies at the Royal Military College, Sg. Besi, Selangor, and he completed his tertiary education at the University of Malaya graduating with a B.A (Hons) in History in 1965.

Entering the Malaysian Civil Service in 1966, he joined the Ministry of Foreign A ̈airs where he held several domestic and overseas postings until his appointment in 1979, as the Malaysian Deputy Permanent Representative to the United Nations. From 1982 until 1985, he served as the Malaysian Ambassador to Vietnam. On his return to Malaysia, he was appointed as Deputy Secretary General III (Administration) of the Ministry of Foreign A ̈airs. He then served as the Malaysian Ambassador to Austria from 1988 until 1991. From 1991 until 1996, he was the Deputy Secretary General I (Political A ̈airs) until his promotion in 1996 to Secretary General of the Ministry of Foreign A ̈airs.

Shortly thereafter, in September 1996, Tan Sri Abdul Halim bin Ali was appointed as the Chief Secretary of the Government, the highest ranking post in the Malaysian Civil Service and was responsible for overseeing and coordinating the policies of the government and their implementation. He retired in March 2001, at which time he was made Chairman of the Employees Provident Fund until 31 January 2007.

He is the Chairman of the Multimedia Development Corporation and Universiti Teknologi Malaysia. He also holds other Directorships in public companies including Esso Malaysia Berhad, IJM Corporation Berhad, Malakoff Corporation Berhad and Badan Pengawas Pemegang Saham Minoriti Berhad (Minority Shareholder Watchdog Group).

DIRECTORS’ PROFILE

YBhg Tan Sri Abdul Halim bin AliChairmanNon-Independent Non-Executive Director

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DIRECTORS’ PROFILE (cont’d.)

Syed Zaid bin Syed Ja� ar Albar, a Malaysian, aged 55, was appointed as an Independent Non-Executive Director on August 14, 2002. He serves as Member of the Executive Committee and the Arrears Recovery Committee. He is also the Chairman of the Nomination & Remuneration Committee.

Syed Zaid Albar holds a degree in law from the UK and is a quali� ed Barrister-at-Law, Lincoln’s Inn. He was called to the Malaysian Bar as an advocate and solicitor of the High Court of Malaya in 1980 and has been active in legal practice ever since. Presently, he is the managing partner of an established law � rm in Kuala Lumpur.

Currently, Syed Zaid Albar also holds other directorships in public companies namely Malaysian Paci� c Industries Berhad, Narra Industries Berhad and Kencana Petroleum Berhad.

Encik Lau Tiang Hua, a Malaysian, aged 57, was appointed as an Independent Non-Executive Director on August 16, 2001. He is also the Chairman of the Audit & Risk Management Committee and a member of the Arrears Recovery Committee.

An accountant by profession, he is a member of the Malaysian Institute of Certi� ed Public Accountants (MICPA), the Malaysian Institute of Accountants (MIA) and the Malaysia Institute of Taxation.

Encik Lau Tiang Hua began his career with an international accounting � rm in Malaysia, rising to the rank of an Audit Manager. Following this, he took a position as the General Manager of Finance and Administration for a major publishing house before starting his own practice, JB Lau and Associates, Chartered Accountants, in 1985. The � rm merged with Grant Thornton on 1 January 2008.

Encik Lau Tiang Hua also acts as an Independent Non-Executive Director for PanGlobal Berhad, Tomei Consolidated Berhad, Scanwolf Corporation Berhad, Land & General Berhad and Ewein Berhad.

Syed Zaid bin Syed Ja� ar AlbarIndependent Non-Executive Director

Encik Lau Tiang HuaIndependent Non-Executive Director

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9 Puan Cindy Tan Ler Chin, a Malaysian, aged 49, was appointed as a Non-Independent Non-Executive Director of MBSB on September 26, 2002. She also serves as a Member of the Executive Committee, Arrears Recovery Committee and Audit & Risk Management Committee. She obtained an Honours Degree in Economics, majoring in Statistics, from Universiti Kebangsaan Malaysia. In 1991, she obtained a Certi� ed Diploma in Accounting and Finance, accorded by the Chartered Association of Certi� ed Accountants.

Puan Cindy began her career with the Employees Provident Fund (EPF), Finance and Investment Department in 1984. She is currently the General Manager of the Investment Compliance and Settlement Department of EPF.

Puan Cindy is also a Director of Malako ̈ Corporation Berhad.

DIRECTORS’ PROFILE (cont’d.)

Puan Cindy Tan Ler ChinNon-Independent Non-Executive Director

010

YBhg Datuk Abdullah bin Haji Kuntom, a Malaysian, aged 66, was appointed as a Non-Independent Non-Executive Director on September 29, 2003. He serves as Member of the Executive Committee and Nomination & Remuneration Committee. He obtained a Master’s Degree in Public Policy and Administration from University of Wisconsin, USA in 1979 and attended an Advanced Management Programme at Oxford University UK, in 1995.

YBhg Datuk Abdullah began his career with the Johor Civil Service in 1967 and served in various Government ministries and departments for 36 years. Amongst the key positions he held were Deputy Secretary of the Contract and Supply Division and Senior Assistant Director of the Budget Division, Ministry of Finance. He was also appointed as the State Financial O¢ cer of Selangor, Administrative O¢ cer of the Asian & Paci� c Development Centre (APDC) and Deputy Secretary-General 1 of the Home A ̈airs Ministry. His last post was Senior Deputy Secretary-General in the Prime Minister’s Department until his retirement in April 1999, following which he was appointed as Chief of Protocol at the Ministry of Foreign A ̈airs until April 2003.

YBhg Datuk Abdullah is also a Director of Leader Steel Holdings Berhad.

YBhg Datuk Abdullah bin Haji KuntomNon-Independent Non-Executive Director

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DIRECTORS’ PROFILE (cont’d.)

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Encik Khalid bin Haji Sufat, a Malaysian, aged 54, was appointed as an Independent Non-Executive Director of MBSB on August 18, 2005. He is also a Member of the Executive Committee. An accountant by profession, he is a Fellow of the Chartered Association of Certi� ed Accountants (United Kingdom) and a Member of both the Malaysian Institute of Accountants (MIA) as well as the Malaysian Institute of Certi� ed Public Accountants (MICPA).

Encik Khalid has held several senior positions in the banking industry. He was Managing Director of Bank Kerjasama Rakyat Malaysia Berhad from June 1998 to June 2000, Executive Director of United Merchant Finance Berhad from 1995 to 1998 and General Manager, Consumer Banking of Malayan Banking Berhad in 1994.

This experience led him to become involved in managing and restructuring a number of listed companies. He became the Executive Director of Tronoh Mines Malaysia Berhad in 2002 and the Group Managing Director of Furqan Business Organization Berhad in 2003 before being appointed as Group Managing Director of Seacera Tiles Berhad in mid-2006, a post he held until late 2007.

Currently, Encik Khalid also holds other directorships in public companies namely Binapuri Holdings Berhad, Amtek Holdings Berhad, Uzma Berhad and Tradewinds (M) Berhad.

Encik Aw Hong Boo, a Malaysian, aged 60, was appointed as an Independent Non-Executive Director on November 10, 2005. He serves as Member of the Audit & Risk Management Committee and the Nomination & Remuneration Committee. He is also the Chairman of the Arrears Recovery Committee.

He is a member of the Malaysian Institute of Certi� ed Public Accountants (MICPA), the Malaysian Institute of Accountants (MIA) and a Fellow of the Institute of Chartered Accountants in England & Wales (ICAEW).

Encik Aw began his career in 1970 as an Audit Senior in London and later with Ernst & Whinney (now known as Ernst & Young), an international public accounting � rm in Singapore and London from 1974 - 1977. He served in RHB Bank Berhad for 21 years between 1978 to 1999, holding various senior managerial positions in � nancial management, banking, � nance and leasing. He was Senior General Manager of Branch Network and Risk Management before his optional retirement in November 1999.

Presently, Encik Aw serves as the Financial Advisor to the Quill Group of Companies and is a Director of Quill Capita Management Sdn Bhd, the Manager of Quill Capita Trust.

Encik Khalid bin Haji SufatIndependent Non-Executive Director

Encik Aw Hong BooIndependent Non-Executive Director

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Encik Jasmy bin Ismail, a Malaysian, aged 46, was appointed as a Non-Independent Non-Executive Director on August 11, 2009. He was appointed as Member of Executive Committee and Arrears Recovery Committee on October 7, 2009.

He obtained a Master of Science in Transport Planning and Management from City University, London. In 1988, Encik Jasmy joined IBM Malaysia and held various positions within the Sales and Marketing organization, responsible mainly for the Public Sector and Financial Services industries. Prior to leaving IBM Malaysia, he was the Executive Assistant to the Chief Executive O¢ cer of IBM Malaysia.

Encik Jasmy joined CCAAP Technologies Sdn Bhd (“CCAAP”) as General Manager in 1996. He was also the Executive Director of New Technology & Innovation Sdn Bhd, responsible for sales operations of the Company.

In 2000, Encik Jasmy co-founded Symphony Global Technologies Sdn Bhd and was involved in the formulation of Symphony House Berhad which was then listed on Bursa Malaysia Securities Berhad in 2003. He was the Chief Executive of Symphony’s Technology Services Division, responsible for the formulation and implementation of business plans and strategies of the division in addition to the day-to-day operations. Encik Jasmy was also appointed as the Chairman of Symphony BCSIS Sdn Bhd, a joint-venture company with OCBC Singapore’s subsidiary BCSIS and held the position until 2007. He also sits on the Board of Symphony BPO Solutions Sdn Bhd, a subsidiary of Symphony House Berhad and Jas Marine International Sdn Bhd.

In 2007, Encik Jasmy successfully completed a management-buy-out of one of the subsidiary companies of Symphony House Berhad and renamed the company to SGT International Sdn Bhd.

Encik Jasmy bin IsmailNon-Independent Non-Executive Director

DIRECTORS’ PROFILE (cont’d.)

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Encik Ahmad Zaini bin Othman , a Malaysian, aged 53, was appointed the Chief Executive O¢ cer of MBSB on 26 February, 2009.

After his early education in Malaysia, Ahmad Zaini obtained his Higher National Diploma (HND) in Accounting in Manchester, England. He continued his tertiary education in the USA where he graduated with a BSc in Finance from the University of Southern Illinois, after which he obtained an MBA (Finance) at the University of St. Louis.

In 1984, upon his return to Malaysia, he began his career in Merchant Banking with Bumiputra Merchant Bankers dealing with Corporate Banking, Syndications and Project Finance. In 1988 he took up the position of Head of Corporate Finance for Intradagang Merchant Bankers where he organized Malaysia’s largest ever project � nance exercise for Perwaja Steel, in which he spent a brief stint as Senior General Manager/Director Corporate Finance.

He returned to the banking sector in 1995 to take up the position of Head/Senior General Manager, Corporate Banking for AmBank, specialising in Islamic Banking and Finance. He managed all corporate banking matters including commercial project/corporate banking.

In 2004 he was made CEO of AmIslamic Bank managing all the group’s a ̈airs pertaining to Islamic Banking in commercial and corporate � nance, and was responsible for setting up the Islamic Business Model for the group.

He is a member of the Association of Chartered Islamic Finance Professionals (ACIFP) and currently serves as the association’s Deputy President. In recognition of his contributions to Islamic banking he was appointed a faculty member (Industry expert) to the International Centre for Education in Islamic Finance (INCEIF).

Ahmad Zaini brings with him a wealth of � nancial and banking experience to MBSB which covers both conventional and Islamic banking as well as project, corporate and business � nance.

CEO’S PROFILE

Encik Ahmad Zaini bin OthmanChief Executive O¢ cer

Notes: • All the Directors and CEO do not have any con ̄ict of interest with MBSB.• All the Directors and CEO have not been convicted for any o ̈ences within the past ten years other than tra¢ c o ̈ences, if any.• The Directors and CEO do not have any family relationship with any directors and/or major shareholders of MBSB other than Tan Sri Abdul Halim bin Ali and Puan Cindy Tan Ler Chin who are nominees of Employees Provident Fund Board (EPF) and Datuk Abdullah bin Haji Kuntom who is a nominee of Permodalan Nasional Berhad (PNB).• The number of Board meetings attended by the Directors during the � nancial year ended 31 December 2009 is disclosed in the Statement of Corporate Governance on page 28 of this Annual Report.

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SYARIAH COUNCIL’S PROFILE

Associate Professor Syed Mohd Ghazali Wafa bin Syed Adwam Wafa, aged 53, began lecturing in Universiti Kebangsaan Malaysia (UKM) since 1985. He was the Head of the Accounting Department and later became the Deputy Dean of Academics and Student Affairs, Faculty of Business Management. A Diploma holder in Agriculture (UPM), BSc (Finance) and an MBA from U.S., he is currently attached to the Graduate School of Business, UKM. Prior to that, he served as the CEO of UKM Kesihatan Sdn Bhd. He is a Senior Associate Fellow of the ‘Institut Islam Hadhari’ of UKM, and also Director, UKM’s Chancellor Foundation.

He conducts courses in Financial Accounting, Management Accounting, Auditing and Business from Islamic Perspective for both undergraduate and graduate levels.

He participates in streamlining methods of assessing zakat for business at the national level. His current research and publications focuses in Muamalat, specializing in contracts, business mechanism, cooperatives, zakat accounting for business, zakat and corporate governance, Baitulmal, Waqf and Islamic Financial Institutions. He is currently a Syariah Committee member of several cooperatives such as KBI, KPFelda and KOPONAS; a Council Member of the Cooperative College of Malaysia, a Working Group Committee member on Islamic Financial Reporting of MASB, Committee member for Zakat Collection (LZS-MAIS) and also Waqf Committee of MAIS.

Professor Dato’ Dr Mohd Ali bin Haji Baharum DIMP, aged 59, is the President of Angkatan Koperasi Kebangsaan Malaysia Berhad (ANGKASA). He graduated with a Degree B.Is (Hons) in Syariah and Law from UKM in 1976. He obtained his Ph.D (Law) at University of Essex in 1986 and MBA in 1994. He has a Diploma in Education from UKM and Diploma in Arabic from International University of Africa, Khartoum Sudan. He also serves as a Syariah Advisor for various � nancial institutions.

Besides being an advisor, he is also involved in various social activities and cooperative movements. He is the Vice President of Koperasi Belia Islam (M) Berhad, Chairman of the Konsortium Koperasi Pengguna Malaysia Berhad, Chairman of Co-Pakat Mara Berhad and Committee of Muafakat MARA. He is also the President of Malaysian – Sudanese Friendship Association (MASOFA), Council Member of Co-operative College of Malaysia and Board Member of Kanz Holding Sdn Bhd.

Ustaz Omar bin Johari, aged 60, is an independent religious scholar and motivator from Muar, Johor. He obtained his Degree in Dakwah from the Islamic Call University, Tripoli, Libya.

He has vast experience in the area of management from both the Government and private sector. He was the Officer in Religious Affairs in the Prime Minister’s Department from 1974 – 1977 and was a lecturer at the Islamic Faculty in UKM from 1981 – 1984.

He was also the Syariah Advisor for Rashid Hussain Securities from 1983 – 1997, DCB/RHB (1997), Oriental Bank, Amanah Raya Berhad and the Advisor for Islamic Religious A ̈airs for Mc Food Industries Sdn Bhd and Mc Donald Malaysia.

Associate Professor Syed Mohd Ghazali Wafa bin Syed Adwam Wafa

Professor Dato’ Dr. Mohd. Ali bin Haji Baharum

Ustaz Omar bin Johari

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CHAIRMAN’SSTATEMENT

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CHAIRMAN’S STATEMENT

YBhg Tan Sri Abdul Halim bin AliChairmanNon-Independent Non-Executive Director

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Overall Business Environment

MBSB’s strong results in 2009 were the culmination of our active transformation into a robust company with greater emphasis on key retail products as well as improved e� ciency in operations. In response to the 2008 financial crisis, central banks in several countries lowered their policy rates and governments increased their public spending. On the local front, Bank Negara Malaysia and market players have taken positive measures to alleviate the situation. The banks managed to stay resilient despite a slower domestic economy, displaying strong capital and pro� t levels. These were supported by a low interest rate regime and ample liquidity.

Analysts believe that the worst is over for the Malaysian banking sector and that banks are poised to perform much better in 2010, benefiting from an economic upturn. It is expected that the banks are also in a good position to handle more competition as the sector opens up to new foreign banks. Review of the Group Financial Performance

I t is my pleasure to report to you the progress made for the Financial Year ended 2009. Despite the challenging economic environment, MBSB has made tremendous advancements as its business focus was realigned and operations streamlined. MBSB recorded a Group pre-tax profit of RM80.315 million in 2009, which was an improvement of 48.6% over the previous year of RM54.043 mil l ion. Similar ly at Company level, the pre-tax pro� t improved by 31.3% to RM83.886 million as compared to the previous year of RM63.9 million.

This improvement was mainly attributed to the growth in net income from the Islamic banking operations and other income arising from an enlarged loan base. This was supported by an increase in corporate and retail deposits. The improvement was partially offset by higher allowances for losses on loans and advances.

The Group and the Company recorded an improvement of 75.6% and 48.4% respectively in its net profit after tax of RM57.203 mil l ion and RM60.7 mil l ion compared to the previous year of RM32.575 million and RM40.911 million.

Lending Activities

MBSB Group’s total net loans, advances and financing grew by 19.7% to RM8.1 billion in 2009. This was due to the growth of 27.1% in retail loans and financing in 2009, particularly Islamic � nancing, which contributed 101% to the overall growth. Conventional retail loans contracted by 1% as a result of lower loan releases. The main business driver for 2009 was personal financing. Sales from this retail � nancing product grew sharply by 307.7% as compared to 43% for the previous year. However, Mortgage products continued to be the company’s key retail o� ering, accounting for 64.3% of the total net loans while Personal Financing stood at 16.1%.

MBSB Group’s net non-performing loans (“NPL”) increased slightly by 0.17% to RM2.7 million on the back of a RM1.3 billion net loan growth in 2009. Accordingly, with the increased loan base, the Group’s NPL ratio for 2009 reduced to 19% compared to 23% in 2008.

Deposits from Customers

MBSB Group’s deposits grew by 20% to RM7.6 billion in 2009 as compared to RM6.3

billion in the previous year. Government and statutory bodies accounted for 45% whilst business enterprises and individuals accounted for 37% and 17% respectively of the total deposits.

As at 31 December 2009, there was no revolving credit outstanding as there was sufficient liquidity from the increased deposits to support MBSB’s business activities.

Dividends

The Board of Directors have recommended a first and final dividend of 4% less 25% income tax for the � nancial year ended 31 December 2009 to MBSB’s shareholders for approval. The payout for the estimated net dividend payment of RM21 million will be 36.7% at the Group level.

Strategic Initiatives

Product Development

Corporate Business. As part of the growth strategy during the year under review, MBSB introduced several new products as part of its expansion programme to cater to the needs of its corporate borrowers. It has introduced Contract Financing under the Islamic and Conventional platforms and Musharakah Business-i financing. On a wholesale basis, MBSB has acquired total retail loan receivables of RM100.0 million with recourse, executed under a structured programme.

Personal Financing . In addition to an expansion in the corporate business sector, MBSB has reached out to government personnel via special tie-ups with selected government sectors for the offering of personal � nancing products. Competitively priced products were o� ered to the police force, teachers and nurses in recognition of their services towards the country. Mortgage . Innovative Home Mortgage products such as Easy Home Financing with RM0 Entry Cost Package, 2nd Generation Home Package and Home Link E-Z Savers were introduced to let customers enjoy some flexibility in financing their homes.

CHAIRMAN’S STATEMENT (cont’d.)

Dear Shareholders,

On behalf of the Board of Directors, it is my pleasure to present the Annual Report and Audited Financial Statements of Malaysia Building Society Berhad (MBSB) and its Group for the � nancial year ended 31 December 2009.

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This £ exibility allows customers to become proud homeowners at minimal costs and concurrently, increase their opportunities for a better quality of life, both in the long and short term.

Retail Deposit. In order to encourage saving habits among the younger generation, programmes such as ‘Jom Raya Savings’ were introduced and were successful, with good response from the customers.

Liquidity . MBSB has also successful ly securit ized its mortgage por tfol io to Cagamas amounting to RM1.0 bil l ion under the Mortgage Backed Securitization programme. This is in part to support its funding programme.

Developing Fee-Based Income Infrastructure

MBSB expanded the scope and scale of its fee or transactional-based revenue as a strategy to sustain its pro� tability growth in view of the highly competitive � nancial services industry. This key strategic initiative will assist to mitigate the impact of reduced net interest margins. As a result, for 2009 MBSB’s fee based income increased by 187% as compared to 33% in the year of 2008.

GLC Transformation Initiatives

MBSB as a Government-Linked Company (GLC), shall continue to benefit from the implementation of best practices suggested in the various guidelines initiated by the Pu t r a j a y a C o m m i t t e e o n G LC H i g h Performance. It is presently on track to deliver tangible results under these initiatives.

The Company has also actively participated in programmes such as Talent Exchange under the Orange Book, various CSR-related activities under the Silver Book and training programmes held for Directors under the Green Book.

Human Capital Development

Human capital development has played an integral role towards the achievement of Company objectives. In view of this, the company has strategically deployed a workforce that is aligned to its new business goals. MBSB also strives to ensure that the well-being of its people is taken care of so as to motivate the sta� . In addition, the company has provided and shall continue to provide the sta� with competitive career advancement and recognition programmes based on an objective appraisal system.

In 2009, MBSB embarked on a succession p lanning programme, management development programme and continued to par ticipate in the Talent Exchange Programme between GLCs in line with the Orange Book. The company has invested more than RM1 million in human capital development to enhance the staff ’s soft and technical skills.

Continuous e� orts have also been undertaken to ensure retention and development of key positions in order to provide capable human capital for the future.

MBSB is committed to ensure that the welfare and wellbeing of its sta� are maintained at the highest of standards.

Corporate Social Responsibility

MBSB has, in 2009, embarked on CSR activities in line with e� orts to improve best practices in CSR, focusing on the contribution towards development and livelihood of society. These activities were done through educational and community engagements.

The community work included joining hands with the Polis DiRaja Malaysia, Malaysian Red Crescent Society and TV3 in promoting a Home Safety Campaign. The campaign was marketed through a

series of segments on TV3’s Malaysia Hari Ini programme. In the educational areas, MBSB continued to monitor the progress of its adopted schools under the PINTAR school adoption programme. The company conducted Qurban programmes at regional level during the Eidul Adha celebration. Apart from zakat contributions to the individual states, MBSB has contributed zakat directly to underprivileged community groups such as orphans and single mothers. A K-Penyayang programme in collaboration with BERNAS, was undertaken to contribute basic necessities to some rural communities in East Malaysia.

Enhancing Services

As a way to expand the company’s reach to its customers, MBSB has opened two new branches at Kulim, Kedah and Bintulu, Sarawak adding up to 32 branches in operation nationwide.

MBSB ’s branches have undergone a remodelling process by changing their outlet concept from a Branch to a Sales and Ser v ice Centre model . With the implementation of this model, MBSB expects to improve the delivery of its products and ser vices and extend personalised services to all its customers. In addition, a Customer Service Committee was established to undertake a three-phase Customer Service Transformation and the exercise is expected to be completed this year.

Organization

In tandem with the realigned business focus, MBSB has improved and streamlined its operations through the establishment of several new departments and committees.

A Project Management and Monitoring Department was established to assess the technical viability of projects and contracts,

CHAIRMAN’S STATEMENT (cont’d.)

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particularly on property development proposals. The department’s role is to also monitor development of the corporate borrowers’ projects, which in turn protects both their interests and those of MBSB. A Corporate Recovery and Project Rehabilitation Division has also been re-established and expanded to expedite recovery of the company’s legacy loans. MBSB has also strengthen the Islamic Syariah Compliance Unit to focus on product compliance from a Syariah perspective.

The Credit and Rehabilitation Assessment Committee is a management committee formed to deliberate on the viability of Corporate Business proposals prior to their submission to the Board. An IT Steering Committee was set up to oversee the development and maintenance of the company’s IT strategic plans. Encik Jasmy Ismail, one of MBSB’s directors has been appointed as the advisor to this committee.

Risk Management

MBSB’s Group Risk Management continued to be at the forefront to ensure that credit quality and management of risks is maintained at all times. To this end, a Group Risk Management Framework was developed to cover the Credit and Market Risks. R isk Management was further enhanced with the implementation of a Whistle Blowing Policy and Business Contingency Plans. Group Risk Management shall continue to review and recalibrate the credit scoring of corporate and retail portfolios in line with the dynamics of economic activities.

With the intention to be ahead of the curve, Group Risk Management has also established Critical Action Teams for special situations to respond and react promptly to developing situations within the credit and risk spheres.

Group Risk Management has initiated training programmes for its credit o� cers in Ear ly Aler t s ituations and Credit Analys is to increase awareness and accountability to ensure that a cohesive culture of risk management is enhanced.

Prospect For 2010

The year 2010 presents an exciting and promising year for MBSB. With the theme of Taking MBSB to the Next Level: The Journey Continues..., MBSB expects to achieve its targets by placing the right people with the right talent and skills in critical areas to further ensure the Company continues to record better pro� ts.

MBSB shall continue to focus on retail lending especially in Personal Financing as there remains a large market yet to be tapped. This strategy last year was able to generate higher than expected revenues within a short period. The second core activity shall be the Mortgage business. We shall undertake new initiatives that adopt the risk-based pricing approach to attract quality loans. The third core business shall be to promote Corporate Loans with special concentration on Islamic Joint-Ventures (Musharakah business) focusing on small and medium enterprises. MBSB plans to also develop new sources of fee-based income from its retail and corporate business products to further increase the company’s income. I n 2 0 1 0 , t h e c o m p a n y ’s e x p a n s i o n programme shall include the opening of Representative O� ces and the development of an Islamic Hub in the East Coast Region. In addition, the company is also considering a strategic business collaboration with a related company on an o� ering of a retail product.

Group Risk Management Division shall be at the forefront in ensuring a robust credit culture is maintained and inculcated among the business drivers. The Company has success fu l ly secured the approval to implement CCRIS and the system is in the final stages of implementation. This certainly forms a key pillar for MBSB’s Know Your Customer initiatives.

Appreciation

On behalf of the Board of Directors, I wish to express my heartfelt thanks to MBSB’s loyal customers and valued shareholders. Our success would not have been possible without your trust and con� dence. To our business partners, please accept my utmost gratitude for your relentless support. My sincere appreciation also goes to my colleagues on the Board and members of the Syariah Supervisory Council for their insights, wisdom and guidance in helping steer MBSB on a steady course.

On behalf of the Board, I would like to take this opportunity to welcome on board our new Director, Encik Jasmy Ismail, who was appointed on 11 August 2009. We look forward to his contribution and advice. I wish to also thank my fellow directors, management and sta� for their contribution and e� orts. We have accomplished much these past few years and I look forward to your continued support as we embark on the next stage of sustainable growth in our mission for greater success, InsyaAllah.

Tan Sri Abdul Halim bin AliChairman

26 March 2010

CHAIRMAN’S STATEMENT (cont’d.)

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MANAGEMENT TEAM

CEO’S OFFICE

Ahmad Zaini OthmanChief Executive O� cer

Azlina Mohd RashadHead of Transformation Management O� ceResponsible in ensuring e� ective implementation of strategic business and operational initiatives

A� andi NasirHead of Strategic PlanningResponsible in ensuring e� ective implementation of corporate stratagies and planning

Koh Ai HoonCompany SecretaryResponsible in providing company secretarial services for MBSB and its Group of Companies

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HEADS OF DIVISION

MANAGEMENT TEAM (cont’d.)

Tang Yow SaiChief Financial O� cerResponsible for all � nancial management and information technology aspects of the Group operations

Shamsudin Hj. Md Yuso� Head of Corporate Credit Processing & ManagementResponsible in evaluating and assessing all corporate loans and in managing asset quality

Kurien ThomasChief Risk O� cerResponsible for the identi� cation, assessment and management of all risks associated with both new and existing business

Fatimah Nurhaliza Mohd HattaHead of MortgageSpearheading the continuous growth of Mortgage Loan business.

Mohd Tahir HarisHead of Property ManagementResponsible in managing and administering all properties owned by MBSB group

Zaili IsmailHead of Corporate BusinessSpearheading the strategic growth of Corporate Loan business (Private Sector)

Kamarudin SamsudinChief Internal AuditorResponsible in the independent review of the adequacy, integrity and e� ectiveness of the company’s system of internal controls

Norhayati Mohd Daud Head of Corporate Recovery & Project RehabilitationStrategizing and managing corporate debt NPL recovery and project rehabilitation

Junaili Ab HamidHead of Corporate BusinessSpearheading the Corporate Business growth (Public Sector) and enhancement of fee based income

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Aidi AhmadHead of Branch NetworkResponsible in managing branches’ daily operations nationwide

Kamari TukimanHead of Mortgage Debt Collection & ManagementResponsible in planning and executing Mortgage Debt Collection and Recovery activities

Hazim Dato’ Yahya Head of Project Management & MonitoringProvides project technical expertise and advice to customers

Ramlah BachikActing Head of Corporate ServicesResponsible in managing the corporate services and human resource functions

Azman AzizHead of Personal FinancingSpearheading the overall business development, sales and marketing of Personal Financing business

MANAGEMENT TEAM (cont’d.)

Mohd Rozali IdrisHead of Personal Financing (Operations)Responsible in managing the backroom operations of the Personal Financing business

Nur Zarina GhazaliHead of Treasury & Structured BusinessResponsible in overseeing and managing the Treasury function of the Company and originating � nancing for structured assets

Sheela ThaverHead of LegalResponsible in managing and providing Legal Services for MBSB and its Group of Companies

HEADS OF DIVISION (cont’d.)

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Azman Mohd ZainActing Regional Business RepresentativeCentral Region

Aminudin Jusoh @ Yuso� Acting Regional Business RepresentativeEast Coast Region

Abdul Halim ZainalRegional Business RepresentativeSouthern Region

Abdul Raif ShaariRegional Business RepresentativeNorthern Region

Morshidi AbongRegional Business RepresentativeEast Malaysia Region

MANAGEMENT TEAM (cont’d.)

REGIONAL BUSINESS REPRESENTATIVESSpearheading the overall business, recovery and operations of the regions

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CORPORATE HIGHLIGHTS 2009

1

2

3

5

6

7

4

1 • 21 January 2009 • Al Mudharabah Plus Lucky Gift Presentation Ceremony | 2 • 31 January - 1 February 2009 • Kem Motivasi

Pintar at Jerejak Resort & Spa | 3 • 10 February 2009 • Luncheon Talk for Talent Exchange Programme Participants | 4 • 12 March 2009 • Blood Donation Drive | 5 • 19 March 2009 • Signing Ceremony between MBSB and National Union of Commercial Workers (NUCW)

on the Implementation of Collective Agreement | 6 • 17 - 19 April 2009 • MBSB Business Conference 2009 | 7 • 22 April 2009 • Seminar and Soft Launching of MBSB Musharakah Joint Venture Programme

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CORPORATE HIGHLIGHTS 2009 (cont’d.)

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8

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8 • 29 April 2009 • Signing Ceremony between MBSB, Cagamas, Maybank, A� n and EON Bank | 9 • 29 April 2009 • Analyst Brie� ng

Session with the CEO | 10 • 30 April 2009 • 39th Annual General Meeting | 11 • 1 - 3 May 2009 • Trip to Pulau Lang Tengah, Terengganu |

12 • 18 May 2009 • Memorandum of Understanding between MBSB and SP Setia | 13 • 27 May 2009 • Program Pintar - Majlis Silaturrahim

bersama MBSB | 14 • 27 May 2009 • Launching of MBSB Kulim Sales and Service Centre

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CORPORATE HIGHLIGHTS 2009 (cont’d.)

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15

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17

18

19 20

21

15 • 17 August 2009 • Launching of MBSB Home Safety Campaign at “Malaysia Hari Ini” Programme | 16 • 4 September 2009 • Program K Penyayang in Sarawak | 17 • 9 September 2009 • Majlis Berbuka Puasa with MBSB | 18 • 13 September 2009 • Program K

Penyayang in Sabah | 19 • 16 October 2009 • MBSB Hari Raya Open House | 20 • 10 November 2009 • Signing Ceremony between

MBSB, Cagamas, Maybank, A� n and EON Bank | 21 • 27 November 2009 • MBSB Hari Raya Qurban Programme

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STATEMENT OFCORPORATEGOVERNANCE

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The Board of Directors (”Board”) of Malaysia Building Society Berhad strongly believes in the importance of corporate governance and is fully committed to ensure that the highest standards of corporate governance and integrity are applied throughout the Group.

In addition, the Board also considers and adopts where appropriate, the principles and best practices of corporate governance asprescribed in the Malaysian Code of Corporate Governance (Revised 2007) and those outlined by other regulatory bodies such as Bank Negara Malaysia’s guidelines on Corporate Governance (BNM GP1).

The Board is pleased to report to shareholders the manner in which it has applied the Principles of the Code and the extent to which ithas complied with the Best Practices of the Code, pursuant to Paragraph 15.25 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Malaysia”) throughout the Financial Year 2009.

A. Board of Directors

Composition of the Board/Board Balance

The Board comprises of eight (8) Directors of whom four (4) are Independent Non-Executive Directors and four (4) are Non–IndependentNon-Executive Directors.

The Independent Non-Executive Directors are independent of Management and free from any business or other relationship with the Company and the Group which could materially a� ect the exercise of their independent judgement. The number of Independent Directors not only exceeds the requirement of Bursa Malaysia but also contributes towards greater impartiality and objectivity in the Board’s decision making process.

The diversity of skill, experience and knowledge of its members in various disciplines and profession allows the Board to addressand/or to resolve the various issues in an e� ective and e� cient manner. The brief description of the background and experience ofeach of the Board member is contained in the Directors’ Pro� le section of this Report.

The number of Board members is also in line with the Putrajaya Committee on GLC High Performance Guidelines to enhance Board E� ectiveness as codi� ed in “The Green Book”.

Board Meetings Board meetings for the ensuing � nancial year are scheduled in advance before the end of each � nancial year to enable Directors to plan ahead and � t the year’s Board meetings into their own schedule.

The Board has at least four (4) scheduled quarterly meetings with additional meetings being convened as and when necessary.

Prior to each meeting, every Director is given the complete agenda and a set of Board papers well in advance so that the Directors have ample time to review matters to be deliberated at the meeting and to facilitate informed decision making.

The Board met ten (10) times during the � nancial year ended 31 December 2009. The details of each of the Directors’ attendance aregiven as below:

All Directors have complied with the minimum 50% attendance requirement at Board Meetings during the � nancial year as stipulatedby the Main Market Listing Requirements of Bursa Malaysia.

STATEMENT OF CORPORATE GOVERNANCE

Name of Director Total Meetings Attended Percentage of Attendance (%)

YBhg Tan Sri Abdul Halim bin Ali 10/10 100%

Encik Lau Tiang Hua 10/10 100%

Syed Zaid bin Syed Ja� ar Albar 9/10 90%

Puan Cindy Tan Ler Chin 10/10 100%

YBhg Datuk Abdullah bin Kuntom 9/10 90%

Encik Khalid bin Haji Sufat 10/10 100%

Encik Aw Hong Boo 10/10 100%

Encik Jasmy bin Ismail 2/2 100% (Appointed on 11 August 2009)

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Training and Development of Directors

During the year, all Directors have attendedtalks, training programs, seminars andconferences conducted by Regulatory Authorities, professional bodies andprofessional trainers and speakers, inorder to stay abreast with the latestdevelopments in the industry and businessenvironment as well as on changes to statutory requirements and regulatory guidelines, so as to enhance their skills andknowledge to enable them to carry outtheir roles effectively.

The training programmes attended by the Directors in 2009 include the following:-

• Corporate Governance Summit 2009 - Truth, Lies and Corporate Governance

• Minda Directors Forum 2009 - Board Response to Turbulent Times

• Ministral Leadership Lecture

• Risk Governance

• Leading Change, What Leaders Really Do

• Lead Without Title Get to the World Class

• Innovation-Led Economy in Malaysia

• 21st Century Challenges in Financial Services

• Khazanah Global Lectures by Sir John Reginald Hartnell Bond, Chairman of Vodafone Group

• Corporate Governance Guide -Towards Boardroom Excellence

• Corporate Governance Week 2009 Programme

• PTD Alumni 2009 Economic Forum

• 2010 Budget Updates and FRS 139 & FRS 7 (PNB)

• Continuing Education Programme - “Doing better deals”

• National Tax Conference 2009

• National Accounting Conference 2009

• Key Performance Indicators Conference for the Public Sector, Statutory Bodies & Government Agencies

• Managing IFRS in Critical times: Learning from Global Experiences

• The non-executive Director Development Series: Is it worth the risk?

• Economic Turmoil: THRIVE, Don’t Just Survive!

• Mandatory Accreditation Programme for Directors of Public Listed Companies

The Directors are also updated on anychanges to legal and governance requirements which will affect theGroup and also themselves as Directors.

Directors’ Code of Ethics

The Directors continue to observe a code of ethics that is consistent with the Company Directors’ Code of Ethics established by the Companies Commission of Malaysia. The Directors fully subscribe to highly ethical standards and take into account theinterest of all stakeholders.

Duties and Responsibilities of the Board

The Board’s statutory and � duciary duties include responsibilities to approve and periodically review the overall business strategies and significant policies of the Company and the Group.

The primary responsibilities of the Board are, amongst others, the following:-

• Reviewing and approving the strategic business plan of the Company and the Group as a whole.

• Overseeing the conduct of the Company and the Group’s business to ascertain its proper management, including setting clear objectives and policies within which senior executives are to operate.

• Identifying and approving policies pertaining to the management of all risk categories including but not limited to credit, market, liquidity, operational, legal and reputational risks.

• Succession planning, including appointing, training and � xing the compensation of and where appropriate, replacing senior management.

• Reviewing the adequacy and the integrity of the Company and the Group’s internal control system and management information system for compliance with applicable laws, regulations, rules, directives and guidelines.

• Developing and implementing an investors’ relations programme or shareholders’ communications policy for the Company.

• Discussing and where appropriate, resolving all matters referred by Management to the Board.

• Approving major loans/corporate loans which are beyond the authority of the Executive Committee (“EXCO”).

Roles and Responsibilities of the Chairmanand the Chief Executive O� cer

There is a clear division of responsibility between the Chairman and Chief Executive O� cer to ensure a proper balance of power and authority. The Chairman of the Board is a Non-Executive Director and together with the rest of the Board, is responsible for setting the policy framework within which the Management is to work. The Chairman also leads the collective e� ort of the Board in monitoring the performance of Management in meeting the corporate goals and objectives. He also guides the Board on all issues presented before them at meetings or at such other forums where the consensus of the Board is required.

The Chief Executive Officer is primarily responsible for overseeing the day to day management to ensure the smooth and e� ective running of the Company and the Group. He is entrusted with making sure that all decisions, directions, policies and/or instructions approved by the Board are carried out by Management in a timely and efficient manner. He carries the primary responsibility for ensuring management competency including the emplacement of an e� ective succession plan to sustain continuity.

Appointment and Re-election of the Board

A formal and transparent procedure has been established by the Board for the appointment of new directors. A proposed candidate is first considered by the Nomination & Remuneration Committee which takes into account the skills and experience of the person before making a recommendation to the Board. All appointments of new Directors are made after prior consultations among existing Directors.

In accordance with the Company’s Articles of Association, one third (1/3) of the membersof the Board for the time being shall retireby rotation at each Annual GeneralMeeting and, subject to eligibility, mayo� er themselves for re-election.

Supply of Information

The Board has full and unrestricted access to all information within the Company and Group as well as the advice and services of senior management and Company Secretaries in carrying out their duties.

STATEMENT OF CORPORATEGOVERNANCE (cont’d.)

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The Directors may also seek independent professional advice, at the Company’sexpense, if and when required.

Board Committees

T h e B o a r d h a s e s t a b l i s h e d B o a r d Committees to assist the Board in the running of the Company and the Group.

Pursuant to the above, the Board has established four (4) Board Committees. Each committee has a clearly de� ned terms of reference regarding its objectives, duties and responsibilities, authority, meetings and memberships. The Board Committees of the Company are as follows:-

a) Executive Committee (EXCO)b) Audit & Risk Management Committee (ARMCO)c) Nomination & Remuneration Committeed) Arrears Recovery Committee (ARC)

Any decision not within its authority isre fer red back to the Board with i tsrecommendations and comments for the Board’s deliberation and approval.

The salient terms of reference of each Board Committee and details of members’ attendance of meetings are as follows:

a) Executive Committee of the Board (EXCO)

The EXCO was established on 29 April 2005 speci� cally to assist the Board to evaluate and approve loan applications within their approval authority limits.

EXCO consists of two (2) Independent Non-Executive Directors and four (4) Non-Independent Non-Executive Directors.

During the financial year 2009, ten (10) meetings were held by the EXCO. The members and their attendance at the meetings are as follows:

STATEMENT OF CORPORATE GOVERNANCE (cont’d.)

b) Audit & Risk Management Committee (ARMCO)

The principal function of the ARMCO is to assist the Board in the e� ective discharge of its fiduciary responsibilities in relationto corporate governance, ensure timelyand accurate financial reporting, proper implementation of risk managementpolicies and strategies in relation to theCompany’s and the Group’s business strategies, the development of a sound internal control system and an e� ective risk management framework.

ARMCO consists of two (2) Independent Non-Executive Directors and one (1) Non-Independent Non-Executive Director.

In accordance with the best practices of corporate governance, ARMCO presentsits report set out on page 39 to 41 of this Annual Report.

c) Nomination & Remuneration Committee

The primary responsibilities of the Nomination Committee are:

a) To recommend to the Board, candidates for all directorships to be filled by the shareholders or the Board. In making its recommendations, the committee should consider the following:- • skills, knowledge, expertise and experience; • professionalism; • integrity, and • in the case of candidates for the position of Independent Non-Executive Directors, the Committee should also evaluate the candidates’ ability to discharge such responsibilities/functions as expected from Independent Non-Executive Directors.

b) To consider, in making its recommendations, candidates for directorships proposed by the Chief Executive O� cer (“CEO”) and, within the bounds of practicability, by any other Senior Executive or any Director or shareholder;

c) To recommend to the Board, Directors to � ll the seats on the Board Committee;

d) To conduct annual review with the Board, the required mix of skills and experience and other qualities, including core competencies which Non-Executive Directors should bring to the Board;

e) To implement a process with the Board, for assessing the effectiveness of the Board as a whole, the Committees of the

Name of Members Total Meetings AttendedYBhg Tan Sri Abdul Halim 10/10bin Ali (Chairman)

Syed Zaid bin Syed Ja� ar Albar 9/10

Puan Cindy Tan Ler Chin 8/10

YBhg Datuk Abdullah 9/10bin Haji Kuntom

Encik Khalid bin Haji Sufat 10/10

Encik Jasmy bin Ismail 2/2(Appointed on 11 August 2009)

Board, and for assessing the contribution of each individual Director including Independent Non-Executive Directors, as well as the CEO. All assessment and evaluations carried out in the discharge of all its functions should be properly documented;

f) To consider and to recommend to the Board the appointment, resignation, retirement and other related issues involving the CEO; and

g) To consider and approve the appointment, promotion, resignation, retirement and other related issues involving General Managers and above.

The primar y responsibil it ies of the Remuneration Committee are:

a) To propose a system and amount of executive and non-executive Directors’ annual remuneration package to the Board;

b) To review remuneration programmes from time to time, gauge their adequacy and results;

c) To ensure the Company has a developed succession policy and that such policy is kept under review;

d) To consider and to recommend to the Board the promotion, remuneration package, increment, bonuses and other related matters involving the CEO; and

e) To consider and approve the promotion, remuneration package, increment, bonuses and other related matters involving General Managers and above.

The Nomination & Remuneration Committeealso carries out the periodic review of the overall remuneration for Directors, CEO andkey Senior Management O� cers whereuponrecommendations are submitted to the Board for approval.

The Committee cons is ts of t wo (2) Independent Non-Executive Directors and one (1) Non-Independent Non-Executive Director.

During the year ended 31 December 2009, � ve (5) meetings were held. The members ofthe Nomination & Remuneration Committeeand their attendance at the meeting are as follows:

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d) Arrears Recovery Committee (ARC)

The principal function of this ARC is todeliberate on proposals for recovery ofnon-performing loans (NPLs), approve proposals within its authority and to recommend to the Board those proposals outside its authority, monitor the progress of recovery of NPLs and formulate recovery strategies.

ARC consists of three (3) Independent Non-Executive Directors and two (2) Non-Independent Non-Executive Directors.

During the year ended 31 December 2009, � ve (5) meetings were held. The members and their attendance at the meetings are as follows:

B. Directors’ Remuneration

Objective of Directors’ Remuneration

The Company’s remuneration policy for Directors is tailored towards attracting and retaining Directors with relevant experience and expertise needed to assist in managing the Company and the Group e� ectively.

Remuneration Package

The remuneration package is as follows:-

a) Directors’ Fee

The Directors are paid an annual fee, thequantum of which is approved by theshareholders at the Annual General Meeting.In the event a Director is appointed or resigns during a financial year, the fee will

D. Accountability and Audit Financial Reporting

The Board acknowledges its responsibility to ensure that the Company’s and the Group’s � nancial statements present a true and fair view of the state of a� airs and are prepared in accordance with applicable Financial Reporting Standards in Malaysia and the provisions of the Companies Act, 1965.

The Board is also committed to providing the highest level of disclosure possible to ensure integrity and consistency of the � nancial reports.

The Group publishes full � nancial statementsannually and condensed � nancial statementsquarterly as required by the Main Market Listing Requirements of Bursa Malaysia.

The Audit & Risk Management Committee assists the Board in scrutinising the informationfor disclosure to ensure accuracy, adequacy and completeness.

Internal Control

The Board has the overall responsibility ofmaintaining a sound system of internalcontrols to safeguard shareholders’ investmentand the Company’s assets.

The Audit & Risk Management Committee through the Internal Audit Department reviews the e� ectiveness of the system of internal controls of the Group periodically. The review covers the � nancial, operational and compliance controls as well as risk management.

be pro-rated and apportioned accordinglybased on the month of the said Director’s appointment or resignation.

b) Allowance

In addition the Directors are paid a meeting allowance for their attendance at meetings of the Board and the Board Committees. Thequantum of the allowance is recommendedby the Nomination & Remuneration Committeeand approved by the Board.

c) Details

The aggregate remuneration of the Directorsduring the � nancial year 2009 are categorisedinto the appropriate components as follows:

C. Shareholders

Relationship with Shareholders and Investors

The Board recognises the importance of communication and proper dissemination of information to its shareholders and investors. Through extensive disclosures ofappropriate and relevant information, theCompany aims to effectively provide shareholders and investors with information to ful� ll transparency and accountability.In this respect , the Company keepsshareholders informed via announcementsand timely release of quarterly financialreports, press releases, annual reportsand circulars to shareholders.

Annual General Meeting

The Annual General Meeting (AGM) of the Company is the principal forum for dialogue and interaction with its shareholders. Shareholders are given the opportunity to participate e� ectively in resolutions tabled at the AGM. All shareholders have direct access to the Board members at this AGM.

STATEMENT OF CORPORATE GOVERNANCE (cont’d.)

Name of Members Total Meetings Attended

Syed Zaid bin SyedJa� ar Albar (Chairman) 5/5

YBhg Datuk Abdullah bin Haji Kuntom 3/5

Encik Aw Hong Boo 5/5

Name of Members Total Meetings AttendedEncik Aw Hong Boo 5/5(Chairman)Syed Zaid bin Syed 5/5Jaffar AlbarPuan Cindy Tan Ler Chin 3/5Encik Lau Tiang Hua 4/5Encik Jasmy bin Ismail 1/1(Appointed on 11 August 2009)

Emoluments Allowance Fee Bonuses Bene� t-in Total (RM) (RM) (RM) (RM) Kind (RM) (RM)

Executive Director - - - - - -Non-Executive - 85, 500 420, 833 - - 506,333Directors

Number of Directors

Range of Remuneration Executive Director Non-Executive DirectorNil - -Below RM50,000 - 1RM50,001 - RM100,000 - 7RM100,001- RM500,000 - -RM500,001-RM1,000,000 - -

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STATEMENT OF CORPORATEGOVERNANCE (cont’d.)

The Statement on Internal Control as set out in this Annual Report provides an overview of the state of internal controls within the Group.

The minutes of the Audit & Risk Management Committee meetings are tabled to the Board for notation and for action by the Board whereappropriate.

Relationship with Auditors

The Company’s external auditors, Messrs Ernst & Young continue to provide the independent assurance to shareholders on the Company’s and the Group’s � nancialstatements. The Board maintains a formaland transparent relationship with the auditors to meet their professional requirements.

The role of the Audit & Risk Management Committee in relation to the internal and external auditors is described in the Audit& Risk Management Committee Report section of the Annual Report.

E. Directors’ Responsibility Statement

The Directors are required by the CompaniesAct, 1965 to prepare � nancial statements for the � nancial year which have been made out in accordance with the applicable Financial Reporting Standards in Malaysiaso as to give a true and fair view of the � nancial position and of the results andcash ² ows of the Group and of the Company for the � nancial year then ended.

In preparing the � nancial statements, theDirectors have used appropriate and relevantaccounting policies that are consistently applied and supported by reasonableas well as prudent judgments andestimates, and that applicable Financial Reporting Standards in Malaysia havebeen complied with.

The Directors are responsible for ensuring that the Group and the Company keep proper accounting records which disclose with reasonable accuracy the financial position of the Group and Company and which enable them to ensure that the financial statements comply with the Companies Act, 1965.

The Directors have the general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and the Company to detect and prevent fraud and other irregularities.

F. Additional Compliance Statement

Utilisation of Proceeds Raised from any Corporate Proposal

There were no proceeds raised by the Company from corporate exercise during the � nancial year.

Share Buy-back

There was no approved share buy-back scheme during the � nancial year.

Options, Warrants or Convertible Securities

There were no options, warrants or convertiblesecurities issued during the � nancial year.

American Depository Receipt (ADR) or GlobalDepository Receipt (GDR) Programme

The Company did not sponsor any ADR or GDR programme during the � nancial year.

Sanctions and/or Penalties Imposed

There were no sanctions or material penalties imposed on the Company and its subsidiaries, Directors or management by the relevant regulatory bodies during the � nancial year.

Non-Audit Fees

Apart from the annual audit fees, the Group has paid non-audit fees amounting toRM50,000 to external auditors for the � nancial year ended 31 December 2009.

Variation in Results

There were no variation between the audited results for the � nancial year ended 31 December 2009 and the unaudited results for the fourth quarter ended 31 December 2009 of the Group.

Pro� t Guarantee

The Company did not issue any profit guarantee during the � nancial year.

Material Contracts with Related Parties

Save as disclosed in note 35 to the � nancialstatements, there are no other material contracts subsisting at the end of the financial year or entered into since the

end of the previous financial year by the Company and its subsidiaries which involves interests of Directors and major shareholders.

Revaluation Policy

The Company revalues its properties every two (2) years and at shorter intervals whenever the fair value of the revalued assets is expected to di� er materially from their carrying value.

G. Statement on Compliance with the Best Practices of the Malaysian Code on Corporate Governance

Having reviewed the governance structure and practices of the Company and the Group, the Board considers that it has complied with the best practices as set out in the Code as well as the items setout in Part A of Appendix 9C of the MainMarket Listing Requirements of Bursa Malaysia in relation to the requirement of a separate disclosure in the Annual Report.

This Statement on Corporate Governance is made in accordance with the resolution of the Board of Directors dated 10 March 2010.

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100

75

50

25

0

20

15

10

5

0

28.4

1

29.9

6

41.9

6 63.9

0 83.8

9

2005

2006

2007

2008

2009

2005

2006

2007

2008

2009

Company Pro�t Before Taxation (RM million)

5

4

3

2

1

0

2005

2006

2007

2008

2009

11

12

15

7 8

Group Basic Earnings Per Share(sen)

2.5 3.

0

3.0

4.0

4.0

Gross Dividend(sen)

2005

2006

2007

2008

2009

337.

86

337.

95

361.

10

700.

17

700.

17Paid-Up Ordinary Share Capital (RM million)

800

700

600

500

400

300

200

100

0

FINANCIAL HIGHLIGHTS

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119

129 13

7

77

83

Company Net Assets Per Share(sen)

100

0

-100

-200

-300 -101

.41

-67.

43

-30.

00

-163

.77

-118

.82

Company Total Reserves (RM million)

2005

2006

2007

2008

2009

2005

2006

2007

2008

2009

4,91

4.08

5,96

4.46

6,72

9.55

7,32

8.11 9,32

5.01

Company Total Assets (RM million)

10

8

6

4

2

0

2005

2006

2007

2008

2009

250

200

150

100

50

0

FINANCIAL HIGHLIGHTS (cont’d.)

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Corporate Social Responsibility

As a corporate ent i t y, CorporateResponsibility (CR) has been part andparcel of our business. MBSB recognisethat our commercial duties go hand in hand with our broader obligations to society. We conduct our business with high standards of professionalism and integrity, and we will continue to play our part inthe life of the communities we serve.

Our responsibility to our customers isto look into their financial affairs withprofessionalism, fairness and transparency.Our duty to our sta� is to provide a safe and pleasant work place, opportunities foradvancement in their career and to getcompetitive wages. At the same time, webelieve that it is our social obligation toshare our success with the less fortunate members of the society.

Workplace

For the year 2009, we continued to give prime importance to ensure the welfare, wellbeing, highest health and safety standards for our staff. The Managementhas taken measures to upgrade the firerated doors, provide proper emergencysignage, brighten up the staircase andparking lots and also replace the CCTVsystems within the head office building, parking lots and branches. We also encouraged our employees to accept health and safety as part of their individual responsibilities.

As at December 2009, the Group had 897 employees spread over 32 branches across

CSR INITIATIVES

the country. As a Government-LinkedCompany, we support local employmentof multi-racial Malaysians and we do not practice discrimination between men and women in our recruitment as well as in remunerations and bene� ts.

Learning and development is part and parcel of our strategy for the growth of our people and our business. Therefore, the Company continues to invest in training and career development programmes. These include team building and internal

and external training programmes. In 2009, the average training per employee was 41.41 hours, which amounted to 37,685 training hours in total.

MBSB compensates all its employees that are competitive to the industry average and provides a comprehensive range of bene� ts to its employees.

Community

Our community engagement extends to working hand in hand with governmental agencies, corporations and NGO’s to embark on educational, community and humanitarian programmes.

In our e� ort to create continuous awarenesson the MBSB Home Safety Campaign, weproduced series of home safety tips segments on Malaysia Hari Ini , T V3 programme. We were supported by Polis DiRaja Malaysia, Malaysian Red Crescent Society and TV3. MBSB sta� participation in this e� ort re² ects the tradition of good corporate citizenry within our organization.

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CSR INITIATIVES (cont’d.)

In the education area, we continued to monitor the progress of our adopted schools in Bukit Mertajam i.e. Sekolah Kebangsaan Machang Bubok and SekolahKebangsaan Bukit Teh under the PINTAR school adoption programme.

In 2009, MBSB donated computers for the establishment of an English Lab in both schools. At the same time, we continued to sponsor motivational Camps, a series of Smart Learning Programmes for students sitting for UPSR examinations and rewarding those students who obtained 5A’s.

MBSB’s community engagement includes Qurban programmes at regional level during the Eidul Adha celebration. It has expanded to Sabah and Sarawak through

the K-Penyayang programme, a collaborationCSR programme with BERNAS. Throughthis programme we distributed basic necessities amounting to RM100,000 toless fortunate communities in rural areas.Apart from contributing zakat fund toindividual states where we operate, wealso utilised the zakat fund to orphanages,single mothers and disaster relief for war victims in Gaza.

Marketplace

Promoting good customer relations is a vital part of our business. We generally seek to respond immediately to customer

complaints and use them as opportunities to learn and improve. The setting up of a Customer Service Committee in MBSB re² ects our commitment towards customer satisfaction. We identified key areas that needed to be improved and conducted internal programmes to enhance our customer service level.

As we believe that we can contribute a little something towards the environment,MBSB continuously promotes awareness among the sta� to minimise the usage of electricity, water and papers.

As MBSB strives for success in business it will continue to be a socially responsible corporate entity.

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Board’s Responsibility

The Board acknowledges overall responsibility and recognises the importance of maintaining a sound system of internal control and for reviewing its adequacy and integrity so as tosafeguard shareholders’ investments andthe Group’s assets. The Board endeavoursto maintain an adequate system oforganization-wide internal control with integrity.

Due to the limitations that are inherent inany system of internal controls, this system is designed to manage, rather than eliminate the risk of failure to achieve business objectivesand therefore can only provide reasonablebut not absolute assurance against material misstatement, fraud or loss occurrence.

The Board remains committed towards operating a sound system of internal control and therefore recognise that the systemmust continuously evolve to support theGroup’s businesses and operations in adynamic business environment. As such, the Board in striving for continuousimprovement will put in place appropriateaction plans, when and where necessaryto further enhance the Group’s system of internal control.

Risk Management

The Board through its Audit & RiskManagement Committee (ARMCO) assumesoverall responsibility for overseeing the Group’s risk.

The Board regards risk management as an integral part of business operations and con� rms that there is an on-going process ofidentifying, evaluating, monitoring, managing and reporting on the signi� cant risks thatmay a� ect the achievement of its business objectives. The Board had also reviewed and improved the risk management framework to strengthen the risk management policies and tightened the relevant internal controls.

The Board is supported by a number of established Board Committees in the execution of its responsibilities namely, Executive Committee (EXCO); Audit & RiskManagement Committee (ARMCO); ArrearsRecovery Committee (ARC); and Nomination& Remuneration Committee, details ofwhich are set out in the Statement on Corporate Governance. Each committee has clearly de� ned terms of reference.

The Board has put in place the ARMCO asthe driver for identifying principal risks andensuring the implementation of appropriate

systems to manage these risks. ARMCO is responsible for monitoring, overseeing and evaluating the duties and responsibilities of Management, the Internal Audit Division and the Group Risk Management Division as those duties and responsibilities relate toMBSB’s processes for controlling its operations.

ARMCO maintains the overall responsibility for risk oversight within MBSB which includes inter-alia reviewing and approving risk management policies and limits, reviewing risk exposure and portfolio composition and ensuring that the infrastructure, resourcesand systems are put in place for risk management activities.

ARMCO is also responsible for determining that all major issues reported by the internal auditor, external auditor and other outside advisors have been satisfactorily resolved. Finally, the Committee is responsible forreporting to the Board of Directors all important matters pertaining to thecompany’s operation.

The responsibil ity for implementing the Group’s strategies and day-to-daybusinesses are delegated to Management. T h e o r g a n i z a t i o n s t r u c t u re s e t s out clear segregation of roles and responsibilities, lines of accountability and leve ls of author i t y to ensure effective and independent stewardship. The Management assists the Board inimplementing the policies approvedby the Board, implementing risk controlprocedures and developing, operating and monitoring internal controls to mitigate and control identi� ed risks.

Dedicated management committeesnamely, Credi t and Rehabi l i tat ionAssessment Committee (CARAC); AssetLiability Committee (ALCO): Management Committee (MANCO); and IT SteeringCommittee assist ARMCO in managingcredit risk, operational risk, market risk andliquidity risks. These committees areresponsible for overseeing the developmentand assessing the e� ectiveness of policies approved by the Board.

The Group has an adequately resourced internal audit function which reports directlyto ARMCO. Its primary responsibility is to provide the Committee with reasonable assurance that the Group’s internal control system continues to operate adequatelyand e� ectively.

The annual audit plan is developed using a risk-based approach and is reviewed

and approved by ARMCO. During the year, the Internal Audit Division has carried out independent and objective reviews in accordance with the approved audit plan covering � nancial accounting, operational and compliance controls. Based on these reviews, the Internal Audit Division hasprovided the ARMCO with periodic reportshighlighting observations, recommendationsand management action plans to improvethe system of internal controls.

Group Risk Management Division

The risk management processes of the Grouphave been enhanced with the strengtheningof the Group Risk Management Division(GRM). The GRM is headed by the ChiefRisk Off icer and is responsible forcommunicating to the Board/ARMCO thecritical risks the Group faces, their changes and the action plans to manage these risks.

The GRM continues to provide advice and guidance on the Corporate and Business Risk to the Group. The scope of advice servesto manage and control significant risk exposures inherent in the Group’s business operations and cover the following areas:

a) Identify signi� cant risks and ensure the implementation of appropriate risk management framework and guidance to manage these risks.

b) Reviewing the adequacy and integrity of the Group’s internal control systems and management information system, including systems of compliance with applicable laws, regulations, rules, directive and guidelines.

c) Conducted risk awareness forum for the management with the objective of p r o v i d i n g c o m p r e h e n s i v e r i s k understanding and the implication on the operation, � nancial, and compliance.

The GRM participates in the development ofmarket risk policies and in the establishmentof credit and operational risks policies. Itreviews compliance with set risk limitsand identifies emerging risk issues. I thas representation in decision-makingmeetings of the ALCO; CARAC; MANCO and IT Steering Committee.

During the year, a series of meetings and workshops with business and support uni ts were conduc ted to enhance their understanding and knowledge of risk management. The key risks identi� ed through this process were subsequently consolidated and documented in the

STATEMENT ON INTERNALCONTROL (SIC)

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STATEMENT ON INTERNALCONTROL (SIC) (cont’d.)

Manuals/Standard Operating Procedures (SOPs) and presented to the relevant committee and ARMCO for approval and adoption.

In 2009, the Group has also undertaken a review of the Group Risk Management Framework and also enhanced the credit scoring system for the mortgage loan portfolio to meet the changes in operating environment as part of the continuous improvement in risk management. The risk management framework has been developed as a guidance to manage major business risk factors, outlining the rolesand responsibilities of the Board of Directors and key committees in managing the company’s risk.

Other Key Elements of Internal Control

Apart from group risk management and internal audit, the other key elements of the Group’s system of internal control include:

• Whenever required, relevant Board committees are established with speci� c responsibilities delegated by the Board to deliberate on matters within the respective scope of responsibility. The committees are guided by written terms of reference and their minutes of meetings are tabled to the Board.

• MBSB has a well-defined organizational structure with clear lines of accountability and has strict authorisation, approval and control procedures within which the senior management operates. A process of hierarchical repor ting has been established which provides for a documented trail of accountability.

• Implementation of business planning for the next financial year and integrated budget process with establ i shed ownership of business objectives, plans and the expected financial outcome based on the Board’s approved Budget Plan (2008 – 2010).

• ARMCO on behalf of the Board regularly reviews internal control issues identi� ed in reports prepared by the internal auditor and external auditor and the related actions taken by Senior Management.

• The Board of Directors reviews the operational and � nancial performance of the Group. Management reports are presented to the Board each quarter prov id ing f inancia l in format ion , including key performance indicators.

• MANCO and ALCO comprises Senior Management with responsibilities that include execution of the following controls: i) Monthly performance reviews of actual performance against expectations and budget via MANCO. ii) Quality assurance on key information and performance report to the Board. iii) Partnership with ARMCO and Internal Audit Division to address any internal control issues.

These management committees are heldon a regular basis to identify, discuss and resolve operational, � nancial and key management issues.

• For the year 2009, reviews and updates on all SOPs are performed to re² ect changing risks or processes and internal control improvements while ensuring that documentation remains current. A structure for organization-wide control and custodian of the Manuals has been established. Continuous e� orts are undertaken to ensure standardisation, timeliness, comprehensiveness of Manuals including authorisation, accountabil ity and monitor ing processes. Al l revised manuals/SOPs are required to be retabled to ARMCO for approvals, highlighting- relevant changes.

• Control Self-Assessments (CSA) checklists have been implemented on the core business operating units with a focus to ascertain the level of control adequacy and compliance. The CSA wil l be implemented progressively to other individual business units of the Group. The CSA would provide a platform for risk assurance and target audits could be carried out e� ciently and e� ectively by the Internal Audit Division.

• The Internal Audit Division reporting to ARMCO performs systematic and regular reviews of key processes via audit of departments and branches in an e� ort to assess the effectiveness, adequacy and integrity of internal controls including compliances. Areas of improvement and proposed recommendations are highlighted to Senior Management and ARMCO with a periodic follow-up review on actions taken.

• As part of best practices of good corporate governance, the Group in 2009 has established a “Whistle Blowing” policy with the objective of providing the sta� with a mechanism to raise their concerns responsibly, regarding malpractices and

irregularities affecting MBSB whilst keeping the identity of the whistle blower con� dential. The policy makes it clear that any such concern can be raised without fear of victimisation, discrimination or disadvantage to the employee reporting the concern.

• Employees are bound to observe prescribed standards of business ethics when conducting themselves at work and in their relationship with external parties, such as customers and suppliers. Employees are expected to conduct themselves with integrity and objectivity and not be placed in a position of conflict of interest. In line with this, MBSB in 2009 has also formulated the Code of Conduct and Ethics.

• The Group is constantly assessing new trends and development on fraud. To this extent the Fraud & Corruption Control Policy has been approved by ARMCO in 2009 and has been disseminated to all employees.

• Training initiatives covering the Anti- Money Laundering and Anti-Terrorism Financing Act and risk awareness are carried out to further strengthen MBSB’s view on its non-tolerance to fraud. In instances where fraud cases are brought to light, stern action were taken against the culprits after due investigation which includes dismissal of service. This in itself is a clear message to staff that the Company views this seriously and should serve as a deterrent to other sta� from committing the same o� ence.

• Continuous education/training for employees on the importance of governance, risk management and internal control as par t of their development programme.

Conclusion

The Board con� rms that the system of internal control with the key elements highlighted above was in place during the financial year, except where stated otherwise. The system is subjected toregular reviews by the Board. The Board believes that the system of internal controls of the Group is sound and sufficient to safeguard shareholders’ investments andthe Group’s assets.

The statement is made in accordance with a resolution of the Board of Directors dated 10 March 2010.

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During the Financial year ended 31 December 2009, a total of 7 Audit & Risk Management Committee (Committee) meetings were held. The Committee comprises the following members and details of their attendance of meetings held during the � nancial year are as follows: -

Activities

During the � nancial year, the main activities undertaken by the Committee in accordance with its terms of reference are summarisedas follows: -

i) Reviewed the quarterly unaudited � nancial results and the annual audited � nancial statements to ensure that the f inancial repor ting and disclosure requirements of the relevant authorities were complied with prior to recommending to the Board for approval.

ii) Reviewed with the external auditors their audit planning memorandum for the year ended 31 December 2009 comprising their audit strategy, scope of work for the year, their annual audit repor t and updates of new developments on Financial Reporting Standards issued by the Malaysian Accounting Standards Board.

iii) Met the external auditors twice for discussion without the presence of the Management.

iv) Reviewed and approved the annual Internal Audit Plan to ensure adequacy of scope and coverage of the auditable areas including the Internal Audit resource requirements.

v) Reviewed the status of completion of the Internal Audit Plan, the internal audit reports, which outlined the audit issues, recommendations and management’s response thereof.

Discussed with management, actions taken to improve the system of internal controls based on the internal auditors’ recommendations for improvement identi� ed in the internal audit reports.

vi) Reviewed the Group Risk Management Framework, Fraud and Corruption Control Guidelines and the Whistle Blowing Policy before recommending to the Board for approval.

vii) Tabled the minutes of each Committee meeting to the Board for notation, and for further direction by the Board, where necessary.

Statement on Internal Audit Function

The Internal Audit function is performed in-house and functionally report to theAudit and Risk Management Committeeas an independent unit that providesobjective evaluation of risks and controls inthe auditable activities. Its primary role isto assist the Audit and Risk ManagementCommittee to discharge its duties andresponsibilities by independently reviewingand reporting the adequacy and integrityof MBSB’s system of internal controls. TheAudit and Risk Management Committeeregularly appraises the resources andtraining needs of the Internal Audit Division to meet the competencies and skills required for e� ective performance of MBSB’s internal audit.

At the beginning of the financial year,the Internal Audit Division has presentedits audit plan, audit budget and scope ofwork to the Audit and Risk ManagementCommittee for approval. The internalauditors have adopted a r isk-basedapproach towards the planning andconduct of audits, which is designed toevaluate and monitor MBSB’s internal contro ls system. I nterna l Audit has developed and implemented the ControlSelf-Assessment to the core business activit ies as a tool to assist the l ine management to perform a self-review of controls over their respective business/operat ions func t ions. The Contro lSelf-Assessment will be implementedfor other business/process units and willcontinuously be refined and risk based

to ensure that it serves the purpose as an additional tool to evaluate the e� ectiveness of the system of internal controls.

The scheduled audits are conducted and audit reports are duly tabled to the Audit and Risk Management Committee. Audit findings and recommendations in the reports are followed up for recti� cation and resolution and the status is duly reportedto the Audit and Risk ManagementCommittee. Ad-hoc audit assignments andinvestigations were also conducted at therequest of the Committee on areas ofconcern identi� ed by the Committee.

In addition to audit assignments, the Internal Audit Division is also invited to be involved in the advisory capacity to review the operational guidelines and manuals to ensure pertinent controls embedded are consistent with the changes in businesses and operations.

The internal auditors also work closely with the external auditors to resolve any control issues as raised by them to ensure that significant issues are duly acted upon by the Management.

For the � nancial year ended 31st December 2009, the Internal Audit Division has incurred an actual operating expenses of approximately RM590,000.

Terms of Reference

1.0) Composition of the Committee

The Board of Directors shall appoint the Committee from amongst its members whoful� l the following requirements: -

i) At least three (3) non-executive directors, a majority of whom are independent directors;

ii) At least one (1) member of the Committee must be a member of the Malaysian Institute of Accountants (MIA) or any other equivalent quali� cations recognised by the MIA; and

Composition of Number of MeetingsThe Committee Attended/Held

Encik Lau Tiang Hua 7/7(Chairman/IndependentNon-Executive Director)

Encik Aw Hong Boo 7/7(Independent Non-Executive Director)

Puan Cindy Tan Ler Chin 7/7(Non-Independent Non-Executive Director)

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iii) No alternate directors shall be appointed as a member of the Committee. The members of the Committee shall elect a Chairman from among themselves who shall be an Independent Director.

All members of the Committee hold o� ce only so long as they are Directors of the Company. In the event of any vacancy in the Committee, arising from retirement or resignation, with the result that the number of members is reduced below 3, the Board of Directors must � ll the vacancy within 3 months.

2.0) Objectives

The primary objectives of the Committee are to: -

i) Assist the Board of Directors in ful� lling its � duciary responsibilities particularly in the areas of accounting and management controls and � nancial reporting;

i i ) Reinforce the independence and objectivity of the Internal Audit Division;

iii) Provide the focal point for communication between external auditors, internal auditors, risk managers, Directors and the Management on matters in connection with accounting, reporting, risks and controls and providing a forum for discussion, independent of the Management; and

iv) Undertake additional duties as may be deemed appropriate and necessary to assist the Board of Directors.

3.0) Rights

The Committee shall: -

i) Have the authority to investigate any matter within its terms of reference;

ii) Have the resources, which are required to perform its duties;

iii) Have full and unrestricted access to any information pertaining to the Company and the Group;

iv) Have direct communication channels with external auditors, internal auditors and risk managers;

v ) B e a b l e t o o b t a i n i n d e p e n d e n t professional or other advice; and

vi) Have the authority to convene meetings with external auditors, internal auditors or both, in the absence of other directors and employees, at least twice a year.

4.0) Duties and Responsibilities

The following are the main duties and responsibilities of the Committee: -

i) To review with external auditors, their audit plan, scope and nature of the audit;

ii) To review with external auditors, their audit report and audit findings and Management’s response there to;

iii) To review the Group’s quarterly � nancial statements and reports, the Group’s and Company’s audited annual � nancial statements before submission to the Board of Directors for approval, focusing on: -

a) Any changes in accounting policies and practices;

b) Significant adjustments and issues arising from the audit;

c) Signi� cant and unusual events;

d) The going concern assumption; and

e) Compliance with applicable approved accounting standards, Bursa Malaysia and legal requirements.

iv) Review any related party transactions and conflict of interest situation that may arise within the Company or Group including any transaction, procedures or course of conduct that raises questions on Management’s integrity;

v) To consider the appointment of external auditors, their audit fee and any question of their resignation or dismissal;

vi) To recommend the nomination of a person or persons as external auditors;

vii) To establish an internal audit function and identify a Head of Internal Audit who reports directly to the Audit Committee. The Head of Internal Audit wil l be responsible for the regular review and/ or appraisal of the effectiveness of the risk management, internal control and governance processes within the Company and the Group;

To do the following, in relation to the internal audit functions: -

a) Review the adequacy of the scope, functions, resources and competency of the Internal Audit Division and that it has the necessary authority to carry out its duties; b) Review the internal audit programme, processes, results of the internal audit programme, processes or investigation undertaken and whether or not appropriate action is taken on the recommendation of the Internal Audit Division;

c) Review any appraisal or assessment of the performance of members of the internal audit function;

d) Approve the appointment or termination of senior staff members of the internal audit function; and

e) Take cognisance of resignations of senior internal audit sta� members and provide the resigning staff member an opportunity to submit his reasons for resigning.

viii)To review the significant risks as identi� ed by Group Risk Management Div is ion and their impact on the operations;

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ix) To ensure the identif ied r isks are continuously monitored and mitigated;

x) To ensure risk exposure of the Company are within parameters set by the Board;

xi) To review operational policies and processes of the Group and to formulate new ones where appropriate with a view to improve e� ciency, cost e� ectiveness and control over the resources of the Group; and

xii) To undertake any other activities as authorised by the Board of Directors.

5.0) Meetings

The Committee meets every quarter or more frequently as circumstances dictate.

The quorum for a meeting shall be two (2) members whereby one (1) of the members p re s e n t m u s t b e a n I n d e p e n d e n tNon-Executive Directors.

As part of its duty to foster communication, the Chief Executive O� cer, the ManagementTeam and the Chief Internal Auditor are invited to attend the meetings for the

purpose of briefing the Committee onthe activities involving their areas ofresponsibilities. The presence of theexternal auditors will be requested when required.

The Chairman of the Committee shallreport and update the Board of Directorson signif icant issues and concernsdiscussed during the Committee meetingsand where appropriate, make the necessaryrecommendations to the Board of Directors.The Chairman of the Committee shouldengage on continuous basis with senior management, such as Chairman, the ChiefExecutive Officer, the Chief FinancialController, the Chief Internal Auditor andthe external auditors in order to be keptinformed of matters a� ecting the Company and the Group.

The Chief Internal Auditor shall be the Secretary to the Committee.

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Analysis of Ordinary Shareholdings

Size of Shareholding No. of Shareholders % of Shareholders No. of Shares % of Issued Share Capital

Less than 100 131 0.94 3,368 0.00

100 - 1,000 7,428 53.05 7,311,503 1.04

1,001 - 10,000 4,940 35.28 21,537,736 3.08

10,001 - 100,000 1,319 9.42 41,404,545 5.91

100,001 – less than 5% of the shares 181 1.29 54,135,828 7.73

5% and above 2 0.02 575,778,547 82.24

Total 14,001 100.00 700,171,527 100.00

Substantial Shareholders (As at 1 March 2010)

Name of Shareholders No. of Ordinary Shares % of Ordinary Shares

1. Employees Provident Fund Board Kumpulan Wang Simpanan Pekerja 471,409,732 67.33

2. Permodalan Nasional Berhad 104,368,815 14.91

ANALYSIS OF SHAREHOLDINGSAs at 1 March 2010

Authorised Share Capital

1,800,000,000 Ordinary Shares of RM1.00 each

Issued and Fully Paid-up Capital

700,171,527 Ordinary Shares of RM1.00 each

Class of Shares

Ordinary Shares of RM1.00 each

Voting Rights

One Vote per Ordinary Share

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Thirty Largest Shareholders (As at 1 March 2010)

Name No. of Shares % of Shares1 Employees Provident Fund Board 469,909,732 67.11

2 Permodalan Nasional Berhad 104,368,815 14.91

3 Poseidon Sendirian Berhad 3,860,700 0.55

4 Philip A/L K.O Kunjappy 2,266,000 0.32

5 Kumpulan Wang Simpanan Pekerja 1,500,000 0.21

6 BHLB Trustee Berhad Exempt An For Phillip Capital Management Sdn Bhd (2) 1,139,300 0.16

7 Ong Tong Pheng @ Eng Ah Toon 1,120,100 0.16

8 Amsec Nominees (Tempatan) Sdn Bhd Pledged Securities Account For Lau Eng Guang 1,015,000 0.15

9 Mary Yeow 1,000,000 0.14

10 Gan Kim Kee @ Gan Leong Lian 920,000 0.13

11 RHB Capital Nominees (Tempatan) Sdn Bhd Pledged Securities Account For Noor Azman @ Noor Hizam B Mohd Nurdin (Ceb) 855,000 0.12

12 Jenny Wong 821,100 0.12

13 T.O.Lim Holdings Sdn Bhd 797,000 0.11

14 Ke-Zan Nominees (Asing) Sdn Bhd Kim Eng Securities Pte. Ltd. For Rising Flame Int’l Ltd 750,000 0.11

15 Philip A/L K.O Kunjappy 667,100 0.10

16 Mayban Nominees (Tempatan) Sdn Bhd DBS Bank For Deva Dassan Solomon (270504) 650,000 0.09

17 Citigroup Nominees (Asing) Sdn Bhd CBNY For Dimensional Emerging Markets Value Fund 630,100 0.09

18 Gerald John Richards 627,100 0.09

19 BHLB Trustee Berhad Exempt An For Employees Provident Fund (Pcm) 555,500 0.08

20 HSBC Nominees (Asing) Sdn Bhd Bny Brussels For Queensland Investment Corporation 535,700 0.08

21 Citigroup Nominees (Asing) Sdn Bhd CBNY For Dimensional Funds Plc 516,100 0.08

22 Public Nominees (Asing) Sdn Bhd Pledged Securities Account For Loh Cheok Leng (Klc/Tas) 510,000 0.07

23 Alliancegroup Nominees (Tempatan) Sdn Bhd Exempt An For Pheim Asset Management Sdn Bhd 500,000 0.07

24 JF Apex Nominees (Tempatan) Sdn Bhd Pledged Securities Account For Loo Khee Kwong @ Danny Loo (Margin) 500,000 0.07

25 Tee Kok Thye 500,000 0.07

26 Mayban Nominees (Tempatan) Sdn Bhd Pledged Securities Account For Tan Cheng Wha 497,600 0.07

27 Cartaban Nominees (Asing) Sdn Bhd SSBT Fund 2DCN For Emerging Markets Value Fund (John Hnck Fdsii) 482,500 0.07

28 CIMB Group Nominees (Tempatan) Sdn Bhd BHLB Trustee Berhad For Prusmall-Cap Fund (50139 Tr01) 480,000 0.07

29 Cartaban Nominees (Asing) Sdn Bhd Union Bank For Acadian Emerging Markets Portfolio 469,900 0.07

30 Onn Kok Puay (Weng Guopei) 452,900 0.07

Total Shareholding of the Thirty Largest Shareholders 598,897,247 85.54

ANALYSIS OF SHAREHOLDINGS (cont’d.)

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SCHEDULE OF PROPERTIES

No Location Tenure No. of Expiry Land Area Description Ages of Net Book Years Date (Sq. Metres) Building Value (Years) (RM’000)

1 Lot 353, PW 7164, Leasehold 99 29.08.2074 7,048.10 Hotel 12 62,565 Kawasan Bandar VIII (The Legacy District of Melaka Tengah. Melaka)

2 PTB 19196-19199 Bandar Yahya, Leasehold 99 08.03.2091 92,181.74 Vacant Land Nil 61,000 Awal, Johor Bahru, District of Johor, Bahru, Johor. (Gadini Sdn Bhd)

3 Lot 141 (No. 13/15) Leboh Ampang, Freehold Nil Nil 265.79 O� ce 52 370 Kuala Lumpur. Building Lot 104, 105,106, 115 & 118, Freehold Nil Nil 635.00 O� ce 10 22,494 Section 12, Leboh Ampang, Building Town of Kuala Lumpur, Wilayah Persekutuan.

4 P.T 27758 / HS(D) 93832, Freehold Nil Nil 57,363.13 Vacant Land Nil 31,999 P.T 27759 / HS(D) 93833, P.T 29301 / HS(D) 95375, Mukim of Sg Buloh, District of Petaling.

5 Lot PT 47, Pekan Tanjung Kling, Freehold Nil Nil 83,160.00 Vacant Land Nil 19,800 Section 11, District of Melaka Tengah. 6 P.T 86, P.T 87, P.T 88, P.T. 89, Leasehold 99 17.10.2099 38,267.00 Vacant Land Nil 17,245 Bandar Bukit Baru, Section IV, District of Melaka Tengah.

7 No. 48, Jalan Dungun, Freehold Nil Nil 1,595.28 O� ce 24 16,386 Damansara Heights, Building Kuala Lumpur.

8 No. 119, Jalan Macalister, Freehold Nil Nil 4,486.51 Heritage 100 11,472 Pulau Pinang. Bungalow

9 Lot 2947 / GM 296, Freehold Nil Nil 47,848.81 Vacant Land Nil 8,197 Lot 2948 / Geran 12622, Mukim of Durian Tunggal, District of Alor Gajah, Melaka. (MDSB)

10 Lot 9, PN 5124, Kawasan Bandar XL, Leasehold 99 05.02.2085 12,790.00 Vacant Land Nil 6,000 Melaka Tengah, Melaka.

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BRANCH NETWORK

Branch Address

NORTHERNKangarLot G.05, Podium Block, Bangunan KWSP,Jalan Seruling, 01000 Kangar, PerlisTel : 04-976 6400Fax : 04-977 4141

Alor Setar1578, Jalan Kota, 05000 Alor SetarKedah Darul AmanTel : 04-731 4655Fax : 04-731 7996

Sungai Petani114, Jalan Pengkalan, Taman Pekan Baru08000 Sungai Petani, Kedah Darul AmanTel : 04-422 9302Fax : 04-421 2046

KulimNo. 26, Jalan Raya, 09000 KulimKedah Darul AmanTel : 04-495 1400Fax : 04-490 4400

Penang119, Jalan Macalister,10400 GeorgetownPulau PinangTel : 04-226 6275Fax : 04-228 6275

Butterworth2783, Jalan Chain Ferry,Taman Inderawasih13600 Prai, PenangTel : 04-398 0145Fax : 04-398 0898

Ipoh45, Persiaran Greenhill, 30450 Ipoh, PerakTel : 05-254 5659Fax : 05-254 4748

TaipingNo. 82, Jalan Barrack, 34000 Taiping, PerakTel : 05-807 4000 Fax : 05-804 1444

Sitiawan Ground & 1st Floor, No. 35,Persiaran PM3/2Pusat Bandar Sri Manjung Seksyen 332040 ManjungPerak Darul RidzuanTel : 05-688 2700Fax : 05-688 2703

CENTRAL

Leboh AmpangBangunan MBSB, Pusat Bandar13/15 Leboh Ampang50100 Kuala LumpurTel : 03-2031 9599Fax : 03-2031 9526

Damansara Ground Floor, Wisma MBSB48, Jalan DungunDamansara Heights50490 Kuala LumpurTel : 03-2095 4044Fax : 03-2095 4022

Cheras185, Jalan SarjanaTaman Connaught56000 Cheras, Kuala LumpurTel : 03-9132 2955Fax : 03-9132 2954

Petaling Jaya3, Jalan 52/16, 46200 Petaling Jaya, SelangorTel : 03-7956 9200Fax : 03-7956 9627

Klang74, Jalan Kapar, 41400 Klang, SelangorTel : 03-3342 6822Fax : 03-3341 3611

Selayang95, Jalan 2/3A, Pusat Bandar Utara68100 Batu Caves, SelangorTel : 03-6136 8682Fax : 03-6136 8679

Bandar Baru Bangi195 & 195A, GF & 1st FloorJalan Seksyen 8/1, Seksyen 8,43650 Bandar Baru Bangi, SelangorTel : 03-8925 7584Fax : 03-8925 7708

SOUTHERNSerembanS-1, Kompleks NegeriJalan Dato’ Bandar Tunggal70000 Negeri SembilanTel : 06-763 8455Fax : 06-763 0701

MelakaPlots 203 & 204, Projek Melaka Raya,Jalan Taman, O� Jalan Bandar Hilir75000 MelakaTel : 06-282 8255Fax : 06-284 7270

Muar13-3 &13-4, Ground FloorJalan Sisi, 84000 Muar, JohorTel : 06-953 2000Fax : 06-953 3200

Batu Pahat37-4, Jalan Rahmat83000 Batu Pahat, JohorTel : 07-431 6614Fax : 07-431 7382

Kluang6, Lot 9053, Jalan Haji Manan86000 Kluang, JohorTel : 07-771 7585Fax : 07-772 6572

TebrauNo.17&17-1, Jalan Mutiara Emas 9/3,Austin Boulevard, Taman Mount Austin,81100 Johor Bahru, Johor.Tel : 07-358 1700/1701/1702Fax : 07-358 1703

Johor Bahru1st & 2nd Floor, Bangunan KWSPJalan Dato’ Dalam, 80000 Johor Bahru JohorTel : 07-223 8977Fax : 07-224 0143

EAST COAST

Kuantan A157-A159, Sri DaganganJalan Tun Ismail25000 Kuantan, PahangTel : 09-515 7677Fax : 09-514 5060

Kuala Terengganu1A, Jalan Air Jernih20300 Kuala TerengganuTerengganu Darul ImanTel : 09-622 7844/7845Fax : 09-622 0744

KemamanNo. K-10723, Taman Chukai UtamaJalan Kubang Kurus, 24000 Kemaman, Terengganu Darul ImanTel : 09-858 9490Fax : 09-858 9291

EAST MALAYSIA

Kuching Ground Floor & 1st FloorTunku Muhammad, Al Idrus Building439, Jalan Kulas Utara 193400 Kuching, SarawakTel : 082-248 240Fax : 082-248 611

Miri1115, Ground Floor, Pelita Commercial Centre, 98000 Miri, SarawakTel : 085-424 400Fax : 085-424 141

Kota KinabaluGround Floor,11 & 12Block C, Lintas Jaya, Uptown Ship,88300 Kota Kinabalu, Sabah.Tel : 088-711501/717501Fax : 088-713503

SandakanLot 38, Block E, Bandar Utama Mile 690000 Sandakan, SabahTel : 089-223 400Fax : 089-223 544

TawauGround Floor, TB 4535Lot 60, Ba Zhong CommercialCentre, Jalan Tawau Lama,91000 Tawau, SabahTel : 089-755 400Fax : 089-749 400

BintuluGround Floor,Lot 4124 Jalan Tun Ahmad Zaid,Jalan Kambar Bidin, 97000 Bintulu, SarawakTel : 086-336 400Fax : 086-339 400

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FINANCIALSTATEMENTS

48 Directors’ Report

50 Statement by Directors

50 Statutory Declaration

51 Independent Auditors’ Report

52 Balance Sheets

53 Income Statements

54 Consolidated Statement of Changes in Equity

55 Statement of Changes in Equity

56 Cash Flow Statements

58 Notes to the Financial Statements

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Directors’ report

The directors have pleasure in presenting their report together with the audited � nancial statements of the Group and of the Company for the � nancial year ended 31 December 2009.

Principal activities

The principal activities of the Company are the granting of loans on the security of freehold and leasehold properties and provision of retail � nancing and related services. The principal activities of the subsidiaries are described in Note 12 to the � nancial statements.

There have been no signi� cant changes in the nature of the principal activities of the Company and its subsidiaries during the � nancial year.

Results

Net pro� t for the year

There were no material transfers to or from reserves or provisions during the � nancial year other than as disclosed in the statements of changes in equity.

In the opinion of the directors, the results of the operations of the Group and of the Company during the � nancial year were not substantially a� ected by any item, transaction or event of a material and unusual nature.

Dividends

The amount of dividends paid by the Company since the date of the last report were as follows:

In respect of the � nancial year ended 31 December 2008 as reported in the directors’ report of that year:

- First and � nal dividend of 3% less 25% taxation on 700,171,527 ordinary shares, declared on 30 April 2009, paid on 27 May 2009

At the forthcoming Annual General Meeting, a � rst and � nal dividend of 4.0% less 25% taxation (3.00 sen net per ordinary share) in respectof the � nancial year ended 31 December 2009, will be proposed for shareholders’ approval. Based on the issued and paid up sharecapital as at 31 December 2009 of 700,171,527 ordinary shares, the total dividend payable would amount to RM21,005,146. The� nancial statements for the current � nancial year do not re� ect this proposed dividend. Such dividend, if approved by the shareholders,will be accounted for in equity in the � nancial year ending 31 December 2010.

Directors

The directors of the Company in o� ce since the date of the last report and at the date of this report are:

YBhg Tan Sri Abdul Halim bin AliYBhg Datuk Abdullah bin Haji KuntomEncik Lau Tiang HuaTuan Syed Zaid bin Syed Ja� ar AlbarPuan Cindy Tan Ler ChinEncik Khalid bin Haji SufatEncik Aw Hong BooEncik Jasmy bin Ismail (appointed on 11 August 2009)

Directors’ bene� ts

Neither at the end of the � nancial year, nor at any time during that year, did there subsist any arrangement to which the Company or its subsidiaries was a party, whereby the directors might acquire bene� ts by means of the acquisition of shares in or debentures of the Company or any other body corporate.

DIRECTORS’ REPORT

Company RM’000

60,700

Group RM’000

57,203

RM’000

15,754

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Directors’ bene� ts (cont’d.)

Since the end of the previous � nancial year, no director has received or become entitled to receive a bene� t (other than bene� ts included in the aggregate amount of emoluments received or due and receivable by the directors as shown in Note 30 to the � nancial statements) by reason of a contract made by the Company or a related corporation with any director or with a � rm of which the director is a member,or with a company in which the director has a substantial � nancial interest.

Directors’ interests

None of the directors in o� ce at the end of the � nancial year had any interest in shares or options in the Company or its related corporations during the � nancial year.

Other statutory information

(a) Before the balance sheets and income statements of the Group and of the Company were made out, the directors took reasonable steps: (i) to ascertain that proper action had been taken in relation to the writing o� of bad debts and the making of provision for doubtful debts and satis� ed themselves that all known bad debts had been written o� and that adequate allowance had been made for doubtful debts; and (ii) to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.

(b) At the date of this report, the directors are not aware of any circumstances which would render: (i) the amount written o� for bad debts or the amount of the allowance for doubtful debts in the � nancial statements of the Group and of the Company inadequate to any substantial extent; and (ii) the values attributed to the current assets in the � nancial statements of the Group and of the Company misleading. (c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing methods of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or � nancial statements of the Group and of the Company which would render any amount stated in the � nancial statements misleading.

(e) As at the date of this report, there does not exist: (i) any charge on the assets of the Group or of the Company which has arisen since the end of the � nancial year which secures the liabilities of any other person; or (ii) any contingent liability of the Group or of the Company which has arisen since the end of the � nancial year other than those arising in the normal course of business of the Group and of the Company as disclosed in Note 37 to the � nancial statements.

(f ) In the opinion of the directors: (i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the � nancial year which will or may a� ect the ability of the Group or of the Company to meet their obligations as and when they fall due; and (ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the � nancial year and the date of this report which is likely to a� ect substantially the results of the operations of the Group or of the Company for the � nancial year in which this report is made.

Auditors

The auditors, Ernst & Young, have expressed their willingness to continue in o� ce.

Signed on behalf of the Board in accordance with a resolution of the directors.

Tan Sri Abdul Halim bin Ali Lau Tiang HuaChairman Director

Kuala Lumpur, Malaysia10 March 2010

DIRECTORS’ REPORT (cont’d.)

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We, Tan Sri Abdul Halim bin Ali and Lau Tiang Hua, being two of the directors of Malaysia Building Society Berhad, do hereby state that, in the opinion of the directors, the accompanying � nancial statements set out on pages 52 to 109 are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable Financial Reporting Standards in Malaysia so as to give a true and fair view of the � nancial position of the Group and of the Company as at 31 December 2009 and of the results and the cash � ows of the Group and of the Company for the year then ended.

Signed on behalf of the Board in accordance with a resolution of the directors.

Tan Sri Abdul Halim bin Ali Lau Tiang HuaChairman Director

Kuala Lumpur, Malaysia10 March 2010

STATEMENT BY DIRECTORSPursuant to Section 169(15) of the Companies Act, 1965

STATUTORY DECLARATIONPursuant to Section 169(16) of the Companies Act, 1965

I, Tang Yow Sai, being the o� cer primarily responsible for the � nancial management of Malaysia Building Society Berhad, do solemnly and sincerely declare that the accompanying � nancial statements set out on pages 52 to 109 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, l960.

Subscribed and solemnly declared bythe abovenamed Tang Yow Sai atKuala Lumpur in the FederalTerritory on 10 March 2010 Tang Yow Sai

Before me,

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Report on the � nancial statements

We have audited the � nancial statements of Malaysia Building Society Berhad, which comprise the balance sheets as at 31 December 2009 of the Group and of the Company, income statements, statements of changes in equity and cash � ow statements of the Group and ofthe Company for the year then ended, and a summary of signi� cant accounting policies and other explanatory notes, as set out on pages 52 to 109.

Directors’ responsibility for the � nancial statements

The directors of the Company are responsible for the preparation and fair presentation of these � nancial statements in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of � nancial statements that are free from materialmisstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimatesthat are reasonable in the circumstances.

Auditors’ responsibility

Our responsibility is to express an opinion on these � nancial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the � nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the � nancial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the � nancial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the � nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the e� ectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the � nancial statements.

We believe that the audit evidence we have obtained is su� cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the � nancial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the � nancial position of the Group and of the Company as at31 December 2009 and of their � nancial performance and cash � ows of the Group and of the Company for the year then ended.

Report on other legal and regulatory requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

(b) We have considered the � nancial statements and the auditors’ report of the subsidiary of which we have not acted as auditors, which is indicated in Note 12 to the � nancial statements.

(c) We are satis� ed that the � nancial statements of the subsidiaries that have been consolidated with the � nancial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated � nancial statements and we have received satisfactory information and explanations required by us for those purposes.

(d) The auditors’ reports on the accounts of the subsidiaries were not subject to any quali� cation and did not include any comment required to be made under Section 174(3) of the Act.

Other matters

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

Ernst & Young Gloria Goh Ewe GimAF: 0039 No. 1685/04/11(J)Chartered Accountants Chartered Accountant

Kuala Lumpur, Malaysia10 March 2010

INDEPENDENT AUDITORS’ REPORTTo The Members of Malaysia Building Society Berhad(Incorporated in Malaysia)

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BALANCE SHEETSAs At 31 December 2009

Assets

Cash and cash equivalentsTrade receivablesOther receivablesInventoriesLoans, advances and � nancingOther investmentsLoans to subsidiariesInvestments in subsidiariesInvestment propertiesProperty, plant and equipmentPrepaid land lease paymentsIntangible assetsDeferred tax assets

Total assets

Liabilities and shareholders’ equity

Bank borrowingsDeposits from customersOther borrowingsTrade payablesOther payablesProvision for taxation and zakatRecourse obligation on loans sold to Cagamas BerhadDeferred tax liabilities

Total liabilities

Share capitalShare premiumCapital reserveCapital redemption reserveAccumulated losses

Total equity

Total liabilities and shareholders’ equity

2008 RM’000 (Restated)

51,973 - 81,694 41,776 6,876,353 43,070 128,658 71,641 - 15,818 - 1,125 16,000 7,328,108

305,235 6,301,381 100,012 - 63,939 21,134 - -

6,791,701

700,172 497,169 17,838 12,486 (691,258)

536,407

7,328,108

Company 2009 RM’000

751,666 - 99,072 41,776 8,203,596 43,070 96,917 70,371 - 17,657 - 884 - 9,325,009

- 7,562,410 50,004 - 102,489 27,568 1,000,610 575

8,743,656

700,172 497,169 17,838 12,486 (646,312)

581,353

9,325,009

2008 RM’000 (Restated)

73,165 7,139 109,114 152,457 6,783,135 43,070 - - 2,330 113,855 10,116 1,188 16,000 7,311,569

305,235 6,301,381 100,012 4,509 50,931 21,183 - 17,203

6,800,454

700,172 497,169 17,838 12,486 (716,550)

511,115

7,311,569

Group 2009 RM’000

763,275 3,298 126,632 125,460 8,118,452 43,070 - - 1,473 111,628 9,951 911 - 9,304,150

- 7,562,410 50,004 4,658 88,581 27,619 1,000,610 17,704

8,751,586

700,172 497,169 17,838 12,486 (675,101)

552,564

9,304,150

Note

5 6 7 8 9 10 11 12 13 14 15 16 22

18 17 18 19 20

21 22

23

The accompanying notes form an integral part of the � nancial statements.

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INCOME STATEMENTSFor The Year Ended 31 December 2009

Revenue

Interest incomeInterest expense

Net interest incomeNet income from Islamic banking operations

Operating incomeOther income

Total incomeOther operating expenses

Operating pro� tAllowance for losses on loans, advances and � nancing

Pro� t before taxation and zakatTaxationZakat

Pro� t for the year

Basic earnings per share (sen)

Company

The accompanying notes form an integral part of the � nancial statements.

Group 2009 RM’000

537,959

312,957 (151,210)

161,747 68,537

230,284 74,414

304,698 (114,485)

190,213 (109,898)

80,315 (22,573) (539)

57,203

8.17

2008 RM’000

416,155

291,418 (188,464)

102,954 24,989

127,943 48,703

176,646 (94,890)

81,756 (27,713)

54,043 (21,191) (277)

32,575

6.71

2009 RM’000

490,751

304,428 (151,210)

153,218 68,537

221,755 33,846

255,601 (61,817)

193,784 (109,898)

83,886 (22,647) (539)

60,700

2008 RM’000

405,084

304,301 (188,464)

115,837 24,989

140,826 23,383

164,209 (64,749)

99,460 (35,560)

63,900 (22,712) (277)

40,911

Note

24

2526

42

27

28

31

32

33

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At 1 January 2008Net pro� t for the yearDividend (Note 34)Share options granted under ESOS recognised in income statementIssue of ordinary shares pursuant to ESOSTransfer of share option reserve to accumulated losses upon expiry of ESOSIssue of ordinary shares upon conversion of RCPS

At 31 December 2008Net pro� t for the yearDividend (Note 34)

At 31 December 2009

The accompanying notes form an integral part of the � nancial statements.

Total RM’000

479,145 32,575 (10,797)

650

9,542

-

-

511,115 57,203 (15,754)

552,564

Accumulated Losses RM’000

(738,417) 32,575 (10,797)

-

-

89

-

(716,550) 57,203 (15,754)

(675,101)

Capital Redemption Reserve - Redeemable Cumulative Preference Shares RM’000

12,486 - -

-

-

-

-

12,486 - -

12,486

Share Option Reserve RM’000

83 - -

650

(644)

(89)

-

- - -

-

Capital Reserve RM’000

17,838 - -

-

-

-

-

17,838 - -

17,838

Share Premium RM’000

661,053 - -

-

1,116

-

(165,000)

497,169 - -

497,169

Redeemable Convertible Preference Shares (“RCPS”) RM’000

165,000 - -

-

-

-

(165,000)

- - -

-

Ordinary Shares RM’000

361,102 - -

-

9,070

-

330,000

700,172 - -

700,172

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor The Year Ended 31 December 2009

Capital reserve arose out of the transfer of the reserves of Malaya Borneo Building Society Limited as at 29 February 1972 to theCompany on 1 March 1972 via a Scheme of Arrangement and is not distributable as cash dividends.

Capital redemption reserve arose out of the redemption of redeemable cumulative preference shares and is not distributable as cash dividends.

Group Non Distributable >>Share Capital> >

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At 1 January 2008Net pro� t for the yearDividend (Note 34)Share options granted under ESOS recognised in income statementIssue of ordinary shares pursuant to ESOSTransfer of share option reserve to accumulated losses upon expiry of ESOSIssue of ordinary shares upon conversion of RCPS

At 31 December 2008Net pro� t for the yearDividend (Note 34)

At 31 December 2009

Total RM’000

496,101 40,911 (10,797)

650

9,542

-

-

536,407 60,700 (15,754)

581,353

Accumulated Losses RM’000

(721,461) 40,911 (10,797)

-

-

89

-

(691,258) 60,700 (15,754)

(646,312)

Capital Redemption Reserve - Redeemable Cumulative Preference Shares RM’000

12,486 - -

-

-

-

-

12,486 - -

12,486

Share Option Reserve RM’000

83 - -

650

(644)

(89)

-

- - -

-

Capital Reserve RM’000

17,838 - -

-

-

-

-

17,838 - -

17,838

Share Premium RM’000

661,053 - -

-

1,116

-

(165,000)

497,169 - -

497,169

Redeemable Convertible Preference Shares (“RCPS”) RM’000

165,000 - -

-

-

-

(165,000)

- - -

-

Ordinary Shares RM’000

361,102 - -

-

9,070

-

330,000

700,172 - -

700,172

Capital reserve arose out of the transfer of the reserves of Malaya Borneo Building Society Limited as at 29 February 1972 to the Companyon 1 March 1972 via a Scheme of Arrangement and is not distributable as cash dividends.

Capital redemption reserve arose out of the redemption of redeemable cumulative preference shares and is not distributable as cash dividends.

The accompanying notes form an integral part of the � nancial statements.

STATEMENT OF CHANGES IN EQUITYFor The Year Ended 31 December 2009

Company Non Distributable >>Share Capital> >

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CASH FLOW STATEMENTSFor The Year Ended 31 December 2009

Cash � ows from operating activitiesPro� t before taxationAdjustments for: Depreciation - investment properties - property, plant and equipmentAmortisation - prepaid land lease payments - intangible assetsGain on disposal of property, plant and equipmentGain on disposal of investment propertiesGain on disposal of foreclosed propertiesGain on disposal of inventoriesImpairment loss on: - investments in subsidiaries - investment in unquoted shares - property, plant and equipmentAllowance for doubtful debts of: - amount due from/loans to subsidiaries - other receivables - trade receivablesAllowance for losses on loans and � nancing, net of reversalsInterest/income-in-suspense, net of recoveries and write o� sShare options granted under ESOS

Operating pro� t before working capital changes Increase in loans, advances and � nancing Decrease in inventories (Increase)/Decrease in receivables Increase in amount due to/(from) subsidiaries Decrease in bank borrowings Increase in deposits from customers Increase/(decrease) in payables Proceeds from disposal of foreclosed properties Cash used in operations Real property gains tax paid Tax paid Tax refund Zakat paid

Net cash used in operating activities

CompanyGroup 2009 RM’000

80,315

66 7,030

165 895 (1,608) (78) (65) (2,000)

- - -

- 18,110 1,531 109,898 394,054 -

608,313 (1,838,427) 28,997 (33,921) - (305,235) 1,261,029 37,614 283

(241,347) (1) (158) 19 (308)

(241,795)

2008 RM’000

54,043

88 6,920

165 588 - - (10,028) (225)

- 483 32

- 17,654 1,057 27,713 469,153 650

568,293 (1,238,563) 20,496 11,360 - (285,778) 913,603 263 -

(10,326) - (3,180) - -

(13,506)

2009 RM’000

83,886

- 1,570

- 859 (18) - (65) -

1,270 - -

(221) - - 109,898 421,486 -

618,665 (1,858,600) - (18,155) 778 (305,235) 1,261,029 38,807 283

(262,428) (1) (144) - (308)

(262,881)

2008 RM’000

63,900

- 1,740

- 552 - - (10,028) (225)

450 483 -

9,445 1,403 - 35,560 479,212 650

583,142 (1,249,707) 1,021 32,403 (10,384) (285,778) 913,603 (1,453) -

(17,153) - (3,162) - -

(20,315)

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The accompanying notes form an integral part of the � nancial statements.

CASH FLOW STATEMENTS (cont’d.)For The Year Ended 31 December 2009

Cash � ows from investing activitiesPurchase of property, plant and equipmentPurchase of intangible assetsProceeds from disposal of property, plant and equipmentProceeds from disposal of investment properties

Net cash used in investing activities

Cash � ows from � nancing activitiesRepayment of other borrowingsRecourse obligation on loans sold to Cagamas BerhadDividends paid - Redeemable Convertible Preference SharesDividends paid - ordinary sharesDecrease in loans to subsidiariesProceeds from issuance of ordinary shares

Net cash generated from/(used in) � nancing activities

Net increase/(decrease) in cash and cash equivalentsCash and cash equivalents at beginning of year

Cash and cash equivalents at end of year (Note 5)

CompanyGroup 2009 RM’000

(5,894) (618) 2,700 871

(2,941)

(50,008) 1,000,610 (15,756) - - -

934,846

690,110 73,165

763,275

2008 RM’000

(3,458) - - -

(3,458)

(50,007) (14,511) (6,600) (10,797) - 9,542

(72,373)

(89,337) 162,502

73,165

2009 RM’000

(3,412) (618) 43 -

(3,987)

(50,008) 1,000,610 (15,756) - 31,715 -

966,561

699,693 51,973

751,666

2008 RM’000

(2,695) - - - (2,695)

(50,007) (14,511) (6,600) (10,797) 1,554 9,542

(70,819)

(93,829) 145,802

51,973

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1. Corporate information The Company is a public limited liability company, incorporated under the Companies Act, 1965 and domiciled in Malaysia, and listed on the Main Market of Bursa Malaysia Securities Berhad. The registered o� ce of the Company is located at 11th Floor, Wisma MBSB, 48, Jalan Dungun, Damansara Heights, 50490 Kuala Lumpur.

The immediate and ultimate holding body of the Company is the Employees Provident Fund Board, a statutory body established in Malaysia.

The principal activities of the Company are the granting of loans on the security of freehold and leasehold properties and provision of retail � nancing and related services. The principal activities of the subsidiaries are described in Note 12 to the � nancial statements. There have been no signi� cant changes in the nature of the principal activities of the Company and its subsidiaries during the � nancial year.

The � nancial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 10 March 2010.

2. Summary of signi� cant accounting policies (a) Basis of preparation

The � nancial statements have been prepared in accordance with Financial Reporting Standards (“FRS”) and the Companies Act, 1965 in Malaysia. The accounting policies adopted by the Group and Company are consistent with those adopted in previous years.

The � nancial statements of the Group and of the Company have been prepared on a historical cost basis. The � nancial statements incorporate those activities relating to Islamic business operations which have been undertaken by the Group and by the Company. Islamic business refers generally to the acceptance of deposits and granting of � nancing under the principles of Syariah.

The � nancial statements are presented in Ringgit Malaysia (“RM”) and all values are rounded to the nearest thousand (RM’000) except when otherwise indicated.

(b) Subsidiaries and basis of consolidation

(i) Subsidiaries

Subsidiaries are entities over which the Group has the ability to control the � nancial and operating policies so as to obtain bene� ts from their activities. The existence and e� ect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity.

In the Company’s separate � nancial statements, investments in subsidiaries are stated at cost less impairment losses. On disposal of such investments, the di� erence between net disposal proceeds and their carrying amounts is included in pro� t or loss.

(ii) Basis of consolidation

The consolidated � nancial statements comprise the � nancial statements of the Company and all its subsidiaries as at the balance sheet date. The � nancial statements of the subsidiaries are prepared for the same reporting date as the Company.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. In preparing the consolidated � nancial statements, intragroup balances, transactions and unrealised gains or losses are eliminated in full. Uniform accounting policies are adopted in the consolidated � nancial statements for like transactions and events in similar circumstances.

Acquisitions of subsidiaries are accounted for using the purchase method. The purchase method of accounting involves allocating the cost of the acquisition to the fair value of the assets acquired and liabilities and contingent liabilities assumed at the date of acquisition. The cost of an acquisition is measured as the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the acquisition.

Any excess of the cost of acquisition over the Group’s interest in the net fair value of the identi� able assets, liabilities and contingent liabilities represents goodwill. Any excess of the Group’s interest in the net fair value of the identi� able assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in pro� t or loss. Minority interests represent the portion of pro� t or loss and net assets in subsidiaries not held by the Group. It is measured at the minorities’ share of the fair value of the subsidiaries’ identi� able assets and liabilities at the acquisition date and the minorities’ share of changes in the subsidiaries’ equity since then.

NOTES TO THE FINANCIAL STATEMENTS31 December 2009

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2. Summary of signi� cant accounting policies (cont’d.)

(c) Interest on loans, advances and � nancing

In respect of end � nancing, bridging, structured and term loans, interest receivable is computed at monthly rests. Interest debited to the loans account in any month is based on the balance at the end of the previous month, and on loans disbursed during the month, interest is computed from the day of disbursement to the end of the month in which it is made.

(d) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic bene� ts will � ow to the Group and the revenue can be reliably measured. The following speci� c recognition criteria must also be met before revenue is recognised:

(i) Interest income and pro� t from operations of Islamic business

Interest income is recognised in the income statement for all interest bearing assets on an accrual basis using the e� ective interest method.

Pro� t from the Islamic business operations is recognised on an accrual basis in accordance with the Principles of Syariah.

Where an account is classi� ed as non-performing, interest is suspended with retrospective adjustment made to the date of � rst default until it is realised on a cash basis. Customers’ accounts are deemed to be non-performing where repayments are in arrears for more than six (6) months from � rst day of default or after maturity date.

(ii) Sale of properties

Revenue from sale of completed properties is recognised upon transfer of signi� cant risks and rewards of ownership to the buyer.

(iii) Fee income

Loans arrangement fees and commissions and insurance fees are recognised as income at the time the underlying transactions are completed and there are no other contingencies associated with the fees.

Commitment fees are recognised as income based on time apportionment.

Income from hotel operations services is recognised as and when the services are rendered.

(iv) Other income

Revenue from rental of hotel rooms, sale of food and beverage, group tours and hotel arrangements, are recognised upon invoices being issued and services rendered.

Rental income from investment property is recognised on a straight line-basis over the term of the lease.

(e) Allowance for bad and doubtful debts

Speci� c allowances are made for bad and doubtful debts which have been individually reviewed and speci� cally identi� ed as bad and doubtful. In the case of loans advanced for joint venture developments where the actual moratorium period is six (6) months or more and where the collateral valued on an estimated realisable basis is lower than the principal amount outstanding, speci� c allowances equivalent to the de� cit are made.

In addition, a general allowance based on a percentage of loan receivable is also made to cover possible losses which are not speci� cally identi� ed.

An uncollectible loan or portion of a loan classi� ed as bad is written o� after taking into consideration the realisable value of collateral, if any, where in the judgement of the management, there is no prospect of recovery.

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

2. Summary of signi� cant accounting policies (cont’d.)

(f) Intangible assets

Intangible assets include the value of computer software licence of the Group and the Company. Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

The useful lives of intangible assets are assessed to be either � nite or inde� nite. Intangible assets with � nite lives are amortised on a straight-line basis over the estimated economic useful lives. The amortisation period and the amortisation method for an intangible asset with a � nite useful life are reviewed at least at each balance sheet date. Changes in the expected useful life or the expected pattern of consumption of future economic bene� ts embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assets with � nite lives is recognised in the income statement in the expense category consistent with the function of the intangible assets.

(i) Goodwill

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of business combination over the Group’s interest in the net fair value of the identi� able assets, liabilities and contingent liabilities. Following the initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but instead, it is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet.

(ii) Software licenses

The useful life of software licences is assessed to be � nite and is amortised on a straight-line basis over 5 years.

(g) Property, plant and equipment and depreciation

All items of property, plant and equipment are initially recorded at cost. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic bene� ts associated with the item will � ow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All repairs and maintenance are charged to the income statement during the period in which they are incurred.

Subsequent to initial recognition, property, plant and equipment except for freehold land are stated at cost less accumulated depreciation and any accumulated impairment losses.

Freehold land has an unlimited useful life and therefore is not depreciated.

Depreciation of other property, plant and equipment is provided for on a straight-line basis to write o� the cost of each asset to its residual value over the estimated useful life, at the following annual rates:

Buildings 2.5% Building renovation 20.0% Furniture and equipment 20.0% Motor vehicles 20.0% Data processing equipment 20.0%

The residual values, useful life and depreciation method are reviewed, and adjusted if appropriate, at each balance sheet date to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic bene� ts embodied in the items of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic bene� ts are expected from its use or disposal. The di� erence between the net disposal proceeds, if any and the net carrying amount is recognised in pro� t or loss.

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2. Summary of signi� cant accounting policies (cont’d.)

(h) Employee bene� ts

(i) Short term bene� ts

Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

(ii) De� ned contribution plans

De� ned contribution plans are post-employment bene� t plans which the Group pays � xed contributions into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold su� cient assets to pay all employee bene� ts relating to employee services in the current and preceding � nancial years. Such contributions are recognised as an expense in the pro� t or loss as incurred. As required by law, companies in Malaysia make contributions to the Employees Provident Fund (“EPF”).

(iii) Share-based compensation

The Malaysia Building Society Berhad’s Employee Share Option Scheme (“ESOS”), an equity-settled, share-based compensation plan, allows the Group’s employees (including executive directors) other than subsidiaries which are dormant, to acquire ordinary shares of the Company. The total fair value of share options granted to employees is recognised as an employee cost with a corresponding increase in the share option reserve within equity over the vesting period and taking into account the probability that the options will vest. The fair value of share options is measured at grant date, taking into account, if any, the market vesting conditions upon which the options were granted but excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable on vesting date.

At each balance sheet date, the Group revises its estimates of the number of options that are expected to become exercisable on vesting date. It recognises the impact of the revision of original estimates, if any, in the pro� t or loss, and a corresponding adjustment to equity over the remaining vesting period. The equity amount is recognised in the share option reserve until the option is exercised, upon which it will be transferred to share premium, or until the option expires, upon which it will be transferred directly to retained earnings.

(i) Investment properties

Investment properties are properties which are held either to earn rental income or for capital appreciation or for both. Such properties are stated at cost, less accumulated depreciation and impairment losses. The depreciation policy is in accordance with that for depreciable property, plant and equipment as described in Note 2(g).

Investment properties are derecognised when either they have been disposed o� or when the investment property is permanently withdrawn from use and no future economic bene� t is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in the income statement in the year in which they arise. (j) Inventories

Inventories of completed properties are stated at the lower of cost (determined on the speci� c identi� cation basis) and net realisable value. Costs include costs associated with the acquisition of land, direct costs and appropriate development overheads.

Inventories of land held for sale are stated at the lower of cost (determined on the speci� c identi� cation basis) and net realisable value. Costs include costs associated with the acquisition of land and direct costs.

Hotel inventories comprising food, beverage and hotel supplies are stated at the lower of cost (determined on the � rst-in, � rst-out basis) and net realisable value.

Net realisable value represents the estimated selling price less the estimated costs of completion and the estimated costs necessary to make the sale.

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

2. Summary of signi� cant accounting policies (cont’d.)

(k) Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that an out� ow of resources embodying economic bene� ts will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to re� ect the current best estimate. Where the e� ect of the time value of money is material, provisions are discounted using a current pre-tax rate that re� ects, where appropriate, the risks speci� c to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as � nance cost. (l) Liabilities

Deposits from customers, bank and � nancial institutions are stated at placement values. Other liabilities are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received.

(m) Income tax

Income tax on the pro� t or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable pro� t for the year and is measured using the tax rates that have been enacted at the balance sheet date.

Deferred tax is provided for, using the balance sheet method, on temporary di� erences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the � nancial statements. In principle, deferred tax liabilities are recognised for all taxable temporary di� erences and deferred tax assets are recognised for all deductible temporary di� erences, unused tax losses and unused tax credits to the extent that it is probable that taxable pro� t will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary di� erence arises from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, a� ects neither accounting pro� t nor taxable pro� t.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is recognised directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or negative goodwill.

(n) Cash and cash equivalents

For the purposes of the cash � ow statements, cash and cash equivalents include cash on hand and at banks, deposits at call and short term highly liquid investments which have an insigni� cant risk of changes in value, net of outstanding bank overdrafts.

(o) Impairment of non-� nancial assets

The carrying amounts of assets, other than investment properties, inventories and deferred tax assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated to determine the amount of impairment loss.

For the purpose of impairment testing of these assets, recoverable amount is determined on an individual basis. An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash � ows are discounted to their present value using a pre-tax discount rate that re� ects current market assessments of the time value of money and the risks speci� c to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

An impairment loss is recognised in pro� t and loss in the period in which it arises.

An impairment loss for an asset is reversed if, and only if, there has been a change in the estimates used to determine the asset’s receiverable amount since the last impairment loss was recognised. The carrying amount of an asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset is recognised in pro� t or loss.

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2. Summary of signi� cant accounting policies (cont’d.) (p) Other investments

Investments other than investments in subsidiaries are stated at cost less impairment losses.

On disposal of an investment, the di� erence between net disposal proceeds and its carrying amount is recognised in the income statement. (q) Trade and other receivables

Trade and other receivables are carried at anticipated realisable values. Bad debts are written o� when identi� ed. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date.

(r) Trade payables

Trade payables are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received.

(s) Interest-bearing borrowings

Interest-bearing borrowings are recorded at the amount of proceeds received, net of transaction costs.

(t) Redeemable Convertible Preference Shares

Redeemable Convertible Preference Shares (“RCPS”) are regarded as compound instruments, consisting of a liability component and an equity component. At the date of issue, the fair value of the liability component is estimated based on the present value of the dividend obligations.

The di� erence between the proceeds of issue of the RCPS and the fair value assigned to the liability component, representing the conversion option, is included in equity.

The liability component is subsequently stated at cost adjusted for the present value of the dividend obligation when the dividend is paid, until extinguished on conversion or redemption whilst the value of the equity component is not adjusted in subsequent periods. (u) Equity instruments

Ordinary shares are classi� ed as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared.

The transaction costs of an equity transaction are accounted for as a 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.

(v) Financial instruments

Financial instruments are recognised in the balance sheet when the Group has become a party to the contractual provisions of the instrument. The accounting policies on recognition and measurement of these items are disclosed in their respective accounting policies.

Financial instruments are classi� ed as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends and gains and losses relating to a � nancial instrument classi� ed as a liability, are reported as expense or income. Distributions to holders of � nancial instruments classi� ed as equity are recognised directly in equity. Financial instruments are o� set when the Group has a legally enforceable right to o� set and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

2. Summary of signi� cant accounting policies (cont’d.)

(w) Leases

(i) Classi� cation

A lease is recognised as a � nance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership. Lease of land and buildings are classi� ed as operating or � nance lease in the same way as leases of other assets and the land and buildings elements of a lease of land and buildings are considered separately for the purpose of lease classi� cation. All leases that do not transfer substantially all the risks and rewards are classi� ed as operating lease, with the following exceptions:

- Property held under operating lease that would otherwise meet the de� nition of an investment property is classi� ed as an investment property on a property-by property basis and, if classi� ed as investment property, is accounted for as if held under a � nance lease; and

- Land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a � nance lease, unless the building is also clearly held under an operating lease.

(ii) Operating lease - The Company as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. The leases range from 73 years to 999 years. The aggregate bene� t of incentives as provided by the lessor is recognised as a reduction of rental expense over the lease term on straight-line basis.

In the case of a lease of land and buildings, the minimum lease payments or the upfront payments made are allocated, whenever necessary, between the land and the buildings elements in proportion to the relative fair values for leasehold interests in the land element and building element of the lease at the inception of the lease. The up-front payment represents prepaid lease payments and are amortised on a straight-line basis over the lease term.

(iii) Operating lease - The Company as lessor

Assets leased out under operating leases are presented on the balance sheets according to the nature of the assets. Rental income from operating lease is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased and recognised on a straight-line basis over the lease term.

3. Standards and Interpretations issued but not yet e� ective

At the date of authorisation of these � nancial statements, the following new FRS, Amendments to FRS and Interpretations were issued but not yet e� ective and have not been applied by the Company: E� ective for � nancial FRS, Amendment to FRS and Interpretations periods beginning on or after

FRS 1: First-time Adoption of Financial Reporting Standards 1 July 2010 FRS 3: Business Combinations (Revised) 1 July 2010 FRS 4: Insurance Contracts 1 January 2010 FRS 7: Financial Instruments: Disclosures 1 January 2010 FRS 8: Operating Segments 1 July 2009 FRS 101: Presentation of Financial Statements (Revised) 1 January 2010 FRS 123: Borrowing Costs 1 January 2010 FRS 127: Consolidated and Separate Financial Statements (Amended) 1 July 2010 FRS 139 Financial Instruments: Recognition and Measurement 1 January 2010 IC Interpretation 9: Reassessment of Embedded Derivatives 1 January 2010 IC Interpretation 10: Interim Financial Reporting and Impairment 1 January 2010 IC Interpretation 11: FRS 2 - Group Treasury Share Transactions 1 January 2010 IC Interpretation 12 Service Concession Arrangements 1 July 2010 IC Interpretation 13: Customer Loyalty Programmes 1 January 2010 IC Interpretation 14: FRS 119 - The Limit on a De� ned Bene� t Asset, Minimum Funding Requirements and their Interaction 1 January 2010 IC Interpretation 15: Agreements for the Construction of Real Estate 1 July 2010 IC Interpretation 16: Hedges of a Net Investment in a Foreign Operation 1 July 2010

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

3. Standards and Interpretations issued but not yet e� ective (cont’d.) E� ective for � nancial FRS, Amendment to FRS and Interpretations periods beginning on or after

IC Interpretation 17: Distributions of Non-cash Assets to Owners 1 July 2010 Amendments to FRS 1: First-time Adoption of Financial Reporting Standards and FRS 127 Consolidated and Separate Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate 1 January 2010 Amendments to FRS 2 Share-based Payment: Vesting Conditions and Cancellations 1 January 2010 Amendments to FRS 2: Share-based Payment 1 July 2010 Amendments to FRS 5: Non-current Assets Held for Sale and Discontinued Operations 1 July 2010 Amendments to FRS 132: Financial Instruments: Presentation 1 January 2010 Amendments to FRS 138: Intangible Assets 1 July 2010 Amendments to FRS 139 Financial Instruments: Recognition and Measurement 1 July 2010 Amendments to FRS 139 Financial Instruments: Recognition and Measurement, FRS 7 Financial Instruments: Disclosures and IC Interpretation 9: Reassessment of Embedded Derivatives 1 January 2010 Amendments to IC Interpretation 9: Reassessment of Embedded Derivatives 1 July 2010 Amendments to FRSs ‘Improvements to FRSs (2009)’ 1 January 2010

Management plan to apply the relevant Standards, Amendments and Interpretations when they become e� ective in the respective � nancial periods. The above and new revised FRS, Amendments to FRS and Interpretations are not expected to have a signi� cant impact on the Group and the Company’s accounting policies upon their initial adoption, except for FRS 139, FRS 7 and Amendments to FRS 139, FRS 7 and IC Interpretations 9. The Group and the Company are exempted from disclosing the possible impact, if any to the � nancial statements upon the initial application of FRS 139, FRS 7 and Amendments to FRS 139, FRS 7 and IC Interpretations 9.

4. Signi� cant accounting estimates and judgements

(a) Critical judgements made in applying accounting policies

The following are the judgements made by management in the process of applying the Group’s accounting policies that have the most signi� cant e� ect on the amount recognised in the � nancial statements.

(i) Classi� cation between investment properties and property, plant and equipment

The Group has developed certain criteria based on FRS 140 in making judgement whether a property quali� es as an investment property. Investment property is a property held to earn rentals or for capital appreciation or both.

Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the provision of services or for administration purposes. If these properties could be sold separately (or leased out separately under a � nance lease), the Group would account for the portion separately. If the portions could not be sold separately, the property is an investment property only if an insigni� cant portion is held for use in the provision of services or for administration purposes. Judgement is made on an individual property basis to determine whether ancillary services are so signi� cant that a property does not qualify as investment property.

(b) Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a signi� cant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next � nancial year are discussed below. (i) Impairment of the loans and receivables

The assessment for impairment performed by the management on non-performing loans is based primarily on conditions prevailing and information available about the counterparty’s � nancial position, fair value of the underlying collaterals and future recoverable cash � ows in workout/restructuring arrangements.

Inherently, this assessment is subject to a signi� cant degree of judgement and is heavily dependent on the estimates of collateral values and recoverable cash � ows. The carrying value of non-performing loans net of speci� c provisions and interest/income-in-suspense as at 31 December 2009 for the Group and the Company was RM1,534,608,000 (2008: RM1,531,912,000) and RM1,619,426,000 (2008: RM1,665,769,000) respectively.

MB

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066

4. Signi� cant accounting estimates and judgements (cont’d.)

(b) Key sources of estimation uncertainty (cont’d.)

(ii) Deferred tax assets

Deferred tax assets are recognised on unused tax losses and unused tax credits to the extent that it is probable that taxable pro� t will be available against which the losses and tax credits can be utilised. Signi� cant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable pro� ts together with future tax planning strategies. The deferred tax assets of the Group and of the Company was RMNil. (2008: RM16,000,000).

5. Cash and cash equivalents

Cash on hand Cash at banks Deposits with licensed banks

Included in cash at banks of the Group is an amount of RM3,851,000 (2008: RM3,760,000) held pursuant to Section 7A of the Housing Development (Control and Licensing) Act, 1966 and therefore restricted from use in other operations.

The weighted average e� ective interest rate of deposits with licensed banks at the balance sheet date was 2.19% (2008: 3.25%) per annum.

The average maturity of deposits with licensed banks as at the end of the � nancial year was 151 days (2008: 314 days).

6. Trade receivables

Trade receivables Less: Allowance for doubtful debts

Included in trade receivables are retention sums on contracts amounting to RM59,000 (2008: RM60,000).

The Group’s normal trade credit terms range from 7 to 30 (2008: 7 to 30) days. Other credit terms are assessed and approved on a case-by-case basis.

The Group has no signi� cant concentration of credit risk within trade receivables that may arise from exposures to a single debtor or to groups of debtors.

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

CompanyGroup2009

RM’000

3,99222,380

736,903

763,275

2008RM’000

3,59956,45113,115

73,165

2009RM’000

3,97110,898

736,797

751,666

2008RM’000

3,56736,09512,311

51,973

Group 2009 RM’000

30,982 (27,684)

3,298

2008 RM’000

33,292 (26,153)

7,139

MB

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7. Other receivables

Unsecured advances in respect of certain projects Loan commitment fees Amount due from subsidiaries Interest to be waived under a restructuring scheme Foreclosed properties Sundry receivables

Less: Allowance for doubtful debts

The unsecured advances in respect of certain projects relate to monies advanced and interest charged on these advances by a subsidiary of the Company.

The amounts due from subsidiaries are unsecured, bear interest of 3.66% (2008: 3.88%) per annum and have no � xed terms of repayment.

The amount of interest to be waived under a restructuring scheme of RM40,578,000 (2008: RM40,578,000) relates to interest receivable from a third party borrower. This amount has been fully provided for.

Included in sundry receivables of the Group and of the Company are rental deposits paid to ultimate holding body amounting to RM104,000 (2008: RM98,000).

The Group has no signi� cant concentration of credit risk within other receivables that may arise from exposures to a single debtor or to groups of debtors other than the unsecured advances in respect of certain projects and interest to be waived under a restructuring scheme.

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

CompanyGroup 2009 RM’000

180,666 8,740 - 40,578 38,385 41,089

309,458

(182,826)

126,632

2008 RM’000

162,733 8,740 - 40,578 31,645 34,700

278,396

(169,282)

109,114

2009 RM’000

- 8,740 66,046 40,578 38,385 44,750

198,499

(99,427)

99,072

2008 RM’000

- 8,740 71,097 40,578 31,645 32,963

185,023

(103,329)

81,694

MB

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068

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

8. Inventories

At cost: Hotel inventories

At net realisable value: Inventories of completed properties Land held for sale

Total inventories

The cost of inventories recognised as an expense was RM26,987,000 (2008: RM13,058,000).

Land held for sale relates to land previously acquired for development which is now intended for sale.

Included in the inventories are land previously acquired for development with the following carrying amounts:

Title registered under the name of a subsidiary Pending transfer of title from a third party

Group2009

RM’000

160

3,000122,300

125,300

125,460

2008RM’000

169

29,988122,300

152,288

152,457

2009RM’000

-

-41,776

41,776

41,776

2008RM’000

-

-41,776

41,776

41,776

Company

Group and Company2009

RM’000

8,200680

8,880

2008RM’000

8,200680

8,880

MB

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069

9. Loans, advances and � nancing

End � nance: Normal housing programme Low cost housing programme Islamic: Property Personal Bridging, structured and term loans Sta� loans

Gross loans, advances and � nancing Interest/income-in-suspense Allowance for bad and doubtful debts and � nancing: - General - Speci� c

Net loans, advances and � nancing

(i) Movements in non-performing loans, advances and � nancing (including interest and income receivable) are as follows:

Non-performing loans (“NPL”) At beginning of year Classi� ed as non-performing during the year Reclassi� ed as performing during the year Amount recovered Amount written o� At end of year Interest/income-in-suspense Speci� c allowance Net non-performing loans, advances and � nancing Ratio of net non-performing loans, advances and � nancing to gross loans, advances and � nancing less speci� c allowance and interest income-in-suspense

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

Group

Group

2009 RM’000

4,022,632 20,329

1,603,197 1,363,160 4,782,810 434

11,792,562 (2,966,966)

(83,224) (623,920)

8,118,452

2008 RM’000 (Restated)

3,985,811 19,688

1,134,338 341,775 4,896,649 579

10,378,840 (2,978,111)

(69,460)(548,134)

6,783,135

2009 RM’000

4,022,961 20,329

1,603,197 1,363,160 5,069,507 434

12,079,588 (3,157,777)

(83,224) (634,991)

8,203,596

2008 RM’000

3,986,423 19,688

1,134,338 341,775 5,159,709 579

10,642,512 (3,141,494)

(69,460) (555,205)

6,876,353

Company

Company 2009 RM’000

4,998,919 1,309,627 (552,259) (211,322) (419,471)

5,125,494 (2,966,966) (623,920)

1,534,608

19%

2008 RM’000 (Restated)

4,689,530 1,211,751 (523,887) (159,205) (193,762)

5,024,427 (2,944,381) (548,134)

1,531,912

23%

2009 RM’000

5,287,488 1,307,758 (552,259) (211,322) (419,471)

5,412,194 (3,157,777) (634,991)

1,619,426

20%

2008 RM’000

4,972,010 1,217,840 (523,887) (159,205) (219,270)

5,287,488 (3,107,764) (513,955)

1,665,769

24%

MB

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070

9. Loans, advances and � nancing (cont’d.)

(ii) Movements in allowance for bad and doubtful debts and interest/income-in-suspense are as follows:

General allowance At beginning of year Allowance made during the year (Note 31)

At end of year

As % of gross loans, advances and � nancing less speci� c allowance and interest/income-in-suspense

Speci� c allowance At beginning of year Allowance made during the year (Note 31) Amount recovered (Note 31) Amount written o�

At end of year

Interest/income-in-suspense

At beginning of year Interest suspended during the year Amount recovered Amount written o� At end of year

The Group has no signi� cant concentration of credit risk within loans, advances and � nancing that may arise from exposures to a single debtor or to groups of debtors.

Included in bridging, structured and term loans granted by the Company in respect of joint venture projects are the following non-performing amounts:

Loans to subsidiaries Loans to joint venture partners

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

Group 2009 RM’000

548,134 126,728 (32,511) (18,431)

623,920

2,978,111 465,606 (71,549) (405,202)

2,966,966

2008 RM’000 (Restated)

556,443 69,689 (52,090) (25,908)

548,134

2,772,766 515,284 (46,052) (263,887)

2,978,111

2009 RM’000

555,205 126,728 (32,511) (14,431)

634,991

3,141,494 493,034 (71,549) (405,202)

3,157,777

2008 RM’000

581,175 77,536 (52,090) (51,416)

555,205

2,926,169 525,264 (46,052) (263,887)

3,141,494

Company

Group and Company

CompanyGroup

2009RM’000

69,46013,764

83,224

1%

2009RM’000

97,284151,063

248,347

2009RM’000

-151,063

151,063

2008RM’000

62,0427,418

69,460

1%

2008RM’000

96,773185,258

282,031

2008RM’000

-185,258

185,258

MB

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071

10. Other investments

Unquoted Redeemable Convertible Secured Loans Stock, (“RCSLS”), at nominal value

11. Loans to subsidiaries

Secured Unsecured

Less: Allowance for doubtful debts

The loans to subsidiaries have no � xed terms of repayment.

The secured loans are secured against landed properties.

The weighted average e� ective annual interest rates of loans to subsidiaries at the balance sheet date was 3.36% (2008: 3.88%) per annum.

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

Group and Company

Company

2009 RM’000

43,070

2008 RM’000

43,070

2009 RM’000

37,164 129,526

166,690 (69,773)

96,917

2008 RM’000

39,117 178,710

217,827 (89,169)

128,658

MB

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072

12. Investments in subsidiaries

Unquoted shares at cost Less: Accumulated impairment losses

Details of the subsidiaries are as follows: E� ective Interest Held (%) Name of Subsidiaries 2009 2008 Principal Activities

MBSB Properties Sdn. Bhd. 100 100 Letting of real property

MBSB Development Sdn. Bhd. 100 100 Property development

Prudent Legacy Sdn. Bhd. 92 92 Property development

Sigmaprise Sdn. Bhd. 100 100 Hotel operations

Gadini Sdn. Bhd. 100 100 Property development

Ganesha Sdn. Bhd. 100 100 Property development

Springtide Sdn. Bhd. 100 100 Property development

Trimonds Sdn. Bhd. 100 100 Investment holding

MBSB Project Management Sdn. Bhd. 100 100 Ceased operations

Supreme Design Sdn. Bhd. 100 100 Under member’s voluntary winding

De� nite Pure Sdn. Bhd. 100 100 Dormant

Malaya Borneo Building Society Limited (“MBBS”) * 100 100 Dormant

MBSB Land Sdn. Bhd. 100 100 Under member’s voluntary winding

Longterm Pride Sdn. Bhd. 100 100 Under member’s voluntary winding

Farawide Sdn. Bhd. 100 100 Hotel operations services

Maxroute Sdn. Bhd. 100 100 Under member’s voluntary winding

Raynergy Sdn. Bhd. 100 100 Dormant

Idaman Usahamas Sdn. Bhd. 100 100 Dormant

* Audited by a � rm of auditors other than Ernst & Young.

All the above subsidiaries are incorporated in Malaysia except for MBBS which is incorporated in Singapore.

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

Company 2009 RM’000

210,805 (140,434)

70,371

2008 RM’000

210,805 (139,164)

71,641

MB

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13. Investment in properties

At 1 January Less: Depreciation (Note 28) Less: Disposals

At 31 December

The fair value of the investment properties as at 31 December 2009 amounted to approximately RM2,664,000 (2008: RM3,800,000) based on a valuation performed by independent valuer.

Included in investment properties of the Group are the following net book value of properties which are:

Pending subdivision of titles Charged to the ultimate holding body for loans which had been fully settled

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

Group 2009 RM’000

2,330 (66) (791)

1,473

2008 RM’000

2,418 (88) -

2,330

Group 2009 RM’000

531 401

2008 RM’000

1,361 406

MB

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074

14. Property, plant and equipment

Group

Cost At 1 January 2009 Additions Disposals

At 31 December 2009

Accumulated depreciation and impairment losses At 1 January 2009: Accumulated depreciation Accumulated impairment losses

Depreciation charge for the year Disposals

At 31 December 2009

Analysed as: Accumulated depreciation Accumulated impairment losses

Net book value At 31 December 2009

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

Total RM’000

240,316 5,894 (1,505)

244,705

85,297 41,164

126,461

7,030 (414)

133,077

91,913 41,164

133,077

111,628

Data processing equipment RM’000

12,266 491 -

12,757

10,834 -

10,834

473 -

11,307

11,307 -

11,307

1,450

Motor vehicles RM’000

714 212 (142)

784

547 -

547

116 (142)

521

521 -

521

263

Furniture and equipment RM’000

20,047 1,209 (4)

21,252

18,425 -

18,425

808 (1)

19,232

19,232 -

19,232

2,020

Building Renovation RM’000

12,457 3,982 -

16,439

9,570 -

9,570

1,113 -

10,683

10,683 -

10,683

5,756

Buildings RM’000

167,814 - (753)

167,061

45,921 40,793

86,714

4,520 (271)

90,963

48,565 40,793

89,358

76,098

Freehold land RM’000

27,018 - (606)

26,412

- 371

371

- -

371

- 371

371

26,041

MB

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075

14. Property, plant and equipment (cont’d.)

Company

Cost At 1 January 2009 Additions Disposals

At 31 December 2009

Accumulated depreciation and impairment losses At 1 January 2009: Accumulated depreciation Accumulated impairment losses

Depreciation charge for the year Disposals

At 31 December 2009

Analysed as: Accumulated depreciation Accumulated impairment losses

Net book value At 31 December 2009

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

Total RM’000

41,964 3,412 (43)

45,333

19,640 6,506

26,146

1,570(40)

27,676

21,209 6,506

27,715

17,657

Data processing equipment RM’000

11,317 489 -

11,806

10,214 -

10,214

411 -

10,625

10,625 -

10,625

1,181

Motor vehicles RM’000

495 212 (39)

668

325 -

325

93 (39)

379

418 -

418

289

Furniture and equipment RM’000

6,665 829 (4)

7,490

5,636 -

5,636

323 (1)

5,958

5,958 -

5,958

1,532

Building Renovation RM’000

4,357 1,882 -

6,239

2,781 -

2,781

530 -

3,311

3,311 -

3,311

2,928

Buildings RM’000

8,542 - -

8,542

684 6,506

7,190

213 -

7,403

897 6,506

7,403

1,139

Freehold land RM’000

10,588 - -

10,588

- -

-

- -

-

- -

-

10,588

MB

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076

14. Property, plant and equipment (cont’d.)

Group

Cost At 1 January 2008 Additions Disposals

At 31 December 2008 (restated)

Accumulated depreciation and impairment losses At 1 January 2008: Accumulated depreciation Accumulated impairment losses

Depreciation charge for the year Impairment loss Disposals

At 31 December 2008 (restated)

Analysed as: Accumulated depreciation Accumulated impairment losses

Net book value At 31 December 2008 (restated)

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

Total RM’000

236,936 3,458 (78)

240,316

78,390 41,132

119,522

6,920 32 (13)

126,461

85,297 41,132

126,429

113,855

Data processing equipment RM’000

11,679 615 (28)

12,266

9,794 -

9,794

1,040 - - 10,834

10,834 -

10,834

1,432

Motor vehicles RM’000

714 - -

714

434 -

434

113 - -

547

547 -

547

167

Furniture and equipment RM’000

18,904 1,193 (50)

20,047

17,827 -

17,827

611 - (13)

18,425

18,425 -

18,425

1,622

Building Renovation RM’000

10,807 1,650 -

12,457

8,944 -

8,944

626 - -

9,570

9,570 -

9,570

2,887

Buildings RM’000

167,814 - -

167,814

41,391 40,761

82,152

4,530 32 -

86,714

45,921 40,761

86,682

81,100

Freehold land RM’000

27,018 - -

27,018

- 371

371

- - -

371

- 371

371

26,647

MB

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077

14. Property, plant and equipment (cont’d.)

Company

Cost At 1 January 2008 Additions Disposals

At 31 December 2008 (restated)

Accumulated depreciation and impairment losses At 1 January 2008: Accumulated depreciation Accumulated impairment losses

Depreciation charge for the year Disposals

At 31 December 2008 (restated)

Analysed as: Accumulated depreciation Accumulated impairment losses

Net book value At 31 December 2008 (restated)

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

Total RM’000

39,310 2,695 (41)

41,964

17,913 6,506

24,419

1,740 (13)

26,146

19,640 6,506

26,146

15,818

Data processing equipment RM’000

10,730 615 (28)

11,317

9,236 -

9,236

978 - 10,214

10,214 -

10,214

1,103

Motor vehicles RM’000

495 - -

495

235 -

235

90 -

325

325 -

325

170

Furniture and equipment RM’000

5,977 701 (13)

6,665

5,455 -

5,455

194 (13)

5,636

5,636 -

5,636

1,029

Building Renovation RM’000

2,978 1,379 -

4,357

2,516 -

2,516

265 -

2,781

2,781 -

2,781

1,576

Buildings RM’000

8,542 - -

8,542

471 6,506

6,977

213 -

7,190

684 6,506

7,190

1,352

Freehold land RM’000

10,588 - -

10,588

- -

-

- -

-

- -

-

10,588

MB

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078

14. Property, plant and equipment (cont’d.)

Included in freehold land and buildings are the net book value of properties which are:

Pending subdivision of titles Charged to the ultimate holding body for loans which had been fully settled

The cost of property, plant and equipment which have been fully depreciated but still in use are as follows:

Building renovation Furniture and equipment Motor vehicles Data processing equipment

15. Prepaid land lease payments

At 1 January Amortisation for the year

At 31 December

Analysed as: Long term leasehold land Short term leasehold land

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

Group Company2009

RM’000

6,00640,699

2009RM’000

257200

2008RM’000

6,36943,824

2008RM’000

266203

Group Company2009

RM’000

7,98816,851

1810,390

35,247

2008RM’000

7,98516,566

15611,409

36,116

2009RM’000

2,3725,489

51 9,814

17,726

2008RM’000

2,3705,157

47 10,799

18,373

Group 2009 RM’000

10,116 (165)

9,951

9,806 145

9,951

2008 RM’000

10,281 (165)

10,116

9,963 153

10,116

MB

SB

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079

16. Intangible assets

Software licences At 1 January Additions Less: Amortisation At 31 December

17. Deposits from customers

Savings Fixed deposits

By type of customers: Government and statutory bodies Business enterprises Individuals Others

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

Group and Company2009

RM’000

28,0797,534,331

7,562,410

3,441,550 2,832,146 1,255,030

33,684

7,562,410

2008RM’000

20,5986,280,783

6,301,381

2,590,924 2,301,196 1,384,142

25,119

6,301,381

CompanyGroup 2009 RM’000

1,125 618 (859)

884

2009 RM’000

1,188 618 (895)

911

2008 RM’000 (Restated)

1,400 277 (552)

1,125

2008 RM’000 (Restated)

1,499 277 (588)

1,188

MB

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080

18. Other borrowings

Short Term Borrowings Bank borrowings

Secured debenture loans

Long Term Borrowings Secured debenture loans

Total Borrowings Bank borrowings Secured debenture loans

Maturity of borrowings: Within one year One year to three years

The weighted average e� ective annual interest rates of borrowings at the balance sheet date were as follows:

Bank borrowings Debenture loans

Bank borrowings represent unsecured revolving credit and interest charged on these borrowings based on the lenders’ cost of funds plus 0.50%. The bank borrowings are due within one year.

The debenture loans are provided by the Employees Provident Fund Board. These debenture loans are secured by way of a � rst � oating charge on the Company’s assets except for assets arising from the Low Cost Housing Finance Programme and the Public Low Cost Housing Programme.

19. Trade payables

The normal trade credit terms granted to the Group range from 30 to 60 (2008: 30 to 60) days.

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

Group and Company2009

RM’000

-

50,004

-

-

50,004

50,004-

50,004

2008RM’000

305,235

49,997

50,015

305,235

100,012

355,23250,015

405,247

Group and Company2009

%

-3.28

2008%

3.95-4.404.43

MB

SB

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009

NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

22. Deferred taxation

At 1 January Recognised in the income statement (Note 32) At 31 December Presented after appropriate o� setting as follows: Deferred tax assets Deferred tax liabilities

20. Other payables

Consultants’ and contractors’ fee payable Due to subsidiaries Deposit for disposal of properties for sale Deposit for disposal of foreclosed properties Others

The amounts due to subsidiaries are unsecured, interest-free and have no � xed terms of repayment.

21. Recourse obligation on loans sold to Cagamas Berhad

Mature within 12 months Mature after 12 months

These amounts relate to proceeds received from conventional housing loans sold to Cagamas Berhad with recourse to the Company. Under the agreement, 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 pre-determined criteria. The resource obligation are repayable as follows:

2010 2011

2008RM’000

58317,897

-828

44,631

63,939

2008RM’000

--

-

2008RM’000

--

-

Company

Group and Company

Group and Company

2009RM’000

58317,893

-828

83,185

102,489

2009RM’000

46,104954,506

1,000,610

2009RM’000

46,104954,506

1,000,610

2008RM’000

583-

3,100828

46,420

50,931

Group2009

RM’000

583-

2,000828

85,170

88,581

2008 RM’000

(33,000) 17,000

(16,000)

(16,000) -

(16,000)

Company 2009 RM’000

(16,000) 16,575

575

- 575

575

2008 RM’000

(14,258) 15,461 1,203

(16,000) 17,203 1,203

Group2009

RM’000

1,20316,501

17,704

-17,704

17,704

081

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

082

Total RM’000

1,203 16,501

17,704

(14,258) 15,461

1,203

OthersRM’000

450-

450

450-

450

Property, plant and equipment RM’000

- 575 - 838 (838) -

Unused tax losses RM’000

(16,000) 16,000

-

(33,838) 17,838

(16,000)

Fair valueadjustment arising from business combination RM’000 16,753 (74)

16,679

18,292 (1,539)

16,753

Deferred tax (assets)/liabilities of the Group:

At 1 January 2009 Recognised in income statement At 31 December 2009 At 1 January 2008 Recognised in income statement At 31 December 2008

22. Deferred taxation (cont’d.)

The components and movements of deferred tax assets and liabilities during the � nancial year prior to o� setting were as follows:

The availability of the unused tax losses and unabsorbed capital allowances for o� setting against future taxable pro� ts of theCompany’s dormant and subsidiaries are subject to no substantial changes in shareholdings of the Company and of those subsidiaries under Section 44(5A) and (5B) of Income Tax Act, 1967.

Deferred tax (assets)/liabilities of the Company:

At 1 January 2009 Recognised in income statement

At 31 December 2009

At 1 January 2008 Recognised in income statement

At 31 December 2008

Deferred tax assets have not been recognised in respect of the following items:

Unused tax losses Allowance for doubtful debts Impairment losses on inventories of land held for sale General provision Unabsorbed capital allowances Others

2008RM’000

27,356292,700

51,29072,237

4,8045,768

454,155

Total RM’000

(16,000) 16,575

575

(33,000) 17,000

(16,000)

Company2009

RM’000

-283,448

49,31783,224

6,5069,260

431,755

Acceleratedcapital

allowancesRM’000

-575

575

838(838)

-

2008RM’000

160,237166,820

70,08630,40712,23023,344

463,124

Unused tax losses RM’000

(16,000) 16,000

-

(33,838) 17,838

(16,000)

Group2009

RM’000

139,994164,853

66,36840,63115,36733,818

461,031

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

083

23. Share capital

Authorised: - Ordinary Shares At 1 January/31 December

- Redeemable Cumulative Preference Shares At 1 January/31 December

- Redeemable Convertible Preference Shares (“RCPS”) At 1 January/31 December

Issued and fully paid: - Ordinary Shares At 1 January Issued during the year: Issued for cash pursuant to ESOS Issued upon conversion of RCPS on the basis of 1 RCPS for 2 ordinary shares

At 31 December

- RCPS (equity component): At 1 January Converted to ordinary shares upon expiry of RCPS

At 31 December

Amount

Amount

2009RM’000

1,000,000

300,000

500,000

1,800,000

2009RM’000

700,172

-

-

700,172

-

-

-

700,172

2008 Units ’000

1,000,000

300,000

500,000

1,800,000

2008Units ’000

361,102

9,070

330,000

700,172

165,000

(165,000)

-

700,172

2008 RM ’000

1,000,000

300,000

500,000

1,800,000

2008 RM’000

361,102

9,070

330,000

700,172

165,000

(165,000)

-

700,172

Number of Sharesof RM1.00 Each

Number of Sharesof RM1.00 Each

2009Units ’000

1,000,000

300,000

500,000

1,800,000

2009Units ’000

700,172

-

-

700,172

-

-

-

700,172

24. Revenue Revenue of the Company comprises gross interest income (after deducting net interest suspended), fee and commission income and other income derived from granting of loans, including Islamic banking operations.

Revenue of the Group comprises all types of revenue derived from the business of granting of loans, property development, property management, letting of real property and hotel operations.

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

084

25. Interest income

Interest income Less: Interest suspended

2008 RM’000

779,915 (475,614)

304,301

Company 2009 RM’000

719,370 (414,942)

304,428

2008 RM’000

756,973 (465,555)

291,418

Group 2009 RM’000

699,626 (386,669)

312,957

2008RM’000

10,9249,941

167,463136

188,464

Group and Company2009

RM’000

3,9516,962

136,3713,926

151,210

26. Interest expense

Bank borrowings Other borrowings Deposits from customers Loans sold to Cagamas Berhad

27. Other income

Other revenue: Rental income Sale of completed properties Revenue from hotel operations Loan agency fees Loan processing fees Insurance commission Others Other income: Gain on disposal of property, plant and equipment Gain on disposal of investment properties Gain on disposal of foreclosed properties Gain on disposal of inventories Others

2008RM’000

98

--

1861,8027,435

400

--

10,028225

3,209

23,383

Company2009

RM’000

13

--

15920,683

7,020539

18-

65-

5,349

33,846

2008RM’000

412

14,4389,185

1861,8027,435

777

--

10,028225

4,215

48,703

Group2009

RM’000

257

29,2619,173

15920,683

7,020539

1,6087865

2,0003,571

74,414

MB

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

085

28. Other operating expenses

Personnel expenses (Note 29) Cost of completed properties sold Establishment related expenses Promotion and marketing related expenses General administrative expenses

Included in other operating expenses are the following:

Auditors’ remuneration: Statutory audits Non-audit fees Amortisation: - prepaid land lease payments - intangible assets Depreciation: - investment properties - property, plant and equipment Directors’ remuneration (Note 30) Impairment loss on: - investments in subsidiaries - investment in unquoted shares - property, plant and equipment Allowance for doubtful debts of: - amount due from/loans to subsidiaries - other receivables - trade receivables Rental of buildings

2008RM’000

32,301

-7,6161,791

23,041

64,749

2008RM’000

143

53

-552

-1,740

386

450483

-

-1,403

-5,853

Company

Company

2009RM’000

38,462

-8,5891,748

13,018

61,817

2009 RM’000

178 38

- 859 - 1,570 554

1,270 - -

(221) 956 - 6,233

2008RM’000

34,66113,058

5,8572,065

39,249

94,890

2008RM’000

184

98

165588

886,920

386

-483

32 -

17,6541,057

817

Group

Group

2009RM’000

40,76928,729

6,5781,970

36,439

114,485

2009RM’000

223

50

165895

667,030

554

---

-18,110

1,531-

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

2008RM’000

25,242

284

3,771-

6502,354

32,301

2008RM’000

29195

386

Company2009

RM’000

30,706

322

4,849130

-2,455

38,462

2009RM’000

421133

554

2008RM’000

27,372

322

3,963-

6502,354

34,661

Group2009

RM’000

32,588

358

5,032130

-2,661

40,769

29. Personnel expenses

Wages and salaries Social security costs Pension costs: - Employees Provident Fund Voluntary/Mutual Separation Scheme Share options granted under ESOS Other sta� related expenses

30. Directors’ remuneration

Directors of the Company Non-Executive: Fees Other emoluments

Total

Group and Company

Number of Directors

The number of directors of the Company whose total remuneration during the � nancial year fell within the following band is as follows:

Non-Executive Directors: RM10,000 - RM50,000 RM50,000 - RM100,000

2008

71

2009

17

31. Allowance for losses on loans and � nancing

Allowance for bad and doubtful debts on loans and � nancing (a) Speci� c allowance - Made in the � nancial year - Written back - Settlement costs (b) General allowance - Made during the � nancial year Bad debts on loans and � nancing - Written o�

2008 RM’000

77,536 (52,090) 671

7,418

2,025

35,560

Company 2009 RM’000

126,728 (32,511) 735

13,764

1,182

109,898

2008 RM’000

69,689 (52,090) 671

7,418

2,025

27,713

Group 2009 RM’000

126,728 (32,511) 735

13,764

1,182

109,898

086

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

32. Taxation

Current income tax: Malaysian income tax (Over)/underprovision in prior years: Malaysian income tax

Deferred tax (Note 22): Relating to origination and reversal of temporary di� erences Relating to changes in tax rates Under/(over)provision in prior years

Total income tax expense

2008RM’000

994

4,718

5,712

15,7311,269

-

17,000

22,712

Company 2009 RM’000

6,258

(186)

6,072

15,960 - 615 16,575

22,647

2008 RM’000

1,012

4,718

5,730

15,657 647 (843)

15,461

21,191

Group 2009 RM’000

6,272

(200)

6,072

15,886 - 615

16,501

22,573

Domestic income tax is calculated at the Malaysian statutory tax rate of 25% (2008: 26%) of the estimated assessable pro� t for the year. The computation of deferred tax as at 31 December 2009 has re¤ ected these changes.

A reconciliation of income tax expense applicable to pro� t before taxation at the statutory income tax rate to income tax expense at the e� ective income tax rate of the Group and of the Company is as follows:

Group

Pro� t before taxation Taxation at Malaysian statutory tax rate of 25% (2008: 26%)E� ect of changes in tax ratesE� ect of income not subject to taxE� ect of expenses not deductible for tax purposesE� ect of utilisation of previously unrecognised tax losses and unabsorbed capital allowancesDeferred tax assets not recognised(Over)/underprovision of income tax in prior yearsUnder/(over)provision of deferred tax in prior yearsRecognition of deferred tax on fair value adjustment upon consolidation Tax income for the year

2008 RM’000

54,043

14,051 647 (11,239) 13,202

(13,569) 14,298 4,718 (843) (74)

21,191

2009 RM’000

80,315

20,079 - (12,433) 13,214

(22,205) 23,577 (200) 615 (74)

22,573

087

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

2008 RM’000

63,900

16,614 1,269 3,293 (2,013)

(13,524) 12,355 4,718 -

22,712

2009 RM’000

83,886

20,972 - 2,479 -

(21,961) 20,728 (186)

615

22,647

32. Taxation (cont’d.)

Company Pro� t before taxation

Taxation at Malaysian statutory tax rate of 25% (2008: 26%) E� ect of changes in tax rate E� ect of expenses not deductible for tax purposes E� ect of income not subject to tax E� ect of utilisation of previously unrecognised tax losses and unabsorbed capital allowance Deferred tax assets not recognised (Over)/underprovision of income tax in prior years Underprovision of deferred tax in prior years Tax income for the year

Tax savings during the � nancial year arising from:

Utilisation of current year tax lossses Utilisation of tax losses brought forward

2008RM’000

-29,017

Company2009

RM’000

21,961-

2008RM’000

4829,061

Group2009

RM’000

21,989-

33. Basic earnings per share

Basic earnings per share is calculated by dividing the net pro� t for the year by the weighted average number of ordinary shares in issue during the � nancial year.

Net pro� t for the year (RM’000) Number of ordinary shares in issue (‘000) Basic earnings per share (sen)

2008

32,575485,374

6.71

2009

57,203700,172

8.17

088

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

34. Dividends

Recognised during the year Final 3% less 25% taxation, on 700,171,527 ordinary shares declared on 30 April 2009, paid on 27 May 2009

Proposed for approval at AGM Final 4.0% less 25% taxation, on 700,171,527 ordinary shares at 31 December 2009

2008Sen

2.25

-

2.25

Net Dividendsper Ordinary Share

Dividends in respect of� nancial year

2009Sen

-

3.00

3.00

2008RM’000

15,754

-

15,754

2009RM’000

-

21,005

21,005

At the forthcoming Annual General Meeting, a � rst and � nal dividend of 4.0% less 25% taxation (3.00 sen net per ordinary share) in respect of the � nancial year ended 31 December 2009, will be proposed for shareholders’ approval. Based on the issued and paid up share capital as at 31 December 2008 of 700,171,527 ordinary shares, the total dividend payable would amount to RM21,005,146. The � nancial statements for the current � nancial year do not re¤ ect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in equity in the � nancial year ending 31 December 2010.

35. Signi� cant related party transactions/balances

(a) Transactions/balances with Employees Provident Fund Board, the ultimate holding body:

Note Expenses Interest on loans Rental paid Agency fees received

Balances Debenture loans 19

2008RM’000

5,914309

9

100,012

Company2009

RM’000

3,400299

4

50,004

2008RM’000

5,914309

9

100,012

Group2009

RM’000

3,400

2994

50,004

(b) Transactions/balances with subsidiaries:

Income/(Expenses) Interest received on loans/advances Interest received on loans for joint venture projects Rental paid

Balances Loans to subsidiaries 11 Bridging, structured and term loans 9 Amount due from 7 Amount due to 21 End � nance loans 9

2008 RM’000

22,941 2,629 (5,036)

217,827 96,773 71,097 17,897 1,021

Company 2009 RM’000

19,744 660 (5,223)

166,716 97,284 66,046 17,893 609

2008RM’000

---

-----

Group2009

RM’000

---

-----

089

MB

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

090

35. Signi� cant related party transactions/balances (cont’d.) (b) Transactions/balances with subsidiaries: (cont’d.)

The directors are of the opinion that all the transactions/balances above have been entered into in the normal course of business and have been established on terms and conditions that are not materially di� erent from those obtainable in transactions with unrelated parties.

(c) The remuneration of directors and other members of key management during the year was as follows:

Short-term employee bene� ts Share-based payment

Included in the total key management personnel are:

Directors’ remuneration (Note 30)

2008RM’000

2,001

18

2,019

2008RM’000

386

2009RM’000

2,081

-

2,081

2009RM’000

554

Group and Company

Group and Company

(d) Transactions and balances with directors and key management:

Income/(expenses) Interest income earned on loans, advances and � nancing Interest cost incurred on savings and deposits Amount due from in respect of loans, advances and � nancing Amount due to in respect of savings and deposits

2008 RM’000

1 (6)

12 181

2008 RM’000

- 149 (149)

-

2009 RM’000

- (8) - 359

2009RM’000

---

-

Executive Directors of the Group and the Company and other members of key management have been granted the following number of options under the Employee Share Options Scheme:

The share options were granted on the same terms and conditions as those o� ered to other employees of the Group.

At 1 January Granted Expired

At 31 December

Group and Company

Group and Company

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

36. Commitments and contingencies

(i) Operational Commitments

Loan commitments not provided for in the � nancial statements: End � nance Islamic Bridging, structured and term loans

Property development: Approved and contracted for Total

(ii) Capital Commitments Property, plant and equipment: Approved but not contracted for

(iii) Contingencies Fully secured:

Financial guarantee to secure payments by a borrower

2008RM’000

304,978437,774317,070

1,059,822

1,667

1,061,489

10,811

42,080

Company2009

RM’000

230,584342,907175,045

748,536

1,667

750,203

12,165

47,430

2008RM’000

304,978437,774317,070

1,059,822

421,528

1,481,350

10,811

42,080

Group2009

RM’000

230,584342,907175,045

748,536

421,528

1,170,064

12,165

47,430

The fully secured contigency is secured by way of a � xed charge over the borrower’s development project, and a debenture creating a � xed and ¤ oating charge over the entire assets of the borrower.

37. Contingent liabilities (Unsecured)

(i) A contractor appointed by one of the Company’s borrowers has instituted civil suits against the Company for an alleged breach of contract and is claiming damages amounting to RM2.54 million.

The Court has � xed 16 March 2010 for further Case Management and the trial dates have been � xed from 21 June 2010 to 25 June 2010.

(ii) A creditor of a wound-up unrelated company has alleged that a subsidiary of the Company (“Subsidiary”), together with three (3) other defendants as co-conspirators, were involved in a scheme to sell o� a major asset of the unrelated company and had thereafter allowed the unrelated company to be wound-up in order to defeat the said creditor’s claim for payment from the unrelated company amounting to RM4.8 million for good sold and delivered.

The full trial has been completed. The matter has been decided in favour of the Subsidiary.

(iii) A former borrower of the Company has instituted a civil suit against the Company for an alleged breach of facility agreement and is claiming damages amounting up to RM43.311 million. The Company had terminated the said facility due to the former borrower’s breach of facility agreement and had subsequently sold the loan asset to an unrelated company.

The Court has � xed 9 April 2010 for further mention of Case Management.

(iv) A former borrower of the Company has instituted a civil suit against the Company for an alleged breach of facility agreement and is claiming damages amounting to RM5 million with interest and costs thereon.

The Company had on 22 May 2009 � led a Notice of Appeal following the Court’s dismissal of the Company’s application to hold a trial of preliminary issue. No date has been � xed by the Court of Appeal. In addition, the Court has yet to � x a date for Case Management.

091

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

092

(v) A former borrower of the Company has instituted a civil suit against the Company for an alleged breach of facility agreement and is claiming damages amounting to RM16.136 million with interest and costs thereon.

On 6 May 2009, the Court allowed the Company’s application to strike out the Plainti� ’s claim with costs.

The Plainti� ’s solicitors have � led a Notice of Appeal to the Court of Appeal on 29 May 2009. Further hearing date has yet to be � xed.

(vi) A borrower has � led a counterclaim seeking damages amounting to RM453 million against the Company’s subsidiary for an alleged breach of contract in relation to uncompleted development projects in Melaka (“Melaka Project”) and Penang (“Penang Project”).

The Company had earlier instituted civil suits against the borrower for its failure to repay term loans amounting to RM239 million in respect of the similar projects.

For the Melaka Project, no date has been � xed for Case Management.

For the Penang Project, the Company’s Solicitors have � led the Notice of Appeal to the Court on 15 April 2009 against the Judge in Chambers decision of the Company’s application for Summary Judgement on 13 April 2009, which was dismissed with costs. The Court has yet to � x the hearing date.

On 20 August 2009, the Company’s solicitors attended Court for the hearing of the application to strike out the counterclaim. The Court will � x a date in respect of the counterclaim, after the appeal is heard.

(vii) A third party and its holding company have instituted a civil suit against the Company and its subsidiary for an alleged breach of facility agreement.

The Company and its subsidiary have � led its defence and a counterclaim in response to the suit. The Company and its subsidiary have also � led an application to strike out the Plainti� ’s suit and are in the process of preparing its response to the Plainti� ’s reply to the striking out.

The Directors after obtaining advice from the Company’s solicitors, are of the opinion that the Company has reasonably good cases in respect of all the claims against the Company and as such, no provision has been made in the � nancial statements.

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

38. Financial instruments

(a) Financial risk management objectives and policies

The risks identi� ed by the Group are categorised as market, credit, operational and strategic risks. The market risk includes the interest rate and liquidity risks. The credit risk addresses credit factors such as credit limit, collateral and valuation of assets and classi� cation by default. The operational risk encompasses the legal, human resource, information technology and reputational risks.

The Board of Malaysia Building Society Berhad (“MBSB”) through the Audit and Risk Management Committee (“ARMCO”) ensures that su¦ cient control is in place to identify and minimise � nancial risks and policies are adhered.

The manuals of all divisions, departments and branches are regularly reviewed and adhered to by all business and supervisory units to ensure processes of risk identi� cation, quanti� cation, mitigation and reporting of risk based capital exposure of the Group are addressed and in place.

(b) Operational risk

Operational risk is the risk of potential loss due to failures or inadequacies of internal operating procedures resulting in ine¦ ciency, reduction in productivity and increase in operating cost. Employees’ risk will also impact the operational risk subject to quality and skills of the employees in addressing the various risks.

Three supervisory management committees, namely Management Committee (“MANCO”), Asset and Liability Committee (“ALCO”) and Credit Committee, monitor the compliance of the Group’s policies on the operational risk arising from any failure in the internal operation process. The internal operation process is currently being reviewed regularly.

(c) Market risk

Market risk is the risk of potential loss as a result of changes in the intrinsic value of � nancial instruments caused by the movement in market variables such as interest rates, equity prices and other related macro economic factors that will eventually a� ect the pro� tability and liquidity gap monitoring of sources and uses of funds.

The ALCO supervises the market risk exposure by monitoring the ¤ uctuations in net interest income or investment value from the impact of market risk factors a� ecting the Company.

(i) Interest rate risk

Interest rate risk is the risk of potential earnings movement arising from movements in interest rates.

The Company’s existing policy on interest rate risk is to maximise Net Interest Income (“NII”) to be derived, increase in Net Interest Margin (“NIM”) and to minimise their volatility impact to the Company’s assets and liabilities.

(ii) Liquidity risk Liquidity risk is the risk of potential losses as a result of mismatch exposure in the maturity of funding of the Group that could be a� ected by interest rate risk and adverse cash ¤ ow position of the Group.

The policy on managing liquidity risk exposure arising from cash ¤ ow obligations are as follows:

- To ensure maximisation of earnings while maintaining adequate liquidity to meet expected and potential (unexpected funding) needs.

- To match cash in¤ ows and out¤ ows within MBSB’s natural market for loans and deposits.

(d) Credit risk Credit risk is the risk of loss due to credit assessment and valuation and inability of borrowers to perform their contractual obligations to the Company.

The Group mitigates the credit risk arising from credit and investment portfolio by ensuring that the credit exposures are subjected to approved counterparty limits (including single customer limit) and terms and conditions for granting of facilities such as borrower’s credit worthiness, structure of lending facility, interest rate pricing and overall viability of the credit exposure.

093

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

094

38. Financial instruments (cont’d.)

The credit risk process incorporates compliance to the Company’s policies and guidelines and credit procedures in order to improve e¦ ciency in the processing of credit assessment and market risk impact, monitoring the quality of the Company’s loan portfolio through the establishment of an appropriate credit risk environment and maintaining the appropriate credit administration and management of credit risk as well as independent credit risk monitoring.

(e) Fair values

The carrying amount and estimated fair values of � nancial instruments of the Group and of the Company as at the � nancial year end are as follows:

2009

Financial assets

Cash and cash equivalents Trade receivables Other receivables (excluding amount due from subsidiaries) Amount due from subsidiaries Loans, advances and � nancing Other investments Loans to subsidiaries

Financial liabilities

Deposits from customers Other borrowings Trade payables Other payables (excluding amount due to subsidiaries) Amount due to subsidiaries

2008

Financial assets Cash and cash equivalents Trade receivables Other receivables (excluding amount due from subsidiaries) Amount due from subsidiaries Loans, advances and � nancing Other investments Loans to subsidiaries

Financial liabilities

Bank borrowings Deposits from customers Other borrowings Trade payables Other payables (excluding amount due to subsidiaries) Amount due to subsidiaries

Fair valueRM’000

751,666-

65,846*

7,510,00065,095

*

7,557,49150,004

-84,596

*

51,793-

48,275*

6,755,71542,647

*

305,2356,280,752

100,012-

46,042*

CompanyCarrying amountRM’000

751,666-

65,84633,226

8,203,59643,07096,917

7,562,41050,004

-84,59617,893

51,793-

48,27533,419

6,876,35343,070

128,658

305,2356,301,381

100,012-

46,04217,897

Fair valueRM’000

763,2753,298

126,632-

7,424,85665,095

-

7,557,49150,004

4,65888,581

-

73,1657,139

109,114-

6,662,67742,647

-

305,2356,280,752

100,0124,509

50,931-

GroupCarrying amountRM’000

763,2753,298

126,632-

8,118,45243,070

-

7,562,41050,004

4,65888,581

-

73,1657,139

109,114-

6,783,13543,070

-

305,2356,301,381

100,0124,509

50,931-

Note

56779

1011

1718192020

56779

1011

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

38. Financial instruments (cont’d.) (e) Fair values (cont’d.)

* It is not practical to estimate the fair values of amounts due from/to subsidiaries due principally to lack of � xed repayment terms entered into by the parties involved and without incurring excessive costs.

The following methods and assumptions are used to estimate the fair values of the following classes of � nancial instruments:

(i) Cash and cash equivalents, trade and other receivables/payables and deposits maturing within 12 months

The carrying amounts approximate fair values due to the relatively short term maturity of these � nancial instruments.

(ii) Loans, advances and � nancing, bank borrowings, deposits maturing after 12 months, other borrowings, recourse obligation on loans sold to Cagamas Berhad

The fair value of ¤ oating rate loans receivable/payable is estimated to approximate their carrying value.

The fair value of � xed rate loans receivables/borrowings/deposits is estimated using discounted cash ¤ ow analysis, based on current incremental lending/borrowing/deposit rates for similar types of lending/borrowing/deposit arrangements.

(iii) Other investments

The fair value of unquoted investments is estimated by discounting the expected future cash ¤ ows using the current interest rates for instruments with similar risk pro� les.

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

39. Interest rate risk

The table below summarises the Group’s and the Company’s exposure to interest rate risk. The table indicate e� ective average interest rates at the balance sheet date and the periods in which the � nancial instruments reprice or mature, whichever is earlier.

Group 2009

Assets Cash and cash equivalents Trade receivables Other receivables Loans, advances and � nancing - performing - non-performing Other investments Other assets Total assets

Liabilities Deposits from customers Other borrowings Trade payables Other payables Recourse obligation on loans sold to Cagamas Berhad Other liabilities

Total liabilities Shareholders’ equity

Total liabilities and shareholders’ equity

On-balance sheet interest sensitivity gap O� -balance sheet interest sensitivity gap

Total interest sensitivity gap

Averageinterest

rate% per

annum

2.16--

6.36-

2.00-

2.733.28

--

5.60-

TotalRM’000

763,2753,298

126,632

6,583,8461,534,606

43,070249,423

9,304,150

7,562,41050,004

4,65888,581

1,000,61045,323

8,751,586552,564

9,304,150

-

-

-

Non-interest

sensitiveRM’000

26,3533,298

126,632

-1,534,606

-249,423

1,940,312

--

4,65888,581

-45,323

138,562552,564

691,126

1,249,186

-

1,249,186

Over 5 years RM’000

- - -

6,406,447 - 43,070 -

6,449,517

- - - -

- -

- -

-

(6,449,517)

-

(6,449,517)

> 1-5 years RM’000

- - -

162,221 - - -

162,221

638,774 - - -

921,070 -

1,559,844 -

1,559,844

(1,397,623)

-

(1,397,623)

> 3-12 months RM’000

3,395 - -

5,559 - - -

8,954

1,876,265 37,495 - -

56,800 -

1,970,560 -

1,970,560

(1,961,606)

-

(1,961,606)

> 1-3 months RM’000

423,349 - -

441 - - -

423,790

2,137,934 8,334 - -

- -

2,146,268 -

2,146,268

(1,722,478)

-

(1,722,478)

Up to 1 month RM’000

310,178 - -

9.178 - - -

319,356

2,909,437 4,175 - -

22,740 - 2,936,352 -

2,936,352

(2,616,996)

-

(2,616,996)

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

39. Interest rate risk (cont’d.)

Group 2008

Assets Cash and cash equivalents Trade receivables Other receivables Loans, advances and � nancing - performing - non-performing Other investments Other assets Total assets

Liabilities Bank borrowings Deposits from customers Other borrowings Trade payables Other payables Other liabilities

Total liabilities Shareholders’ equity

Total liabilities and shareholders’ equity

On-balance sheet interest sensitivity gap O� -balance sheet interest sensitivity gap

Total interest sensitivity gap

Averageinterest

rate% per

annum

3.25-

-

7.03-

2.00-

4.18

3.774.43

---

TotalRM’000

73,1657,139

109,114

5,209,9731,573,162

43,070295,946

7,311,569

305,235

6,301,381100,012

4,50950,93138,386

6,800,454511,115

7,311,569

-

-

-

Non-interest

sensitiveRM’000

60,0507,139

109,114

-1,573,162

-295,946

2,045,411

-

--

4,50950,93138,386

93,826511,115

604,941

1,440,470

-

1,440,470

Over 5years

RM’000

---

5,068,713-

43,070-

5,111,783

-

-----

--

-

5,111,783

-

5,111,783

> 1-5 years RM’000

- - -

127,038 - - -

127,038

-

1,975,525 50,015 - - -

2,025,540 -

2,025,540

(1,898,502)

-

(1,898,502)

> 3-12 months RM’000

3,310 - -

11,254 - - -

14,564

-

956,171 37,495 - - -

993,666 -

993,666

(979,102)

-

(979,102)

> 1-3 months RM’000

- - -

208 - - -

208

-

2,266,637 8,334 - - -

2,274,971 -

2,274,971

(2,274,763)

-

(2,274,763)

Up to 1 month RM’000

9,805 - -

2,760 - - -

12,565

305,235

1,103,048 4,168 - - -

1,412,451 -

1,412,451

(1,399,886)

-

(1,399,886)

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

098

39. Interest rate risk (cont’d.)

Company 2009

Assets Cash and cash equivalents Trade receivables Other receivables Loans, advances and � nancing - performing - non-performing Other investments Loan to subsidiaries Other assets Total assets

Liabilities Deposits from customers Other borrowings Recourse obligation on loans sold to Cagamas Berhad Other payables Other liabilities

Total liabilities Shareholders’ equity

Total liabilities and shareholders’ equity

On-balance sheet interest sensitivity gap O� -balance sheet interest sensitivity gap

Total interest sensitivity gap

Averageinterest

rate% per

annum

2.16-

3.62

6.36-

2.00--

2.733.28

5.60--

TotalRM’000

751,66665,84633,226

6,584,1441,619,452

43,07096,917

130,688

9,325,009

7,562,41050,004

1,000,610102,489

28,143

8,743,656581,353

9,325,009

-

-

-

Non-interest

sensitiveRM’000

14,86965,84633,226

-1,619,452

43,07096,917

130,688

2,004,068

--

-102,489

28,143

28,143581,353

609,496

1,394,572

-

1,394,572

Over 5years

RM’000

---

6,406,745----

6,406,745

--

---

--

-

6,406,745

-

6,406,745

> 1-5 years RM’000

- - -

162,221 - - - -

162,221

638,774 -

921,070 - -

1,559,844 -

1,559,844

(1,397,623)

-

(1,397,623)

> 3-12 months RM’000

3,395 - -

5,559 - - - -

8,954

1,876,265 37,502

56,800 - -

1,970,567 -

1,970,567

(1,961,613)

-

(1,961,613)

> 1-3 months RM’000

423,349 - -

441 - - - -

423,790

2,137,934 8,334

- - -

2,146,268 -

2,146,268

(1,722,478)

-

(1,722,478)

Up to 1 month RM’000

310,053 - -

9,178 - - - -

319,231

2,909,437 4,186

22,470 - -

2,936,345 -

2,936,345

(2,617,114)

-

(2,617,114)

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

39. Interest rate risk (cont’d.)

Company 2008

Assets Cash and cash equivalents Other receivables (excluding amount due from subsidiaries) Amount due from subsidiaries Loans, advances and � nancing - performing - non-performing Other investments Loans to subsidiaries Other assets Total assets

Liabilities Bank borrowings Deposits from customers Other borrowings Other payables Other liabilities

Total liabilities Shareholders’ equity

Total liabilities and shareholders’ equity

On-balance sheet interest sensitivity gap O� -balance sheet interest sensitivity gap

Total interest sensitivity gap

Averageinterest

rate% per

annum

3.25

-

3.88

7.03-

2.003.88

--

4.18

3.774.43

--

TotalRM’000

51,973

48,275

33,419

5,210,5841,665,769

43,070128,658146,360

7,328,108

305,235

6,301,381100,012

63,93921,134

6,791,701536,407

7,328,108

-

-

-

Non-interest

sensitiveRM’000

39,662

48,275

-

-1,665,769

--

146,360

1,900,066

-

--

63,93921,134

85,073536,407

621,480

1,278,586

-

1,278,586

Over 5years

RM’000

-

-

33,419

5,069,324-

43,070128,658

-

5,274,471

-

----

--

-

5,274,471

-

5,274,471

> 1-5 years RM’000

-

-

-

127,038 - - - -

127,038

-

1,975,525 50,015 - -

2,025,540 -

2,025,540

(1,898,502)

-

(1,898,502)

> 3-12 years RM’000

3,310

-

-

11,254 - - - -

14,564

-

956,171 37,495 - -

993,666 -

993,666

(979,102)

-

(979,102)

> 1-3 years RM’000

-

-

-

208 - - - -

208

-

2,266,637 8,334 - -

2,274,971 -

2,274,971

(2,274,763)

-

(2,274,763)

Up to 1 month RM’000

9,001

-

-

2,760 - - - -

11,761

305,235

1,103,048 4,168 - -

1,412,451 -

1,412,451

(1,400,690)

-

(1,400,690)

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

40. Segment information

(a) Business Segments:

The Group is organised into four major business segments:

(i) Financing - the granting of loans on the security of freehold and leasehold properties and provision of retail � nancing and related services;

(ii) Property development - the development of residential and commercial properties;

(iii) Letting of real property - the letting of o¦ ce buildings; and

(iv) Hotel operations - the letting of hotel rooms, sale of food and beverage and other related income. Other business segments include project management and investment holding, none of which are of a su¦ cient size to be reported separately.

Other business segments include project management and investment holding, none of which are of a su¦ cient size to be reported seperately.

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 on terms and conditions that are not materially di� erent from those obtainable in transactions with unrelated parties.

Revenue and expenses

RevenueExternal salesInter-segment sales

Total revenue

Result

Segment resultsTaxationZakat

Net pro� t for the year

Assets

Segment assetsUnallocated corporate assetsConsolidated total assets

Liabilities

Segment liabilitiesUnallocated corporate liabilitiesConsolidated total liabilities

Other Information

Capital expenditureDepreciation and amortisation of prepaid land lease payments, investment properties and property, plant and equipmentAmortisationImpairment loss on: - property, plant and equipment - Investment properties - investments in subsidiariesReversal of impairment loss on: - other investmentsNon-cash expenses other than depreciation, amortisation and impairment losses

2008RM’000

416,155-

416,155

54,043(21,191)

(277)

32,575-

7,295,56916,000

7,311,569

6,778,821

21,633

6,800,454

3,458

7,008753

32

-

-

483

507,289

2008RM’000

13,883(34,112)

2,072

(270,647)

(579,745)

-

228-

-

-

(449)

-

(1,851)

2008RM’000

--

(96)

390

2,172

-

--

-

-

-

-

2

2008RM’000

11,546-

(3,655)

72,553

111,553

764

2,507178

-

-

-

-

8

2008RM’000

3305,036

(9,795)

61,938

139,916

-

2,53323

32

-

-

-

18

2008 RM’000

14,438 -

1,617

86,227

314,520

-

- -

-

-

-

-

(8,220)

2008RM’000

376,00829,076

63,900

7,345,108

6,790,705

2,694

1,740552

-

-

449

483

517,332

2009RM’000

537,959-

537,959

80,315(22,573)

(539)

57,203

9,304,150-

9,304,150

8,713,899

37,687

8,751,586

6,511

7,0961,060

-

-

-

-

483,755

2009RM’000

39,703(38,704)

5,081

(196,526)

(561,642)

-

228-

-

-

(1,270)

-

-

2009RM’000

--

(37)

390

2,207

-

--

-

-

-

-

-

2009RM’000

11,481-

(3,456)

67,659

109,184

542

2,634178

-

-

-

-

-

2009RM’000

2445,223

(8,123)

60,246

146,328

1,940

2,66423

-

-

-

-

-

2009 RM’000

29,261 -

2,965

47,372

274,166

-

- -

-

-

-

-

(6,212)

2009 RM’000

457,270 33,481

83,885

9,325,009

8,743,656

4,029

1,570 859

-

-

1,270

-

489,967

FinancingProperty

DevelopmentLetting of

Real Property Hotel Operations Others Eliminations Consolidated

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

40. Segment information (cont’d.)

(b) Geographical Segments:

Segmental reporting is not analysed by geographical locations as the Group’s activities are pre-dominantly in Malaysia.

41. Reclassi� cation and restatement of compratives The Group and Company had reviewed and changed the presentation of certain balances as at 31 December 2008 as follows:

a) reclassi� cation of software license costs previously capitalised under property, plant and equipment to intangible assets.

b) regrossing of gross loans, advances and � nancing and speci� c allowance balances previously wrongly written o� .

42. The operations of Islamic business

Balance sheet as at 31 December 2009

Assets

Cash and cash equivalents Financing, advances and other loans Other receivables

Total assets

Liabilities

Deposits from customers Other payables Provision for taxation Provision for zakat

Total Liabilities

Islamic fund Retained pro� ts

Total liabilities and Islamic fund

Group

Property, plant and equipment Intangible assets Gross loans, advances and � nancing Speci� c allowance

Company

Property, plant and equipment Intangible assets

2008RM’000

53,6461,441,212

752,192

2,247,050

2,112,37898,26313,185

277

2,224,103

4,00018,947

2,2,947

2,247,050

AsrestatedRM’000

113,855

1,18810,378,840

548,134

15,8181,125

2009RM’000

257,8892,890,991

486,524

3,635,404

3,170,744383,463

27,974508

3,582,689

4,00048,715

52,715

3,635,404

Increase/ (decrease) RM’000

(533) 533 25,508 25,508

(533) 533

Previously stated

RM‘000

114,388655

10, 353,332522,626

16,351592

Group and CompanyNote

(a)(b)(c)

(d)(e)

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

102

42. The operations of Islamic business (cont’d.)

Income statement for the year 31 December 2009

Income derived from investment of general investment deposits and islamic capital funds Income attributable to depositors Net income from � nancing operations Other income Other expenses Allowance for losses on advances and � nancing Pro� t before taxation and zakat Taxation Zakat Pro� t after taxation and zakat

Statement of changes in equity For the year ended 31 December 2009

Group and company

At 1 January 2008 Pro� t after taxation and zakat

At 31 December 2008

At 1 January 2009 Pro� t after taxation and zakat

At 31 December 2009

2008 RM’000

90,961 (65,972)

24,989 6,794 (736) (16,194)

14,853 (5,220) (277)

9,356

TotalRM’000

13,5919,356

22,947

22,94729,768

52,715

2009 RM’000

159,210 (90,673)

68,537 30,106 (19,152) (34,395)

45,096 (14,789) (539) 29,768

Retainedpro� ts

RM’000

9,5919,356

18,947

18,94729,768

48,715

Islamicfund

RM’000

4,000-

4,000

4,000-

4,000

Group and CompanyNote

(f )

(g)

(i)

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

2008 RM’000

14,853

3,598 16,194

34,645 (575,874) 60,415 439,330 67,895

26,411 -

26,411

26,411 27,235

53,646

2008RM’000

41,33512,311

53,646

2009 RM’000

45,096

6,544 34,395

86,035 (1,490,711) 265,669 1,058,366 285,193

204,552 (309)

204,243

204,243 53,646

257,889

2009RM’000

19,183238,706

257,889

Group and Company

Group and Company

42. The operations of Islamic business (cont’d.)

Cash ¢ ow statement for the year ended 31 December 2009

Cash ¢ ows from operating activities

Pro� t before taxation and zakat Adjustments for: Income-in-suspense Allowance for losses on advances and � nancing

Operating pro� t before working capital changes Increase in � nancing, advances and other loans Decrease/(Increase) in other receivables Increase in deposits from customers Increase in other payables

Cash generated from/(used in) operations Zakat paid

Net cash generated from/(used in) operating activities

Net increase/(decrease) in cash and short term funds Cash and short term funds at beginning of � nancial year

Cash and short term funds at end of � nancial year

(a) Cash and short term funds

Cash at banks Deposits with licensed banks

The weighted average e� ective yield rates of deposits with licensed banks at the balance sheet date was 2.76% (2008: 3.26%).

The average maturities of deposits with licensed banks as at the end of the � nancial year were from overnight placement to 270 days (2008: 365 days).

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

104

42. The operations of Islamic business (cont’d.)

(b) Financing, advances and other loans

(i) By type:

Term � nancing Corporate � nancing Property � nancing Personal � nancing Sta� � nancing Less: Unearned income

Income-in-suspense Allowance for bad and doubtful � nancing: - General - Speci� c

Net � nancing, advances and other loans

(ii) By contract:

Bai Bithaman Ajil (deferred payment sale) Bai Al-Inah (cost-plus)

(iii) Movements in non-performing � nancing, advances and other loans (including income receivable)

Non-performing loans (“NPL”) At beginning of year Classi� ed as non-performing during the year Reclassi� ed as performing during the year

At end of year

Speci� c provision Income-in-suspense

Net non-performing loans, advances and � nancing

Ratio of net non-performing loans and � nancing to gross loans and � nancing less income-in-suspense

2008 RM’000

4,810 2,920,408 469,483 1,432 (1,915,205)

1,480,928 (7,321)

(14,508) (17,887)

1,441,212

1,118,009 323,203

1,441,212

45,700 156,316 (124,664)

77,352

(17,887) (7,321)

52,144

4%

2009 RM’000

5,283 4,140,151 2,180,264 902 (3,354,961)

2,971,639 (13,865)

(29,147) (37,636)

2,890,991

1,573,456 1,317,535

2,890,991

77,352 199,227 (141,165)

135,414

(37,636) (13,867)

83,911

3%

Group and Company

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

2008 RM’000

8,941 5,567

14,508

1%

7,440 16,662 (6,035) (180)

17,887

3,543 8,966 (5,368) 180

7,321

2008RM’000

751,935257

752,192

2009 RM’000

14,508 14,639

29,147

1%

17,887 24,530 (4,779) (2)

37,636

7,321 14,462 (7,920) 2

13,865

2009RM’000

486,060464

486,524

Group and Company

Group and Company

42. The operations of Islamic business (cont’d.) (b) Financing, advances and other loans (cont’d.)

(iv) Movements in allowance for bad and doubtful debts and income-in-suspense are as follows:

General allowance At beginning of year Allowance made during the year

At end of year

As % of gross loans, advances and � nancing less speci� c allowance and interest-in-suspense Speci� c Allowance At beginning of year Allowance made during the year Amount recovered Amount reclassed to interest-in-suspense

At end of year

Income-in-suspense At beginning of year Income suspended during the year Amount recovered Amount reclassed from speci� c provision At end of year

(c) Other receivables

Due from Head O¦ ce Others

105

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

42. The operations of Islamic business (cont’d.)

(d) Deposits from customers

(i) By type of deposit:

Al-Wadiah savings account Mudharabah Fund

(ii) By type of customer:

Business enterprises Individuals

(e) Other payables

Pro� t payable Others

(f) Income derived from investment of General Investment Deposits and Islamic capital funds

Financing, advances and other loans Deposits with � nancial institutions Less: Income suspended

2008RM’000

5,6212,106,757

2,112,378

2008RM’000

2,099,52612,852

2,112,378

2008RM’000

14,69483,569

98,263

2008 RM’000

92,460 2,099

94,559 (3,598)

90,961

2009RM’000

13,9003,156,844

3,170,744

2009RM’000

3,144,22626,518

3,170,744

2009RM’000

11,283372,180

383,463

2009 RM’000

164,673 1,081

165,754 (6,544)

159,210

Group and Company

Group and Company

Group and Company

Group and Company

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

2008RM’000

42486

226

736

2008RM’000

3635

56

424

2009RM’000

1,526162

17,464

19,152

2009RM’000

1,29523

208

1,526

Group and Company

Group and Company

42. The operations of Islamic business (cont’d.)

(g) Other expenses

Personnel expenses (Note 42(h)) Promotion and marketing related expenses General administrative expenses

(h) Personnel expenses

Wages and salaries Social security costs Pension costs - Employees Provident Fund

(i) Taxation

Domestic income tax is calculated at the Malaysian statutory tax rate of 25% (2008: 26%) of the estimated assessable pro� t for the year.

A reconciliation of the income tax expense applicable to pro� t before taxation and zakat at the statutory income tax rate to income tax expense at the e� ective income tax rate of the Group and of the Company is as follows:

Pro� t before taxation and zakat Taxation at Malaysian statutory tax rate of 25% (2008: 26%) Deferred tax assets not recognised during the year

Tax expense for the year Deferred tax assets amounting to RM29,147,000 (2008: RM14,508,000) have not been recognised in respect of the following items:

Allowance for doubtful debts

2008RM’000

14,853

3,8621,358

5,220

2008RM’000

14,508

2009RM’000

45,069

11,2743,515

14,789

2009RM’000

29,147

Group and Company

Group and Company

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

108

42. The operations of Islamic business (cont’d.)

(j) Yield/pro� t rate risk

The table below summarises the Group’s and the Company’s exposure to yield/pro� t rate risk for the Islamic business operations. The table indicates e� ective average yield/pro� t rates at the balance sheet date and the periods in which the � nancial instruments either reprice or mature, whichever is earlier.

2009

Assets Cash and cash equivalents Financing, advances and other loans - performing - non-performing Other receivables

Total assets

Liabilities Deposits from customers Other liabilities

Total liabilities Equity

Total liabilities and equity

On-balance sheet yield/pro� t sensitivity gap O� -balance sheet yield/pro� t sensitivity gap

Total yield/pro� t sensitivity gap

Averageyield/pro� t

rate% per

annum

2.16

5.50 - -

2.45 -

TotalRM’000

257,889

2,755,577 135,41

486,524

3,635,404

3,170,744411,945

3,582,68952,715

3,635,404

-

-

-

Non-yield/pro� t rate

sensitiveRM’000

19,183

- 135,414 486,524

641,121

- 411,945

411,945 52,715

464,660

176,461

-

176,461

Over 5years

RM’000

-

2,630,277 - -

2,630,277

- -

- -

-

2,630,277

-

2,630,277

> 1-5 years RM’000

-

123,112 - -

123,112

1,078 -

1,078 -

1,078

122,034

-

(122,034)

> 3-12 months RM’000

3,401

1,896 - -

5,297

473,459 -

473,459 -

473,459

(468,162)

-

(468,162)

> 1-3 months RM’000

180,302

94 - -

180,396

1,213,081 -

1,213,081 -

1,213,081

(1,032,685)

-

(1,032,685)

Up to 1 month RM’000

55,003

198 - -

55,201

1,483,126 -

1,483,126 -

1,483,126

(1,427,925)

-

(1,427,925)

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109

42. The operations of Islamic business (cont’d.)

(j) Yield/pro� t rate risk (cont’d.)

2008

Assets Cash and cash equivalents Financing, advances and other loans - performing - non-performing Other receivables

Total assets

Liabilities Deposits from customers Other liabilities

Total liabilities Equity

Total liabilities and equity

On-balance sheet yield/pro� t sensitivity gap O� -balance sheet yield/pro� t sensitivity gap

Total yield/pro� t sensitivity gap

Averageyield/pro� t

rate% per

annum

3.26

6.57 - -

3.48 -

TotalRM’000

53,646

1,389,068 52,144

752,192

2,247,050

2,112,378111,725

2,224,10322,947

2,247,050

-

-

-

Non-yield/pro� t rate

sensitiveRM’000

-

- 52,144 752,192

804,336

- 111,725

111,725 22,947

134,672

669,664

-

669,664

Over 5years

RM’000

-

1,299,385 - -

1,299,385

- -

- -

-

1,299,385

-

1,299,385

> 1-5 years RM’000

-

88,461 - -

88,461

2,327 -

2,327 -

2,327

86,134

-

86,134

> 3-12 months RM’000

3,146

1,021 - -

4,167

555,785 -

555,785 -

555,785

(551,618)

-

(551,618)

> 1-3 months RM’000

229

51 - -

280

1,537,806 -

1,537,806 -

1,537,806

(1,537,526)

-

(1,537,526)

Up to 1 month RM’000

50,271

150 - -

50,421

16,460 -

16,460 -

16,460

33,961

-

33,961

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009PROXY FORMMALAYSIA BUILDING SOCIETY BERHAD (9417-K)(Incorporated in Malaysia)

I/We of

being a member/members of MALAYSIA BUILDING SOCIETY BERHAD hereby appoint

of

or failing him of

or failing him, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the Annual General Meeting of the

Company to be held at Ballroom 1, 1st Floor, Sime Darby Convention Centre, 1A Jalan Bukit Kiara 1, 60000 Kuala Lumpur on Thursday, 29 April

2010 at 11.00 a.m. and at any adjournment thereof.

My/Our proxy to vote as indicated hereunder.

1 To receive and adopt the Audited Financial Statements of the Company and of the Group for the year ended 31 December 2009 and Reports of the Directors and Auditors thereon. Resolution 1

2 To declare a � rst and � nal dividend of 4% less 25% income tax for the � nancial year ended 31 December 2009. Resolution 2

3 To approve payment of Directors’ Fees amounting to RM420,833 for the � nancial year ended 31 December 2009. Resolution 3

6 To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorise the Directors to determine their remuneration. Resolution 7

Number of Shares Held

NO. RESOLUTIONS FOR AGAINST

4 To re-elect the following Directors who retire in accordance with Article 86 of the Company’s Articles of Association and who being eligible o� er themselves for re-election:-

(i) Datuk Abdullah bin Kuntom Resolution 4 (ii) Puan Cindy Tan Ler Chin Resolution 5

5 To re-elect the following Director who retire in accordance with Article 78 of the Company’s Articles of Association and who being eligible o� er himself for re-election:-

(i) Encik Jasmy bin Ismail Resolution 6

Date: Signed

in the presence of:

NOTES:-

1. This proxy form duly signed and sealed, must be deposited at the Registered O¦ ce of the Company, 11th Floor, Wisma MBSB, 48 Jalan Dungun, Damansara Heights, 50490 Kuala Lumpur, not less than 48 hours before the time � xed for holding the meeting.2. If you wish to appoint a proxy, please insert the full name of the proxy (in block letters) in the space provided. A proxy need not be a member of the Company. Where a member appoints two proxies, the appointments shall be invalid unless he speci� es the proportions of his holding to be represented by each proxy.3. In case of a corporation, the instrument appointing the proxy must be under seal or under the hand of an o¦ cer or attorney duly authorised.4. Unless voting instructions are indicated in the spaces provided above, the proxy may vote or abstain as he/she thinks � t.

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NOTES TO THE FINANCIAL STATEMENTS (cont’d.)31 December 2009

To: Secretarial Department MALAYSIA BUILDING SOCIETY BERHAD (9417-K)

8th Floor, Wisma MBSB No. 48, Jalan Dungun Damansara Heights 50490 Kuala Lumpur

( ]STAMP

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