Statement on Corporate Governance - Malaysiastock.biz • Anti-Money Laundering and Counter...

The Board of Directors of Alliance Financial Group Berhad has adopted the best practice of corporate governance in all areas of its activities with the objective of achieving business prosperity and corporate accountability. The ultimate objective is to safeguard the interests of all stakeholders and to enhance shareholders’ value. The Board is committed to ensure that the Company is in compliance with the guidelines on Best Practices in Corporate Governance set out in the Malaysian Code on Corporate Governance (Revised 2007) and Bank Negara Malaysia (BNM) Guidelines on Corporate Governance for Licensed Institutions (Revised BNM/GP1).

1. The Board of Directors

1.1 Composition

The Board comprises seven members, who are all Non-Executive Directors, of whom five are Independent Directors. The Board is constituted of individuals of high calibre and diverse experience and collectively has the necessary skills and qualifications to effectively manage the Company and to discharge the responsibilities of the Board. The current board members are all very experienced in the management of businesses and in terms of academic background have skills in the areas of law, banking, finance, accounting and economic.

The presence of a majority of Independent Non-Executive Directors also provides the necessary checks and balances to ensure that the interests of all shareholders and the general public are given due consideration in the decision-making process.

A brief profile of each Director is presented on pages 14 to 17 of this Annual Report.

1.2 Duties and Responsibilities

The Board is led by the Chairman, Datuk Oh Chong Peng, who is an Independent Non-Executive Director.

The Chairman receives strong and positive support from the Group Company Secretary in discharging his duties and responsibilities to ensure the effective functioning of the Board.

There are matters specifically reserved for the Board’s decision to ensure that the direction and control of the Group are firmly in hand. The day-to-day conduct of the Group’s business is delegated to the employees of the Group subject to the authority limit given. The Board is ultimately responsible for the overall performance of the Company and of the Group.

The principal duties and responsibilities of the Board are:

• formulatingthebusinessdirectionandobjectivesoftheGroup;

• reviewing, adopting and approving the Group’s annual budgets, strategic plans, keyoperationalinitiatives,majorinvestmentsandfundingdecisions;

• overseeingtheconductofbusinessoftheGroup;

• reviewingtheriskmanagementprocesseswithintheGroup;

• assumingitsresponsibilityinsuccessionplanningwithintheGroup;and

• reviewing the adequacy and integrity of internal control systems and managementinformation systems to ensure compliance with relevant laws, rules, regulations, directives and guidelines.

The Board also assumes various functions and responsibilities that are required of them by regulatory authorities, as specified in guidelines and directives issued from time to time.

1.3 Directors’ Code of Ethics

The Directors in the Group adhere to the code of ethics as set out in the Bank Negara Malaysia’s BNM/GP7 – Part 1 Code of Ethics:Guidelines on the Code of Conduct for Directors, Officers and Employees in the Banking Industry and the Code of Ethics for Company Directors established by the Companies Commission of Malaysia.

1.4 Board Meetings

The Board meets on a regular basis to review business performance, strategies, business plans and significant policies as well as to consider business and other proposals which require the Board’s approval. Ad-hoc Board meetings, where necessary, are held to deliberate on corporate proposals or urgent issues which require the Board’s consideration between scheduled meetings.

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The Board met nine times during the financial year ended 31 March 2010. Details of each Director’s attendance for the financial year ended 31 March 2010 are as follows:

Name of Director Attendance

1. Datuk Oh Chong Peng (Chairman) 9/9

2. Dato’ Thomas Mun Lung Lee 8/9

3. Tan Yuen Fah 9/9

4. Stephen Geh Sim Whye 9/9

5. Phoon Siew Heng 8/9

6. Megat Dziauddin bin Megat Mahmud 8/9

7. Kung Beng Hong 8/9

8. Tee Kim Chan (Retired on 29.7.2009) 4/4

9. Datuk Bridget Anne Chin Hung Yee (Resigned on 1.3.2010) 7/8

1.5 Access to Information

Board members are provided with relevant proposal papers and supporting documents at least three clear days before the relevant Board and Board Committee meetings to provide sufficient time for the Directors to review, consider and obtain further information, where required, for deliberation at meetings. Urgent proposals can be presented less than three clear days subject to approval of the Chairman. Senior management and advisers are invited to attend Board meetings, where necessary, to provide additional information and insights on the relevant agenda items tabled at Board meetings.

The Directors have full access to the services of the Company Secretary, whose role includes ensuring that Board procedures, applicable rules and regulations are complied with.

Every Director has the right to resources, whenever necessary and reasonable, for the performance of his duties at the cost of the Company.

Directors may seek external independent professional advice at the expense of the Company, to assist them in making well-informed decisions whether as a full Board or in their individual capacity.

1.6 Appointment and Re-election of Directors

Pursuant to the guidelines issued by BNM, the appointment of new Directors and re-appointment of Directors upon the expiry of their respective tenure of office as approved by BNM, are subject to the prior approval of BNM.

Any proposed appointment of new Board members and proposed re-appointment will be assessed by the Nomination Committee. The Nomination Committee will, upon its assessment, submit its recommendation to the Board for approval subject to BNM’s consent.

Upon appointment, new Directors are advised of their legal and statutory responsibilities. All Directors are also regularly being updated on new requirements affecting their responsibility and are constantly reminded of their obligations.

In accordance with the Articles of Association of the Company, newly appointed Directors shall hold office only until the next Annual General Meeting (AGM), and shall then be eligible for re-election. Additionally, one-third (1/3) of the remaining existing Directors shall retire from office at each AGM and be eligible to offer themselves for re-election provided always that all Directors shall retire from office at least once every three years.

Directors of the Company who are over the age of 70 years would vacate their office and submit themselves for re-appointment annually at each AGM in accordance with Section 129(6) of the Companies Act, 1965.

1.7 Directors’ Training

The Board places the responsibility for training of directors on the Nomination Committee which on a continuous basis, evaluates and determines the training needs of Directors.

All the Directors have completed the Mandatory Accreditation Programme and attended various training programmes under the Continuing Education Programmes pursuant to the requirements of Bursa Securities.

The Company has in place a Directors’ Orientation Programme for newly appointed Directors to familiarise themselves with the Group’s business operations. The Directors are provided with the opportunity for relevant training programmes on an ongoing basis on areas relating to the banking and financial industry to keep themselves abreast with the latest developments in the marketplace. As at 31 March 2010, five out of seven Directors have attended the eight-day Financial Institutions Directors’ Education (FIDE) Programme jointly developed by BNM and Malaysia Deposit Insurance Corporation. The remaining Directors are planning to attend the FIDE Programme during the next financial year.

ALLIANCE FINANCIAL GROUP BERHAD(6627-X)•2010ANNUALREPORT 65

During the financial year, the Directors have attended seminars, conferences and courses on various topics covering accounting, tax, corporate governance, finance, management, Islamic banking and risk management. Some of the seminars, conferences and courses attended by Directors as at 31 March 2010 included the following:

• StrategicTaxPlanningforCorporateRestructuring

• PracticalApproachtoTaxAudits&Investigations

• UpdateonFinancialReportingStandards7&139

• MalaysianAccountingStandardBoard’sPublicForumonAccountingIssues,FairValueandFinancial Instruments

• LatestDevelopmentsinCorporateGovernanceandBoardRemuneration

• ColumbusCorporateGovernance

• CorporateSocialResponsibility&BoardLevelLeadership

• “InternationalCentreforLeadershipinFinanceExecutiveSeries”byBankNegaraMalaysia

• BankNegaraMalaysia’sFinancialIndustryConference

• IslamicBanking&Finance:TheWayForward

• Anti-MoneyLaunderingandCounterFinancingofTerrorismTrendsandTypologies

1.8 Board Committees

The Board has established various Board Committees to assist and complement the Board in the execution of its responsibilities. Each Board Committee operates within its terms of reference, which clearly define its functions and authority. The Board Committees of the Company are as follows:

(a) Audit Committee

The Terms of Reference and the composition of the Audit Committee are presented in the Audit Committee Report on pages 81 to 83 of this Annual Report.

(b) Nomination Committee

The Nomination Committee reviews the existing mix of skills, experience, size, effectiveness of the Board and contribution of each individual Director. It also considers and recommends to the Board, the candidates for directorships.

The salient Terms of Reference of the Nomination Committee are as follows:

• toestablishminimumrequirementsfortheboardi.e.requiredmixofskills,experience,qualification and other core competencies required of a director. The Committee is also responsible for establishing minimum requirements for the Chief Executive Officer (CEO).Therequirementsandcriteriashouldbeapprovedbythefullboard;

• torecommendandassessthenomineesfordirectorship,boardcommitteemembersas well as nominees for the CEO. This includes assessing directors for reappointment, before an application for approval is submitted to BNM. The actual decision as to who shallbenominatedshouldbetheresponsibilityofthefullboard;

• tooverseetheoverallcompositionoftheboard,intermsoftheappropriatesizeandskills, and the balance between executive directors, non-executive directors and independentdirectorsthroughannualreview;

• torecommendtotheboardtheremovalofadirector/CEOfromtheboard/managementifthedirector/CEOisineffective,errantandnegligentindischarginghisresponsibilities;

• toestablishamechanismfortheformalassessmentontheeffectivenessoftheboardas a whole and the contribution of each director to the effectiveness of the board, the contribution of the board’s various committees and the performance of the CEO and other key senior management officers. Annual assessment is conducted based on an objective performance criterion. Such performance criteria are approved by the full board;

• toensurethatalldirectorscontinuetoreceiveappropriatetraining inorder tokeepabreastwiththelatestdevelopmentintheindustry;

• to oversee the appointment, management succession planning and performanceevaluationofkeyseniormanagementofficers;

• torecommendtotheboardtheremovalofkeyseniormanagementofficersiftheyareineffective,errantandnegligentindischargingtheirresponsibilities;and

• toassess,onanannualbasis,toensurethatthedirectorsandkeyseniormanagementofficers are not disqualified under Section 56 of the Banking and Financial Institutions Act, 1989.

The Nomination Committee annually assesses the effectiveness of the Board as a whole and the contribution of each individual Director by way of a set of customised self-assessment questionnaires. The results of the self-assessment by Directors are compiled by the Company Secretary and tabled to the Nomination Committee and Board for deliberation. Arising from the annual review, the Nomination Committee and the Board has identified gaps in skills and expertise that they feel would enhance the effectiveness of the Board and are actively in search for suitable candidates.

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The Nomination Committee comprises entirely of Non-Executive Directors with the majority being independent. For the financial year ended 31 March 2010, a total of two meetings were held by the Nomination Committee. The members of the Nomination Committee and the details of attendance during the financial year ended 31 March 2010 are as follows:

Committee Members Attendance






6. Stephen Geh Sim Whye (Appointed on 29.7.2009) N/A

(c) Remuneration Committee

The Remuneration Committee reviews and makes recommendations to the Board on the remuneration package of Non-Executive Directors. The reviews cover all aspects of remuneration, including but not limited to Directors’ fees, allowances and benefits-in-kind based on the level of responsibilities undertaken by the particular Director concerned.

The salient Terms of Reference of the Remuneration Committee are as follows:

• to recommend a framework of remuneration for directors, CEO and key seniormanagement officers of the Company for the full board’s approval. The remuneration framework should support the Company’s culture, objectives and strategy and should reflect the responsibility and commitment, which goes with the board membership and responsibilities of the CEO and senior management officers. There should be a balance in determining the remuneration package, which should be sufficient to attract and retain the employees and/or directors of calibre, and yet not excessive to the extent of the Company’s funds are used to subsidise the excessive remuneration. This framework should cover all aspects of remuneration including director’s fees, salaries, allowances,bonuses,optionsandbenefits-in-kind;

• to provide oversight on remuneration matters of operating subsidiaries and torecommend specific remuneration packages for executive director(s) and CEO. The remuneration package should be structured such that it is competitive and consistent with the Company’s culture, objectives and strategy. Salary scales drawn up should be within the scope of the general business policy and not be dependant on short-term performance to avoid incentives for excessive risk-taking. As for non-executive directors and independent directors, the level of remuneration should be linked to their level of responsibilities undertaken and contribution to the effective functioning of the board. In addition, the remuneration of each board member may differ based on their levelofexpertise,knowledgeandexperience;

• toreviewannuallytheGroupPolicyonremunerationofnon-executivedirectorsofthesubsidiaries and to recommend the remuneration of the non-executive directors for the board’sapproval;

• to approve new key senior management appointments and remuneration package,transfers and promotions of senior management officers and assessing the performanceofkeyseniormanagementofficersoftheCompany;and

• toreviewandapproveannualsalaryincrementandperformancebonusforemployeesof the Company.

The Remuneration Committee comprises of entirely Non-Executive Directors with the majority being independent. For the financial year ended 31 March 2010, a total of two meetings were held by the Remuneration Committee. The members of the Remuneration Committee and the details of attendance during the financial year ended 31 March 2010 are as follows:






5. Tee Kim Chan (Retired on 29.7.2009) N/A


(d) Employees’ Share Participating Scheme Committee

The Employees’ Share Participating Scheme Committee (ESPS Committee) is a sub-committee of the Remuneration Committee established to implement and administer the AFGB Employees’ Share Scheme (ESS) in accordance with the Bye-Laws approved by the shareholders of the Company on 28 August 2007.

The members of the ESPS Committee and the details of attendance during the financial year ended 31 March 2010 are as follows:







The minutes of all Board Committees are circulated to the Board for notation.

1.9 Directors’ Remuneration

The objective of the Company’s policy on Directors’ remuneration is to attract and retain Directors needed to steer the Company towards achieving its goal effectively. The determination of the Non-Executive Directors’ remuneration is a matter for the Board as a whole.

The level of remuneration of Non-Executive Directors is linked to their level of responsibilities undertaken.

Non-Executive Directors are paid annual Directors’ fees and sitting allowances for attendance to Board/Committee meetings. The members of Board Committees are also paid allowances for additional responsibilities undertaken. Directors of the Company who are employees within the Group are remunerated separately in accordance with their employment contracts.

The Directors are recommending for shareholders’ approval at the AGM an increase to Non-Executive Directors’ remuneration as the fees have not been revised for three years and to make the fees payable more in line with current market rates. The proposed fees are as follows:

Existing (per annum) Proposed (per annum)

Non-Executive Chairman RM96,000 RM120,000

Non-Executive Director RM48,000 RM60,000


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Details of the Company’s Directors’ Remuneration (including benefits-in-kind) for each Director in the Company and the Group for the financial year ended 31 March 2010 are set out below:

COMPANY

Company Total

RM’000

SUBSIDIARIES

Group Total

RM’000

ABMB AIBB AIS AIMB

Fees RM’000

Salary, Allowances,

Benefits-in-kind

and others RM’000

Fees RM’000

Salary, Allowances,

Benefits-in-kind

and others RM’000

Fees RM’000

Salary, Allowances,

Benefits-in-kind

and others RM’000

Fees RM’000

Salary, Allowances,

Benefits-in-kind

and others RM’000

Fees RM’000

Salary, Allowances,

Benefits-in-kind

and others RM’000

Executive Directors – – – – – – – – – – – –

Non-Executive DirectorsDatuk Oh Chong Peng (Chairman) 120 83 203 – – – – – – – – 203

Dato’ Thomas Mun Lung Lee 60 43 103 144 90 120 8 – – – – 465

Tan Yuen Fah 60 41 101 72 44 – – – – – – 217

Stephen Geh Sim Whye 60 43 103 – – – – – – – – 103

Phoon Siew Heng 60 35 95 72 71 60 38 – – – – 336

Megat Dziauddin bin Megat Mahmud 60 56 116 72 95 60 8 120 8 24 19 522

Kung Beng Hong 60 29 89 72 135 60 28 – – – – 384

Tee Kim Chan (Retired on 29.7.2009) 20 22 42 68 107 – – – – 24 16 257

Datuk Bridget Anne Chin Hung Yee (Resigned on 1.3.2010)

– – – – * 2,184 – – – – – – * 2,184

Total 500 352 852 500 2,726 300 82 120 8 48 35 4,671

* This includes the fair value of share grants vested on 12.12.2009 to Datuk Bridget Anne Chin Hung Yee under the Employees’ Share Scheme amounting to RM69,355. These share grants had since been lapsed following her resignation as Group Chief Executive Officer of ABMB.

ABMB : Alliance Bank Malaysia Berhad AIS : Alliance Islamic Bank Berhad AIBB : Alliance Investment Bank Berhad AIMB : Alliance Investment Management Berhad


2. Accountability and Audit

2.1 Financial Reporting

The annual financial statements and quarterly results are reviewed by the Audit Committee and approved by the Board of Directors for BNM’s clearance prior to public release. A statement by the Directors explaining the Board’s responsibility for preparing the annual financial statements is set out on page 110 of this Annual Report.

2.2 Risk Management Framework

A Risk Management report, which provides an overview of the risk management framework within the Group, is disclosed on pages 86 to 93 of this Annual Report.

2.3 Internal Control

A Statement on Internal Control, which provides an overview of the state of internal control within the Group, is disclosed on page 85 of this Annual Report.

2.4 Policy against Fraud

All employees are entrusted with the responsibility to stay alert to risk of fraud and assist in the combat against fraud. The Group has in place reporting procedures with regards to fraud, robbery/burglary and including breach of the Code of Ethics.

The Group also has in place a Whistle Blower’s Policy which is designed to provide an avenue for staff to report any possible financial improprieties such as manipulation of financial results, misappropriation of assets, intentional circumvention of internal controls, inappropriate influence on related party transactions by related parties, or other improprieties. The Whistle Blower’s Policy is also an avenue for employees to raise concerns in relation to the specific issues which are in the interest of integrity and justice, and which fall outside the scope of other Group policies and procedures.

2.5 Anti-Money Laundering and Counter-Financing of Terrorism

The Anti-Money Laundering and Anti-Terrorism Financing Act 2001 provides the legal framework to counter money laundering and terrorism financing in reporting institutions. In order to reduce the likelihood of any of the entities within the Group becoming vehicles for money laundering, terrorism financing and other unlawful activities, the Group has a policy on anti-money laundering and counter-financing of terrorism setting out the minimum standards that are to be adopted and implemented by the entities within the Group.

The key features of the policy are:

• auniformcustomeracceptancepolicywhichrequires,amongstothers,establishmentofabusiness relationship only after satisfactory verification of a new customer or persons acting ontheirbehalf;

• customerduediligencetobeconductedwiththeapplicationofarisk-basedapproach;

• ongoingmonitoringoftransactionstodetectunusualandsuspiciouspatternsofactivityandintensifiedmonitoringforhigherriskcustomers;

• clear enunciation of the roles and responsibilities of various persons within the Group,includingtheBoardofDirectors;

• requirementforreportingofsuspicioustransactionsandprohibitionagainstdisclosureofsuspicioustransactionreportsmade;

• co-operationwiththeFinancialIntelligenceUnit,BNMandotherregulatoryauthoritieswithnocompromiseonconfidentialityofcustomerinformation;

• properretentionofrecordsfortheprescribedretentionperiod;and

• ensuringstaffawarenessandtraining.

The standards expected by the Group are upheld and reinforced by annual training programmes on anti-money laundering and counter-financing of terrorism.

2.6 Relationship with the Auditors

Through the Audit Committee, the Company has established a formal and transparent relationship with the auditors, both internal and external. The external auditors are invited to discuss the annual financial statements, their audit plan, audit findings and other special matters that require the Board’s attention. The Audit Committee meets with the external auditors and internal auditors twice a year, without the presence of the Management.


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3. Corporate ResponsibilityThe Board has adopted the best practices in corporate governance in all its activities to ensure that we achieve business prosperity for the benefit of all stakeholders. Whilst we are committed to achieving our business and financial goals in an ethical, responsible and sustainable manner, we are also mindful of the need to fulfil our responsibilities to the marketplace, workplace, community and the environment in which we operate.

4. Investor Relations and Shareholders CommunicationThe Company acknowledges the importance of regular communication with shareholders and investors. The Company endeavours to maintain constant and effective communication with shareholders through timely and comprehensive announcements. The Board regards the AGM as an opportunity to communicate directly with shareholders and encourages attendance and participation. The notice of AGM is despatched to shareholders, together with explanatory notes or circulars on items of special business, at least 21 days prior to the meeting date.

Briefings for analysts are conducted every quarter in conjunction with the release of the quarterly financial results to provide consistent dialogues between the Group’s Senior Management and the investment community. During the last 12 months, the Group has participated at roadshows and dialogues both locally and internationally to share with the investment community the latest updates and pertinent information on the Group’s progress. These platforms enabled the investment community to express their views on the Group’s performance and in turn, the Group had the opportunity to manage investors’ expectations and strengthen their understanding of the Group.

Shareholders, potential investors and members of the public can access the Company’s website at www.alliancegroup.com.my for information of the Group. They can also convey their concerns and queries to the Senior Independent Non-Executive Director of the Company, Dato’ Thomas Mun Lung Lee at fax no. 03-2694 6200 or by e-mail to [email protected], or by mail to the registered office of the Company at 3rd Floor, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur, Malaysia.

5. Corporate DisclosureThe Corporate Disclosure Policies and Procedures for the Group (CDPP) provides timely, consistent and fair disclosure of corporate information to enable informed decisions by investors.

The objectives of the CDPP are:

(a) raising awareness of directors, management and employees on disclosure requirements and practices;

(b) providing guidance in disseminating corporate information to, and in dealing with investors, analysts,mediarepresentativesandthepublic;and

(c) ensuring compliance with the disclosure obligations under the Main Market Listing Requirements of Bursa Securities and other applicable laws.

The Group Company Secretary being the Corporate Disclosure Manager (CDM), serves as the primary contact person for matters referenced in the CDPP. He oversees and co-ordinates disclosure of material information to Bursa Securities. The CDM also ensures compliance with the CDPP and undertakes reviews of any violations, including assessment and implementation of appropriate consequences and remedial action.

Certain designated senior management staff of the Group are authorised to communicate Group information to the investing public. The authorised spokespersons are regularly reminded of their responsibility to exercise due diligence in making sure that the information to be disseminated to the investing public is accurate, clear, timely and complete, and that due care is observed when responding to analysts, the media and the investing public.

To take advantage of current information technology to disseminate relevant information to the investing public, all announcements released by the Company are made accessible via the Company’s website, www.alliancegroup.com.my.

6. Dealings in Securities The Group has in place an internal procedure governing dealings in securities by the Directors and employees to prevent contravention of applicable rules and requirements, including the provisions of the Main Market Listing Requirements of Bursa Securities and insider trading laws.

“WatchList”and“RestrictedList”arecirculatedregularly to therelevantDirectorsandemployeesreminding them to refrain from dealing with relevant securities. Directors and principal officers of the Group are also reminded on a quarterly basis in relation to restriction in dealings in securities of the Company during Closed Periods.

This Statement on Corporate Governance is made in accordance with a resolution of the Board of Directors dated 18 May 2010.


At the Heart of Our Business – Responsible Corporate Conduct At the very heart of the Alliance Financial Group (the Group) lies a deep-rooted commitment to undertaking responsible corporate conduct in a manner that helps build strong relationships and elevates the standing of our shareholders, customers, employees and business partners as well as the communities and environment in which we operate. We recognise that it is our responsibility as a successful financial institution to constantly review the manner in which we engage with our stakeholders and to ensure that we undertake our role in a way that promotes sustainability and good corporate citizenship. Moreover, good corporate responsibility is a requirement for participation in society and is increasingly viewed as such by diverse stakeholders and opinion formers.

The Group’s corporate responsibility activities are continuously guided by the principles of accountability, honesty, transparency and sustainability. The Group adheres to the broad guidelines set out by Bursa Malaysia Securities Berhad and we sincerely support the corporate responsibility vision laid out by the Prime Minister and the expectations of the Securities Commission, among others. We are committed to embracing corporate responsibility wholeheartedly and to playing a leading role going forward. The Group aspires to be identified as an ethical, respectful and transparent entity in all its business activities and we will work to ensure that we are adding sustainable value to society at large and encouraging our people to make a difference where it is needed.

Going Beyond PhilanthropyOneofAlliance’scorevaluesis“Caring”whichunderpinsourbeliefthat“beyondourbusinessobjectives,we care about people - their existence, welfare, passions and dreams.”We are of the opinion that acorporation’s corporate responsibility ambitions are best realised when its activities are not based on donations or philanthropy alone. While we will continue to be active in philanthropic endeavours, more importantly, we want to place an emphasis on ensuring that our corporate responsibility activities align with our core values, mission and vision and that they impact in a tangible and sustainable manner upon our stakeholders.

It is in this spirit that we have recently created a Corporate Responsibility Department under the purview of theCorporateStrategy&BusinessPlanningunitwhichisdedicatedtoadvancingourcorporateresponsibilityagenda under the direct guidance of senior management and the Board.

Key Areas of Corporate Responsibility Alliance continues to establish policies and practices as well as encourage staff contributions and corporate activities in four key areas of corporate responsibility:

• EngagingtheMarketplace;

• MaintainingaConduciveWorkplace;

• DevelopingourCommunity;and

• ConservingourEnvironment.

Engaging the MarketplaceAs a Group, we continuously undertake initiatives to engage with our shareholders, investors and customers to strengthen relationships and create value for them. In line with our core values of practising integrity and ethics in all our business dealings, as well as to be transparent and accountable to our shareholders and investors, the Group provides consistent, accurate, transparent and timely information to the investment community.

Engaging with Stakeholders and Investors

The Group Investor Relations unit is responsible for building and strengthening the Group’s credibility in the marketplace, ensuring proactive engagement with our shareholders and the investment community, as well as disseminating information to as extensive an audience as possible both locally and internationally.

The Group continues to have a strong following amongst domestic and international institutional investors, fund managers and the stockbroking industry’s research analysts. In the financial year under review, extensive investor relations activities led to a rise in research coverage. Three additional research houses initiated coverage on the Group. The Group’s performance is now covered by 12 research houses, equally split between international and local based research houses. The significant level of resources allocated to the investor relations function is a reflection of the Group’s commitment to maintaining a consistently high standard of transparency for its stakeholders. Our proactive approach to investor relations has also made Alliance Bank Malaysia Berhad (the Bank) one of the most widely covered small-mid cap banks in the country.

Despite 2009 proving to be a challenging year for the global economy, communications to the investing community remained a priority. Over the course of the year, the investor relations team responded to numerous requests for meetings, including one-to-one, group updates and conference calls. The Group’s policy of responding to questions within three working days is appreciated by fund managers and analysts, and we received a regular and high level of information requests.

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Snapshot of Investor Relations Activities for the Financial Year Ended 31 March 2010

1st Quarter 2009/2010

•Publicationof1Q2009/2010Results•MediaStatementandAnalystsBriefing•AnalystsBriefing(May2009)•CreditSuisseRoadshow(Singapore)

2nd Quarter 2009/2010

•PublicationofAnnualReport2009•AnnualGeneralMeeting(July2009)•PublicationofHalfYear2009/2010Results•MediaStatementandAnalystsBriefingbyTeleconference (August 2009)

3rd Quarter 2009/2010•Publicationof3Q2009/2010Results•MediaStatementandAnalystsBriefing•AnalystsBriefing(December2009)

4th Quarter 2009/2010

•PublicationofFullYear2009/2010Results•Investors/FundManagers/AnalystsBriefing(January2010)•MediaStatementandAnalystsBriefing•AnalystsBriefing(February2010)•KAFCorporateDay

The year saw us conducting face-to-face briefings for research analysts and fund managers immediately upon the release of our half-year results. Senior management personnel conducted presentations and meetings at four investor conferences, including one roadshow in Singapore, plus five teleconferences. The investor relations team also actively engaged with the Minority Shareholder Watchdog Group (MSWG) in our conferences and annual general meetings, where we openly responded to their queries about the Group and our businesses.

In response to the high level of queries regarding an internal investigation on the Group CEO and Group COO in early 2010, the investor relations team responded with appropriate communications. The team worked together with Group Corporate Affairs, the Board of Directors and senior management to facilitate the flow of the latest information to the investing community in a consistent manner to help the investing community make informed decisions. At the same time, these efforts helped garner feedback that was relayed to the Board and senior management. Additionally, a comprehensive programme of face-to-face meetings was organised for Board and management members to meet with research analysts, fund managers and the MSWG. These platforms provided stakeholders the opportunity to seek clarification about the issues at hand. The Group ensured that high standards of both responsible corporate governance and permitted market communication were maintained while the internal investigations were undertaken.

We are keen to disseminate information to the market in a timely manner. The efficacy of our efforts can be seen in the high number of visits to our website and in the steady upgrades and enhancements of our website content. We continue to populate our site with timely release of our quarterly financial results and key information about the Group which is easily accessible to the investing community and members of the media.

Our proactive approach to investor relations has also created a platform for the investing community to express their views on the Group’s performance to senior management and the Board of Directors. Our Directors are kept well informed of investors’ expectations. Our investor relations team also continues to actively track, monitor and feed analysts’ recommendations, concerns and priorities to management and the Board of Directors on a regular basis.

Enhancing Shareholder Value

The Group continue to push the envelope on innovation and business excellence to deliver top quality returns to our investors. Our commitment to setting new standards of excellence culminated in our garnering several awards and accolades over the course of the financial year.

TheBankalsomadeitsdebutonMalaysia’stop30MostValuableBrands2009followinganevaluationwhich took into account the Bank’s financial and brand strengths. In addition, the Group was awarded the 2009 Excellence Award for the National Award for Management Accounting (NAfMA). This top award is an acknowledgement of the Group’s commitment to maintaining excellent management accounting practices.


Nurturing Customer Growth

To demonstrate the Group’s commitment to its customers on the SME, Commercial and Corporate Banking fronts, we continued to undertake initiatives to help nurture and grow their businesses.

For the seventh consecutive year, the Group played the role of Main Sponsor for the Nanyang Golden Bull Award 2009, the most prestigious annual business award for Malaysia’s best performing and most resilient small and medium-sized enterprises (SMEs). The Nanyang Golden Bull Award was established to further promote the development of the SMEs as catalysts of economic growth and domestic investment.

To ensure SMEs have greater access to banking services we have to date established 26 Alliance Business Centres at our bank branches and 26 Trade Service counters across the country. On top of this, we continued to conduct complimentary business talks, seminars and workshops on issues relevant to SMEs.

To support our customers and draw attention to our innovative product and service offering, the Group participatedinanumberofhighprofileindustryevents.The“InsightsintotheFinancialWorld”conference,for example, saw three leading external economics and marketing professionals being invited to speak to selected Alliance customers on how they could prosper amidst a distressed economic environment.

In support of the SME segment, our Commercial Banking unit took part in the 12th SMIDEX exhibition held at theKualaLumpurConventionCentre.With thetheme“Innovation&TechnologySustainingPower forSMEs”,theeventinvolvedbusinessmatchingandbriefingsessionsbyvariousfinancialinstitutions.

Through Alliance Islamic Bank Berhad (AIS), the Group continues to meet the needs of customers looking for innovative Shariah-compliant products and services. Since its establishment in April 2008, AIS has grown by leaps and bounds. On the product front, AIS’ Personal Financing-i product received the Excellence in Business Model Innovation Award from Asian Banker on the back of over 180% year-on-year growth in personal financing-i. The year under review saw the latest Islamic Banking Centre (IBC) being established, bringing the total number of IBCs within the Group network to eight.

Undertaking Good Corporate Governance Practices

Good corporate governance is the hallmark of a well-run organisation and the Group is committed to adopting and implementing best-in-class standards and international best practices. It is Alliance’s firm belief that proactive stakeholder communications enables us to fulfil our corporate governance responsibilities. Through regular Board meetings of the various entities, the Board is kept abreast and in control of the respective businesses. In addition, there are Board committees such as the Audit Committee, Group Risk Management Committee, Nomination Committee, Executive Committee as well as the Group Management and Remuneration Committee to provide further supervisory oversight of the Group.

The Group also has an ongoing process for identifying, evaluating and managing the significant risks faced in the ever changing financial environment. This process is reviewed regularly by the Board in accordance withthe“StatementonInternalControl:GuidanceforDirectorsofPublicListedCompanies”issuedbytheTask Force on Internal Control. Our management is tasked with implementing these policies, procedures and guidelines and they are monitored independently by the Board’s Audit Committee.

TheGrouphas inplaceaCompliance&OperationalRiskManagementFramework (CORMFramework)that complies with the laws, regulations, rules, directives and guidelines applicable to the Group. To ensure our businesses and support units fully comply with the CORM Framework, risk officers undertake timely and effective monitoring and management. To enhance business standards and ethics, the Group has establishedalistofpoliciesincludingtheCodeofConduct;PolicyonPublicationsandCommunications;Policy on Entertainment and Gifts; Policy on ChineseWalls, Confidential Information, Inside InformationandConflictsofInterest;ComplianceCharter;ConsumerSalesComplianceGuidelines;andWhistleBlowerPolicy.

To prevent or minimise the likelihood of the Group being used as a vehicle for money laundering, terrorist financing or other unlawful activities, a robust Anti-Money Laundering and Counter-Financing of Terrorism Policy Framework has been rolled out. Compliance standards are enforced within all business units and all activities are stringently monitored and reported to the Board who makes specific revisions if necessary.

Corporate Responsibility (cont’d)

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Maintaining a Conducive WorkplaceThe Group’s workforce is the engine that drives us forward and we remain committed to providing a safe, conducive and healthy working environment. As the Group’s employees are key to our competitive advantage, we endeavour to source the best talent from diverse backgrounds and cultures within our Malaysian heritage. For the financial year under review, the Group had over 4,400 employees on its payroll.

Competitive Employee Benefits

In fostering a culture of entrepreneurship, learning and development, the Group strives to be an employer of choice by offering each employee a competitive compensation and benefits package that aims to attract the best talent and optimise the unique abilities of each employee. The Group subscribes to a performance-driven work culture and, in keeping with this philosophy, our employee rewards and remuneration schemes are driven by performance at the company, division and individual levels.

To ensure that we are pegged to market, Group Human Resource participates in salary surveys conducted by external human resource consulting firms every year to ensure our employees are rewarded competitively, internally and externally, against market benchmarks. When rewarding individual employees, the Group also reviews the total remuneration which includes fixed and variable pay to ensure employees are fairly rewarded based on company, division and individual performance.

We continue to offer our employees a host of other attractive and competitive benefits to reinforce their importance to us. In addition to a competitive compensation and benefits package, we provide birthday leave, refunds and rebates on commission for the purchase of insurance, as well as competitive housing loaninterestrates.EmployeescontinuetoenjoythebenefitsoftheAllianceBankStaffVisaandMasterCardCredit Card which offer a reduced interest rate from 18% p.a. to 12% p.a. and Double Timeless Bonus Points for every Ringgit spent on top of the special merchant tie-up promotions and privileges.

In recognition of employee loyalty and dedication, the Group awarded certificates and cash awards to 249 long-service employees for their 15 and 25 years of service. A total of 175 employees completed 15 years of service while another 74 employees completed 25 years of service in the year under review. We take pride that our efforts to inculcate a conducive workplace and to nurture our employees have paid off with many seeing Alliance as the ideal place of employment to fulfil their long-term career goals.

Robust Human Capital Development

The strategic value of investing and developing human capital forms an integral part of the Group’s policies, financial commitment and business framework. Human capital development is vital to the Group’s long-term success and we remain committed to continuously investing in learning and development programmes that align with our business objectives.

The Group Talent Management and Succession Planning Framework, which was developed in 2006, was further enhanced in the year under review after taking into consideration the business strategies and future direction of the Group. To ensure sustainability, Group Human Resource is working very closely with Business and Support Heads to identify, develop, motivate and retain high potential employees. A Talent Review Council comprising the Management Committee was also set up to facilitate round table discussions on the talent pool and ensure the pool was reviewed holistically across the Group.

Given the shortage of leadership talent in the market, it is vital that the Group ensures we have a pipeline of available talents for succession planning. As such, nurturing and developing high potential employees was one of the key areas of focus under the year’s Learning and Development Roadmap. To support this, the Group also designed and developed a Leadership Competency Profile blueprint to guide us in the recruitment and development of talents.

Besides nurturing and developing talents, the Group is also focusing its efforts on building a competent workforce to support its future growth. This addresses the development of the workforce in general. In the year under review, the Group focused on the design and development of Learning and Career Development Roadmaps for the sales and service job families. These roadmaps highlight the various technical, regulatory and soft skills training that the sales and service staff are required to undergo at different stages of their career to ensure that they have the knowledge and competencies to deliver on their current and future roles. Based on these roadmaps, competency based training programmes will be rolled out in 2010.

The Group continues to open up learning opportunities to all levels of staff whereby the Group Human Resource is responsible for facilitating access to such learning and development opportunities. In the 2009 calendar year, the Group invested significantly on learning and development programmes.

Aside from this, the Group continued to sponsor employees seeking professional certification such as the Certified Credit Professional (CCP) and Pasaran Kewangan Malaysia Certificate (PKMC), as well as certification from organisations such as the Malaysia Insurance Institute (for PCE A, PCE B, PCE C), the Federation of Investment Managers Malaysia (for the CEILI), and the Securities Industry Development Corporation (for SIDCModule6&7).TheGroupalsosupportsstaffwhowishtoattendexternalprofessionalandtechnicalprogrammes to enhance their functional expertise in finance, Islamic banking, risk management, credit and other related areas. To ensure the effective assimilation of new recruits into the work culture, the Group also conducts induction programmes.


Proactive Employee Engagement

The Group believes that engaged employees gives us a competitive edge. As such, employee motivation and engagement is key to retaining the Group’s best talents besides providing a platform for nurturing and developing potential ones. Following a group-wide independent Employee Engagement Survey by an international consultant in May 2008, the Group in 2009 initiated a series of follow-up action plans with the objective of further promoting staff engagement.

A group-wide Employee Engagement Framework covering initiatives at the corporate level as well as at divisional, departmental and branch levels was rolled out with the aim of building a strongly engaged workforce. The framework focused on the Group’s five core values – caring, conviction, creativity, resilience and integrity. Riding on these five core values in combination with the Group’s strategy, we further enhanced our Talent Management and Succession Planning Framework. In doing so, we paid special attention to the Learning and Development Roadmap and focused our efforts on leadership development, design and development of learning and development roadmaps for the sales and service job families, as well as enhancements to the existing communication structure, among other areas.

To ensure the successful implementation of the Group’s engagement strategy, the Group is in the midst of creating an Employee Engagement Community. This initiative will see a team of employees representing key departments and branches being groomed and trained to drive and champion all employee engagement initiatives. The Group believes that appointing champions at key locations will help to identify leadership potential and at the same time leverage each champion’s strength to effectively cascade the Group’s mission and aspirations down to all employees throughout the Group.

As part of our employee engagement efforts, the Group also launched a series of health talks to promote health and wellness among staff. Other programmes in the pipeline include modules on city survival skills and social etiquette as well as holiday programmes for the children of our staff, all of which will be launched within this new financial year.

As a caring employer and as part of our responsibility to educate the young, the Group has implemented the annual Cahaya Mata Scholarship Scheme to help employees further their children’s education. Since 2007, seven scholarships have been granted to deserving children of employees pursuing their tertiary education. The programme provides an opportunity for awardees to kick-start their career with the Group upon graduation.

To foster greater teamwork and encourage open communication, the Group continues to organise employee get-togethers. Besides the Group’s Annual Dinner and Family Day events, the Group also organised an Alliance Fiesta in October 2009 to celebrate three festivals (Hari Raya, Tanglung and Deepavali) with a view to promoting multi-racial harmony. To further promote teamwork, an inter-departmental and branch dècor competition was implemented group-wide which attracted participation from many key departments and branches.

TheAllianceRecreational&SportsClubwassetuptoencourageahealthylifestyleaswellastopromotesports and teamwork among the Group’s employees. The club organises various internal activities such as bowling tournaments, badminton games, futsal and football competitions to unleash hidden sporting talent and build camaraderie among employees. Other activities such as go-karting competitions, treasure hunt, fitness trials and movie days also serve to complement these efforts.

To demonstrate our support and commitment towards sports activities, the Group sponsored the Alliance Football and Futsal Team as well as the Alliance Badminton team to the National Bank’s Sports Council Annual Tournament.


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Stringent Safety and Health Practices

The Group remains committed to implementing stringent safety and health practices at the workplace.

At our headquarters, employees abide by the building management’s non-smoking house-rule within the building. A designated smoking area has been set apart from the main entrance to keep non-smokers from inhaling second-hand smoke when entering and exiting the building. To ascertain our employees have a safe, healthy and conducive working environment, the Group continuously implements the following measures:

• ensures that all premises are equipped with the necessary safety equipment which are in goodworking condition. All respective floors at the head office or branches have at least one first aid kit to beusedininstancesofstafforcustomersexperiencingminorinjuriesormildsickness;

• ensures that all department heads and branch managers are conversant with crisis managementreportingprocedures;

• providesbasicamenities,facilitiesandequipmentsoouremployees,customers,suppliers,vendorsand other persons who have access to the premises can carry out their duties and business in a safe manner;

• ensuresthatemployeesaregivenadequateinformation,instructionandsupervisiontocarryouttheirdutiesinasafemanner;and

• adherestotheOccupationalSafety&HealthAct1994andotherrelatedregulationsasmaybeenforcedby the authorities from time to time.

Uponattendingtheir inductionprogrammes,allstaffareprovidedwiththe“StaffSafetyandEmergencyHandbook”whichprovidesguidanceonhowtorespondintheeventofnaturaldisasters,fires,bombthreats,floods or bank robberies. The handbook also outlines measures to safeguard customer and staff property as well as procedures for minimising damage in the event of any untoward incident. The Group also ensures safety drills and programmes are in place and conducted regularly to promote safety awareness among our employees.

Developing our CommunityAlliance believes in going beyond mere philanthropic pursuits. We focus on programmes and activities that promote sustainable economic development and self-sufficiency while at the same time align with our core values, mission and vision. Fundamental to our corporate vision is our determination to care for the communities and environment in which we operate and we constantly seek to align our business activities with this for the benefit of all our stakeholders.

As part of our corporate responsibility efforts, we continue to dedicate considerable resources to the community and employee welfare in areas which encourage staff volunteerism and the promotion of educational initiatives.

In the Spirit of Volunteerism

Employee volunteerism has long been an area of strength within the Group and our employees have consistently sought to make a difference in their local communities. Time and again, our employees have responded with their money, time and effort and the Group has recognised and empowered our employees by backing their desire to volunteer.

In the year under review, employees of the Group undertook various initiatives that cut across racial and cultural boundaries to meet a broad range of humanitarian needs. The year saw our staff focusing their efforts in the areas of orphanages and shelters, whereby Alliance Islamic Bank Berhad (AIS) staff contributed RM30,000 to Yayasan Pembangunan Anak Yatim dan Miskin (PEMANGKIN) to assist them in facilitating the development of orphanages in Malaysia and Indonesia. AIS staff also pooled together cash to host a Hari Raya buka puasa event and distribute duit raya to 40 orphans and underprivileged children from a home in Kuala Lumpur.

Alliance Partnership raised more than RM10,000 to help support an orphanage and down syndrome children’s home in Selangor. Outside Malaysia, the Alliance Partnership team also sponsored the education andhealthcareofanumberofchildreninIndonesiaunderthechildsponsorshipprogrammeofWorldVisionInternational.

In the spirit of volunteerism, staff members rendered assistance to a centre in Kuala Lumpur which caters for neglected children via free tuition, donation and other activities. Similarly, the Corporate Banking unit lent support in cash and in-kind to a shelter in Kajang. The year also saw staff from the Share Services Division initiating a visit to a home for underprivileged children in Puchong where they brought along donations in cash and in-kind as well as spent valuable time with the home’s children. Demonstrating the Group’s caring spirit, our branches in the Kota Kinabalu region and East Malaysia Regional Office (EMRO) departments collectively donated 48 boxes containing clothes, shoes, bags, household utensils and food to the Franciscan Sisters of the Immaculate Conception, while staff from Consumer Banking provided donations in-kind to the Agathians Shelter. On top of this, staff provided printed resources and publications to help support a university in Melaka.


Reaching Out to Communities

The Group continues to fulfil its responsibility as a caring corporate citizen by providing financial support to deserving recipients in the fields of education and healthcare as well to many worthy causes such as orphanages, the disabled, the poor and victims of natural disasters both in Malaysia and abroad.

Fuelling Educational Pursuits

Alliance continually listens to its customers and looks for opportunities to add value as well as build stronger ties with them and their respective communities. In response to our customers’ requests to establish a platform which would enable them to contribute towards the schools of their choice, we initiated the Alliance CIS Affinity Card programme, a micro-donation programme which is a joint effort between the Bank and its credit card customers. The funds generated from the programme are channelled to various Chinese Independent Schools (CIS) of customers’ choice to fund school activities and projects. Since its inception in September 2005 until end March 2010, some RM580,000 has been donated to 16 CIS in Malaysia selected by our customers.

Incollaborationwith theGroup’scollegeanduniversitypartnersaround theKlangValley,ninestudentsfrom these partner institutions were selected to participate in the Group’s first ever 20-day undergraduate development programme called the Short Attachment Programme. Designed to bridge the gap between campus and office life, the programme incorporated a series of small group workshops as well as the opportunity to experience real-life work under our supervision.

Alsoontheeducationfront,GroupResourcingheldaworkshoptitled“I’mNotAGenericGraduate”withstudents from Sunway University College, while our Klang branch staff made donations to the Eng Ann Residents Association educational fund to reward high-achieving students.

In support of Bank Negara Malaysia’s objective of inculcating financial literacy among the younger generation, we participated in the School Adoption Programme which saw our staff engaging directly with students and distributing our financial literacy publication, Solve the Quagmire of Money, featuring the fundamentals of saving and budgeting.

Donations by the Group were also made to the Selangor and Federal Territory Association to assist in the education and training of mentally handicapped children and adults in 12 special schools and centres.

The year saw AIS staff taking the opportunity to directly sponsor an Afghanistan child’s education at a refugee camp, while Consumer Banking supported the Don Bosco Children’s Home at Bundu Tuhan in Kundasang, Sabah.

Promoting Local Arts and Sports

In the year under review, the Group lent its support to various initiatives to promote Malaysian arts and sports. To support the spirit of sportsmanship, Alliance contributed RM10,000 to the IRB Asian Rugby Seven Series held in Kota Kinabalu, a prestigious international event which showcases the top rugby teams from around Asia. The Bank also contributed RM3,000 to the KL Marathon 2009 to further advance sporting excellence.

Lending Support in Times of Need

The Group understands it has a vital role to play in helping effect positive change in communities, especially in times of disaster. To this end, we have been actively engaged with MERCY Malaysia, a non-profit medical relief organisation, to assist in its efforts to provide medical and humanitarian assistance to the citizens of countries affected by natural disasters. In response to the devastation caused by natural catastrophes in Sumatra and the Philippines, Alliance staff raised RM15,000 through an emergency appeal fund. When Haiti was struck by an earthquake, Alliance staff once again responded by donating RM10,000 to support international relief efforts.

Alliance staff frequently immerse themselves in creative opportunities with third parties to raise funds and awareness for good causes. Our staff participated in a fund raising project initiated by the Malaysia Book of Records to sell copies of the book via the Bank’s branches. Of the RM20,000 collected from this effort, donations of RM10,000 each were channelled to the Montfort Boys Town and Majlis Kanser Nasional respectively. We also participated in the Montblanc Signature for Good campaign in support of Unicef Malaysia in which we contributed one of five art pieces, which were auctioned for a total of RM85,888.

The Group also directly supports many other causes via donations and sponsorships. The year’s initiatives included:

• donationofRM5,000toKelabSukan&Kebajikan,JabatanKewangandanPerbendaharaanNegeriMalaysia;

• sponsorshipofTheEdge’sMyDreamHomeContest,inassociationwithPertubuhanAkitekMalaysia(PAM)andInstitutPerekabentukDalamanMalaysia(IPDM)forthethirdconsecutiveyear;

• sponsorshipofvouchersfortheFederationofMalaysianUnitTrustManager’sAnnualEvent;

• contributionofgiftstoYayasanKelantanDarulEhsanforitsFamilyDay;and

• contributiontowardspurchasingrefreshmentsforHindustaffandwell-wishersinconjunctionwithaceremonial procession during the Thaipusam festival.

Our community engagement efforts also extend to supporting the physically and mentally challenged. To ensure equal access for all, we built a concrete ramp in our newly-opened branch in Taman Nusa Bestari, Johor, providing wheelchair users and the physically challenged easy accessibility upon alighting from their vehicles.


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Going Forward – Formally Empowering VolunteersGoing forward, the Group recognises the importance of formally empowering employees, enabling them to truly go above and beyond the call of duty to make a real difference in their communities. In doing so, we hope not only to help build deeper relationships between our staff and the communities that we operate in, but we are looking to give our people a sense of personal fulfilment as well as inspire them in ways that the workplace alone may not always provide. As such, the Group has made employee volunteerism a high priority and is looking for creative ways for our employees to participate more easily and more broadly in their communities. To this end, the Group has announced two key programmes that will actively be promoted over the course of the new financial year.

Under Alliance’s Staff Charity Day programme, all employees will be provided one paid day per year to dedicate their time to a community activity. These activities may cover any charitable area that our staff feel is important to them and to their local communities. Subject to approval, the Group will allow staff to engage directly with the charities within their localities. By way of support, the Group is providing time and coverage of certain costs and is putting into place a recognition programme. A high level of staff participation is expected and the engagement levels of our people as well as their feedback will be tracked and supported by senior management. We actively encourage staff to undertake community activities as teams and to provide feedback on what support they require to make the difference they want to see. This programme will be supported by a formal series of awards and supporting publicity to recognise and reward staff contributions to society.

For the second initiative, the Staff Donation Programme, the Group will set aside RM2 million to match donations to charities that staff want to support. The Group will create a voluntary payroll deduction programme to allow staff to donate efficiently at whatever level of contribution they feel comfortable with. In addition to match-funding and facilitating donations, we will also work with individual charities to provide tax exemption receipts to contributing staff, thereby allowing them to file for deductions on their total annual contributions.

Under this scheme, we have identified three initial platforms to which staff may contribute. These include a multi-racial children’s home in Melaka under the auspices of Lembaga Pengurusan KebajikanAnakYatim; theWomen’sAidOrganisation;andtheMalaysianAssociation for theBlind.These organisations have been identified and vetted with the support of the Ministry of Women, Family and Community Development.

It is our intention to expand the range of charities which staff can contribute to under this programme. The Group will continue to identify and add worthy causes in areas that staff are most interested in contributing towards. To this end, we will actively engage with our staff and will also monitor where they wish to spend their time and resources under the Charity Day programme. This will in turn enable us to identify charitable themes and entities where our people can truly make a difference.

Conserving Our Environment

Supporting Worthy Environmental Causes

The Group believes that every small step taken towards conserving our immediate environment makes a difference in sustaining the broader environment and our planet. We remain committed to conducting our business in a sensible manner by supporting solutions or causes that minimise the environmental impact of our business and preserve the natural environment.


Going Forward: Encouraging Sustainable Business PracticesAlliance recognises that financial institutions have a significant secondary impact on the environment via the types of projects and business strategies we support in our relationships with customers. To date, we have an informal policy of assessing the environmental and social impacts of potential lending opportunities, which are conducted as a part of our regular review of risks. The Board recognises the need to enhance and formalise this policy and we are actively examining best practices appropriate for a business of our size.

It suffice to say that the scope of policy will include the consideration of issues such as labour and working conditions, natural resource management, pollution prevention, impact on indigenous people and health and safety. Wherever possible, we intend to discourage or avoid business activities that are harmful in these areas. We also intend to support customers who, like us, intend to make sustainability a core component of their working practices.

Moving Forward ResponsiblyMoving forward, the Group is committed to evolving its approach to corporate responsibility in tandem with the changing business environment and customer needs. We also remain committed to devoting significant resources and executive expertise to all future corporate responsibility initiatives. Our desire is to conduct our business in a responsible manner that will help build sustainable relationships with our shareholders, customers, employees and partners as well as the communities and environment in which we operate.


Generating Awareness Amongst Employees

Recognising the importance of educating and instilling awareness amongst staff on environmental conservation, oneofthesuccessfulinitiativesisaquarterly“Eco-Quiz”competitionimplementedin2008.Thiscompetitionisfeaturedinourin-housenewsletter,“ScalingNewHeights”andhasreceivedencouragingparticipationfromstaff.

Minimising Our Carbon Impact

The Group recognises that, as a large institution, we have a responsibility to minimise our potential harmful impact on the environment, particularly in areas where our daily operations contribute to greenhouse gases and to global warming. To this end, we are committed to measuring, monitoring and reducing our carbon footprint and to report transparently the actions we are taking to minimise our impact. Over the course of the new financial year, the Group intends to conduct a full scale review of the impact of our carbon footprint across our physical network of branches and operations centres. We will review our procurement and sourcing practices, examine our policies in areas such as mailing and travel, and identify those areas where we can best make changes to minimise our impact on the environment.

Conserving Natural Resources

We seek to be transparent and will report our use of natural resources including important sub-categories such as energy, water and paper usage. It is important that we set ourselves high but realistic targets over the short and medium timeframes as well as put in place the key measures necessary to achieve them. We recognise that significant opportunities exist in several areas for the Group to reduce our overall environmental impact and we will dedicate resources to a range of targeted initiatives in these areas to quickly affect change.

These actions will require both policy and direction setting from the Board and management, as well as workplace changes that will require the support of our staff. The clear sentiment of our employees is that they support this direction. The Group has also undertaken staff environmental awareness campaigns and plans to continue to roll out education and incentives.

To date, the Group has already carried out key actions to reduce resource usage in:

• Energyconservation–allairconditioningunitsinourpremisesareautomaticallyswitchedoffat5:45pmandarenotrestartedagainuntil8:45am;and

• Paperconservation–alladministrativeservicesarebeingreviewedwithaviewto institutingautomatedsystems to reduce paper. We have also limited staff access to colour printing and require that double-sided printing and copying be the future standard.

Another area where the Group is taking action to address our impact is in our corporate and staff entertainment and dining policies. Recognising that consumer demand for non-sustainable ingredients can encourage harmful harvesting practices and natural resource depletion, we are looking at ways to minimise any unnecessary impact that the Group may have in this regard.

Finally, with immediate effect we are reducing the print run for all Group publications. In reducing the print run of this year’s Group annual report, only 1,000 copies of the full version were printed as opposed to 1,500 copies in the preceding year.

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Audit Committee The Audit Committee comprises the following Directors:

Tan Yuen Fah (Chairman)Independent Non-Executive Director

Stephen Geh Sim Whye Independent Non-Executive Director

Megat Dziauddin bin Megat Mahmud Independent Non-Executive Director

Kung Beng Hong Non-Independent Non-Executive Director

Tee Kim Chan (Retired on 29.7.2009)Independent Non-Executive Director

Terms of Reference

1. Policy

It is the policy of the Company to establish an Audit Committee to ensure that internal and external audit functions are properly conducted and that audit recommendations are being carried out effectively.

2. Objectives

The objectives of this policy are:

a. tocomplywiththerelevantregulatoryandstatutoryrequirementsonauditcommittee;and

b. to provide independent oversight of the Company and subsidiaries’ financial reporting and internal control system and ensuring checks and balances within the Company and subsidiaries.

3. Composition of the Audit Committee

The Audit Committee shall be appointed by the Directors which shall fulfil the following requirements:

a. theAuditCommitteemustbecomposedofnofewerthanthreemembers;

b. all the Audit Committee members must be non-executive directors, with a majority of them being independentdirectors;

c. the members of the Audit Committee shall elect a Chairman from among themselves who shall beanIndependentDirector;and

d. at least one member of the Audit Committee:

i. mustbeamemberoftheMalaysianInstituteofAccountants;or

ii. if he is not a member of the Malaysian Institute of Accountants, he must have at least three years’workingexperience;and

aa. he must have passed the examinations specified in Part I of the 1st Schedule of the AccountantsAct1967;or

bb. he must be a member of one of the associations of accountants specified in Part II of the1stScheduleoftheAccountantsAct1967;or

iii. fulfils such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad.

No alternate Director shall be appointed as a member of the Audit Committee.

4. Secretary to the Audit Committee

The Company Secretary shall be the Secretary to the Committee.

5. Quorum

Two members of the Audit Committee shall constitute a quorum at any meeting and majority of members present must be Independent Directors to form a quorum.

Audit Committee Report


6. Attendance at Meetings

• TheHeadofGroupInternalAuditisinvitedtoattendallmeetingsoftheAuditCommittee.

• TheHeadofFinanceandExternalAuditorsarenormallyinvitedtoattendmeetingsasandwhennecessary.

• OtherBoardmembersmayattendmeetingsupontheinvitationoftheAuditCommittee.

• TheSecretaryoftheAuditCommitteeshallprovidethenecessaryadministrativeandsecretarialservices for the effective functioning of the Committee. The minutes of meetings are circulated to the Committee Members and to all other members of the Board.

7. Frequency of Meetings

The Committee shall meet at least four times a year. However, the frequency of meetings would increase depending on the scope of the audit activities and the number of audit reports produced.

8. Functions of the Audit Committee

The functions of the Audit Committee are as follows:

a. To consider the appointment of the External Auditors, the audit fee and any questions of resignation or dismissal and whether there is reason (supported by grounds) to believe that the ExternalAuditorsarenotsuitableforre-appointment;

b. To discuss with the External Auditors before the audit commences, the nature and scope of the audit,andensureco-ordinationwheremorethanoneauditfirmisinvolved;

c. TorecommendthenominationofapersonorpersonsasExternalAuditors;

d. To review:

• withtheExternalAuditors,theauditplan;

• withtheExternalAuditors,theirevaluationofthesystemofinternalcontrols;

• withtheExternalAuditors,theirauditreport;

• theassistancegivenbytheCompany’sofficerstotheExternalAuditors;

• theconsolidatedfinancialstatementsoftheCompany;and

• anyrelatedpartytransactionsthatmayarisewithintheGroup;

e. To review the quarterly and year-end financial statements of the Company, prior to the approval of the Board of Directors, focusing particularly on:

• anychangesinaccountingpoliciesandpractices;

• significantadjustmentsarisingfromtheaudit;

• anyothersignificantandunusualevents;

• thegoingconcernassumption;and

• compliancewithaccountingstandardsandotherlegalrequirements;

f. To discuss problems and reservations arising from the interim and final audits, and any matter theExternalAuditorsmaywishtodiscuss(intheabsenceofManagementwherenecessary);

g. ToreviewtheExternalAuditors’ManagementletterandManagement’sresponse;

h. To meet with the External Auditors without executive Board members presence at least twice a year;

i. To propose best practices on disclosure in financial results and annual reports of the Company in line with the principles set out in the Malaysian Code on Corporate Governance, other applicable laws,rules,directivesandguidelines;

j. Toreviewtheeffectivenessofinternalcontrolsandriskmanagementprocesses;

k. To do the following where an internal audit function exists:

• reviewtheadequacyofthescope,functions,competencyandresourcesoftheinternalauditfunction,andthatithasthenecessaryauthoritytocarryoutitswork;

• reviewtheinternalauditplanandresultsoftheinternalauditprocessandwherenecessaryensure that appropriate action is taken on the recommendations of the internal audit function;

• reviewanyappraisalorassessmentoftheperformanceofmembersoftheinternalauditfunction;

• toconsiderthemajorfindingsofinternalinvestigationsandManagement’sresponses;

l. To consider and examine any other matters as defined by the Board.

Audit Committee Report (cont’d)

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9. Authority

The Committee is authorised by the Board to:

a. investigateanymatterwithinthescopeoftheCommittee’sduties;

b. havefullandunrestrictedaccesstoanyinformationintheCompany;

c. obtainindependentprofessionaladviceorotheradvice,wheneverdeemednecessary;

d. make recommendations for improvements of operating performance and management control arisingfrominternalandexternalauditrecommendations;

e. havetheresourceswhicharerequiredtoperformitsduties;

f. have direct communication channels with the External Auditors and person(s) carrying out the internalauditfunctionoractivity,ifany;and

g. be able to convene meetings with the External Auditors, the Internal Auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary.

The Chairman and/or members of the Audit Committee are authorised by the Board to engage on a continuous basis with senior management, the Chairman, the Chief Executive Officer, the Head of Finance, the Head of Internal Audit and the External Auditors in order to be kept informed of matters affecting the Company.

Audit Committee Meetings held for the Financial Year Ended 31 March 2010During the financial year ended 31 March 2010, a total of six Audit Committee meetings were held. The details of attendance of the Committee members are as follows:

Name of Committee Member Attendance

Tan Yuen Fah 6/6

Stephen Geh Sim Whye 6/6

Megat Dziauddin bin Megat Mahmud 6/6

Kung Beng Hong 6/6

Tee Kim Chan (Retired on 29.7.2009) 3/3

Summary of ActivitiesThe Audit Committee has during the financial year ended 31 March 2010 carried out the following duties:

a. ReviewedthequarterlyresultsandmaderecommendationstotheBoardforapproval;

b. Reviewed with the External Auditors, the draft Audited Financial Statements of the Company and the Groupforthefinancialyearended31March2009;

c. Reviewed with the External Auditors, their report on the Limited Review of Half Year Financial Statementsforthesixmonthsperiodended30September2009;

d. Reviewed with the External Auditors, their management letter together with Management’s responses totheauditfindingsforthefinancialyearended31March2009;

e. ReviewedwiththeExternalAuditors,theirauditplanforthefinancialyearended31March2010;

f. Considered the appointment of the new External Auditors and audit fees for the financial year ended 31March2010;

g. Reviewedthenon-auditservicesrenderedbytheExternalAuditors;

h. ReviewedtheinternalauditreportswithInternalAuditors;

i. Reviewed the Statement on Internal Control, Audit Committee Report and Risk Management Report for inclusioninthe2009AnnualReport;

j. Reviewed the allocation of share options and share grants pursuant to the Employees’ Share Scheme oftheCompanyforthefinancialyearended31March2008;

k. Reviewed with the Internal Auditors, the internal audit plan for the Company and its non-bank subsidiariesforthefinancialyearended31March2010;

l. ReviewedBankNegaraMalaysia’sexaminationreportsonsubsidiaries;

m. ReviewedrecurrentrelatedpartytransactionsenteredintobytheCompanyanditssubsidiaries;

n. ReviewedtheTermsofReferenceofAuditCommittee;

o. ReviewedtheCorporateDisclosurePoliciesandProcedures;

p. MetwiththeExternalAuditorswithoutthepresenceoftheexecutivestwiceduringtheyear;and

q. Met with the Internal Auditors without the presence of the executives twice during the year.


Subsequent to the financial year ended 31 March 2010, the Audit Committee carried out the following duties:

a. Reviewed with the External Auditors, the draft Audited Financial Statements of the Company and the Groupforthefinancialyearended31March2010;

b. Reviewed with the External Auditors, their management letter together with Management’s responses totheauditfindingsforthefinancialyearended31March2010;

c. Reviewedthenon-auditservicesrenderedbytheExternalAuditors;

d. Reviewed the allocation of share options and share grants pursuant to the Employees’ Share Scheme oftheCompanyforthefinancialyearended31March2009;and

e. Reviewed the Statement on Internal Control, Audit Committee Report and Risk Management Report for inclusion in the 2010 Annual Report.

Internal Audit Function The internal audit function is undertaken by the Group Internal Audit Department. The Head of Group Internal Audit Department reports directly to the Audit Committee.

The Internal Audit Department is responsible for the provision of independent audit reports to the Audit Committee on the Group’s system of internal control and its authority is provided in the Audit Charter, which formally documents the roles, duties and responsibilities of the Internal Auditors. The cost incurred for the Group internal audit function during the financial year amounted to RM3.9 million.

Statement on Employees’ Share Scheme (ESS)The Audit Committee confirms that the share options and share grants offered/awarded to eligible employees of the Company and its subsidiaries pursuant to the ESS during the financial year under review had been made in accordance with the criteria of allocation pursuant to the Bye-Laws of the ESS.

Audit Committee Report (cont’d)

84

ResponsibilityThe Board acknowledges its overall responsibility for the Group’s system of internal control and for reviewing its adequacy and integrity. The system of internal control is designed to manage the Group’s risks within an acceptable risk profile, rather than eliminate the risk of failure to achieve the policies and business objectives of the Group. It can therefore only provide a reasonable but not absolute assurance of effectiveness against material misstatement of management and financial information or against financial losses and fraud.

The Board regularly receives and reviews reports on internal control and is of the view that the system of internal control that has been instituted throughout the Group is sound and adequate to safeguard the shareholders’ investments and the Group’s assets.

The Group has instituted an on-going process for identifying, evaluating and managing the significant risks faced by the Group and this process includes updating the system of internal control when there are changes to the business environment or regulatory guidelines. The process is regularly reviewed by the Board and is in accord with the ‘Statement on Internal Control: Guidance for Directors of Public Listed Companies’, issued by the Task Force on Internal Control. The role of Management is to implement the Board’s policies, procedures and guidelines on risk and control to identify and evaluate the risks faced and design, operate and monitor a suitable system of internal control to manage these risks.

The Board has extended the responsibilities of the Audit Committee to include the role of monitoring all internal controls on behalf of the Board, including identifying risk areas and communicating critical risk issues to the Board. The Audit Committee is supported by an internal audit function which is independent of the activities they audit. The internal auditors have performed their duties with impartiality, competency and due professional care.

Risk Management FrameworkThe Board ensures that the Group manages risk within clearly defined guidelines and provides an independent oversight to ensure that risk management policies are complied with, through a framework of established control and reporting process.

The Group Risk Management Committee reviews and recommends risk management strategies, policies and risk tolerance for subsequent approval by the Boards of the Group’s Banking subsidiaries. In addition, the committee also oversees the activities of the management committees such as the Group Assets and Liabilities Management Committee, Group Credit Risk Management Committee and Group Operational Risk Management Committee, which assume the responsibility of overseeing specific areas of risks pertaining to the Group’s business activities and implement various risk management policies and procedures.

Major risks arising from the Group’s day-to-day activities in the financial services industry comprise credit risk, liquidity risk, market risk and operational risk. For more information on the risks and relevant guidelines and policies, please refer to Note 42 under the Financial Statements.

System of Internal ControlTo ensure that a sound system of control is in place, the Board has established primary processes in reviewing the adequacy and integrity of the system of internal controls. The primary processes include:

• RegularandcomprehensivemanagementreportsaremadeavailabletotheBoardonamonthlybasis,covering financial performance and key business indicators, which allow for effective monitoring of significantvariancesbetweenactualperformanceagainstbudgetsandplans;

• ClearlydefineddelegationofresponsibilitiestocommitteesoftheBoardandtoManagementincludingorganisationstructuresandappropriateauthoritylevels;

• Acodeof conduct, human resourcepoliciesandperformance reward system to supportbusinessobjectives,riskmanagementandthesystemofinternalcontrol;

• Aproperproceduretocontrolapplicationsandtheenvironmentofcomputerinformationsystems;

• Regularupdateof internalpoliciesandprocedures, toadapt tochanging riskprofilesandaddressoperationaldeficiencies;

• RegularreviewofthebusinessprocessesbytheGroup’sinternalaudit,toassesstheeffectivenessofthecontrolenvironmentandhighlightsignificantrisksimpactingtheGroup;

• Documentationandperiodicassessmentofcontrolsandprocessesbyallbusinessunitsformanagingkeyrisks;and

• Regular senior management meetings are held to review, identify, discuss and resolve strategic,operational, financial and key management issues.

Review of the Statement by External AuditorsAs required by paragraph 15.23 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the external auditors have reviewed this Statement on Internal Control for the financial year ended 31 March 2010 and have reported the results of the review thereof to the Board.

Statement on Internal Control


IntroductionThe Group has established an Integrated Risk Management Framework (IRMF) which incorporates risk management and compliance frameworks. The IRMF ensures all practices are consistent with industry’s best practices to better position the Group to deal with economic and business challenges. Under the IRMF, we have supporting structures and frameworks for Board and Senior Management oversight. The Group Risk Management Committee (GRMC) has been established at the Banking Group level for risk oversight within the Group. At Alliance Financial Group Berhad (AFGB), the Board carries out high level risk management of its investments in all operating subsidiaries as well as the capitalisation needs of the Group.

Risk Management InfrastructureThe Group’s IRMF infrastructure outlines the fundamental principles upon which accountability and responsibility for effective risk management are based. These principles stipulate that:

• The GRMC is responsible for risk oversight which includes reviewing and approving risk managementpolicies, risk exposures and limits, whilst ensuring the necessary infrastructure and resources are in place.

• SpecialisedSeniorManagementriskcommittees,namelytheGroupCreditRiskManagementCommittee(GCRMC), Group Operational Risk Management Committee (GORMC) and Group Assets and Liabilities Management Committee (GALCO) are to assist the GRMC in managing credit, operational, market and liquidity risk respectively. These specialised committees are responsible for the development and implementation of risk policies, as well as the assessment of the effectiveness of these policies.

• Businessunitsformthefirstlineofdefenceagainstrisk,bymanagingtherisk-rewardtrade-offcontainedwithin the policies and guidelines laid down by the Group.

• Businessriskunitsformthefirstlineofdefence;andareprincipallyresponsibleformonitoringandensuringthat the conduct of their business activities are carried out within the approved policies, product programme parameters and business models.

• Group Risk Management forms the second line of defence. Group Risk Management is responsible forassisting the Group in formulating the risk management framework and policies; developing tools andmethodologies for risk identification, measurement, monitoring and reporting. This role furthermore includes recommending risk mitigation measures.

• Group Risk Management assists the GRMC and the Board in performing independent monitoring andreporting to ensure that the approved risk policies, directives and limits are implemented and complied with.

• Group Internal Audit forms the third line of defence, by providing an independent assessment of riskmanagement processes and infrastructure as well as the adequacy and effectiveness of risk policies and internal controls.

The Group’s Risk Governance Framework encompassing the “three lines of defence” concept isdepicted below:

Responsible ForGovernance Committees

3rd Line of Defence

The Board/ Senior Management

The Board/ Senior

Management

• Oversightoftheintegrityandeffectiveness of the CORM Framework

• InternalAudit–Provideindependent assurance to Senior Management/Board, and Risk Management Committee on the effectiveness of internal control

GAC/BOD

GRMC

2nd Line of Defence

Risk Type Heads

Group Legal & Compliance

Group Risk Management

• Theeffectivenessandintegrityof the CORM Framework by reviewing adequacy of ongoing monitoring by line management

• Updatingofstandardsandgrouplevel policies

• Inlinewithchangestoexternalregulations and the Group’s risk principles as set by the Board

GORMC

GCRMC

GALCO

GPMC

Shariah Committee

1st Line of Defence

Line Managers in the Business

Line Management

Business Risk Officers/

Unit Risk Officers

Business Managers (including Support

Functions)

• Ensuringcompliancetolaws,regulations, standards, policies, procedures, etc. via timely and effective monitoring and management

Management Meetings

Risk Management

86

Index Table

GAC : Group Audit Committee

BOD : Board of Directors

CORM : Compliance and Operational Risk Management

GRMC : Group Risk Management Committee

GORMC : Group Operational Risk Management Committee

GCRMC : Group Credit Risk Management Committee

GALCO : Group Assets and Liabilities Management Committee

GPMC : Group Product Management Committee

Stress TestingThe Group carries out stress testing to estimate the potential impact of extreme events on the Group’s earnings, balance sheet and capital. These stress tests also aim to gauge our sensitivity and vulnerability to a sector, customer or product segment.

The Group has a stress testing framework which is applied to identify:

• Potential vulnerable riskareasof theGroup’sportfolio to stressevents. It examinesanalternativefuture that could cause problems to the Group’s portfolio, thus enabling the Group to assess the potentialworstcasescenariosandtobepreparedtofacesuchchallenges;and

• Possibleeventsorfuturechangesinfinancialandeconomicconditionsthatcouldhaveunfavourableeffects on the Group’s ability to withstand such changes (particularly in relation to the Group’s capital and earnings capacity to absorb potentially significant losses), thus enabling the Group to take steps to manage these risks and conserve capital.

The Stress Test Steering Group comprises representatives from Group Risk, Business Risk, Group Finance and the Lines of Business. The stress test parameters are formulated internally, taking into account the economic scenario, plus current and forecasted key indicators over a rolling one year period. The scenario and parameters are presented to the Stress Test Steering Group and to the GRMC for deliberation before being rolled out to the respective business units to run portfolio and segmental stress tests.

In collaboration with Group Finance, the results are then centrally consolidated by the Lines of Business at the banking entity and banking group levels, analysed and reported to the Stress Test Steering Group, GRMC/Board and the Central Bank. These results are not reviewed in isolation. Where appropriate, proactive action is taken to adjust our product programmes, lending guidelines and contingency plans.

Risk Culture• Anorganisation’sriskculture, i.e. thesoftsideof itsriskmanagementactivities, isoftentakenfor

granted, even though it is a critical dimension for building effective risk management architecture.

• Atabasiclevel,anorganisation’sriskculturerelatestotheunderlyingawarenessthatmanagementand all employees in the organisation possesses in relation to risk and risk-taking matters.

• Theriskculturesetsthetoneofanorganisation.Hence,theGroupmakesanefforttoinstilthistoneinto our employees when they join our organisation, to guide them during the conduct of their daily activities and in pursuit of our organisational and business objectives.

• A strong risk culture provides an essential foundation upon which an organisation can build riskmanagement architecture to better manage risks and opportunities in a rapidly changing environment.


Key Attributes of an Effective Risk Culture

1. Leadership & Strategy Demonstrate ethics and values• Sharedethicalpractices• Toneatthe“top”

Communicate mission and objectives• Top-downalignmentofstrategies• Policiesandguidelines

2. Accountability & Reinforcement Assign individual accountability• Assignmentofownership• Accountabilityprinciple

Measure and reward performance• Incentiveanddiscipline• Performanceindicators• Monitoring

3. People & Communication Promote competence• Competenceandresources• Training

Share information and knowledge• Informationquality• Top-downcommunication• Lateralcommunication

4. Risk Management & Infrastructure Assess and measure risk• Riskassessmentpractices• Risktoolsandprocesses

Establish process and controls• Processreliabilityandefficiency• Controleffectivenessandefficiency• Systemsaccessandsecurity

Group Risk Management contains three central risk functions, namely Credit Risk Management, Market Risk Management and Operational Risk Management. The roles and responsibilities of each department are outlined below.

Credit Risk ManagementThe Group’s Credit Risk Management focuses on managing the risk of financial loss as a result of a customer or counterparty’s failure to discharge their contractual obligations. For this purpose, we have established a common platform for the centralisation of core credit policies to ensure that the overall risk philosophy, risk strategies, risk appetite and tolerance limits, and control measures are consistently applied across the Group.

The Group Credit Risk Policies Framework is implemented to ensure effective governance and control over the risk management processes. The framework clearly defines the roles and responsibilities with regards to policy development, review, approval and revision of the Group’s core risk policies. It also sets the infrastructure for the different levels and types of risk policies for consistency and harmonisation.

The role of Group Credit Risk Management is further differentiated between Group Credit Risk and the respective business risk units, in that the Group Credit Risk Management handles risk controls on broad policies, sets risk standards, risk appetite and tolerance limits for the Group. The business risk units, on the other hand, assume the ownership as well as management of the risks inherent in their respective business activities, which they must understand and control, guided by the policies and standards set by Group Credit Risk Management. Specific product and credit programmes have been developed to manage various products and class of lending. Exposure limits, macro-economic condition triggers and asset quality tripwires are amongst the parameters set within each product or credit programme. Additionally, we ensure that there are clear segregation of duties between loan originators, evaluators and approvers in the Risk Management function.

Risk Management (cont’d)

88

Risk Infrastructure/Methodology/Tools

Prospecting & Account Planning Risk Assessment & Credit Approval Documentation/Disbursement Monitoring Collection & Recovery

• GroupLoansOriginationSystem • InternalRatingSystems• ProductProgrammes• RiskAcceptanceCriteria

• CollateralManagement&LimitMonitoring System

• DocumentationChecklist• StandardLoanDocuments

• CollateralManagement&LimitMonitoring System

• RiskConcentration

• DebtManagementSystem• CollectionStrategies• TrackingofCollectionand

Recoveries

• RetailLoansOriginationSystemwent live in July 2009

• BusinessLoansOriginationSystemcovering Corporate/Commercial/SME Banking customers is currently under the pilot run stage

• Developmentofratingmodels/scorecards for the following products/business segments:– Credit Cards– Mortgage– Hire Purchase– Personal Loans– SME loans– Commercial loans– Corporate loans

• Developmentandperiodic review of Product Programmes/ Risk Acceptance Criteria

• Phase2BofCollateralManagement&LimitMonitoring System involving the documentation checklists and barcoding is in progress

• Phase3ofCollateralManagement&LimitMonitoringSystempertaining to straight-through processing with various origination/source systems for limit activation is in progress

• Phase2AofCollateralManagement&LimitMonitoringSystem on limit monitoring and booking has cut-over to production in September 2009

• DebtManagementSystemwentlive in 2009

Market Risk ManagementThe Group’s Market Risk Management department essentially focuses on managing market risk, which comprises Price Risk and Liquidity Risk. Price Risk is the risk of loss of earnings arising from changes in interest rates, foreign exchange rates, equity prices, commodity prices and in their implied volatilities.

Liquidity Risk takes two forms: funding liquidity risk and market liquidity risk. Funding liquidity risk could arise if the Group is unable to meet financial commitments when due. Market liquidity risk arises if the Group is unable to unwind or offset its position in the market within a short span of time, at or near the previous market price, because of inadequate market depth or disruptions to the marketplace. Within the Group, market risk in the Banking Book is supervised primarily by the GALCO and executed through Financial Markets. Market risk in the Trading Book is managed primarily by Financial Markets based on policies and limits approved by the GRMC/Board.

The bulk of the Group’s treasury positions are held under the Banking Book. These comprise short-term money market instruments and longer term capital market instruments, including Malaysian Government Securities and corporate bonds. The Trading Book is relatively small, comprising mainly foreign exchange instruments, which are primarily entered into to meet the needs of our wealth management, commercial and corporate customers.

While the Group offers share financing, stockbroking and unit trust management services to our retail customers, the treasury arm did not undertake proprietary trading of equities and commodities during the financial year ended 31 March 2010.


Group Market Risk Management undertakes the following support roles:

• Formulating and reviewing the Group’s market risk management framework and policies as wellas the asset-liability management framework and policies in accordance with the Group’s business directionandrevisedregulatoryrequirements;

• Carrying out independent monitoring of treasury activities on a daily basis, in accordance withapprovedpoliciesandlimits.Thisincludesreportingofexceptions;

• Providing independentmarked-to-marketvaluationof treasurypositionsand riskexposures,usingdataobtainedfromvarioussources,suchasindependentmarketprice/informationproviders;

• Reviewingnewproductproposalpapers(inconjunctionwithotherriskmanagementunits),toassessthemarketandliquidityriskspriortolaunchingnewproducts;and

• ProvidingintegratedriskmanagementsupportactivitiesinconjunctionwithotherRiskManagementfunctions and participating with other departments on joint assignments and projects involving market risk, liquidity risk and asset-liability management and stress testing exercises.

Projects and initiatives related to market and liquidity risk management include:

Treasury System

More than a year ago, the Group implemented a new, Group-wide treasury system to enable the Group to better manage our treasury transactions and risk exposures. Under the Second Phase of this project, our front, middle and back office personnel have been working together to add new instruments to our existing range of treasury products. The rollout of new products is subject to meeting the requirements of User Acceptance Testing, staff training, product sign-offs and approval processes.

Meanwhile, back-testing of ourValue-at-Risk (VaR) model revealed that the actual results were withinexpected parameters, indicating that the model used is reliable.

Summarised Treasury Workflow

Processing&settlementhandled by the

Back Office

Daily reporting to Senior Management

Monthly reporting to GALCO&GRMC

Pre-deal risk limit checks

Dealer inputs deals into the Treasury System

Prepares daily compliance reports&monthlyrisk

dashboards

Independent monitoring by Middle Office

Deals negotiated with clients and counterparties


90

Asset-Liability Management & Funds Transfer System

The Group is in the process of implementing matched-term Funds Transfer Pricing (FTP) to measure the relative performance of deposit-taking and loan-generation units. Through the FTP process, the interest rate risks in the Banking Book will be managed by the GALCO via Financial Markets, thus allowing the other business units to concentrate on managing their portfolio credit risk exposures.

Our IT personnel have moved the Assets & Liabilities Management (ALM) Module into the ProductionEnvironment, and are preparing the system to go ‘live’.

Operational Risk ManagementOperational risk is the risk of direct and indirect loss resulting from inadequate or failed internal processes, people and systems or from external events. To manage these risks, the Group has adopted the following guiding principles:

• SoundriskmanagementpracticesasoutlinedintheORMFramework.ThisisinaccordancewithBaselIIandregulatoryguidelines;

(For Islamic Banking, our ORM Framework has been adapted to ensure compliance with the Islamic Financial Services Board (IFSB) and our regulatory bodies)

• BoardandSeniorManagementoversight;

• Well-definedresponsibilitiesforallstaff;

• Well-established operational risk methodologies and processes applied in the identification,assessment,measurement,controlandmonitorofrisks;

• RegulardashboardreportssubmittedtoSeniorManagementandRiskManagementCommittee;and

• Continuouscultivationofanorganisationalculturethatplacesgreatemphasisoneffectiveoperationalrisk management and adherence to sound operating controls.

Our revised ORM Frameworks have further been streamlined to better explain how the existing operational risk tools will complement each other in managing operational risk. The illustration below summarises how the operational risk tools complement each other:

Monthly GRMC meeting (Board level)

Prepare GALCO reports/dashboard

Pre-GALCO meeting (Working Group level)

Gather data from source systems, general ledger

and management information systems

Monthly GALCO meeting (Senior Management level)

Proposal papers, policy papers&informationpapers submitted by

business and support units


Escalation and reporting processes are well instituted through various management committees of GORMC and GRMC as well as the Board. The responsibilities of the committees and Board also include the following:

• OversightandimplementationoftheOperationalRiskManagementFrameworks;

• Establishmentofriskappetiteandtheprovisionofstrategicandspecificdirections;

• Regularreviewofoperationalrisksreportsandprofiles;

• Addressingoperationalriskissues;and

• Ensuringcompliancewithregulatoryandinternalrequirementsincludingdisclosures.

The Group also ensures that staff training is conducted and ongoing to cover all staff, in particular new recruits. The training programme includes emphasis on business continuity planning. Meanwhile, scheduled business continuity and disaster recovery exercises are conducted at periodic intervals.

Internal audit plays its part in ensuring an independent assurance of the implementation of the Framework through their regular audit reviews and reports to the Board.

Business Risk TeamsBesides the abovementioned Group Risk Management functions outlined above, the Group has dedicated Business Risk Teams to manage the risks within their respective lines of business such as Consumer Banking, SME Banking, Commercial Banking, Corporate Banking, Islamic Banking and Investment Banking. These Business Risks Teams are generally set up to focus on the core credit functions of their business segments, typically handling policy setting, credit assessment, credit documentation and administration, portfolio management, credit analytics, loan monitoring and recovery. They are also responsible for identifying Key Risk Indicators and other risk mitigation parameters for managing their portfolios.

With these Business Risk Teams in place, the Group has benefited in terms of improved product/portfolio focus, turnaround time, better credit quality and more effective monitoring of Key Risk Indicators through risk dashboard monitoring/reporting and credit analytics.

Islamic Risk ManagementIslamic Risk Management was specifically formed to cover Operational and Shariah Compliance Risk, Credit Risk and Market Risks for Alliance Islamic Bank Berhad, with emphasis on providing all-round focus on Islamic banking, particularly Shariah Compliance Risk.

The term Shariah Compliance Risk arises from the risk of failure to comply with Shariah rules and principles determined by the relevant Shariah regulatory councils. The Shariah compliance in the Islamic banking business activities includes prohibition of Riba (interest), Gharar (uncertainty) and Masyir (gambling).

Under the Group’s Operational and Shariah Risk Management Framework (ORM-i), the Group applies several key measures, including:

• AdoptingsoundriskmanagementpracticesinaccordancewiththeIslamicFinancialServicesBoard(IFSB),BaselIIandregulatoryguidelines;

• ProvidingcontinuousBoardandSeniorManagementoversight;

• Ensuring that theBank complieswithShariahprinciples in relation to existing andnewproducts,servicesandbusinessactivitiesatallthetimes,byhavingadequatemechanismsandprocesses;

• Establishingclearlinesofrolesandresponsibilities;

• Providingtimelymanagementreports;

• Fosteringriskawarenessthroughongoingstafftraining;and

• Deploying the Shariah ReviewTeam to conduct independent Shariah reviews regularly at variousbusiness lines and reporting their findings to the Shariah Committee and Board.


92

Basel II AccordThe Group monitors its capital adequacy position closely to ensure compliance with BNM requirements and international best practices. In this regard, we are guided by the Basel II Accord which provides guidance on the amount of regulatory capital that banks need to put aside in proportion to their risk profile arising from a bank’s lending, investment and trading activities. We are committed towards adhering to such international standards that are established to protect shareholders and customers against the risk of bank failure.

The following table highlights the Basel II approaches adopted by the Group as at 31 March 2010:

Risk Category Basel II Approach under Pillar 1

Credit Risk Standardised Approach

Market Risk Standardised Approach

Operational Risk Basic Indicator Approach

Ongoing Basel II Projects/Initiatives:

Credit Risk Rating Models/Scorecards

A number of credit rating models/scorecards covering both business and consumer portfolios are currently being developed and staff training is being conducted. The Group is also in the process of setting up anIndependentCreditModelValidationUnittoindependentlyvalidateallcreditratingmodels/scorecardsimplemented in the Group to ensure their robustness and compliance with Basel II rating requirements.

Collateral Management Module

Phase 1 addresses the operational and monitoring requirements of the Basel II Accord and BNM’s guidelines in order for the collateral to be eligible for credit risk mitigation. This phase was completed previously.

Phase 2A covers limit monitoring and booking has cut-over to production in September 2009.

Phase2B involvesthedocumentationofchecklistsandbarcoding;thisiscurrentlyinprogress.

Phase 3 pertaining to straight-through processing with various origination/source systems for limit activation;thisiscurrentlyinprogress.


94

The following additional compliance information is provided in accordance with Paragraph 9.25 of the Main Market Listing Requirements of Bursa Securities:

1. Utilisation of ProceedsThere were no proceeds raised from any corporate proposal during the financial year ended 31 March 2010.

2. Non-Audit FeesNon-audit fees paid/payable to the external auditors, Messrs PricewaterhouseCoopers by the Group for the financial year ended 31 March 2010 amounted to RM1,122,000.

3. Variations in ResultsThere were no variances of 10% or more between the audited results for the financial year ended 31 March 2010 and the unaudited results previously announced.

4. Material ContractsThere were no material contracts (not being contracts entered into in the ordinary course of business) entered into by the Group involving Directors’ and major shareholders’ interests, either still subsisting at the end of the financial year or, if not then subsisting, entered into since the end of the previous financial year.

5. Profit GuaranteeThere was no profit guarantee given by the Company in respect of the financial year ended 31 March 2010.

6. Revaluation of Landed PropertiesThe Group does not adopt a policy of regular revaluation of its landed properties.

7. Options, Warrants or Convertible Securities There were no options, warrants or convertible securities issued by the Company which were exercised during the financial year ended 31 March 2010.

8. Share Buy-BackThe Company did not buy back any of its shares during the financial year ended 31 March 2010.

9. American Depository Receipt (ADR) or Global Depository Receipt (GDR)The Company did not sponsor any ADR or GDR programmes during the financial year ended 31 March 2010.

10. Sanctions and/or PenaltiesThere were no public sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or Management by the relevant regulatory bodies during the financial year ended 31 March 2010.

Additional Compliance Information

ALLIANCE FINANCIAL GROUP BERHAD (6627-X) • 2010 ANNUAL REPORT 95

List of Propertiesas at 31 March 2010

Remaining Age of Built-Up Net Book Year of Lease Period Property Area Value Location Current Use Purchase Tenure (Expiry Year) (Years) (Sq Ft) (RM’000)

11A, Jalan Raja Chulan Alliance Bank’s branch/ 1982 Freehold – 39 37,200 2,66550200 Kuala Lumpur Office premises

1, Jalan Tembaga SD5/2A Alliance Bank’s branch/ 1992 Freehold – 16 10,099 728Bandar Sri Damansara Office premises 52100 Kepong, Kuala Lumpur

150 – 152, Jalan Cerdas Alliance Bank’s branch/ 1997 Leasehold 68 years 31 12,012 2,549Taman Connaught Office premises 99 years 207856000 Kuala Lumpur

43 & 45, Jalan Bunga Tanjung 6A Alliance Bank’s branch/ 1997 Leasehold 71 years 28 8,400 1,266Taman Putra Office premises 99 years 208168000 Ampang, Selangor

1960 E & F, Jalan Stadium Alliance Bank’s branch/ 1979 Leasehold 29 years 29 6,330 47805100 Alor Setar, Kedah Office premises 60 years 2039

Ground & Mezzanine Floor Alliance Bank’s branch/ 1995 Freehold – 15 5,667 1,523Wisma Malvest Office premises 20 & 20A Jalan Tun Dr Awang Sungai Nibong Kecil 11900 Bayan Lepas, Pulau Pinang

71, Lot 3175 & 3176, Block 10 Alliance Bank’s branch/ 2007 Leasehold 35 years 3 9,862 2,340Jalan Laksamana Cheng Ho Office premises 60 years 2045 93200 Kuching, Sarawak

B-400, Jalan Beserah Alliance Bank’s branch/ 1996 Freehold – 19 6,967 47025300 Kuantan, Pahang Office premises

LG134/LG135/G128/F89 Alliance Bank’s branch/ 1984 Freehold – 26 5,454 930Holiday Plaza Office premises Jalan Dato Sulaiman 80250 Johor Bharu, Johor

1-01 & 1A-01 Vacant 1996 Freehold – 12 13,742 5,866Menara Sarawak Enterprise Jalan Bukit Meldrum 80300 Johor Bahru, Johor

96


Lot 1 & 3, Jalan Permas Jaya 10/2 Alliance Bank’s branch/ 1996 Freehold – 17 25,436 1,813Bandar Baru Permas Jaya, Pelentong Office premises 81750 Masai, Johor Bahru, Johor

3 & 5, Jalan Bentara 1 Alliance Bank’s branch/ 1996 Freehold – 18 5,720 1,059Tun Aminah Office premises 81308 Johor Bahru, Johor

Unit 01-G & 01-1, Seremban City Alliance Bank’s branch/ 1997 Freehold – 11 7,276 1,823Jalan Tunku Munawir Office premises 70000 Seremban, Negeri Sembilan

101 & 103, Jalan Melaka Raya 24 Alliance Bank’s branch/ 1995 Leasehold 84 years 12 7,520 630Taman Melaka Raya Office premises 99 years 2094 75000 Melaka

Lot 7 & 9, Block D Alliance Bank’s branch/ 1996 Leasehold 913 years 16 7,497 966Nountun Industrial Estate Office premises 999 years 2923 88450 Inanam Kota Kinabalu, Sabah

Lot 4-6, Block K Alliance Bank’s branch/ 1980 Leasehold 61 years 32 13,979 690Sinsuran Complex Office premises 99 years 2071 W.D.T. 132 88999 Kota Kinabalu, Sabah

Lot 1086, Jalan Utara Alliance Bank’s branch/ 1981 Leasehold 50 years 37 15,511 678W.D.T. 127 Office premises 99 years 2060 91000 Tawau, Sabah

Lot 8, Block A Alliance Bank’s branch/ 1984 Leasehold 891 years 24 4,500 247Beaufort Jaya Com Centre Office premises 999 years 290189800 Beaufort, Sabah

Lot 1, Block C Alliance Bank’s branch/ 1992 Leasehold 70 years 25 4,800 449Mile 4 1/2 Jalan Labuk Office premises 99 years 2080Bandar Kim Fung 90000 Sandakan, Sabah

1 & 2, Block A, Jalan Jungkat Alliance Bank’s branch/ 1993 Leasehold 914 years 16 7,333 335Pangie Light Ind. Complex Office premises 999 years 2924 89989 Tenom, Sabah

List of Propertiesas at 31 March 2010 (cont’d)



Lot 365 & 366, Section 11 Vacant 1993 Freehold – 16 9,552 1,074Jalan Kulas Satu 93400 Kuching, Sarawak

17, 19 & 21, Jalan USJ 9/5 Alliance Bank’s branch/ 1996 Freehold – 14 13,860 2,81047620 Subang Jaya, Selangor Office premises

2 & 3 Block A, Phase III Alliance Bank’s branch/ 1994 Pending – 15.5 12,594 1,059 Luyang Com Centre Office premises Issuance of Title Damai Plaza, Jalan Damai Leasehold 88300 Kota Kinabalu, Sabah

59-60, Jalan Tiga Alliance Bank’s branch/ 1963 Leasehold 879 years 52 9,900 72090702 Sandakan, Sabah Office premises 999 years 2889

Lot B1 & B2, 6th Floor, Block 45 Vacant 1985 Leasehold 885 years 38 1,500 54Church Road 999 years 2895 90702 Sandakan, Sabah

MPWPL U 0072 & 0073 Alliance Bank’s branch/ 1979 Leasehold 47, 53 years 44 5,800 73924-25 Jalan Merdeka Office premises 99 years 2057, 2063 44 87007 Labuan

MDLD 0090, Block 39, Jalan Panji Vacant 1995 Leasehold 51 years 30 5,032 51991100 Lahad Datu, Sabah 99 years 2061

Lot 84, Jalan Gaya Alliance Bank’s branch/ 1987 Leasehold 872 years 52 10,040 1,747 88000 Kota Kinabalu, Sabah Office premises 999 years 2882

21 Lot 2, Block E Vacant 1996 Leasehold 913 years 10 3,739 394Nountun Industrial Estate 999 years 2923 Jalan Tuaran 89350 Inanam, Kota Kinabalu, Sabah

45, Jalan Sungai Besi Indah 1/21 Alliance Bank’s branch/ 2001 Leasehold 81 years 9 9,909 1,44543300 Balakong, Selangor Office premises 99 years 2091

3, Jalan SS 15/2A, Wisma Projass Alliance Bank’s branch/ 2005 Freehold – 24 50,800 7,59647500 Subang Jaya, Selangor Office premises

Lot PT2736-2737, PT2237-2239 Vacant land 1992 Freehold – – 1,167 27,748PT2283, 48 & 515 acresKuala Pahang, District of Pekan, Pahang

98

KEDAH

PULAU PINANG

PERAKTERENGGANU

SELANGOR

KUALA LUMPUR

NEGERI SEMBILAN

MELAKA

JOHOR

SARAWAK

SABAHPAHANG

WILAYAH PERSEKUTUAN LABUAN

Directoryas at 31 May 2010


ALLIANCE BANK MALAYSIA BERHADBRANCHES

KEDAH

Alor Setar1960 E & F, Jalan Stadium05100 Alor Setar, KedahTel : 04-731 0744Fax : 04-733 8055

Lunas, Kulim888 & 889, Jalan AmanTaman Sejahtera09600 Lunas, Kulim, KedahTel : 04-484 3275/76/78Fax : 04-484 3277

Sejati Indah, Sungai PetaniGround Floor, Wisma Uni-Green18, Jalan Permatang GedongTaman Sejati Indah08000 Sungai Petani, KedahTel : 04-431 1673/81 04-431 2139Fax : 04-431 1687

Sungai PetaniAlliance Rakan116A, Ground FloorJalan Pengkalan, Taman Pekan Baru08000 Sungai Petani, KedahTel : 04-420 7700Fax : 04-420 7701

PULAU PINANG

Bandar Baru Air ItamNo. 37, Jalan AngsanaBandar Baru Air Itam11500 Pulau PinangTel : 04-8273 288Fax : 04-8273 688

Beach StreetGround Floor, Bangunan Barkath21, Beach Street10300 Georgetown, Pulau PinangTel : 04-262 8100Fax : 04-261 3300

Bukit MertajamGround & 1st Floor, Wisma Ng Ah Yan42, Lebuh Nangka 2, Taman Mutiara14000 Bukit Mertajam, Pulau PinangTel : 04-530 3130Fax : 04-530 7433

Bukit MertajamAlliance Rakan3195, Ground FloorMaju Utama Business Centre, Jalan Maju14000 Bukit Mertajam, Pulau PinangTel : 04-540 1100Fax : 04-540 1101

Butterworth 4105-4107, Jalan Bagan Luar12000 Butterworth, Pulau PinangTel : 04-331 4863/64Fax : 04-331 3904

JelutongAlliance Rakan9-1-13A, Taman Kheng Tian Business CentreJalan Van Praagh, Bandar Jelutong11600 Pulau PinangTel : 04-288 7888Fax : 04-288 7889

Sungai Nibong KecilGround & Mezzanine FloorWisma Malvest, 20 & 20AJalan Tun Dr Awang, Sungai Nibong Kecil11900 Bayan Lepas, Pulau PinangTel : 04-642 5918Fax : 04-642 5924

PERAK

Ipoh40 & 42, Persiaran Greenhill30450 Ipoh, PerakTel : 05-241 2342/3 05-241 2346/8Fax : 05-241 2355

Sitiawan23 & 24, Jalan Raja OmarTaman Selamat, 32000 Sitiawan, PerakTel : 05-691 1212Fax : 05-691 7975

SELANGOR

Aman Suria DamansaraJ-G-23 & J-G-25, Block JJalan PJU 1/43, PJU1Aman Suria Damansara47301 Petaling Jaya, SelangorTel : 03-7880 8842Fax : 03-7880 4299

Ampang PointGround & Mezzanine Floor65, Jalan Mamanda 9, Ampang PointTaman Dato Ahmad Razali68000 Ampang, SelangorTel : 03-4252 3822Fax : 03-4252 3877

Balakong45, Jalan Sungai Besi Indah 1/21Taman Sungai Besi Indah43300 Seri Kembangan, SelangorTel : 03-8948 6972Fax : 03-8948 9530

Bandar Bukit Tinggi56, Lorong Batu Nilam 4BBandar Bukit Tinggi41200 Klang, SelangorTel : 03-3324 1122Fax : 03-3324 3311

Bandar Puteri Puchong11 & 13, Jalan Puteri 2/1Bandar Puteri Puchong47100 Puchong, SelangorTel : 03-8063 2833Fax : 03-8063 2711

100

SELANGOR

CP Tower, Petaling JayaUnit 1-2, Right WingLevel 1, CP Tower11, Jalan 16/11, Off Jalan Damansara46350 Petaling Jaya, SelangorTel : 03-7957 3366Fax : 03-7957 3360

Damansara UptownUnit 102 & 103, Level 1, Uptown 22, Jalan SS21/37, Damansara Uptown47400 Petaling Jaya, SelangorTel : 03-7660 9798Fax : 03-7660 9799

KajangLot 4 & 5, Jalan Jeloh 3Off Jalan Bukit43000 Kajang, SelangorTel : 03-8733 5966Fax : 03-8736 4004

KlangGround Floor1, Lorong Kasawari 4BTaman Eng Ann41150 Klang, SelangorTel : 03-3345 3700Fax : 03-3345 3733

Kota Damansara 7-G & 9-G, Jalan PJU 5/20Pusat Perdagangan Kota DamansaraPJU5 Kota Damansara47810 Petaling Jaya, SelangorTel : 03-6142 8632Fax : 03-6142 8732

Mutiara Damansara G19, IKANO Power Centre2, Jalan PJU 7/2, Mutiara Damansara47800 Petaling Jaya, SelangorTel : 03-7727 1041Fax : 03-7727 1478

Puchong Jaya11, Jalan Kenari 5 Bandar Puchong Jaya47100 Puchong Jaya, SelangorTel : 03-8075 9185Fax : 03-8075 9200

Rawang71, Jalan Bandar Rawang 2Bandar Baru Rawang48000 Rawang, SelangorTel : 03-6091 7622Fax : 03-6091 7922

Selayang71 & 73, Jalan 2/3APusat Bandar Utara Selayang KM 12, Jalan Ipoh68100 Batu Caves, SelangorTel : 03-6135 1800Fax : 03-6135 1787

Seri Kembangan31-1 & 31-2Jalan Serdang Perdana 2/1Taman Serdang Perdana43300 Seri KembanganSelangorTel : 03-8941 6610Fax : 03-8941 6620

Seri KembanganAlliance Rakan1503B, Ground FloorJalan Besar43300 Seri Kembangan, SelangorTel : 03-8945 5616Fax : 03-8945 5646

Shah AlamGround & 1st Floor2, Jalan Murni 25/61Taman Sri Muda, Seksyen 2540400 Shah Alam, SelangorTel : 03-5121 9336Fax : 03-5121 9373

SS2, Petaling Jaya53 & 55, Jalan SS2/5547300 Petaling Jaya, SelangorTel : 03-7875 8255Fax : 03-7874 0973

Subang Jaya3 Alliance3, Jalan SS15/2A47500 Subang Jaya, SelangorTel : 03-5634 2870Fax : 03-5634 1128

Sunway PyramidLot 1.96A, Ground Floor, New WingSunway Pyramid, Bandar Sunway46150 Petaling Jaya, SelangorTel : 03-5636 0870Fax : 03-5636 0670

Taman Putra43-45, Jalan Bunga Tanjung 6ATaman Putra68000 Ampang, SelangorTel : 03-4291 7740Fax : 03-4296 1250

USJ, Subang JayaGround & 1st Floor17, 19 & 21, Jalan USJ 9/5N47620 UEP Subang Jaya, SelangorTel : 03-8024 1300Fax : 03-8023 4379

KUALA LUMPUR

Bangsar28, Lorong Ara Kiri 2Lucky Garden, Bangsar59100 Kuala LumpurTel : 03-2095 3185Fax : 03-2095 3184

Capital SquareGround Floor Menara Multi-PurposeCapital Square No. 8, Jalan Munshi Abdullah50100 Kuala LumpurTel : 03-2694 8800Fax : 03-2694 6867

Directoryas at 31 May 2010 (cont’d)


KUALA LUMPUR

Jalan AmpangGround & 3rd Floor Menara CMY 160, Jalan Ampang 50450 Kuala LumpurTel : 03-2164 8240Fax : 03-2168 8390

Jalan Ipoh41 & 43, Jalan Ipoh51200 Kuala LumpurTel : 03-4041 2288Fax : 03-4041 7918

Jalan IpohAlliance Rakan729, Ground FloorBatu 41/2, Jalan Ipoh51200 Kuala LumpurTel : 03-6250 2610Fax : 03-6250 2710

Jalan Mega Mendung116, Jalan Mega MendungBandar ParkOff Jalan Klang Lama58200 Kuala LumpurTel : 03-7983 1177Fax : 03-7987 3511

Jalan Sultan IsmailMezzanine Floor Menara Prudential10, Jalan Sultan Ismail50250 Kuala LumpurTel : 03-2070 4477Fax : 03-2070 4900

Jalan Tun Tan Cheng Lock15, Jalan Tun Tan Cheng Lock50000 Kuala LumpurTel : 03-2072 0978Fax : 03-2072 0968

KepongGround Floor, 52, Jalan PrimaVista Magna, Metro Prima Kepong52100 Kuala LumpurTel : 03-6257 9997Fax : 03-6257 9996

Kuchai Entrepreneurs Park1, Jalan 1/116B, Kuchai Entrepreneurs Park58200 Kuala LumpurTel : 03-7984 8800Fax : 03-7981 6486

Mid Valley15-G & 15-1, The Boulevard OfficesMid Valley City, Lingkaran Syed Putra59200 Kuala LumpurTel : 03-2283 1849Fax : 03-2287 8217

Mont’KiaraUnit A-0G-02, Block APlaza Mont’Kiara 2, Jalan Kiara, Mont’Kiara50480 Kuala LumpurTel : 03-6203 1543Fax : 03-6201 2607

Pandan IndahGround & Mezzanine Floor11 & 13, Jalan Pandan Indah 4/34Pandan Indah55100 Kuala LumpurTel : 03-4295 7300Fax : 03-4296 4107

Pandan IndahAlliance RakanMezzanine Floor11 & 13, Jalan Pandan Indah 4/34Pandan Indah55100 Kuala LumpurTel : 03-4280 1196Fax : 03-4280 3411

SegambutGround & 1st Floor 22, Wisma Sin Hoh HuatPersiaran Segambut Tengah51200 Kuala LumpurTel : 03-6257 2105Fax : 03-6257 2680

Setapak86, Jalan 2/23A, Taman Danau KotaOff Jalan Genting Kelang, Setapak53300 Kuala LumpurTel : 03-4143 9643Fax : 03-4143 9568

Sri Damansara1, Jalan Tembaga SD 5/2ABandar Sri Damansara52100 Kuala LumpurTel : 03-6275 0144/0529/0684Fax : 03-6275 0457 03-6272 1732

Taman Connaught150-152, Jalan CerdasTaman Connaught56000 Kuala LumpurTel : 03-9102 3973Fax : 03-9102 3740

Taman Maluri254 & 254A, Jalan MahkotaTaman Maluri, Cheras55100 Kuala LumpurTel : 03-9285 4133Fax : 03-9283 1397

Taman Tun Dr Ismail24, Jalan Tun Mohd Fuad 1Taman Tun Dr Ismail60000 Kuala LumpurTel : 03-7729 8239Fax : 03-7729 8237

102

JOHOR

Batu PahatGround, 1st & 2nd Floor2 & 4, Jalan Kundang 3Taman Bukit Pasir83000 Batu Pahat, JohorTel : 07-431 4088Fax : 07-434 0033

Bukit Bakri, Muar88, Jalan Tepi PasarBukit Bakri84200 Muar, JohorTel : 06-986 7633Fax : 06-986 6721

Holiday Plaza, Johor BahruUnit G128, Holiday PlazaJalan Dato Suleiman, Century Garden80250 Johor Bahru, JohorTel : 07-331 1200Fax : 07-331 1207

Jalan Tebrau396B & 396B-1, Jalan TebrauTaman Majidee80250 Johor Bahru, JohorTel : 07-332 2331Fax : 07-331 1310

Johor Jaya50 & 52, Jalan Dedap 13Taman Johor Jaya81100 Johor Bahru, JohorTel : 07-353 5388Fax : 07-355 7377

Johor JayaAlliance Rakan33, Jalan Dedap 21, Taman Johor Jaya81100 Johor Bahru, JohorTel : 07-353 7105Fax : 07-353 7106

Kelapa Sawit, Kulai16 & 17, Jalan Susur Satu26th Mile, Jalan Air Hitam, Kelapa Sawit81030 Kulai, JohorTel : 07-652 3704/5/7Fax : 07-652 3706

Permas Jaya1 & 3, Jalan Permas Jaya 10/2Bandar Baru Permas Jaya81750 Johor Bahru, JohorTel : 07-386 2480Fax : 07-386 2482

SegamatNo. 115, Jalan Genuang85000 Segamat, JohorTel : 07-931 1170Fax : 07-931 2727

Sri Gading, Batu Pahat1 & 2, Jalan Ria 1Taman Ria Jaya, Sri Gading83000 Batu Pahat, JohorTel : 07-455 9406Fax : 07-455 9411

Taman Molek1 & 1-01, Jalan Molek 1/29Taman Molek81100 Johor Bahru, JohorTel : 07-355 6577Fax : 07-355 4677

Taman Nusa Bestari1-G & 1-01, Jalan Bestari 6/2 Taman Nusa Bestari 81300 Skudai, JohorTel : 07-237 8626Fax : 07-237 8621

Taman PelangiGround Floor, Shoplot Nos. 1 & 3Jalan Perang, Taman Pelangi80400 Johor Bahru, JohorP.O. Box 61, Taman Sri Tebrau80057 Johor Bahru, JohorTel : 07-332 7016Fax : 07-333 7411

Tesco Desa TebrauLot F09, 1st FloorTesco Desa TebrauTaman Desa Tebrau81100 Johor Bahru, JohorTel : 07-357 1127Fax : 07-357 0027

Tun Aminah3 & 5, Jalan Bentara 1Taman Ungku Tun Aminah81300 Skudai, JohorTel : 07-554 0031Fax : 07-554 2494

Ulu TiramGround Floor, Lots 34 & 36,Jalan Johar 3, Desa Cemerlang81800 Ulu Tiram, JohorTel : 07-861 5143Fax : 07-861 5157

MELAKA

Melaka99, 101 & 103, Jalan Melaka Raya 24Taman Melaka Raya75000 MelakaTel : 06-284 9249Fax : 06-284 9248

Taman Desa Cheng PerdanaG-1, Ground Floor, Bangunan KKJalan Cheng Perdana 1/1ATaman Desa Cheng Perdana 175260 MelakaTel : 06-3365 111Fax : 06-3365 110

NEGERI SEMBILAN

Seremban1G & 1-1, Arab Malaysian Business CentreJalan Tuanku Munawir70000 Seremban, Negeri SembilanTel : 06-762 5610/21Fax : 06-762 5612

PAHANG

KuantanB400, Jalan Beserah25300 Kuantan, PahangTel : 09-567 2508Fax : 09-567 3307



TERENGGANU

Kuala TerengganuGround & Mezzanine FloorWisma Kam Choon101, Jalan Kampong Tiong20100 Kuala Terengganu, TerengganuTel : 09-623 5244Fax : 09-623 6379

Kuala TerengganuAlliance RakanMezzanine FloorWisma Kam Choon101, Jalan Kampong Tiong20100 Kuala Terengganu, TerengganuTel : 09-630 1290/91Fax : 09-624 0261

SABAH

Bandar Kim Fung, SandakanLot 1, Block C, Bandar Kim FungMile 41/2, Jalan Utara P.O. Box 163Post Office, Mile 11/2, Jalan Utara90307 Sandakan, SabahTel : 089-275 020/21/22Fax : 089-275 027

BeaufortLot B, Block A, Beaufort JayaCommercial Centre, P.O. Box 22089808 Beaufort, SabahTel : 087-211 721Fax : 087-212 392

DonggongonWisma PPSDonggongon New TownshipW.D.T. No. 5680509 Penampang, SabahTel : 088-713 411/2 088-718 980Fax : 088-718 634

Federal House, Kingfisher’s Park, KK(Service Centre)Aras 1, Blok A,Kompleks Pentadbiran Kerajaan Persekutuan Sabah, Jalan UMS88400 Kota Kinabalu, SabahTel : 088-435 761Fax : 088-484 712

Inanam, Kota KinabaluGround, 1st & 2nd FloorLot 7 & 9, Block D, Nountun Industrial Estate89350 Inanam, Kota Kinabalu, SabahTel : 088-435 761Fax : 088-435 770

Inanam, Kota KinabaluAlliance RakanA-1-10, Ground FloorLot 10, Block A, Lorong Inanam Sentral 1 Inanam New Township88450 Inanam, SabahTel : 088-432 420Fax : 088-432 421

Jalan Gaya82 & 84, Jalan Gaya88000 Kota Kinabalu, SabahTel : 088-251 177Fax : 088-223 629

KeningauLot No. 1, Block B-8, Jalan Arusap89000 Keningau, SabahTel : 087-330 301Fax : 087-330 294

Kota MaruduShoplot No. 8, Block ESedco Shophouses, P.O. Box 26089108 Kota Marudu, SabahTel : 088-661 104Fax : 088-661 106

KundasangShoplot No. 6, Block BSedco Shophouses, P.O. Box 15289308 Ranau, SabahTel : 088-889 679Fax : 088-889 676

Lahad DatuLot 1 MDLD 4709, Jalan Kastam Lama91100 Lahad Datu, SabahTel : 089-883 911/5Fax : 089-883 916

Luyang DamaiGround & 1st Floor, Shoplot No. 2 & 3Block A, Luyang Commercial CentreDamai Plaza, Phase III, Jalan Damai88300 Kota Kinabalu, SabahTel : 088-249 073/084/085/109Fax : 088-249 064

Sandakan59-61, Jalan TigaP.O. Box 22490702 Sandakan, SabahTel : 089-275 193 089-216 771/089-222 693Fax : 089-271 641

SinsuranLot 4, 5, & 6, Block KSinsuran Complex88000 Kota Kinabalu, SabahTel : 088-237 762Fax : 088-212 511

TambunanLot 1, Block BSedco Shophouses, W.D.T. 5589659 Tambunan, SabahTel : 087-771 171Fax : 087-771 157

Tawau1086, Jalan Utara, W.D.T. 12791009 Tawau, SabahTel : 089-776 483Fax : 089-763 287

TenomGround & Mezzanine FloorShoplot Nos 1 & 2, Block APangie Light Industrial ComplexJalan Jungkat, Tenom New TownshipP.O. Box 379, 89909 Tenom, SabahTel : 087-737 757Fax : 087-737 762

104

SARAWAK

Kuching178, Jalan Chan Chin Ann93100 Kuching, SarawakTel : 082-257 129Fax : 082-257 275

Laksamana70 & 71, Block 10Jalan Laksamana Cheng Ho93200 Kuching, SarawakTel : 082-230 888Fax : 082-238 889

MiriGround & 1st Floor, Lot 353, Block 7Miri Concession Land District(Pelita Commercial Centre)Jalan Miri Pujut98000 Miri, SarawakTel : 085-427 535Fax : 085-439 535

SibuGround Floor, 32, Jalan BakoBrooke Drive 396000 Sibu, SarawakTel : 084-317 628Fax : 084-317 148

LABUAN

Labuan MPWPL U 0072 & 0073Jalan Merdeka, P.O. Box 39687008 Labuan FTTel : 087-412 826Fax : 087-415 446

ALLIANCE INVESTMENT BANK BERHAD(A participating organisation ofBursa Malaysia Securities Berhad)

HEAD OFFICE

20th Floor, Menara Multi-PurposeCapital SquareNo. 8, Jalan Munshi Abdullah50100 Kuala LumpurTel : 03-2692 7788Fax : 03-2692 8787www.allianceinvestmentbank.com.my

BRANCHES

PERLIS

Kangar2nd Floor, Podium BlockBangunan KWSP01000 Kangar, PerlisTel : 04-976 5200Fax : 04-977 0868

KEDAH

Alor SetarLot T-30, 2nd Floor, Wisma PKNKJalan Sultan Badlishah05000 Alor Setar, KedahTel : 04-731 7088Fax : 04-731 8428

PULAU PINANG

Pulau PinangSuite 2.1 & Suite 2.4, Level 2Wisma Great EasternNo. 25, Leboh Light10200 Pulau PinangTel : 04-261 1688Fax : 04-261 6363

KUALA LUMPUR

Kuala Lumpur17th Floor, Menara Multi Purpose Capital Square No. 8, Jalan Munshi Abdullah50100 Kuala LumpurTel : 03-2697 6333Fax : 03-2697 2929

JOHOR

KluangNo. 73, Ground Floor & 1st FloorJalan Rambutan86000 Kluang, JohorTel : 07-771 7922Fax : 07-777 1079

PAHANG

KuantanA-397, A-399 & A-401Taman Sri Kuantan III, Jalan Beserah25300 Kuantan, PahangTel : 09-566 0800Fax : 09-566 0801

TERENGGANU

Kuala TerengganuNo.1D & 1E, Jalan Air Jerneh20300 Kuala Terengganu, TerengganuTel : 09-631 7922Fax : 09-631 3255



ALLIANCE ISLAMIC BANK BERHAD

HEAD OFFICE

22nd Floor, Menara Multi-PurposeCapital SquareNo. 8, Jalan Munshi Abdullah50100 Kuala LumpurTel : 03-2694 8800Fax : 03-2698 4691www.allianceislamicbank.com.my

ISLAMIC BANKING CENTRES

PULAU PINANG

Beach StreetGround Floor, Bangunan Barkath21, Beach Street10300 Georgetown, Pulau PinangTel : 04-262 8100Fax : 04-261 3300

SELANGOR

Kota Damansara 7-G & 9-G, Jalan PJU 5/20Pusat Perdagangan Kota DamansaraPJU5 Kota Damansara47810 Petaling Jaya, SelangorTel : 03-6142 8632Fax : 03-6142 8732

Ampang PointGround & Mezzanine Floor65, Jalan Mamanda 9, Ampang PointTaman Dato Ahmad Razali68000 Ampang, SelangorTel : 03-4252 3822Fax : 03-4252 3877

KUALA LUMPUR

Capital SquareGround FloorMenara Multi-PurposeCapital SquareNo. 8, Jalan Munshi Abdullah50100 Kuala LumpurTel : 03-2694 8800Fax : 03-2694 6867

Jalan AmpangGround & 3rd FloorMenara CMY160, Jalan Ampang50450 Kuala LumpurTel : 03-2164 8240Fax : 03-2168 8390

JOHOR

Taman PelangiGround Floor, Shoplot Nos. 1 & 3Jalan Perang, Taman Pelangi80400 Johor Bahru, JohorP.O. Box 61, Taman Sri Tebrau80057 Johor Bahru, JohorTel : 07-333 2064/2177Fax : 07-333 7411

MELAKA

Taman Desa Cheng PerdanaG-1, Ground Floor, Bangunan KKJalan Cheng Perdana 1/1ATaman Desa Cheng Perdana 175260 MelakaTel : 06-3365 111Fax : 06-3365 110

SABAH

SinsuranLot 4, 5, & 6, Block KSinsuran Complex88000 Kota Kinabalu, SabahTel : 088-237 758Fax : 088-212 511

ALLIANCE INVESTMENT MANAGEMENT BERHAD23.01, 23rd FloorMenara Multi-PurposeCapital SquareNo. 8, Jalan Munshi Abdullah50100 Kuala LumpurTollfree: 1-800-88-3065Tel : 03-2698 4299Fax : 03-2693 0792 (General) 03-2691 9403 (Operations)www.allianceimb.com.my

ALLIANCE TRUSTEE BERHAD3rd Floor, Menara Multi-PurposeCapital SquareNo. 8, Jalan Munshi Abdullah50100 Kuala LumpurTel : 03-2694 4888Fax : 03-2694 6200

106

Analysis of Shareholdingsas at 31 May 2010

Class of securities : Ordinary shares of RM1.00 each

Authorised share capital : RM2,000,000,000

Issued and paid-up share capital : RM1,548,105,929

Voting rights : One vote per ordinary share

Shareholdings Distribution ScheduleSize of Shareholdings No. of Shareholders % of Shareholders No. of Shares Held % of Issued Shares

Less than 100 1,751 8.64 39,632 0.00

100 - 1,000 4,552 22.46 3,691,458 0.24

1,001 – 10,000 10,873 53.65 46,261,899 2.99

10,001 – 100,000 2,619 12.93 77,457,187 5.00

100,001 – less than 5% of issued shares 469 2.32 846,137,638 54.66

5% and above of issued shares 2 0.01 574,518,115 37.11

Total 20,266 100.00 1,548,105,929 100.00

Thirty (30) Largest Shareholders Name No. of Shares Held % of Issued Shares

1. Mayban Nominees (Tempatan) Sdn Bhd – DBS Bank for Vertical Theme Sdn Bhd 373,475,175 24.13

2. Employees Provident Fund Board 201,042,940 12.99

3. CIMSEC Nominees (Tempatan) Sdn Bhd – CIMB Bank Bhd for Vertical Theme Sdn Bhd 76,382,600 4.93

4. Malaysia Focus Investment Fund Limited 71,228,700 4.60

5. Medimetro (M) Sdn Bhd 56,000,000 3.62

6. ABB Nominee (Tempatan) Sdn Bhd – Pledged Securities Account for Caizhi Development Sdn Bhd 46,235,776 2.99

7. UOBM Nominees (Asing) Sdn Bhd – Exempt AN for Societe Generale Bank & Trust 41,494,900 2.68

8. HSBC Nominees (Asing) Sdn Bhd – Exempt AN for RBS Coutts Bank Ltd 23,610,776 1.53

9. Eden Engineering Sdn Bhd 22,295,763 1.44

10. Atlasplus Sdn Bhd 21,927,408 1.42


Thirty (30) Largest Shareholders (cont’d) Name No. of Shares Held % of Issued Shares

11. HSBC Nominees (Asing) Sdn Bhd – Exempt AN for Clariden Leu Ltd 20,400,000 1.32

12. Public Nominees (Tempatan) Sdn Bhd – PB Trustee Services Berhad 19,070,300 1.23

13. Multi-Purpose Holdings Berhad 17,471,600 1.13

14. Malaysia Nominees (Tempatan) Sendirian Berhad – Great Eastern Life Assurance (Malaysia) Berhad 16,148,100 1.04

15. HSBC Nominees (Tempatan) Sdn Bhd – Nomura Asset Management Malaysia for Employees Provident Fund 15,604,300 1.01

16. HSBC Nominees (Asing) Sdn Bhd – Exempt AN for JPMorgan Chase Bank, National Association 13,122,100 0.85

17. Cartaban Nominees (Asing) Sdn Bhd – Exempt AN for State Street Bank & Trust Company 13,101,000 0.85

18. SBB Nominees (Tempatan) Sdn Bhd – Employees Provident Fund Board 12,055,700 0.78

19. Citigroup Nominees (Asing) Sdn Bhd – CBNY for Dimensional Emerging Markets Value Fund 11,988,000 0.77

20. HSBC Nominees (Asing) Sdn Bhd – Exempt AN for Credit Suisse 11,613,392 0.75

21. HSBC Nominees (Asing) Sdn Bhd – BBH and Co Boston for Vanguard Emerging Markets Stock Index Fund 11,038,817 0.71


23. Cartaban Nominees (Asing) Sdn Bhd – SSBT Fund D26J for Emerging Markets Global Small Capitalization Fund 8,989,900 0.58

24. Citigroup Nominees (Tempatan) Sdn Bhd – Exempt AN for American International Assurance Berhad 8,472,400 0.55



27. Citigroup Nominees (Tempatan) Sdn Bhd – Exempt AN for Prudential Fund Management Berhad 6,564,200 0.42

28. Citigroup Nominees (Asing) Sdn Bhd – Chase Manhattan Trustees Limited for Pacific Trust 6,250,800 0.40

29. AM Nominees (Tempatan) Sdn Bhd – Employees Provident Fund Board 5,939,000 0.38

30. Maybest Enterprise Sdn Bhd 5,315,800 0.34

Total 1,162,715,947 75.11

108

No. of Ordinary Shares

Name of Substantial Shareholder Direct Interest % of Issued Shares Indirect Interest % of Issued Shares Total % of Issued Shares

Vertical Theme Sdn Bhd 449,857,775 29.06 – – 449,857,775 29.06Langkah Bahagia Sdn Bhd – – 449,857,7751 29.06 449,857,775 29.06Duxton Investments Pte Ltd – – 449,857,7751 29.06 449,857,775 29.06Lutfiah Binti Ismail – – 449,857,7752 29.06 449,857,775 29.06Fullerton Financial Holdings Pte Ltd – – 449,857,7753 29.06 449,857,775 29.06Fullerton Management Pte Ltd – – 449,857,7754 29.06 449,857,775 29.06Temasek Holdings (Private) Limited – – 449,857,7755 29.06 449,857,775 29.06Minister for Finance (Incorporated) of Singapore – – 449,857,7756 29.06 449,857,775 29.06Employees Provident Fund Board 242,284,840 15.65 – – 242,284,840 15.65

Notes:1 Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 held through Vertical Theme Sdn Bhd. 2 Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 held through Langkah Bahagia Sdn Bhd.3 Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 held through Duxton Investments Pte Ltd.4 Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 held through Fullerton Financial Holdings Pte Ltd.5 Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 held through Fullerton Management Pte Ltd.6 Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 held through Temasek Holdings (Private) Limited.

Substantial Shareholdersas at 31 May 2010

Direct Interest Indirect InterestShares held in the Company No. of Shares % of Issued Shares No. of Shares % of Issued Shares

Megat Dziauddin bin Megat Mahmud 3,000 negligible – –Dato’ Thomas Mun Lung Lee (held through spouse, Datin Teh Yew Kheng) – – 35,000 negligible

Other than as disclosed above, none of the other Directors have any interests in the Company or in any of the Company’s related corporation.

Directors’ Shareholdingsas at 31 May 2010

FinancialStatements

110 Statement of Board ofDirectors’ Responsibilities

111 Directors’ Report

118 Statement by Directors

118 Statutory Declaration

119 Independent Auditors’ Report

121 Balance Sheets

123 Income Statements

124 Consolidated Statement ofChanges in Equity

125 Statement of Changes in Equity

126 Consolidated Cash Flow Statement

129 Cash Flow Statement

131 Notes to the Financial Statements

financial_0065 18/06/2010 8:21 PM Page 109

The Companies Act, 1965 requires Directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Groupand the Company for the financial year.

In preparing the financial statements, the Directors are responsible for the adoption of suitable accounting policies that comply with the provisions of the CompaniesAct, 1965, applicable Financial Reporting Standards in Malaysia as modified by Bank Negara Malaysia Guidelines. The Directors are also responsible to ensure theirconsistent use in the financial statements, supported where necessary by reasonable and prudent judgements.

The Directors hereby confirm that suitable accounting policies have been consistently applied in the preparation of the financial statements. The Directors also confirmthat the Company maintains adequate accounting records and an effective system of internal control to safeguard the assets of the Group and the Company andprevent and detect fraud or any other irregularities.

110

Statement of Board of Directors’ ResponsibilitiesFor preparing the Annual Audited Financial Statements


The Directors present their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 March 2010.

PRINCIPAL ACTIVITIESThe principal activities of the Company are investment holding and provision of management services to the subsidiaries.

The principal activities of the subsidiaries are commercial banking and financing, Islamic banking, investment banking including provision of stockbroking services, unit trusts and fund management, and the provision ofrelated financial services.

There have been no significant changes in the nature of the principal activities during the financial year.

RESULTSGroup Company

RM’000 RM’000

Profit before taxation and zakat 408,938 128,726 Taxation and zakat (107,438) (27,993)

Net profit after taxation and zakat 301,500 100,733

Attributable to:Equity holders of the Company 301,424 100,733 Minority interests 76 –

Net profit after taxation and zakat 301,500 100,733

RESERVES AND PROVISIONSThere were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements.

Directors’ Report

111ALLIANCE FINANCIAL GROUP BERHAD (6627-X) • 2010 ANNUAL REPORT


DIVIDENDSThe amount of dividends declared and paid by the Company since 31 March 2009 were as follows:

RM’000

(i) First interim dividend of 1.3 sen per share, tax exempt under the single tier tax system, on 1,548,105,929 ordinary shares of RM1.00 each,in respect of financial year ended 31 March 2010, was paid on 26 August 2009 19,904

(ii) Second interim dividend of 5.1 sen per share, tax exempt under the single tier tax system, on 1,548,105,929 ordinary shares of RM1.00 each,in respect of financial year ended 31 March 2010, was paid on 26 March 2010 77,980

97,884

Dividends paid on the shares held in Trust pursuant to the Company’s ESS which are classified as shares held for ESS are not accounted for in the total equity. An amount of RM222,000 and RM973,000 being dividendspaid for those shares were added back to the appropriation of retained profits in respect of the first and second interim dividends respectively.

The Directors do not recommend the payment of any final dividend in respect of the current financial year.

EMPLOYEES’ SHARE SCHEMEThe Alliance Financial Group Berhad Employees’ Share Scheme (“ESS”) is governed by the Bye-Laws approved by the shareholders at an Extraordinary General Meeting held on 28 August 2007. The ESS which comprisesthe Share Option Plan, the Share Grant Plan and the Share Save Plan took effect on 3 December 2007 and is in force for a period of 10 years.

On 25 August 2009, the Company offered/awarded the following share options and share grants to Directors and employees of the Company and its subsidiaries who have met the criteria of eligibility for the participationin the ESS:

(i) 10,189,800 share options under the Share Option Plan at an option price of RM2.38 per share which will be vested subject to the achievement of performance conditions.

(ii) 2,620,800 share grants under the Share Grant Plan. The first 50% of the share grants are to be vested at the end of the second year and the remaining 50% of the share grants are to be vested at the end of thethird year from the date on which an award is made.

There were no share options offered under the Share Save Plan during the financial year.

The salient features of the ESS are disclosed in Note 30 to the financial statements.

SHARES HELD FOR EMPLOYEES’ SHARE SCHEMEDuring the financial year ended 31 March 2010, the Trustee of the ESS had purchased 5,581,700 ordinary shares of RM1.00 each fully paid in the Company from the open market at an average price of RM2.25 per share. Thetotal consideration paid for the purchase including transaction costs was RM12,570,000. The shares purchased are being held in trust by the Trustee of the ESS in accordance with the Trust Deed dated 3 December 2007.

During the financial year ended 31 March 2010, 816,900 shares have been vested and transferred from the Trustee to the eligible employees of the Company and its subsidiaries in accordance with the terms under theShare Grant Plan of the ESS. As at 31 March 2010, the Trustee of the ESS held 19,070,300 ordinary shares representing 1.23% of the issued and paid-up capital of the Company. Such shares are held at a carrying amountof RM46,697,000 and further relevant details are disclosed in Note 29 to the financial statements.

112

Directors’ Report


BUSINESS REVIEW FOR FINANCIAL YEAR ENDED ("FYE") 31 MARCH 2010In response to global and local economic conditions, the Group focused on strengthening its risk management practices to maintain the credit quality of its loan portfolios, improve cost efficiencies and to ensure its liquidityand capital positions stay strong.

For the 12 months ended 31 March 2010, the Group recorded profit before taxation of RM408.9 million, a growth of RM105.6 million or 35% compared to RM303.3 million in the corresponding period last year.

During the year under review, the Group recorded loans growth of 9.3%, with the loans portfolio diversified in line with our desired mix. Net non-performing loans maintained as last year at 1.8%. The Group’s risk-weightedcapital ratio and core capital ratio improved to 15.4% and 11.1% from 14.6% and 10.3% respectively compared to 31 March 2009.

For the year under review, the Group received several local and regional accolades as listed below for its branding and product innovation.

• 2009 National Award for Management Accounting (NAfMA 2009)

• Malaysia’s Top 30 Most Valuable Brands 2009 (MMVB 2009)

• The Best Equity Malaysia Islamic Fund in the 3-year category by The Edge-Lipper Malaysia Fund Awards 2009

• Most Personalised Personalisation award (You:nique Picture Card) by Multos World Awards 2009

• Excellence in Business Model Innovation Award 2009 by Asian Banker’s Excellence in Retail Financial Services Awards Programme

ECONOMIC OUTLOOK AND PROSPECTS FOR FYE 31 MARCH 2011Following the global downturn, economic growth solidified and expanded in the second half of 2009. In 2010, the IMF projects that global growth will rise by 4%. This represents an upward revision of 0.75% point fromthe IMF October 2009 World Economic Outlook. Bank Negara Malaysia expects 4.5-5.5% real gross domestic product (GDP) growth this year, supported by both strong domestic demand and continued improvement inexternal demand, especially from the regional economies. At the current level of the Overnight Policy Rate, the stance of monetary policy remains accommodative and supportive of economic growth. A supportive monetaryenvironment, including continued access to competitive financing, will remain in place to foster recovery in private sector activity.

BUSINESS OUTLOOK FOR FYE 31 MARCH 2011We foresee an economic recovery and rising GDP in 2011. At the macro level, we are confident that the recently announced first phase of the New Economic Model (NEM) will be good for various sectors, ultimatelyimpacting the man-on-the-street’s financial planning and management.

At the Group level, we approach the financial year with a renewed but cautious optimism. We are confident that our customer segmentation model will enable us to deepen our customer relationships. The Group has beensteadily transforming its business model to enable the best delivery to our customers and to maximise synergies between our various lines of business.

The small-to-medium enterprise (SME) sector is expected to be a strong growth driver in the country’s plans to achieve its goal of a high income nation, as supported by the NEM. The SME sector remains one of AllianceBank’s areas of strength and we are well-positioned to take advantage of this renewed outlook for the sector.

We also expect to benefit from the transformation journey that we have embarked on since 2007. Our top priority is to ensure that our underlying business momentum remains intact and sustains our growth momentum.Human capital development and talent management will continue to remain a key priority for the Group.

The Group expects to continue to record satisfactory performance in the new financial year ending 31 March 2011.

Directors’ Report



RATING BY EXTERNAL RATING AGENCYThe banking subsidiary Alliance Bank Malaysia Berhad (“ABMB”) is rated by Rating Agency Malaysia Berhad (“RAM”). Based on RAM’s rating in November 2009, ABMB’s short-term and long-term ratings are reaffirmedat P1 and A1 respectively. RAM has classified these rating categories as follows:

P1 – Financial institutions in this category have superior capacities for timely payments of obligations.

A1 – Financial institutions rated in this category are adjudged to offer adequate safety for timely payments of financial obligations. This level of rating indicates financial institutions with adequate credit profiles, butwhich possess one or more problem areas, giving rise to the possibility of future riskiness. Financial institutions rated in this category have generally performed at industry average and are considered to be morevulnerable to changes in economic conditions than those rated in the higher categories.

DIRECTORSThe names of the Directors of the Company in office since the date of the last report and at the date of this report are:

Datuk Oh Chong Peng

Dato’ Thomas Mun Lung Lee

Tan Yuen Fah

Stephen Geh Sim Whye

Phoon Siew Heng

Megat Dziauddin Bin Megat Mahmud

Kung Beng Hong

Datuk Bridget Anne Chin Hung Yee (resigned on 1 March 2010)

Tee Kim Chan (retired on 29 July 2009)

DIRECTORS’ BENEFITSNeither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the Directors might acquire benefits by means of the acquisitionof shares in, or debentures of, the Company or any other body corporate, other than those arising from the share options and share grants under the ESS.

Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by theDirectors or the fixed salary of a full-time employee of the Company or related corporations as shown in Note 34(b) and Note 46(c) to the financial statements of the Company or financial statements of related corporations)by reason of a contract made by the Company or a related corporation with any Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

114

Directors’ Report


DIRECTORS’ INTERESTSAccording to the Register of Directors' Shareholdings, the interests of Directors in office at the end of the financial year in shares, share options and share grants in the Company were as follows:

Number of Ordinary Shares of RM1.00 Each1.4.2009 Acquired Sold 31.3.2010

The Company

Megat Dziauddin Bin Megat Mahmud – Direct 3,000 – – 3,000Dato’ Thomas Mun Lung Lee – Indirect (held through spouse, Datin Teh Yew Kheng) 35,000 – – 35,000

By virtue of their shareholdings in the Company, the above Directors are deemed to have beneficial interests in the shares of the subsidiary companies of the Company. None of the other Directors in office at the end ofthe financial year had any interest in shares, share options and share grants in the Company or its related corporations during the financial year.

ISSUE OF SHARESThere was no change in the issued and paid-up capital of the Company during the financial year.

BAD AND DOUBTFUL DEBTSBefore the balance sheets and income statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that proper action had been taken in relation to the writing off of baddebts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts.

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

CURRENT ASSETSBefore the balance sheets and income statements of the Group and of the Company were made out, the Directors took reasonable steps to ensure that any current assets which were unlikely to realise their value asshown 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.

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

Directors’ Report



VALUATION METHODAt the date of this report, the Directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Companymisleading or inappropriate.

CONTINGENT AND OTHER LIABILITIESAt the date of this report, there does not exist:

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

(ii) any contingent liability in respect of the Group and of the Company which has arisen since the end of the financial year other than in the ordinary course of business.

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

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

ITEMS OF AN UNUSUAL NATUREIn the opinion of the Directors:

(i) the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and

(ii) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature which is likely to affect substantially the resultsof the operations of the Group and of the Company for the financial year in which this report is made.

SIGNIFICANT EVENTS DURING THE YEARThe significant events during the financial year are disclosed in Note 50 to the financial statements.

SUBSEQUENT EVENTThere was no material event subsequent to the balance sheet date that require disclosure or adjustment to the financial statements.

116

Directors’ Report


AUDITORSThe auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 15 June 2010.

Datuk Oh Chong Peng Dato’ Thomas Mun Lung Lee

Kuala Lumpur, Malaysia

Directors’ Report



We, Datuk Oh Chong Peng and Dato’ Thomas Mun Lung Lee, being two of the Directors of Alliance Financial Group Berhad, do hereby state that, in the opinion of the Directors, the accompanying financial statements setout on pages 121 to 222 are drawn up in accordance with the provisions of the Companies Act, 1965 and the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and Bank NegaraMalaysia Guidelines, so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 March 2010 and of the results and the cash flows of the Group and of the Company for the financialyear then ended.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 15 June 2010.

Datuk Oh Chong Peng Dato’ Thomas Mun Lung Lee

Kuala Lumpur, Malaysia

I, Lee Eng Leong, being the officer primarily responsible for the financial management of Alliance Financial Group Berhad, do solemnly and sincerely declare that the accompanying financial statements set out onpages 121 to 222 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declaredby the abovenamed Lee Eng Leongat Kuala Lumpur in the Federal Territory on15 June 2010 Lee Eng Leong

Before me,

Sivanason a/l MarimuthuCommissioner for Oaths

Kuala Lumpur, Malaysia15 June 2010

118

Statement by DirectorsPursuant to Section 169(15) of the Companies Act, 1965

Statutory DeclarationPursuant to Section 169(16) of the Companies Act, 1965


Report on the financial statementsWe have audited the financial statements of Alliance Financial Group Berhad, which comprise the balance sheets as at 31 March 2010 of the Group and of the Company, and the income statements, statements ofchanges in equity and cash flow statements of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 121 to 222.

Directors’ responsibility for the financial statements

The Directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with the Companies Act, 1965, the MASB Approved Accounting Standards in Malaysiafor Entities Other than Private Entities and the Bank Negara Malaysia Guidelines. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation offinancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in thecircumstances.

Auditors’ responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks ofmaterial misstatement of the financial 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 financialstatements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includesevaluating 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 financial statements.

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

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with the Companies Act, 1965, the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and BankNegara Malaysia Guidelines so as to give a true and fair view of the financial position of the Group and of the Company as at 31 March 2010 and of their financial performances and cash flows for the year then ended.

Independent Auditors’ Reportto the members of Alliance Financial Group Berhad (Incorporated in Malaysia)



Report on other legal and regulatory requirementsIn 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 have been properly kept in accordance with the provisions of the Act.

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

(c) The audit reports on the financial statements of the subsidiaries did not contain any qualification and any adverse comment made under Section 174(3) of the Act.

Other mattersThis 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 otherperson for the content of this report.

PricewaterhouseCoopers Mohammad Faiz Bin Mohammad AzmiAF: 1146 No.2025/03/12 (J)Chartered Accountants Chartered Accountant


120

Independent Auditors’ Reportto the members of Alliance Financial Group Berhad (Incorporated in Malaysia)


Balance Sheetsas at 31 March 2010


Group Company 2010 2009 2010 2009

Note RM’000 RM’000 RM’000 RM’000

ASSETSCash and short-term funds 3 3,564,545 4,990,686 30,847 453,878Deposits and placements with banks and other financial institutions 4 150,156 198,523 610,800 200,000Securities held-for-trading 5 – 46,055 – –Securities available-for-sale 6 5,154,828 6,320,122 – –Securities held-to-maturity 7 931,420 314,620 – –Derivative financial assets 8 44,698 40,858 – –Loans, advances and financing 9 20,648,445 18,718,097 – –Balances due from clients and brokers 10 72,568 44,680 – –Land held for investment 11 27,748 27,748 – –Other assets 12 186,707 235,626 6,057 38,929Tax recoverable 24,316 71,397 1,334 475Statutory deposits 13 258,506 199,024 – –Investments in subsidiaries 14 – – 1,776,984 1,729,142Leasehold land 15 11,119 12,136 – –Property, plant and equipment 16 123,974 137,567 361 473Intangible assets 17 361,858 368,512 – –Deferred tax assets 18 102,727 120,517 – –

TOTAL ASSETS 31,663,615 31,846,168 2,426,383 2,422,897

The accompanying notes form an integral part of the financial statements.


Group Company 2010 2009 2010 2009

Note RM’000 RM’000 RM’000 RM’000

LIABILITIES AND EQUITYDeposits from customers 19 23,628,331 25,575,441 – –Deposits and placements of banks and other financial institutions 20 2,289,666 1,183,387 – –Derivative financial liabilities 8 50,175 49,564 – –Amount due to Cagamas Berhad 21 28,077 58,391 – –Bills and acceptances payable 22 538,350 2,215 – –Balances due to clients and brokers 23 80,249 51,856 – –Other liabilities 24 892,880 956,532 4,649 6,098Subordinated bonds 25 600,000 600,000 – –Long term borrowings 26 600,000 600,000 600,000 600,000Provision for taxation 4,201 2,213 – –Deferred tax liabilities 18 5 31 4 32

TOTAL LIABILITIES 28,711,934 29,079,630 604,653 606,130

Share capital 27 1,548,106 1,548,106 1,548,106 1,548,106Reserves 28 1,445,732 1,249,906 320,321 304,788Shares held for Employees’ Share Scheme 29 (46,697) (36,127) (46,697) (36,127)

CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS 2,947,141 2,761,885 1,821,730 1,816,767Minority interests 4,540 4,653 – –

TOTAL EQUITY 2,951,681 2,766,538 1,821,730 1,816,767

TOTAL LIABILITIES AND EQUITY 31,663,615 31,846,168 2,426,383 2,422,897

COMMITMENTS AND CONTINGENCIES 44(c) 14,293,097 15,081,294 – –

122

Balance Sheetsas at 31 March 2010



Group Company 2010 2009 2010 2009

Note RM’000 RM’000 RM’000 RM’000

Interest income 31 1,094,407 1,250,599 17,426 4,405Interest expense 32 (477,539) (595,975) (20,017) (2,460)

Net interest income/(expense) 616,868 654,624 (2,591) 1,945Net income from Islamic banking business 52 245,821 165,128 – –

862,689 819,752 (2,591) 1,945Other operating income 33 201,830 235,038 136,818 123,665

Net income 1,064,519 1,054,790 134,227 125,610Other operating expenses 34 (554,631) (559,406) (3,446) (3,685)

Operating profit 509,888 495,384 130,781 121,925Write-back of/(allowance for) losses on loans, advances and financing and other losses 35 31,931 (115,131) – –Allowance for impairment 36 (132,881) (76,941) (2,055) (691)

Profit before taxation and zakat 408,938 303,312 128,726 121,234Taxation and zakat 37 (107,438) (74,424) (27,993) (25,436)

Net profit after taxation and zakat 301,500 228,888 100,733 95,798

Attributable to:Equity holders of the Company 301,424 229,121 100,733 95,798Minority interests 76 (233) – –


Earnings per share (sen):Basic 38(a) 19.7 14.9Diluted 38(b) 19.6 14.8

Net dividends per ordinary share in respect of the financial year (sen): 39 6.32 6.20

Income Statementsfor the year ended 31 March 2010




124

Consolidated Statement of Changes in Equityfor the year ended 31 March 2010


Attributable to Equity Holders of the CompanyNon-Distributable <Distributable>

Employees’Share Profit

Scheme Equalisation SharesShare Share Statutory Capital Revaluation (“ESS”) Reserve held for Retained Minority Total

Capital Premium Reserve Reserve Reserve Reserve (“PER”) ESS Profits Total Interests EquityGroup Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 April 2008 1,548,106 304,289 366,910 7,013 (22,776) 1,438 – (26,254) 410,712 2,589,438 4,950 2,594,388

Unrealised net gain on revaluation ofsecurities available-for-sale – – – – 10,704 – – – – 10,704 – 10,704

Transfer to income statement – – – – 46,562 – – – – 46,562 – 46,562Deferred tax assets 18 – – – – (14,316) – – – – (14,316) – (14,316)

Income and expense recognised directly in equity – – – – 42,950 – – – – 42,950 – 42,950Net profit/(loss) after taxation and zakat – – – – – – – – 229,121 229,121 (233) 228,888

Total recognised income and expense for the year – – – – 42,950 – – – 229,121 272,071 (233) 271,838Transfer to statutory reserve – – 63,005 – – – – – (63,005) – – –Purchase of shares pursuant to ESS 29 – – – – – – – (9,873) – (9,873) – (9,873)Share-based payment under ESS 30 – – – – – 6,304 – – – 6,304 – 6,304Dividends paid to shareholders 39 – – – – – – – – (96,055) (96,055) – (96,055)Dividends paid to minority interests – – – – – – – – – – (64) (64)

At 31 March 2009 1,548,106 304,289 429,915 7,013 20,174 7,742 – (36,127) 480,773 2,761,885 4,653 2,766,538

At 1 April 2009 1,548,106 304,289 429,915 7,013 20,174 7,742 – (36,127) 480,773 2,761,885 4,653 2,766,538

Unrealised net loss on revaluation of securitiesavailable-for-sale – – – – (16,979) – – – – (16,979) – (16,979)

Deferred tax assets 18 – – – – 4,245 – – – – 4,245 – 4,245

Income and expense recognised directly in equity – – – – (12,734) – – – – (12,734) – (12,734)Net profit after taxation and zakat – – – – – – – – 301,424 301,424 76 301,500

Total recognised income and expense for the year – – – – (12,734) – – – 301,424 288,690 76 288,766Transfer to statutory reserve – – 63,562 – – – – – (63,562) – – –Transfer to PER 28 – – – – – – 26,388 – (26,388) – – –Purchase of shares pursuant to ESS 29 – – – – – – – (12,570) – (12,570) – (12,570)Share-based payment under ESS 30 – – – – – 7,020 – – – 7,020 – 7,020Dividends paid to shareholders 39 – – – – – – – – (97,884) (97,884) – (97,884)Dissolution of subsidiaries – – – – – – – – – – (189) (189)ESS shares vested to:– employees of subsidiaries – – – – – (1,978) – 1,978 – – – –– own employees – – – – – (22) – 22 – – – –Transfer of ESS shares purchase price

difference on shares vested – – – – – (421) – – 421 – – –

At 31 March 2010 1,548,106 304,289 493,477 7,013 7,440 12,341 26,388 (46,697) 594,784 2,947,141 4,540 2,951,681


Statement of Changes in Equityfor the year ended 31 March 2010



Attributable to Equity Holders of the CompanyNon-Distributable < Distributable >

Employees’Shares

Scheme SharesShare Share (“ESS”) held for Retained Total

Capital Premium Reserve ESS Profits EquityCompany Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 April 2008 1,548,106 304,289 14 (26,254) 678 1,826,833Net profit after taxation – – – – 95,798 95,798Purchase of shares pursuant to ESS 29 – – – (9,873) – (9,873)Share-based payment under ESS 30 – – 64 – – 64Dividends paid to shareholders 39 – – – – (96,055) (96,055)

At 31 March 2009 1,548,106 304,289 78 (36,127) 421 1,816,767

At 1 April 2009 1,548,106 304,289 78 (36,127) 421 1,816,767Net profit after taxation – – – – 100,733 100,733Purchase of shares pursuant to ESS 29 – – – (12,570) – (12,570)Share-based payment under ESS 30 – – 14,684 – – 14,684Dividends paid to shareholders 39 – – – – (97,884) (97,884)ESS recharge amount received from subsidiaries – – – 1,978 – 1,978ESS shares vested to– employees of subsidiaries – – (1,978) – – (1,978)– owned employees – – (22) 22 – –Transfer of ESS shares purchase price difference on shares vested – – (421) – 421 –

At 31 March 2010 1,548,106 304,289 12,341 (46,697) 3,691 1,821,730


2010 2009RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before taxation and zakat 408,938 303,312Adjustments for:

Accretion of discount less amortisation of premium of securities (27,127) (99,244)Depreciation of property, plant and equipment 39,713 36,494Dividends from securities held-to-maturity (6,321) (5,390)Gain on disposal of property, plant and equipment (1,011) (203)Loss on disposal of leasehold land 649 –Gain on disposal of foreclosed properties (7,029) (7,414)Net gain from redemption of securities held-to-maturity – (16,841)Net loss/(gain) from sale of securities held-for-trading 228 (420)Net gain from sale of securities available-for-sale (11,556) (20,197)Unrealised loss on revaluation of securities held-for-trading 5,152 1,154Unrealised (gain)/loss on revaluation of derivative instruments (3,266) 4,823Interest expense on subordinated bonds 36,540 36,540Interest expense on long term borrowings 20,017 2,460Interest income from securities held-to-maturity (17,251) (13,085)Interest income from securities available-for-sale (177,797) (111,492)Interest income from deposits and placements with banks and other financial institutions – (5)Return on capital from investment – (88)Impairment on other assets – 40Allowance for loan, advances and financing (net of recoveries) 21,397 182,868Allowance for other assets 4,050 133Allowances for commitments and contingencies 1,433 –Impairment net of write-back of securities available-for-sale 134,712 76,128Impairment net of write-back of securities held-to-maturity (3,900) (42)Impairment net of write-back of foreclosed properties (15) 815Impairment of goodwill 2,084 –Amortisation of leasehold land 138 139Amortisation of computer software 16,307 14,654Profit Equalisation Reserve (50,058) (1,867)Share options/grants under Employees’ Share Scheme 7,020 6,304Property, plant and equipment written off 1,160 3,218Computer software written off 1,589 76Loss on liquidation of subsidiaries 50 –

Operating profit before working capital changes carried forward 395,846 392,870

126

Consolidated Cash Flow Statementfor the year ended 31 March 2010


2010 2009RM’000 RM’000

Operating profit before working capital changes brought forward 395,846 392,870Changes in working capital:

Deposits from customers (1,947,110) 4,223,681Deposits and placements of banks and other financial institutions 1,106,279 (264,136)Bills and acceptances payable 536,135 (159,203)Balance due from clients and brokers (47,158) 16,843Other liabilities (15,006) (166,024)Deposits and placements with banks and other financial institutions 48,367 334,312Securities held-for-trading 40,722 50,001Loans, advances and financing (1,951,746) (3,281,993)Other assets 51,591 35,070Statutory deposits with Bank Negara Malaysia (59,482) 423,062Amount due to Cagamas Berhad (30,314) (197,000)

Cash (used in)/generated from operations (1,871,876) 1,407,483Taxes and zakat paid (35,573) (85,338)

Net cash (used in)/generated from operating activities (1,907,449) 1,322,145

CASH FLOWS FROM INVESTING ACTIVITIESNet dividends received from securities held-to-maturity 5,558 4,678Interest received from securities held-to-maturity 17,251 13,085Interest received from securities available-for-sale 177,797 111,492Interest received from deposits and placements with banks and other financial institutions – 5Return on capital from investment – 88Purchase of property, plant and equipment (28,458) (47,880)Purchase of computer software (13,326) (29,577)Purchase of shares from market (12,570) (9,873)Proceeds from disposal of property, plant and equipment 2,189 419Proceeds from disposal of leasehold land 230 –Return on capital from liquidation of subsidiaries (38) –Purchase of securities held-to-maturity, net of maturity and redemption proceeds (586,943) 566,600Purchase of securities available-for-sale, net of sale proceeds 1,026,285 (3,168,231)

Net cash generated from/(used in) investing activities 587,975 (2,559,194)




2010 2009RM’000 RM’000

CASH FLOWS FROM FINANCING ACTIVITIESDrawdown of long term borrowings – 600,000Interest paid on subordinated bonds (36,540) (36,540)Interest paid on long term borrowings (20,017) (2,460)Dividends paid to shareholders of the Company (97,884) (96,055)Dividends paid to minority interests – (64)

Net cash (used in)/generated from financing activities (154,441) 464,881

NET CHANGE IN CASH AND CASH EQUIVALENTS (1,473,915) (772,168)CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,944,211 5,716,379

CASH AND CASH EQUIVALENTS AT END OF YEAR 3,470,296 4,944,211

Cash and cash equivalents comprise the following:Cash and short-term funds 3,564,545 4,990,686Less: Monies held in trust (Note 3) (94,249) (46,475)

3,470,296 4,944,211

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2010 2009RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIESProfit before taxation 128,726 121,234Adjustments for:

Depreciation of property, plant and equipment 81 98Property, plant and equipment written off 31 –Interest income from deposits and placements with banks and other financial institutions (16,946) (4,405)Interest income from securities available-for-sale (695) –Accretion of discount less amortisation of premium of securities 215 –Interest expense on long term borrowings 20,017 2,460Return on capital from investment – (88)Impairment on other assets 15,199 40(Write-back of)/allowance for doubtful debts due from subsidiaries (13,144) 651Gain on disposal of property, plant and equipment – (11)Net gain from sale of securities available-for-sale 388 –Share options/grants under Employees’ Share Scheme 14,684 64Gross dividend income from subsidiary (136,321) (122,601)

Operating profit/(loss) before working capital changes 12,235 (2,558)Changes in working capital:

Receivables (3,730) (1,948)Payables (1,264) (664)Deposits (410,800) (200,000)Subsidiaries (15,458) (805)

Cash used in operations (419,017) (205,975)Taxes refund 200 479

Net cash used in operating activities (418,817) (205,496)

Cash Flow Statementfor the year ended 31 March 2010



2010 2009RM’000 RM’000

CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant and equipment – (30)Interest received from deposits and placements with banks and other financial institutions 16,946 4,405Interest received from security available-for-sale 695 –Return on capital from investment – 88Purchase of shares from market (12,570) (9,873)Purchase of securities available-for-sale, net of sale proceeds (603) –Net dividend received 107,241 96,951ESS recharge amount received from subsidiaries 1,978 –Proceed from disposal of property, plant and equipment – 49

Net cash generated from investing activities 113,687 91,590

CASH FLOWS FROM FINANCING ACTIVITIESDrawdown of long term borrowings – 600,000Dividends paid (97,884) (96,055)Interest paid on long term borrowings (20,017) (2,460)

Net cash (used in)/generated from financing activities (117,901) 501,485

NET CHANGE IN CASH AND CASH EQUIVALENTS (423,031) 387,579CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 453,878 66,299

CASH AND CASH EQUIVALENTS AT END OF YEAR 30,847 453,878

Cash and cash equivalents comprise the following:Cash and short-term funds 30,847 453,878

130

Cash Flow Statementfor the year ended 31 March 2010



1. CORPORATE INFORMATIONThe Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at3rd Floor, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur, Malaysia.

The principal activities of the Company are investment holding and provision of management services to the subsidiaries.

The principal activities of the subsidiaries are commercial banking and financing, Islamic banking, investment banking including provision of stockbroking services, unit trusts and fund management, and theprovision of related financial services.

There have been no significant changes in the nature of the principal activities during the financial year.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on 15 June 2010.

2. SIGNIFICANT ACCOUNTING POLICIESThe accounting policies adopted by the Group are consistent with those adopted in the annual audited financial statements for the previous financial year.

Standards, amendments to published standards and interpretations that are applicable to the Group and are effective

There are no new accounting standards, amendments to published standards and interpretations to existing standards effective for the Group’s financial year ended 31 March 2010 and applicable to the Group.

Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group but not yet effective

(i) The revised FRS 3 "Business Combinations" (effective prospectively from 1 July 2010). The revised standard continues to apply the acquisition method to business combinations, with some significantchanges. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the incomestatement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of theacquiree’s net assets. All acquisition-related costs should be expensed. The application of this standard is not expected to have a material impact on the financial statements of the Group.

(ii) FRS 8 "Operating Segments" (effective from 1 July 2009) replaces FRS 1142004 "Segment Reporting". The new standard requires a ‘management approach’, under which segment information is reported ina manner that is consistent with the internal reporting provided to the chief operating decision-maker. The improvement to FRS 8 (effective from 1 January 2010) clarifies that entities that do not provideinformation about segment assets to the chief operating decision-maker will no longer need to report this information. Prior year comparatives must be restated. The application of this standard is not expectedto have a material impact on the financial statements of the Group.

(iii) The revised FRS 101 “Presentation of Financial Statements” (effective from 1 January 2010) prohibits the presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the statementof changes in equity. ‘Non-owner changes in equity’ are to be presented separately from owner changes in equity. All non-owner changes in equity will be required to be shown in a performance statement,but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income).

Where entities restate or reclassify comparative information, they will be required to present a restated balance sheet as at the beginning comparative period in addition to the current requirement to presentbalance sheets at the end of the current period and comparative period.

The application of this standard is not expected to have a material impact on the financial statements of the Group, other than the presentation format of the balance sheets and the income statements.

Notes to the Financial Statements31 March 2010



2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(iv) FRS 123 "Borrowing Costs" (effective from 1 January 2010) which replaces FRS 1232004 "Borrowing Costs", requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction

or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs isremoved. The improvement to FRS 123 clarifies that the definition of borrowing costs includes interest expense calculated using the effective interest method defined in FRS 139 "Financial Instruments:Recognition and Measurement". The application of this standard is not expected to have a material impact on the financial statements of the Group.

(v) The revised FRS 127 "Consolidated and Separate Financial Statements" (effective prospectively from 1 July 2010) requires the effects of all transactions with non-controlling interests to be recorded in equityif there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entityis re-measured to fair value, and a gain or loss is recognised in the income statement. The application of this standard is not expected to have a material impact on the financial statements of the Group.

(vi) FRS 139 “Financial Instruments: Recognition and Measurement” (effective from 1 January 2010) establishes principles for recognising and measuring financial assets, financial liabilities and some contractsto buy and sell non-financial items. Hedge accounting is permitted under strict circumstances. The amendments to FRS 139 provide further guidance on eligible hedged items. The amendment providesguidance for two situations. On the designation of a one-sided risk in a hedged item, the amendment concludes that a purchased option designated in its entirety as the hedging instrument of a one-sidedrisk will not be perfectly effective. The designation of inflation as a hedged risk or portion is not permitted unless in particular situations. The improvement to FRS 139 clarifies that the scope exemption inFRS 139 only applies to forward contracts but not options for business combinations that are firmly committed to being completed within a reasonable timeframe.

(vii) IC Interpretation 9 "Reassessment of Embedded Derivatives" (effective from 1 January 2010) requires an entity to assess whether an embedded derivative is required to be separated from the host contractand accounted for as a derivative when the entity first becomes a party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly modifiesthe cash flows that otherwise would be required under the contract, in which case reassessment is required. The improvement to IC Interpretation 9 (effective from 1 July 2010) clarifies that this interpretationdoes not apply to embedded derivatives in contracts acquired in a business combination, businesses under common control or the formation of a joint venture.

(viii) FRS 7 “Financial Instruments: Disclosures” (effective from 1 January 2010) provides information to users of financial statements about an entity’s exposure to risks and how the entity manages those risks.The improvement FRS 7 clarifies that entities must not present total interest income and expense as a net amount within finance costs on the face of the income statement.

The Group has applied the transitional provision in the respective standards which exempts entities from disclosing the possible impact arising from the initial application of the following standards andinterpretations on the financial statements of the Group.

– FRS 139, Amendments to FRS 139 on eligible hedged items, Improvement to FRS 139 and IC Interpretation 9

– FRS 7 and Improvement to FRS 7

For banking institutions, Bank Negara Malaysia may prescribe the use of an alternative basis for collective assessment of impairment for a transitional period for purpose of complying with the collective assessmentof impairment requirement in FRS 139.

(ix) The amendment 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 ControlledEntity or Associate" (effective from 1 January 2010) allows first-time adopters to use a deemed cost of either fair value or the carrying amount under previous accounting practice to measure the initial costof investments in subsidiaries, jointly controlled entities and associates in the separate financial statements. The amendment also removes the definition of the cost method from FRS 127 and requiresinvestors to present dividends as income in the separate financial statements. The amendment to FRS 1 and FRS 127 are not expected to have a material impact on the financial statements of the Group.

132



2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(x) The amendment to FRS 2 "Share-based Payment: Vesting Conditions and Cancellations" (effective from 1 January 2010) deals with vesting conditions and cancellations. It clarifies that vesting conditions

are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. These features would need to be included in the grant date fair value fortransactions with employees and others providing similar services; they would not impact the number of awards expected to vest or valuation there of subsequent to grant date. All cancellations, whetherby the entity or by other parties, should receive the same accounting treatment. The improvement to FRS 2 (effective from 1 July 2010) clarifies that contributions of a business on formation of a joint ventureand common control transactions are outside the scope of FRS 2. The application of this standard is not expected to have a material impact on the financial statements of the Group.

(xi) The amendments to FRS 132 “Financial Instruments: Presentation” and FRS 101(revised) “Presentation of Financial Statements” – “Puttable financial instruments and obligations arising on liquidation”(effective from 1 January 2010) require entities to classify puttable financial instruments and instruments that impose on the entity an obligation to deliver to another party a prorata share of the net assetsof the entity only on liquidation as equity, if they have particular features and meet specific conditions. The application of this standard is not expected to have a material impact on the financial statementsof the Group.

(xii) IC Interpretation 10 "Interim Financial Reporting and Impairment" (effective from 1 January 2010) prohibits the impairment losses recognised in an interim period on goodwill and investments in equityinstruments and in financial assets carried at cost to be reversed at a subsequent balance sheet date. The application of this standard is not expected to have a material impact on the financial statementsof the Group.

(xiii) IC Interpretation 11 "FRS 2 Group and Treasury Share Transactions" (effective from 1 January 2010) provides guidance on whether share-based transactions involving treasury shares or involving groupentities should be accounted for as equity-settled or cash-settled share-based payment transactions in the stand-alone accounts of the parent and group companies. The application of this standard is notexpected to have a material impact on the financial statements of the Group.

(xiv) IC Interpretation 13 "Customer Loyalty Programmes" (effective from 1 January 2010) clarifies that where goods or services are sold together with a customer loyalty incentive, the arrangement is a multiple-element arrangement and the consideration receivable from the customer is allocated between the components of the arrangement using fair values. The application of this standard is not expected to havea material impact on the financial statements of the Group.

(xv) IC Interpretation 14 "FRS 119 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction" (effective from 1 January 2010) provides guidance on assessing the limit in FRS119 on the amount of the surplus that can be recognised as an asset. The application of this standard is not expected to have a material impact on the financial statements of the Group.

(xvi) IC Interpretation 17 "Distribution of non-cash assets to owners" (effective from 1 July 2010) provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholderseither as a distribution of reserves or as dividends. FRS 5 " Non-current Assets Held for Sale and Discontinued Operations" has also been amended to require that assets are classified as held for distributiononly when they are available for distribution in their present condition and the distribution is highly probable. The application of this standard is not expected to have a material impact on the financialstatements of the Group.




2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)The following amendments are part of the Malaysian Accounting Standards Board’s (“MASB”) improvements project:

(xvii) FRS 5 “Non-current Assets Held for Sale and Discontinued Operations”

– Improvement effective from 1 January 2010 clarifies that FRS 5 disclosures apply to non-current assets or disposal groups that are classified as held for sale and discontinued operations.

– Improvement effective from 1 July 2010 clarifies that all of a subsidiary’s assets and liabilities are classified as held for sale if a partial disposal sale plan results in loss of control. Relevant disclosureshould be made for this subsidiary if the definition of a discontinued operation is met.

The application of this standard is not expected to have a material impact on the financial statements of the Group.

(xviii) FRS 107 “Statement of Cash Flows” (effective from 1 January 2010) clarifies that only expenditure resulting in a recognised asset can be categorised as a cash flow from investing activities. The applicationof this standard is not expected to have a material impact on the financial statements of the Group.

(xix) FRS 110 “Events After the Balance Sheet Date” (effective from 1 January 2010) reinforces existing guidance that a dividend declared after the reporting date is not a liability of an entity at that date giventhat there is no obligation at that time. The application of this standard is not expected to have a material impact on the financial statements of the Group.

(xx) FRS 116 “Property, Plant and Equipments” (consequential amendment to FRS 107 “Statement of Cash Flows”) (effective from 1 January 2010) requires entities whose ordinary activities comprise of rentingand subsequently selling assets to present proceeds from the sale of those assets as revenue and should transfer the carrying amount of the asset to inventories when the asset becomes held for sale. Aconsequential amendment to FRS 107 states that cash flows arising from purchase, rental and sale of those assets are classified as cash flows from operating activities. The application of this standard isnot expected to have a material impact on the financial statements of the Group.

(xxi) FRS 117 “Leases” (effective from 1 January 2010) clarifies that the default classification of the land element in a land and building lease is no longer an operating lease. As a result, leases of land shouldbe classified as either finance or operating, using the general principles of FRS 117. The application of this standard is not expected to have a material impact on the financial statements of the Group.

(xxii) FRS 118 “Revenue” (effective from 1 January 2010) provides more guidance when determining whether an entity is acting as a ‘principal’ or as an ‘agent’. The application of this standard is not expectedto have a material impact on the financial statements of the Group.

(xxiii) FRS 119 “Employee Benefits” (effective from 1 January 2010) clarifies that a plan amendment that results in a change in the extent to which benefit promises are affected by future salary increases is acurtailment, while an amendment that changes benefits attributable to past service gives rise to a negative past service cost if it results in a reduction in the present value of the defined benefit obligation.The definition of return on plan assets has been amended to state that plan administration costs are deducted in the calculation of return on plan assets only to the extent that such costs have been excludedfrom measurement of the defined benefit obligation. The application of this standard is not expected to have a material impact on the financial statements of the Group.

(xxiv) FRS 127 “Consolidated & Separate Financial Statements” (effective from 1 January 2010) clarifies that where an investment in a subsidiary that is accounted for under FRS 139 is classified as held for saleunder FRS 5, FRS 139 would continue to be applied.

The amendment will not have an impact on the Group’s operations because it is the Group’s policy for an investment in subsidiary to be recorded at cost in the standalone accounts of each entity.

(xxv) FRS 128 “Investments in Associates” (effective from 1 January 2010) clarifies that an investment in an associate is treated as a single asset for impairment testing purposes. Reversals of impairment arerecorded as an adjustment to the carrying amount of the investment to the extent that the recoverable amount of the associate increases. The application of this standard is not expected to have a materialimpact on the financial statements of the Group.

134



2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(xxvi) FRS 128 “Investments in Associates" and FRS 131 "Interests in Joint Ventures” (consequential amendments to FRS 132 “Financial instruments: Presentation” and FRS 7 “Financial instruments: Disclosure”

(effective from 1 January 2010) clarify that where an investment in associate or joint venture is accounted for in accordance with FRS 139, only certain, rather than all disclosure requirements in FRS 128or FRS 131 need to be made in addition to disclosures required by FRS 132 and FRS 7.

The amendment will not have an impact on the Group’s operations because it is the Group’s policy for an investment in an associate to be equity accounted in the Group’s consolidated accounts. On FRS131, the amendment will not have an impact on the Group’s operations as there are no interests held in joint ventures.

(xxvii) FRS 134 “Interim Financial Reporting” (effective from 1 January 2010) clarifies that basic and diluted earnings per share (“EPS”) must be presented in an interim report only in the case when the entity isrequired to disclose EPS in its annual report. The application of this standard is not expected to have a material impact on the financial statements of the Group.

(xxviii) FRS 136 “Impairment of Assets” (effective from 1 January 2010) clarifies that the largest cash-generating unit (or group of units) to which goodwill should be allocated for the purposes of impairment testingis an operating segment before the aggregation of segments with similar economic characteristics. The improvement also clarifies that where fair value less costs to sell is calculated on the basis ofdiscounted cash flows, disclosures equivalent to those for value in use should be made. The application of this standard is not expected to have a material impact on the financial statements of the Group.

(xxix) FRS 138 "Intangible Assets". Improvement effective from 1 January 2010 clarifies that a prepayment may only be recognised in the event that payment has been made in advance of obtaining right of accessto goods or receipt of services. This means that an expense will be recognised for mail order catalogues when the entity has access to the catalogues and not when the catalogues are distributed to customers.It confirms that the unit of production method of amortisation is allowed. The application of this standard is not expected to have a material impact on the financial statements of the Group.

(xxx) FRS 140 “Investment Property” (effective from 1 January 2010) requires assets under construction/development for future use as investment property to be accounted as investment property rather thanproperty, plant and equipment. Where the fair value model is applied, such property is measured at fair value. However, where fair value is not reliably measurable, the property is measured at cost until theearlier of the date construction is completed and fair value becomes reliably measurable. It also clarifies that if a valuation obtained for an investment property held under lease is net of all expected payments,any recognised lease liability is added back in order to determine the carrying amount of the investment property under the fair value model. The application of this standard is not expected to have a materialimpact on the financial statements of the Group.

Standards, amendments to published standards and interpretations to existing standards that are not applicable to the Group and not yet effective

FRS 4 Insurance Contracts

FRS 120 Accounting for Government Grants

FRS 129 Financial Reporting in Hyperinflationary Economies

IC Interpretation 12 Service Concession Arrangements

IC Interpretation 15 Agreements for Construction of Real Estates

IC Interpretation 16 Hedges of a Net Investment in a Foreign Operation




2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(a) Basis of Preparation

The financial statements have been prepared in accordance with the provisions of the Companies Act, 1965, the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities,Bank Negara Malaysia ("BNM") Guidelines and Shariah principles.

The financial statements of the Group and the Company have also been prepared under the historical cost convention, except the following assets which are stated at fair value: securities held-for-trading,securities available-for-sale and derivative financial instruments.

The financial statements incorporate all activities relating to the Islamic banking business which have been undertaken by the Group. Islamic banking business refers generally to the acceptance of depositsand granting of financing under the Shariah principles.

The financial statements are presented in Ringgit Malaysia ("RM") and all numbers are rounded to the nearest thousand (RM’000), unless otherwise stated.

In the preparation of the financial statements, management is required to make certain judgements, estimates and assumptions that affect the application of accounting policies and the reported amount ofassets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates arerecognised in the financial statements in the period in which the estimate is revised and in any future periods affected.

In particular, information about significant areas of critical judgements and estimation uncertainty in applying accounting policies that have the most significant effects on the amount recognised in thefinancial statements are described in the following notes:

(i) Annual testing for impairment of goodwill and intangible assets (Note 17) – the measurement of the recoverable amount of cash-generating units are determined based on the value-in-use method,which requires the use of estimates for cash flow projections approved by management covering a 5-year period, estimates growth rates for cash flows beyond the fifth year extrapolated in perpetuityand discount rates applied to the cash flow projections.

(ii) Fair value estimation for securities held-for-trading (Note 5) and securities available-for-sale (Note 6) and derivative financial assets and liabilities (Note 8) – the fair value of financial instruments thatare not traded in active market are determined using valuation techniques based on assumptions of market conditions existing at the balance sheet date, including reference to quoted market pricesand independent dealer quotes for similar financial instruments and discounted cash flows method.

(iii) Income taxes (Note 37) – significant management judgement is required in estimating the provision for income taxes, as there may be differing interpretations of tax law for which the final outcomewill not be established until a later date. Liabilities for taxation are recognised based on estimates of whether additional taxes will be payable. The estimation process may involve seeking the adviseof experts, where appropriate. Where the final liability for taxation assessed by the Inland Revenue Board is different from the amounts that were initially recorded, these differences will affect theincome tax expense and deferred tax provisions in the period in which the estimate is revised or when the final tax liability is established.

(iv) Deferred tax assets (Note 18) - deferred tax assets are recognised for all unutilised tax losses to the extent that it is probable that taxable profit will be available against which the tax losses can beutilised. Significant 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 profits togetherwith future tax planning strategies.

(v) Allowance for losses on loans, advances and financing (Note 35) – whilst the assessment of allowance for losses required for loans, advances and financing is made in accordance with therequirements of BNM/GP3 – Guidelines on the Classification of Non-Performing Loans and Provisions for Substandard, Bad and Doubtful Debts, the Group exercise judgement in ascertaining therecoverable amount when assessing the levels of loan loss allowance required.

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2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(a) Basis of Preparation (cont’d)

(vi) Impairment of assets – assessment of impairment of securities available-for-sale (Note 6) and securities held-to-maturity (Note 7) is made in line with the guidance in the revised BNM/GP8 – Guidelineson Financial Reporting for Licensed Institutions to determine when the investment is impaired. Management judgement is required to evaluate the duration and extent by which the fair value of thefinancial instruments are below its carrying value and when there is indication of impairment in the carrying value of the financial instruments. The assessment of impairment of property, plant andequipment (Note 16) and foreclosed properties also requires management judgement in the assessment of whether negative fluctuations in values of similar properties in the same location representan indication of impairment in the value of the properties.

(vii) Fair value estimation and impairment assessment of certain unquoted shares (Note 6) – ABMB received a free allocation of certain unquoted shares of which some had been subsequently redeemedby the said issuer. The issuer company’s latest quoted share price, discounted at 10% was used as the proxy to estimate the fair value of the remaining unquoted shares.

(b) Subsidiaries and Basis of Consolidation

(i) Subsidiaries

Subsidiaries are entities over which the Group has the ability to control the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential votingrights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity.

In the Company’s separate financial statements, investments in subsidiaries are stated at cost less impairment. The policy for recognition and measurement of impairment is in accordance with Note 2(k)(iv).

On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in the income statement.

(ii) Basis of Consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries are preparedfor 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 theconsolidated financial statements, intragroup balances, transactions and unrealised gains or losses are eliminated in full. Uniform accounting policies are adopted in the consolidated financialstatements 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 acquiredand 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 the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill.

Any excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in the income statement.

Minority interests represent the portion of the income statement and net assets in subsidiaries not held by the Group. It is measured at the minorities’ share of the fair value of the subsidiaries’identifiable assets and liabilities at the acquisition date and the minorities’ share of changes in the subsidiaries’ entity since then.




2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(c) Associates

Associates are entities in which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial andoperating policy decisions of the investee but not in control or joint control over those policies.

Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting. Under the equity method, the investment in associate is carried in the consolidatedbalance sheet at cost adjusted for post-acquisition changes in the Group’s share of net assets of the associate. The Group’s share of the net profit or loss of the associate is recognised in the consolidatedincome statement. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of such changes. In applying the equity method, unrealised gains andlosses on transactions between the Group and the associate are eliminated to the extent of the Group’s interest in the associate. After application of the equity method, the Group determines whether it isnecessary to recognise any additional impairment with respect to the Group’s net investment in the associate. The associate is equity accounted for from the date the Group obtains significant influence untilthe date the Group ceases to have significant influence over the associate.

Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilitiesand contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of the associate’sprofit or loss in the period in which the investment is acquired.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any long term interests that, in substance, form part of the Group’s net investment in the associate,the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

The most recent available audited financial statements of the associates are used by the Group in applying the equity method. Where the dates of the audited financial statements used are not coterminouswith those of the Group, the share of results is arrived at from the last audited financial statements available and management financial statements to the end of the accounting period. Uniform accountingpolicies are adopted for like transactions and events in similar circumstances.

On disposal of such investments, the difference between net disposal proceeds and their carrying amount is included in the income statement.

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2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(d) Intangible Assets

(i) Goodwill

Goodwill is measured at cost less accumulated impairment, if any. Goodwill is no longer amortised. Instead it is allocated to cash-generating units which are expected to benefit from the synergies ofthe business combination. Each cash-generating unit represents the lowest level at which the goodwill is amortised and is not larger than a reportable business segment. The carrying amount ofgoodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired. Gains and losses on the disposal of an entity include the carryingamount of goodwill relating to the entity sold. The policy for the recognition and measurement of impairment is in accordance with Note 2(k)(iii).

(ii) Computer Software

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring the specific software to use. The costs are amortised over their useful lives which is fiveyears and are stated at cost less accumulated amortisation and accumulated impairment, if any. Computer software is assessed for impairment whenever there is an indication that it may be impaired.The amortisation period and amortisation method are reviewed at least at each balance sheet date.

The policy for the recognition and measurement of impairment is in accordance with Note 2(k)(iii).

Costs associated with maintaining computer software programmes are recognised as expenses as incurred. Costs that are directly associated with production of identifiable and unique softwareproducts controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. These costs include software developmentemployee costs and appropriate portion of relevant overhead.

(iii) Other Intangible Assets

Intangible assets acquired separately are measured at cost on initial recognition. The cost of intangible assets acquired in a business combination is their fair values as at the date of acquisition.Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment. The useful lives of intangible assets are assessed to be eitherfinite or indefinite. Intangible assets with finite lives are amortised on a straight-line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication thatthe intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each balance sheet date.

Intangible assets with indefinite useful lives are not amortised but tested for impairment annually or more frequently if the events or changes in circumstances indicate that the carrying value may beimpaired either individually or at the cash-generating unit level. The useful life of an intangible asset with an indefinite life is also reviewed annually to determine whether the useful life assessmentcontinues to be supportable.




2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(e) Loans, Advances and Financing

Loans, advances and financing are stated at cost less any allowance for losses on loans, advances and financing.

Specific allowance for losses on loans, advances and financing are made with regard to specific risks and relate to those loans or trade receivables that have been individually reviewed and specificallyidentified as bad and doubtful debts.

A general allowance based on a percentage of total outstanding loans and financing (including unearned interest/income), net of specific allowance for losses on loans, advances and financing, is maintainedby the Group against risks which are not identified.

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

Values assigned to collateral held for non-performing loans secured by properties is determined based on the realisable values of the properties, being the forced sale value provided by independentparties/valuers, on the following basis:

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

(ii) no value assigned to the realisable value of the properties held as collateral for non-performing loans which are in arrears for seven (7) years or more.

The allowance for losses on loans, advances and financing are computed in conformity with BNM/GP3. Consistent with previous years, the Group classified the loans, advances and financing as non-performing when repayments are in arrears for more than three (3) months from the first day of the default or after maturity date.

The Group has adopted a more stringent basis for specific allowances on non-performing loans by making a 100% specific allowance on the balance of the non-performing loans which are more than three(3) months-in-arrears and not covered by realisable value of collateral. The Directors are of the view that such treatment will reflect a more prudent provisioning policy on loans, advances and financing.

Bank Negara Malaysia has granted indulgence to the Group and other local banks from complying with the requirement on the impairment of loans, advances and financing under the revised Guideline onFinancial Reporting for Licensed Institutions ("BNM/GP8"). The Group will be deemed to be in compliance with the requirement on the impairment of loans, advances and financing under the revised BNM/GP8if the allowances for non-performing loans, advances and financing are computed based on BNM/GP3 requirements, which is consistent with the accounting policy adopted in the previous financial year.

For margin balances of the stockbroking business, the accounts are classified as non-performing loans when the closing market value of the counter(s) so financed has fallen below 130% of the outstandingbalance, and 100% specific allowance is make on the non-performing loans, net of collateral held, if any.

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2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(f) Provisions for Liabilities

Provisions for liabilities are recognised when the Group and the Company have a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefitswill 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 reflect the current best estimate. Where theeffect of the time value of money is material, the provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increasein the provision due to the passage of time is recognised as finance cost.

(g) Repurchase Agreements

Securities purchased under resale agreements are securities which the Group have purchased with a commitment to resell at future dates. The commitment to resell the securities is reflected as an asseton the balance sheet.

Conversely, obligations on securities sold under repurchase agreements are securities which the Group have sold from their portfolio, with a commitment to repurchase at future dates. Such financingtransactions and the obligations to repurchase the securities are reflected as liabilities on the balance sheet.

(h) Securities

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

(i) Securities Held-for-trading

Securities are classified as held-for-trading if they are acquired principally for the purpose of selling or repurchasing in the near term. Securities held-for-trading are stated at fair value and any gainor loss arising from a change in their fair values and the derecognition of securities held-for-trading are recognised in the income statement. Securities classified as held-for-trading are not reclassifiedto securities held-to-maturity or securities available-for-sale while they are held. However, for the period from 1 July 2008 to 31 December 2009, BNM’s circular dated 20 October 2008 allows thereclassification of securities held-for-trading to securities available-for-sale and securities held-to-maturity under certain limited circumstances.

(ii) Securities Held-to-maturity

Securities held-to-maturity are financial assets with fixed or determinable payments and fixed maturity that the Group have the positive intent and ability to hold to maturity. Unquoted shares inorganisations set up for socio-economic purposes and equity instruments received as a result of loan restructuring or loan conversion which do not have a quoted market price in an active marketand whose fair value cannot be reliably measured are also classified as securities held-to-maturity as permitted by revised BNM/GP8.

The securities held-to-maturity are measured at accreted/amortised cost based on the effective yield method. Amortisation of premium, accretion of discount and impairment as well as gain or lossarising from derecognition of securities held-to-maturity are recognised the income statement.

Any sale or reclassification of a significant amount of securities held-to-maturity not close to their maturity would result in the reclassification of all securities held-to-maturity to securities available-for-sale, and prevents the Group from classifying the similar class of securities as securities held-to-maturity for the current and following two (2) financial years.

(iii) Securities Available-for-sale

Securities available-for-sale are financial assets that are not classified as held-for-trading or held-to-maturity. The securities available-for-sale are measured at fair value. The return and cost of thesecurities available-for-sale are credited and charged to the income statement using accreted/amortised cost based on effective yield method. Any gain or loss arising from a change in fair value afterapplying the accreted/amortised cost method are recognised directly in equity through the statement of changes in equity, until the financial asset is sold, collected, disposed of or impaired, at whichtime the cumulative gain or loss previously recognised in equity will be transferred to the income statement.




2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(i) Investment Properties

Investment properties are properties which are held either to earn rental income or for capital appreciation or both.

Such property is initially measured at cost, including transaction costs. Subsequent to initial recognition, investment property is carried at cost less any accumulated depreciation and any accumulatedimpairment. The policy for the recognition and measurement of impairment is in accordance with Note 2(k)(iv).

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

Such property is derecognised when either it has been disposed and no future economic benefit is expected from its disposal. Any gain or loss on the retirement or disposal is recognised in the incomestatement in the year in which they arise.

(j) 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 probablethat future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairsand maintenance are charged to the income statement during the financial period in which they are incurred.

When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Subsequent to initial recognition, property, plant and equipment except for freehold land are stated at cost less accumulated depreciation and accumulated impairment, if any. The policy for the recognitionand measurement of impairment is in accordance with Note 2(k)(iv).

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 off the cost of each asset to its residual value over the estimated useful life:

Buildings 2%

Renovations 20%

Office equipment and furniture 10%

Computer equipment 33.3%

Motor vehicles 10% – 16.6%

The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates andexpected pattern of consumption of the future economic benefits 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 benefits are expected from its use or disposal. The difference between the net disposal proceeds, if anyand the net carrying amount is recognised in the income statement.

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2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(k) Impairment of Assets

The carrying amount of the Group’s assets, except for deferred tax assets and financial assets (other than securities held-to-maturity and available-for-sale) are reviewed at each balance sheet date todetermine whether there are any indications of impairment. If any such indications exist, the asset’s recoverable amount is estimated to determine the amount of impairment. The policy of the impairmentof assets are summarised as follows:

(i) Securities Held-to-maturity

For securities carried at amortised cost in which there are objective evidence of impairment, impairment is measured as the difference between the securities’ carrying amount and the present valueof the estimated future cash flows discounted at the securities’ original effective interest rate. The amount of the impairment is recognised in the income statement.

Subsequent reversals in the impairment is recognised when the decrease can be objectively related to an event occurring after the impairment was recognised, to the extent that the securities’ carryingamount does not exceed its amortised cost if no impairment had been recognised. The reversal is recognised in the income statement.

For securities carried at cost, impairment is measured as the difference between the securities’ carrying amount and the present value of estimated future cash flows discounted at the current marketrate of return for similar securities. The amount of impairment is recognised in the income statement and such impairment is not reversed subsequent to its recognition.

(ii) Securities Available-for-sale

For securities available-for-sale in which there are objective evidence of impairment, the cumulative impairment that had been recognised directly in equity shall be transferred from equity to theincome statement, even though the securities have not been derecognised. The cumulative impairment is measured as the difference between the acquisition cost (net of any principal repayment andamortisation) and the current fair value, less any impairment previously recognised in the income statement.

Impairment recognised on investment in equity instruments classified as available-for-sale is not reversed subsequent to its recognition. Reversals of impairment on debt instruments classified asavailable-for-sale are recognised in the income statement if the increase in fair value can be objectively related to an event occurring after the recognition of the impairment in the income statement.

(iii) Goodwill/Intangible Assets

Goodwill and intangible assets that have an indefinite useful life are tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired. Forimpairment testing, goodwill from business combinations or the intangible assets is allocated to cash-generating units ("CGU") which are expected to benefit from the synergies of the businesscombination or intangible asset.

The recoverable amount is determined for each CGU based on its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discountrate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment is recognised in the income statement when the carrying amount of theCGU, including the goodwill or intangible asset, exceeds the recoverable amount of the CGU. The total impairment is allocated, first, to reduce the carrying amount of goodwill or intangible assetsallocated to the CGU and then to the other assets of the CGU on a pro-rata basis.

An impairment on goodwill is not reversed in subsequent periods. An impairment for other intangible assets is reversed if and only if there has been a change in the estimates used to determine theintangible asset’s recoverable amount since the last impairment was recognised and such reversal is through the income statement to the extent that the intangible asset’s carrying amount does notexceed the carrying amount that would have been determined, net of amortisation, if no impairment had been recognised.




2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(k) Impairment of Assets (cont’d)

(iv) Other Assets

Other assets such as property, plant and equipment, investment properties, foreclosed properties and investments in subsidiaries and associate are reviewed for objective indications of impairment ateach balance sheet date or whenever there is any indication that these assets may be impaired. Where such indications exist, impairment is determined as the excess of the asset’s carrying valueover its recoverable amount (greater of value in use or fair value less costs to sell) and is recognised in the income statement. An impairment for an asset is reversed if and only if there has been achange in the estimates used to determine the asset’s recoverable amount since the last impairment was recognised.

The carrying amount is increased to its revised recoverable amount, provided that the amount does not exceed the carrying amount that would have been determined (net of amortisation ordepreciation) had no impairment been recognised for the asset in prior years. A reversal of impairment for an asset is recognised in the income statement.

(l) Leases

A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership. All leases that do not transfer substantially all the risks and rewards areclassified as operating leases.

(i) Finance Leases

Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of theleases, less accumulated depreciation and impairment. The corresponding liability is included in the balance sheet as borrowings. In calculating the present value of the minimum lease payments, thediscount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Company’s incremental borrowing rate is used. Any initial direct costs are also addedto the carrying amount of such assets.

Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments andthe fair value of the assets acquired, are recognised in the income statement over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of theobligations for each accounting period.

The depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment as described in Note 2(j). The policy for the recognition and measurement ofimpairment is in accordance with Note 2(k)(iv).

(ii) Operating Leases

Operating lease payments are recognised in the income statement on a straight-line basis over the term of the relevant lease. The aggregate benefit of incentives provided by the lessor is recognisedas a reduction of rental expenses over the lease term on a straight-line basis.

The land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. Leasehold land that normally has an indefinite economic life andwhere title is not expected to pass to the lessee by the end of the lease term is treated as an operating lease. The payment made on entering into or acquiring a leasehold land is accounted for asprepaid lease payments at the balance sheet date. In the case of a lease of land and buildings, the prepaid lease payments or the upfront payments made are allocated, whenever necessary, betweenthe land and buildings elements in proportion to the relative fair values for leasehold interest in the land element and buildings element of the lease at the inception of the lease. The prepaid leasepayments are amortised over the lease term in accordance with the pattern of benefits provided.

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2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(m) Bills and Acceptances Payable

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

(n) Equity Instruments

Ordinary shares and irredeemable convertible preference shares ("ICPS") are classified as equity. Dividends on ordinary shares and ICPS 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 theequity transaction which would otherwise have been avoided.

(o) Subordinated Bonds

The interest-bearing instruments are recognised as liability and are recorded at face value. Interest expense are accrued based on the effective interest rate method.

(p) Interest-bearing Borrowings

Interest-bearing bank borrowings are recorded at the amount of proceeds received. All the borrowing costs are recognised as expenses in the income statement in the period in which they are incurred.

(q) Other Assets

Other receivables are carried at anticipated realisable values. Bad debts are written off when identified. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balancesheet date.

(r) Liabilities

Deposits from customers, deposits and placements of banks and other financial institutions are stated at placement values. Other liabilities are stated at fair value which is the consideration to be paid inthe future for goods and services received.

(s) Balances Due From Clients and Brokers

In accordance with the Rules of Bursa Malaysia Securities Berhad (the "Bursa"), clients’ accounts for the Group are classified as non-performing (doubtful or bad) under the following circumstances:

Criteria for classification as non-performingTypes Doubtful Bad

Contra losses When account remains outstanding for 16 to 30 calendar days When the account remains outstanding for more thanrom the date of contra transaction. 30 calendar days from the date of contra transaction.

Overdue purchase contracts When the account remains outstanding from T+5 market days When the account remains outstanding for more thanto 30 calendar days. 30 calendar days.

Bad debts are written off when identified. Specific allowances are made for balances due from clients and brokers which are considered doubtful or which have been classified as non-performing after takinginto consideration collateral held by the Group and deposits of and amounts due to dealer’s representative in accordance with the Rules of the Bursa. General allowance is made based on a certain percentageof balances due from clients and brokers (excluding outstanding purchase contracts which are not due for payment) net of specific allowances already made.




2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(t) Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of the revenue can be measured reliably.

(i) Dividend Income

Dividend income from securities held-to-maturity, securities available-for-sale and investment in subsidiaries and associates are recognised when the right to receive payment is established.

(ii) Interest Income

Interest income is recognised in the income statement for all interest-bearing assets on an accrual basis. Interest income includes the amortisation of premium or accretion of discount. Interest incomeon securities are recognised on an effective yield basis.

Interest income on overdrafts, housing loans and term loans is accounted for on accrual basis by reference to rest periods as stipulated in the loan agreements, which are either monthly or daily.Interest income on hire purchase, block discounting and leasing business is recognised on the effective interest method. Income from the Islamic banking business is recognised on the accrual basisin accordance with the Shariah principles.

Where an account is classified as non-performing, interest/income accrued and recognised as income prior to the date the loan is classified as non-performing is reversed out of interest income andset-off against the accrued interest/income receivable account in the balance sheet. Thereafter, interest/income on the non-performing loan shall be recognised as income on a cash basis. Customers’accounts are deemed to be non-performing where repayments are in arrears for more than three (3) months from the first day of default or after maturity date.

The policy on interest income recognition on non-performing loans is in conformity with the revised BNM/GP8 issued by BNM on 5 October 2004.

(iii) Brokerage Income

Brokerage fee are charged to the clients and is recognised on the day when the contracts are executed.

(iv) Fees and Other Income

Loan arrangement fees and commissions, management and participation fees and underwriting commissions are recognised as income when all conditions precedent are fulfilled.

Commitment, guarantee and portfolio management fees which are material are recognised as income based on time apportionment basis.

Corporate advisory fees are recognised as income on the completion of each stage of the assignment.

As allowed under Bank Negara Malaysia’s Circular on "Accounting Treatment of Handling Fees for Hire Purchase Loans" dated 16 October 2006, the Group has continued to expense off upfront handlingfees paid to hire purchase dealers for hire purchase loans and hire purchase financing to the income statement in the year which they are incurred.

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2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(u) Recognition of Interest and Financing Expenses

Interest expense and attributable profit (on activities relating to Islamic banking business) on deposits and borrowings of the Group are recognised on an accrual basis.

(v) Derivative Financial Instruments

Derivative financial instruments are initially recognised at fair value, which is normally zero or negligible at inception except for options and subsequently re-measured at their fair value. The fair value ofoptions at inception is normally equivalent to the premium received (for options written) or paid (for options purchased). All derivatives are carried as assets when fair value is positive and as liabilities whenfair value is negative. Changes in the fair value are recognised in the income statement.

Interest income and expenses associated with interest rate swaps are recognised over the life of the swap agreement as a component of interest income or interest expense.

(w) Foreign Currency Translations

Transactions in foreign currencies are initially recorded in Ringgit Malaysia at rates of exchange ruling at the date of the transaction. At each balance sheet date, foreign currency monetary items are translatedinto Ringgit Malaysia at exchange rates ruling at that date.

All exchange rate differences are taken to the income statement.

The financial statements are presented in Ringgit Malaysia, which is also the Group’s and the Company’s primary functional currency.

(x) Income Tax

Income tax on the profit 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 profit for the year and is measuredusing the tax rates that have been enacted at the balance sheet date.

Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements.In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused taxcredits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is notrecognised if the temporary difference 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 ofthe transaction, affects neither accounting profit nor taxable profit.

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 atthe balance sheet date. Deferred tax is recognised as income or an expense in the income statement for the period, except when it arises from a transaction which is recognised directly in equity, in whichcase the deferred tax is also charged or credited 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.

(y) Foreclosed Properties

Foreclosed properties are stated at cost less impairment, if any, of such properties. The policy for the recognition and measurement of impairment is in accordance with Note 2(k)(iv).

(z) Cash and Cash Equivalents

Cash and cash equivalents as stated in the cash flow statements comprise cash and bank balances and short-term deposits maturing within one month that are readily convertible into cash with insignificantrisk of changes in value.




2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(aa) Zakat

This represents business zakat. It is an obligatory amount payable by the Group to comply with the Shariah principles.

(ab) Profit Equalisation Reserve ("PER")

PER refers to the amount appropriated out of the total Islamic banking gross income in order to maintain a certain level of return to depositors in conformity with BNM’s "The Framework of the Rate of Return"(BNM/GP2-i). PER is appropriated from and written back to the total Islamic banking gross income in deriving the net distributable gross income. This amount appropriated is shared by the depositors andthe Bank/Group. The PER is deducted at a rate which does not exceed the maximum amount of total of 15% monthly gross income, monthly net trading income, other income and irregular income. PER ismaintained up to the maximum of 30% of total Islamic banking capital fund.

(ac) Employee Benefits

(i) Short-Term Benefits

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 accumulatingcompensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short-term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

(ii) Defined Contribution Plans

Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities or funds and will have no legal or constructive obligations to payfurther contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. Such contributions arerecognised as an expense in the income statement as incurred. As required by law, companies in Malaysia make contributions to the Employees Provident Fund ("EPF").

The ESS comprise the Share Option Plan, the Share Grant Plan and the Share Save Plan. The ESS are an equity-settled, share-based compensation plans, in which the Group’s Directors and employeesare granted or are allowed to acquire ordinary shares of the Company.

The total fair value of the share options/share grants offered/awarded to the eligible Directors and employees are recognised as an employee cost with a corresponding increase in the share schemereserve within equity over the vesting period and taking into account the probability that the scheme will vest. The fair value of the shares options/share grants are measured at grant date, taking intoaccount, if any, the market vesting conditions upon which the share options/share grants were offered/awarded but excluding the impact of any non-market vesting conditions. Non-market vestingconditions are included in assumptions about the number of share options/share grants that are expected to become exercisable/to vest.

At each balance sheet date, the Group revises its estimates of the number of share options/share grants that are expected to become exercisable/to vest. It recognises the impact of the revision oforiginal estimates, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period. The equity amount is recognised in the share scheme reserve until theshare options/share grants are exercised/vested.

The proceeds received net of any directly attributable transaction costs are credited to equity when the options are exercised.

148



2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(ad) Contingent Liabilities and Contingent Assets

The Group does not recognise a contingent liability but discloses its existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will beconfirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflowof resources will be required to settle the obligation. A contingent liability also arises in the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably.

A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of theGroup. The Group does not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually certain.

(ae) Segment reporting

Segment reporting is presented for enhanced assessment of the Group’s risks and returns. A business segment is a group of assets and operations engaged in providing products or services that are subjectto risks and returns that are different from those of other business segments.

Segment revenue, expense, assets and liabilities are those amounts resulting from the operating activities of a segment that are directly attributable to the segment and the relevant portion that can beallocated on a reasonable basis to the segment. Segment revenue, expense, assets and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of theconsolidation process, except to the extent that such intra-group balances and transactions are between group enterprises within a single segment.

3. CASH AND SHORT-TERM FUNDSGroup Company

2010 2009 2010 2009RM’000 RM’000 RM’000 RM’000

Cash and balances with banks and other financial institutions 558,376 457,254 1,027 298Money at call and deposit placements maturing within one month 3,006,169 4,533,432 29,820 453,580

3,564,545 4,990,686 30,847 453,878

Note:

(i) Included in the cash and short-term funds are monies held in trust by a subsidiary amounting to RM94,249,000 (2009: RM46,475,000).

(ii) There is an amount of RM29,850,000 (2009: RM453,690,000) being the deposits placement by the Company with its subsidiaries.

(iii) An amount of RM991,000 (2009: RM182,000) being a bank account maintained by PB Trustee Services Berhad pursuant to the Company’s ESS.




4. DEPOSITS AND PLACEMENTS WITH BANKS AND OTHER FINANCIAL INSTITUTIONSGroup Company

2010 2009 2010 2009RM’000 RM’000 RM’000 RM’000

Licensed banks 150,156 198,523 600,000 200,000Licensed investment banks – – 10,800 –

150,156 198,523 610,800 200,000

The deposits of the Company with maturity more than one month amounting to RM610,800,000 (2009: RM200,000,000) are placed with its subsidiaries.

5. SECURITIES HELD-FOR-TRADINGGroup

2010 2009RM’000 RM’000

At fair value

Money market instrument:Commercial papers – 9,951Malaysia Gonernment securities – 24,690

Quoted securities in Malaysia:Shares – 2,470Debt securities – 8,942

Quoted securities:Debt securities – 2

– 46,055

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6. SECURITIES AVAILABLE-FOR-SALEGroup

2010 2009RM’000 RM’000

At fair value

Money market instruments:Malaysian Government securities 1,748,115 1,647,355Malaysian Government investment certificates 566,495 113,849Malaysian Government treasury bills – 132,492Bank Negara Malaysia bills – 74,525Cagamas bonds 205,629 –Negotiable instruments of deposits 459,444 1,696,057Commercial papers – 98,906Bankers’ acceptances 799,951 1,578,533Khazanah bonds – 9,909

Quoted securities in Malaysia:Shares [Note (a)] 3,919 3,010Debt securities 7,591 6,071

Unquoted securities:Shares 11,377 6,877Debt securities 1,352,307 952,538

5,154,828 6,320,122




6. SECURITIES AVAILABLE-FOR-SALE (cont’d)(a) Disclosures of the reclassification from securities held-for-trading ("HFT") to securities available-for-sale ("AFS") portfolio in the financial statements of the Group is as follows:

(i) Amount reclassified from securities HFT to AFS portfolio on 31 December 2008:

Group RM’000

Fair value of securities HFT reclassified to AFS portfolio as at reclassification date 3,419

There was no new security reclassified during the financial year ended 31 March 2010.

(ii) Carrying amount and fair value of securities HFT reclassified to AFS portfolio as at the end of the financial year:

Group 2010 2009

RM’000 RM’000

Securities HFT reclassified to AFS portfolioCarrying amount 3,902 3,010Fair value 3,902 3,010

(iii) The fair value loss recognised in respect of the securities HFT reclassified to AFS portfolio during the financial year:

Group 2010 2009

RM’000 RM’000

Unrealised loss recognised in equity 483 409

(iv) Effective interest rate for the security reclassified from HFT to AFS portfolio is not applicable as the security reclassified is an equity portfolio.

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7. SECURITIES HELD-TO-MATURITYGroup

2010 2009RM’000 RM’000

At amortised cost

Money market instruments:Malaysian Government securities 811,208 –Malaysian Government investment certificates 39,368 53,770Cagamas bonds – 20,000Khazanah bonds – 53,896

At cost

Quoted securities in Malaysia:Debt securities 4,902 4,902

Unquoted securities:Shares 22,021 22,021Debt securities 152,248 266,865

1,029,747 421,454Accumulated impairment (98,327) (106,834)

931,420 314,620




8. DERIVATIVE FINANCIAL ASSETS/(LIABILITIES)Derivative financial instruments are off-balance sheet financial instruments whose values change in response to changes in prices or rates (such as foreign exchange rates, interest rates and security prices) of theunderlying instruments. These instruments allow the Group and the banking customers to transfer, modify or reduce their foreign exchange and interest rate risk hedge relationships. The Group also transacts inthese instruments for proprietary trading purposes. The risks associated with the use of derivative financial instruments, as well as management’s policy for controlling these risks are set out in Note 42.

The table below shows the Group’s derivative financial instruments as at the balance sheet date. The contractual or underlying notional amounts of these derivative financial instruments and their correspondinggross positive (derivative financial asset) and gross negative (derivative financial liability) fair values as at balance sheet date are analysed below.

2010 2009

Contract/ Fair Value Contract/ Fair Value Notional NotionalAmount Assets Liabilities Amount Assets Liabilities

Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Foreign exchange contracts:– Currency forwards 432,551 5,037 (10,194) 209,230 1,693 (626)– Currency swaps 1,810,451 33,075 (32,981) 1,924,698 23,249 (29,048)– Currency spots 142,983 224 (179) 335,480 2,153 (1,011)– Currency options 66,418 252 (158) 4,815 20 (11)

Interest rate related contracts:– Interest rate swaps 1,050,000 6,110 (6,663) 1,050,000 13,743 (18,868)

Total derivative assets/(liabilities) 3,502,403 44,698 (50,175) 3,524,223 40,858 (49,564)

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9. LOANS, ADVANCES AND FINANCINGGroup

2010 2009RM’000 RM’000

Overdrafts 1,632,204 1,610,636Term loans/financing– Housing loans/financing 9,081,024 7,842,479– Syndicated term loans/financing 259,826 314,794– Hire purchase receivables 1,070,593 1,360,731– Lease receivables 104 104– Other term loans/financing 7,261,555 5,858,653Bills receivables 56,173 71,906Trust receipts 161,254 154,941Claims on customers under acceptance credits 2,025,751 1,735,910Staff loans [include RM182,000 loans to Directors of banking subsidiary (2009: RM1,437,000)] 102,583 117,974Credit/charge card receivables 685,003 645,058Revolving credits 1,115,275 995,713Other loans 339,071 257,432

23,790,416 20,966,331Less: Unearned interest and income (2,380,480) (1,376,192)

Gross loans, advances and financing 21,409,936 19,590,139Less: Allowance for losses on loans, advances and financing

– Specific (438,582) (531,824)– General (322,909) (340,218)

Total net loans, advances and financing 20,648,445 18,718,097




9. LOANS, ADVANCES AND FINANCING (cont’d)Group

2010 2009RM’000 RM’000

(i) By maturity structure:

Within one year 6,307,079 5,758,320One year to three years 906,149 947,862Three years to five years 1,408,276 1,485,367Over five years 12,788,432 11,398,590

Gross loans, advances and financing 21,409,936 19,590,139

(ii) By type of customer:

Domestic non-bank financial institutions– Stockbroking companies 20,001 –– Others 168,766 276,429Domestic business enterprises– Small and medium enterprises 4,393,907 4,185,864– Others 4,170,355 3,861,118Government and statutory bodies 16,590 17,345Individuals 12,157,289 10,886,992Other domestic entities 5,088 4,356Foreign entities 477,940 358,035


(iii) By interest/profit rate sensitivity:

Fixed rate– Housing loans/financing 316,948 171,467– Hire purchase receivables 950,134 1,197,050– Other fixed rate loans/financing 2,188,491 1,503,071Variable rate– Base lending rate plus 14,097,157 13,223,436– Cost plus 3,753,267 3,381,339– Other variable rates 103,939 113,776


156




2010 2009RM’000 RM’000

(iv) By economic purposes:

Purchase of securities 351,976 273,541Purchase of transport vehicles 907,561 1,190,239Purchase of landed property 11,092,067 10,477,736

of which: – Residential 8,408,597 7,730,962– Non-residential 2,683,470 2,746,774

Purchase of fixed assets excluding land and buildings 66,540 61,094Personal use 2,007,919 1,155,811Credit card 685,003 645,058Purchase of durable goods – 15Construction 293,211 313,552Working capital 5,384,583 4,846,438Others 621,076 626,655


(v) Movements in non-performing loans, advances and financing ("NPL") are as follows:

At beginning of year 875,070 1,158,506Non-performing during the year 670,112 775,826Reclassified as performing during the year (412,025) (493,941)Recoveries (194,930) (328,770)Amount written off (131,948) (236,551)

At end of year 806,279 875,070Specific allowance (438,582) (531,824)

– on non-performing loans (415,168) (451,554)– on performing loans (23,414) (80,270)

Net non-performing loans, advances and financing 367,697 343,246

Net NPL as % of gross loans, advances and financing less specific allowance– Including specific allowance on performing loans 1.8% 1.8%– Excluding specific allowance on performing loans 1.9% 2.2%





2010 2009RM’000 RM’000

(vi) Movements in the allowance for losses on loans, advances and financing are as follows:

General AllowanceAt beginning of year 340,218 289,296Allowance made during the year 59,732 78,854Amount written back (77,041) (27,932)

At end of year 322,909 340,218

As % of gross loans, advances and financing less specific allowance 1.5% 1.8%

Specific AllowanceAt beginning of year 531,824 636,429Allowance made during the year 331,471 416,100Amount written back in respect of recoveries (292,765) (284,154)Amount written off (131,948) (236,551)

At end of year 438,582 531,824

Included in specific allowance of the Group are allowances made for high risk accounts which are still performing amounting to RM23,414,000 (2009: RM80,270,000).

(vii) Non-performing loan, advances and financing analysed by economic purposes are as follows:

Purchase of securities 16,399 16,347Purchase of transport vehicles 13,992 26,376Purchase of landed property 336,433 399,985

of which: – Residential 240,152 273,500– Non-residential 96,281 126,485

Purchase of fixed assets excluding land and buildings 198 630Personal use 40,451 55,927Credit card 14,188 17,518Construction 14,905 22,674Working capital 321,637 307,833Others 48,076 27,780

806,279 875,070

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10. BALANCES DUE FROM CLIENTS AND BROKERSGroup

2010 2009RM’000 RM’000

Due from clients 89,050 59,688Due from brokers – 2,522

89,050 62,210Less: Allowance for bad and doubtful debts (16,482) (17,530)

72,568 44,680

These represent amounts receivable by Alliance Investment Bank Berhad ("AIBB") from non-margin clients and outstanding contracts entered into on behalf of clients where settlements via the Central DepositorySystem has yet to be made.

AIBB’s normal trade credit terms for non-margin client is three (3) market days in accordance with the Bursa Malaysia Securities Berhad’s Fixed Delivery and Settlement System ("FDSS") trading rules.

Included in the balances due from clients and brokers are non-performing accounts, as follows:

Group 2010 2009

RM’000 RM’000

Classified as doubtful 691 841Classified as bad 16,150 18,091

16,841 18,932

The movements in allowance for bad and doubtful debts are as follows:

At beginning of year 17,530 24,665Allowance made during the year 848 2,828Reversal of allowance (959) (5,789)Amount written off (937) (4,174)

At end of year 16,482 17,530




11. LAND HELD FOR INVESTMENTGroup

2010 2009RM’000 RM’000

Freehold land, at cost 23,114 23,114Development costs 8,943 8,943

32,057 32,057

Accumulated impairment:At beginning/end of year (4,309) (4,309)

Carrying amount at end of year 27,748 27,748

12. OTHER ASSETSGroup Company

2010 2009 2010 2009RM’000 RM’000 RM’000 RM’000

Other receivables, deposits and prepayments [Note (a)] 141,971 172,414 234 419Interest/income receivable 61,191 77,231 5,805 1,889Trade receivables 32 34 – –Manager’s stocks [Note (b)] 1,017 1,243 – –Foreclosed properties 4,349 4,883 – –Amount due from subsidiaries [Note (c)] – – 714 50,460

208,560 255,805 6,753 52,768Less: Allowance for other assets (21,853) (20,179) (696) (13,839)

186,707 235,626 6,057 38,929

Note:

(a) Other receivables, deposits and prepayments

Included in other receivables, deposits and prepayments of the Group is an amount of RM28,077,000 (2009: RM33,004,000) being the principal balance of housing loans and hire purchase loans acquiredby the banking subsidiary from a state owned entity and which have been sold to Cagamas Berhad, with recourse obligations.

160



12. OTHER ASSETS (cont’d)Note: (cont’d)

(b) Manager’s stocks

The manager’s stock represent units held by the Group in the trust funds it manages and is stated at the lower of cost and market value. Cost is determined using the weighted average method of valuation.Market value of unit trust stock is determined by the Group as manager of the trust funds based on the underlying value of the trust funds.

Group 2010 2009

RM’000 RM’000

Manager’s stocks 1,017 1,243

Market value 1,026 1,248

The Group has no significant concentration of credit risk that may arise from the exposure to a single debtor or group of debtors.

(c) Amount due from subsidiaries

Company2010 2009

RM’000 RM’000

Non-interest bearing 714 50,460Less: Allowance for doubtful debts (696) (13,839)

18 36,621

The amounts due from subsidiaries of RM714,000 (2009: RM50,460,000) are unsecured, interest-free and have no fixed terms of repayment.

13. STATUTORY DEPOSITSStatutory deposits comprise the following:

(a) Non-interest bearing statutory deposits of RM258,406,000 (2009: RM198,924,000) relating to the banking subsidiaries, maintained with Bank Negara Malaysia in compliance with Section 37(1)(c) of theCentral Bank of Malaysia Act, 1958 (revised 1994), the amounts of which are determined as a set percentage of total eligible liabilities.

(b) Interest bearing statutory deposits of RM100,000 (2009: RM100,000) relating to a subsidiary, Alliance Trustee Berhad which is maintained with the Accountant-General in compliance with Section 3(f) of theTrust Companies Act, 1949.




14. INVESTMENTS IN SUBSIDIARIESCompany

2010 2009RM’000 RM’000

Unquoted shares, at costAt beginning of year 1,767,198 1,767,198Subscription of additional shares in subsidiaries [Note (a)] 50,440 –Employee Share Scheme [Note (b)] 12,601 –

1,830,239 1,767,198Less: Accumulated impairment (53,255) (38,056)

At end of year 1,776,984 1,729,142

Note:

(a) On 22 July 2009, the Company increased its cost of investment in its wholly-owned subsidiaries by way of capitalisation of amount owing from subsidiaries as follows:

Company2010

RM’000

(i) Kota Indrapura Development Corporation Berhad 42,391(ii) Pridunia Sdn. Bhd. 7,534(iii) Setiu Integrated Resort Sdn. Bhd. 257(iv) Hijauan Setiu Sdn. Bhd. 258

50,440

(b) This amount is in respect of the services rendered by the employees of the Company’s subsidiaries, pursuant to Employee Share Scheme.

162



14. INVESTMENTS IN SUBSIDIARIES (cont’d)Details of the subsidiaries, which are incorporated in Malaysia, are as follows:

Effective EquityName Principal Activities Interest Held (%)

2010 2009

Subsidiaries of the Company

Alliance Bank Malaysia Berhad Banking and finance business and the provision of related financial services 100 100

Hijauan Setiu Sdn. Bhd. Investment holding 100 100

Setiu Integrated Resort Sdn. Bhd. Investment holding 100 100

Pridunia Sdn. Bhd. Dormant 100 100

Matrix Core Options & Futures Sdn. Bhd. Dormant 100 100

Alliance Trustee Berhad Trustee services 100 100

Kota Indrapura Development Corporation Berhad Property holding 100 100

Syabas Sutra Sdn. Bhd. Liquidated – 100

Subsidiary of Syabas Sutra Sdn. Bhd.

ABG Capital Management Sdn. Bhd. Liquidated – 100

Subsidiaries of Alliance Bank Malaysia Berhad

Alliance Investment Bank Berhad Investment banking business including Islamic banking, provision of stockbroking services and related financial services 100 100

Alliance Islamic Bank Berhad Islamic banking and the provision of related financial services 100 100

Alliance Direct Marketing Sdn. Bhd. Dealing in sales and distribution of consumer and commercial banking products 100 100

AllianceGroup Nominees (Asing) Sdn. Bhd. Nominee services 100 100

AllianceGroup Nominees (Tempatan) Sdn. Bhd. Nominee services 100 100

AllianceGroup Properties Sdn. Bhd. Real property investment 100 100

Alliance Investment Management Berhad Management of unit trusts funds, provision of fund management and investment advisory services 70 70

AFB Nominees (Tempatan) Sdn. Bhd. Liquidated – 100




14. INVESTMENTS IN SUBSIDIARIES (cont’d)Effective Equity

Name Principal Activities Interest Held (%)

2010 2009

Subsidiaries of Alliance Investment Bank Berhad

Alliance Research Sdn. Bhd. Investment advisory 100 100

AIBB Nominees (Tempatan) Sdn. Bhd. Nominee services 100 100

AIBB Nominees (Asing) Sdn. Bhd. Nominee services 100 100

KLCS Sdn. Bhd. Dormant 100 100

Alliance Investment Futures Sdn. Bhd. Dormant 100 100

Rothputra Nominees (Tempatan) Sdn. Bhd. Dormant 100 100(under members’ voluntary winding up)

KLCity Ventures Sdn. Bhd. Dormant 100 100(under members’ voluntary winding up)

KLCS Asset Management Sdn. Bhd. Dormant 100 100(under members’ voluntary winding up)

KLCity Unit Trust Bhd. Dormant 94.94 94.94(under members’ voluntary winding up)

Rothputra Nominees (Asing) Sdn. Bhd. Liquidated – 100

Alliance Asset Management (L) Limited Liquidated – 100

Alliance Merchant Nominees (Tempatan) Sdn. Bhd. Liquidated – 100

Alliance Merchant Nominees (Asing) Sdn. Bhd. Liquidated – 100

Alliance Capital Asset Management Sdn. Bhd. Liquidated – 70

Unincorporated trust for ESS * Special purpose vehicle for ESS – –

* Deemed subsidiary pursuant to IC 112 – Consolidation: Special Purpose Entities

164





15. LEASEHOLD LANDGroup

2010 2009RM’000 RM’000

Long term leasehold land

CostAt beginning of year 15,472 15,472Disposals (1,055) –

At end of year 14,417 15,472

Accumulated AmortisationAt beginning of year (3,336) (3,197)Charge for the year (138) (139)Disposals 176 –

At end of year (3,298) (3,336)

Net Carrying Amount 11,119 12,136

The leasehold land is stated at cost less accumulated amortisation and impairment, if any.


166


16. PROPERTY, PLANT AND EQUIPMENTOffice

equipmentFreehold and Computer Motor

land Buildings Renovations furniture equipment vehicles TotalGroup RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2010CostAt beginning of year 2,962 50,442 127,453 80,741 140,188 5,131 406,917Additions – – 20,074 5,111 3,273 – 28,458Disposals – (99) (1,022) (3,443) (1,781) (2,016) (8,361)Written off – – (30,595) (9,756) (10,485) – (50,836)

At end of year 2,962 50,343 115,910 72,653 131,195 3,115 376,178

Accumulated DepreciationAt beginning of year – 13,875 80,589 53,182 114,895 2,853 265,394Charge for the year – 981 16,357 4,949 17,202 224 39,713Disposals – (51) (116) (3,435) (1,668) (1,913) (7,183)Written off – – (29,519) (9,683) (10,474) – (49,676)

At end of year – 14,805 67,311 45,013 119,955 1,164 248,248

Accumulated ImpairmentAt beginning/end of year – 3,956 – – – – 3,956

Net Carrying Amount 2,962 31,582 48,599 27,640 11,240 1,951 123,974




16. PROPERTY, PLANT AND EQUIPMENT (cont’d)Office

equipmentFreehold and Computer Motor

land Buildings Renovations furniture equipment vehicles TotalGroup RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2009CostAt beginning of year 2,962 50,442 140,854 85,438 129,309 5,844 414,849Additions – – 23,711 10,317 13,702 150 47,880Disposals – – (81) (1,516) (7) (859) (2,463)Written off – – (37,031) (13,498) (2,816) (4) (53,349)

At end of year 2,962 50,442 127,453 80,741 140,188 5,131 406,917

Accumulated DepreciationAt beginning of year – 12,866 100,643 62,897 101,590 3,282 281,278Charge for the year – 1,009 14,848 4,557 15,823 257 36,494Disposals – – (80) (1,478) (7) (682) (2,247)Written off – – (34,822) (12,794) (2,511) (4) (50,131)

At end of year – 13,875 80,589 53,182 114,895 2,853 265,394

Accumulated ImpairmentAt beginning/end of year – 3,956 – – – – 3,956

Net Carrying Amount 2,962 32,611 46,864 27,559 25,293 2,278 137,567


16. PROPERTY, PLANT AND EQUIPMENT (cont’d)Office

equipmentComputer and Motor

equipment furniture vehicles Renovations TotalRM’000 RM’000 RM’000 RM’000 RM’000

Company

2010CostAt beginning of year 276 567 396 629 1,868Written off – (13) – (30) (43)

At end of year 276 554 396 599 1,825

Accumulated DepreciationAt beginning of year 258 496 101 540 1,395Charge for the year 11 12 32 26 81Written off – (12) – – (12)

At end of year 269 496 133 566 1,464

Net Carrying Amount 7 58 263 33 361

2009CostAt beginning of year 276 567 492 599 1,934Additions – – – 30 30Disposals – – (96) – (96)

At end of year 276 567 396 629 1,868

Accumulated DepreciationAt beginning of year 232 483 127 513 1,355Charge for the year 26 13 32 27 98Disposals – – (58) – (58)

At end of year 258 496 101 540 1,395

Net Carrying Amount 18 71 295 89 473

168



17. INTANGIBLE ASSETSGroup

2010 2009RM’000 RM’000

Goodwill

CostAt beginning/end of year 304,149 304,149

Accumulated impairment:At beginning of year – –Allowance for impairment (Note 36) (2,084) –

At end of year (2,084) –

Net carrying amount 302,065 304,149

Computer software

CostAt beginning of year 166,590 137,654Additions 13,326 29,577Written off (6,994) (641)

At end of year 172,922 166,590

Accumulated amortisationAt beginning of year (102,227) (88,138)Charge for the year (16,307) (14,654)Written off 5,405 565

At end of year (113,129) (102,227)

Net carrying amount 59,793 64,363

Total carrying amount of goodwill and computer software 361,858 368,512




17. INTANGIBLE ASSETS (cont’d)(a) Impairment Test on Goodwill

Goodwill is reviewed annually for impairment, or more frequently when there are indications that impairment may have occurred. Goodwill has been allocated to the Group’s cash-generating units ("CGU")that expected to benefit from the synergies of the acquisitions, identified according to the business segments as follows:

Group 2010 2009

RM’000 RM’000

Corporate banking 44,758 44,758Commercial banking 13,459 13,459Small and medium enterprise banking 42,621 42,621Consumer banking 101,565 101,565Treasury 83,284 83,284Corporate finance and equity capital market 1,838 1,838Stockbroking business 12,433 12,433Debt capital market – 2,084Asset management 2,107 2,107

302,065 304,149

For annual impairment testing purposes, the recoverable amount of the CGUs, which are reportable business segments, are determined based on their value-in-use. The value-in-use calculations apply adiscounted cash flow model using cash flow projections based on financial budget and projections approved by management. The key assumptions for the computation of value-in-use include the discountrates, cash flow projection and growth rates applied are as follows:

(i) Discount rate

The discount rate of 10.2% (2009: 7.3%) are based on the pre-tax weighted average cost of capital plus an appropriate risk premium, that reflect specific risks relating to the Group. The pre-taxweighted average cost of capital is generally derived from an appropriate capital asset pricing model, which itself depends on inputs reflecting a number of financial and economic variables includingthe risk-free rate in the country.

(ii) Cash flow projections and growth rate

Cash flow projections are based on five-year financial budget and projections approved by management. Cash flows beyond the fifth year are extrapolated in perpetuity using a nominal long termgrowth rate of 6.5% (2009: 6.5%) based on average annual Gross Domestic Product growth rate forecasted for the 10 years from year 2011 to 2020 reported in the Third Industrial Master Plan. Cashflows are extrapolated in perpetuity due to the long term perspective of these businesses within the Group.

Impairment is recognised in the income statement when the carrying amount of a CGU exceeds its recoverable amount. This annual impairment test review reveals that there was no evidence of impairmentfor the financial year, except for the impairment on debt capital market.

(b) Sensitivity to Changes in Assumptions

Any reasonable possible change in the key assumptions would not cause the carrying amount of the goodwill to exceed the recoverable amount of the CGU, which would warrant any impairment to be recognised.

170



18. DEFERRED TAXDeferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The netdeferred tax assets and liabilities shown on the balance sheet after appropriate offsetting are as follows:

Group Company2010 2009 2010 2009

RM’000 RM’000 RM’000 RM’000

Deferred tax assets, net 102,727 120,517 – –Deferred tax liabilities, net (5) (31) (4) (32)

102,722 120,486 (4) (32)

At beginning of year 120,486 161,294 (32) (242)Recognised in the income statement (Note 37) (22,009) (26,492) 28 210Recognised in equity 4,245 (14,316) – –

At end of year 102,722 120,486 (4) (32)

Deferred tax assets and liabilities prior to offsetting are summarised as follows:

Deferred tax assets 122,724 141,138 – –Deferred tax liabilities (20,002) (20,652) (4) (32)

102,722 120,486 (4) (32)




18. DEFERRED TAX (cont’d)The components and movements of deferred tax assets and liabilities during the financial year prior to offsetting are as follows:

Allowance for Unabsorbedlosses on loans, tax losses Other

advances and and capital temporaryfinancing allowances differences Total

Group RM’000 RM’000 RM’000 RM’000

Deferred tax assets:At 1 April 2008 120,088 878 53,110 174,076Recognised in income statement (23,846) 5,456 (232) (18,622)Recognised in equity – – (14,316) (14,316)

At 31 March 2009 96,242 6,334 38,562 141,138Recognised in income statement (12,357) (1,836) (8,466) (22,659)Recognised in equity – – 4,245 4,245

At 31 March 2010 83,885 4,498 34,341 122,724

Property,plant and

equipment TotalGroup RM’000 RM’000

Deferred tax liabilities:At 1 April 2008 12,782 12,782Recognised in income statement 7,870 7,870

At 31 March 2009 20,652 20,652Recognised in income statement (650) (650)

At 31 March 2010 20,002 20,002

172



18. DEFERRED TAX (cont’d)Other Property,

temporary plant anddifferences equipment Total

Company RM’000 RM’000 RM’000

Deferred tax liabilities:At 1 April 2008 157 85 242Recognised in income statement (187) (23) (210)

At 31 March 2009 (30) 62 32Recognised in income statement (19) (9) (28)

At 31 March 2010 (49) 53 4

Group 2010 2009

RM’000 RM’000

Deferred tax assets of the Group have not been recognised in respect of:Unabsorbed tax losses 11,148 26,280




19. DEPOSITS FROM CUSTOMERSGroup

2010 2009RM’000 RM’000

Demand deposits 8,122,263 6,815,306Savings deposits 1,679,449 1,628,580Fixed/investment deposits 12,215,318 14,085,022Money market deposits 1,160,946 2,063,280Negotiable instruments of deposits 409,092 979,604Structured deposits [Note (a)] 41,263 3,649

23,628,331 25,575,441

Note:

(a) Structured deposits represent foreign currency time deposits with embedded foreign exchange options.

(i) The maturity structure of fixed/investment deposits, money market deposits and negotiable instruments of deposits are as follows:

Due within six months 9,608,666 12,547,616Six months to one year 4,041,324 4,343,188One year to three years 105,240 195,586Three years to five years 30,126 41,516

13,785,356 17,127,906

(ii) The deposits are sourced from the following types of customers:

Domestic financial institutions 415,986 249,681Government and statutory bodies 837,472 1,360,896Business enterprises 8,152,109 9,552,952Individuals 13,531,116 13,660,573Others 691,648 751,339

23,628,331 25,575,441

174



20. DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONSGroup

2010 2009RM’000 RM’000

Licensed banks 1,385,564 425,996Licensed investment banks 80,000 140,000Licensed Islamic banks 75,000 –Bank Negara Malaysia 749,102 617,391

2,289,666 1,183,387

21. AMOUNT DUE TO CAGAMAS BERHADThis relates to proceeds received from conventional housing loans and hire purchase loans sold directly to Cagamas Berhad with recourse to the Group. Under the agreement, the Group undertakes to administerthe loans on behalf of Cagamas Berhad and to buy back any loans which are regarded as defective based on pre-determined and agreed upon prudential criteria set by Cagamas Berhad.

22. BILLS AND ACCEPTANCES PAYABLEBills and acceptances payable represents the Group’s own bills and acceptances rediscounted and outstanding in the market.

23. BALANCES DUE TO CLIENTS AND BROKERSGroup

2010 2009RM’000 RM’000

Due to clients 75,984 51,856Due to brokers 4,265 –

80,249 51,856

These mainly relate to amounts payable to non-margin clients and outstanding contracts entered into on behalf of clients where settlement via the Central Depository System has yet to be made.

AIBB’s normal trade credit terms for non-margin clients is three (3) market days according to Bursa Malaysia Securities Berhad’s FDSS trading rules.




24. OTHER LIABILITIESGroup Company

2010 2009 2010 2009RM’000 RM’000 RM’000 RM’000

Other payable and accruals 768,853 744,690 1,489 3,181Interest/income payable 100,573 138,384 1,699 1,271Remisier’s accounts 23,454 23,400 – –Profit equalisation reserve [Note (a)] – 50,058 – –Amount due to subsidiaries [Note (b)] – – 1,461 1,646

892,880 956,532 4,649 6,098

Note:

(a) Profit equalisation reserve

Group 2010 2009

RM’000 RM’000

At beginning of year 50,058 51,925Provision made during the year 9,987 6,125Amount written back during the year (60,045) (7,992)

At end of year – 50,058

The profit equalisation reserve has been fully written back during the current financial year and the Directors have subsequently appropriated an amount of RM26,388,000 out of retained profits to a profitequalisation reserve in the Statement of Changes in Equity as disclosed in Note 28.

Profit equalisation reserve at the end of previous financial year which relates to the shareholder’s portion is RM5,513,000.

(b) The amount due to subsidiaries are unsecured, interest-free and have no fixed terms of repayment.

176



25. SUBORDINATED BONDSGroup

2010 2009RM’000 RM’000

At face value 600,000 600,000

The following are the salient features of the said bonds:

• Issue date : 26 May 2006

• Tenor of the facility/issue : 10-year from the Issue Date on a non-callable 5 year basis

• Anniversary date : 26 May

• Maturity date : 26 May 2016

• Interest coupon : 6.09% per annum, subject to revision of rate in year six

• Revision of interest : The bonds, unless redeemed at the end of five (5) years from the settlement date, shall bear interest of 7.59% per annum from the sixth year onwards until the final redemption

• Redemption option : The issuer may, at its option, redeem the subordinated bonds in part or in whole, at any anniversary date on or after five (5) years from the issue date

• Final redemption : At par on maturity date

26. LONG TERM BORROWINGSGroup/Company

2010 2009RM’000 RM’000

UnsecuredFixed rate term loan [Note (a)] 400,000 400,000Floating rate term loan [Note (b)] 200,000 200,000

600,000 600,000

Note:

(a) The term loan bears a fixed interest rate at 3.5% per annum repayable by way of a bullet payment at the end of the third year with extension option of one (1) year.

(b) The term loan bears interest at Cost of Fund plus 0.5% per annum repayable by way of a bullet payment at the end of the fourth year.




27. SHARE CAPITALGroup/Company

Number of Ordinary Shares of RM1 each Amount

2010 2009 2010 2009‘000 ‘000 RM’000 RM’000

AuthorisedAt beginning/end of year 2,000,000 2,000,000 2,000,000 2,000,000

Issued and fully paidAt beginning/end of year 1,548,106 1,548,106 1,548,106 1,548,106

28. RESERVESGroup Company

Note 2010 2009 2010 2009RM’000 RM’000 RM’000 RM’000

Non-distributable:Statutory reserve (a) 493,477 429,915 – –Capital reserve (b) 7,013 7,013 – –Revaluation reserve (c) 7,440 20,174 – –Employees’ share scheme reserve (d) 12,341 7,742 12,341 78Share premium 304,289 304,289 304,289 304,289Profit equalisation reserve (e) 26,388 – – –

850,948 769,133 316,630 304,367Distributable:Retained profits (f) 594,784 480,773 3,691 421

1,445,732 1,249,906 320,321 304,788

178



28. RESERVES (cont’d)Note:

(a) The statutory reserve is maintained by the Group, in compliance with Section 36 of the Banking and Financial Institutions Act, 1989 and Section 15 of the Islamic Banking Act, 1983 and is not distributableas dividends.

(b) The capital reserve is in respect of retained profit capitalised for a bonus issue by a subsidiary company.

(c) The revaluation reserve is in respect of unrealised fair value gains and losses on securities available-for-sale.

(d) The employees’ share scheme reserve relates to the equity-settled share options/grants to Directors and employees. This reserve is made up of the estimated fair value of the share options/share grantsbased on the cumulative services received from Directors and employees over the vesting period.

(e) At the end of the financial year, the Directors appropriated an amount of RM26,388,000 (2009: RM Nil) out of retained profits to a profit equalisation reserve which is derived in accordance with the “Frameworkof Rate of Return” (BNM/GP2-i). The profit equalisation reserve at the end of the financial year which relates to the depositors’ portion is RM10,656,000.

(f) Prior to 1 January 2008, Malaysian companies adopted the full imputation system. In accordance with the Finance Act, 2007 which was gazetted on 28 December 2007, companies shall not be entitled todeduct tax on dividend paid, credited or distributed to its shareholders, and such dividends will be exempted from tax in the hands of the shareholders ("single tier system"). However, there is a transitionalperiod of six years, expiring on 31 December 2013, to allow companies to pay franked dividends to their shareholders using their Section 108 balance under limited circumstances. Companies also have anirrevocable option to disregard their accumulated tax credit under Section 108 of the Income Tax Act, 1967 and opt to pay dividends under the single tier system. The change in the tax legislation also providesfor the Section 108 balance to be locked-in as at 31 December 2007 in accordance with Section 39 of the Finance Act, 2007.

The Company has elected to distribute dividends out of its entire retained earnings under the single tier tax system.

29. SHARES HELD FOR EMPLOYEES’ SHARE SCHEMEA trust has been established for the ESS and is administrated by an appointed trustee. The Trustee will be entitled from time to time to accept financial assistance from the Company upon such terms and conditionsas stipulated in the Trust Deed dated 3 December 2007 and the Trustee may purchase the Company’s shares from the open market for the purpose of the ESS. The Trustee shall refrain from exercising any votingrights attached to these shares. In accordance with FRS 132 Financial Statements - Presentation and Disclosure, the share purchased for the benefit of the ESS are recorded as “Share Held for ESS” in the equityon the balance sheet.

During the financial year, the Trustee of the ESS had purchased 5,581,700 ordinary shares of RM1.00 each fully paid in the Company from the open market at an average price of RM2.25 per share. The totalconsideration paid for the purchase including transaction costs was RM12,570,000. The shares purchased are being held in trust by the Trustee of the ESS in accordance with the Trust Deed dated 3 December 2007.

During the financial year ended 31 March 2010, 816,900 shares have been vested and transferred from the Trustee to the eligible employees of the Company and its subsidiaries in accordance with the termsunder the Share Grant Plan of the ESS. As at 31 March 2010, the Trustee of the ESS held 19,070,300 ordinary shares representing 1.23% of the issued and paid-up capital of the Company.




30. EMPLOYEES’ SHARE SCHEME ("ESS")The Alliance Financial Group Berhad Employees’ Share Scheme (“ESS”) is governed by the Bye-Laws approved by the shareholders at an Extraordinary General Meeting held on 28 August 2007. The ESS whichcomprises of the Share Option Plan, the Share Grant Plan and the Share Save Plan took effect on 3 December 2007 and is in force for a period of 10 years.

There were no share options offered under the Share Save Plan during the financial year.

The salient features of the ESS are as follows:

(i) The ESS is implemented and administered by the Employees’ Share Participating Scheme Committee (“ESPS Committee”) in accordance with the Bye-Laws.

(ii) The total number of shares which may be available under the ESS shall not exceed in aggregate 10% of the total issued and paid-up share capital of the Company at any one time during the existence ofthe ESS and out of which not more than 50% of the shares available under the ESS shall be allocated, in aggregate, to Directors and senior management. In addition, not more than 10% of the shares availableunder the ESS shall be allocated to any individual Director or employee who, either singly or collectively through his/her associates, holds 20% or more in the issued and paid-up capital of the Company.

(iii) The subscription price for each share under the Share Option Plan, Share Grant Plan and Share Save Plan may be at a discount (as determined by the ESPS Committee or such other pricing mechanism asmay from time to time be permitted by Bursa Malaysia Securities Berhad or such other relevant regulatory authorities), provided that the discount shall not be more than 10% from the 5-day weighted averagemarket price of the shares of the Company transacted on Bursa Malaysia Securities Berhad immediately preceding the date on which an offer is made or at par value of the shares, whichever is higher.

(iv) The ESPS Committee may at its discretion offer to any Director or employee of a corporation in the Group to participate in the ESS if the Director or employee:

(a) has attained the age of 18 years;

(b) in the case of a Director, is on the board of directors of a corporation in the Group;

(c) in the case of an employee, is employed by a corporation in the Group; and

(d) is not a participant of any other employee share option scheme implemented by any other corporation within the Group which is in force for the time being

provided that the non-executive directors of the Group who are not employed by a corporation in the Group shall not be eligible to participate in the Share Save Plan.

(v) Under the Share Option Plan and Share Grant Plan, the ESPS Committee may stipulate the performance targets, performance period, value and/or other conditions deemed appropriate.

(vi) Under the Share Save Plan, the ESPS Committee may at its discretion offer Share Save Option(s) to any employees of the Group to subscribe for the shares of the Company and the employee shall authorisedeductions to be made from his/her salary.

(vii) The Company may decide to satisfy the exercise of options/awards of shares under the ESS through the issue of new shares, transfer of existing shares or a combination of both new and existing shares ofthe Company.

(viii) The Company may appoint or authorise the trustee of the ESS to acquire the Company’s shares from the open market to give effect to the ESS.

180



30. EMPLOYEES’ SHARE SCHEME ("ESS") (cont’d)The following table illustrates the number and weighted average exercise prices ("WAEP") of, and movements in, share options/grants during the financial year:

Group Share Options Share Grants2010 Number of Share Options Number of Share Grants

At At At Atbeginning Offered/ end beginning Offered/ Vested/ end

of year awarded Lapsed of year of year awarded exercised Lapsed of year‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000

2008 Share Scheme 7,940 – (2,139) 5,801 1,791 – (817) (261) 7132009 Share Scheme 9,876 – (2,594) 7,282 2,325 – – (479) 1,8462010 Share Scheme – 10,190 (2,087) 8,103 – 2,621 – (343) 2,278

17,816 10,190 (6,820) 21,186 4,116 2,621 (817) (1,083) 4,837

WAEP 2.86 2.38 2.72 2.68

Share Options Share Grants2009 Number of Share Options Number of Share Grants



2008 Share Scheme 8,669 – (729) 7,940 1,985 – – (194) 1,7912009 Share Scheme – 10,328 (452) 9,876 – 2,452 – (127) 2,325

8,669 10,328 (1,181) 17,816 1,985 2,452 – (321) 4,116

WAEP 3.07 2.70 2.93 2.86




30. EMPLOYEES’ SHARE SCHEME ("ESS") (cont’d)The following table illustrates the number and weighted average exercise prices ("WAEP") of, and movements in, share options/grants during the financial year (cont’d):

Company Share Options Share Grants2010 Number of Share Options Number of Share Grants



2008 Share Scheme 94 – – 94 18 – (9) – 92009 Share Scheme 92 – – 92 19 – – – 192010 Share Scheme – 111 – 111 – 24 – – 24

186 111 – 297 37 24 (9) – 52

WAEP 2.89 2.38 – 2.70

Share Options Share Grants2009 Number of Share Options Number of Share Grants



2008 Share Scheme 94 – – 94 18 – – – 182009 Share Scheme – 92 – 92 – 19 – – 19

94 92 – 186 18 19 – – 37

WAEP 3.07 2.70 – 2.89

182



30. EMPLOYEES’ SHARE SCHEME ("ESS") (cont’d)(a) Details of share options/grants at the end of financial year:

WAEP Exercise PeriodRM

2008 Share Options 3.07 12.12.2010 – 11.12.20142009 Share Options 2.70 02.09.2011 – 01.09.20152010 Share Options 2.38 25.08.2012 – 24.08.2016

Vesting Dates

2008 Share Grants – First 50% of the share grants 12.12.2009– Second 50% of the share grants 12.12.2010



(b) Fair value of share options/share grants offered/awarded:

The fair value of share options/share grants under the Share Option Plan and the Share Grant Plan during the financial year was estimated by an external valuer using a binomial model, taking into accountthe terms and conditions upon which the share options/share grants were offered/awarded. The fair value of share options and share grants measured at offer/award date and the assumptions are as follows:

Share Options2008 2009 2010

Fair value of the shares as at grant date,– 12 December 2007 (RM) 0.8072 – –– 2 September 2008 (RM) – 0.7040 –– 25 August 2009 (RM) – – 0.7489

Weighted average share price (RM) 3.1000 2.6600 2.4000Weighted average exercise price (RM) 3.0696 2.6989 2.3784Expected volatility (%) 0.2617 0.2709 0.3403Expected life (years) 7 7 7Risk free rate (%) 3.57 to 4.57 3.79 to 5.22 2.04 to 4.61Expected dividend yield (%) 1.78 1.78 1.78




30. EMPLOYEES’ SHARE SCHEME ("ESS") (cont’d)(b) Fair value of share options/share grants offered/awarded (cont’d):

Share Grants2008 2009 2010

Fair value of the shares as at grant date,– 12 December 2007 (RM) 2.9639 – –– 2 September 2008 (RM) – 2.5432 –– 25 August 2009 (RM) – – 2.2941

Weighted average share price (RM) 3.1000 2.6600 2.4000Expected volatility (%) 0.2617 0.2709 0.3403Risk free rate (%) 3.57 to 4.57 3.79 to 5.22 2.04 to 4.61Expected dividend yield (%) 1.78 1.78 1.78

The expected life of the share options is based on the exercisable period of the share options and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumptionthat the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of the share options/share grants were incorporated into the measurementof fair value.

The risk-free rate is employed using a range of risk-free rates for Malaysian Government Securities ("MGS") tenure from 1-year to 20-year MGS.

31. INTEREST INCOMEGroup Company

2010 2009 2010 2009RM’000 RM’000 RM’000 RM’000

Loans, advances and financing– Interest other than recoveries from NPLs 777,276 850,339 – –– Recoveries from NPLs 51,796 67,548 – –Money at call and deposit placements with financial institutions 55,936 127,624 16,946 4,405Securities held-for-trading 684 134 – –Securities available-for-sale 177,797 111,492 695 –Securities held-to-maturity 17,251 13,085 – –Others 6,024 1,495 – –

1,086,764 1,171,717 17,641 4,405Accretion of discount less amortisation of premium 27,127 99,244 (215) –Net interest suspended (19,484) (20,362) – –

1,094,407 1,250,599 17,426 4,405

184



32. INTEREST EXPENSEGroup Company

2010 2009 2010 2009RM’000 RM’000 RM’000 RM’000

Deposits and placements of banks and other financial institutions 39,176 23,522 – –Deposits from customers 370,620 526,972 – –Loans sold to Cagamas 254 3,426 – –Subordinated bonds 36,540 36,540 – –Long term borrowings 20,017 2,460 20,017 2,460Others 10,932 3,055 – –

477,539 595,975 20,017 2,460

33. OTHER OPERATING INCOMEGroup Company

2010 2009 2010 2009RM’000 RM’000 RM’000 RM’000

(a) Fee income:

Commissions [Note (i)] 14,251 22,921 – –Service charges and fees 36,204 31,379 – –Portfolio management fees 6,290 6,044 – –Corporate advisory fees 1,130 3,638 – –Underwriting commissions – 81 – –Brokerage fees 26,613 13,842 – –Guarantee fees 7,256 8,674 – –Processing fees 6,000 11,015 – –Commitment fees 13,768 13,259 – –Other fee income 20,976 22,144 – –

132,488 132,997 – –




33. OTHER OPERATING INCOME (cont’d)Group Company

2010 2009 2010 2009RM’000 RM’000 RM’000 RM’000

(b) Investment income:

(Loss)/gain arising from sale/redemption of:– Securities held-for-trading (228) 420 – –– Securities available-for-sale 11,556 20,197 (388) –– Securities held-to-maturity – 16,841 – –Unrealised (loss)/gain from revaluation of:– Securities held-for-trading (5,152) (1,154) – –– Derivative instruments 3,266 (4,823) – –Realised gain on derivative instruments 35,533 64,022 – –Gross dividend income from:– Securities held-to-maturity 6,321 5,390 – –– Subsidiaries – – 136,321 122,601

51,296 100,893 135,933 122,601

(c) Other income/(expense):

Foreign exchange gain/(loss) 11,673 (10,740) – –Rental income 88 224 – –Gain on disposal of property, plant and equipment 1,011 203 – 11Loss on disposal of leasehold land (649) – – –Loss on liquidation of subsidiaries (50) – – –Gain on disposal of foreclosed properties 7,029 7,414 – –Return on capital from investment – 88 – 88Others (1,056) 3,959 885 965

18,046 1,148 885 1,064

Total other operating income 201,830 235,038 136,818 123,665

Note (i): The commission income is net-of an amount of RM15,867,000 (2009: RM11,573,000) being sales commission expense which was amortised over the expected life of loan products.

186



34. OTHER OPERATING EXPENSESGroup Company

2010 2009 2010 2009RM’000 RM’000 RM’000 RM’000

Personnel costs

– Salaries, allowances and bonuses 255,630 257,990 1,121 1,169– Contribution to EPF 40,246 42,877 247 245– Share options/grants under ESS 7,020 6,304 105 64– Others 28,936 31,176 123 162

331,832 338,347 1,596 1,640

Establishment costs

– Depreciation of property, plant and equipment 39,713 36,494 81 98– Amortisation of computer software 16,307 14,654 – –– Amortisation of leasehold land 138 139 – –– Rental of premises 30,402 27,641 179 242– Water and electricity 7,280 7,661 10 4– Repairs and maintenance 8,672 9,916 16 20– Information technology expenses 29,048 36,625 2 4– Others 24,888 11,161 – –

156,448 144,291 288 368

Marketing expenses

– Promotion and advertisement 9,420 6,081 – –– Branding and publicity 2,790 6,022 – –– Others 4,297 6,192 – –

16,507 18,295 – –

Administration and general expenses

– Communication expenses 11,849 14,531 11 8– Printing and stationery 4,493 6,127 13 7– Insurance 4,530 (2,250) 3 3– Professional fees 11,538 20,276 169 224– Others 17,434 19,789 1,366 1,435

49,844 58,473 1,562 1,677

Total other operating expenses 554,631 559,406 3,446 3,685




34. OTHER OPERATING EXPENSES (cont’d)Group Company

2010 2009 2010 2009RM’000 RM’000 RM’000 RM’000

Included in the other operating expenses are the following:

Auditors’ remuneration [Note (a)] 1,887 857 82 44Hire of equipment 3,865 1,710 10 10Property, plant and equipment written off 1,160 3,218 31 –Computer software written off 1,589 76 – –

(a) Auditors’ remuneration

Statutory audit fee 765 595 38 27Audit related services 483 197 26 17Tax compliance work 145 – 13 –Other services 494 65 5 –

Total 1,887 857 82 44

(b) Directors’ remuneration

Directors of the Company:

Non-Executive Directors– Allowances 812 702 292 325– Fees 1,356 1,227 480 432– Benefits-in-kind 62 62 38 38

2,230 1,991 810 795

Past Director– Allowances 146 – 22 –– Fees 111 – 20 –

257 – 42 –

188



34. OTHER OPERATING EXPENSES (cont’d)Group Company

2010 2009 2010 2009RM’000 RM’000 RM’000 RM’000

(b) Directors’ remuneration (cont’d)

CEOs and Directors of Subsidiaries:

Chief Executive Officers– Salaries and allowances 3,253 2,579 – –– Bonuses 158 2,963 – –– Contribution to EPF 413 722 – –– Share options/grants under ESS 536 877 – –– Benefits-in-kind 67 51 – –

4,427 7,192 – –

Non-Executive Directors– Allowances 337 352 – –– Fees 361 372 – –

698 724 – –

Past Directors– Salaries and allowances 1 51 – –– Fees 4 98 – –

5 149 – –

Total 7,617 10,056 852 795

Total Directors’ remuneration excluding benefits-in-kind 7,488 9,943 814 757




34. OTHER OPERATING EXPENSES (cont’d)(b) Directors’ remuneration (cont’d)

2010 2009Executive Non- Executive Non-Directors/ Executive Directors/ Executive

CEOs Directors CEOs Directors

Directors of the Company:

Below RM50,000 – 1 – –RM50,001 – RM100,000 – 2 – 5RM100,001 – RM150,000 – 4 – 2RM150,001 – RM200,000 – – – 1RM200,001 – RM250,000 – 1 – –RM250,001 – RM300,000 – – – –RM300,001 – RM350,000 – – – –RM350,001 – RM400,000 – – – –RM400,001 – RM450,000 – – – –Above RM450,000 – – – –

Directors of the Group:

Below RM50,000 – 2 – 2RM50,001 – RM100,000 – 1 – 3RM100,001 – RM150,000 – 3 – 3RM150,001 – RM200,000 – – – 3RM200,001 – RM250,000 – 2 – 1RM250,001 – RM300,000 – 1 – 2RM300,001 – RM350,000 – 2 – –RM350,001 – RM400,000 – 1 – –RM400,001 – RM450,000 – – – 2Above RM450,000 4 2 4 –

190



35. (WRITE-BACK OF)/ALLOWANCE FOR LOSSES ON LOANS, ADVANCES AND FINANCING AND OTHER LOSSESGroup

2010 2009RM’000 RM’000

(Write-back of)/allowance for bad and doubtful debts and financing:

(a) Specific allowance

– Made during the year 331,471 416,100– Written back during the year (292,765) (284,154)

(b) General allowance

– Made during the year 59,732 78,854– Written back during the year (77,041) (27,932)

(c) Bad debts on loans and financing– Recovered (59,246) (69,742)– Written off 435 1,872

(37,414) 114,998Allowance for commitments and contingencies 1,433 –Allowance for other assets 4,050 133

(31,931) 115,131

36 ALLOWANCE FOR IMPAIRMENTGroup Company

2010 2009 2010 2009RM’000 RM’000 RM’000 RM’000

Allowance for/(write-back of) impairment on securities:– Securities available-for-sale [Note(a)] 134,712 76,128 – –– Securities held-to-maturity (3,900) (42) – –Allowance for impairment on goodwill (Note 17) 2,084 – – –(Write-back of)/allowance for impairment on foreclosed properties (15) 815 – –(Write-back of)/allowance for impairment on debt due from subsidiaries – – (13,144) 651Impairment on other assets – 40 15,199 40

132,881 76,941 2,055 691

Note:

(a) During the financial year, the Group made impairment allowances of RM141,450,000 (2009: RM78,550,000) relating to a Collateralised Loan Obligations.




37. TAXATION AND ZAKATGroup Company

2010 2009 2010 2009RM’000 RM’000 RM’000 RM’000

Income tax:Provision for current year 91,204 101,300 28,717 25,900Over provision in prior years (5,868) (53,398) (696) (254)

Deferred tax (Note 18) 22,009 26,492 (28) (210)

Taxation 107,345 74,394 27,993 25,436Zakat 93 30 – –

107,438 74,424 27,993 25,436

Income tax is calculated at the Malaysian Statutory tax rate of 25% (2009: 25%) of the estimated assessable profit for the year.

A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company is as follows:

Group Company2010 2009 2010 2009

RM’000 RM’000 RM’000 RM’000

Profit before taxation 408,938 303,312 128,726 121,234

Taxation at Malaysian statutory tax rate of 25% (2009: 25%) 102,234 75,828 32,182 30,309Effect on deferred tax for reduction in income tax rate – (1) – –Effect of expenses not deductible for tax purposes 10,145 7,492 1,503 566Effect of income not subject to tax (2,001) (315) (5,000) (5,025)Reversal of deferred tax provided in prior years 6,387 44,788 4 (160)Over provision of tax expense in prior years (5,868) (53,398) (696) (254)Unabsorbed tax losses which deferred tax recognised during the year (3,552) – – –

Tax expense for the year 107,345 74,394 27,993 25,436

Tax savings during the year arising from:– utilisation of current year tax losses 85 804 – –– utilisation of tax losses brought forward from previous year 7,185 – – –

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38. EARNINGS PER SHARE(a) Basic

The calculation of the basic earnings per share is based on net profit attributable to equity holders of the Company for the financial year divided by the weighted average number of ordinary shares of RM1.00each in issue during the financial year excluding the weighted average shares held for ESS.

Group2010 2009

Net profit attributable to equity holders of the Company (RM’000) 301,424 229,121

Weighted average number of ordinary shares in issue (‘000) 1,548,106 1,548,106Effect of shares bought back for ESS (‘000) (17,424) (11,033)

1,530,682 1,537,073

Basic earnings per share (sen) 19.7 14.9

(b) Diluted

The calculation of the diluted earnings per share is based on the net profit attributable to equity holders of the Company for the financial year divided by the weighted average number of ordinary shares ofRM1.00 each in issue during the financial year, excluding the weighted average shares held for ESS and taken into account the assumed Share Grants to employees under ESS were vested to the employeesas at 31 March 2010.

Group2010 2009

Net profit attributable to equity holders of the Company (RM’000) 301,424 229,121

Weighted average number of ordinary shares in issue (‘000) 1,548,106 1,548,106Effect of shares bought back for ESS (‘000) (17,424) (11,033)Effect of Share Grants under ESS (‘000) 4,837 4,116

1,535,519 1,541,189

Diluted earnings per share (sen) 19.6 14.8




39. DIVIDENDSDividend Net Dividends

in respect of financial year per Ordinary Share2010 2009 2010 2009

RM’000 RM’000 Sen Sen

Recognised during the financial year:

First interim dividend

1.3 sen per share, tax exempt under the single tier tax system, on 1,548,105,929 ordinary shares of RM1.00 each,declared in the financial year ended 31 March 2010, paid on 26 August 2009 19,904 – 1.28 –

2.5 sen per share, tax exempt under the single tier tax system, on 1,548,105,929 ordinary shares of RM1.00 each,declared in the financial year ended 31 March 2009, paid on 27 August 2008 – 38,434 – 2.48

Second interim dividend

5.1 sen per share, tax exempt under the single tier tax system, on 1,548,105,929 ordinary shares of RM1.00 each,declared in the financial year ended 31 March 2010, paid on 26 March 2010 77,980 – 5.04 –

3.75 sen per share, tax exempt under the single tier tax system, on 1,548,105,929 ordinary shares of RM1.00 each,declared in the financial year ended 31 March 2009, paid on 3 March 2009 – 57,621 – 3.72

97,884 96,055 6.32 6.20

Dividends paid on the shares held in Trust pursuant to the Company’s ESS which are classified as shares held for ESS are not accounted for in the equity. An amount of RM1,195,000 (2009: RM702,000) beingdividends paid for those shares were added back to the appropriation of retained profits in respect of the dividends.

40. CAPITAL COMMITMENTSGroup

2010 2009RM’000 RM’000

Capital expenditure:Authorised and contracted for 22,942 37,474Authorised but not contracted for 21,376 4,242

44,318 41,716

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41. MATERIAL LITIGATIONS(a) Alliance Bank Malaysia Berhad’s ("ABMB") wholly-owned subsidiary, Alliance Investment Bank Berhad (“AIBB”) was served with a Writ of Summons and Statement of Claim dated 10 July 2008 (“the Suit”)

by Celcom (Malaysia) Berhad (“Celcom”).

The Suit was filed by one Mohd Shuaib Ishak as a derivative action on behalf of Celcom pursuant to Section 181A(1) of the Companies Act, 1965.

The Suit arises from the Amended and Restated Supplemental Agreement dated 4 April 2002 entered into between among others Celcom and DeTe Asia Holding GmbH (“DeTeAsia”), the acquisition of Celcomshares by Telekom Enterprise Sdn Bhd (“TESB”), the consequent Mandatory General Offer exercise implemented by Telekom Malaysia Berhad (“TM”) and the de-merger exercise of the mobile and fixed-linebusinesses of the TM Group.

AIBB has been named as one of the 21 defendants in the Suit for its role as advisor to Celcom. Celcom is claiming against the defendants jointly and/or severally for the sum of US$232,999,745.80 plusdamages and interest.

The Court of Appeal had on 27 March 2009 allowed the appeal brought by Celcom against the leave granted to Mohd Shuaib Ishak to commence the derivative action on behalf of Celcom. Mohd ShuaibIshak has since filed an application for leave to appeal to the Federal Court against the said decision and the same is fixed for hearing on 2 November 2009. Hearing adjourned to 19 January 2010. On 19January 2010, the leave application was adjourned to another date to be confirmed by the Federal Court.

Meanwhile, AIBB has filed an application to cease being a party to the proceedings on the ground that it has been improperly and unnecessarily been made a party to the proceedings on 16 July 2009. Theapplication is fixed for mention on 6 November 2009 pending the exchange of affidavits between the parties. Parties have completed exchanging/filing of all the affidavits. The Court has fixed the applicationfor hearing on 29 January 2010. The Court has adjourned the application for hearing on 23 March 2010. On 23 March 2010, the Court heard submissions from both parties and fixed 16 April 2010 to deliverdecision. On 16 April 2010, the Court had granted AIBB’s application to cease being a party to the proceedings. The Plaintiff had on 22 April 2010 filed on appeal against the decision and the matter has beenfixed for case management on 22 June 2010.

(b) A corporate borrower had issued a Writ of Summons in 2005 against an agent bank for a syndicate of lenders comprising three banks of which ABMB is one of them, claiming for general, special andexemplary damages alleging a breach of duty and contract.

The credit facilities consist of a bridging loan of RM58.5 million and a revolving credit facility of RM4.0 million which were granted by the syndicate lenders of which ABMB’s participation was RM18.5 million.In 2002, the credit facilities were restructured to a loan of RM30.0 million, of which ABMB’s participation was RM8.31 million, payable over seven years. The syndicated lenders had also filed a suit againstthe corporate borrower for the recovery of the above-mentioned loan.

The two suits were then consolidated and heard together. On 6 May 2009, judgment was delivered against the agent bank for special damages amounting to RM115.0 million together with interest at therate of 6% per annum from date of disbursement to date of realisation with general damages to be assessed by the Court.

The agent bank’s solicitors have since filed an appeal against the said decision. The Court had on 24 June 2009 granted a stay of execution of the judgment pending appeal to the Court of Appeal.

The corporate borrower has since filed an appeal to the Court of Appeal against the stay order granted by the High Court.

On 24 November 2009, the Court of Appeal dismissed the corporate borrower’s appeal against the order for stay of execution granted by the High Court in favour of the agent Bank with cost of RM20,000.

Next case management fixed for 29 July 2010 pending receipt of the Grounds of Judgment and Notes of Proceedings which are still not available for the agent bank to file the Record of Appeal.

The advice from the agent bank’s solicitors is that they have a better than even chance of succeeding in the said appeal.




41. MATERIAL LITIGATIONS (cont’d)(c) ABMB had in 1999 filed a suit against a corporate borrower, hereinafter referred to as the first defendant and the second defendant as guarantor (collectively called “Defendants”) for money outstanding due

to a default in banking facility amounting to RM2.36 million. The Defendants in turn counter-claimed against the Bank for special damages amounting to RM15.5 million and general damages to be assessedby the Court for negligence and/or wrongful termination of the banking facilities, statutory interest on judgment sum, costs and such other and/or further relief deemed fit by the Court.

On 4 May 2009, the High Court in Kota Kinabalu granted judgment in favour of the Defendants with damages to be assessed by the Deputy Registrar.

At a clarification hearing held on 25 May 2009, the Court clarified that ABMB’s liability to pay damages under the counter-claim is only in respect of general damages to be assessed by the Court and notspecial damages.

ABMB has since filed its appeal and application for stay of execution against the said judgment.

On 3 August 2009, the High Court dismissed ABMB’s application for stay of execution of the judgment granted in favour of the Defendants. ABMB has since filed an appeal to the Court of Appeal against thesaid decision.

On 16 November 2009, the Court of Appeal had dismissed the ABMB’s appeal for stay of execution with no order as to cost and directed that an early hearing date would be scheduled for the ABMB’s appeal proper.

In light of the above, the High Court has fixed the matter for mention on 12 January 2010 in order to fix a hearing date for assessment of damages (counter claim). The Court fixed hearing for assesment ofdamages fixed from 17 May 2010 to 19 May 2010. On 17 May 2010, the Court fixed the matter for continued hearing of the assessment of damages from 21 June 2010 to 22 June 2010.

Based on the advice from ABMB’s solicitors, ABMB has a fair chance of success in its appeal.

(d) (i) ABMB had commenced a civil suit against an individual borrower in March 2007 for recovery of an overdraft facility secured by shares from the individual borrower and shares from a third party. Theindividual borrower counter-claimed against ABMB for various declarations amongst others that ABMB had acted wrongfully or in bad faith in demanding repayment of the facility and that there wasin existence a collateral contract between the individual borrower, ABMB and the third party. In addition, the individual borrower is also claiming for general damages to be assessed by the courts.

ABMB filed its reply and defence to counter-claim on 7 July 2007. Case management has been fixed for 25 November 2009.

The matter has been fixed for further case management on 18 January 2010 for parties to comply with the directions given by the Court. The Court has further adjourned the matter to 25 February2010 for parties to comply with the directions given by the Court.

On 25 February 2010, the Court suggested parties consider mediation as an alternative to the ordinary dispute resolution trial process and fixed the matter for continued case management on 24 March 2010.The matter has been fixed for further case management on 23 June 2010.

ABMB’s solicitors are of the firm view that ABMB has good defence to the counter-claim.

(ii) Arising from the above-mentioned suit (Note 41 d(i)), the third party in September 2008 filed a separate suit against ABMB for force selling the shares pledged by the third party. The third party allegesamongst others that ABMB sold the pledged shares off-market without notice to them in breach of the collateral contract between the third party and ABMB. The third party is claiming for damagesfor loss of the benefit of the shares pledged to ABMB, damages for conversion, damages for misrepresentation and for breach of contract.

ABMB had filed its defence to the suit on 13 November 2008. Pending setting down of the matter for trial by the Plaintiff.

ABMB’s solicitors are of the firm view that there is no such collateral contract and that ABMB has good defence to the claim brought by the third party.

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42. FINANCIAL RISK MANAGEMENT POLICIESThe Group manages risk within clearly defined guidelines that are approved by the Directors. In addition, the Board of Directors of the Group provides independent oversight to ensure that risk management policiesare complied with, through a framework of established controls and reporting process.

The guidelines and policies adopted by the Group to manage the main risks that arise in the conduct of its business activities are as follows:

(a) Credit Risk

Credit risk is the potential loss of revenue and/or principal arising from defaults by borrowers or counterparties through business activities in lending, trading, investing and hedging. Exposure to credit riskmay be categorised as primary or secondary.

Primary exposure to credit risk arises from loans, advances and financing. The amount of credit exposure is represented by the carrying amount of loans, advances and financing in the balance sheet. Thelending activities in the Group are guided by the Group’s Credit Policies and Guidelines, in line with Best Practices in the Management of Credit Risk, issued by Bank Negara Malaysia. These credit policiesand guidelines also include an Internal Grading model adopted by the Group to grade its loan and financing accounts according to their respective risk profiles.

On the other hand, secondary credit exposure arise from financial transactions with counterparties (including interbank market activities, derivative instruments used for hedging and debt instruments), ofwhich the amount of credit exposure in respect of these instruments is equal to the carrying amount of these assets in the balance sheet. This exposure is monitored on an on-going basis againstpredetermined counterparty limits.

The credit exposure arising from off-balance sheet activities, i.e. commitments and contingencies is set out in Note 44(c) to the financial statements.

Credit risk arising from Treasury activities are managed by appropriate policies, counterparty limits and supported by the Group’s Risk Management Framework.

(b) Market Risk

Market risk refers to the potential loss arising from the movement in the market rates or prices; the main components being interest rate risk and foreign exchange risk.

The Group has developed an internal Risk Management Frameworks, which includes policies and guidelines to manage market risk in general. Market risk arising from the trading activities is controlled viaposition limits, sensitivity limits and regular revaluation of positions versus current market quotations.

The Group is also susceptible to exposure to market risk arising from changes in prices of the shares quoted on Bursa Malaysia, which will impacts on the Group’s balances due from clients and brokers.The risk is controlled by application of credit approvals, limits and monitoring procedures.

(i) Interest Rate Risk

As a subset of market risk, interest rate risk refers to the volatility in net interest income as a result of changes in interest rate levels and shifts in the composition of the assets and liabilities. Interestrate risk is managed through interest rate sensitivity analysis. The potential reduction in net interest income from an unfavourable interest rate movement is monitored and reported to Management.In addition to pre-scheduled meetings, Group Assets and Liabilities Committee ("ALCO") members will also deliberate on revising the Bank’s lending and deposit rates in response to changes in thebenchmark rates set by the central bank.

The effects of changes in the levels of interest rates on the market value of securities are monitored closely and mark-to-market valuations are regularly reported to Management.

(ii) Foreign Currency Exchange Risk

Foreign exchange risk refers to the potentially adverse movements in the exchange rates for foreign exchange positions taken by the Group from time to time. Foreign exchange risk is managed viaapproved risk limits and open positions are regularly revalued against current exchange rates and reported to Management.




42. FINANCIAL RISK MANAGEMENT POLICIES (cont’d)(c) Liquidity Risk

Liquidity risk relates to the Group’s ability to maintain adequate liquid assets so as to punctually meet its financial obligations and commitments when due. Market liquidity risk refers to the potential riskthat the Group is unable to liquidate its assets/securities at or near the previous market price due to inadequate market depth or disruptions to the marketplace.

The Group’s liquidity risk profile is managed using Bank Negara Malaysia’s New Liquidity Framework, other internal policies and ALCO benchmarks. A contingency funding plan is also established by theGroup as a forward-looking measure to ensure that liquidity risk can be addressed according to the degrees of key risk indicators, and which incorporates alternative funding strategies which are ready tobe implemented on a timely basis to mitigate the impact of unforseen adverse changes in liquidity in the marketplace.

(d) Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.

Operational risk management identifies the inherent and residual risks in the Group’s processes and activities, monitors and controls risk impacts. It analyses the risk profile of the Group, determines anycauses of failure, assesses potential loss and enhances controls to reduce/avoid risks.

Individual business and support departments are responsible for the management of their day-to-day operational risks while support, monitoring and reporting is provided by the Operational Risk ManagementDepartment. Group Internal Audit plays the role of providing independent compliance assurance to senior management and the Board.

The main activities undertaken by the Group in managing operational risks includes the pre-identification of risks control and self assessments; key risk indicators, reviews of documentation of the Group’sprocesses and procedures; conducting operational risk awareness internal training and managing potential crisis events via the mitigation resource of business continuity management.

The Group has implemented regulatory and Basel II requirements for capital charge for operational risk under the Basic Indicator Approach. Ongoing monitoring and periodic policy/process changes arecarried out to reduce the Group’s exposure to unexpected losses, improve control and management of operational risk, to cultivate an organizational culture that places a high priority on effective operationalrisk management and adherence to sound operating controls and best practices.

43. INTEREST RATE RISKIn macro terms, interest rate risk refers to the overall sensitivity of the Group’s earnings and/or economic values of the Group’s portfolio to changes in interest rates. Interest rate risk is managed through variousrisk management techniques including re-pricing gap, net interest income simulation and stress testing.

The Group is exposed to various risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. The effect of changes in the levels of interestrates on the market value of securities are monitored regularly and the outcome of mark-to-market valuations are escalated to Management regularly. The table below summarises the effective interest rates atthe balance sheet date and the periods in which the financial instruments will re-price or mature, whichever is the earlier.

198





43. INTEREST RATE RISK (cont’d)Non-trading book

Non-interest/ EffectiveUp to >1-3 >3-6 >6-12 >1-5 Over 5 profit Trading interest/profit

Group 1 month months months months years years sensitive book Total rate2010 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

AssetsCash and short-term funds 3,006,169 – – – – – 558,376 – 3,564,545 2.21Deposits and placements with banks and other financial institutions – 150,000 156 – – – – – 150,156 2.38Securities available-for-sale 96,539 1,303,340 230,086 176,628 3,292,957 39,982 15,296 – 5,154,828 3.22Securities held-to-maturity – 2,700 – 57,319 847,349 5,199 18,853 – 931,420 2.81Loans, advances and financing 15,475,122 1,264,499 551,325 358,905 1,601,953 1,351,853 44,788* – 20,648,445 5.40Balances due from clients and brokers 441 – – – – – 72,127 – 72,568 12.00Other non-interest/profit sensitive balances – – – – – – 1,096,955 44,698 1,141,653 –

Total assets 18,578,271 2,720,539 781,567 592,852 5,742,259 1,397,034 1,806,395 44,698 31,663,615

LiabilitiesDeposits from customers 11,636,012 1,768,370 1,889,989 3,680,162 135,986 – 4,517,812 – 23,628,331 1.53Deposits and placements of banks and other financial institutions 875,212 531,017 135,775 1,700 743,460 – 2,502 – 2,289,666 1.96Amount due to Cagamas Berhad – – – – 28,077 – – – 28,077 4.54Bills and acceptances payable 241,035 285,476 11,839 – – – – – 538,350 2.45Balances due to clients and brokers 36,489 – – – – – 43,760 – 80,249 1.50Subordinated bonds – – – – 600,000 – – – 600,000 6.09Long term borrowings – – – – 600,000 – – – 600,000 3.33Other non-interest/profit sensitive balances – – – – – – 897,086 50,175 947,261 –

Total liabilities 12,788,748 2,584,863 2,037,603 3,681,862 2,107,523 – 5,461,160 50,175 28,711,934Equity – – – – – – 2,947,141 – 2,947,141 –Minority interests – – – – – – 4,540 – 4,540 –

Total liabilities and equity 12,788,748 2,584,863 2,037,603 3,681,862 2,107,523 – 8,412,841 50,175 31,663,615

On-balance sheet interest/profit sensitivity gap 5,789,523 135,676 (1,256,036) (3,089,010) 3,634,736 1,397,034 (6,606,446) (5,477) –Off-balance sheet interest/profit sensitivity gap – – – – – – – – –

Total interest/profit sensitivity gap 5,789,523 135,676 (1,256,036) (3,089,010) 3,634,736 1,397,034 (6,606,446) (5,477) –

* Non-performing loans, specific allowance and general allowance of the Group are classified as non-interest/profit sensitive.


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Non- EffectiveUp to >1-3 >3-6 >6-12 >1-5 Over 5 interest interest

Company 1 month months months months years years sensitive Total rate2010 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

AssetsCash and short-term funds 29,820 – – – – – 1,027 30,847 2.03Deposits and placements with banks

and other financial institutions – 10,800 – – 600,000 – – 610,800 2.75Other non-interest sensitive balances – – – – – – 1,784,736 1,784,736 –

Total assets 29,820 10,800 – – 600,000 – 1,785,763 2,426,383

LiabilitiesLong term borrowings – – – – 600,000 – – 600,000 3.33Other non-interest sensitive balances – – – – – – 4,653 4,653 –

Total liabilities – – – – 600,000 – 4,653 604,653Equity – – – – – – 1,821,730 1,821,730 –

Total liabilities and equity – – – – 600,000 – 1,826,383 2,426,383

On-balance sheet interest sensitivity gap 29,820 10,800 – – – – (40,620) –Off-balance sheet interest sensitivity gap – – – – – – – –

Total interest sensitivity gap 29,820 10,800 – – – – (40,620) –





Non-interest/ EffectiveUp to >1-3 >3-6 >6-12 >1-5 Over 5 profit Trading interest/profit

Group 1 month months months months years years sensitive book Total rate2009 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

AssetsCash and short-term funds 4,533,432 – – – – – 457,254 – 4,990,686 2.00Deposits and placements with banks and other financial institutions – 195,860 2,663 – – – – – 198,523 1.57Securities held-for-trading – – – – – – – 46,055 46,055 3.30Securities available-for-sale 682,878 1,915,832 951,476 233,214 2,306,065 220,770 9,887 – 6,320,122 3.11Securities held-to-maturity 15,000 116,000 40,130 26,366 93,044 5,227 18,853 – 314,620 4.79Loans, advances and financing 13,724,402 929,957 512,891 618,787 2,131,856 797,176 3,028* – 18,718,097 5.45Balances due from clients and brokers 880 – – – – – 43,800 – 44,680 12.00Other non-interest/profit sensitive balances – – – – – – 1,172,527 40,858 1,213,385 –

Total assets 18,956,592 3,157,649 1,507,160 878,367 4,530,965 1,023,173 1,705,349 86,913 31,846,168

LiabilitiesDeposits from customers 12,796,023 2,115,330 2,295,656 4,212,964 237,102 – 3,918,366 – 25,575,441 2.22Deposits and placements of banks and other financial institutions 443,236 127,973 5,367 4,883 594,781 – 7,147 – 1,183,387 1.43Amount due to Cagamas Berhad – 12,051 15,914 30,426 – – – – 58,391 3.66Bills and acceptances payable 2,097 45 73 – – – – – 2,215 2.91Balances due to clients and brokers 30,680 – – – – – 21,176 – 51,856 2.50Subordinated bonds – – – – 600,000 – – – 600,000 6.09Long term borrowings – – – – 600,000 – – – 600,000 3.33Other non-interest/profit sensitive balances – – – – – – 958,776 49,564 1,008,340 –

Total liabilities 13,272,036 2,255,399 2,317,010 4,248,273 2,031,883 – 4,905,465 49,564 29,079,630Equity – – – – – – 2,761,885 – 2,761,885 –Minority interests – – – – – – 4,653 – 4,653 –

Total liabilities and equity 13,272,036 2,255,399 2,317,010 4,248,273 2,031,883 – 7,672,003 49,564 31,846,168

On-balance sheet interest/profit sensitivity gap 5,684,556 902,250 (809,850) (3,369,906) 2,499,082 1,023,173 (5,966,654) 37,349 –On-balance sheet interest/profit sensitivity gap – – – – – – – – –

Total interest/profit sensitivity gap 5,684,556 902,250 (809,850) (3,369,906) 2,499,082 1,023,173 (5,966,654) 37,349 –

* Non-performing loans, specific allowance and general allowance of the Group are classified as non-interest/profit sensitive.


202



Non- EffectiveUp to >1-3 >3-6 >6-12 >1-5 Over 5 interest interest

Group 1 month months months months years years sensitive Total rate2009 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

AssetsCash and short-term funds 453,580 – – – – – 298 453,878 2.22Deposits and placements with banks and

other financial institutions – 200,000 – – – – – 200,000 2.63Other non-interest sensitive balances – – – – – – 1,769,019 1,769,019 –

Total assets 453,580 200,000 – – – – 1,769,317 2,422,897

LiabilitiesLong term borrowings – – – – 600,000 – – 600,000 3.33Other non-interest sensitive balances – – – – – – 6,130 6,130 –

Total liabilities – – – – 600,000 – 6,130 606,130Equity – – – – – – 1,816,767 1,816,767 –

Total liabilities and equity – – – – 600,000 – 1,822,897 2,422,897

On-balance sheet interest sensitivity gap 453,580 200,000 – – (600,000) – (53,580) –Off-balance sheet interest sensitivity gap – – – – – – – –

Total interest sensitivity gap 453,580 200,000 – – (600,000) – (53,580) –

44. CAPITAL ADEQUACYThe capital adequacy ratios of the ABMB group are computed in accordance with Bank Negara Malaysia’s revised Risk-Weighted Capital Adequacy Framework (RWCAF-Basel II). The ABMB group has adopted theStandardised Approach for credit risk and market risk, and the Basic Indicator Approach for operational risk.

The detailed disclosure on the risk-weighted assets, as set out in Note 44(a), (b), (c) and (d) are presented in accordance with paragraph 4.3 of Bank Negara Malaysia’s Concept Paper, Risk-Weighted Capital AdequacyFramework (Basel II) and Capital Adequacy Framework of Islamic Bank (CAFIB) – Disclosure requirements (Pillar 3).


44. CAPITAL ADEQUACY (cont’d)The capital adequacy ratios of the ABMB group are as follows:

2010 2009

Before deducting proposed dividendsCore capital ratio 11.39% 10.41%Risk-weighted capital ratio 15.65% 14.76%

After deducting proposed dividendsCore capital ratio 11.13% 10.30%Risk-weighted capital ratio 15.40% 14.65%

Components of Tier-I and Tier-II capital are as follows:

2010 2009RM’000 RM’000

Tier-I capital (Core Capital)Paid-up share capital 596,517 596,517Irredeemable convertible preference shares 4,000 4,000Share premium 597,517 597,517Retained profits 882,471 772,867Statutory reserves 735,515 671,953Other reserves 10,018 10,035Minority interests 4,539 4,652

2,830,577 2,657,541Less: Purchased goodwill/goodwill on consolidation (302,065) (304,149)

Deferred tax assets (99,347) (119,305)

Total Tier-I capital 2,429,165 2,234,087

Tier-II capitalSubordinated bonds 600,000 600,000General allowance for losses on loans, advances and financing 322,933 340,246

Total Tier-II capital 922,933 940,246

Total Capital 3,352,098 3,174,333Less: Investment in subsidiaries (12,760) (7,066)

Total Capital Base 3,339,338 3,167,267




44. CAPITAL ADEQUACY (cont’d)(a) The breakdown of RWA by exposures in each major risk category are as follows:

Risk-Group Gross Net Weighted Capital2010 Exposures Exposures Assets RequirementsExposure Class RM’000 RM’000 RM’000 RM’000

(i) Credit Risk

On-balance sheet exposures:Sovereigns/Central banks 5,182,234 5,182,234 – –Public sector entities 50,809 50,809 10,162 813Banks, Development Financial Institutions ("DFIs") and Multilateral Development Banks ("MDBs") 2,821,041 2,821,042 582,524 46,602Insurance companies, Securities Firms and Fund Managers 20,204 20,204 20,204 1,616Corporates 7,432,449 7,149,098 6,197,422 495,794Regulatory retail 7,946,216 7,446,260 5,580,751 446,460Residential mortgages 6,669,658 6,657,174 2,949,854 235,988Higher risk assets 7,522 7,530 11,296 904Other assets 747,641 747,640 548,695 43,895Equity exposures 34,317 34,317 46,761 3,741Defaulted exposures 359,469 357,170 441,834 35,347

Total on-balance sheet exposures 31,271,560 30,473,478 16,389,503 1,311,160

Off-balance sheet exposures:Credit-related off-balance sheet exposures 3,154,545 3,147,948 2,766,939 221,355Derivative financial instruments 86,119 86,119 33,275 2,662

Total off-balance sheet exposures 3,240,664 3,234,067 2,800,214 224,017

Total on and off-balance sheet exposures 34,512,224 33,707,545 19,189,717 1,535,177

(ii) Market Risk [Note 44(d)]

Foreign Currency Risk 19,663 1,573

(iii) Operational Risk – – 2,126,663 170,133

Total RWA and capital requirements 34,512,224 33,707,545 21,336,043 1,706,883

204


LongPosition

9,074

ShortPosition(19,663)


44. CAPITAL ADEQUACY (cont’d)(a) The breakdown of RWA by exposures in each major risk category are as follows (cont’d):

Risk-Group Gross Net Weighted Capital2009 Exposures Exposures Assets RequirementsExposure Class RM’000 RM’000 RM’000 RM’000

(i) Credit Risk

On-balance sheet exposures:Sovereigns/Central banks 4,337,191 4,337,191 – –Banks, DFIs and MDBs 6,093,539 6,093,539 1,310,282 104,823Insurance companies, Securities Firms and Fund Managers 261 261 261 21Corporates 6,781,201 6,582,929 6,052,013 484,161Regulatory retail 7,164,206 6,800,280 5,096,510 407,721Residential mortgages 5,806,677 5,795,702 2,692,680 215,414Higher risk assets 7,306 7,307 10,958 877Other assets 774,965 774,965 554,030 44,322Equity exposures 31,782 31,782 47,673 3,814Defaulted exposures 445,132 466,391 567,277 45,382

Total on-balance sheet exposures 31,442,260 30,890,347 16,331,684 1,306,535

Off-balance sheet exposures:Credit-related off-balance sheet exposures 3,437,216 3,407,295 2,986,797 238,944Derivative financial instruments 95,147 95,147 35,124 2,810

Total off-balance sheet exposures 3,532,363 3,502,442 3,021,921 241,754

Total on and off-balance sheet exposures 34,974,623 34,392,789 19,353,605 1,548,289

(ii) Market Risk

Interest Rate Risk 8,896 712Equity Risk 31,386 2,511Foreign Exchange Risk 19,620 1,569

Total [Note 44(d)] 59,902 4,792

(iii) Operational Risk – – 2,041,388 163,311

Total RWA and capital requirements 34,974,623 34,392,789 21,454,895 1,716,392



LongPosition34,65111,4134,240

50,304

ShortPosition

––

(19,620)(19,620)


206


44. CAPITAL ADEQUACY (cont’d)(b) The breakdown of credit risk exposures by risk-weights are as follows:

Disclosures by risk-weights

Exposures after netting and Credit risk mitigationInsurance Total

companies, exposuresGroup Securities after Total2010 Sovereigns/ Public Banks, Firms and Higher netting and Risk-Risk-Weights Central Sector DFIs and Fund Regulatory Residential risk Other Equity Credit risk Weighted

banks entities MDBs Managers Corporates retail mortgages assets assets Exposures mitigation AssetsRM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

0% 5,192,234 – – – – – – – 198,945 – 5,391,179 –20% – 50,809 2,811,286 – 1,182,762 – – – – – 4,044,857 808,97235% – – – – – – 3,505,236 – – – 3,505,236 1,226,83350% – – 93,545 – 6,618 15,326 2,571,166 – – – 2,686,655 1,343,32775% – – – – – 8,964,756 586,082 – – – 9,550,838 7,163,128100% – – – 20,468 7,585,506 44,448 82,879 – 548,695 9,429 8,291,425 8,291,425150% – – – – 103,685 93,973 – 14,809 – 24,888 237,355 356,032

Total exposures 5,192,234 50,809 2,904,831 20,468 8,878,571 9,118,503 6,745,363 14,809 747,640 34,317 33,707,545 19,189,717

Risk-weighted assets by exposures – 10,162 609,030 20,468 7,980,895 6,916,637 3,034,856 22,213 548,695 46,761 19,189,717Average risk-weight – 20% 21% 100% 90% 76% 45% 150% 73% 136% 57%Deduction from Capital base – – – – – – – – – – –

2009

0% 4,347,191 – – – – – – – 220,935 – 4,568,126 –20% – – 5,842,950 – 643,684 – – – – – 6,486,634 1,297,32735% – – – – – – 2,795,907 – – – 2,795,907 978,56750% – – 343,282 – 44,459 21,288 2,158,656 – – – 2,567,685 1,283,84375% – – – – – 8,469,612 852,225 – – – 9,321,837 6,991,378100% – – – 336 7,649,228 51,332 97,893 – 554,030 – 8,352,819 8,352,819150% – – – 27 133,697 121,445 – 12,830 – 31,782 299,781 449,671

Total exposures 4,347,191 – 6,186,232 363 8,471,068 8,663,677 5,904,681 12,830 774,965 31,782 34,392,789 19,353,605

Risk-weighted assets by exposures – – 1,340,231 377 8,000,740 6,596,352 2,794,957 19,245 554,030 47,673 19,353,605Average risk-weight – – 22% 104% 94% 76% 47% 150% 71% 150% 56%Deduction from Capital base – – – – – – – – – – –


44. CAPITAL ADEQUACY (cont’d)(c) The off-balance sheet exposures and their related counterparty credit risk of the Group are as follows:

PositiveFair Value Credit Risk-

Principal of Derivative Equivalent WeightedAmount Contracts Amount AssetsRM’000 RM’000 RM’000 RM’000

Group2010Credit-related exposures

Direct credit substitutes 501,940 501,940 501,940Transaction-related contingent items 456,421 228,211 228,211Short-term self-liquidating trade-related contingencies 167,968 33,594 33,594Irrevocable commitments to extent credit:– maturity exceeding one year 1,526,427 763,214 626,319– maturity not exceeding one year 8,137,938 1,627,586 1,376,875

10,790,694 3,154,545 2,766,939

Derivative financial instruments

Foreign exchange related contracts:– less than one year 2,452,403 38,588 64,501 28,951Interest rate related contracts:– one year or less 560,000 491 2,745 549– over one year to five years 430,000 4,864 13,030 2,606– over five years 60,000 755 5,843 1,169

3,502,403 44,698 86,119 33,275

14,293,097 44,698 3,240,664 2,800,214




44. CAPITAL ADEQUACY (cont’d)(c) The off-balance sheet exposures and their related counterparty credit risk of the Group are as follows (cont’d):

PositiveFair Value Credit Risk-

Principal of Derivative Equivalent WeightedAmount Contracts Amount AssetsRM’000 RM’000 RM’000 RM’000

2009Credit-related exposures

Direct credit substitutes 448,370 448,370 448,370Transaction-related contingent items 505,920 252,960 252,960Short-term self-liquidating trade-related contingencies 112,406 22,481 22,481Irrevocable commitments to extent credit:– maturity exceeding one year 2,051,099 1,025,549 825,344– maturity not exceeding one year 8,439,276 1,687,856 1,437,642

11,557,071 3,437,216 2,986,797


Foreign exchange related contracts:– less than one year 2,474,223 27,115 58,004 27,695Interest rate related contracts:– over one year to five years 990,000 2,123 30,124 6,025– over five years 60,000 11,620 7,019 1,404

3,524,223 40,858 95,147 35,124

15,081,294 40,858 3,532,363 3,021,921

208



44. CAPITAL ADEQUACY (cont’d)(d) The RWA and capital requirements for the various categories of risk under market risk are as follows:

Group

Risk-Weighted CapitalAssets Requirements

2010 RM’000 RM’000

Interest rate risk– General interest rate risk – –– Specific interest rate risk – –

– –

Equity risk– General interest rate risk – –– Specific interest rate risk – –

– –

Foreign exchange risk 19,663 1,573

19,663 1,573

2009

Interest rate risk– General interest rate risk 8,586 687– Specific interest rate risk 310 25

8,896 712

Equity risk– General interest rate risk 11,412 913– Specific interest rate risk 19,974 1,598

31,386 2,511

Foreign exchange risk 19,620 1,569

59,902 4,792




45. LEASE COMMITMENTSThe Group and the Company have lease commitments in respect of equipment on hire and premises, all of which are classified as operating leases. A summary of the non-cancellable long term commitments is asfollows:

Group Company2010 2009 2010 2009

RM’000 RM’000 RM’000 RM’000

Within one year 30,077 34,710 297 410Between one and five years 21,194 50,289 159 626

51,271 84,999 456 1,036

The operating leases for the Group and the Company's other premises typically cover for an initial period of three years with options for renewal. These leases are cancellable but are usually renewed upon expiryor replaced by leases on other properties. Future minimum lease commitments are anticipated to be not less than the rental expense for 2010.

46. SIGNIFICANT RELATED PARTY TRANSACTIONSIn addition to related party disclosures mentioned elsewhere in the financial statements, set out below are the Group’s and the Company’s other significant related party transactions and balances:

Group Company2010 2009 2010 2009

RM’000 RM’000 RM’000 RM’000

(a) TransactionsInterest income

– subsidiaries – – (16,946) (4,399)– key management personnel (42) (26) – –

Dividend income– subsidiary – – (136,321) (122,601)

Overhead expenses recharged– subsidiaries – – (1,341) (1,372)

Interest expenses– key management personnel 1,875 1,973 – –

Management fees paid– related companies 173 129 – –

210



46. SIGNIFICANT RELATED PARTY TRANSACTIONS (cont’d)Group Company

2010 2009 2010 2009RM’000 RM’000 RM’000 RM’000

(b) BalancesAmount due to deposits from customers

– key management personnel (66,111) (63,779) – –Money at call and deposit placements with financial institutions

– subsidiaries – – 640,650 653,690Loans, advances and financing

– key management personnel 1,468 1,950 – –Other assets

– subsidiaries – – 5,824 38,510Other liabilities

– subsidiaries – – (1,452) (1,646)

(i) The above transactions have been entered into the normal course of business based on negotiated and mutually agreed terms, and have been established on terms and conditions that are not materiallydifferent from those obtainable in transactions with unrelated parties.

(ii) Related companies refer to member companies of Alliance Financial Group Berhad.

(iii) Key management personnel refer to those persons having authority and responsibility for planning, directing and controlling the activities of the Group and the Company, directly or indirectly, includingExecutive Directors and Non-Executive Directors of the Group and the Company (including close members of their families). Other members of key management personnel of the Group are the GroupChief Executive Officer, Group Chief Operating Officer, Group Chief Financial Officer, Group Chief Risk Officer, Group Chief Credit Officer and Group Company Secretary.




212

46. SIGNIFICANT RELATED PARTY TRANSACTIONS (cont’d)(c) Compensation of key management personnel

Remuneration of Directors and other members of key management for the year is as follows:

Group Company2010 2009 2010 2009

RM’000 RM’000 RM’000 RM’000

Short-term employee benefitsFees 1,717 1,599 480 432Salary and other remuneration, including meeting allowances 6,709 10,162 577 678Contribution to EPF 702 1,213 42 50Share options/grants under ESS 779 1,346 68 40

Benefits-in-kind 131 124 38 38

10,038 14,444 1,205 1,238

Included in the total key management personnel are:Directors’ remuneration (Note 34) 7,355 9,907 810 795

Executive Directors of the Group and other members of key management have been offered/awarded the following number of share options/share grants under the ESS:

Share Options Share Grants2010 2009 2010 2009‘000 ‘000 ‘000 ‘000

GroupAt beginning of year 4,693 1,556 683 219Directors/Key management personnel appointed during the year – 621 – 87Offered/awarded 2,609 2,516 363 377Vested – – (132) –Lapsed (5,013) – (605) –

At end of year 2,289 4,693 309 683

CompanyAt beginning of year 134 68 19 9Offered/awarded 87 66 15 10Vested – – (5) –

At end of year 221 134 29 19

The above share options/share grants were offered/awarded on the same terms and conditions as those offered to other employees of the Group (Note 30).



47. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIESThe carrying amounts and the fair value of the financial assets and liabilities of the Group and of the Company are as follows:

2010 2009Carrying Fair Carrying Fairamount value amount valueRM’000 RM’000 RM’000 RM’000

Group

Financial assetsCash and short-term funds 3,564,545 3,564,545 4,990,686 4,990,686Deposits and placements with banks and other financial institutions 150,156 150,156 198,523 198,523Securities held-for-trading – – 46,055 46,055Securities available-for-sale 5,154,828 5,154,828 6,320,122 6,320,122Securities held-to-maturity 931,420 961,176 314,620 373,207Derivative financial assets 44,698 44,698 40,858 40,858Loans, advances and financing 20,648,445 20,993,406 18,718,097 19,058,314Balances due from clients and brokers 72,568 72,568 44,680 44,680

Financial liabilitiesDeposits from customers 23,628,331 23,627,035 25,575,441 25,498,242Deposits and placements of banks and other financial institutions 2,289,666 2,257,623 1,183,387 1,155,980Derivative financial liabilities 50,175 50,175 49,564 49,564Amount due to Cagamas Berhad 28,077 24,478 58,391 56,985Bills and acceptances payable 538,350 538,350 2,215 2,215Balances due to clients and brokers 80,249 80,249 51,856 51,856Subordinated bonds 600,000 611,400 600,000 612,420Long term borrowings 600,000 602,000 600,000 600,000

Company

Financial assetsCash and short-term funds 30,847 30,847 453,878 453,878Deposits and placements with banks and other financial institutions 610,800 610,800 200,000 200,000

Financial liabilityLong term borrowings 600,000 602,000 600,000 600,000

Note: The fair value of the other assets and other liabilities, which are considered short-term in nature, are estimated to be approximately their carrying values.




214

47. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (cont’d)The methods and assumptions used in estimating the fair values of financial instruments are as follows:

(i) Cash and short-term funds

The carrying amounts approximate fair values due to the relatively short maturity of the financial instruments.

(ii) Deposits and placements with banks and other financial institutions

The fair values of these financial instruments with remaining maturity of less than one year approximate their carrying amounts due to the relatively short maturity of the financial instruments. For thosefinancial instruments with maturity of more than one year, the fair values are estimated based on discounted cash flows using applicable prevailing market rates for placements of similar credit risk andsimilar remaining maturity as at the balance sheet date.

(iii) Securities held-for-trading, Securities available-for-sale and Securities held-to-maturity

The fair values are estimated based on quoted or observable market prices at the balance sheet date. Where such quoted or observable market prices are not available, the fair values are estimated usingpricing models or discounted cash flow techniques. Where discounted cash flow technique is used, the expected future cash flows are discounted using prevailing market rates for a similar instrument atthe balance sheet date.

(iv) Derivative financial instruments

The fair values of derivative financial instruments are obtained from quoted market rates in active market, including recent market transactions and valuation techniques, such as discounted cash flow models,as appropriate.

(v) Loans, advances and financing

The fair values of fixed rate loans with remaining maturity of less than one year and variable rate loans are estimated to approximate their carrying values. For fixed rate loans and Islamic financing withremaining maturity of more than one year, the fair values are estimated based on expected future cash flows of contractual instalment payments and discounted at applicable prevailing rates at balancesheet date offered to new borrowers with similar credit profiles. In respect of non-performing loans, the fair values are deemed to approximate the carrying values, net of specific allowance for losses onloans, advances and financing.

(vi) Deposits from customers

The fair values of deposit liabilities payable on demand (demand and savings deposits), or deposits with maturity of less than one year are estimated to approximate their carrying amounts. The fair valuesof fixed deposits with remaining maturities of more than one year are estimated based on expected future cash flows discounted at applicable prevailing rates offered for deposits of similar remainingmaturities. For negotiable instruments of deposits, the fair values are estimated based on quoted or observable market prices as at the balance sheet date. Where such quoted or observable market pricesare not available, the fair values of negotiable instruments of deposits are estimated using the discounted cash flow technique.

(vii) Deposits and placements of banks and other financial institutions and Bills and acceptances payable

The carrying values of these financial instruments with remaining maturity of less than one year approximate their carrying amounts due to the relatively short maturity of the financial instruments.



47. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (cont’d)(viii) Amount due to Cagamas Berhad

The fair values of amount due to Cagamas Berhad are determined based on the discounted cash flows of future instalment payments at applicable prevailing Cagamas rates as at the balance sheet date.

(ix) Long term borrowings

The fair values of variable rate borrowings are estimated to approximate carrying values. For fixed rate borrowings, the fair values are estimated based on discounted cash flow techniques using a currentyield curve approximate for the remaining term to maturity.

(x) Subordinated bonds

The fair value of the subordinated bonds is estimated based on discounted cash flow techniques using a current yield curve appropriate for the remaining term to maturity.

(xi) Balances due from/due to clients and brokers

The carrying amounts are reasonable estimates of the fair values because of their short tenor.




48. SEGMENTAL REPORTING2010

Inter-segmenteliminations/

Commercial Investment Islamic consolidationBanking Banking Banking Others* adjustments ConsolidatedRM’000 RM’000 RM’000 RM’000 RM’000 RM’000

REVENUEExternal revenue 1,176,182 99,087 241,133 19,427 – 1,535,829Inter-segment 43,273 2,300 (19,341) 160,723 (186,955) –

Total revenue 1,219,455 101,387 221,792 180,150 (186,955) 1,535,829

RESULTSSegment results 387,855 36,390 148,193 156,617 (162,610) 566,445Finance costs (36,540) – – (20,017) – (56,557)Write-back of/(allowance for) losses on loans, advances and financing and other losses 5,263 61,923 (34,929) (326) – 31,931Allowance for impairment (103,358) (33,568) – (2,055) 6,100 (132,881)

Profit before taxation and zakat 253,220 64,745 113,264 134,219 (156,510) 408,938Taxation (107,345)Zakat (93)

Profit after taxation and zakat 301,500Minority interests (76)

Net profit for the year 301,424

* Category "Others" consist of businesses from investment holding (the Company), unit trust, asset management and non-banking subsidiaries within the Group.

Included in the revenue and segment results under category "Others" for the financial year ended 31 March 2010, an amount of RM136,321,000 being the dividend income received by the Company from itssubsidiary, Alliance Bank Malaysia Berhad. The dividend amounts were eliminated as inter-segment consolidation adjustments to derive the Group’s revenue and profit before tax.

216



48. SEGMENTAL REPORTING (cont’d)2010

Commercial Investment IslamicBanking Banking Banking Others* ConsolidatedRM’000 RM’000 RM’000 RM’000 RM’000

AssetsSegment assets 24,419,921 1,855,936 4,861,728 37,129 31,174,714Unallocated corporate assets 127,043Intangible assets 361,858

31,663,615

LiabilitiesSegment liabilities 23,379,635 1,210,307 3,507,380 610,406 28,707,728Unallocated corporate liabilities 4,206

28,711,934

Other informationCapital expenditure 40,738 874 169 3 41,784Depreciation of property, plant and equipment 35,204 4,157 193 159 39,713Amortisation of leasehold land 138 – – – 138Amortisation of computer software 15,784 220 206 97 16,307Other non-cash expenses/(income) 113,965 (21,888) 40,014 543 132,634






Inter-segmenteliminations/

Commercial Investment Islamic consolidationBanking Banking Banking Others* adjustments ConsolidatedRM’000 RM’000 RM’000 RM’000 RM’000 RM’000

REVENUEExternal revenue 1,359,043 105,953 163,059 12,331 – 1,640,386Inter-segment 39,628 2,500 (25,708) 144,656 (161,076) –

Total revenue 1,398,671 108,453 137,351 156,987 (161,076) 1,640,386

RESULTSSegment results 462,783 13,379 80,684 123,782 (146,244) 534,384Finance costs (36,540) – – (2,460) – (39,000)(Allowance for)/write-back of losses on loans, advances and financing and other losses (53,873) (22,697) (38,250) (311) – (115,131)Allowance for impairment (58,318) (17,471) – (1,152) – (76,941)

Profit/(loss) before taxation and zakat 314,052 (26,789) 42,434 119,859 (146,244) 303,312Taxation (74,394)Zakat (30)

Profit after taxation and zakat 228,888Minority interests 233

Net profit for the year 229,121


Included in the revenue and segment results under category "Others" for the financial year ended 31 March 2009, an amount of RM122,601,000 being the dividend income received by the Company from itssubsidiary, Alliance Bank Malaysia Berhad. The dividend amounts were eliminated as inter-segment consolidation adjustments to derive the Group’s revenue and profit before tax.

218




Commercial Investment IslamicBanking Banking Banking Others* ConsolidatedRM’000 RM’000 RM’000 RM’000 RM’000

AssetsSegment assets 26,477,579 1,620,010 3,147,934 40,219 31,285,742Unallocated corporate assets 191,914Intangible assets 368,512

31,846,168

LiabilitiesSegment liabilities 24,903,699 1,602,477 1,957,084 614,126 29,077,386Unallocated corporate liabilities 2,244

29,079,630

Other informationCapital expenditure 66,797 9,651 882 127 77,457Depreciation of property, plant and equipment 31,413 4,727 84 270 36,494Amortisation of leasehold land 139 – – – 139Amortisation of computer software 13,993 340 174 147 14,654Other non-cash expenses 68,235 50,647 23,565 18,211 160,658





49. COMPARATIVE FIGURESThe presentation and classifications of items in the current year’s financial statements are consistent with the previous financial year except for the following comparative figures which have been restated toconform with current year’s presentation:

Group

As previously Asreported Reclassification restated

Note RM’000 RM’000 RM’000

(i) Balance sheet as at 31 March 2009

Cash and short-term funds (i) 4,998,175 (7,489) 4,990,686Derivative financial assets (ii) 17,310 23,548 40,858Balances due from clients and brokers (iii) 69,525 (24,845) 44,680Land held for investment (iv) 28,922 (1,174) 27,748Other assets (i), (v) 233,930 1,696 235,626Deposits and placements of banks and other financial institutions (i) (1,190,782) 7,395 (1,183,387)Derivative financial liabilities (ii) (26,016) (23,548) (49,564)Balances due to clients and brokers (iii) (76,701) 24,845 (51,856)Other liabilities (i), (v) (954,930) (1,602) (956,532)Deferred tax liabilities (iv) (1,205) 1,174 (31)

(ii) Income statement for the financial year ended 31 March 2009

Interest income (vi) 1,250,187 412 1,250,599Interest expense (vi), (vii) (588,618) (7,357) (595,975)Net income from Islamic banking business (vii), (viii) 163,935 1,193 165,128Other operating income (viii), (ix) 232,618 2,420 235,038Other operating expenses (vii) (564,429) 5,023 (559,406)Allowance for losses on loans, advances and financing and other losses (viii) (112,042) (3,089) (115,131)Allowance for impairment (ix) (78,339) 1,398 (76,941)

220



49. COMPARATIVE FIGURES (cont’d)Note:

(i) The reclassification is in relation to certain balances which were previously classified as cash and short-term funds and deposits and placements of banks and other financial institutions, now classified asother assets or other liabilities respectively.

(ii) The reclassification is to present transaction balances on derivative financial instruments on a gross basis arising from certain counterparties which were previously presented on a net basis.

(iii) The reclassification is to present the amounts due from/to brokers that are settled on a net basis.

(iv) The reclassification is in relation to deferred tax liability on the land held by a subsidiary previously recognised at Group level, but is now reversed as this is no longer deemed necessary.

(v) The reclassification is to net-off certain allowance for impairment on other assets against the outstanding balances.

(vi) The reclassification is to present interest income/expense from interest rate swaps on a net basis, as interest income/expense from interest rate swaps are settled on a net basis on each reset date.

(vii) The reclassification is in relation to certain expenses which were previously classified as interest expense and net income from Islamic banking business, now classified as other operating expenses.

(viii) The reclassification is to present the provision for certain legal expenses from other operating income and net income from Islamic banking business to allowance for losses on loans, advances and financingand other losses.

(ix) The reclassification is in relation to mark-to-market loss on securities held-for-trading which were previously classified as allowances for impairment now classified as unrealised loss on revaluation ofsecurities held-for-trading under other operating income.

50. SIGNIFICANT EVENTS DURING THE YEARDissolution of subsidiaries

The following subsidiaries of the Company were dissolved pursuant to Section 272(5) of the Companies Act, 1965:

(a) Subsidiary of the Company

(i) ABG Capital Management Sdn Bhd (subsidiary of Syabas Sutra Sdn. Bhd.) was dissolved on 1 July 2009; and

(ii) Syabas Sutra Sdn. Bhd. was dissolved on 2 July 2009.

(b) Subsidiary of Alliance Bank Malaysia Berhad

(i) AFB Nominees (Tempatan) Sdn. Bhd. was dissolved on 2 July 2009.

(c) Subsidiaries of Alliance Investment Bank Berhad

(i) Alliance Capital Asset Management Sdn. Bhd. was dissolved on 1 April 2009;

(ii) Alliance Asset Management (L) Limited was dissolved on 6 April 2009;

(iii) Alliance Merchant Nominees (Tempatan) Sdn. Bhd. was dissolved on 2 July 2009;

(iv) Alliance Merchant Nominees (Asing) Sdn. Bhd. was dissolved on 2 July 2009; and

(v) Rothputra Nominees (Asing) Sdn. Bhd. was dissolved on 2 July 2009.




51. SUBSEQUENT EVENTThere was no material event subsequent to the balance sheet date that require disclosure or adjustment to the financial statements.

52. NET INCOME FROM ISLAMIC BANKING BUSINESSGroup

2010 2009RM’000 RM’000

Income derived from investment of depositors’ funds and others 212,251 186,724Income derived from investment of Islamic Banking funds 25,212 22,543Transfer from profit equalisation reserve 50,058 1,867Income attributable to depositors and financial institutions (59,130) (69,564)Other expenses directly attributable to the investment of the depositors and shareholders’ funds (1,911) (2,949)

226,480 138,621Add: Income due to head office eliminated at Group level 19,341 26,507

245,821 165,128

Note:

Net income from Islamic banking business comprises income generated from both Alliance Islamic Bank Berhad ("AIS") and Islamic banking business currently residing in Alliance Investment Bank Berhad ("AIBB").Both AIS and AIBB are wholly-owned subsidiaries of Alliance Bank Malaysia Berhad, which in turn is a wholly owned subsidiary of the Company.

222



AbridgedFinancialStatements

224 Balance Sheets

226 Income Statements

227 Statements of Changes in Equity

229 Cash Flow Statements

232 Notes to the Financial Statements

247 Independent Auditors’ Report


224

BANK GROUP2010 2009 2010 2009

RM’000 RM’000 RM’000 RM’000

ASSETSCash and short-term funds 3,182,455 4,880,518 3,563,549 4,990,498Deposits and placements with banks and other financial institutions 983,000 1,001,373 150,156 198,523Securities held-for-trading – 34,641 – 46,055Securities available-for-sale 3,266,979 4,378,893 5,154,828 6,320,122Securities held-to-maturity 655,250 170,667 931,420 314,620Derivative financial assets 44,698 40,858 44,698 40,858Loans, advances and financing 17,132,000 16,277,911 20,648,445 18,718,097Balances due from clients and brokers – – 72,568 44,680Other assets 207,700 253,999 186,200 235,179Tax recoverable 18,143 36,042 22,974 70,923Statutory deposits with Bank Negara Malaysia 208,200 169,200 258,406 198,924Investments in subsidiaries 801,664 801,664 – –Investment in an associate 230 230 506 503 Leasehold land 11,119 12,136 11,119 12,136Property, plant and equipment 115,589 124,328 123,614 137,094Deferred tax assets 65,900 73,129 102,722 120,510Intangible assets 245,068 249,192 361,858 368,512

TOTAL ASSETS 26,937,995 28,504,781 31,633,063 31,817,234

Balance Sheets of Alliance Bank Malaysia Berhadas at 31 March 2010


BANK GROUP2010 2009 2010 2009

RM’000 RM’000 RM’000 RM’000

LIABILITIES AND EQUITY Deposits from customers 20,450,911 23,224,565 24,270,378 26,230,317Deposits and placements of banks and other financial institutions 1,796,043 1,083,361 2,289,666 1,183,387Derivative financial liabilities 50,175 49,564 50,175 49,564Amount due to Cagamas Berhad 28,077 58,391 28,077 58,391Bills and acceptances payable 531,369 2,200 538,350 2,215Balances due to clients and brokers – – 80,249 51,856Other liabilities 753,946 830,985 895,375 953,912Provision for taxation – – 4,202 2,213Deferred tax liabilities – – 1 –Subordinated bonds 600,000 600,000 600,000 600,000

TOTAL LIABILITIES 24,210,521 25,849,066 28,756,473 29,131,855

Share capital 600,517 600,517 600,517 600,517Reserves 2,126,957 2,055,198 2,271,534 2,080,210

CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE BANK 2,727,474 2,655,715 2,872,051 2,680,727Minority interests – – 4,539 4,652

TOTAL EQUITY 2,727,474 2,655,715 2,876,590 2,685,379

TOTAL LIABILITIES AND EQUITY 26,937,995 28,504,781 31,633,063 31,817,234

COMMITMENTS AND CONTINGENCIES 13,400,173 14,355,021 14,293,097 15,081,294


Balance Sheets of Alliance Bank Malaysia Berhadas at 31 March 2010


226

BANK GROUP2010 2009 2010 2009

RM’000 RM’000 RM’000 RM’000

Interest income 1,050,776 1,206,011 1,093,927 1,250,594Interest expense (448,437) (561,148) (474,499) (597,956)

Net interest income 602,339 644,863 619,428 652,638Net income from Islamic banking business – – 245,821 165,128

602,339 644,863 865,249 817,766Other operating income 174,316 203,725 201,973 235,053

Net income 776,655 848,588 1,067,222 1,052,819Other operating expenses (425,340) (422,345) (551,643) (556,286)Share of results in an associate – – 3 9

Operating profit 351,315 426,243 515,582 496,542Write-back of/(allowance for) losses on loans, advances and financing and other losses 5,263 (53,873) 32,258 (114,820)Allowance for impairment (103,358) (58,318) (132,881) (76,901)

Profit before taxation and zakat 253,220 314,052 414,959 304,821Taxation and zakat (70,042) (76,974) (108,521) (74,638)


Attributable to:Equity holders of the Bank 183,178 237,078 306,362 230,416Minority interests – – 76 (233)


Earnings per share (sen)– Basic 51 39 – Diluted 38 29

Net dividends per ordinary share in respect of the year (sen) 19.65 9.82

Income Statements of Alliance Bank Malaysia Berhadfor the year ended 31 March 2010



Statements of Changes in Equity of Alliance Bank Malaysia Berhadfor the year ended 31 March 2010

Non-distributable Distributablereserves reserves

Held forsale related Equity

Ordinary Share Statutory Other Revaluation to disposal contribution Retained Totalshares ICPS1 premium reserve reserves reserves group from parent profits equity

BANK RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 April 2008 596,517 4,000 597,517 554,417 17 (14,919) – 1,252 742,286 2,481,087Amount recognised directly in equity relating to the assets classified as held for sale – – – – – (1) 1 – – –

As restated 596,517 4,000 597,517 554,417 17 (14,920) 1 1,252 742,286 2,481,087Amount vested to a subsidiary – – – – – – (1) – – (1)

Unrealised net gain on revaluation of securities available-for-sale – – – – – 5,380 – – – 5,380Transfer to income statement – – – – – 33,456 – – – 33,456Deferred tax assets – – – – – (9,709) – – – (9,709)

Income and expense recognised directly in equity – – – – – 29,127 – – – 29,127Net profit after taxation – – – – – – – – 237,078 237,078

Total recognised income and expense for the year – – – – – 29,127 – – 237,078 266,205Share-based payment under Employees’ Share Scheme (“ESS”) – – – – – – – 5,375 – 5,375Transfer to statutory reserve – – – 47,144 – – – – (47,144) –Dividends paid – – – – – – – – (96,951) (96,951)

At 31 March 2009 596,517 4,000 597,517 601,561 17 14,207 – 6,627 835,269 2,655,715

At 1 April 2009 596,517 4,000 597,517 601,561 17 14,207 – 6,627 835,269 2,655,715

Unrealised net loss on revaluation of securities available-for-sale – – – – – (11,007) – – – (11,007)Deferred tax assets – – – – – 2,752 – – – 2,752

Income and expense recognised directly in equity – – – – – (8,255) – – – (8,255)Net profit after taxation – – – – – – – – 183,178 183,178

Total recognised income and expense for the year – – – – – (8,255) – – 183,178 174,923Share-based payment under ESS – – – – – – – 5,772 – 5,772Payment for ESS recharged from parent – – – – – – – (1,695) – (1,695)Transfer of ESS recharged difference on shares vested – – – – – – – (370) 370 –Dividends paid – – – – – – – – (107,241) (107,241)Reclassification of other reserves to retained profits – – – – (17) – – – 17 –

At 31 March 2010 596,517 4,000 597,517 601,561 – 5,952 – 10,334 911,593 2,727,474

1 ICPS = Irredeemable (non-cumulative) Convertible Preference Shares.


228

Statements of Changes in Equity of Alliance Bank Malaysia Berhadfor the year ended 31 March 2010

Attributable to Equity Holders of the Bank

Non-distributable Distributablereserves reserves

Equity ProfitOrdinary Share Statutory Other Revaluation contribution equalisation Retained Minority Total

share ICPS premium reserve reserves reserves from parent reserve (“PER”) profits Total interests equityGROUP RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 April 2008 596,517 4,000 597,517 608,948 10,035 (22,776) 1,424 – 702,407 2,498,072 4,949 2,503,021

Unrealised net gain on revaluation of securitiesavailable-for-sale – – – – – 10,704 – – – 10,704 – 10,704

Transfer to income statement – – – – – 46,562 – – – 46,562 – 46,562Deferred tax assets – – – – – (14,316) – – – (14,316) – (14,316)

Income and expense recognised directly in equity – – – – – 42,950 – – – 42,950 – 42,950Net profit after taxation and zakat – – – – – – – – 230,416 230,416 (233) 230,183

Total recognised income and expense for the year – – – – – 42,950 – – 230,416 273,366 (233) 273,133Share-based payment under ESS – – – – – – 6,240 – – 6,240 – 6,240Transfer to statutory reserve – – – 63,005 – – – – (63,005) – – –Dividends paid to holding company – – – – – – – – (96,951) (96,951) – (96,951)Dividends paid to minority interests – – – – – – – – – – (64) (64)

At 31 March 2009 596,517 4,000 597,517 671,953 10,035 20,174 7,664 – 772,867 2,680,727 4,652 2,685,379

At 1 April 2009 596,517 4,000 597,517 671,953 10,035 20,174 7,664 – 772,867 2,680,727 4,652 2,685,379

Unrealised net loss on revaluation of securitiesavailable-for-sale – – – – – (16,979) – – – (16,979) – (16,979)

Deferred tax assets – – – – – 4,245 – – – 4,245 – 4,245

Income and expense recognised directly in equity – – – – – (12,734) – – – (12,734) – (12,734)Net profit after taxation and zakat – – – – – – – – 306,362 306,362 76 306,438

Total recognised income and expense for the year – – – – – (12,734) – – 306,362 293,628 76 293,704Share-based payment under ESS – – – – – – 6,915 – – 6,915 – 6,915Payment for ESS recharged from parent – – – – – – (1,978) – – (1,978) – (1,978)Transfer of ESS recharged difference on shares vested – – – – – – (416) – 416 – – –Transfer to statutory reserve – – – 63,562 – – – – (63,562) – – –Transfer to PER – – – – – – – 26,388 (26,388) – – –Dividends paid to holding company – – – – – – – – (107,241) (107,241) – (107,241)Reclassification of other reserves to retained profits – – – – (17) – – – 17 – – –Dissolution of subsidiaries – – – – – – – – – – (189) (189)

At 31 March 2010 596,517 4,000 597,517 735,515 10,018 7,440 12,185 26,388 882,471 2,872,051 4,539 2,876,590


BANK GROUP2010 2009 2010 2009

RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIESProfit before taxation and zakat: 253,220 314,052 414,959 304,821Adjustments for:

Accretion of discount less amortisation of premium of securities (33,912) (92,950) (27,342) (99,244)Depreciation of property, plant and equipment 35,204 31,413 39,631 36,395Amortisation of computer software 15,784 13,993 16,307 14,654Amortisation of leasehold land 138 139 138 139 Dividends from securities held-to-maturity (5,806) (4,343) (6,321) (5,390)Dividends from subsidiaries (18,935) (7,398) – –Gain on disposal of property, plant and equipment (663) (143) (1,011) (192)Loss on disposal of leasehold land 649 – 649 –Property, plant and equipment written-off 702 2,209 1,129 3,218Computer software written-off 1,589 10 1,589 76 Gain on disposal of foreclosed properties (7,029) (7,414) (7,029) (7,414)Net gain from redemption of securities held-to-maturity – (13,992) – (16,841)Net (gain)/loss from sale of securities held-for-trading (363) 203 228 (420)Net gain from sale of securities available-for-sale (9,688) (18,531) (11,944) (20,197)Unrealised (gain)/loss on revaluation of securities held-for-trading (27) (100) 5,152 1,154Interest expense on subordinated bonds 36,540 36,540 36,540 36,540Unrealised (gain)/loss on revaluation of derivative instruments (3,266) 4,823 (3,266) 4,823Interest income from securities held-to-maturity (13,089) (12,065) (17,251) (13,085)Interest income from securities available-for-sale (119,504) (69,730) (177,102) (111,492)Allowance for loans, advances and financing (net of recoveries) 39,009 99,913 21,397 182,868Allowance for other assets (net of recoveries) 4,077 2,954 3,723 (178)Impairment net of write-back of securities available-for-sale 102,863 54,419 134,712 76,128Impairment net of write-back of securities held-to-maturity 450 3,099 (3,900) (42)Impairment net of write-back of foreclosed properties – 800 (15) 815 Allowance for impairment of goodwill 45 – 2,084 –Allowance for commitment and contingencies 1,433 – 1,433 –Share options/grants under Employees’ Share Scheme 5,772 5,375 6,915 6,240Profit Equalisation Reserve – – (50,058) (1,867)Share of results in an associate – – (3) (9)(Gain)/loss on liquidation of subsidiaries – (8) 50 –

Operating profit before working capital changes carried forward 285,193 343,268 381,394 391,500

Cash Flow Statements of Alliance Bank Malaysia Berhadfor the year ended 31 March 2010



230

BANK GROUP2010 2009 2010 2009

RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES (cont’d)Operating profit before working capital changes brought forward 285,193 343,268 381,394 391,500Changes in working capital:

Deposits from customers (2,773,654) 5,012,698 (1,959,939) 4,811,237Deposits and placements of banks and other financial institutions 712,682 (171,034) 1,106,279 (264,136)Bills and acceptances payable 529,169 (159,218) 536,135 (159,203)Other liabilities (78,472) (102,225) (9,892) (163,631)Deposits and placements with banks and other financial institutions 18,373 (488,538) 48,367 334,312Securities held-for-trading 35,077 3,617 40,722 50,001Loans, advances and financing (893,098) (3,072,170) (1,951,745) (3,281,993)Other assets 55,697 16,139 51,786 35,521Balances due from clients and brokers – – (47,158) 32,344Amount due from subsidiaries (6,635) 6,930 – –Amount due from holding company 193 203 193 203 Statutory deposits with Bank Negara Malaysia (39,000) 378,627 (59,482) 423,062Amount due to Cagamas Berhad (30,314) (197,000) (30,314) (197,000)Payment for ESS recharged from parent (1,695) – (1,978) –

Cash (used in)/generated from operations (2,186,484) 1,571,297 (1,895,632) 2,012,217Taxes and zakat paid (36,579) (61,476) (35,763) (85,917)

Net cash (used in)/generated from operating activities (2,223,063) 1,509,821 (1,931,395) 1,926,300



BANK GROUP2010 2009 2010 2009

RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM INVESTING ACTIVITIESNet dividends from securities held-to-maturity 4,993 3,634 5,558 4,678Net dividends from subsidiaries 14,201 5,548 – –Interest income from securities held-to-maturity 13,089 12,065 17,251 13,085Interest income from securities available-for-sale 119,504 69,730 177,102 111,492Additional investment in a subsidiary – (300,000) – –Purchase of property, plant and equipment (28,287) (37,853) (28,458) (47,850)Purchase of computer software (13,294) (28,944) (13,326) (29,577)Purchase of securities held-to-maturity, net of maturity and redemption proceeds (458,314) 394,882 (586,943) 566,600Purchase of securities available-for-sale, net of sale proceeds 1,014,876 (1,692,495) 1,026,888 (3,168,231)Proceeds from disposal of property, plant and equipment 1,783 319 2,189 370 Proceeds from disposal of leasehold land 230 – 230 –Return on capital from liquidation of subsidiaries – 18 (38) –Proceeds from vesting of Islamic business, net of cash vested – 460,726 – –

Net cash generated from/(used in) investing activities 668,781 (1,112,370) 600,453 (2,549,433)

CASH FLOWS FROM FINANCING ACTIVITIESInterest expense on subordinated bonds (36,540) (36,540) (36,540) (36,540)Dividends paid to holding company (107,241) (96,951) (107,241) (96,951)Dividends paid to minority interests – – – (64)

Net cash used in financing activities (143,781) (133,491) (143,781) (133,555)

Net (decrease)/increase in cash and cash equivalents (1,698,063) 263,960 (1,474,723) (756,688)Cash and cash equivalents at beginning of year 4,880,518 4,616,558 4,944,023 5,700,711

Cash and cash equivalents at end of year 3,182,455 4,880,518 3,469,300 4,944,023

Cash and cash equivalents comprise the following:Cash and short-term funds 3,182,455 4,880,518 3,563,549 4,990,498Less: Monies held in trust – – (94,249) (46,475)

3,182,455 4,880,518 3,469,300 4,944,023




232

1. SECURITIES HELD-FOR-TRADINGBANK GROUP

2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

At fair valueMoney market instruments:Commercial papers – 9,951 – 9,951Malaysian Government securities – 24,690 – 24,690

Quoted securities in Malaysia:Shares – – – 2,470Debt securities – – – 8,942

Unquoted securities:Debt securities – – – 2

– 34,641 – 46,055

2. SECURITIES AVAILABLE-FOR-SALEBANK GROUP

2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

At fair valueMoney market instruments:Malaysian Government securities 965,960 1,203,288 1,748,115 1,647,355Malaysian Government investment certificates 127,827 – 566,495 113,849Malaysian Government treasury bills – 73,205 – 132,492Bank Negara Malaysia bills – 49,616 – 74,525Negotiable instruments of deposits 349,973 1,216,501 459,444 1,696,057Commercial papers – 34,203 – 98,906Bankers’ acceptances 799,951 1,306,056 799,951 1,578,533Khazanah bonds – – – 9,909Cagamas bonds 170,327 – 205,629 –

Quoted securities in Malaysia:Shares (Note (a)) 17 – 3,919 3,010Debt securities 7,591 6,071 7,591 6,071

Unquoted securities:Shares 11,377 6,877 11,377 6,877Debt securities 833,956 483,076 1,352,307 952,538

3,266,979 4,378,893 5,154,828 6,320,122

Notes to the Financial Statements of Alliance Bank Malaysia Berhad– 31 March 2010


2. SECURITIES AVAILABLE-FOR-SALE (cont’d)Note:

(a) Disclosures of the reclassification from securities held-for-trading ("HFT") to securities available-for-sale ("AFS") portfolio in the financial statements of the Group is as follows:

(i) Amount reclassified from securities HFT to AFS portfolio on 31 December 2008:

Group` RM’000

Fair value of securities HFT reclassified to AFS portfolio as at reclassification date 3,419

There was no new security reclassified during the financial year ended 31 March 2010.

(ii) Carrying amount and fair value of securities HFT reclassified to AFS portfolio as at the end of the financial year:

GROUP2010 2009

RM’000 RM’000

Securities HFT reclassified to AFS portfolioCarrying amount 3,902 3,010Fair value 3,902 3,010

(iii) The fair value loss recognised in respect of the securities HFT reclassified to AFS portfolio during the financial year:

GROUP2010 2009

RM’000 RM’000

Unrealised loss recognised in equity 483 409

(iv) Effective interest rate for the security reclassified from HFT to AFS portfolio is not applicable as the security reclassified is an equity portfolio.




234

3. SECURITIES HELD-TO-MATURITYBANK GROUP

2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

At amortised costMoney market instruments:Malaysian Government securities 634,434 – 811,208 –Malaysian Government investment certificates – 9,798 39,368 53,770Cagamas bonds – 20,000 – 20,000Khazanah bonds – 14,752 – 53,896

At costQuoted securities in Malaysia:Debt securities – – 4,902 4,902

Unquoted securities:Shares 17,981 17,981 22,021 22,021Debt securities 64,504 171,858 152,248 266,865

716,919 234,389 1,029,747 421,454Accumulated impairment (61,669) (63,722) (98,327) (106,834)

655,250 170,667 931,420 314,620



4. LOANS, ADVANCES AND FINANCINGBANK GROUP

2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

Overdrafts 1,539,697 1,551,626 1,632,204 1,610,636Term loans/financing– Housing loans/financing 7,489,866 7,086,945 9,081,024 7,842,479– Syndicated term loans/financing 253,927 309,204 259,826 314,794– Hire purchase receivables 547,873 725,190 1,070,593 1,360,731– Lease receivables 104 104 104 104 – Other term loans/financing 4,153,896 3,937,992 7,261,555 5,858,653Bills receivables 55,727 68,918 56,173 71,906Trust receipts 141,964 125,914 161,254 154,941Claims on customers under acceptance credits 1,708,882 1,522,235 2,025,751 1,735,910Staff loans [included loans to Directors of a subsidiary of RM182,000 (2009: RM1,437,000)] 40,084 49,277 102,583 117,974Credit/charge card receivables 685,003 645,058 685,003 645,058Revolving credits 936,466 853,369 1,115,275 995,713Other loans 264,126 177,295 339,071 257,432

17,817,615 17,053,127 23,790,416 20,966,331Less: Unearned interest and income (57,713) (85,226) (2,380,480) (1,376,192)

Gross loans, advances and financing 17,759,902 16,967,901 21,409,936 19,590,139

Less: Allowance for losses on loans, advances and financing– Specific (366,203) (394,418) (438,582) (531,824)– General (261,699) (295,572) (322,909) (340,218)

Total net loans, advances and financing 17,132,000 16,277,911 20,648,445 18,718,097




236

4. LOANS, ADVANCES AND FINANCING (cont’d) BANK GROUP

2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

(i) By maturity structure:

Within one year 5,560,190 5,165,936 6,307,079 5,758,320One year to three years 533,503 526,027 906,149 947,862Three years to five years 1,008,175 954,944 1,408,276 1,485,367Over five years 10,658,034 10,320,994 12,788,432 11,398,590


(ii) By type of customer:

Domestic non-bank financial institutions– Stockbroking companies 20,001 – 20,001 –– Others 168,664 276,382 168,766 276,429Domestic business enterprises– Small and medium enterprises 3,749,924 3,519,194 4,393,907 4,185,864– Others 3,486,234 3,209,216 4,170,355 3,861,118Government and statutory bodies 14,341 15,094 16,590 17,345Individuals 9,859,573 9,597,201 12,157,289 10,886,992Other domestic entities 4,650 3,846 5,088 4,356Foreign entities 456,515 346,968 477,940 358,035


(iii) By interest/profit rate sensitivity:

Fixed rate– Housing loans/financing 30,172 39,046 316,948 171,467– Hire purchase receivables 489,857 640,148 950,134 1,197,050– Other fixed rate loans/financing 766,555 728,628 2,188,491 1,503,071Variable rate– Base lending rate plus 13,215,052 12,544,399 14,097,157 13,223,436– Cost plus 3,229,272 2,982,040 3,753,267 3,381,339– Other variable rates 28,994 33,640 103,939 113,776





2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

(iv) By economic purposes:

Purchase of securities 274,661 191,203 351,976 273,541Purchase of transport vehicles 437,530 622,264 907,561 1,190,239Purchase of landed property 10,108,682 9,727,956 11,092,067 10,477,736

of which: – Residential 7,838,529 7,443,796 8,408,597 7,730,962– Non-residential 2,270,153 2,284,160 2,683,470 2,746,774

Purchase of fixed assets excluding land and buildings 60,768 32,771 66,540 61,094Personal use 757,539 710,728 2,007,919 1,155,811Credit card 685,003 645,058 685,003 645,058Purchase of durable goods – 15 – 15 Construction 249,439 264,882 293,211 313,552Working capital 4,733,313 4,326,792 5,384,583 4,846,438Others 452,967 446,232 621,076 626,655


(v) Movements in non-performing loans, advances and financing are as follows:

At beginning of year 699,539 1,055,634 875,070 1,158,506Amount vested to a subsidiary – (57,310) – –Non-performing during the year 572,424 593,603 670,112 775,826Reclassified as performing during the year (363,767) (437,388) (412,025) (493,941)Recoveries (156,621) (277,082) (194,930) (328,770)Amount written off (101,097) (177,918) (131,948) (236,551)

At end of year 650,478 699,539 806,279 875,070Specific allowance (366,203) (394,418) (438,582) (531,824)

– on non-performing loans (354,777) (335,289) (415,168) (451,554)– on performing loans (11,426) (59,129) (23,414) (80,270)

Net non-performing loans, advances and financing 284,275 305,121 367,697 343,246

Net NPL as % of gross loans, advances and financing less specific allowance– Including specific allowance on performing loans 1.6% 1.8% 1.8% 1.8%– Excluding specific allowance on performing loans 1.7% 2.2% 1.9% 2.2%




238


2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

(vi) Movements in the allowance for losses on loans, advances and financing are as follows:

General AllowanceAt beginning of year 295,572 284,660 340,218 289,296Amount vested to a subsidiary – (35,398) – –Allowance made during the year 38,162 66,330 59,732 78,854Amount written back (72,035) (20,020) (77,041) (27,932)

At end of year 261,699 295,572 322,909 340,218

As % of gross loans, advances and financing less specific allowance 1.5% 1.8% 1.5% 1.8%

Specific AllowanceAt beginning of year 394,418 543,351 531,824 636,429Amount vested to a subsidiary – (24,618) – –Allowance made during the year 255,307 253,034 331,471 416,100Amount written back in respect of recoveries (182,425) (199,431) (292,765) (284,154)Amount written off (101,097) (177,918) (131,948) (236,551)

At end of year 366,203 394,418 438,582 531,824

Included in specific allowance of the Bank and the Group are allowances made for high risk accounts which are still performing amounting to RM11,426,000 (2009: RM59,129,000) and RM23,414,000 (2009: RM80,270,000) respectively.




2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

(vii) Non-performing loans, advances and financing analysed by economic purposes are as follows:

Purchase of securities 6,674 6,613 16,399 16,347Purchase of transport vehicles 5,263 11,086 13,992 26,376Purchase of landed property 320,664 380,323 336,433 399,985

of which: – Residential 233,041 266,416 240,152 273,500– Non-residential 87,623 113,907 96,281 126,485

Purchase of fixed assets excluding land and buildings 198 630 198 630 Personal use 33,289 44,926 40,451 55,927Credit card 14,188 17,518 14,188 17,518Construction 13,437 22,608 14,905 22,674Working capital 233,911 204,254 321,637 307,833Others 22,854 11,581 48,076 27,780

650,478 699,539 806,279 875,070

5. CAPITAL ADEQUACYThe capital adequacy ratios of the Bank and the Group are computed in accordance with Bank Negara Malaysia’s revised Risk-Weighted Capital Adequacy Framework (RWCAF-Basel II). The Bank and the Grouphave adopted the Standardised Approach for credit risk and market risk, and the Basic Indicator Approach for operational risk.

(a) The capital adequacy ratios of the Bank and the Group are as follows:

BANK GROUP2010 2009 2010 2009

Before deducting proposed dividends

Core capital ratio 13.57% 12.67% 11.39% 10.41%Risk-weighted capital ratio 13.91% 13.18% 15.65% 14.76%

After deducting proposed dividends

Core capital ratio 13.28% 12.55% 11.13% 10.30%Risk-weighted capital ratio 13.61% 13.05% 15.40% 14.65%




240

5. CAPITAL ADEQUACY (cont’d) (b) The components of Tier I and Tier II Capital of the Bank and the Group are as follows:

BANK GROUP2010 2009 2010 2009

RM’000 RM’000 RM’000 RM’000

Tier I Capital (Core Capital)

Paid-up share capital 596,517 596,517 596,517 596,517ICPS 4,000 4,000 4,000 4,000Share premium 597,517 597,517 597,517 597,517Retained profits 911,593 835,269 882,471 772,867Statutory reserves 601,561 601,561 735,515 671,953Other reserves – 17 10,018 10,035Minority interests – – 4,539 4,652

2,711,188 2,634,881 2,830,577 2,657,541Less: Purchased goodwill/goodwill on consolidation (186,272) (186,317) (302,065) (304,149)

Deferred tax assets (65,900) (73,129) (99,347) (119,305)

Total Tier I Capital 2,459,016 2,375,435 2,429,165 2,234,087

Tier II Capital

Subordinated bonds 600,000 600,000 600,000 600,000General allowance for losses on loans, advances and financing 261,699 295,572 322,933 340,246

Total Tier II Capital 861,699 895,572 922,933 940,246

Total Capital 3,320,715 3,271,007 3,352,098 3,174,333Less: Investment in subsidiaries (801,664) (801,664) (12,760) (7,066)

Total Capital Base 2,519,051 2,469,343 3,339,338 3,167,267



5. CAPITAL ADEQUACY (cont’d) (c) The breakdown of risk-weighted assets (“RWA”) by exposures in each major risk category are as follows:

Risk-Bank Gross Net Weighted 2010 Exposures Exposures Assets Exposure Class RM’000 RM’000 RM’000

(i) Credit Risk

On-balance sheet exposures 25,820,857 25,107,511 13,650,583Off-balance sheet exposures 2,925,477 2,921,464 2,533,488

Total on and off-balance sheet exposures 28,746,334 28,028,975 16,184,071

(ii) Market Risk – – 19,663

(iii) Operational Risk – – 1,912,210

Total RWA 28,746,334 28,028,975 18,115,944

Group2010Exposure Class

(i) Credit Risk





Total RWA 34,512,224 33,707,545 21,336,043




242

5. CAPITAL ADEQUACY (cont’d) (c) The breakdown of RWA by exposures in each major risk category are as follows (cont’d):

Risk-Bank Gross Net Weighted 2009 Exposures Exposures Assets Exposure Class RM’000 RM’000 RM’000

(i) Credit Risk





Total RWA 30,660,950 30,161,661 18,741,874

Group2009Exposure Class

(i) Credit Risk





Total RWA 34,974,623 34,392,789 21,454,895



5. CAPITAL ADEQUACY (cont’d) (d) The off-balance sheet exposures and their related counterparty credit risk of the Bank and the Group are as follows:

Positive Fair Value Credit Risk-

Principal of Derivative Equivalent Weighted Amount Contracts Amount Assets

Bank RM’000 RM’000 RM’000 RM’000 2010

Credit-related exposures


9,897,770 2,839,358 2,500,213


Foreign exchange related contracts:– less than one year 2,452,403 38,588 64,501 28,951Interest rate related contracts:– one year or less 560,000 491 2,745 549 – over one year to five years 430,000 4,864 13,030 2,606– over five years 60,000 755 5,843 1,169

3,502,403 44,698 86,119 33,275

13,400,173 44,698 2,925,477 2,533,488




244

5. CAPITAL ADEQUACY (cont’d) (d) The off-balance sheet exposures and their related counterparty credit risk of the Bank and the Group are as follows (cont’d):



Group RM’000 RM’000 RM’000 RM’000 2010



10,790,694 3,154,545 2,766,939


Foreign exchange related contracts:– less than one year 2,452,403 38,588 64,501 28,951Interest rate related contracts:– one year or less 560,000 491 2,745 549 – over one year to five years 430,000 4,864 13,030 2,606– over five years 60,000 755 5,843 1,169

3,502,403 44,698 86,119 33,275

14,293,097 44,698 3,240,664 2,800,214






Bank RM’000 RM’000 RM’000 RM’000 2009



10,830,798 3,201,650 2,799,823



3,524,223 40,858 95,147 35,124

14,355,021 40,858 3,296,797 2,834,947




246




Group RM’000 RM’000 RM’000 RM’000 2009


Direct credit substitutes 448,370 448,370 448,370Transaction-related contingent items 505,920 252,960 252,960Short-term self-liquidating trade-related contingencies 112,406 22,481 22,481Irrevocable commitments to extent credit:– maturity exceeding one year 2,051,099 1,025,549 825,344– maturity not exceeding one year 8,439,276 1,687,856 1,437,642

11,557,071 3,437,216 2,986,797



3,524,223 40,858 95,147 35,124

15,081,294 40,858 3,532,363 3,021,921




On 15 June 2010, we reported on the statutory financial statements of Alliance Bank Malaysia Berhad for the financial year ended 31 March 2010. In that report we stated:

“Report on the financial statementsWe have audited the financial statements of Alliance Bank Malaysia Berhad, which comprise the balance sheets as at 31 March 2010 of the Bank and of the Group, and the income statements, statements of changes inequity and cash flow statements of the Bank and of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 12 to 125.

Directors’ responsibility for the financial statements

The Directors of the Bank are responsible for the preparation and fair presentation of these financial statements in accordance with the Companies Act, 1965, the MASB Approved Accounting Standards in Malaysia forEntities Other than Private Entities and the Bank Negara Malaysia Guidelines. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation offinancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in thecircumstances.

Auditors’ responsibility

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

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

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

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with the Companies Act, 1965, the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and theBank Negara Malaysia Guidelines so as to give a true and fair view of the financial position of the Bank and of the Group as at 31 March 2010 and of their financial performance and cash flows for the year then ended.

Independent Auditors’ Reportto the member of Alliance Bank Malaysia Berhad (88103-W) (Incorporated in Malaysia)


248

Report on other legal and regulatory requirementsIn 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 Bank and its subsidiaries have been properly kept in accordance with the provisions of the Act.

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

(c) The audit reports on the financial statements of the subsidiaries did not contain any qualification and any adverse comment made under Section 174(3) of the Act.

Other mattersThis report is made solely to the member of the Bank, 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 personfor the content of this report.”

Other than the non-publication of all the notes to the financial statements, excluding those notes for the Bank and the Group pertaining to securities held-for-trading, securities available-for-sale, securities held-to-maturity,loans, advances and financing and capital adequacy, the financial statements reproduced herewith are similar in all material respects to those reported on by us.

Accordingly, for a fuller appreciation of the state of affairs of the Bank and the Group as at 31 March 2010 and of the results and cash flows of the Bank and the Group for the financial year ended on that date, referenceshould be made to the statutory financial statements of the Bank for the financial year ended 31 March 2010 in which context of our report of 15 June 2010 was made.

PricewaterhouseCoopers Mohammad Faiz Bin Mohammad AzmiAF: 1146 No. 2025/03/12 (J)Chartered Accountants Chartered Accountant


The full version of the financial statements is available at Alliance Bank’s website at www.alliancebank.com.my

Independent Auditors’ Reportto the member of Alliance Bank Malaysia Berhad (88103-W) (Incorporated in Malaysia)



Notice of Annual General Meeting

AGENDA1. To receive the Audited Financial Statements for the financial year ended 31 March 2010 together with the Reports of the Directors and Auditors thereon.

2. To approve the increase and payment of Directors’ fees in respect of the financial year ended 31 March 2010.

3. To re-elect the following Directors who retire by rotation pursuant to Article 82 of the Company’s Articles of Association:(a) Stephen Geh Sim Whye(b) Phoon Siew Heng

4. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company and authorise the Directors to fix their remuneration.

As Special Business to consider and, if thought fit, to pass the following resolutions:

5. Ordinary Resolution

Re-appointment of Director pursuant to Section 129(6) of the Companies Act, 1965

“THAT Dato’ Thomas Mun Lung Lee, a Director who vacates his office pursuant to Section 129(2) of the Companies Act, 1965 be and is hereby re-appointed as Director of the Company to hold office until the conclusion of the next Annual General Meeting of the Company.”

6. Special Resolution

Proposed Amendment to Article 146 of the Articles of Association of the Company

“THAT the existing Article 146 of the Articles of Association of the Company be deleted in its entirety and substituted thereof with a new Article 146 as follows:

Existing Article 146

Payment by cheque

Any dividend, interest or other money payable in cash in respect of shares may be paid by cheque or warrant, sent through the post directed to the registered address of the holder or to such person and to such address as the holder may in writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent, and the payment of any such cheque or warrant shall operate as a good discharge to the Company in respect of the money represented thereby, notwithstanding that it may subsequently appear that the same has been stolen or that the endorsement thereon has been forged. Every such cheque or warrant shall be sent at the risk of the person entitled to the money thereby represented.

Resolution 1

Resolution 2

Resolution 5

Resolution 6

Resolution 7

Resolution 3Resolution 4

NOTICE IS HEREBY GIVEN THAT the 44th Annual General Meeting of Alliance Financial Group Berhad will be held at the Ballroom 2, Level 1, Sime Darby Convention Centre, 1A Jalan Bukit Kiara 1, 60000 Kuala Lumpur on Thursday, 29 July 2010 at 2.30 p.m. for the following purposes:

250

New Article 146

Payment by cheque or electronic transfer of remittance

Any dividend, interest or other money payable in cash in respect of shares may be paid by cheque or warrant sent through the post directed to the registered address of the holder or paid via electronic transfer of remittance to the bank account provided by the holder who is named on the Register and/or Record of Depositors. Every such cheque or warrant or electronic transfer of remittance shall be made payable to the order of the person to whom it is sent or remitted, and the payment of any such cheque or warrant or electronic transfer of remittance shall operate as a good discharge to the Company in respect of the money represented thereby, notwithstanding that it may subsequently appear that the same has been stolen or the instruction for the electronic transfer of remittance or that the endorsement thereon has been forged. Every such cheque or warrant or electronic transfer of remittance shall be sent or remitted at the risk of the person entitled to the money thereby represented.”

7. To transact any other business for which due notice shall have been given in accordance with the Company’s Articles of Association and/or the Companies Act, 1965.

BY ORDER OF THE BOARD

LEE WEI YEN (MAICSA 7001798)Group Company Secretary

Kuala Lumpur2 July 2010

Notes:

1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote in his stead.

2. A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

3. To be valid, the Form of Proxy, duly completed must be deposited at the registered office of the Company at 3rd Floor, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur, not less than 48 hours before the time set for holding the meeting.

4. A member who is an authorised nominee may appoint one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

5. A member other than an authorised nominee shall be entitled to appoint not more than two (2) proxies to attend and vote at the same meeting.

6. Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.

7. If the appointor is a corporation, the Form of Proxy must be executed under its common seal or under the hand of an officer or attorney duly authorised.

EXPLANATORY NOTES

(i) To approve the increase and payment of Directors’ Fees in respect of the financial year ended 31 March 2010It is proposed that the fees for Non-Executive Directors of the Company be increased from RM48,000 per annum to RM60,000 per annum, whilst the fee for the Non-Executive Chairman be increased from RM96,000 to RM120,000 per annum. The fees have not been revised for three (3) years and the proposed increase would improve the levels of remuneration of Non-Executive Directors/Chairman to sufficiently attract new Directors and retain existing Directors of calibre taking into account the levels of contribution such as effort and time spent and the increased responsibilities of the Directors, and the remuneration and conditions of the industry.

(ii) Re-appointment of Director pursuant to Section 129(6) of the Companies Act, 1965Pursuant to Section 129(2) of the Companies Act, 1965, the office of Dato’ Thomas Mun Lung Lee, a Director who has attained the age of seventy (70) years, shall become vacant at the conclusion of the forthcoming 44th Annual General Meeting. The proposed re-appointment of Dato’ Thomas Mun Lung Lee will require a resolution passed by a majority of not less than three-fourth (3/4) of the members of the Company who are entitled to vote at the forthcoming Annual General Meeting.

(iii) Proposed Amendment to Article 146 of the Articles of Association of the CompanyThe proposed Amendment to Article 146 of the Articles of Association of the Company is to allow the Company to pay its future dividends by way of electronic transfer of remittance in line with the amendments to the Main Market Listing Requirements of Bursa Malaysia Securities Berhad in relation to Electronic Dividend payment.

Notice of Annual General Meeting (cont’d)

Form of Proxy

Shareholding represented by Proxy

Seal of Corporation

(Incorporated in Malaysia)

)

)

I/We (full name in block capitals) _______________________________________________________________________________________________________________________________________

identity card no./company registration no. ________________________________________________________________________________________________________________________________

of ______________________________________________________________________________________________________________________________________________________________

being a member/members of ALLIANCE FINANCIAL GROUP BERHAD hereby appoint __________________________________________________ (NRIC No. ______________________________________

of ______________________________________________________________________________________________________________________________________________________________

or failing him ______________________________________________________________________________________________________ (NRIC No. ______________________________________

of ______________________________________________________________________________________________________________________________________________________________

as my/our proxy/proxies to vote for me/us on my/our behalf at the 44th Annual General Meeting of the Company to be held at the Ballroom 2, Level 1, Sime Darby Convention Centre, 1A Jalan Bukit Kiara 1, 60000 Kuala Lumpur on Thursday, 29 July 2010 at 2.30 p.m. and at any adjournment thereof.

RESOLUTIONS *FOR *AGAINST

1. To receive the Audited Financial Statements for the financial year ended 31 March 2010 together with the Reports of the Directors and Auditors thereon Resolution 1

2. To approve the increase and payment of Directors’ fees in respect of the financial year ended 31 March 2010 Resolution 2

3. To re-elect the following Directors, who retire by rotation pursuant to Article 82 of the Company’s Articles of Association:(a) Stephen Geh Sim Whye Resolution 3(b) Phoon Siew Heng Resolution 4

4. To re-appoint Messrs PricewaterhouseCoopers as Auditors and authorise the Directors to fix their remuneration Resolution 5

5. To re-appoint Dato’ Thomas Mun Lung Lee, a Director who vacates his office pursuant to Section 129(2) of the Companies Act, 1965 Resolution 6

6. To amend the Articles of Association of the Company Resolution 7

* Please indicate with an “X” on how you wish your vote to be cast. If no specific direction as to voting is given, the proxy will vote or abstain at his discretion.

As witness my/our hand(s) this _______________ day of ____________________ 2010.

Signature(s) of Member

Notes: 1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy or

proxies to attend and vote in his stead.2. A proxy may but need not be a member of the Company and the provisions of

Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

3. To be valid, the Form of Proxy, duly completed must be deposited at the registered office of the Company at 3rd Floor, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur, not less than 48 hours before the time set for holding the meeting.

4. A member who is an authorised nominee may appoint one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

5. A member other than an authorised nominee shall be entitled to appoint not more than two (2) proxies to attend and vote at the same meeting.

6. Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.

7. If the appointor is a corporation, the Form of Proxy must be executed under its common seal or under the hand of an officer or attorney duly authorised.

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www.alliancegroup.com.my

Alliance Financial Group Berhad (6627-X)

3rd Floor, Menara Multi-PurposeCapital SquareNo. 8, Jalan Munshi Abdullah50100 Kuala Lumpur, Malaysia

Tel : 03-2694 4888Fax : 03-2694 6200

2010 ANNUAL REPORT

(6627-X)

GAINING MOMENTUM

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