ambank (m) berhad · 2016. 10. 30. · bnm : bank negara malaysia board : board of directors of...

SERIAL NO:

AmBank (M) Berhad (Company Number: 8515-D)

(Incorporated in Malaysia under the Companies Act, 1965)

INFORMATION MEMORANDUM IN RELATION TO THE NON-INNOVATIVE TIER 1 CAPITAL

PROGRAMME OF UP TO RM500 MILLION IN NOMINAL VALUE

COMPRISING:-

(1) NON-CUMULATIVE PERPETUAL CAPITAL SECURITIES TO BE

ISSUED BY AmBANK (M) BERHAD UNDER A PROGRAMME

WHICH ARE STAPLED TO:

(2) SUBORDINATED NOTES TO BE ISSUED BY AmPREMIER CAPITAL BERHAD, A WHOLLY-OWNED SUBSIDIARY OF AmBANK (M) BERHAD UNDER A PROGRAMME

Principal Adviser and Lead Manager

AmInvestment Bank Berhad (Company No. 23742-V)

A member of

This Information Memorandum is dated 23 January 2009

Company No. 8515-D

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IMPORTANT NOTICE The Securities Commission (“SC”) has approved this proposal pursuant to Section 212 of the Capital Markets and Services Act, 2007, as amended from time to time (“CMSA”). Please note that the SC’s approval of this proposal shall not be taken to indicate that the SC recommends the proposal. AmBank (M) Berhad (“AmBank”) has prepared this Information Memorandum (“IM”), which is being provided on a confidential basis to potential investors of the non-innovative tier 1 capital of up to RM500 million in nominal value (“RMNIT1”) to be issued under a programme (“RMNIT1 Programme”) which comprises the non-cumulative perpetual capital securities (“NCPCS”) to be issued by AmBank under a programme (“NCPCS Programme”) which are stapled to subordinated notes (“SubNotes”) to be issued by AmPremier Capital Berhad (“AmPremier”) under a programme (“SubNotes Programme”). The RMNIT1 may not be issued, offered, sold, transferred or otherwise disposed of, directly or indirectly, nor may any document or other material in connection therewith including this IM be distributed, in Malaysia other than to persons, whether as principal or agent, falling within any one of the categories of persons specified in Schedule 6 or Section 229(1)(b), Schedule 7 or Section 230(1)(b) and Schedule 9 or Section 257(3) of the CMSA subject to any law, order, regulation or official directive of Bank Negara Malaysia (“BNM”), the SC and/or any other regulatory authority from time to time. This IM may not be, in whole or in part, reproduced or used for any other purpose, or shown, given, copied to or filed with any other person including, without limitation, any government or regulatory authority except with the prior consent of AmBank or as required under Malaysian laws, regulations or guidelines. The persons preparing this IM have made all enquiries as were reasonable in the circumstances and after making such enquiries have reasonable grounds to believe and do believe up to the time of the issue of this IM that the information herein is true and not misleading and there is no material omission therein. This IM should not be construed as a recommendation by AmBank or any other party to subscribe for or purchase the RMNIT1. Further, the information contained herein should not be read as a representation or warranty, express or implied, as to the merits of the RMNIT1 or the purchase thereof. This IM is not a substitute for, and should not be regarded as, an independent evaluation and analysis. Each recipient should perform and is deemed to have made his/its own independent investigation and analysis of AmBank, the RMNIT1 and all other relevant matters, including but not limited to the information and data set out in this IM, and each recipient should consult its own professional advisers. AmBank confirms that, to the best of its knowledge and belief: (a) this IM contains all information with respect to AmBank and its subsidiary companies that is material in the context of the purpose for which this IM is issued, (b) the information and data contained in this IM are true, accurate and not misleading in all material respects, and (c) there is no material omission of any information and data from this IM. This IM has not been and will not be made to comply with the laws of any jurisdiction outside Malaysia (“Foreign Jurisdiction”), and has not been and will not be lodged, registered or approved pursuant to or under any legislation of (or with or by any regulatory authority or other relevant body of) any Foreign Jurisdiction and it does not constitute an offer of, or an invitation to subscribe for or purchase the RMNIT1 or any other securities of any kind by any party in any Foreign Jurisdiction. This IM is not a and is not intended to be a prospectus.

Company No. 8515-D

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By accepting delivery of this IM, each recipient agrees to the terms upon which this IM is provided to such recipient as set out in this IM, and further agrees and confirms that: (a) it will keep confidential all of such information and data, (b) it is lawful for the recipient to receive this IM and to subscribe for, purchase or in any other way to receive the RMNIT1 under all jurisdictions to which the recipient is subject, (c) the recipient will comply with all the applicable laws in connection with such subscription, purchase or acceptance of the RMNIT1, (d) AmBank and all other parties involved in the preparation of this IM and their respective directors, officers, employees, agents and professional advisers are not and will not be in breach of the laws of any jurisdiction to which the recipient is subject to as a result of such subscription, purchase or acceptance of the RMNIT1 and they shall not have any responsibility or liability in the event that such subscription or acceptance of the RMNIT1 is or shall become unlawful, unenforceable, voidable or void, (e) it is aware that the RMNIT1 can only be transferred or otherwise disposed of in accordance with the relevant selling restrictions and all applicable laws, (f) it has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of subscribing for or purchasing the RMNIT1 and is able and prepared to bear the economic and financial risks of investing in or holding the RMNIT1, (g) it is subscribing for, purchasing or accepting the RMNIT1 for its own account, and (h) it, at the point of issuance of the RMNIT1, falls within one or more of the categories of persons to whom an offer or invitation to subscribe for or purchase the RMNIT1 would constitute an excluded issue, excluded offer or excluded invitation pursuant to Schedule 6 or Section 229(1)(b), Schedule 7 or Section 230(1)(b) and Schedule 9 or Section 257(3) of the CMSA (subject to any law, order, regulation or official directive of BNM, the SC and/or any other regulatory authority from time to time), and after the point of issuance of the RMNIT1, falls within one or more of the categories of persons to whom an offer or invitation to subscribe for or purchase the RMNIT1 would constitute an excluded offer or excluded invitation pursuant to Schedule 6 or Section 229(1)(b) and Schedule 9 or Section 257(3) of the CMSA (subject to any law, order, regulation or official directive of BNM, the SC and/or any other regulatory authority from time to time). Each recipient is solely responsible for seeking all appropriate expert advice as to the laws of all jurisdictions to which it is subject. Neither the delivery of this IM nor the offering, sale or delivery of any RMNIT1 shall in any circumstance imply that the information contained herein concerning the issuers is correct at any time subsequent to the date hereof or that any other information supplied in connection with the RMNIT1 is correct as of any time subsequent to the date indicated in the document containing the same. The Lead Manager expressly does not undertake to advise any investor in the RMNIT1 of any information coming to their attention. The recipient of this IM or the potential investors should review, inter-alia, the most recently published documents incorporated by reference into this IM when deciding whether or not to purchase any RMNIT1. This IM includes certain historical information and reports thereon derived from sources believed to be reliable and other publicly available information. Such information and reports have been included solely for illustrative purposes. No representation or warranty is made as to the accuracy of any information and report thereon derived from such and other third party sources. This IM includes “forward looking statements”. These statements include, among other things, disclosure of AmBank’s business strategy and expectation concerning its position in the Malaysian economy, future operations, liquidity, financial position and settlement of indebtedness. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may affect actual outcomes, many of which are outside the control of AmBank. All these statements are based on assumptions made by AmBank that, although believed to be reasonable, are subject to risks and uncertainties that may cause actual events and the future results of AmBank to be materially different from that expected or indicated by such statements and no assurance is given that any of such statements will be realised. Therefore, the contingencies and inherent uncertainties underlying such information should be carefully considered by investors and the inclusion of a forward looking statement in this IM is not a representation or warranty by AmBank or any other person that the plans and objectives of AmBank will be achieved. Further, such parties are not under any obligation to update or revise such forward-looking statements to reflect any change in expectations or circumstances. Any difference in the expectations of AmBank and its actual performance may result in AmBank’s financial and operating performance and plans being materially different from those anticipated.

Company No. 8515-D

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This IM will be lodged with the SC. Such lodgement shall not be taken to indicate that the SC recommends the RMNIT1, or that it assumes responsibility for the correctness of any statement, opinion or report contained in this IM. EACH ISSUE OF PRIVATE DEBT SECURITIES (IN THIS CASE, THE ISSUE OF NCPCS AND SUBNOTES UNDER THE RMNIT1 PROGRAMME) WILL CARRY DIFFERENT RISKS. INVESTORS MUST RELY ON THEIR OWN EVALUATION TO ASSESS THE MERITS AND RISKS OF AN INVESTMENT IN ANY ISSUE OF NCPCS AND SUBNOTES UNDER THE RMNIT1 PROGRAMME. IT IS RECOMMENDED THAT PROSPECTIVE INVESTORS CONSULT THEIR OWN LEGAL, FINANCIAL AND OTHER ADVISERS BEFORE PURCHASING OR ACQUIRING THE RMNIT1.

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Company No. 8515-D DEFINITIONS

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For the purpose of this IM, unless otherwise indicated, the following definitions shall apply:- Act : The Companies Act, 1965 or any statutory modification, amendment

or re-enactment thereof for the time being in force AHB : AMMB Holdings Berhad (223035-V) AHB Group : AHB and its subsidiary companies AIGB : AmInvestment Group Berhad (657000-X) AmBank or NCPCS Issuer : AmBank (M) Berhad (8515-D) AmBank Group : AmBank and its subsidiary companies Amcorp : AmcorpGroup Berhad (1166-T) AMFB : AMFB Holdings Berhad (5493-X) AmIslamic Bank : AmIslamic Bank Berhad (295576-U) AmInvestment Bank : AmInvestment Bank Berhad (23742-V), a member of the

AmInvestment Bank Group AmLife : AmLife Insurance Berhad (15743-P) (formerly known as

AmAssurance Berhad) AmPremier or SubNotes Issuer

: AmPremier Capital Berhad (842581-H)

ANZ : Australia and New Zealand Banking Group Limited (005 357 522) ANZ Funds : ANZ Funds Pty Ltd (004 594 343), a wholly-owned subsidiary

company of ANZ ATMs : Automated Teller Machines BAFIA : The Banking and Financial Institutions Act, 1989 or any statutory

modification, amendment or re-enactment thereof for the time being in force

BNM : Bank Negara Malaysia Board : Board of Directors of AmBank Bursa Securities : Bursa Malaysia Securities Berhad (635998-W) CBCs : Commercial Business Centres CGC : Credit Guarantee Corporation Malaysia Berhad (12441-M) CGSB : Clear Goal Sdn Bhd (736317-V) CMSA : The Capital Markets and Services Act, 2007 or any statutory

modification, amendment or re-enactment thereof for the time being in force

CPS : Convertible preference shares


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DAGS : Direct Access Guarantee Schemes EBCs : Electronic Banking Channels EGM : Extraordinary General Meeting EPF : Employees Provident Fund Board EPS : Earnings per share FAST Rules : The Rules on Fully Automated System for Issuing/Tendering issued

by BNM FYE : Financial year ended IM : Information Memorandum Intercompany Loan : The on-lent of the proceeds raised from the issue of the SubNotes

by AmPremier to AmBank through a subordinated intercompany loan

IPBM Code : The Code of Conduct and Market Practices for the Malaysian

Corporate Bond Market issued by Institut Peniaga Bon Malaysia and approved by BNM

IPS : 6% irredeemable non-cumulative CPS of RM1.00 each IT : Information Technology MBf Capital : MBf Capital Berhad (227890-W) MBf Finance : MBf Finance Berhad (8515-D) MBFC : Malaysia Borneo Finance Corporation (M) Berhad (8515-D) MDIC : Malaysia Deposit Insurance Corporation (Perbadanan Insurans

Deposit Malaysia) MTN : Medium term notes MTN Programme : Issuance of up to RM2.0 billion Ringgit-denominated subordinated

medium term notes under a programme NCPCS : Non-cumulative perpetual capital securities NCPCS Programme : Issuance of up to RM500 million NCPCS by AmBank under a

programme NIT1 : Non-innovative tier 1 capital NPLs : Non-performing loans NA : Net assets RAM : RAM Rating Services Berhad (763588-T) RBCs : Regional Business Centres


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RENTAS Rules : The Rules on Scripless Securities under the Real Time Electronic Transfer of Funds and Securities System issued by BNM

RM : Ringgit Malaysia RMNIT1 : NIT1 denominated in RM of up to RM500 million RMNIT1 Programme : Issuance of up to RM500 million NIT1 under a programme,

comprising the NCPCS Programme and the SubNotes Programme RWCR : Risk Weighted Capital Ratio SC : Securities Commission Share(s) : Ordinary share(s) of RM1.00 each SMEs : Small medium enterprises SSCs : Sales and Service Centres Stapled Securities : Securities constituted by stapling the NCPCS and SubNotes

together SubNotes : Subordinated Notes SubNotes Programme : Issuance of up to RM500 million SubNotes by AmPremier under a

programme Trust Deed : The Trust Deed entered or to be entered into between the

NCPCS/SubNotes Issuers and the Trustee constituting the NCPCS/SubNotes, respectively

Trustee : Pacific Trustees Berhad (317001-A) TSDAH : Tan Sri Dato’ Azman Hashim US : United States of America YTM : Yield to maturity All references to “Company”, “we”, “us”, “our” and “ourselves” in this IM are referring to AmBank.


Company No. 8515-D

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TABLE OF CONTENTS

Page

1. EXECUTIVE SUMMARY .......................................................................................................... 1

1.1 Background Information on AmBank ...................................................................... 1 1.2 Background Information on AmPremier .................................................................. 1 1.3 Description of the Transaction and Structure of the RMNIT1

Programme.................................................................................................................. 1 1.4 Rationale for the Issuance of the RMNIT1 Programme .......................................... 2 1.5 Utilisation of Proceeds .............................................................................................. 3 1.6 Rating........................................................................................................................... 3 1.7 Approvals Required.................................................................................................... 3 1.8 Conflict of Interest and Appropriate Mitigating Measures ..................................... 5

2. PRINCIPAL TERMS AND CONDITIONS OF THE RMNIT1 PROGRAMME........................... 7

2.1 Overview of Transaction............................................................................................ 7 2.2 Principal Terms and Conditions of the Stapled Securities.................................. 10 2.3 Principal Terms and Conditions of the NCPCS..................................................... 14 2.4 Principal Terms and Conditions of the SubNotes ................................................ 27

3. INVESTMENT CONSIDERATIONS........................................................................................ 39

3.1 Considerations Relating to the Malaysian Banking Industry............................... 39 3.2 Considerations Relating to the AmBank Group.................................................... 40 3.3 Considerations Relating to the Stapled Securities ............................................... 46

4. DESCRIPTION OF THE NCPCS ISSUER ............................................................................ 52

4.1 History and Background Information on AmBank................................................ 52 4.2 Business Overview................................................................................................... 52 4.3 Recent Developments .............................................................................................. 53 4.4 Corporate Information.............................................................................................. 55 4.5 Information on Directors and Senior Management............................................... 58 4.6 AmBank’s Businesses ............................................................................................. 65 4.7 Competitive Strengths ............................................................................................. 75 4.8 Strategy...................................................................................................................... 77 4.9 Risk Management ..................................................................................................... 80

5. DESCRIPTION OF THE SUBNOTES ISSUER...................................................................... 82

5.1 Background Information on AmPremier................................................................. 82 5.2 Substantial Shareholders......................................................................................... 82

5.3 Information on Management.................................................................................... 83 5.4 Other Material Information ....................................................................................... 83

Company No. 8515-D

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TABLE OF CONTENTS (CONT’D)

Page 6. FINANCIAL AND OTHER MATERIAL INFORMATION ........................................................ 84

6.1 Financial Highlights .................................................................................................. 84 6.2 Commentaries On Past Performance ..................................................................... 86 6.3 Capital Adequacy Ratio ............................................................................................ 88

6.4 Material Capital Commitments and Contingent Liabilities ................................... 89 6.5 Material Contracts..................................................................................................... 90 6.6 Material Litigation ..................................................................................................... 92

APPENDICES APPENDIX I INTERIM FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

1 APRIL 2008 TO 30 SEPTEMBER 2008


Company No. 8515-D

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1. EXECUTIVE SUMMARY The executive summary is only a summary of information about the RMNIT1 Programme. You should read and understand the whole IM prior to deciding whether or not to invest in the RMNIT1 Programme. The executive summary should be read in conjunction with the full text of this IM.

1.1 Background Information on AmBank

AmBank was incorporated on 25 March 1969 as a public limited company under the Act, under the name of Malaysia Borneo Finance Corporation (M) Berhad. MBFC was listed on the Main Board of the stock exchange now known as Bursa Malaysia Securities Berhad on 8 June 1983 and changed its name to MBf Finance on 19 December 1985. Pursuant to a restructuring scheme, MBf Finance became a wholly-owned subsidiary of MBf Capital, with MBf Capital assuming the listing status of MBf Finance. MBf Capital was listed on the Main Board of Bursa Securities in place of MBf Finance effective from 15 January 1993 and consequently, MBf Finance was delisted. MBf Finance changed its name to AmFinance Berhad on 3 April 2002 and assumed its present name, i.e. AmBank (M) Berhad on 1 June 2005. AmBank Group provides banking and financial services which include loans, advances and financing, deposit services, credit cards, remittance services, foreign exchange and (through its wholly-owned subsidiary, AmIslamic Bank) Islamic banking services. As at 31 December 2008, the authorised share capital of AmBank is RM3,886,250,002 comprising 1,386,250,002 Shares and 2,500,000,000 IPS of which 670,363,762 Shares and 150,000,000 IPS respectively are issued and fully paid-up.

1.2 Background Information on AmPremier AmPremier was incorporated on 26 December 2008 as a public limited company under the Act, under the name of AmPremier Capital Berhad. AmPremier is a special purpose vehicle set up to facilitate the issuance of the RMNIT1 Programme. Its sole business activity is to issue the SubNotes whereby the proceeds of the issue are to be on-lent to its holding company, AmBank. As at 31 December 2008, the authorised share capital of AmPremier is RM100,000 comprising 100,000 Shares of which 2 Shares are issued and fully paid-up, and wholly-owned by AmBank.

1.3 Description of the Transaction and Structure of the RMNIT1 Programme The RMNIT1 is structured in accordance with the Risk-Weighted Capital Adequacy Framework (General Requirements and Capital Components) issued by BNM. The RMNIT1 comprises the NCPCS to be issued by AmBank, which will be stapled to the SubNotes to be issued by AmPremier, a wholly-owned subsidiary of AmBank. Each stapled NCPCS and SubNote together will constitute a Stapled Security. The NCPCS and SubNotes cannot be traded separately until the occurrence of any one of certain Assignment Events (as defined in Section 2.1).

Company No. 8515-D

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The steps involved in relation to the issuance of the RMNIT1 Programme in respect of every tranche are as follows:-

Step I: Investors subscribe to the NCPCS by paying AmBank a cash consideration equal

to the principal amount of the NCPCS. AmBank receives such proceeds and issues to the investor fully-paid NCPCS.

Step 2: AmBank then enters into a “Forward Purchase Contract” with the investors of the

NCPCS.

(a) Under the terms of the Forward Purchase Contract, AmBank pays up front for the rights of ownership of the SubNotes (to be issued separately by AmPremier simultaneously with the NCPCS) upon an Assignment Event (as defined in Section 2.1); and

(b) The payment under the Forward Purchase Contract is equal to the principal

amount of the SubNotes.

Step 3: The payment by AmBank to the investors under the Forward Purchase Contract is used by the investors to subscribe for the SubNotes to be issued by AmPremier.

Step 4: Prior to the occurrence of an Assignment Event (as defined in Section 2.1), the

NCPCS and SubNotes cannot be traded separately, therefore generating one set of securities, i.e. the Stapled Securities.

Step 5: Upon receipt of the principal amount of the SubNotes, AmPremier will on-lend the

entire proceeds to AmBank by way of an intercompany loan.

1.4 Rationale for the Issuance of the RMNIT1 Programme The issuance of the RMNIT1 Programme is being undertaken by AmBank as part of its capital management initiatives to support and strengthen its capital position and increase its Tier 1 capital as well as capacity for the inclusion of subordinated bonds as fully eligible Tier 2 capital. In addition, the issuance of the RMNIT1 in different tranches will provide AmBank the flexibility to raise fixed-rate funding to fund the growth of its business operations at competitive rates at the appropriate time and take advantage of liquidity in the capital markets in a more cost effective manner in the long run.

AmBank

AmPremier

SubNotes issued

NCPCS issued

StaplingContract

Forward Purchase Contract

1.

2.

Principal Amount

Principal Amount

Forward Purchase Price

4.

3.

Cash Payment

Contract

5. Inter-

company loan

Investors

Company No. 8515-D

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1.5 Utilisation of Proceeds The gross proceeds of up to RM500 million raised from the issuance of the RMNIT1 Programme shall be applied towards funding the growth of AmBank’s business operations and to defray expenses in relation to the issuance of the RMNIT1 Programme of approximately RM1.1 million. The NCPCS will be issued together with the SubNotes progressively over a period of thirty (30) years from the date of the first issuance provided that the first issue is within two (2) years from the date of the SC’s approval. The gross proceeds raised from each tranche of the issuance of the RMNIT1 Programme are estimated to be fully utilised within one (1) year from receipt of such tranche of proceeds.

1.6 Rating As at the date of this IM, RAM has assigned a long-term rating of A3 for the RMNIT1 Programme.

1.7 Approvals Required

The RMNIT1 Programme has been approved by the SC vide its letter dated 6 January 2009 and also, in the same approval letter waived the inclusion of the following provisions of the SC’s Guidelines on the Minimum Contents Requirements for Trust Deeds in the Trust Deed. Such waiver was sought as the Stapled Securities are essentially a ‘hybrid’ instrument and are prohibited from having provisions which will give rise to, or cause, an early redemption such as restrictive covenants, cross default or negative pledge clauses. Waivers sought in relation to Trust Deed Guidelines Item references relate to paragraphs in the Trust Deed Guidelines Item Description 12.1 The trust deed and the terms and conditions of debentures must provide for, but

should not be limited to, the following:-

(i) a list of all events, the occurrence of any of which would entitle or oblige the trustee to declare the debentures immediately due and repayable (to the extent appropriate and subject to any materiality thresholds and provision for remedy or period of grace which may be negotiated) including the following:-

● where there is any default in payment of any principal, premium or interest or

profit rate (where applicable) under the debentures;

● where a winding up order has been made against the borrower or a resolution to wind up the borrower has been passed;

● where a scheme of arrangement under section 176 of the Act has been

instituted against the borrower;

● where a receiver has been appointed over the whole or a substantial part of the assets of the borrower;

● where there is a breach by the borrower of any term or condition in the

debentures or provision of the trust deed or of any other document relating to the issue, offer or invitation in respect of the debentures;

Company No. 8515-D

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Waivers sought in relation to Trust Deed Guidelines Item references relate to paragraphs in the Trust Deed Guidelines Item Description ● where any other indebtedness of the borrower becomes due and payable

prior to its stated maturity or where the security created for any other indebtedness becomes enforceable; and

● where there is a revocation, withholding or modification of a licence,

authorisation or approval that impairs or prejudices the borrower’s ability to comply with the terms and conditions of the debentures or the provisions of the trust deed or any other document relating to the issue, offer or invitation in respect of the debentures.

(ii) the powers of the trustee upon the occurrence of any event described in

subparagraph (i) including:-

● the powers of the trustee to declare the debentures immediately due and repayable;

● the powers of the trustee to enforce the provisions of the trust deed; ● the circumstances under which the trustee shall be bound to enforce the

provisions of the trust deed; and

● the circumstances under which the holders of the debentures are entitled to pursue their rights and remedies.

14.1 As a minimum, the trust deed must provide for the following covenants of the

borrower:-

(iii) that the borrower will not enter into a transaction, whether directly or indirectly with interested persons (including a director, substantial shareholder or persons connected with them) unless –

(a) such transaction shall be on terms that are no less favourable to the

borrower than those which could have been obtained in a comparable transaction from persons who are not interested persons; and

(b) with respect to transactions involving an aggregate payment or value

equal to or greater than an agreed sum, the borrower obtains certification from an independent adviser that the transaction is carried out on fair and reasonable terms;

Provided that the borrower certifies to the trustee that the transaction complies with paragraph (a), that the borrower has received the certification referred to in paragraph (b) (where applicable) and that the transaction has been approved by the majority of the board of directors or shareholders in a general meeting as the case may require;

(vi) ……to provide the trustee and any person appointed by it (e.g. auditors) access to such books and accounts.

16.1 The trust deed should provide for covenants to ensure that the borrower shall immediately notify the trustee in the event that the borrower becomes aware:-

(i) of any event of default or that such other right or remedy under the terms, provisions and covenants of the debentures and trust deed have become immediately enforceable;

Company No. 8515-D

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Waivers sought in relation to Trust Deed Guidelines Item references relate to paragraphs in the Trust Deed Guidelines Item Description 16.3

The trust deed should provide for a covenant by the borrower to provide to the trustee at least annually, a certificate that the borrower has complied with its obligations under the trust deed and the terms and conditions of the debentures and that there did not exist or had not existed, from the date the debentures were issued or date of the previous certificate as the case may be, any event of default and if such is not the case, to specify the same.

20.3 The trust deed should provide for provisions relating to the duties of the trustee which should include the following:-

(i) a duty to exercise reasonable diligence to ascertain, based on the accounts, reports, certificates, circulars or opinions furnished to the trustee, whether the borrower or each guarantor (where applicable) has committed any breach of the term and conditions of the debentures or provisions of the trust deed or whether an event of default has occurred or is continuing;

(ii) in the case where an event of default has occurred and is continuing, the

trustee shall exercise such rights and powers vested in it by the trust deed and use a reasonable degree of skill and diligence in exercising such rights and powers.

BNM has vide its letter dated 23 December 2008 approved the implementation of the RMNIT1 Programme to be eligible as Tier 1 capital under the capital adequacy framework for financial institutions subject to compliance with BNM's guidelines on “Risk-Weighted Capital Adequacy Framework (General Requirements and Capital Components)”.

1.8 Conflict of Interest and Appropriate Mitigating Measures

Principal Adviser

AmInvestment Bank is a wholly-owned subsidiary of AIGB, which in turn is a wholly-owned subsidiary of AHB. AmBank is a wholly-owned subsidiary of AMFB, which in turn is a wholly-owned subsidiary of AHB. AmPremier is a wholly-owned subsidiary of AmBank, which effectively also a wholly-owned subsidiary of AHB. As such, AHB, AIGB, AmInvestment Bank, AMFB, AmBank and AmPremier are deemed to be related corporations. Notwithstanding the aforementioned, AmInvestment Bank, in relation to its role as, amongst others, the Principal Adviser to AmBank and AmPremier in respect of the issuance of the RMNIT1 Programme as well as Lead Manager for the issuance of the RMNIT1 Programme, has considered the factors involved and believes that objectivity and independence in carrying out its role has been/will be maintained at all times for the following reasons:-

• AmInvestment Bank is a licensed investment bank and its appointment as,

amongst others, the Principal Adviser and Lead Manager to AmBank and AmPremier in respect of the issuance of the RMNIT1 Programme is in the ordinary course of its business;

• The conduct of AmInvestment Bank is regulated strictly by BAFIA and CMSA, and

AmInvestment Bank has in place its own internal policies, controls and checks with regards to transactions involving its related corporations;

Company No. 8515-D

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• Save for the professional fees charged in relation to its role as, amongst others, the Principal Adviser and Lead Manager to AmBank and AmPremier for the issuance of the RMNIT1 Programme, AmInvestment Bank will not be deriving any monetary benefit from the proposal outside of its aforesaid capacities; and

• Save for the credit facilities extended to subsidiaries of AHB and other transactions

between AmInvestment Bank in its ordinary course of business as a licensed investment bank and AHB Group which transactions are established on terms and conditions that are no more favourable than those with independent third parties, there are no other financial facilities granted by AmInvestment Bank to AHB or its subsidiary companies.

After taking into consideration of the above, conflict of interest situations, if any, in relation to the appointment of AmInvestment Bank as Principal Adviser and Lead Manager for the issuance of the RMNIT1 Programme are considered mitigated. AmBank, AmPremier and each of its board of directors have confirmed that they are aware of the above conflict of interest situations and that notwithstanding such conflict, they are agreeable to proceed with the appointment of AmInvestment Bank as the Principal Adviser and Lead Manager for the issuance of the RMNIT1 Programme.

Other Adviser

Messrs. Adnan Sundra & Low, being the legal adviser to the Principal Advisor and Lead Arranger and legal due diligence solicitors in respect of the issuance of the RMNIT1 Programme, have confirmed that they do not have any interest in the issuance of the RMNIT1 Programme outside of their capacity as the legal adviser and legal due diligence solicitors.


Company No. 8515-D

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2. PRINCIPAL TERMS AND CONDITIONS OF THE RMNIT1 PROGRAMME

2.1 Overview of Transaction The RMNIT1 is structured in accordance with the Risk-Weighted Capital Adequacy Framework (General Requirements and Capital Components) issued by BNM. The RMNIT1 comprises the NCPCS to be issued by AmBank, which will be stapled to the SubNotes to be issued by AmPremier, a wholly-owned subsidiary of AmBank. Each stapled NCPCS and SubNote together will constitute a Stapled Security. The NCPCS and SubNotes cannot be traded separately until the occurrence of any one of certain Assignment Events (as defined hereunder). The steps involved in relation to the issuance of the RMNIT1 Programme in respect of every tranche are as follows:-

Step I: Investors subscribe to the NCPCS by paying AmBank a cash consideration equal

to the principal amount of the NCPCS. AmBank receives such proceeds and issues to the investor fully-paid NCPCS.

Step 2: AmBank then enters into a Forward Purchase Contract with the investors of the

NCPCS.

(a) Under the terms of the Forward Purchase Contract, AmBank pays up front for the rights of ownership of the SubNotes (to be issued separately by AmPremier simultaneously with the NCPCS) upon an Assignment Event (as defined hereunder); and

(b) The payment under the Forward Purchase Contract is equal to the principal

amount of the SubNotes.

Step 3: The payment by AmBank to the investors under the Forward Purchase Contract is used by the investors to subscribe for the SubNotes to be issued by AmPremier.

Step 4: Prior to the occurrence of an Assignment Event (as defined hereunder), the

NCPCS and SubNotes cannot be traded separately, therefore generating one set of securities, i.e. the Stapled Securities.

Step 5: Upon receipt of the principal amount of the SubNotes, AmPremier will on-lend the

entire proceeds to AmBank by way of an intercompany loan.

AmBank

AmPremier

SubNotes issued

NCPCS issued

StaplingContract

Forward Purchase Contract

1.

2.

Principal Amount

Principal Amount

Forward Purchase Price

4.

3.

Cash Payment

Contract

5. Inter-

company loan

Investors

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Upon occurrence of an Assignment Event (as defined hereunder), the Stapled Securities will “unstaple”, and the ownership of the SubNotes will be assigned from the investors to AmBank pursuant to the Forward Purchase Contract. Such an Assignment Event will leave the investors holding only the NCPCS. The events/circumstances which will result in an “Assignment Event” in respect of each tranche of RMNIT1 issuance include the following:- (a) Breach of BNM’s capital adequacy requirements by AmBank;

(b) Commencement of a Winding Up Proceeding against AmBank or AmPremier (as

defined in Sections 2.3 and 2.4, respectively); (c) Appointment of an administrator in connection with a restructuring of AmBank;

(d) Occurrence of an Enforcement Event (as defined in Section 2.4) in respect of the

SubNotes;

(e) AmPremier or any subsequent Substituted Issuer (as defined in Section 2.2) ceases to be, directly or indirectly, a subsidiary of AmBank;

(f) Requirement by BNM or AmBank elects for the occurrence of the Assignment

Event;

(g) The interest payment date coinciding with the tenth anniversary of the issue date;

(h) 60 days after a Regulatory Event (as defined in Sections 2.3 and 2.4) has occurred, subject to such Regulatory Event continuing to exist at the end of such 60 days;

(i) Any deferral of Interest Payment (as defined in Section 2.4) on the SubNotes; or

(j) The final maturity of that tranche of the SubNotes.

The Assignment Event serves as the mechanism for loss absorption as prescribed by BNM. BNM requires that all Tier 1 instruments are able to absorb losses on a going-concern basis. Following an Assignment Event, investors are left holding only the NCPCS which are subordinated perpetual instruments that distribute non-cumulative distributions.

As long as there is no occurrence of an Assignment Event, the NCPCS will not make any distribution, and the SubNotes will continue to pay interest. However, if AmBank or AmPremier has not declared or distributed dividends on Shares or securities ranking pari-passu with or junior to the SubNotes, and did not redeem, purchase, repay or otherwise acquire any of its Shares, preference shares or securities ranking pari-passu with or junior to the SubNotes in the past six (6) months preceding the interest payment dates, AmPremier may, at its option elect not to make any interest payment. Furthermore, so long as AmBank does not meet BNM’s minimum capital adequacy ratio requirements, AmPremier may defer such interest payments.

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Following an Assignment Event, and as mentioned above, investors are left holding only the NCPCS which are subordinated perpetual instruments that distribute non-cumulative distributions. If these NCPCS remain outstanding, they will begin to make distributions calculated at the same rate as the interest payments on the SubNotes. If AmBank has not declared or distributed dividends on Shares or securities ranking pari-passu with or junior to the NCPCS, and did not redeem, purchase, repay or otherwise acquire any of its Shares, preference shares or securities ranking pari-passu with or junior to the NCPCS in the past six (6) months preceding the distribution dates, AmBank may, at its option elect not to make any NCPCS distribution. Furthermore, so long as AmBank does not meet BNM’s minimum capital adequacy ratio requirements, AmBank may not make any NCPCS distribution. AmBank will not be obliged to distribute undistributed distributions, and such non-payment will not be an Enforcement Event (as defined in Section 2.4) or an event of default.


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2.2 Principal Terms and Conditions of the Stapled Securities

1) Stapling and Transfer

: Each NCPCS issued by AmBank will be stapled to a SubNote issued by AmPremier. Each stapled NCPCS and SubNote together will constitute a “Stapled Security”. Transfer restrictions Until the Assignment Date (as defined hereunder), a NCPCS may not be transferred unless a transfer of the corresponding SubNote which forms part of the same Stapled Security is transferred at the same time, from the same transferor to the same transferee. No separate dealings Until the Assignment Date (as defined hereunder), a NCPCS, and any interest in a NCPCS, is not capable of being transferred, assigned or made the subject of an encumbrance, lien or trust in whole or in part, separately from the corresponding SubNote which forms part of the same Stapled Security. Any transferee, assignee or holder of an encumbrance, lien or trust takes the Stapled Security subject to, and agrees to be bound by, the Terms and Conditions of the Stapled Securities. Unstapling Upon assignment of the SubNotes to AmBank in accordance with the Assignment Event, the corresponding NCPCS ceases to be stapled to the SubNote. For the avoidance of doubt, the SubNote does not cease to be stapled to the corresponding NCPCS which forms part of the same Stapled Security in any other circumstances. Once unstapled, the SubNotes may not be assigned to any person other than AmBank.

2) Assignment Event : An Assignment Event in respect of a tranche, means the occurrence of any of the following events:- (a) AmBank is in breach of BNM’s minimum capital adequacy ratio

requirements applicable to AmBank; or (b) Commencement of a Winding Up Proceeding in respect of AmBank

or AmPremier (as defined in Sections 2.3 and 2.4, respectively); or (c) Appointment of an administrator in connection with a restructuring of

AmBank; or (d) Occurrence of an Enforcement Event in respect of the SubNotes (as

defined in Section 2.4); or (e) AmPremier or any subsequent Substituted Issuer (as defined

hereunder) ceases to be, directly or indirectly, a subsidiary of AmBank; or

(f) BNM requires that an Assignment Event occurs; or (g) AmBank elects that an Assignment Event occurs; or (h) The Interest Payment Date of the SubNotes (as defined in Section

2.4) occurring 10 years after the issue date of that tranche (i.e. either the 10th/20th/40th Interest Payment Date depending on whether it is a annual, semi-annual, or quarterly interest payments respectively during the Initial Interest Payment Period (as defined in Section 2.4); or

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(i) 60 days after a Regulatory Event (as defined in Sections 2.3 and 2.4) has occurred, subject to such Regulatory Event continuing to exist at the end of such 60 days; or

(j) Any deferral of Interest Payment (as defined in Section 2.4) on the

SubNotes; or (k) The Final Maturity (as defined in Section 2.4) of the SubNotes of that

tranche. If an Assignment Event occurs in respect of a tranche, AmBank must notify holders of such tranche of the Stapled Securities of the occurrence of that event by sending to the trustee of each holder of such tranche of the Stapled Securities:- (a) the details of the particular Assignment Event, and (b) the date of such Assignment Event (the “Assignment Date”), as soon as practicable after becoming aware of the applicable Assignment Event. Any notice, once given, is irrevocable. If an Assignment Event in respect of a tranche occurs at any time:- (a) all amounts payable in respect of such tranche of SubNotes after

the Assignment Date (together with or any other amount accrued but unpaid as at the Assignment Date) will be payable to AmBank save for where the Assignment Date is the first Optional Redemption Date (as defined in Section 2.3), such interest accruing from (and including) the last interest payment date immediately before such Assignment Date until (but excluding) such Assignment Date itself shall remain payable by AmPremier to the holders holding the SubNotes (which are stapled to the NCPCS) immediately before the Assignment Date;

(b) such tranche of the SubNotes and all rights, title and interest of the

holders in them are automatically assigned to AmBank on the Assignment Date; and

(c) AmPremier may redeem such tranche of the SubNotes and

AmBank may prepay the Intercompany Loan relating to such tranche.

3) Substitution of

AmPremier : AmPremier may, subject to compliance with applicable law, without the

consent of any holder of the Stapled Securities, NCPCS or SubNotes, substitute for itself any other subsidiary of AmBank as the counterparty in respect of the SubNotes (“Substituted Issuer”), provided that:- (a) AmPremier and the Substituted Issuer have entered into such

documents as are necessary to give effect to the substitution and in which the Substituted Issuer has undertaken in favour of each holder of the SubNotes to be bound by the terms and conditions of the Stapled Securities and SubNotes and, as the counterparty in respect of the SubNotes in place of AmPremier (or of any previous substituted issuer under this paragraph);

(b) the Substituted Issuer and AmPremier have obtained all the

Approvals (as defined hereunder) necessary for such substitution and for the performance by the Substituted Issuer of its obligations under the SubNotes and the documents effecting the substitution;

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(c) if applicable, the Substituted Issuer has appointed a process agent as its agent to receive service or process on its behalf in relation to any legal proceedings arising out of or in connection with the SubNotes; and

(d) the trustees for the holders of the Stapled Securities are of the

reasonable opinion that the respective interests of the holders of the Stapled Securities will not be materially prejudiced by such substitution.

For the avoidance of doubt, if sub-paragraph (d) above is not met, AmPremier or the Substituted Issuer (whichever relevant) may only effect such substitution subject to the prior consent of the holders of the Stapled Securities having been obtained. Substituted Issuer’s rights and obligations under documents Upon such substitution, the Substituted Issuer shall succeed to, and be substituted for, AmPremier (or any previous substituted issuer under this paragraph) under the terms of the SubNotes with the same rights and obligations as if the Substituted Issuer had originally been named as the issuer in the terms of the SubNotes, and AmPremier (or any previous substituted issuer under this paragraph) shall be released from its obligations under the SubNotes. Further substitutions After a substitution, the Substituted Issuer may, subject to compliance with applicable law, effect a further substitution (including to AmPremier or a previous substituted issuer). All the provisions specified in this paragraph will apply (with necessary changes) and references in these terms to AmPremier are taken, where the context so requires, to be or include references to any such further Substituted Issuer. Notice to Holders AmPremier or the Substituted Issuer (whichever relevant) must notify the holders of the Stapled Securities of the particulars of any substitution as soon as practicable after the substitution and specify the Substituted Issuer. “Approvals” means obtaining or procuring such prior approval of BNM, SC, Bursa Securities (if required), any other regulatory or governmental approvals, and/or approval of the shareholder(s) of AmBank and/or any other requisite approvals, if such approvals are required to carry out the matters referred to in this clause or Clause 4, Substitution and Variation.

4) Substitution and Variation

: AmBank or AmPremier may, subject to obtaining the Approvals and compliance with applicable law, but without any requirement for the consent or approval of the holders of the Stapled Securities, substitute at any time all (but not in part) of the NCPCS or SubNotes for, or vary the terms of the NCPCS or SubNotes or Stapled Securities to become, Qualifying Equivalent Securities (as defined hereunder) if (1) a Tax Event (as defined in Sections 2.3 and 2.4) occurs, so that no Tax Event exists after such substitution or variation or (2) a Regulatory Event (as defined in Sections 2.3 and 2.4) occurs, so that no Regulatory Event exists after such substitution or variation. If Qualifying Equivalent Securities (as defined hereunder) are substituted for the NCPCS, the amount of Qualifying Equivalent Securities to be given in substitution for each NCPCS shall be equal to the original principal amount of the NCPCS.

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If Qualifying Equivalent Securities (as defined hereunder) are substituted for the SubNotes, the amount of Qualifying Equivalent Securities to be given in substitution for each SubNote shall be equal to the original principal amount of the SubNotes. “Qualifying Equivalent Securities” means securities substituting the NCPCS or the SubNotes (as the case may be), or the NCPCS or the SubNotes or the Stapled Securities (as the case may be) after their terms have been varied under this clause:- (a) which have terms taken as a whole not less favourable to an

investor (as reasonably determined by AmBank, and provided that a certification to such effect by the management of AmBank shall have been delivered to the holders of the Stapled Securities prior to the substitution or variation of the relevant NCPCS or SubNotes or Stapled Securities) than the terms of the NCPCS or the SubNotes or the Stapled Securities;

(b) which qualify as NIT1 under BNM’s NIT1 Guidelines if substituting

or varying the terms of the NCPCS, or varying the terms of the Stapled Securities;

(c) which have a pari passu ranking with the NCPCS or the SubNotes

as the case may be; and (d) which shall bear the same distribution or interest rate from time to

time as the NCPCS Distribution Rate (as defined in Section 2.3) or the Interest Rate (as defined in Section 2.4).

5) Forward Purchase : Investors will subscribe for the Stapled Securities by paying AmBank a cash

consideration equal to the principal amount of the NCPCS, in return for which AmBank will issue fully-paid NCPCS to such investors. AmBank will then enter into a forward purchase contract (the “Forward Purchase Contract”) with such investors pursuant to which:- (a) AmBank pays such investors up-front for a purchase of SubNotes (in a

principal amount equal to the principal amount for the NCPCS purchased by such investors) upon an Assignment Event; and

(b) such investors apply this up-front amount to subscribe at par for the

relevant amount of SubNotes from AmPremier.


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2.3 Principal Terms and Conditions of the NCPCS (a) Name of parties involved in the transaction (where applicable) Principal Adviser/Lead Manager : AmInvestment Bank Solicitors : Adnan Sundra & Low Trustee : Pacific Trustees Berhad Facility Agent : AmInvestment Bank Primary subscriber(s) and amount

subscribed : To be determined prior to each issuance in respect of

issuance via bought deal basis only. Underwriter(s) and amount

underwritten : N/A. AmBank is proposing to issue the NCPCS via a direct

placement without prospectus on a best effort basis or a bought deal basis or book running on a best effort basis.

Central Depository : BNM Paying Agent : BNM Reporting Accountant : Ernst & Young (Firm No.: AF 0039) Tax Adviser : Deloitte KassimChan Tax Services Sdn Bhd (b) Facility description : NCPCS programme - The NCPCS will be recognised as

NIT1 in accordance with the Risk Weighted Capital Adequacy Framework issued by BNM.

(c) Issue size : Up to RM500,000,000 in nominal value.

The total outstanding NCPCS shall not at any time exceed RM500,000,000 in nominal value.

(d) Issue price : 100% of the principal amount of the NCPCS. (e) Tenor of the facility/issue : Facility

Up to 60 years from the date of the first issuance of NCPCS. The NCPCS Issuer may issue the NCPCS at any time within the 30-year period from the date of the first issuance provided that the first issue is within two (2) years from the date of the SC’s approval. Issue The tenor of the NCPCS will be perpetual.

(f) Interest/coupon (%) : The interest/coupon will be determined by the Lead Manager,

in consultation with AmBank prior to the respective issuance.

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(g) Interest/coupon payment frequency

: Subject to applicable law, the clause relating to “NCPCS Distribution” and the clause relating to “Limitation on Payments”, NCPCS Distributions will accrue on the relevant tranche of NCPCS from (and including) the Assignment Date of such NCPCS and will be payable in arrears on the following dates (each a “NCPCS Distribution Date”) for each tranche:- (a) Annually, semi-annually, or quarterly (to be

determined by the Lead Manager, in consultation with AmBank prior to the respective issuance) during the period from (and including) the Assignment Date to (but excluding) the first Optional Redemption Date (as defined in Section 2.3(x)(i)) (“Initial NCPCS Distribution Period”); and

(b) Thereafter, semi-annually in each year.

(h) Interest/coupon payment basis : “NCPCS Distribution Rate” in respect of a tranche of NCPCS means a fixed rate per annum (to be determined prior to issuance). The “NCPCS Distribution” payable in respect of a tranche of the NCPCS shall be calculated by applying the relevant NCPCS Distribution Rate to the original principal amount of the NCPCS of such tranche, multiplied by the relevant Day Count Fraction (as defined hereunder). Where appropriate, NCPCS Distributions shall also include any Additional Amounts (as defined in Section 2.3(x)(iv)) due and payable with respect thereto. “Day Count Fraction” means in respect of any period, the actual number of days in the relevant period divided by 365.

(i) YTM (%) : The YTM will be determined by the Lead Manager in

consultation with AmBank prior to the respective issuance. (j) Security/collateral (if any) : None. (k) Details on utilisation of

proceeds : The issuance of NCPCS Programme forms part of the

issuance of RMNIT1 Programme. The proceeds of the NCPCS shall be applied towards the Forward Purchase Contracts. Following the subscription by investors of the SubNotes, the proceeds of issue of the SubNotes will be on-lent by AmPremier to AmBank through an Intercompany Loan, to become immediately available to AmBank, without limitation, for its working capital and general banking purposes. In this respect, the gross proceeds of up to RM500 million raised from the issuance of RMNIT1 Programme shall be applied towards funding the growth of AmBank’s business operations and to defray expenses in relation to the issuance of RMNIT1 Programme.

(l) Sinking fund (if any) : None.

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(m) Rating : Final long-term rating of A3 from RAM. (n) Form and denomination : The issuance of NCPCS Programme forms part of the

issuance of RMNIT1 Programme. The issuance of RMNIT1 Programme is issued in accordance with:- (a) IPBM Code; (b) RENTAS Rules; and (c) FAST Rules, or their replacement thereof (collectively the “Codes of Conduct”) applicable from time to time. The RENTAS Rules shall prevail to the extent of any inconsistency between the RENTAS Rules and the IPBM Code. The NCPCS shall be in denominations greater or equal to RM1,000 each. Any amounts issued in denominations greater than RM1,000 will be in increments of RM1,000 or such other denominations as determined or allowed by BNM and in multiples of RM1,000 and will be represented at all times by a “Global Certificate” to be deposited with BNM, and is exchangeable for definitive bearer form only in certain limited circumstances. The NCPCS will be stapled to the SubNotes and together will constitute a Stapled Security. The NCPCS and SubNotes cannot be traded separately until an Assignment Event occurs.

(o) Mode of Issue : The NCPCS may be issued via direct placement without

prospectus on a best effort basis or a bought deal basis or book running on a best effort basis.

(p) Selling restriction : At Issuance

The NCPCS may not be offered, sold or delivered, directly or indirectly, nor may any document or other material in connection therewith be distributed in Malaysia other than to persons falling within Schedule 6 or Section 229(1)(b), Schedule 7 or Section 230(1)(b), and Schedule 9 or Section 257(3) of the CMSA. After Issuance The NCPCS may not be offered, sold or delivered, directly or indirectly, nor may any document or other material in connection therewith be distributed in Malaysia other than to persons falling within Schedule 6 or Section 229(1)(b) and Schedule 9 or Section 257(3) of the CMSA.

(q) Listing status : The NCPCS will not be listed on Bursa Securities or on any

other stock exchange.

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(r) Minimum level of subscription (RM or %)

: 5% of the respective tranche of the NCPCS to be issued if the issuance is via book-building. 100% of the respective tranche of the NCPCS to be issued if the issuance is via private placement or bought deal.

(s) Other regulatory approvals required in relation to the issue, offer or invitation and whether or not obtained

: The issuance of NCPCS Programme forms part of the issuance of RMNIT1 Programme. In this respect, the following approvals have been obtained:- (a) BNM’s approval for the issuance of RMNIT1

Programme and classification of the NCPCS as Tier 1 capital of AmBank for inclusion in the computation of AmBank’s RWCR. In addition, BNM’s approval was obtained for the establishment of AmPremier; and

(b) SC’s approval on the waiver from compliance with

certain provisions under the SC’s Guidelines on the Minimum Contents Requirements for Trust Deeds in respect of the issuance of NCPCS Programme.

(t) Conditions precedent

: To include but not limited to the following (in form acceptable

to the Lead Manager):- (a) execution of all Transaction Documents (as defined

in Section 2.3(x)(xvii)); (b) delivery of the NCPCS Issuer’s Memorandum and

Articles of Association, board resolution and other constitutional documents of the NCPCS Issuer required by the Lead Manager;

(c) evidence that the Stapled Securities have been

accorded the requisite rating as stated in this Principal Terms and Conditions;

(d) receipt by the Lead Manager of tax and legal

opinions; (e) all representations and warranties made by AmBank

to the Lead Manager in the programme agreement remaining true and correct and there having been no material adverse change in AmBank's financial condition; and

(f) receipt by AmBank of all requisite regulatory

approvals for the issuance of the NCPCS.

(u) Representations and warranties

: Representations and warranties typical and customary for financing of this nature, which shall include but not be limited to the following:- (a) that the NCPCS Issuer is a company duly

incorporated under the laws of Malaysia as a legal entity and has full power and authority to own its assets and carry on its business as it is now being carried on;

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(b) that the NCPCS Issuer has the power and capacity to execute, deliver and perform the terms of the Transaction Documents (as defined in Section 2.3(x)(xvii)) and the NCPCS Issuer has taken all necessary corporate and other actions to authorise the execution, delivery and performance of the Transaction Documents (as defined in Section 2.3(x)(xvii));

(c) that no Enforcement Event (as defined in Section 2.3

(x)(xii)) has occurred; (d) that to the best of the knowledge of the directors of

the NCPCS Issuer, the NCPCS Issuer is not in liquidation and no steps have been taken by any person for or with a view to the appointment of a liquidator, receiver and/or manager or judicial manager of the NCPCS Issuer or any of its assets or undertakings that would have a material adverse effect on the ability of the NCPCS Issuer to comply with its obligations under the Transaction Documents (as defined in Section 2.3(x)(xvii));

(e) no litigation or arbitration is current or, to the NCPCS

Issuer’s knowledge, is threatened, which if adversely determined would have a material adverse effect on the ability of the NCPCS Issuer to comply with its obligations under the Transaction Documents (as defined in Section 2.3(x)(xvii));

(f) the written information provided to the Lead Manager

and contained in the IM are true, complete, accurate and not misleading and no circumstance or situation has arisen which would materially and adversely affect the condition of the NCPCS Issuer (financial or otherwise) or the earnings, affairs or business prospects of the NCPCS Issuer or the success of the issue of the NCPCS;

(g) there has been no change in the business or

condition (financial or otherwise) of the NCPCS Issuer or its subsidiaries since the date of its last audited financial statements which might have a material adverse effect on the ability of the NCPCS Issuer to comply with its obligations under the Transaction Documents (as defined in Section 2.3(x)(xvii));

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(h) that the audited financial statements and unaudited financial statements of the NCPCS Issuer to be delivered to the Trustee from time to time in accordance with the trust deed have been prepared in accordance with all relevant laws and the approved accounting standards issued by the Malaysian Accounting Standards Board (save for matters specifically disclosed therein) consistently applied and give a true and fair view of the financial condition and results of operations of the NCPCS Issuer and its subsidiaries, taken as a whole, as of the date or dates to which they were made up and that there has been no adverse change in the financial position of the NCPCS Issuer and its subsidiaries taken as a whole, which is material in the context of the issue of the NCPCS since the date of such financial statements; and

(i) non-conflict with laws, contracts or constitutional

documents in the execution of the Transaction Documents (as defined in Section 2.3(x)(xvii)).

(v) Events of default

: Please refer to the clause relating to “Limited Right of

Acceleration”. (w) Principal terms and conditions

for the warrants : Not applicable as no warrants are issued.

(x) Other principal terms and conditions for the issue (i) Optional Redemption : On any Optional Redemption Date (as defined hereunder) of

a tranche of NCPCS, AmBank may, at its option, redeem such tranche of the NCPCS (in whole, but not in part) at the Redemption Amount (as defined hereunder), subject to the Redemption Conditions (as defined hereunder) being satisfied. “Optional Redemption Date” in relation to a particular tranche of NCPCS means the NCPCS Distribution Date which corresponds to the 10th/20th/40th (depending on whether it is a annual, semi-annual, or quarterly distributions respectively are to be made during the Initial NCPCS Distribution Period) Interest Payment Date or any NCPCS Distribution Date thereafter of such tranche. “Redemption Conditions” in relation to each tranche of NCPCS means:- (a) an Assignment Event has occurred and the SubNotes

have been assigned to AmBank in connection therewith;

(b) AmBank is solvent at the time of any redemption of

the NCPCS; (c) AmBank meets BNM’s minimum capital adequacy

ratio requirements applicable to AmBank; and (d) AmBank has obtained the written approval of BNM

prior to redemption.

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“Redemption Amount” in relation to each tranche of NCPCS means an amount equal to:- (a) 100% of the principal amount for the respective

tranche of the NCPCS; (b) accrued but unpaid NCPCS Distributions (if any) up to

(and excluding) the date on which the NCPCS are redeemed;

(c) any other amounts outstanding on the NCPCS (if any)

up to (and excluding) the date on which the NCPCS are redeemed;

(d) an amount equal to accrued Interest Payments of the

SubNotes stapled to such tranche of NCPCS (if any) (as defined in Section 2.4) from the last Interest Payment Date (as defined in Section 2.4 (g)) before the Assignment Date up to (and excluding) the Assignment Date if not already paid to the holders of the NCPCS through an optional distribution as detailed in the clause relating to “Capital and Dividend Stopper”; and

(e) an amount equal to any other amounts outstanding on

the SubNotes excluding unpaid interest from the last Interest Payment Date before the Assignment Date up to (and excluding) the Assignment Date if not already paid to the holders of the NCPCS through an optional distribution as detailed in the clause relating to “Capital and Dividend Stopper”.

(ii) Redemption due to

Aborting of Merger or Acquisition

If the NCPCS were issued for the purpose of funding a merger or acquisition, which is subsequently aborted, AmBank may, at its option, and subject to BNM’s prior approval, redeem the NCPCS (in whole, but not in part) at 101% or at prevailing market rates, whichever is higher, of the aggregate principal amount of the NCPCS together with accrued and unpaid NCPCS Distributions and any Additional Amounts (as defined in Section 2.3(x)(iv)) thereon.

(iii) Tax Redemption

: AmBank may, at its option, redeem the NCPCS (in whole, but

not in part) at the Redemption Amount, subject to the Redemption Conditions being satisfied, if a Tax Event (as defined hereunder)) occurs. “Tax Event” means any time if there is more than an insubstantial risk, as determined by AmBank and as certified by an external tax advisor, that AmBank and/or AmPremier will be required to pay any Additional Amounts (as defined in Section 2.3(x)(iv)) in respect of the NCPCS, the SubNotes, or the Intercompany Loan, or will no longer be able to fully deduct interest in respect of the SubNotes or the Intercompany Loan for taxation purposes as a result of a change in any applicable law or regulation which comes into effect on or after the issue date.

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(iv) Taxation and Additional Amounts

: All NCPCS Distributions payable by AmBank in respect of the NCPCS shall be made free and clear of, and without withholding or deduction for taxes imposed, levied, collected, withheld or assessed by or within Malaysia or any authority therein or thereof having power to tax, unless such withholding or deduction is required by law. In that event, AmBank shall pay such additional amounts (“Additional Amounts”) as will result in receipt by the holders of such amounts as would have been received by them had no such withholding or deduction been required.

(v) Regulatory Redemption : AmBank may, at its option, redeem the NCPCS (in whole, but

not in part) at the Redemption Amount, subject to the Redemption Conditions being satisfied, if a Regulatory Event (as defined in Section 2.3(x)(v)) occurs. “Regulatory Event” means any time there is more than an insubstantial risk, as determined by AmBank and as certified by an external legal advisor, that the NCPCS will no longer qualify as NIT1 of AmBank for the purposes of BNM’s capital adequacy requirements under any applicable regulations or guidelines.

(vi) NCPCS Distribution : NCPCS Distributions on the relevant tranche of the NCPCS

will not begin to accrue until the Assignment Date in respect of that tranche. From the Assignment Date in respect of the relevant tranche of the NCPCS, NCPCS Distributions will accrue and holders of that tranche of the NCPCS will be entitled to receive NCPCS Distributions, calculated at the respective NCPCS Distribution Rate, subject to:- (a) AmBank meeting and continuing to meet BNM’s

minimum capital adequacy ratio requirements applicable to AmBank on the relevant NCPCS Distribution Date following a distribution of a NCPCS Distribution; and

(b) The Payment Limitation Condition (as defined in

Section 2.3(x)(vii)) not being met. For the avoidance of doubt, if the Payment Limitation Condition (as defined in Section 2.3(x)(vii)) is not met and AmBank does not meet BNM’s minimum capital adequacy ratio requirements applicable to AmBank on the relevant NCPCS Distribution Date, or if the Payment Limitation Condition (as defined in Section 2.3(x)(vii)) is not met and AmBank would not continue to meet BNM’s minimum capital adequacy ratio requirements applicable to AmBank following an NCPCS Distribution, holders of the NCPCS will not be entitled to receive NCPCS Distributions on the relevant NCPCS Distribution Date.

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(vii) Limitations on Payments : If the Payment Limitation Condition (as defined hereunder) is met on the 15th business day prior to any NCPCS Distribution Date, AmBank may, at its option, elect not to distribute NCPCS Distributions on such NCPCS Distribution Date provided that the Payment Limitation Condition (as defined hereunder) continues to be met in the period from the 15th business day prior to such NCPCS Distribution Date to (and including) such NCPCS Distribution Date. If AmBank elects not to distribute the NCPCS Distribution on such NCPCS Distribution Date, such NCPCS Distribution will be cancelled and any such cancellation and non-payment will not constitute or be deemed a default by AmBank for any purpose whatsoever. If AmBank has not fully distributed a NCPCS Distribution on a NCPCS Distribution Date, or has not fully paid to holders of the NCPCS an amount equal to accrued Interest Payments (if any) and any other amounts outstanding on the SubNotes (if any) from the last Interest Payment Date before the Assignment Date up to (and excluding) the Assignment Date, the relevant restrictions described in the clause relating to “Capital and Dividend Stopper”, will apply. Any payment of (a) dividends to shareholders of AmBank and/or (b) dividends or interest to holders of securities or instruments ranking pari passu with or junior to the NCPCS and which contain deferral rights or rights of non-payment with respect to interest payment(s), in connection with the Payment Limitation Condition (as definedhereunder) ceasing to exist, may only be made simultaneously with, or immediately following the full distribution of a NCPCS Distribution on a NCPCS Distribution Date. The “Payment Limitation Condition” is deemed to be met if during the 6 month period immediately preceding any NCPCS Distribution Dates:- (a) AmBank did not declare dividends, or make any

interest payment(s), on other securities or obligations ranking pari passu with or junior to the NCPCS; and

(b) AmBank did not redeem, purchase, repay or

otherwise acquire any of its Shares, preference shares or securities ranking pari passu with or junior to the NCPCS, or any securities or obligations of any of its subsidiary undertakings benefiting from a guarantee from AmBank, ranking, as to the right of repayment of principal, or in the case of any such guarantee, as to the payment of sums under such guarantee, pari passu with or junior to the NCPCS.

Notwithstanding the above, on any NCPCS Distribution Date with respect to which (i) a Regulatory Event has occurred and is continuing and (ii) AmBank is not in breach of BNM minimum capital adequacy ratio requirements, AmBank shall be obliged to pay the NCPCS Distribution.

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For the avoidance of doubt, no NCPCS Distributions will be made if a distribution of a NCPCS Distribution will result in AmBank breaching BNM’s minimum capital adequacy ratio requirements i.e. such NCPCS Distribution will be cancelled and any such cancellation and non-payment will not constitute or be deemed a default by AmBank for any purpose whatsoever.

(viii) Capital and Dividend

Stopper : Following an Assignment Event, in the event that AmBank

(a) does not fully distribute a NCPCS Distribution on a

NCPCS Distribution Date; or (b) has not fully paid to holders of the NCPCS an amount

equal to accrued Interest Payments (if any) and any other amounts outstanding on the SubNotes (if any) from the last Interest Payment Date before the Assignment Date up to (and excluding) the Assignment Date;

the relevant restrictions of Capital and Dividend Stopper shall apply. Dividend Stopper AmBank shall not pay any dividend to shareholders or make any interest payment or distribution on any other securities or obligation ranking pari passu with or junior to the NCPCS which contain deferral rights or rights of non-payment with respect to interest payments or dividend distributions including other Non-innovative and Innovative Tier 1 Capital qualifying securities (“Dividend Stopper”). Capital Stopper Furthermore, AmBank shall not redeem, purchase, repay or otherwise acquire any of its Shares, preference shares or securities ranking pari passu with or junior to the NCPCS, or any securities or obligation of any of its subsidiary undertakings benefiting from a guarantee from AmBank, ranking, as to the right of repayment of principal, or in the case of any such guarantee, as to the payment of sums under such guarantee, pari passu with or junior to the NCPCS, including other Non-innovative and Innovative Tier 1 Capital qualifying securities (“Capital Stopper”). The Dividend Stopper and Capital Stopper will apply until:-

(i) AmBank has fully distributed NCPCS Distributions on

the next annual/next two semi-annual/next four quarterly distributions (depending on the applicable distribution periods) during the Initial NCPCS Distribution Period or the next two semi-annual distributions after the Initial NCPCS Distribution Period, in the case of (a) and/or (b) above; or

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(ii) AmBank has set aside an amount sufficient to provide for the full distribution of NCPCS Distribution on the next annual/next two semi-annual/next four quarterly distributions (depending on the applicable distribution periods) during the Initial NCPCS Distribution Period or the next two semi-annual distributions after the Initial NCPCS Distribution Period in the case of (a) and/or (b) above and if upon determination of the amount of each of such NCPCS Distribution there is a shortfall in the amounts set aside with reference to the amounts so determined, an amount at least equal to such shortfall shall be paid or irrevocably set aside in the same manner; or

(iii) an optional distribution has been paid to the holders

of the NCPCS equal to accrued Interest Payments (if any) and any other amounts outstanding on the SubNotes (if any) from the last Interest Payment Date before the Assignment Date up to (and excluding) the Assignment Date in the case of (b) above.

For the avoidance of doubt, in the case where only (a) above occurs, the Dividend Stopper and Capital Stopper will apply until either (i) or (ii) above are met; in the case where only (b) above occurs, the Dividend Stopper and Capital Stopper will apply until any of (i), (ii) or (iii) is met; and in the case where both (a) and (b) occurs, the Dividend Stopper and Capital Stopper will apply until (iii) and one of (i) or (ii) are met.

(ix) Subordination : The principal amount of, and any NCPCS Distributions

payable and any Additional Amounts payable on the NCPCS will be subordinated in right of payment upon occurrence of any Winding Up Proceeding (as defined hereunder), to the prior payment in full of all deposit liabilities and all other liabilities of AmBank (including liabilities of all offices, branches and subsidiaries of AmBank wherever located and any securities (whether subordinated or unsubordinated) of AmBank that rank senior to the NCPCS) except, in each case, to those liabilities and securities which by their terms rank equal with or junior to the NCPCS. Claims in respect of the NCPCS will rank pari passu and without preference among themselves and with the most junior class of preference shares (if any) of AmBank, but in priority to the rights and claims of holders of the ordinary equity shares of AmBank.

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“Winding Up Proceeding” means the occurrence of any of the following:- (a) An agency or supervisory authority in Malaysia having

jurisdiction in respect thereof shall have instituted a proceeding or a proceeding instituted in court or a court, agency or supervisory authority in Malaysia having jurisdiction in respect thereof entered a decree or order for the appointment of a receiver or liquidator in any insolvency, rehabilitation, readjustment of debt, marshalling of assets and liabilities, or similar arrangements involving AmBank or all or substantially all of its properties, or for the winding up of or liquidation of its affairs and such proceeding, decree or order shall not have been vacated or shall have remained in force undischarged or unstayed for a period of 30 days; or

(b) AmBank files a petition in accordance with any

insolvency statute. (x) Amendments : No provision of the NCPCS may be amended without the prior

written consent of BNM if such amendment would or may result in the NCPCS not being treated as NIT1 of AmBank on a consolidated or unconsolidated basis.

(xi) Guarantee : The NCPCS will not be secured or covered by a guarantee of

AmBank or any related entity of AmBank, or any other arrangement that legally or economically enhances the seniority of the claims of the holders of the NCPCS.

(xii) Limited Right of

Acceleration : If an Enforcement Event (as defined hereunder) occurs in

respect of a tranche of NCPCS, then holders of that tranche of NCPCS may institute such proceedings as it chooses to enforce the obligations of AmBank under the relevant NCPCS and/or institute Winding Up Proceedings against AmBank but provided that no person shall have any right to accelerate payment of such NCPCS or of other tranche of NCPCS in the case of such default in the payment of any NCPCS Distributions on or other amounts owing under any of the tranche of NCPCS or a default in the performance of any other covenants of AmBank. If a Winding Up Proceeding occurs or an effective resolution of the shareholders of AmBank is passed for a winding up of AmBank, all the holders of the NCPCS of all tranches may declare that all the outstanding NCPCS to be due and payable immediately, by a notice in writing to AmBank. Upon such a declaration, the outstanding amount of the NCPCS and any NCPCS Distributions payable shall become immediately due and payable. “Enforcement Event” means a default is made in the payment of relevant tranche NCPCS Distributions on the NCPCS on the due date for payment thereof and such default continues for 14 days (other than non-payment of NCPCS Distributions in accordance with Limitations on Payments).

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(xiii) Repurchase and Cancellation

: AmBank or any of its subsidiaries may at any time purchase, subject to the prior approval of BNM, the NCPCS at any price in the open market or by private treaty. If purchases are made by tender, such tender must (subject to any applicable rules and regulations) be made available to all holders of the NCPCS equally. NCPCS purchased by AmBank or any of its related companies may not be used for voting purposes or for directing or requesting the Trustee to take any action. All NCPCS which are (a) redeemed or (b) purchased by AmBank or any of its subsidiaries (other than in the ordinary course of business) will forthwith, subject to the prior approval of BNM, be cancelled and accordingly may not be reissued or resold.

(xiv) Voting Rights : Holders of the NCPCS will not be entitled to receive notice of

or attend or vote at any meeting of the ordinary shareholders of AmBank or to participate in the management of AmBank.

(xv) Governing Laws : The NCPCS will be governed by, and construed in

accordance with Malaysian Law. (xvi) Covenants : Covenants typical and customary for financing of this nature. (xvii) Transaction Documents : Transaction Documents shall refer to:-

(a) Programme Agreement; (b) Trust Deed; (c) Depository and Paying Agency Agreement; and (d) Any other legal documentation as may be advised by

the legal counsel for the Lead Manager


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2.4 Principal Terms and Conditions of the SubNotes

(a) Name of parties involved in the transaction (where applicable) Principal Adviser/Lead Manager : AmInvestment Bank Solicitors : Adnan Sundra & Low Trustee : Pacific Trustees Berhad Facility Agent : AmInvestment Bank Primary subscriber(s) and

amount subscribed : To be determined prior to each issuance in respect of

issuance via bought deal basis only. Underwriter(s) and amount

underwritten : N/A. AmPremier is proposing to issue the SubNotes via

a direct placement without prospectus on a best effort basis or a bought deal basis or book running on a best effort basis.

Central Depository

: BNM

Paying Agent : BNM Reporting Accountant : Ernst & Young (Firm No.: AF 0039) Tax Adviser : Deloitte KassimChan Tax Services Sdn Bhd (b) Facility description : SubNotes programme (c) Issue size : Up to RM500,000,000 in nominal value.

The total outstanding SubNotes shall not at any time exceed RM500,000,000 in nominal value.

(d) Issue price : 100% of the principal amount of the SubNotes. (e) Tenor of the facility/issue : Facility

Up to 60 years from the date of the first issuance of SubNotes. The SubNotes Issuer may issue the SubNotes at any time within the 30-year period from the date of the first issuance provided that the first issue is within two (2) years from the date of the SC’s approval. Issue The tenor of the SubNotes will be 30 years. On the Final Maturity Date (as defined hereunder), AmPremier shall redeem the SubNotes (in whole, but not in part) at the Redemption Amount (as defined in Section 2.4(x)(i)). “Final Maturity Date” in relation to a tranche means the Interest Payment Date 30 years from the issue date of the SubNotes.

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(f) Interest/coupon (%) : The interest/coupon will be determined by Lead Manager, in consultation with AmPremier prior to the respective issuance.

(g) Interest/coupon payment

frequency : Subject to applicable law, the clause relating to

“Interest Payments” and the clause relating to “Limitation on Payments”, Interest Payments will accrue on the relevant tranche of the SubNotes from (and including) the issue date of such SubNotes and will be payable in arrears on the following dates (each an “Interest Payment Date”) for each tranche:- (a) annually, semi-annually, or quarterly (to be

determined by the Lead Manager, in consultation with AmPremier prior to the respective issuance) during the period from (and including) the relevant issue date to (but excluding) the 10th/20th/40th (depending whether it is a annual, semi-annual, or quarterly interest payments respectively during the Initial Interest Payment Period) Interest Payment Date (“Initial Interest Payment Period”); and

(b) thereafter, semi-annually in each year. An “Interest Period” in respect of a tranche of SubNotes is the period from and including an Interest Payment Date (or the issue date, in case of the first Interest Period) to but excluding the immediately succeeding Interest Payment Date.

(h) Interest/coupon payment

basis : “Interest Rate” in respect of a tranche of SubNotes

means a fixed rate per annum (to be determined prior to issuance). The “Interest Payment” in respect of a tranche of the SubNotes in relation to an Interest Period shall be calculated by applying the relevant Interest Rate to the original principal amount of the SubNotes of such tranche, multiplied by the relevant Day Count Fraction (as defined hereunder). Where appropriate, Interest Payments shall also include any Additional Amounts (as defined in Section 2.4(x)(iv)) due and payable with respect thereto. “Day Count Fraction” means in respect of any period, the actual number of days in the relevant period divided by 365.

(i) YTM (%) : The YTM will be determined by the Lead Manager in

consultation with AmPremier prior to the respective issuance.

(j) Security/collateral (if any) : None.

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(k) Details on utilisation of proceeds

: The proceeds of the issue of the SubNotes will be on-lent by AmPremier to AmBank through the Intercompany Loan. The proceeds of the subordinated loan shall be made immediately available to AmBank, without limitation, for its working capital and general banking purposes.

(l) Sinking fund (if any) : None. (m) Rating : Final long-term rating of A3 from RAM. (n) Form and denomination : The issuance of SubNotes Programme forms part of

the issuance of RMNIT1 Programme. The issuance of RMNIT1 Programme is issued in accordance with:- (a) IPBM Code; (b) RENTAS Rules; and (c) FAST Rules, or their replacement thereof (collectively the “Codes of Conduct”) applicable from time to time. The RENTAS Rules shall prevail to the extent of any inconsistency between the RENTAS Rules and the IPBM Code. The SubNotes shall be in denominations greater or equal to RM1,000 each. Any amounts issued in denominations greater than RM1,000 will be in increments of RM1,000 or such other denominations as determined or allowed by BNM and in multiples of RM1,000 and will be represented at all times by a “Global Certificate” to be deposited with BNM, and is exchangeable for definitive bearer form only in certain limited circumstances. The SubNotes will be stapled to the NCPCS and together will constitute a Stapled Security. The SubNotes and NCPCS cannot be traded separately until an Assignment Event occurs.

(o) Mode of Issue : The SubNotes may be issued via direct placement

without prospectus on a best effort basis or a bought deal basis or book running on a best effort basis.

(p) Selling restriction : At Issuance The SubNotes may not be offered, sold or delivered, directly or indirectly, nor may any document or other material in connection therewith be distributed in Malaysia other than to persons falling within Schedule 6 or Section 229(1)(b) or Schedule 7 or Section 230(1)(b), and Schedule 9 or Section 257(3) of the CMSA.

Company No. 8515-D

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After Issuance The SubNotes may not be offered, sold or delivered, directly or indirectly, nor may any document or other material in connection therewith be distributed in Malaysia other than to persons falling within Schedule 6 or Section 229(1)(b) and Schedule 9 or Section 257(3) of the CMSA.

(q) Listing status : The SubNotes will not be listed on Bursa Securities or

on any other stock exchange. (r) Minimum level of subscription

(RM or %) : 5% of the respective tranche of the SubNotes to be

issued if the issuance is via book-building. 100% of the respective tranche of the SubNotes to be issued if the issuance is via private placement or bought deal.

(s) Other regulatory approvals

required in relation to the issue, offer or invitation and whether or not obtained

: The issuance of SubNotes Programme forms part of the issuance of RMNIT1 Programme. In this respect, the following approvals have been obtained:- (a) BNM’s approval for the issuance of RMNIT1

Programme and classification of the NCPCS as Tier 1 capital of AmBank for inclusion in the computation of AmBank’s RWCR. In addition, BNM’s approval was obtained for the establishment of AmPremier; and

(b) SC’s approval on the waiver from compliance with certain provisions under the SC’s Guidelines on the Minimum Contents Requirements for Trust Deeds in respect of the issuance of SubNotes Programme.

(t) Conditions precedent

: To include but not limited to the following (in form

acceptable to the Lead Manager):- (a) execution of all Transaction Documents (as

defined in Section 2.4(x)(xvii)); (b) delivery of the SubNotes Issuer’s Memorandum

and Articles of Association, board resolution and other constitutional documents of the SubNotes Issuer required by the Lead Manager;

(c) evidence that the Stapled Securities have been

accorded the requisite rating as stated in this Principal Terms and Conditions;

(d) receipt by the Lead Manager of tax and legal

opinions;

Company No. 8515-D

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(e) all representations and warranties made by AmPremier to the Lead Manager in the programme agreement remaining true and correct and there having been no material adverse change in AmPremier's financial condition; and

(f) receipt by AmPremier of all requisite regulatory

approvals for the issuance of the SubNotes.

(u) Representations and warranties

: Representations and warranties typical and customary for financing of this nature, which shall include but not be limited to the following:- (a) that the SubNotes Issuer is a company duly

incorporated under the laws of Malaysia as a legal entity and has full power and authority to own its assets and carry on its business as it is now being carried on;

(b) that the SubNotes Issuer has the power and

capacity to execute, deliver and perform the terms of the Transaction Documents (as defined in Section 2.4(x)(xvii)) and the SubNotes Issuer has taken all necessary corporate and other actions to authorise the execution, delivery and performance of the Transaction Documents (as defined in Section 2.4(x)(xvii));

(c) that no Enforcement Event (as defined in

Section 2.4(x)(xii)) has occurred; (d) that to the best of the knowledge of the directors

of the SubNotes Issuer, the SubNotes Issuer is not in liquidation and no steps have been taken by any person for or with a view to the appointment of a liquidator, receiver and/or manager or judicial manager of the SubNotes Issuer or any of its assets or undertakings that would have a material adverse effect on the ability of the SubNotes Issuer to comply with its obligations under the Transaction Documents (as defined in Section 2.4(x)(xvii));

(e) no litigation or arbitration is current or, to the

SubNotes Issuer’s knowledge, is threatened, which if adversely determined would have a material adverse effect on the ability of the SubNotes Issuer to comply with its obligations under the Transaction Documents (as defined in Section 2.4(x)(xvii));

Company No. 8515-D

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(f) the written information provided to the Lead Manager and contained in the IM are true, complete, accurate and not misleading and no circumstance or situation has arisen which would materially and adversely affect the condition of the SubNotes Issuer (financial or otherwise) or the earnings, affairs or business prospects of the SubNotes Issuer or the success of the issue of the SubNotes;

(g) that the audited financial statements and

unaudited financial statements of the SubNotes Issuer to be delivered to the Trustee from time to time in accordance with the trust deed have been prepared in accordance with all relevant laws and the approved accounting standards issued by the Malaysian Accounting Standards Board (save for matters specifically disclosed therein) consistently applied and give a true and fair view of the financial condition and results of operations of the SubNotes Issuer, taken as a whole, as of the date or dates to which they were made up and that there has been no adverse change in the financial position of the SubNotes Issuer taken as a whole, which is material in the context of the issue of the SubNotes since the date of such financial statements; and

(h) non-conflict with laws, contracts or constitutional

documents in the execution of the Transaction Documents (as defined in Section 2.4(x)(xvii)).

(v) Events of default

: Please refer to the clause relating to “Limited Right of

Acceleration”. (w) Principal terms and conditions

for the warrants : Not applicable as no warrants are issued.

(x) Other principal terms and conditions for the issue (i) Optional Redemption : On any Optional Redemption Date (as defined

hereunder) of a tranche of SubNotes, AmPremier may, at its option, redeem such tranche of the SubNotes (in whole, but not in part) at the Redemption Amount (as defined hereunder), subject to the Redemption Conditions (as defined hereunder) being satisfied. “Optional Redemption Date” in relation to a particular tranche of SubNotes, means any Interest Payment Date of that tranche. “Redemption Conditions” in relation to each tranche of SubNotes means:- (a) an Assignment Event has occurred, and the

SubNotes have been assigned to AmBank in connection therewith; and

Company No. 8515-D

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(b) AmPremier and AmBank, or AmBank, as the case may be, has obtained the written approval of BNM prior to redemption.

“Redemption Amount” in relation to each tranche of SubNotes means an amount equal to 100% of the principal amount for the respective tranche of the SubNotes together with Deferred Interest Amount (as defined in Section 2.4(x)(vii)), accrued but unpaid Interest Payments (if any) and any other amounts outstanding on the SubNotes up to (and excluding) the date on which the SubNotes are redeemed. Upon an assignment of the SubNotes to AmBank following an Assignment Event, AmBank and AmPremier may redeem the SubNotes and the Intercompany Loan.

(ii) Redemption due to

Aborting of Merger or Acquisition

: If the SubNotes were issued for the purpose of funding a merger or acquisition, which is subsequently aborted, AmPremier may, at its option, and subject to BNM’s prior approval, redeem the SubNotes (in whole, but not in part) at the Redemption Amount.

(iii) Tax Redemption

: AmPremier may, at its option, redeem the SubNotes (in

whole, but not in part) at the Redemption Amount, subject to the Redemption Conditions being satisfied, if a Tax Event (as defined hereunder) occurs. “Tax Event” means any time if there is more than an insubstantial risk, as determined by AmPremier or AmBank, and as certified by an external tax advisor, that AmPremier will be required to pay any Additional Amounts (as defined in Section 2.4(x)(iv)) or will no longer be able to deduct interest in respect of the SubNotes or AmBank will no longer be able to fully deduct interest in respect of the Intercompany Loan for taxation purposes as a result of a change in any applicable law or regulation which comes into effect on or after the issue date.

(iv) Taxation and Additional

Amounts : All payments by AmPremier in respect of the SubNotes

shall be made free and clear of, and without withholding or deduction for taxes imposed, levied, collected, withheld or assessed by or within Malaysia or any authority therein or thereof having power to tax, unless such withholding or deduction is required by law. In that event, AmPremier shall pay such additional amounts (“Additional Amounts”) as will result in receipt by the holders of such amounts as would have been received by them had no such withholding or deduction been required.

(v) Regulatory Redemption : AmPremier may, at its option, redeem the SubNotes (in

whole, but not in part) at the Redemption Amount, subject to the Redemption Conditions being satisfied, if a Regulatory Event (as defined hereunder) occurs.

Company No. 8515-D

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“Regulatory Event” means any time there is more than an insubstantial risk, as determined by AmBank or AmPremier, and as certified by an external legal advisor, that the NCPCS will no longer qualify as NIT1 of AmBank for the purposes of BNM’s capital adequacy requirements under any applicable regulations or guidelines.

(vi) Interest Payments : Each tranche of the SubNotes will bear interest at the

respective Interest Rate and holders of that tranche of the SubNotes will be entitled to receive Interest Payments subject to:- (a) AmBank meeting and continuing to meet BNM’s

minimum capital adequacy ratio requirements applicable to AmBank on the relevant Interest Payment Date following an Interest Payment; and

(b) the Payment Limitation Condition not being met. For the avoidance of doubt, if the Payment Limitation Condition (as defined in Section 2.4(x)(vii)) is not met and AmBank does not meet BNM’s minimum capital adequacy ratio requirements applicable to AmBank on the relevant Interest Payment Date, or if the Payment Limitation Condition (as defined in Section 2.4(x)(vii)) is not met and AmBank would not continue to meet BNM’s minimum capital adequacy ratio requirements applicable to AmBank following an Interest Payment, holders of the SubNotes will not be entitled to receive Interest Payments on the relevant Interest Payment Date.

(vii) Limitations on Payments : If the Payment Limitation Condition (as defined

hereunder) is met on the 15th business day prior to any Interest Payment Date, AmPremier may, at its option, elect not to pay Interest Payments on such Interest Payment Date provided that the Payment Limitation Condition (as defined hereunder) continues to be met in the period from the 15th business day prior to such Interest Payment Date to (and including) such Interest Payment Date. If AmPremier elects not to pay Interest Payments on such Interest Payment Date, such Interest Payment (“Deferred Interest Amounts”) will be deferred and any such deferral and non-payment will not constitute or be deemed a default by AmPremier for any purpose whatsoever. If AmPremier has not fully paid Interest Payments on an Interest Payment Date, the restrictions described in the clause relating to “Capital and Dividend Stopper” will apply.

Company No. 8515-D

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Any payment of (a) dividends to shareholders of AmBank or AmPremier and/or (b) dividends or interest to holders of securities or instruments ranking pari passu with or junior to the SubNotes (or the Intercompany Loan, in the case of AmBank) and which contain deferral rights or rights of non-payment with respect to interest payment(s), in connection with the Payment Limitation Condition (as defined hereunder) ceasing to exist, may only be made simultaneously with, or immediately following the full payment of Interest Payments on an Interest Payment Date. The “Payment Limitation Condition” is deemed to be met if during the 6 month period immediately preceding any Interest Payment Date:- (a) AmBank or AmPremier did not declare

dividends, or make any interest payment(s), on other securities or obligations ranking pari passu with or junior to the SubNotes (or the Intercompany Loan, in the case of AmBank); and

(b) AmBank or AmPremier did not redeem,

purchase, repay or otherwise acquire any of its Shares, preference shares or securities ranking pari passu with or junior to the SubNotes, or any securities or obligations of any of its subsidiary undertakings benefiting from a guarantee from AmBank or AmPremier, ranking, as to the right of repayment of principal, or in the case of any such guarantee, as to the payment of sums under such guarantee, pari passu with or junior to the SubNotes.

For the avoidance of doubt, no Interest Payment will be made if the payment of Interest Payments will result in AmBank breaching BNM’s minimum capital adequacy ratio requirements.

(viii) Capital and Dividend

Stopper : In the event that AmPremier does not fully pay Interest

Payments on an Interest Payment Date, then AmBank, AmPremier or any other subsidiary of AmBank or AmPremier shall not pay any dividend to shareholders or make any interest payment or distribution on any other securities or obligations ranking pari passu with or junior to the SubNotes which contain deferral rights or rights of non-payment with respect to interest payment(s) including other Non-innovative and Innovative Tier 1 Capital qualifying securities (“Dividend Stopper”).

Company No. 8515-D

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Furthermore, AmBank, AmPremier or any other subsidiary of AmBank or AmPremier shall not redeem, purchase, repay or otherwise acquire any of its Shares, preference shares or securities ranking pari passu with or junior to the SubNotes, or any securities or obligations of any of its subsidiary undertakings benefiting from a guarantee from AmBank or AmPremier, ranking, as to the right of repayment of principal, or in the case of any such guarantee, as to the payment of sums under such guarantee, pari passu with or junior to the SubNotes, including other Non-innovative and Innovative Tier 1 Capital qualifying securities (“Capital Stopper”). The Dividend Stopper and Capital Stopper will apply until:- (a) AmPremier has paid the full amount of Interest

Payments on the next annual/next two semi-annual/next four quarterly Interest Payments (depending on the applicable Interest Payments periods) during the Initial Interest Payment Period or the next two semi-annual Interest Payments after the Initial Interest Payment Period, as the case may be; or

(b) AmBank has set aside an amount sufficient to

provide for the full payment of Interest Payments on the next annual/next two semi-annual/next four quarterly Interest Payments (depending on the applicable Interest Payment periods) during the Initial Interest Payment Period or the next two semi-annual Interest Payments after the Initial Interest Payment Period, as the case may be.

(ix) Subordination : The principal amount of, and Interest Payments and any

Additional Amounts payable on, the SubNotes will be subordinated in right of payment upon occurrence of any Winding Up Proceeding (as defined hereunder), to the prior payment in full of all deposit liabilities and all other liabilities of AmPremier (including liabilities of all offices, branches and subsidiaries of AmPremier wherever located and any securities (whether subordinated or unsubordinated) of AmPremier that rank senior to the SubNotes) except, in each case, to those liabilities and securities which by their terms rank pari passu with or junior to the SubNotes. Claims in respect of the SubNotes will rank pari passu and without preference among themselves and with the most junior class of notes or preference shares (if any) of AmPremier but in priority to the rights and claims of holders of the ordinary equity shares of AmPremier. For the avoidance of doubt, AmBank’s payment obligations under the Intercompany Loan will rank pari passu with the NCPCS issued by AmBank in relation to the Stapled Securities.

Company No. 8515-D

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“Winding Up Proceeding” means the occurrence of any of the following:- (a) An agency or supervisory authority in Malaysia

having jurisdiction in respect thereof shall have instituted a proceeding or a proceeding instituted in court or a court, agency or supervisory authority in Malaysia having jurisdiction in respect thereof entered a decree or order for the appointment of a receiver or liquidator in any insolvency, rehabilitation, readjustment of debt, marshalling of assets and liabilities, or similar arrangements involving AmBank or AmPremier or all or substantially all of its properties, or for the winding up of or liquidation of its affairs and such proceeding, decree or order shall not have been vacated or shall have remained in force undischarged or unstayed for a period of 30 days; or

(b) AmPremier and any subsequent Substituted

Issuer files a petition in accordance with any insolvency statute.

(x) Amendments : No provision of the SubNotes may be amended without

the prior written consent of BNM if such amendment would or may result in the NCPCS not being treated as NIT1 of AmBank on a consolidated or unconsolidated basis.

(xi) Guarantee : The SubNotes will not be secured or covered by a

guarantee of AmPremier or any related entity of AmPremier, or any other arrangement that legally or economically enhances the seniority of the claims of the holders of the SubNotes.

(xii) Limited Right of

Acceleration : If an Enforcement Event (as defined hereunder) occurs

in respect of a tranche of SubNotes, then holders of that tranche of SubNotes may institute such proceedings as it chooses to enforce the obligations of AmPremier under the relevant SubNotes and/or institute Winding Up Proceedings against AmPremier but provided that no person shall have any right to accelerate payment of such SubNotes or of other tranche of SubNotes in the case of such default in the payment of any interest on or other amounts owing under any of the tranche of SubNotes or a default in the performance of any other covenants of AmPremier. If a Winding Up Proceeding occurs or an effective resolution of the shareholders of AmPremier is passed for a winding up of AmPremier, all the holders of the SubNotes of all tranches may declare that all the outstanding SubNotes to be due and payable immediately, by a notice in writing to AmPremier. Upon such a declaration, the outstanding amount together with interest to and including the date of repayment shall become immediately due and payable.

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“Enforcement Event” means a default is made in the payment of relevant tranche Interest Payments on the SubNotes on the due date for payment thereof and such default continues for 14 days (other than non-payment of interest in accordance with Limitations on Payments).

(xiii) Repurchase and

Cancellation : AmBank or any of its subsidiaries may at any time

purchase, subject to the prior approval of BNM, the SubNotes at any price in the open market or by private treaty. If purchases are made by tender, such tender must (subject to any applicable rules and regulations) be made available to all holders of the SubNotes equally. SubNotes purchased by AmBank or any of its related companies may not be used for voting purposes or for directing or requesting the Trustee to take any action. All SubNotes which are (a) redeemed or (b) purchased by AmBank or any of its subsidiaries (other than in the ordinary course of business) will forthwith, subject to the prior approval of BNM, be cancelled and accordingly may not be reissued or resold.

(xiv) Voting Rights : None. (xv) Governing Laws : The SubNotes will be governed by, and construed in

accordance with Malaysian Law. (xvi) Covenants : Covenants typical and customary for financing of this

nature. (xvii) Transaction Documents : Transaction Documents shall refer to:-

(a) Programme Agreement; (b) Trust Deed; (c) Depository and Paying Agency Agreement; and (d) Any other legal documentation as may be

advised by the legal counsel for the Lead Manager


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3. INVESTMENT CONSIDERATIONS

The business of each of AmBank and AmPremier is subject to a number of factors, many of which are outside their control. Prior to making an investment decision, prospective investors should carefully consider, along with the other information in this IM, the following risks. The risks and risk factors set forth below are not an exhaustive list of the challenges currently facing each of AmBank and AmPremier or that may develop in the future. Additional risks, whether known or unknown, may in the future have a material adverse effect on AmBank, AmPremier or the Stapled Securities.

3.1 Considerations Relating to the Malaysian Banking Industry

3.1.1 The AmBank Group may be adversely affected by changes to the Malaysian regulatory environment for the financial industry

To the extent that the member companies of AmBank Group are financial institutions licensed under BAFIA, those member companies are regulated by BNM. Those member companies are also subject to relevant securities and other laws in Malaysia. BNM is given extensive powers to regulate the Malaysian banking industry under BAFIA. This includes the authority to limit the interest rates charged by banks on certain types of loans, establish limits on lending to certain sectors of the Malaysian economy, establish priority lending guidelines in furtherance of certain social and economic objectives, and establish measures requiring maintenance of reserves and minimum capital adequacy requirement. BNM also has broad investigative and enforcement powers. Accordingly, potential investors should be aware that BNM could, in the future, significantly restrict business activities, set interest rates at levels or restrict credit in a way which may be adverse to the operations, financial condition or asset quality of banks and financial institutions in Malaysia, including those member companies of the AmBank Group which are financial institutions licensed under BAFIA.

3.1.2 Deposits in Malaysia are not insured up to their full amount, and the cost of

deposit insurance may increase

On 16 October 2008, the Malaysian Government moved to guarantee all bank deposits in an effort to shore up confidence in the Malaysian financial system, particularly after several regional jurisdictions had done so to curb potentially damaging capital outflows. BNM announced the guarantee for all local and foreign currency deposits from 16 October 2008 until 31 December 2010. Once the temporary Government guarantee expires on 31 December 2010, MDIC plans to revert to the explicit and limited coverage Deposit Insurance System. MDIC will monitor developments in the banking system and evaluate the need to increase the limit and the scope of coverage at that time.

Generally, BNM is not required to act as lender of last resort to meet liquidity needs in the banking system generally or for specific institutions. In the past, BNM has on a case-by-case basis provided a safety net for individual banks with an isolated liquidity crisis. However, there can be no assurance that BNM will provide such assistance in the future. Effective from 1 September 2005, BNM has introduced a deposit insurance system. Under the “Deposit Insurance System”, eligible deposits are insured up to a prescribed limit of RM60,000 (inclusive of principal and interest) per depositor, per member institution. There is also separate coverage of up to RM60,000 per depositor, per member institution for Islamic deposits (i.e. those accepted under Shariah principles), accounts held under joint ownership, trust accounts and accounts in the name of sole proprietorships and partnerships. The Malaysia Deposit Insurance System is administrated by MDIC, an independent statutory body, and all licensed commercial banks (including subsidiaries of foreign banks operating in Malaysia) and Islamic banks are member institutions of the Deposit Insurance System.

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However, the fact that deposits exceeding the prescribed limits are not insured up to their full amount could lead to or exacerbate liquidity problems, which, if severe, could have an adverse effect on AmBank’s business, financial condition, results of operations or prospects, or on the Malaysian financial markets generally.

3.2 Considerations Relating to the AmBank Group

3.2.1 Political and Economic Factors Political and economic conditions and developments in Malaysia as well as abroad could have a profound effect on the financial performance of the AmBank Group. Adverse political and economic conditions or developments, such as an unstable political system, nationalisation and severe fluctuations in interest and currency exchange rates, create uncertainty and could discourage the free flow of investment capital and affect international trade, ultimately resulting in adverse developments in national economic activity. This in turn may have a material adverse impact on the financial performance of the AmBank Group as a financial services provider. As a result of globalisation, economic or market problems in a single country or region are increasingly affecting other markets generally. A continuation of these situations could adversely affect global economic conditions and world markets and, in turn, could cause a chain reaction effect and thus adversely affect the AmBank Group’s businesses.

3.2.2 Recent market conditions or continued market deterioration may have an adverse effect on AmBank's business, financial condition, results of operations or prospects

Following concerns over US sub-prime residential mortgage loans and related securities, the credit markets, primarily in US and Europe but also elsewhere, have been experiencing substantial dislocations, liquidity disruptions and market corrections whose scope, duration, severity and economic effect remain uncertain. This global liquidity crisis has had, and may continue to have, an adverse effect on markets in the US, Europe and Asia, and could affect conditions in the Malaysian economy, on which AmBank’s business depends. AmBank does not have any investments in any assets or securities linked to, or the value of which is derived from, assets that could be classified as sub-prime residential mortgages, or in investment securities comprising asset funds and trusts which hold and invest in assets that are classified as sub-prime residential mortgages. As such, AmBank currently does not have any direct or indirect exposure to the sub-prime residential lending market in US or elsewhere. However, the values of many of the investment securities that AmBank holds are sensitive to the volatility of the credit markets and accordingly, such investment securities may be adversely affected by future developments in the credit markets. A continuation or intensification of adverse conditions in the credit markets may materially affect the value of AmBank's investment portfolio.

Although to date AmBank has not experienced any substantial adverse effect on its assets or funding sources as a consequence of this liquidity crisis, there can be no assurance that this liquidity crisis will not, if sustained, adversely affect AmBank’s business, financial condition, results of operations or prospects. In particular, if AmBank perceives a likelihood of impending deterioration in economic conditions, it may decrease its risk tolerance in its lending activities, which could have the effect of reducing its interest margin and interest income, and ultimately the results of its operations.

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In addition, to the extent that any of AmBank's borrowers have been adversely affected by the recent deterioration of conditions in the sub-prime residential mortgage market and the global credit and financial markets generally, the ability of such borrowers to service their debt obligations to AmBank may also be affected. If loans to these borrowers were to become non-performing, this could adversely affect AmBank's business, financial condition, results of operations or prospects.

3.2.3 Competition

Whilst the number of domestic banking institutions have been reduced over time through consolidation, the Malaysian banking industry operates in a very competitive environment fostered by BNM’s policies, inter-alia, foreign licensed Islamic banks and domestic Islamic banks which are now allowed to offer/perform products and services that are similar to those of the AmBank Group. Although these policies are designed, in part, to encourage development of financial institutions in Malaysia and to strengthen domestic financial institutions in preparation for increased foreign competition, any increased competition could have an adverse effect on the AmBank Group’s operations in the form of reduced margins, smaller market share and reduced income generally. Although the AmBank Group would plan for expansion and growth in future business volume, the AmBank Group’s future growth would inevitably be subject to competition from other service providers and also customer preference. As such, there can be no assurance that the AmBank Group will be able to maintain or increase its present market share in the future.

3.2.4 The new interest rate framework in Malaysia may give rise to more

competition and may adversely affect AmBank’s profits

AmBank’s exposure to interest rates arises mainly from its loan portfolio, holdings of securities and its interbank deposit/placement position. When interest rates decline, AmBank’s net interest margin generally improves, since a large portion of AmBank’s loan portfolio consists of fixed-rate auto finance loans, while its liabilities include variable-rate customer deposits the interest rates on which decline. Conversely, when interest rates rise, the opposite generally occurs. In addition, AmBank’s fixed-rate loan portfolio is principally financed by deposits with maturities of, typically, less than one year that generally move in tandem with short-term interest rates. To mitigate the risk of mismatch of interest rates on fixed-rate auto finance loans, AmBank has introduced, among other measures, floating-rate auto finance loans with effect from October 2005. AmBank has also entered into interest rate swaps, periodically sold portions of its portfolio of housing loans and auto finance loans to Cagamas Berhad (the National Mortgage Corporation), and undertaken asset securitisations, whereby the loans are sold on a non-recourse basis to a special purpose vehicle. However, the actual effect on earnings due to a change in interest rates depends on the direction, degree and timing of such change in interest rates, the behaviour and contractual repricing dates of AmBank’s funding operations, assets and liabilities and its ability to respond to changes in interest rates.

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To a certain extent, interest rates are regulated in Malaysia. The liberalisation of the interest rate framework introduced in April 2004 represents a change in the system of implementing monetary policy and was intended to promote more efficient pricing by banking institutions. Although BNM continues to influence interest rates, the new interest rate framework allows more freedom and flexibility for AmBank and the banking industry in setting lending rates, and so allows AmBank to compete more effectively in terms of pricing in its target business segments. There can be no assurance that BNM will not impose increased or additional controls on interest rates which may have an adverse impact on AmBank’s business, financial condition, results of operations or prospects.

3.2.5 A concentration in auto financing loans may adversely affect AmBank’s loan portfolio and its business, financial condition, results of operations or prospects

Auto financing loans have historically accounted for a significant portion of the AmBank Group's loan portfolio. The future growth of AmBank’s auto financing business depends on a number of factors, including continued growth in the Malaysian economy supporting growth in automobile sales. Therefore, there can be no assurance that AmBank’s auto financing loan portfolio, or its income from such loans, will continue to grow. In addition, because of the concentration of such loans, AmBank’s NPLs position is more exposed than it otherwise would be to the inability of its customers to service their auto loans, and the occurrence of any of the economic risks discussed in this section may require AmBank to make additional loan loss provisions.

3.2.6 A decline in AmBank’s asset quality could adversely affect its business,

financial condition, results of operations or prospects if its loan provisions are insufficient to cover its liabilities

AmBank’s business, financial condition, results of operations or prospects could be adversely affected if AmBank’s loan provisions are insufficient, the value of AmBank’s collateral securing NPLs declines, a material amount of AmBank’s loans becomes uncollectible, or there is a downturn in the Malaysian economy. A significant amount of AmBank’s collateral is in the form of vehicles, which do not maintain their value due to depreciation. Any significant decline in AmBank’s asset quality could adversely affect its business, financial condition, results of operations or prospects.

Although AmBank believes that it has adopted a sound asset quality management and intends to maintain it, there is no assurance that the system will remain effective or adequate in the future.

3.2.7 A decline in collateral values or inability to realise collateral value may

necessitate an increase in AmBank’s provisions

A significant portion of AmBank’s loans is secured by collateral such as real estate and securities, the values of which, in many cases, have declined due to economic deterioration since the beginning of the global credit crisis. Due to the global liquidity and economic crisis, a portion of AmBank’s loans may exceed the value of the underlying collateral. Any decline in the value of the collateral securing AmBank’s NPLs, coupled with inability to obtain additional collateral or inability to realise the value of collateral may require AmBank to increase its loan loss provisions, which may adversely affect AmBank’s business, financial condition, results of operations or prospects.

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3.2.8 AmBank may experience liquidity problems as it is dependent on short-term funding

The funding requirements of Malaysian banks are primarily met through short-term funding, namely fixed-term deposits from customers and from other financial institutions. AmBank’s experience is that a substantial portion of its customers’ fixed deposits are rolled over upon maturity. However, no assurance can be given that this will continue in the future. If a substantial number of depositors, or a small number of large depositors, fail to roll over deposited funds upon maturity, AmBank’s liquidity position could be adversely affected and AmBank may be required to seek alternative sources of short-term or long-term funding, which may be more expensive than deposits, to finance its operations. Furthermore, there can be no guarantee that AmBank will be able to obtain such funds.

3.2.9 AmBank’s risk management system may be inadequate or ineffective in managing risks

As a commercial banking institution covering activities including retail, commercial and corporate banking and treasury products and services, AmBank is subject to business risks which are inherent in the financial services industry. Generally, these business risks can be broadly divided into:-

(a) Market risk, which is the risk of loss associated with changes in the value of

portfolios and financial instruments caused by movements in market variables, such as interest rates, foreign exchange rates and equity prices;

(b) Funding risk, which is the risk that AmBank is not able to fund its day-to-

day operations at a reasonable cost; (c) Credit risk, which is the risk of loss due to the inability or unwillingness of a

counterparty to meet its payment obligations; (d) Operational risk, which is the risk of potential loss from a breakdown in

internal processes and systems, deficiencies in people and management or operational failure arising from external events; and

(e) Legal and regulatory risk, which is the risk of breaches of applicable laws

and regulatory requirements, breaches of obligations of fidelity, unenforceability of counterparty obligations, and inappropriate documentation of contractual obligations.

Each of the business risks above has an implication on AmBank’s financial condition and every transaction that AmBank undertakes is subject to, inter-alia, the abovementioned risks. AmBank’s financial position may be adversely affected resulting from any of the risks operating on its own. For example, AmBank’s investment position in a certain assets may require a huge mark-down as a result of the slump in the market price of that assets, or AmBank may find that it will not be able to enforce a counterparty obligation due to imperfect documentation. Far more critical to AmBank’s financial conditions is a risk that has a ‘chain reaction’ effect whereby the operation of one risk leads to the operation of one or more other risks. For example, a market downturn may result in AmBank’s customers incurring losses thus weakening their financial condition and triggering an increase in credit risks. Such increased credit risks may require AmBank to set aside additional loss provisions which could potentially affect AmBank’s credit rating adversely thereby increasing liquidity risk. In an extreme case, the additional loss provisions (if large) may lead to AmBank breaching regulatory capital requirements.

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To counter the business risks it face, AmBank has put in place a risk management system to manage uncertainties such that deviations from AmBank’s intended objectives are kept within acceptable levels. The risk management system thus serves to identify, capture and analyse the risks assumed by AmBank at an early stage, continuously measuring and monitoring the risks and to set limits, policies and procedures to control them to ensure sustainable risk-taking and sufficient return. However, the risk management framework, as a whole may not always be fully effective as there may be risks that have not been anticipated or identified and certain risks may be significantly greater than indicated by historical data. Further, the data relied upon to formulate the risk management framework may not be accurate, complete, up-to-date or properly evaluated. The process to manage operational, legal and regulatory risks would require proper recording and verifying a large number of transactions and events. Such process may not be fully effective in all cases. Any failure in the effectiveness of AmBank’s risk management procedures could have a material adverse effect on AmBank’s business, financial condition, results of operations or prospects. A description of AmBank’s risk management structure is set out in Section 4.6 of this IM.

3.2.10 Major shareholders may influence policies of AmBank

As of 31 December 2008, Amcorp and ANZ held 19.37% and 19.17%, respectively, of the issued share capital of AHB, which, in turn, holds 100% of the issued share capital of AmBank through AMFB. As of 31 December 2008, TSDAH, the Non-Independent Non-Executive Chairman held directly and indirectly, a 100% controlling interest in Amcorp. Based on these shareholding interests in Amcorp, AHB and AmBank, each of these major shareholders may, to a certain extent, be able to exercise control over matters which require shareholders’ approval. There can be no assurance that the corporate objectives and strategies of AmBank would not be substantially influenced by the policies of the shareholders. In the case of ANZ as major shareholder, AmBank and such shareholder enjoy a strategic relationship which has been and is expected to continue to be of significant benefit to AmBank. If for any reason the nature or extent of ANZ’s investment in AmBank were to change over time, there can be no assurance that AmBank would continue to benefit from this or any similar strategic relationship to the same extent.

3.2.11 AmBank may be adversely affected by the implementation of Basel II (as

defined hereunder)

As of 1 January 2008, the AmBank Group had adopted the “Standardised Approach” for credit risk and “Basic Indicator Approach” for operational risk. This is in accordance with the timeline set by BNM to adopt the standards recommended by the Bank of International Settlements set out in “International Convergence of Capital Measurement and Capital Standards: A Revised Framework” (“Basel II”) in Malaysia by 2008 for the Standardised Approach. AmBank may incur substantial costs in the continued maintenance of complying with Basel II. The incurrence of any such costs or the failure by AmBank to maintain compliance with Basel II may have a material adverse effect on the AmBank Group’s business, financial condition, results of operations or prospects.

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3.2.12 Employee misconduct could adversely tarnish AmBank’s image and affect its business, financial condition, results of operations or prospects

As with any business enterprise, the AmBank Group is susceptible to the risks associated with acts of misconduct by its employees including directors. Acts of misconduct by employees may take various forms and could include misappropriation of AmBank’s assets or the assets of its clients, concealment and or wilful misstatement of its liabilities, unauthorised transactions and/or commitment of its resources, and breach of client confidentiality. Acts of misconduct by employees would not only result in financial loss to AmBank but also tarnish its image, which would bring about a loss of its stature in the market. Furthermore, acts of misconduct may also cover breaches of laws, regulations and guidelines, which, in extreme cases, could result in suspension and/or revocation of its banking and finance licences under BAFIA. Whilst the risks of misconduct by employees, including directors, cannot be entirely eliminated, AmBank has in place internal control systems to check such misconduct and to take appropriate actions.

AmBank is committed towards business integrity and professionalism and firmly supports effective corporate governance and development of best practices. AmBank's Board through various committees manages the business and affairs of the bank in a manner consistent with the objectives of good corporate governance and accountability towards the enhancement of shareholder value.

AmBank has continued to invest in human resource development to better equip its management team to keep abreast with current development of international market practices and to develop new skills required in meeting the demands of an increasingly dynamic and competitive market. Whilst there is no assurance that there would be continuity in AmBank’s present management team throughout the tenure of the RMNIT1 Programme, AmBank will endeavour to maintain its current prudent management philosophy and to continue to adhere to a high standard of corporate governance practices.

3.2.13 IT risk could affect AmBank’s business, financial condition, results of operations or prospects AmBank is susceptible to IT risk as large portions of its operational systems are computerised. However, AmBank has taken reasonable steps to reduce these risks, which include:- (a) Adoption of an “Information System Operational Risk Scorecard” which is

used to monitor and manage the critical information system operational risk;

(b) Adoption of an IT governance model which include regular reviews by

senior management; (c) Formulation of an “Information and Communication Technology” plan which

is reviewed annually which ensures continuous upgrading of the critical IT application systems;

(d) Formulation and adoption of disaster recovery procedures and facilities for

critical application areas which are tested on a regular basis; and

(e) Conduct of regular audits to ensure that appropriate mechanisms are in place and are being adopted for IT security and control.

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3.3 Considerations Relating to the Stapled Securities

3.3.1 The Stapled Securities may not be a suitable investment for all investors Each potential investor in the Stapled Securities must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:- (a) have sufficient knowledge and experience to make a meaningful evaluation

of the Stapled Securities, the merits and risks of investing in the Stapled Securities and the information contained or incorporated by reference in this IM;

(b) have access to, and knowledge of, appropriate analytical tools to evaluate,

in the context of its particular financial situation, an investment in the Stapled Securities and the impact such an investment will have on its overall investment portfolio;

(c) understand thoroughly the terms of the Stapled Securities and be familiar

with the behaviour of any relevant indices and financial markets; and (d) be able to evaluate (either alone or with the help of a financial adviser)

possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. The Stapled Securities are complex financial instruments. Sophisticated institutional investors generally do not purchase complex financial instruments as stand-alone investments. They purchase complex financial instruments as a way to reduce risk or enhance yield with an understood, measured and appropriate addition of risk to their overall portfolios. A potential investor should not invest in the Stapled Securities unless it has the expertise (either alone or with a financial adviser) to evaluate how the Stapled Securities will perform under changing conditions, the resulting effects on the value of the Stapled Securities and the impact this investment will have on the potential investor's overall investment portfolio.

3.3.2 Liquidity of the NCPCS and the SubNotes

The Stapled Securities will constitute a new issue of securities with no established trading market. No assurance can be given as to whether an active or liquid trading market for the Stapled Securities or, following the occurrence of an Assignment Event, the NCPCS, will develop or be sustained. Furthermore, no assurance can be given as to the market prices for the Stapled Securities or, following the occurrence of an Assignment Event, the NCPCS, if a market does develop. The Stapled Securities or, following the occurrence of an Assignment Event, the NCPCS, may trade at a discount to the price at which investors purchased the Stapled Securities.

3.3.3 Interest Payment on the SubNotes may be deferred Interest on the SubNotes is deferred on an Interest Payment Date if the NCPCS Issuer does not meet BNM’s minimum capital adequacy ratio requirements on that Interest Payment Date or if the payment of interest will result in the NCPCS Issuer breaching BNM’s minimum capital adequacy ratio requirements.

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Further, the payment of interest may be deferred at the option of the SubNotes Issuer in certain circumstances set out in Limitation on Payments (as set out in clause (x)(vii) of the Principal Terms and Conditions of the SubNotes), and such deferral will not constitute or be deemed a default for any purpose whatsoever. In the event that the SubNotes Issuer does not fully pay Interest Payments on an Interest Payment Date, an Assignment Event will be triggered and the SubNotes will be assigned to the NCPCS Issuer. If the SubNotes Issuer has not made a payment of any interest amount, whether deferred or not, the restrictions on Capital and Dividend Stopper will apply (as set out in clause (x)(viii) of the Principal Terms and Conditions of the SubNotes). There is no default interest payable under the SubNotes.

3.3.4 Investors will receive Interest Payments on the SubNotes only if the NCPCS Issuer pays interest on the Intercompany Loan. The ability of the SubNotes Issuer to make payments on the SubNotes is dependent solely upon the NCPCS Issuer making the related payments on the Intercompany Loan when due. If the NCPCS Issuer fails to make payments on the Intercompany Loan, the SubNotes Issuer will not have sufficient funds to make payments on the SubNotes.

3.3.5 The NCPCS Issuer may elect, without default, not to make distribution payments on the NCPCS, and the NCPCS Issuer will not be required to redeem any NCPCS Investors should carefully consider the relevant Payment Limitation Condition in clause (x) (vii) of the Principal Terms and Conditions of NCPCS. If the Payment Limitation Condition is met on the 15th business day prior to any NCPCS Distribution Date, the NCPCS Issuer, may, at its option, elect to forego paying distributions on such NCPCS Distribution Date on the NCPCS. Any such election will not constitute or be deemed a default by the NCPCS Issuer for any purpose whatsoever. In addition, distributions are subject to the NCPCS Issuer meeting and continuing to meet BNM’s minimum capital adequacy ratio requirements applicable to the NCPCS Issuer on the relevant NCPCS Distribution Date following a distribution. If the NCPCS Issuer does not meet such minimum capital adequacy ratio requirements on the relevant NCPCS Distribution Date and the NCPCS Issuer would not continue to meet such requirements following a distribution, holders of the NCPCS will not be entitled to receive any distribution on the relevant NCPCS Distribution Date. If the NCPCS Issuer does not pay distributions on the NCPCS due to the Payment Limitation Conditions or because of the minimum capital adequacy ratio limitations, the NCPCS may trade at a lower price. Accordingly, the market price for the NCPCS may be more volatile than other securities that are not subject to such limitations. In addition, following an Assignment Event, the NCPCS Issuer is under no obligation to redeem the NCPCS. There is no default interest payable under the NCPCS.

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3.3.6 The SubNotes Issuer’s and the NCPCS Issuer’s respective obligations under the SubNotes and NCPCS will be deeply subordinated and the SubNotes Issuer or the NCPCS Issuer will not make any payments under the SubNotes or the NCPCS respectively unless it can satisfy in full all of its other obligations and other claims that rank senior to those obligations Claims in respect of the SubNotes will rank pari passu with the most junior class of notes or preference shares (if any) of the SubNotes Issuer, but in priority to the rights and claims of holders of the ordinary equity shares of the SubNotes Issuer. The SubNotes Issuer’s obligations under the SubNotes are subordinated to its obligations to its creditors, other than creditors whose claims rank or are expressed to rank equally with or junior to the claims of holders of the SubNotes. Claims in respect of the NCPCS will rank pari passu with the most junior class of preference shares (if any) of the NCPCS Issuer, but in priority to the rights and claims of holders of the ordinary equity shares of the NCPCS Issuer. The NCPCS Issuer’s obligations under the NCPCS are subordinated to its obligations to its depositors and creditors, other than creditors whose claims rank or are expressed to rank equally with or junior to the claims of holders of NCPCS.

3.3.7 A downgrade in ratings may affect the market price of the Stapled Securities The Stapled Securities are rated A3 by RAM. There can be no assurance that the rating will remain in effect for any given period or that the ratings will not be revised by the rating agencies in the future if, in their judgement, circumstances so warrant. Any downgrade or withdrawal of a rating may have an adverse effect on the liquidity and market price of the Stapled Securities but would not constitute an event of default or an event obliging the SubNotes Issuer and NCPCS Issuer to prepay the Stapled Securities.

3.3.8 Substitution and Variation of the NCPCS or the SubNotes can be done without the consent of the NCPCS or the SubNotes holders The NCPCS Issuer or the SubNotes Issuer may, subject to obtaining the prior approval of BNM, SC, Bursa Securities (if required), any other regulatory or governmental approvals and/or approval of the shareholder(s) of the NCPCS Issuer, if such approval is needed, but without any requirement for the consent or approval of the NCPCS or the SubNotes holders, substitute at any time all (but not in part) of the NCPCS or the SubNotes for, or vary the terms of the NCPCS or the SubNotes to become Qualifying Equivalent Securities if (1) a Tax Event occurs, so that no Tax Event exists after such substitution or variation or (2) a Regulatory Event occurs, so that no Regulatory Event exists after such substitution or variation (as set out in clause (4) of the Principal Terms and Conditions of the Stapled Securities).

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3.3.9 Substitution of AmPremier can be done without the consent of the NCPCS or the SubNotes holders SubNotes Issuer may, without the consent of any holder of the NCPCS or SubNotes, substitute for itself any other subsidiary of AmBank as the counterparty in respect of the SubNotes, subject to (a) compliance with applicable law; (b) entering into such documents as are necessary with the Substituted Issuer to give effect to the substitution; (c) the SubNotes Issuer and the Substituted Issuer having obtained the approvals of BNM, SC, Bursa Securities (if required), and/or any other regulatory or governmental approvals for such substitution and for the performance by the Substituted Issuer of its obligations under the SubNotes and the documents effecting the substitution; (d) the Substituted Issuer having appointed a process agent as its agent to receive service or process on its behalf in relation to any legal proceedings arising out of or in connection with the SubNotes (if applicable); and (e) the trustees for the holders of the Stapled Securities are of the reasonable opinion that the respective interests of the holders of the Stapled Securities will not be materially prejudiced by such substitution.

For the avoidance of doubt, if the trustees for the holders of the Stapled Securities are not of the reasonable opinion that the interests of the holders of the Stapled Securities will not be materially prejudiced by such substitution, the SubNotes Issuer or the Substituted Issuer (whichever relevant) may only effect such substitution subject to the prior consent of the holders of the Stapled Securities having been obtained (as set out in clause (3) of the Principal Terms and Conditions of the Stapled Securities).

3.3.10 Investors must be prepared to bear the economic risks of an investment in the Stapled Securities until the maturity thereof

The NCPCS Issuer or the SubNotes Issuer may redeem the NCPCS or SubNotes only in accordance with clauses (x) (i), (x) (ii), (x) (iii), or (x) (v) of the Principal Terms and Conditions of NCPCS or Principal Terms and Conditions of SubNotes, as applicable, for tax reasons, regulatory reasons, where the Stapled Securities are issued for the purpose of funding a merger of acquisition which is subsequently aborted or at its option, with the prior written approval of BNM if approval is then required.

However, the NCPCS Issuer is under no obligation to redeem the NCPCS, which are perpetual in tenure and have no fixed maturity date.

Accordingly, unless the NCPCS Issuer or the SubNotes Issuer, as applicable, redeems the NCPCS or SubNotes, if an investor wishes to obtain the cash value of its investment it will have to sell its Stapled Securities. Neither the interest rate on the SubNotes nor the distribution rate on the NCPCS will be adjusted to reflect subsequent changes in interest rates or other market conditions. As a result, an investor may not be able to sell its Stapled Securities for the amount of its original investment.

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3.3.11 There are no terms in the NCPCS and SubNotes that limit the NCPCS Issuer’s and SubNotes Issuer’s ability to incur additional indebtedness, including indebtedness that ranks senior to or equally with the Stapled Securities There are no restrictions on the amount or number of other tier 1 capital securities that AmBank may issue which rank pari passu with the Stapled Securities or on the amount of indebtedness that AmBank may incur which rank senior to the Stapled Securities. The creation and issue of further tier 1 capital securities ranking pari passu with the Stapled Securities or the incurrence of indebtedness ranking senior to the Stapled Securities shall not require the consent of the holders of the Stapled Securities. The issue of such tier 1 capital securities and/or incurrence of such indebtedness may reduce the amount recoverable by the holders of the Stapled Securities in the event of dissolution or winding-up of AmBank.

3.3.12 The NCPCS and the SubNotes cannot be transferred or traded separately

prior to the occurrence of an Assignment Event and the effect of an Assignment Event

Until the occurrence of an Assignment Event, a NCPCS may not be transferred unless a transfer of the corresponding SubNote which forms part of the same Stapled Security is transferred at the same time (and vice versa), from the same transferor to the same transferee. Until the Assignment Date, a NCPCS and any interest in a NCPCS is not capable of being transferred, assigned or made the subject of an encumbrance, lien or trust in whole or in part, separately from the corresponding SubNote which forms part of the same Stapled Security (and vice versa). Upon the occurrence of an Assignment Event in respect of a tranche of Stapled Securities, the NCPCS of that tranche cease to be stapled to the corresponding SubNotes and the latter are automatically assigned to AmBank. Once unstapled, the SubNotes may not be assigned to any person other than AmBank.

3.3.13 Limited Rights Of Acceleration under the NCPCS and the SubNotes

In respect of the NCPCS, if an Enforcement Event (as defined in clause (x) (xii) of the Principal Terms and Conditions of NCPCS) occurs in respect of a tranche of NCPCS, then holders of that tranche of NCPCS may institute such proceedings as it chooses to enforce the obligations of the NCPCS Issuer under the relevant NCPCS and/or institute Winding Up Proceedings (as defined in clause (x) (ix) of the Principal Terms and Conditions of NCPCS) against the NCPCS Issuer but provided that no person shall have any right to accelerate payment of such NCPCS or of other tranche of NCPCS in the case of such default in the payment of any distributions on or other amounts owing under any of the tranche of NCPCS or a default in the performance of any other covenants of the NCPCS Issuer. If a Winding Up Proceeding occurs or an effective resolution of the shareholders of the NCPCS Issuer is passed for a winding up of the NCPCS Issuer, all the holders of the NCPCS of all tranches may declare that all outstanding NCPCS be due and payable immediately, by a notice in writing to the NCPCS Issuer. Upon such a declaration, the outstanding amount of the NCPCS and any NCPCS Distributions payable shall become immediately due and payable.

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In respect of the SubNotes, if an Enforcement Event (as defined in clause (x) (xii) of the Principal Terms and Conditions of the SubNotes) occurs in respect of a tranche of SubNotes, then holders of that tranche of SubNotes may institute such proceedings as it chooses to enforce the obligations of the SubNotes Issuer under the relevant SubNotes and/or institute Winding Up Proceedings (as defined in clause (x) (ix) of the Principal Terms and Conditions of the SubNotes) against the SubNotes Issuer but provided that no person shall have any right to accelerate payment of such SubNotes or of other tranche of SubNotes in the case of such default in the payment of any interest on or other amounts owing under any of the tranche of SubNotes or a default in the performance of any other covenants of the SubNotes Issuer. If a Winding Up Proceeding occurs or an effective resolution of the shareholders of the SubNotes Issuer is passed for a winding up of the SubNotes Issuer, all the holders of the SubNotes of all tranches may declare that all outstanding SubNotes be due and payable immediately, by a notice in writing to the SubNotes Issuer. Upon such a declaration, the outstanding amount of the Subnotes together with interest to and including the date of repayment shall become immediately due and payable.


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4. DESCRIPTION OF THE NCPCS ISSUER 4.1 History and Background Information on AmBank

AmBank was incorporated on 25 March 1969 as a public limited company under the Act, under the name of Malaysia Borneo Finance Corporation (M) Berhad. MBFC was listed on the Main Board of the stock exchange now known as Bursa Malaysia Securities Berhad on 8 June 1983 and changed its name to MBf Finance on 19 December 1985. Pursuant to a restructuring scheme, MBf Finance became a wholly-owned subsidiary of MBf Capital, with MBf Capital assuming the listing status of MBf Finance. MBf Capital was listed on the Main Board of Bursa Securities in place of MBf Finance effective from 15 January 1993 and consequently, MBf Finance was delisted. MBf Finance changed its name to AmFinance Berhad on 3 April 2002 and assumed its present name, i.e. AmBank (M) Berhad on 1 June 2005.

AmBank Group provides banking and financial services which include loans, advances and financing, deposit services, credit cards, remittance services, foreign exchange and (through its wholly-owned subsidiary, AmIslamic Bank) Islamic banking services. As at 31 December 2008, the authorised share capital of AmBank is RM3,886,250,002 comprising 1,386,250,002 Shares and 2,500,000,000 IPS of which 670,363,762 Shares and 150,000,000 IPS respectively are issued and fully paid-up.

4.2 Business Overview

As at 30 September 2008, AmBank had unaudited consolidated total assets of RM78.06 billion, loans, advances and financing of RM54.75 billion, customer deposits of RM48.93 billion and shareholders’ funds of RM4.16 billion. In terms of total assets, AmBank was the fifth largest domestic bank in Malaysia (based on the published financial results of the nine domestic banks in Malaysia) as at 30 September 2008. AmBank is engaged in a wide range of retail, business and Islamic banking activities. Following the Business Transfer, as further described below, AmBank expects to expand its corporate and investment banking services to its clients. AmBank is a market leader in the retail banking sector and has the fourth largest retail assets (defined as loans to individuals for purchase of transport vehicles, purchase of residential properties, credit cards receivables and loans for personal use) by value in Malaysia (based on the published financial results of the nine domestic banks in Malaysia) as at 30 September 2008. AmBank’s principal retail banking activities are the provision of consumer loans (such as auto financing, mortgages and personal financing/co-operative loans (“Co-op”), small business and asset financing and credit cards. Currently, the focus of AmBank’s business banking activities is commercial lending and trade finance, in particular, for mid-sized corporations and SMEs in Malaysia. Following the Business Transfer, the focus of AmBank's corporate and investment banking business is expected to be providing treasury and lending services to its large corporate and institutional clients. Currently, AmBank’s distribution network comprises 186 branches, 534 ATMs and 106 self-service EBCs in Malaysia. Besides its network of dedicated nationwide marketing officers and personal bankers, AmBank also leverages on the sales agents in the AHB Group. In total the AHB Group has over 7,600 personal bankers, marketing, sales and financial services personnel and agents. The AHB Group was the six largest financial services group in Malaysia in terms of total assets, RM82.88 billion (based on the published financial results of both domestic and foreign financial services groups in Malaysia) as at 30 September 2008. The AHB Group’s business operations include investment banking, commercial banking, retail banking, Islamic banking, insurance and other related financial services. AHB controls 100.0% of the share capital of AmBank, through its wholly-owned subsidiary AMFB.

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4.3 Recent Developments The following recent developments are expected to have a significant impact on AmBank’s operations in future.

4.3.1 Group Internal Reorganisation

The Malaysian banking and financial services industry has undergone rapid changes in recent years, with the greater liberalisation of the sector having led to heightened competition as well as the entry of foreign participants in the domestic financial services sector. To remain competitive, and to enhance its business operations so as to consolidate its position as a leading financial services group in the domestic and regional markets, AHB Group has undertaken a restructuring exercise to migrate to a universal banking platform, which entailed the functional integration and streamlining of the AHB Group's corporate structure. The restructuring involved:

(a) the transfer of AmInvestment Bank’s fund-based business to AmBank (with

respect to its non-Islamic banking business) and to AmIslamic Bank (with respect to its Islamic banking business) (the “Business Transfer”); and

(b) the share transfer of AmInvestment Bank’s 100% owned offshore bank

subsidiary, AmInternational (L) Ltd (“AMIL”), to AmBank (“AMIL Transfer”). The integration of the fund-based business activities of AmInvestment Bank and AmBank will enable AmInvestment Bank to leverage AmBank's balance sheet to provide for larger and more structured investment banking deal flow. This is crucial following the completion of the framework for investment banking whereby the BNM introduced more stringent limits on lending, underwriting of both debt instruments and equities as well as proprietary trading by investment banks. In addition, the universal banking platform is in line with global trends and international market practices as it is now widely implemented by major banking groups. The Business Transfer and AMIL Transfer were completed on 12 April 2008.

4.3.2 Partnership with ANZ

On 26 April 2007, AHB obtained the approval of its shareholders at an EGM for its proposed strategic partnership with the ANZ by way of ANZ's equity participation in the AHB Group. ANZ's equity participation entailed:- (a) the issuance of 163,934,426 CPS to ANZ at an issue price of RM3.05 per

share which are convertible into 163,934,426 new Shares in AHB, all of which have since been converted into Shares by ANZ in March 2008; and

(b) the issuance of RM575.0 million exchangeable bonds by AmBank to ANZ

which are exchangeable into 188,524,590 new Shares in AHB at RM3.05 per Share (subsequent to a rights issue exercise undertaken by AHB to partially fund the privatisation of AIGB, the outstanding bonds are now exchangeable for 194,915,254 Shares and the exchange price has been reduced to RM2.95 per Share).

ANZ has also purchased 300,000,000 Shares in AHB from Amcorp. As at 31 December 2008, ANZ has a direct shareholding of 19.17% in AHB and this will increase to 24.6% upon exchange of the exchangeable bonds. ANZ’s equity investment provides ANZ with the opportunity to make senior management appointments to the AHB Group, which include the positions of

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Deputy Group Managing Director, Chief Financial Officer and Group Chief Risk Officer. ANZ has also appointed three directors to the board of directors of AHB, one director to the boards of directors of each of the major companies of the AHB Group, and also has representation on the various Management Committees of AmBank. ANZ is an international banking and financial services group which is ranked amongst the top 50 banks in the world by market capitalisation. ANZ has over six million customers worldwide and a presence in over 30 countries, with its primary operations in Australia, New Zealand and Asia Pacific. ANZ’s securities are listed on the Australia, New Zealand and New York Stock Exchanges. ANZ is a leading retail, corporate and institutional bank in Australia and one of the largest banks in New Zealand. Its retail business in Australia provides a full range of product through over 780 branches. ANZ was named Money Magazine's Bank of the Year 2007 in Australia for the seventh time in the past eight years, and registered wins in the following categories: Business Bank of the Year 2007, Home Loan Lender of the Year 2007 and Online Lender of the Year 2007. Other recent awards include Best Local Cash Management Bank (Asiamoney), Best Trade Finance Bank, Australia (Global Finance) and Best Trade Bank in Asia (Trade and Forfaiting Review). ANZ has established partnerships with the following financial institutions in Asia: Metrobank Card Corporation (Philippines), Panin Bank (Indonesia), Sacombank (Vietnam), Saigon Securities Inc (Vietnam), ANZ Royal (Cambodia), Vientiane Commercial Bank (Laos), Bank of Tianjin (China) and the Shanghai Rural Commercial Bank (China). AmBank believes that the AHB Group's partnership with ANZ will create further market growth opportunities, given ANZ's exposure to international products, banking systems as well as cross border capabilities in Asia. By leveraging on ANZ's capabilities in risk management, retail banking and SME banking, product innovation, branding, IT infrastructure, training and development of personnel, AmBank aims to entrench its position as a premier financial institution providing innovative products and services to its customers.

4.3.3 The Capital Plan To ensure that AmBank is sufficiently capitalised for its future growth, AmBank has implemented a capital plan, including the issuance of MTN Programme. As at 30 September 2008, AmBank has effected a drawdown of RM1,460 million on its MTN Programme. The issuance of the current RMNIT1 Programme also forms part of AmBank’s capital management initiatives to support and strengthen its capital position and to raise funds for the growth of its business operations.


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4.4 Corporate Information

4.4.1 Principal Place of Business

The registered office of AmBank is located at 22nd Floor, Bangunan AmBank Group, 55 Jalan Raja Chulan, 50200 Kuala Lumpur while the principal place of business of its Retail and Business Banking Divisions are located at Menara AmBank, No. 8, Jalan Yap Kwan Seng, 50450 Kuala Lumpur and Menara Dion, Jalan Sultan Ismail, 50250 Kuala Lumpur respectively.

4.4.2 Share Capital and Changes in Share Capital Share Capital

The authorised and issued and fully paid-up share capital of AmBank as at 31 December 2008 are as follows:-

Type No. of shares

Par value

(RM) Total (RM)

Authorised 3,886,250,002 1.00 3,886,250,002 - Shares 1,386,250,002 1.00 1,386,250,002 - IPS 2,500,000,000 1.00 2,500,000,000 Issued and fully paid-up 820,363,762 1.00 820,363,762 - Shares 670,363,762 1.00 670,363,762 - IPS 150,000,000 1.00 150,000,000

The changes in the issued and paid-up share capital of AmBank since its incorporation are as follows:-


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Shares

Date of Allotment

No. of Shares allotted

Par value

Type of issuance

Cumulative share capital

(RM) (RM) 25.03.1969 2 1.00 Subscribers’ shares 2 11.06.1969 999,998 1.00 Cash 1,000,000 24.09.1969 200,000 1.00 Cash 1,200,000 11.11.1969 100,000 1.00 Cash 1,300,000 03.01.1970 100,000 1.00 Cash 1,400,000 31.03.1970 100,000 1.00 Cash 1,500,000 25.03.1971 500,000 1.00 Cash 2,000,000 23.06.1971 400,000 1.00 Cash 2,400,000 28.09.1971 220,000 1.00 Cash 2,620,000 29.12.1971 30,000 1.00 Cash 2,650,000 28.01.1972 250,000 1.00 Cash 2,900,000 13.03.1972 50,000 1.00 Cash 2,950,000 17.03.1972 50,000 1.00 Cash 3,000,000 10.04.1972 50,000 1.00 Cash 3,050,000 16.06.1972 50,000 1.00 Cash 3,100,000 02.11.1972 400,000 1.00 Cash 3,500,000 27.02.1973 500,000 1.00 Cash 4,000,000 18.03.1974 540,000 1.00 Cash 4,540,000 29.03.1974 460,000 1.00 Cash 5,000,000 04.11.1974 1,000,000 1.00 Cash 6,000,000 23.02.1976 5,325,000 1.00 Rights issue of 3 for 2 at

RM1.00 per share 11,325,000

09.03.1976 3,675,000 1.00 Rights issue of 3 for 2 at RM1.00 per share

15,000,000

17.04.1980 2,300,000 1.00 Special issue to Bumiputera investors at RM1.10 per share

17,300,000


24,220,000

14.03.1983 67,816,000 0.501 Bonus issue of 7 for 5 at RM0.50 per share

58,128,000

09.05.1983 1,744,000 0.501 Cash 59,000,000 18.06.1984 29,500,000 0.501 Rights issue of 1 for 4 at

RM1.30 per share 73,750,000


110,625,000


165,937,500


221,250,000


331,875,000

16.12.1992 663,750,000 0.501 Shares allotted to MBf Capital pursuant to a scheme of arrangement

331,875,0002


663,750,000

23.06.1997 700,000,000 0.501 Cash 1,013,750,000 29.07.1999 724,000,000 0.501 Cash 1,375,750,000 29.07.1999 2,476,000,0005 0.501 Allotment of Preference

Shares 2,613,750,000

12.06.2002 (5,227,499,996) 0.501 Capital reduction 23 12.06.2002 0 1.00 Consolidation 23 18.07.2002 528,402,118 1.00 4 528,402,120 31.05.2005 64,825,308 1.00 6 593,227,428 29.06.2005 17,136,334 1.00 6 610,363,762 20.05.2008 60,000,000 1.00 7 670,363,762

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Notes:-

1 The par value of the shares was subdivided from RM1.00 to RM0.50 on 22 December 1981.

2 The shares were cancelled on 16 December 1992 pursuant to a scheme of arrangement under Section 176 of the Act between MBf Finance and its shareholders sanctioned by the High Court of Malaya on 17 September 1992 under Originating Petition No. D6-26-27-92 and re-allotted to MBf Capital on the same date. Pursuant to the said scheme, every one (1) ordinary share of RM0.50 each in MBf Finance was exchanged for one (1) new ordinary share of RM1.00 each in MBf Capital.

3 Pursuant to an order by the High Court dated 22 April 2002 for capital reduction and consolidation in accordance with Section 64(2) of the Act.

4 Settlement for part of the consideration due in respect of the transfer of business from AMFB pursuant to the vesting order of the High Court of Malaya under Section 50 of BAFIA.

5 Preference shares which were subsequently converted to ordinary shares of RM0.50 each on 23 January 2002.

6 81,961,642 new Shares allotted to AMFB pursuant to the acquisition of all issued shares in AmIslamic Bank.

7 Conversion of RM300,000,000 nominal amount of Interest Bearing Irredeemable Convertible Unsecured Loan Stock due 2017 (“ICULS”) at the coversion price of RM5.00 nominal amount of ICULS for every one (1) Share.

IPS

Date of Allotment No. of IPS allotted

Type of issuance

Cumulative share capital

(RM) 18.05.2007 150,000,000 Allotment of Preference

Shares 150,000,000

4.4.3 Substantial Shareholders

Based on the Registrar of Substantial Shareholders, the substantial shareholders of AmBank as at 31 December 2008 and its shareholdings in AmBank are as follows:-

No. of Shares Substantial Shareholders

Nationality/ Country of

Incorporation Direct

interest % Indirect

interest %

AMFB

Malaysia 670,363,7623 100 - -

AHB

Malaysia - - 670,363,7621,3 100

TSDAH Malaysian - - 670,363,7622,3 100 Amcorp Malaysia - - 670,363,7622,3 100 CGSB Malaysia - - 670,363,7622,3 100 ANZ Funds Australia - - 670,363,7622,3 100 ANZ Australia - - 670,363,7622,3 100

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Notes:- 1 Deemed interested by virtue of its interest in AMFB 2 Deemed interested by virtue of his/its interests in AMFB via his/its substantial

interests in AHB 3 Excluding 150,000,000 IPS

4.5 Information on Directors and Senior Management

4.5.1 Board

The members of the Board as at 31 December 2008 are as follows:-

Name/ Designation

Address Date of

appointment

Nationality NRIC/

Passport Number

TSDAH (Chairman, Non-Independent Non-

Executive Director)

No. 2 Jalan Teberau Satu Ukay Heights 68000 Ampang Selangor

20.12.2001 Malaysian 390717-10-5069

Tun Mohammed Hanif bin Omar (Independent Non-Executive Director)

No.74-76 Jalan USJ 12/3B 47630 Subang Jaya Selangor

20.12.2001 Malaysian 390116-08-5111

Tan Sri Datuk Clifford

Francis Herbert (Independent Non-Executive

Director)

No. 59 Jalan Setiakasih SatuBukit Damansara 50490 Kuala Lumpur

01.10.2005 Malaysian 411004-10-5405

Dato’ Gan Nyap Liou @ Gan Nyap Liow (Independent Non-Executive

Director)

No. 30 Lorong Kemaris 1 Bukit Bandaraya Bangsar 59100 Kuala Lumpur

15.06.2006 Malaysian 541219-04-5409

Tan Kheng Soon (Independent Non-Executive

Director)

No. 16 Jalan Taman Seputeh 6 58000 Kuala Lumpur

01.10.2005 Malaysian 390210-07-5083

Cheah Tek Kuang (Chief Executive Officer)

No. 1 Jalan Setiabakti 10 Bukit Damansara 50490 Kuala Lumpur

20.12.2001 Malaysian 470528-07-5067

Ashok Ramamurthy (Non-Independent Non-

Executive Director)

No. 78 Persiaran Nusantara Duta Nusantara Jalan Sri Hartamas 50480 Kuala Lumpur

18.11.2008 Australian L9980756

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4.5.2 Directors’ Shareholdings

Name (Designation) No. of Shares held as at 31 December 2008 Direct % Indirect % TSDAH (Chairman, Non-Independent Non-Executive Director)

-

-

670,363,7621,2

100

Tun Mohammed Hanif Omar (Independent Non-Executive Director)

- - - -

Tan Sri Datuk Clifford Francis Herbert (Independent Non-Executive Director)

- - - -

Dato’ Gan Nyap Liou @ Gan Nyap Liow (Independent Non-Executive Director)

- - - -

Tan Kheng Soon (Independent Non-Executive Director)

- - - -

Cheah Tek Kuang (Chief Executive Officer)

- - - -

Ashok Ramamurthy (Non-Independent Non-Executive Director)

- - - -

Notes:- 1 Deemed interested by virtue of his interests in AMFB via his substantial interests in AHB 2 Excluding 150,000,000 IPS


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4.5.3 Directors’ Profiles

Y. Bhg. Tan Sri Dato’ Azman Hashim TSDAH, a Malaysian, aged 69, was appointed to the Board of AmBank on 20 December 2001. TSDAH has been the Chairman of AHB, the holding company of AmBank, since 1991. He is the Non-Independent Non-Executive Chairman of AHB.

TSDAH also sits as Chairman of the board of several subsidiaries of AHB, namely AIGB, AMFB, AmInvestment Bank, AmIslamic Bank, AmProperty Trust Management Berhad, AmLife, AmG Insurance Berhad and AMAB Holdings Sdn Bhd.

TSDAH, a Chartered Accountant, a Fellow of the Institute of Chartered Accountants and a Fellow of the Institute of Chartered Secretaries and Administrators, has been in the banking industry since 1960 when he joined BNM and served there until 1964. He practised as a Chartered Accountant in Azman Wong Salleh and Co. from 1964 to 1971. He then joined the board of Malayan Banking Berhad from 1966 until 1980 and was its Executive Director from 1971 until 1980. He was the Executive Chairman of Kwong Yik Bank Berhad, a subsidiary of Malayan Banking Berhad, from 1980 until April 1982 when he acquired AmInvestment Bank.

TSDAH is the Executive Chairman of Amcorp and RCE Capital Berhad, and Chairman of Malaysian South-South Corporation Berhad and MCM Technologies Berhad. He serves as a member on the Boards of Pembangunan MasMelayu Berhad and the Islamic Banking and Finance Institute Malaysia Sdn Bhd. TSDAH is also involved in several charitable organisations as Chairman of AmGroup Foundation and Perdana Leadership Foundation, and Trustee for ECM Libra Foundation, Yayasan Perpaduan Nasional, Malaysian Liver Foundation, Yayasan Canselor Open University Malaysia and recently, Yayasan Wakaf Malaysia.

TSDAH is the Chairman of the Malaysian Investment Banking Association, the Malaysia Productivity Corporation, East-Asia Business Council and Chairman Emeritus of the Pacific Basin Economic Council (PBEC) International and Co-Chairman of Malaysia – Singapore Roundtable. He is President of the Malaysia South-South Association, Malaysia-Japan Economic Association, Malaysian Prison FRIENDS Club and Non-Aligned Movement’s (“NAM”) Business Council and Treasurer, Malaysia-Australia Foundation. He is a Member of the APEC Business Advisory Council, The Trilateral Commission (Asia-Pacific Group), the Malaysian-British and Malaysia-China Business Councils, and the United Nations Economic and Social Commission for Asia and the Pacific (“UNESCAP”) Business Advisory Council. He is also the Leader of the ASEAN-Japanese Business Meeting (Malaysia Committee, Keizai Doyukai) and is on the Board of Advisors, AIM Centre for Corporate Social Responsibility. He is the Pro-Chancellor, Open University of Malaysia and Member, Governing Body of the Asian Productivity Organisation and International Advisory Panel, BNM International Centre for Education in Islamic Finance (“INCEIF”).

Y. A. Bhg. Tun Mohammed Hanif Omar Tun Mohammed Hanif Omar, a Malaysian, aged 69, was appointed to the Board of AmBank on 20 December 2001. Tun Mohammed Hanif also sits on the Board of AHB and other subsidiaries of AHB, namely AMFB, AmIslamic Bank and AmInvestment Bank. Tun Mohammed Hanif was the Inspector General of the Malaysian Police Force for 20 years until his retirement in January 1994. Tun Mohammed Hanif is also currently the Chairman of General Corporation Berhad, Deputy Chairman of Genting Berhad and Resorts World Berhad. He has been the President of the Malaysian Institute of Management since 2001.

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Tun Mohammed Hanif received his Bachelor of Arts from the then University of Malaya, Singapore in 1959, LLB (Honours) from Buckingham University, United Kingdom in 1986 and Certificate of Legal Practice (Honours) from the Legal Qualifying Board in 1987. Y. Bhg. Tan Sri Datuk Clifford Francis Herbert Tan Sri Datuk Clifford Francis Herbert, a Malaysian, aged 67, was appointed to the Board of AmBank on 1 October 2005. Tan Sri Datuk Clifford joined the Malaysian civil service in 1964 as Assistant Secretary in the Public Services Department. From 1968 to 1975, he was the Assistant Secretary in the Development Administration Unit, Prime Minister’s Department. Tan Sri Datuk Clifford served in the Ministry of Finance from 1975 to 1997, culminating as Secretary General to the Treasury. From 1994 to 1997, he was also a Board member of BNM. From 1994 to 2000, he was the Chairman of KL International Airport Berhad which built the Kuala Lumpur International Airport. He was the former Chairman of Percetakan Nasional Malaysia Berhad and had been a Board member of numerous statutory bodies and government related public companies. Tan Sri Datuk Clifford is currently the Board member of Resorts World Berhad, Shell Refining Company (Federation of Malaya) Berhad, AHB, AmInvestment Bank and AmIslamic Bank. Additionally, Tan Sri Datuk Clifford is also involved in several charitable organisations. He is a Vice-President of the Federation of Malaysian Manufacturers. Tan Sri Datuk Clifford holds a Masters of Public Administration from University of Pittsburgh and a Bachelor of Arts (Honours) from University of Malaya. Y. Bhg. Dato’ Gan Nyap Liou @ Gan Nyap Liow Dato’ Gan Nyap Liou @ Gan Nyap Liow, a Malaysian, aged 54, was appointed to the Board of AmBank on 15 June 2006. He is also a Board member of AmIslamic Bank. Dato’ Gan was with Accenture, a global management and technology consulting firm for 26 years until his retirement in December 2004. He was a partner for 16 years and had held many global leadership roles including Managing Partner for Malaysia, ASEAN, Asia and Corporate Development, Asia Pacific. Dato’ Gan is currently the Chairman of REDtone International Berhad and Cuscapi Berhad. He is also a Director of Tien Wah Press Holdings Berhad, AMDB Berhad, Tanjong Public Limited Company and Badan Pengawas Pemegang Saham Minoriti Berhad (Minority Shareholder Watchdog Group). Dato’ Gan was also the Chairman of the Association of Computer Industry Malaysia and the Vice President of the Association of Asian Oceania Computer Industry Organisation, and was a member of the Ministry of Science and Technology Think Tank, Copyright Tribunal and the Labuan International Financial Exchange Committee. Dato’ Gan is a Chartered Accountant, a Fellow of the Association of Chartered Certified Accountants and a Certified Management Consultant.

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Mr. Tan Kheng Soon Mr. Tan Kheng Soon, a Malaysian, aged 69, was appointed to the Board of AmBank on 1 October 2005. Mr. Tan began his career in the financial industry with his attachment to BNM from 1959 to 1986. He served in various departments including economics, foreign exchange, exchange control and investment, until he was promoted to Manager of the Exchange Control Department, and was later seconded to Cagamas Berhad as its first General Manager in 1986. In 1989, he joined Malaysian French Bank Berhad (now known as Alliance Bank Berhad) as Senior Vice-President and retired from office in October 1996. He was a Director of AmBank Berhad (now known as AmIslamic Bank) from 1999 until 2005. Mr. Cheah Tek Kuang Mr. Cheah Tek Kuang, a Malaysian, aged 61, was appointed to the Board of AmBank on 20 December 2001. Mr. Cheah is currently the Group Managing Director of AHB and Chief Executive Officer of AmBank. Mr. Cheah joined AmInvestment Bank in 1978 and held various senior positions. In 1994, he was promoted to Managing Director, and he became the Group Managing Director of AmInvestment Bank from January 2002 to December 2004 before assuming the office of Group Managing Director in AHB. He remains as a Non-Independent Non-Executive Director of AmInvestment Bank. Mr. Cheah’s directorships in other public companies include Bursa Malaysia Berhad, AlGB, AmIslamic Bank, AmLife, AmG Insurance Berhad and Cagamas Berhad. He is an Investment Panel Committee Member of the EPF and Kumpulan Wang Persaraan. He also currently serves as a Council Member of the Association of Banks in Malaysia and is an Alternate Chairman of the Malaysian Investment Banking Association. He is also the Investment Committee Member of SEAVI III Trust. Mr. Cheah has a Bachelor of Economics (Honours) degree from the University of Malaya and is a Fellow of the Institute of Bankers Malaysia. Mr. Ashok Ramamurthy Mr. Ashok Ramamurthy, an Australian, aged 46, was appointed to the Board of AmBank on 18 November 2008. Mr. Ashok is currently the Group Chief Financial Officer and Deputy Group Managing Director of AHB. Mr. Ashok is also a director in AHB subsidiaries, namely AIGB, AmInvestment Bank, AmIslamic Bank and AmInvestment Management Sdn Bhd. As the Group Chief Financial Officer of AHB, Mr. Ashok is accountable for the delivery of financial performance to meet the targets set by the Group Managing Director and AHB Board and to meet all financial regulatory reporting requirements. The role, as a key member of the Leadership Committees, is required to proactively manage resources and trends to deliver superior financial performance in a challenging and competitive environment. Mr. Ashok has over 20 years finance experience within ANZ, across multiple geographies including New Zealand, Australia and India. He has been successful in developing and executing transformational strategy and leading large Finance functions.

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4.5.4 Profile of Key Management Mr. Cheah Tek Kuang Please refer to Section 4.5.3. Mr. Ashok Ramamurthy Please refer to Section 4.5.3. Y. Bhg. Datuk Mohamed Azmi Mahmood Datuk Mohamed Azmi Mahmood, a Malaysian aged 54 is currently the Managing Director, Retail Banking of AmBank and has 27 years of experience in the banking industry. Datuk Azmi first joined AMFB in 1981 as an Accountant. Over the years, he rose to become Senior General Manager. In 1989, he was seconded by Bank Negara Malaysia to First Malaysia Finance Berhad as its Chief Executive Officer in a rescue scheme of the finance company. In January 1991, he rejoined AMFB and was promoted to Managing Director on 1 August 1994, which he held until 14 June 2002 to assume the office of Managing Director, Retail Banking in AmBank with effect from 15 June 2002. Datuk Azmi is also a Director of AmLife, AmG Insurance Berhad, Malaysian Electronic Payment System (1997) Sdn Bhd (MEPS), MEPS Currency Management Sdn Bhd, Akademi IBBM Sdn Bhd, Financial Information Services Sdn Bhd and FIS Data Link Sdn Bhd. Datuk Azmi is also a Council Member and Honorary Treasurer of the Association of Finance Companies of Malaysia, a Council Member and Honorary Secretary of the Association of Hire Purchase Companies of Malaysia, a Member of the Council and Committee of the Institute of Bankers Malaysia. He is a Fellow of the Institute of Bankers Malaysia. Y. Bhg. Dato’ James Lim Cheng Poh Dato’ James Lim Cheng Poh, a Malaysian, aged 60, joined AmBank Berhad as its Managing Director/CEO, on 15 June 2004. After the merger of the business operations of AmBank Berhad and AmFinance Berhad, whereby AmFinance Berhad became AmBank (M) Berhad on 1 June 2005, he was then appointed as Managing Director, Business Banking of AmBank (M) Berhad. On 30th June 2005, Dato’ James was appointed as a Director on the Board of Directors of AmLife. He graduated from Camborne School of Mines (England) in Mining Engineering and holds a Masters Degree in Science (Engineering) from Queen’s University in Canada as well as a Masters Degree in Business Administration from Harvard University, USA. Prior to joining AmBank Berhad, he served in the Hong Leong Group for more than 20 years. He joined the Hong Leong Group in 1983 and held various senior positions and served in various capacities including insurance, properties and finance in the Hong Leong Group. In 1994, he was appointed as the Senior Group Managing Director of Hong Leong Bank Berhad, a position he held until 16 October 2003. Under his leadership, he has developed Hong Leong Bank into one of the fastest growing banks in the country.

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En. Mahdi Morad En. Mahdi Morad, a Malaysian, aged 52, is currently the Executive Director, Retail Banking of AmBank. He joined Arab-Malaysian Finance Berhad (now known as AMFB Holdings Berhad) in 1989. Prior to this, he held various positions in Asia Commercial Finance Berhad and Sime Darby Plantations Berhad. En. Mahdi has a Bachelor of Science degree in Agricultural Business from Iowa State University, USA and a Masters degree in Business Administration from University of Missouri, USA. He also serves as a director on the boards of various subsidiaries of AmBank, namely AmPremier, AMBB Capital (L) Ltd, AmCapital (L) Inc, MBf Information Services Sdn Bhd, MBf Trustees Bhd, Bougainvillea Development Sdn Bhd, AmProperty Holdings Sdn Bhd and AmCredit & Leasing Sdn Bhd. He is also the Chairman of Arab-Malaysian Credit Berhad. Mr. Andrew Strain Kerr Mr. Andrew Strain Kerr, an Australian, is currently the Chief Risk Officer of AHB. Mr. Andrew is responsible for the development and leadership of the risk function within the AmBank Group, ensuring the financial and reputational integrity of AmBank through an effective risk management framework. He has over 27 years banking experience (including 7 years in South East Asia) with major international financial institutions (including 15 years with Bank of America and 5 ½ years with the Australia and New Zealand Banking Group). He has worked predominantly in the areas of corporate finance and Risk Management (including significant hands on Basel II transition experience), incorporating key leadership and management positions in Australia, Hong Kong and Malaysia. Mr. Andrew has been very successful in instilling a strong credit culture both at the organisational and business unit level and in delivering material change agendas within risk management.

Mr. Sim How Chuah Mr. Sim How Chuah, a Malaysian, aged 54, is currently a Senior General Manager in the Business Banking Division at AmBank. He joined Arab-Malaysian Finance Berhad (now known as AMFB Holdings Berhad) in 1984 and was subsequently transferred to AmBank in 1994. Prior to joining Arab-Malaysian Finance Berhad, he was with BDO Binder from 1974 to 1984 where he was initially with the audit arm and his last position was a Director and Manager of the company’s secretarial department. He has more than 20 years of experience in the banking industry. He also serves as a director on the Board of AmPremier, AMBB Capital (L) Ltd and AmCapital (L) Inc, subsidiaries of AmBank. En. Ahmad Zaini Othman En. Ahmad Zaini Othman, a Malaysian, aged 51, is the CEO of AmIslamic Bank. He joined the AmBank Group through the commercial banking arm in 1996 where he was made responsible in overseeing the Corporate Banking Division, which included the Islamic Banking operations of the bank among many other responsibilities in the dual-banking environment. With over 24 years of banking and corporate sector experience, he is well-versed in merchant and commercial banking, specifically in areas of corporate and project financing.

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Currently, he is a committee member of the Central Bank of Malaysia’s Islamic Law Review Committee and the Arbitration Committee. He also serves as the Vice President and council member of Association of Islamic Banking Institutions Malaysia (AIBIM) and AIBIM Structured Business Committee. He has participated actively in the formulation of the Certified Islamic Financing Professional (CIFP) programme offered by the International Centre for Education in Islamic Finance (INCEIF) and has been appointed as one of INCEIF Associate Faculty Member (Industry Expert). He is also a committee member of Islamic Banking and Finance Institute Malaysia (IBFIM) - Training and Education Committee. En. Ahmad Zaini holds a Higher National Diploma in Accounting at Stockport College of Technology, Manchester (England), a Bachelor’s Degree of Science (Finance) from Southern Illinois University, USA and also a Master’s Degree in Business Administration (Finance) from the St. Louis University, USA.

4.6 AmBank’s Businesses

Following the completion of the Business Transfer, AmBank’s operations have been divided into four business divisions: the Retail Banking Division, the Business Banking Division, the Investment Banking Division, and the Islamic Banking Division (which crosses AmBank’s various lines of business, including business and retail banking). As at 30 September 2008, the majority of AmBank’s net profits are derived from its Retail Banking Division.

4.6.1 Retail Banking

AmBank’s Retail Banking services and products are offered across the following Business Units:- • auto financing • mortgages and other consumer loans; • credit cards and line of credit; • personal financing/Co-op; • asset financing and small business (including leasing and equipment

financing). • deposits (savings accounts, demand deposits and fixed term deposits); and • retail distribution (including transactional banking, bancassurance, wealth

management and the distribution of investment products and insurance products).

As at 30 September 2008, the Retail Banking business served approximately 5.1 million customer accounts through its extensive distribution network of branches, ATMs, EBCs, 24-hour customer contact centre, mobile banking and Internet banking services. The AmBank Group’s retail assets (including Islamic financing sold to Cagamas Berhad, which per BNM guidelines are required to be accounted for as off balance sheet items) were RM37.5 billion as at 30 September 2008 comprised mainly of loans for the purchase of transport vehicles, for the purchase of residential properties, credit cards receivables and loans for personal use.

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To emphasise its commitment to customers, AmBank has adopted a customer service campaign known as Customer F.I.R.S.T. (which stands for Friendly, Innovative, Responsive, Simple and Trustworthy). Under this campaign, AmBank consistently benchmarks itself against the world’s best banking practices and reviews and rewards branches that excel in customer service. In addition, AmBank has rolled out the SSCs model to integrate its bancassurance and branch network to improve performance and efficiency and to focus on both sales and service at all branches. Personal banking officers have also been placed at branches to offer the full range of retail banking products.

(a) Auto financing

The AmBank Group had RM24.4 billion loans outstanding in the purchase of transport vehicles sector, and is representing approximately 41.7% of the AmBank Group’s total loan portfolio as at 30 September 2008. The following table sets out the AmBank Group’s vehicle financing portfolio as at the dates indicated.

As at 31 March 2007

As at 31 March 2008

As at 30 September

2008 Loans for purchase of transport vehicles (net of unearned interest) 22.74 billion 24.12 billion 24.40 billion

AmBank has been focusing on rebalancing its portfolio by focusing on higher profit segments. AmBank has established relationships with over 4000 new, used and reconditioned vehicle dealers in Malaysia. AmBank also has strategic alliances with all of the major car manufacturers and car distributors in Malaysia, including amongst others, Proton, Perodua, Naza Group of Companies, UMW Toyota, Honda Malaysia, the Sime Darby Automotive, Mercedes-Benz Malaysia and many others. AmBank’s market share has grown in recent years as a result of AmBank’s competitive pricing strategies, its focus on product innovations and service, and its continued good relationships with vehicle dealers. AmBank continues to form new alliances with vehicle distributors so as to increase growth in, and diversify, its vehicle financing portfolio. Auto financing is usually offered on a fixed-rate basis, generally secured by the vehicle being purchased and typically has a term of three to seven years (with a maximum of nine years). The financing typically represents 75.0% to 90.0% of the assessed collateral value of the vehicle to be financed, depending on the credit assessment of the borrower, and the age of the vehicles.

Prior to granting loans for used vehicles, AmBank requires an inspection by Pusat Pemeriksaan Kenderaan Berkomputer Sdn Bhd, the official vehicle inspection body in Malaysia to assess the roadworthiness of the vehicles.

In June 2004, AmBank’s auto financing operations and fulfilment department obtained the ISO 9001 certifications from the Department of Standards Malaysia, the United Kingdom Accreditation Service and the Comité Francais d’aAccréditation, for auto financing processing, documentation, disbursement and customer service.

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AmBank implemented an automated credit scoring system in January 2005 as part of its ongoing efforts to improve credit risk management. In addition, it has also improved AmBank’s turn-around time in credit processing.

AmBank continues to reinforce its presence in the vehicle financing market through marketing initiatives, participation in roadshows and sales promotions with vehicle distributors and dealers throughout Malaysia. AmBank intends to grow its auto financing portfolio by:- (i) streamlining processing operations to five Business Centres in

Klang Valley, 11 outside Klang Valley with 28 other Auto Finance Units spread across the nation;

(ii) improving service and turn-around time in credit appraisals and

disbursements via its automated credit scoring system; (iii) introducing more innovative products, and programmes including a

dedicated Dealer Management Programme; and (iv) conducting regular dealer satisfaction surveys and establishing tie-

ups with new dealers. AmBank continuously improves its risk management scorecards and credit scoring capabilities to offer customers differential interest rates according to their credit profile. In June 2007, AmBank won the Excellence in Automobile Lending Award for the Asia Pacific and Persian Gulf Region at the Sixth Asian Banker Excellence in Retail Financial Services Awards, the highest accolade ever awarded to a Malaysian vehicle financier. This award recognises AmBank’s commitment to building business franchises that are sustainable, competitive and profitable.

In 2008, AmBank Auto Finance Division won another prestigious award – the Frost & Sullivan Award for Automotive Finance Company of The Year, an award that acknowledges the relentless effort of the AmBank Auto Finance team and recognises AmBank’s outstanding performance in automotive financing. As part of the efforts to improve the overall profitability of the auto financing business, AmBank has previously engaged a consulting firm to review the overall business model for its vehicle financing business, for which ANZ is also assisting in this review process in order to improve the overall returns from the auto financing business via their lending expertise in risk management and risk-based pricing approaches.

(b) Mortgages and Other Consumer Loans

In the residential mortgages segment, the AmBank Group’s had approximately 6.5% of the domestic market (including Islamic financing asset sold to Cagamas Berhad, which per BNM guidelines are required to be accounted for as off balance sheet items) as at 30 September 2008 with loan assets of RM11.2 billion, based on figures published by BNM of residential property purchases. As at 30 September 2008, the financing of residential mortgages represented approximately 19.1% of the AmBank Group’s total loan portfolio. The table below sets out the AmBank Group’s residential property financing portfolio as at the dates indicated.

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As at 31

March 2007 As at 31

March 2008

As at 30 September

2008 Loans for residential property (net of unearned interest)

10.76 billion 10. 98billion 11.15 billion

AmBank’s residential property loans normally have terms of between 20 and 25 years, with a maximum loan tenure of 30 years. Under construction residential property loans are typically of fixed-rate for a period of one to two years, and of variable rate for the remaining tenure, and are secured by a registered charge on the property being financed. As for completed residential property loans, the loan structure is mainly on variable rate for the whole tenure. Generally, interest on residential property loans is calculated on a daily reducing balance basis. AmBank’s marketing activities in relation to mortgages and other consumer loans include product-bundling initiatives and active participation in sales launches and major property expositions, such as the Malaysia Property Expo (MAPEX, which is organised annually by the Real Estate and Housing Developers’ Association). AmBank also has strategic alliances with major housing developers to provide attractive end financing packages to home buyers. AmBank introduced several key initiatives during 2007 and 2008, such as the AmBank Homelink Mortgage Refinancing Campaign, which offers exclusive gifts to customers who refinance their existing home loans. In the commercial property sector, AmBank introduced the PropertyLink product in mid-December 2007, which provides flexibility in repayment and interest savings to customers. AmBank currently has five mortgage business centres in Kuala Lumpur, Penang, Johor Bahru, Kuching and Kota Kinabalu and three mortgage marketing hubs in Ipoh, Malacca and Kuantan, as well as 178 relationship desks with personal bankers located in branches nationwide.

(c) Credit Cards and Line of Credit As at 30 September 2008, AmBank was the sixth largest credit card lender in Malaysia based on credit card receivables amongst all credit card lenders. In addition to issuing its own credit cards, AmBank also has a strategic alliance with an independent credit card issuer, MBf Cards. Credit cards receivables owned by AmBank generated from cardholders of MBf Cards amounted to more than RM1 billion as at 30 September 2008. AmBank had financed about 800,000 credit card accounts with total credit cards receivables of nearly RM2 billion as at 30 September 2008.

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AmBank issues MasterCard, Visa and Al-Taslif Islamic credit cards. Among others, AmBank has entered into several co-brand credit and prepaid card arrangements with RealRewards, one of the country’s largest cross-industry loyalty program operator. Others include a co-brand card program with Samsung and eCosway being the latest in the stable. AmBank is also aggressively into cross-selling efforts to increase product holding ratio amongst AmBank Group customers, offering attractive product bundling offers to its corporate banking customers and retail lending products, such as residential property loans and auto financing. Other marketing initiatives implemented by AmBank include co-marketing programmes with AmLife. The recent alliance with global players like Sony Ericsson, Sharp, HP and iPOD to offer gifts for balance transfer and quick cash on instalment repayment programme had brought in more than RM100 million of new receivables.

In June 2006, AmBank introduced prepaid cards in Malaysia and have penetrated into various key segments with its innovative co-brand cards for the youth, multi-level-marketing organisations, payroll, foreign remittance and telco. In collaboration with MasterCard Worldwide, AmBank has launched limited edition FIFA 2006 and UEFA 2008 cards which became instant hit amongst football fans. AmBank has, in November 2007, launched the AmBank i-Talk Prepaid MasterCard, a joint collaboration between Telecom Malaysia Bhd and AmBank. As at 30 September 2008, AmBank had sold over 200,000 prepaid cards, making it the largest prepaid card issuer in Malaysia.

Revenues from AmBank’s credit card business consist principally of finance charges on outstanding balances, annual fees and cash advance fees paid by its cardholders, and merchant fees payable by service establishments. AmBank has also re-entered the merchant acquiring business by launching the first grocery easy payment program in Malaysia, which allows customers to pay for their retail purchases at large Malaysian grocery stores through instalment payments. Besides its own sales team, AmBank has also tie up with Master Merchants to accelerate the take up of new merchants. As at 30 September 2008, AmBank has about 7,000 merchants, the key ones include eCosway, Thai Airways and Gleneagle Hospital Penang.

(d) Personal Financing/Co-op

As at 30 September 2008, the AmBank Group ranked third in personal financing/Co-op, based on the published financial results of domestic and foreign financial institutions in Malaysia, with a market share of 6.3% and based on a gross financing portfolio of RM1,830.5 million. The principal personal financing/Co-op products offered by AmIslamic Bank, a subsidiary of AmBank, is aimed at members of co-operatives who are government employees. The asset quality of such personal financing/Co-op is significantly enhanced by the payment method, which is typically via a deduction from monthly salary. AmIslamic Bank has launched sales campaigns to involve AmBank and AmIslamic Bank’s staff in the marketing of personal financing/Co-op products. AmIslamic Bank has also launched campaigns such as “Win A Car – Merdeka Promotion” during June to August 2008, where customers have the opportunity to win a Proton Saga by applying for its Personal Financing/Co-op facility.

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(e) Transactional Banking, Bancassurance and Wealth Management In addition to cross-selling deposits and demand deposits under transactional banking and lending products, such as mortgages, auto financing and micro loans, this business unit offers customers with access to investment products such as fixed income and equity unit trusts, insurance products (such as mortgage reducing term assurance, life, general and auto insurance) and other bancassurance products. In furtherance of AmBank’s strategy to cross-sell, such investment and insurance products are substantially sourced from within the AHB Group. To expand its marketing and distribution of unit trust products in the industry, AmBank partners with third party funds management companies such as ING Funds Berhad, Prudential Fund Management Berhad and other leading mutual fund companies which act as sales agents for its unit trust funds. AmBank employs sales representatives at its major branches to strengthen its sales platform and its focus on promoting the entire range of its consumer sales products.

(f) Deposits

The various deposit products offered by the Retail Banking Division include savings accounts, demand deposits and fixed term deposits. The bank continues to grow their term deposits base by providing good service, maintaining strong relationships with their customers and an aggressive but selective pricing strategy, to fund assets growth. The bank’s key strategies revolve around the concepts of:- (1) Acquisition – understanding its key customer segments and

meeting their Transact and Save needs; (2) Activation – increasing transactionality and primary accounts; and (3) Anti-Attrition – prevention to reduce dormancy and closure. The bank continues to focus on initiatives which will provide long-term sustainable growth specifically in low-cost deposits. This growth comes from a stable base of customers who choose AmBank for their primary banking relationship, and is driven by several factors such as convenience, accessibility and branding. In the pipeline for the next financial year of FY2010 are a number of products and campaigns which are targeted at specific segments of the market as well as major broad based acquisition campaign to increase deposit balances specifically in low-cost deposits. These are strategic initiatives meant to expand AmBank’s customer base while increasing the balances in the deposit portfolio.

(g) Asset Financing and Small Business

Asset Financing and Small Business primarily provides financing products to SMEs, including industrial hire purchase, loans funded by BNM, loans backed by CGC, block discounting, overdrafts, Bumiputera development loans and DAGS. DAGS are guaranteed by CGC and referred to AmBank for further credit review and processing after CGC has conducted its initial round of credit checking.

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AmBank actively promotes BNM-funded loan schemes, such as the Fund for Small and Medium Industries, the New Entrepreneurs Fund, and CGC loan schemes, all of which are intended to assist SMEs in accessing cheaper loan financing.

As at 30 September 2008, the AmBank Group’s asset financing and small business gross loan portfolio amounted to RM2,205.5 million. Besides focusing on direct sales, the marketing team of AmBank’s Asset Financing and Small Business unit also focuses on strengthening their relationships with suppliers and vendors. AmBank has also, in February 2007, launched AmMikro, its micro-financing product. AmMikro’s mandate is to provide unsecured term loans with fixed repayment periods to eligible micro enterprises for working capital purposes. The introduction of the micro financing product is in line with the sovereign call to build up the SMEs sector.

4.6.2 Business Banking

The Business Banking Division provides a wide range of products and services to Corporate and Commercial customers. In addition, the SMEs market segment has also been identified as a target market with high growth potential. The Business Banking Division has also established a Bumiputera unit that focuses on expanding our customer base to include Bumiputera entrepreneurs, Government-linked corporations and statutory bodies. The products and services offered includes:- (a) Corporate Lending

AmBank provides traditional corporate lending products and services, including working capital financing and other commercial loans (such as overdrafts, revolving credit facilities, project financing, bridging loans and syndicated loan participation). The Business Banking Division also offers a lending programme (for both Conventional and Islamic) focusing on SMEs financing requirements in respect of the purchase of commercial and industrial properties. This programme offers a more flexible and faster approval process compared to the approval process normally applicable within the Business Banking Division.

(b) Trade Services AmBank’s trade businesses contribute RM3.3 billion in receivables as at 30 September 2008. The Business Banking Division intends to further increase its trade business to boost non-interest income.

(c) Factoring The AmBank Group had factoring loans outstanding of RM63.0 million as at 30 September 2008. Currently, AmBank has allocated RM500 million to a lending programme to support its factoring products. The factoring lending programme focuses primarily on providing loans to contractors that supply products and services to government ministries and state agencies, multi-national companies and large corporations. This risk is mitigated because the assignment of receivables and collection are from a stronger-rated debtor party.

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The factoring lending programme has a more streamlined approval system which allows AmBank to process loans faster. Factoring products offer attractive working capital financing instruments due to the inexpensive fees, faster turnaround time and comprehensive associated services including performance guarantees, advanced payment guarantees, upfront mobilisation funding prior to commencement of work and certification of progress works.

(d) Cash Management and Transaction Management

Since its launch in February 2006, AmBank’s cash and transaction management product has been subscribed by more than 2,000 corporate customers. The product is assisting customers to achieve efficiency in their daily transactions by streamlining transaction processing in their daily and routine cash management tasks. AmBank’s current cash management solutions include receivables management, payables management, liquidity management and corporate Internet banking.

As part of the division’s strategy to extend its geographical reach, five business centres have been set-up, i.e. in Johor Bahru, Kota Kinabalu, Kuala Lumpur, Kuching and Penang. These RBCs are further supported by 17 CBCs strategically located throughout the country. The CBCs provide marketing services and serve as document collection centres. The RBCs also cross-sell the Group’s products and services, such as debt capital markets products, corporate finance advisory services and private banking products. The Business Banking Division customers are also supported by AmBank’s branch network in their daily transactional requirements. In addition, there are also 3 product teams, namely trade, factoring and cash management, which supports the marketing arm in the provision of advisory service, new product development and operations.

In 2007, AmBank:-

• strengthened its relationships with cross-border partners and added

correspondent banks for ease of foreign clearing and trade transactions; • introduced structured lending programmes and contract financing

programmes through the use of factoring services, which provide flexibility and speed for customers awarded with supplies and services contracts by Government ministries and agencies;

• ensured more structured and systematic coverage of the market by its

relationship managers, who have been identified to specialise in selected growth industries, such as oil and gas, metals, chemicals, palm oil, infrastructure and utilities as well as fast moving consumer goods sectors; and

• reengineered its end-to-end processes based on the Six Sigma principles

to allow for more speedy approvals of loan applications and timely usage of funds.

4.6.3 Investment Banking

With the completion of the Business Transfer, AHB Group is able to migrate to a universal banking platform for its corporate and investment banking clients. The universal banking platform will facilitate the initiation and development of a more competitive range of products and services, as well as enable AmBank to utilise its balance sheet to provide for larger and more structured investment banking deal flow generated from its Investment Banking Divisions.

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In addition to corporate loans, the Investment Banking Divisions will also provide treasury services that will permit AmBank’s corporate and investment banking clients to trade interest rates, credit spreads and foreign currencies. The Divisions will aim to meet the growing demand for foreign exchange and complex derivatives-related products by continuing to focus its resources on the development of both conventional and Islamic banking products.

4.6.4 Islamic Banking

The AmBank Group’s Islamic Banking business crosses AmBank’s various lines of businesses. Islamic investment banking transactions are often originated out of other corporate entities within the AHB Group. As at 30 September 2008 and as compared to its competitors in the Malaysian market, the AmBank Group was ranked sixth in Islamic banking (including Islamic window) based on total assets, third in Islamic hire purchase and first in Islamic credit cards in Malaysia (based on the published financial results of the 9 domestic banks in Malaysia). As at 30 September 2008, the AmBank Group’s Islamic banking business had gross total financing (net of loans sold to Cagamas Berhad) of approximately RM9.5 billion. The Islamic banking business applies the same credit approval process, credit scoring system and collateral policy as those of AmBank. The AmBank Group offers a complete range of innovative commercial and retail banking services to its clients through AmIslamic Bank, which commenced operations on 1 May 2006.

Since its inception, AmIslamic Bank has not only shown remarkable growth but also capitalise on the robust demand for Islamic financial services. With its universal banking license and 15 years of experience in offering Islamic banking products & services via the AmBank group channels, AmIslamic Bank continues in building its relationship with existing customers as well as new ones in providing a complete range of innovative retail and commercial banking products and services. This is further complemented by the Group’s extensive network of branches, ATM’s, and e-banking centres nationwide. The following are some of the strategic initiatives that are being taken at AmIslamic Bank, some of which have been completed:-

Dedicated branches

As the key part of its business moving forward, AmIslamic Bank has set up 2 dedicated branches in Bandar Baru Bangi and Putrajaya, which began operations in November 2007. This marked a significant accomplishment in enhancing its visibility and fulfilling AmBank Group’s vision in making AmIslamic Bank the premier Islamic Bank of choice in Malaysia and the region. These 2-standalone branches not only strengthened AmIslamic Bank’s competitive position but also affirmed its commitment towards the development of the Islamic banking industry. AmIslamic Branding for the Group In an effort taken at AmIslamic Bank in conjunction with the International Currency Business Unit (“ICBU”) license granted by BNM, the AmBank Group is now adopting the brand name of “AmIslamic” in order to create and build a brand that is relevant and preferred for Islamic banking & finance both locally and globally.

Synonymous with the AmBank Group’s Islamic entity, “AmIslamic” shall be known as the promoting brand for all the Group’s Islamic products and services i.e. Investment banking, Funds Management, ICBU products etc.

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AmIslamic being an Islamic brand name would be a more preferred brand for Islamic business activities/investors etc. This will also provide a greater brand exposure and growth potential for AmIslamic brand in the global Islamic banking & finance scene (under government’s initiative to promote Malaysia as the International Islamic Financial Centre – the MIFC) Tie Ups & Alliances

Product & Business development for AmIslamic Bank has been an ongoing function and continuously improved as the business carries on. Apart from enhancing existing products and developing new ones, AmIslamic Bank also invests in tying up its products through various alliances and collaborations with 3rd parties in expanding its product reach and market penetration. In addition to those in the pipelines, the following are some of the major ones:- • Forged a strategic alliance with Takaful Ikhlas Sdn Bhd and Syarikat

Rahman Brothers Travel & Tours, where Al-Taslif Card members were introduced with easy payment plans. Payments are made directly through e-channel for takaful premiums or Umrah package.

• AmIslamic Bank had signed a tri-partite agreement with Takaful IKHLAS

Sdn Bhd and FWU AG (specialises in “white label” investment solutions for European and International distribution partners) to promote the distribution of Takaful Investment-linked plan through AmIslamic Bank and AmBank’s branches throughout the country. Under this programme, a customer can invest funds in specific Islamic deposits that are linked to the Takaful plan. This has made Malaysia the first country to introduce such partnership i.e. between Islamic institution, Takaful institution and FWU AG.

• Working with the “Muslim Community Cooperative Australia” on possible

business tie-ups with AmIslamic Bank. This is an initiative to penetrate our Islamic mortgage financing overseas.

Retail and Business Banking Activities

In 2008, the major focus was on growing the AmBank Group’s retail and commercial business. In this regard, a number of new products were introduced and marketing campaigns were organised: • Islamic Floor Stocking-i under the mudharabah concept for car dealers to

finance their new and used cars. • Islamic REPOS under Sell & Buy Back Agreement-i was introduced and

has attracted voluminous and active placements from corporate customers and financial institutions.

• The AmIslamic Bank Business Centre has further evolved in its focus from

the retail segment to the commercial SMEs segment. • AmIslamic Bank’s dedicated branches were appointed as AmTrustee

Berhad’s agents to provide our walk-in customers with will writing facilities. • Revolving Credit-i based on Bai Inah concept for clean facilities only.

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• AmIslamic Bank launched its first Islamic Structured Deposit called Active Commodities Islamic Negotiable Instrument of Deposit (NID-i). This new product is designed to take advantage of the potential upside of investment in commodities while at the same time, giving capital protection at maturity to the investors. Essentially, NID-i is a deposit with a fixed tenure and returns linked to the performance of shariah compliant underlying asset, which may be equities, bonds, commodities, foreign exchange, indices or any combination of these assets.

4.7 Competitive Strengths

AmBank considers the following to be its principal competitive strengths:-

4.7.1 Strategic partnership with ANZ, a major international banking and financial services group

The partnership with ANZ enables AmBank to leverage on the international expertise and strengths of ANZ, as ANZ brings with it its international best practices as well as exposure to international products, banking systems and cross border capabilities. The equity participation of ANZ will enable AmBank to compete more effectively against international banks, given the expected enhancement of its product development abilities and risk management practices. The capital infusion provided by ANZ through its equity participation in AHB, which capital in turn was injected into AmBank, has enabled AmBank to strengthen its balance sheet and places AmBank in a stronger position in the Malaysian and international markets. AmBank believes that the following benefits will be derived by AmBank from the AHB Group's strategic partnership with ANZ:- (i) Risk Management Framework: ANZ has a proven track record in

transferring risk capabilities to its partners. This includes improvements of credit risk management systems, knowledge transfer on Basel II implementation and enhancement of financial discipline.

(ii) Retail and SMEs Banking: ANZ’s successful credit card business in other

Asian markets will enable AmBank to adopt ANZ’s best practise and capture a larger share of the fast-growing Malaysian credit card market. In addition, ANZ has experience and capabilities in deposit-raising strategies, mortgages and branch service enhancement. ANZ’s experience with SMEs will also enable AmBank to leverage ANZ’s vast corporate banking experience for business expansion purposes.

(iii) Product Innovation: AmBank will have access to ANZ’s products and

services expertise for product enhancement and innovation as well as cross-selling activities via AmBank's existing franchise and distribution channels.

(iv) Branding: It is envisaged that ANZ will add significant credibility and

provide a “unique selling point” for AmBank to position itself as a domestic bank with a significant foreign shareholding, and further strengthen its brand equity.

(v) IT Infrastructure and other Operations: AmBank will be able to leverage on

ANZ’s international standards and IT practices for the enhancement of its existing IT infrastructure. ANZ’s best practices in the area of compliance will enable AmBank to enhance its internal auditing and reporting systems. Further, AmBank will also gain exposure to ANZ’s highly automated banking processes and centralised back office operations.

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(vi) Training and Development: With staff secondment and training, AmBank will be able to absorb and implement ANZ’s international service standards to enhance the overall quality of its human capital.

(vii) Regional Presence and Cross-Border Transactions: The partnership will

also provide AmBank with access to ANZ’s wide international network for remittance, trade finance operations and investment banking cross border dealflow.

4.7.2 Extensive and diversified distribution network

AmBank currently operates 186 branches, 534 ATMs and 106 EBCs in Malaysia. Besides its network of dedicated nationwide marketing officers and personal bankers, AmBank also leverages on the sales force in the AHB Group. In total the AHB Group has over 7,600 personal bankers, marketing, sales and financial services personnel and agents. In early 2004, AmBank commenced remodelling its branches into SSCs to enhance customer service and increase sales activities. In addition to its branch network, AmBank has a 24-hour customer contact centre aimed at providing its customers with convenient point of contact. In October 2008, AmBank’s contact centre was awarded the Gold Award for “Best Contact Centre Telemarketer” for individual category and Special Excellence Award under the “Best Mystery Shopper Results for Telemarketing Contact Centre” at the 9th CCAM Annual Contact Centre Awards 2008. AmBank intends to expand its network of branches to 200 by March 2010. In addition, AmBank initiated the weekend banking and extended-hour banking concepts in Malaysia, and offers Internet and mobile banking facilities to all of its customers.

4.7.3 Extensive and diversified retail banking business

AmBank has a well established retail franchise and has established a niche in Islamic Banking and offers a diversified range of retail banking products and services covering seven principal areas: (i) auto financing; (ii) mortgages and other consumer loans; (iii) credit cards and line of credit; (iv) personal financing/Co-op; (v) asset financing and small business (including leasing and equipment financing), (vi) retail distribution (including transactional banking, bancassurance, wealth management and the distribution of investment products and insurance products); and (vii) deposits (including savings accounts, demand deposits and fixed term deposits). This range provides AmBank with an extensive retail loan base. As at 30 September 2008, the AmBank Group’s retail assets were RM37.5 billion.

4.7.4 Leading market position in key products

AmBank is the second largest provider of auto financing in Malaysia, with a market share of approximately 21.3% as at 30 September 2008, and currently has relationships with over 4,000 dealers in Malaysia. These relationships provide an extensive distribution network for AmBank’s auto financing products. AmBank is also a leading Islamic banking franchise. Its subsidiary, AmIslamic Bank is the fifth largest Islamic bank in Malaysia in terms of asset size as at 30 September 2008, and the largest Islamic credit card issuer in Malaysia, measured by the total amount of credit card receivables outstanding as at 30 September 2008, commanding a 54% market share.

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4.7.5 Ability to provide and cross-sell a wide range of products and services

As part of the AHB Group, AmBank is able to leverage a group-wide sales force to assist it in offering a wide range of products and services provided by other members of the AHB Group, making it a “one-stop” financial centre for customers. At AmBank’s branches, customers can purchase, for example, unit trust funds (which AmBank cross-sells with AmInvestment Bank), insurance products (which AmBank cross-sells with AmLife) and securities trading services offered by other members of the AHB Group.

4.7.6 Established and reputable brand name

AmBank believes it has established a reputable and recognised brand name in Malaysia. The AmBank Group was selected as one of the Top 30 Most Valuable Brands in Malaysia through a brand valuation exercise carried out by the Association of Accredited Advertising Agents Malaysia in collaboration with Interbrand, a global brand consultancy firm. This recognition depicts the strength of AmBank’s brand in Malaysia.

AmBank’s brand values are expressed through the acronym “F.I.R.S.T.”, standing for “Friendly, Innovative, Responsive, Simple and Trustworthy”. By applying these values, AmBank strives to be the best bank in Malaysia and seeks to provide exceptional customer service. AmBank is committed to the satisfaction of its customers.

4.7.7 Important strategic alliances

AmBank has entered into a number of strategic alliances including an arrangement with MBf Cards, currently the largest non-bank credit card issuer in Malaysia, for the provision of credit card financing to certain card holders of MBf Cards. In addition, AmBank has mortgage alliances with certain state governments and housing developers. AmBank also has relationships with government co-operatives to expand its personal financing/Co-op services throughout Malaysia. In the auto financing sector, AmBank has strong business alliances with car manufacturers, car principals, franchise holders and auto dealers. AmBank has introduced NexG prepaid credit cards and is the largest issuer of the prepaid card in Malaysia and has an alliance with one of its key strategic partners, Telekom Malaysia Berhad to issue a co-branded prepaid card with iTalk airtime. In addition, AmBank has forged a strategic alliance to install 400 ATMs at 7-Eleven stores (24-hour convenience stores) nationwide. At present, there are 146 AmBank ATMs at selected 7-Eleven stores.

4.8 Strategy

AmBank’s focus is to achieve sustainable and profitable growth within its risk management framework. In order to achieve this objective, AmBank aims to meet the needs of its customers and develop innovative and competitive products and services. To best effect each of the business strategies enumerated below, AmBank intends to leverage on the international expertise and strengths of ANZ. ANZ brings with it its international best practices as well as exposure to international products, banking systems and cross border capabilities. AmBank’s principal strategies are in alignment to the overall AHB Group’s strategies, and are as follows:-

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4.8.1 Maximise income and continue to deliver profitable growth and meet its return on equity targets by focusing on its core business areas

AHB Group had in late 2007 announced its medium term aspirations which includes an intention to double its 31 March 2007 underlying net profit after tax and attain a return on equity of 20%. Amidst the current global economic challenges that preceded since then, the Group is currently evaluating the timeframe to achieve its medium term aspirations. AmBank aims to meet these targets by continuing to focus on its core business areas: (i) auto financing, (ii) mortgages and other consumer loans, (iii) credit cards and line of credit, (iv) personal financing/Co-op, (v) asset financing and small business, (vi) retail distribution, (vii) deposits, and (viii) SME business. AmBank is pursuing the following in line with this strategy:- Business Areas Strategy Auto financing • Grow profitability via segmentation approach

• Enhance risk based pricing models • Improve dealer management

Mortgages • Grow its mid market segments

• Focus on refinancing & owner occupied housing • Adopt rigorous risk based approach to investment

properties Credit cards • Grow cards base, utilisation, revenue and profitability via

free for life programs • Focus on low-rate (no frills) card, family card and co-

branding • Be “card of choice” by increasing product holding ratio

Personal financing/Co-op

• Build relationships to grow receivables and profitability • Enhance customer service • Expand sales force

Asset financing and small business

• Enhance retention strategies • Build strategic alliances with machinery dealers & suppliers • Diversify into non-manufacturing sectors

Deposits • Acquisition of new transactional accounts and main-bank

customers • Activation – getting customers to utilise accounts • Anti-attrition – preventing dormancy and accounts closure

SMEs • Increase SMEs portfolio by building affinity and business

rapport for repeat business • Increase transactional deposits and expand cash

management business • Grow non-interest income via forex, remittance, trade and

cash management services • Cross-sell lending products across customer base of

Group

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4.8.2 Decrease cost of funds specifically and generally enhance cost efficiency

AHB Group has outlined as part of its strategic aspirations, a targeted reduction in its funding costs of 40 basis points in the medium term, while simultaneously reducing the interest rate volatility risk in its funding costs. AmBank aims to move towards the target by building its deposit distribution capabilities and creating deposit-focused product units. AHB Group also seeks to reduce its costs and increase its efficiency in various other aspects of its business and attain, in the medium term, a cost to income ratio of circa 40%. From an operational perspective, AmBank aims to centralise its key processes and backroom activities to increase its efficiency. AmBank also aims for further operational enhancement via simplification, automation and outsourcing. With respect to its employees, AmBank aims to streamline performance management activities to align targets across its banking business.

4.8.3 Reduce NPLs and strengthen receivables management, collections and risk

management policies

AmBank aims to reduce its net NPLs ratio from 2.9% as at 30 September 2008 to circa 2.5% by March 2009, by strengthening its credit risk infrastructure. AmBank aims to improve its risk assessment processes with the goal of further refining credit scoring across all retail products. AmBank has established a retail collection centre to focus on maximising recovery efforts.

4.8.4 Differentiate and enhance customer experience

AmBank aims to elevate the customer experience through brand differentiation and migration of customer transactions to preferred and more cost effective delivery channels. AmBank consistently monitors its brand position in the market and is dedicated to the enhancement of its brand positioning and brand awareness amongst consumers, with a particular focus on customer profitability in all sales acquisition programmes and campaigns.

4.8.5 Leverage AmBank’s expanded and diversified distribution network

AmBank aims to leverage on its distribution network in Malaysia. Currently, AmBank has a network of 186 branches, 534 ATMs and 106 EBCs. Besides its network of dedicated nationwide marketing officers and personal bankers, AmBank also leverages the sales agents in the AHB Group. In total the AHB Group has over 7,600 personal bankers, marketing, sales and financial services personnel and agents. This enlarged distribution network has enabled AmBank to offer all of its products and services throughout its branches nationwide. Presently, AmBank offers throughout its branch network consumer loan products and services. AmBank has 186 branches across Malaysia with five mortgage business centres. In addition, AmBank has CBCs which support five regional business hubs located at Kuala Lumpur, Penang, Kuching, Kota Kinabalu and Johor Bahru in Malaysia.

4.8.6 Leverage the synergies of AmBank’s Business Banking, Retail Banking and Corporate and Investment Banking divisions

AmBank currently aims to utilise the synergies of its Business Banking and Retail Banking divisions to:- • reduce the cost of borrowing by achieving CASA (Current Accounts Saving

Accounts) portfolio growth; • reduce operational cost by achieving cost efficiencies; and • introduce new products and services.

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Following the Business Transfer, AmBank also intends to utilise the synergies between its existing divisions.

4.8.7 Extend distribution of banking products and services to all branches

AmBank aims to extend its comprehensive banking products and services to all of its branches, including offering overdraft services and additional international remittance services.

4.9 Risk Management AmBank’s risk management is performed on a group basis among its banking entities. The AHB Group recognises that every risk assumed by the AHB Group carries potential gains as well as possible erosion of shareholders’ value. The main objectives of the AHB Group’s risk management policies are to identify, capture and analyse these risks at an early stage, as well as to continuously measure and monitor these risks and to set limits, policies and procedures to control them to ensure sustainable risk-taking and sufficient returns. To this end, 7 types of risks, namely strategic, capital, credit, market, funding, operational and legal have been identified. The AHB Group’s risk management efforts are guided by the following objectives:- All significant risk in the AHB Group must be recognised, systematically identified

and prioritised according to their significance and implications. Centralised overview, accountability and management of risks in the AHB Group to

allow a more informed decision-making process in which all risks are considered and evaluated from a complete organisation or business unit perspective.

A uniform risk language for quantifiable risks that permits comparability and risk

aggregation to allow management to assess the impact of risks in a familiar form and also to foster comparison amongst various types of risks.

Better awareness, grading and development of risk indicators on non-quantifiable

risks for making decisions. Data collection will be initiated in the near term to quantify such risks and ultimately integrate them into a value-based decision making process.

The AHB Group only takes risks that it can accommodate. The size of permissible

risk-taking activity will be assessed against the capital at risk. Risk taking activities must be able to generate sufficient profits to cover expected

losses that can arise from their inherent risks in the long-run. A risk costing methodology and allocation system has been developed to impute risks as a cost to a particular business line, product or customer.

A balance must be achieved between revenue expectations and risks involved in

relation to any customer, product or venture consideration. A risk-return factor will be a consideration in such assessments.

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The AHB Group’s main risk management organisational structure (as illustrated below) is made up of the following components:- Board

Risk Management Committee of Directors

Executive Risk Management Committees

Risk Management Department

Risk management structure


Board

Group Managing Director

Executive Risk Management Committees

Portfolio Management &

Credit Policy Committee

Group Operational &

Legal Risk Committee

Group Traded Market Risk Committee

Risk Management Department

Risk Management Committee of

Directors

Group Assets and Liabilities

Committee

Islamic Assets and Laibilities

Committee

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5. DESCRIPTION OF THE SUBNOTES ISSUER 5.1 Background Information on AmPremier

AmPremier was incorporated on 26 December 2008 as a public limited company under the Act, under the name of AmPremier Capital Berhad. AmPremier is a special purpose vehicle set up to facilitate the issuance of the RMNIT1 Programme. Its sole business activity is to issue the SubNotes whereby the proceeds of the issue are to be on-lent to its holding company, AmBank. As at 31 December 2008, the authorised share capital of AmPremier is RM100,000 comprising 100,000 Shares of which 2 Shares are issued and fully paid-up, and wholly-owned by AmBank.

5.2 Substantial Shareholders

Based on the Registrar of Substantial Shareholders, the substantial shareholders of AmPremier as at 31 December 2008 and its shareholdings in AmPremier are as follows:

No. of shares

Substantial Shareholders

Nationality/ Country of

Incorporation Direct

interest % Indirect %

AmBank Malaysia 2 100% - - AMFB Malaysia - - 2 1 100% AHB Malaysia - - 2 2 100% TSDAH Malaysian - - 2 3 100% Amcorp Malaysia - - 2 3 100% CGSB Malaysia - - 2 3 100% ANZ Funds Australia - - 2 3 100% ANZ Australia - - 2 3 100%

Notes: 1 Deemed interested by virtue of its interests in AmBank. 2 Deemed interested by virtue of its interests in AmBank via its interests in AMFB. 3 Deemed interested by virtue of his/its interests in AmBank via his/its substantial interests in AHB.


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5.3 Information on Management

The directors of AmPremier are Mahdi Bin Morad and Sim How Chuah. As at the date of this IM, the directors of AmPremier do not have any interest in the Shares of AmPremier.

The following are the personal profiles of the directors:- (a) Mahdi Bin Morad

Please refer to Section 4.5.4

(b) Sim How Chuah Please refer to Section 4.5.4

5.4 Other Material Information

(a) Material Contracts AmPremier has not engaged, since its incorporation, and will not engage in any material activities other than those relating, or incidental, to the issue of the SubNotes.

(b) Material Litigation AmPremier is not involved in any legal or arbitration proceedings (including proceedings which, as far as AmPremier is aware, are pending or threatened) which management of AmPremier believes would, individually or taken as a whole, have a material adverse effect on the business, financial condition, results of operations or prospects of AmPremier.


Company No. 8515-D

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6. FINANCIAL AND OTHER MATERIAL INFORMATION

6.1 Financial Highlights

A summary of the consolidated financial statements of the AmBank Group based on the audited financial statements for the past two (2) FYEs 31 March 2007 to 2008 and restated after incorporating the prior year’s adjustments as well as the unaudited financial statements for the six (6) months financial period ended 30 September 2008 are as follows:-

FYE 31 March

2007 (Restated

consolidated)

FYE 31 March

2008 (Restated

consolidated)

6-months financial

period ended 30 September 2008

(Unaudited consolidated)

RM million RM million RM million Income Statement Revenue 4,685.8 5,004.5 2,364.3 Interest income 3,301.9 3,739.1 1,868.3 Interest expense (1,932.7) (2,156.1) (1,014.0) Net interest income 1,369.2 1,583.0 854.3 Net income from Islamic Banking

business

562.5

533.2

274.6 Other operating income 509.5 371.1 28.0 Net income 2,441.2 2,487.3 1,156.9 Other operating expenses (783.9) (899.9) (461.3) Operating profit 1,657.3 1,587.4 695.6 Allowance for losses on loans and

financing

(1,537.3)

(517.0)

(81.9) Impairment loss (287.8) (119.6) (35.3) Provision for commitments and

contingencies

-

(1.6)

(14.8) Profit/(loss) before share in results

of associated company andtaxation

(167.8)

949.2

563.6 Share in results of associated

company

0.1

0.1

- Profit/(loss) before zakat and

taxation

(167.7)

949.3

563.6 Zakat (0.8) (0.6) - Taxation (17.8) (329.9) (145.6) Profit/(loss) after zakat and

taxation

(186.3)

618.8

418.0 Net Profit/(loss) attributable to

equity holder of AmBank

(186.3)

618.8

418.0 EPS (sen) Basic (30.52) 94.13 62.47 Fully diluted (30.52) 79.47 51.05

Notes:- The summary restated consolidated financial statements of AmBank Group for the FYE 31 March 2007 was derived from:

i. the audited consolidated financial statements of AmBank Group for the FYE 31 March 2007

after adjusting for the adoption of BNM’s revised guidelines on Financial Reporting for Licensed Institutions (“BNM/GP8”) in respect of the treatment of derivative financial instruments and the adoption of new and revised FRSs which are applicable to AmBank Group with effect from April 2007

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ii. inclusion of financial results of AmInvestment Bank’s fund based activities including its 100% owned subsidiary company, AMIL, vested to AmBank Group in FYE 2009 under the pooling of interest method under Malaysian Generally Accepted Accounting Practices (“Merger Method”). Under the Merger Method, the results of business transferred from AmInvestment Bank, together with the assets and liabilities are included in the financial statements of AmBank Group as if the merger had been effected prior to and throughout the current financial year.

The summary restated consolidated financial statements of AmBank Group for the FYE 31 March 2008 was derived from the audited consolidated financial statements of AmBank Group for the FYE 31 March 2008 after adjusting for inclusion of financial results of AmInvestment Bank’s fund based activities including its 100% owned subsidiary company, AMIL, vested to AmBank Group in FYE 2009 under the Merger Method. Under the pooling of interest method, the results of business transferred from AmInvestment Bank, together with the assets and liabilities are included in the financial statements of AmBank Group as if the merger had been effected prior to and throughout the current financial year

FYE 31 March

2007 (Restated

consolidated)

FYE 31 March

2008 (Restated

consolidated)

6-months financial period ended 30 September 2008

(Unaudited consolidated)

RM milllion RM million RM million Balance Sheet ASSETS Cash and short-term funds 10,254.2 10,837.9 10,215.5 Securities purchased under resale

agreements

161.2

-

791.5 Deposits and placements with

banks and other financial institutions

1,830.4

1,329.7

1,129.1 Securities held-for-trading 6,577.1 6,541.0 1,177.6 Securities available-for-sale 1,308.5 1,252.5 5,456.8 Securities held-to-maturity 2,143.4 1,156.5 894.4 Derivative financial assets 284.0 307.7 245.0 Loans, advances and financing 47,378.3 52,090.1 54,754.9 Other assets 875.6 920.9 719.8 Statutory deposit with BNM 1,807.1 1,660.2 1,978.6 Deferred tax asset 873.9 645.1 467.4 Investment in subsidiary companies

-

-

- Investment in associated

companies

0.6

0.7

0.8 Prepaid land lease payments 4.5 4.4 4.4 Property and equipment 178.0 169.3 156.0 Intangible assets 54.5 61.5 69.0 TOTAL ASSETS 73,731.3 76,977.5 78,060.8

Company No. 8515-D

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FYE 31 March 2007

(Restated consolidated)

FYE 31 March 2008

(Restated consolidated)

6-months financial period ended 30 September 2008 (Unaudited

consolidated) RM million RM million RM million

LIABILITIES AND EQUITY Deposits from customers 42,387.8 47,618.3 48,931.8 Deposits and placements of banks

and other financial institutions

17,840.5

16,335.9

17,090.6 Derivative financial liabilities 332.4 352.0 241.4 Obligation on securities sold under

repurchase agreements

3,233.7

-

68.8 Bills and acceptances payable 1,461.6 1,909.2 2,370.9 Recourse obligation on loans sold

to Cagamas Berhad

702.6

244.0

164.0 Other liabilities 1,383.3 1,497.2 1,433.0 Subordinated term loans 460.0 460.0 - Hybrid securities 684.2 689.5 720.7 MTN - 860.0 1,460.0 Subordinated bonds 600.0 600.0 400.0 Exchangeable bonds - 575.0 575.0 Irredeemable Convertible

Unsecured Loan Stocks

-

131.6

- Irredeemable Non-Cumulative

CPS

-

150.0

150.0 Term loan 103.7 271.5 292.5 Total Liabilities 69,189.8 71,694.2 73,898.7 Share capital 610.4 610.4 670.4 Reserves 3,931.0 4,672.9 3,491.7 Minority Interests 0.1 - - Total Equity 4,541.5 5,283.4 4,162.1 TOTAL LIABILITIES AND EQUITY

73,731.3

76,977.5

78,060.8

NA per share (RM) 7.44 8.66 6.21 Gearing ratio (times) 1 0.4 0.7 0.9

1 Comprising subordinated term loans, subordinated bonds, exchangeable bonds, hybrid

securities, irredeemable convertible unsecured loan stocks (liability portion), irredeemable non-cumulative CPS, MTN and term loan.

6.2 Commentaries On Past Performance

FYE 31 March 2007 On 1 May 2006, the Islamic Banking business of AmBank was transferred to and vested into AmIslamic Bank, a wholly owned subsidiary of AmBank, to formalise the corporate separation of the conventional banking business from the Islamic banking business. With the new Islamic operational structure in place and ongoing effective communication with its customers, AmBank is aiming for maximum optimisation of its services to further propel its Islamic banking services.

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During the year, the AmBank Group adopted a more stringent basis for charging specific allowances on NPLs. Accordingly, only 50% of the realisable value is assigned to 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, no value is assigned to the realisable value of the properties held as collateral for non-performing loans which are in arrears for more than seven (7) years. Further, a specific allowance of 20% is provided on non-performing loans which are more than three (3) months but less than six (6) months in arrears. This change in the method of provisioning has resulted in an additional specific allowance charge for the year of RM515.5 million. The AmBank Group also set aside impairment loss of RM213.8 million on debt converted securities and incurred unrealised loss of RM107.7 million upon marking to market the derivative financial instruments as required under BNM’s revised guidelines. The AmBank Group reported a pre-tax loss of RM167.7 million for the year due to higher loss allowances as a result of adopting a more prudent provisioning policy on loans, advances and financing and debt converted instruments. In December 2006, AmBank prepaid the RM680 million subordinated term loan facility to Astute Assets Berhad. In the same month, its wholly owned subsidiary, AmIslamic Bank issued RM400 million Subordinated Sukuk Musyarakah (“Sukuk Musyarakah”) for purposes of increasing AmIslamic Bank’s capital funds. The Sukuk Musyarakah is for a period of ten (10) years and carries a profit rate of 4.8% per annum for the first five (5) years and shall be stepped up by 0.5% per annum every subsequent year to maturity date.

FYE 31 March 2008

The year 2008 represented a year of performance turnaround for AmBank Group. From a loss position in the previous financial year, the Group registered a profit before zakat and tax of RM 949.3 million. Net interest income increased mainly due to increase in interest on loans, advances and financing attributable to loan growth and lower NPLs, which fell to 3.54% from 6.05%. Debt provisioning charge registered a significant decline as a result of the more stringent provisioning policy adopted with effect from previous year coupled with lower net NPLs. Other operating income decreased mainly due to loss in revaluation of securities held-for-trading impacted by rising interest rates and domestic economic conditions. Operating expenses increased due to the impact of back-dated salary cost (accruing since financial year ended 31 March 2006) for union employees. During the year, the AmBank had issued five tranches of MTN totaling RM 860 million under the MTN Programme. The proceeds raised from the MTN programme had been utilised for the refinancing of existing subordinated debts and for general working capital requirements. The MTN issued had been included as Tier 2 capital under the capital adequacy framework for financial institutions. On 11 March 2008, AHB, the ultimate holding company announced a Proposed Group Internal Restructuring whereby the fund-based activity of AmInvestment Bank shall be transferred to and vested in the Bank for conventional business and AmIslamic Bank for Islamic banking business pursuant to the vesting order issued by the High Court of Malaya at Kuala Lumpur.

Unaudited financial statements for the six (6) months financial period ended 30 September 2008

Effective 12 April 2008, the fund-based activity of AmInvestment Bank was transferred to the Bank and AmIslamic Bank. AmBank also set-up an offshore branch in Labuan upon obtaining a licence to carry on offshore banking business in Labuan.

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The business transfer including the entire operations of AMIL is accounted under the pooling of interest method. Under the pooling of interest method, the results of business transferred from AmInvestment Bank, together with the assets and liabilities are included in the financial statements of the AmBank Group as if the merger had been effected prior to and throughout the current financial year. AmBank Group registered a profit before zakat and tax (“PBT”) of RM 563.6 million representing a 38% increase compared to the PBT for the corresponding period last year. The significant increase in PBT was attributable to increase in net interest income arising from loan growth and a 78% reduction in loan loss provision. Lower provisions were underpinned by improved credit control, collections and recoveries management. Net NPLs of AmBank Group continued to improve to 2.9%. The increase in net interest income was partially offset by lower other operating income and increase in operating expenses. During the period, AmBank issued the sixth tranche of MTN amounting to RM600 million. The proceeds raised were utilised for the refinancing of existing subordinated debts (RM 200 million subordinated bonds and RM460 million subordinated term loan were repaid in the period) and general working capital requirements. On 20 May 2008, the holding company, AMFB exercised its conversion right to convert the entire RM300 million ICULs into 60,000,000 fully paid ordinary shares of RM1.00 each.

6.3 Capital Adequacy Ratio Our historical capital adequacy ratio for the past two (2) FYEs 31 March 2007 to 2008 as

well as for financial period ended 30 September 2008 together with the proforma effects of the RMNIT1 Programme on our capital adequacy ratio based on our unaudited consolidated balance sheet as at 30 September 2008 are set out below.

Audited as at

31 March 2007 Audited as at

31 March 2008 Unaudited

as at 30 September 2008

After the RMNIT1 Programme

(RM’000) (RM’000) (RM‘000) (RM’000) Tier 1 capital 2,762.1 3,655.9 5,304.6 5,804.6 Tier 2 capital 2,049.9 3,096.4 3,286.3 3,286.3 Capital base 4,812.0 6,752.3 8,590.9 9,090.9 Risk-weighted assets 56,148.3 51,602.9 63,305.5 63,305.5 Capital Ratios:- Core capital 4.92% 7.08% 8.38% 9.17% Risk-weighted capital 8.57% 13.09% 13.57% 14.36%

Company No. 8515-D

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6.4 Material Capital Commitments and Contingent Liabilities

In the normal course of business, AmBank Group makes various commitments and incurs certain contingent liabilities with legal recourse to its customers. No material losses are anticipated as a result of these transactions. The commitments and contingencies are not secured against the AmBank Group’s assets.

The commitments and contingencies outstanding of the AmBank Group as at 30 September 2008 are as follows:- Principal Credit Equivalent Risk Weighted Amount Amount Amount (RM’000) (RM’000) (RM’000) Derivative Financial Instruments Interest rate related contracts: Interest rate swaps 24,788,309 722,049 147,994 Foreign exchange related contracts: Forward exchange contracts 4,011,943 151,597 73,008 Interest rate futures: maturing within one year 40,000 27,923 13,961 maturing more than one year to less 60,000 28,865 14,432 than five years Cross currency swap: less than one year 246,414 15,507 3,363 maturing more than one year to less 545,499 47,902 9,580 than five years 29,692,165 993,843 262,338 Commitments Irrevocable commitments to extend

credit maturing :

within one year 8,928,022 1,785,604 1,843,648 more than one year 3,360,175 1,680,088 1,076,839

unutilised credit card lines 4,089,653 817,931 611,279 Forward purchase commitments 303,715 884 177 Sell and buy back agreements 333,448 2,102 1,570 17,015,013 4,286,609 3,533,513 Contingent Liabilities Direct credit substitutes 2,143,426 2,143,426 1,942,405 Short-term self liquidating trade-related

contingencies

671,587

134,317

134,632 Obligations under underwriting

agreements

1,374,000

687,000

839,000 Islamic financing sold to Cagamas

Berhad with recourse

1,484,024

1,484,024

1,119,234 Unpaid portion of partly paid shares 250 250 250 Certain transaction-related contingent

items

1,266,971

633,486

592,564 Others 49,437 - - 6,989,695 5,082,503 4,628,085

53,696,873 10,362,955 8,423,936

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As at 30 September 2008, AmBank Group has the following capital commitments:-

Amount (RM’000) Authorised and contracted for : Purchase of computer equipment and software 35,305 Leasehold improvements 3,744 Authorised but not contracted for: Purchase of computer equipment and software 46,371 85,420

6.5 Material Contracts

Save as disclosed below, there are no other material contracts (including contracts not reduced into writing), not being contracts entered into in the ordinary course of business which have been entered into by AmBank during the past two (2) years preceding the date of this IM:- (a) Exchangeable Bond Subscription Agreement dated 2 March 2007 between

AmBank, AHB and ANZ pursuant to which AmBank has agreed to issue exchangeable bonds and ANZ has agreed to procure ANZ Funds to subscribe for the exchangeable bonds for a price of RM575,000,000, on the terms and conditions set out therein.

(b) Exchangeable Bond Trust Deed dated 15 May 2007 between AmBank, AHB and

BHLB Trustee Berhad in relation to the issue of the exchangeable bonds, on the terms and conditions set out therein.

(c) Depository and Paying Agency Agreement dated 16 May 2007 between AmBank,

BHLB Trustee Berhad, BNM and AmInvestment Bank in relation to the issue of the exchangeable bonds.

(d) Trust Deed dated 21 January 2008 between AmBank, AmInvestment Bank and

Pacific Trustees Berhad in relation to the issue of MTNs under the MTN Programme on the terms and conditions set out therein.

(e) Depository and Paying Agency Agreement dated 21 January 2008 between

AmBank, Pacific Trustees Berhad, BNM and AmInvestment Bank in relation to the issue of the MTNs under the MTN Programme.

(f) Programme Agreement dated 21 January 2008 between AmBank, and

AmInvestment Bank in relation to the issue of the MTNs under the MTN Programme, on the terms and conditions set out therein.

(g) Facility Agency Agreement dated 21 January 2008 between AmBank, Pacific

Trustees Berhad and AmInvestment Bank in relation to the issue of the MTNs under the MTN Programme, on the terms and conditions set out therein.

Company No. 8515-D

- 91 -

(h) Business Transfer Agreement dated 11 March 2008 (as supplemented by the supplemental agreement dated 27 March 2008) between AmBank and AmInvestment Bank in respect of the scheme for the transfer of the assets and liabilities (and all rights and interests relating or attaching thereto) relating to the conventional treasury, investment and credit/lending activities or business carried out by AmInvestment Bank to AmBank (excluding such assets and liabilities as listed in the Business Transfer Agreement), for a consideration equivalent to the total book value of the assets acquired less the total book value of the liabilities to be assumed, as determined in the manner as set out therein.

(i) Technical Services Agreement dated 28 August 2008 between AmBank, AHB and

ANZ in relation to the provision by ANZ of technical services to AmBank in relation to the foreign exchange, interest rate, commodities and commodities derivatives business of AmBank on the cost-fee arrangement basis as stipulated therein.

(j) Sale and Purchase Agreeement dated 18 September 2007 between AmBank and

ABS Enterprise One Berhad (“ABS Enterprise”) in relation to the sale by AmBank of a portfolio of commercial non-performing loans to ABS Enterprise for a consideration including a maximum cash payment of RM110,813,496.00.

(k) Equitable Assignment Agreement dated 18 September 2007 between AmBank and

ABS Enterprise in relation to the assignment by AmBank of all its rights, interest, title and benefit in and to the Portfolio Assets (as defined in the ABS Enterprise Sale and Purchase Agreement) sold to ABS Enterprise pursuant to the ABS Enterprise Sale and Purchase Agreement.

(l) Sale and Purchase Agreeement dated 28 September 2007 between AmBank and

Neptune ABS One Berhad (“Neptune ABS One”) in relation to the sale by AmBank of a portfolio of commercial non-performing loans to Neptune ABS One for a consideration including a maximum cash payment of RM111,273,206.00.

(m) Equitable Assignment Agreement dated 28 September 2007 between AmBank and

Neptune ABS One (as supplemented by the Supplemental Assignment dated 26 November 2007) in relation to the assignment by AmBank of all its rights, interest, title and benefit in and to the Portfolio Assets (as defined in the Neptune ABS One Sale and Purchase Agreement) sold to Neptune ABS One pursuant to the Neptune ABS One Sale and Purchase Agreement.

(n) Sale and Purchase Agreeement dated 28 September 2007 between AmBank and

Neptune ABS Two Berhad (“Neptune ABS Two”) in relation to the sale by AmBank of a portfolio of retail non-performing loans to Neptune ABS Two for consideration including a maximum cash payment of RM114,686,969.00.

(o) Equitable Assignment Agreement dated 28 September 2007 between AmBank and

Neptune ABS Two (as supplemented by the Supplemental Assignment dated 17 October 2007) in relation to the assignment by AmBank of all its rights, interest, title and benefit in and to the Portfolio Assets (as defined in the Neptune ABS Two Sale and Purchase Agreement) sold to Neptune ABS Two pursuant to the Neptune ABS Two Sale and Purchase Agreement.

Company No. 8515-D

- 92 -

6.6 Material Litigation

As at the 31 December 2008 :- (a) in respect of litigation, claims and arbitration arising from the ordinary course of

business:-

(i) the financial impact thereof has already been accounted for in the last audited financial statements of our Company and our relevant subsidiary companies;

(ii) and if not accounted for as alluded to in the preceding sub-paragraph (i),

the respective Boards of our Company and our relevant subsidiary companies are of the view that there is no material and adverse impact on the financial position of our Company and our relevant subsidiary companies arising from such litigation, claims and arbitration;

(iii) our Company and our relevant subsidiary companies are not engaged in

any material litigation, claims and arbitration either as plaintiff or defendant; and

(iv) our Boards do not know of any pending or threatened proceedings against

us and/or any of our relevant subsidiary companies that is likely to have a material adverse effect on our or our relevant subsidiary’s financial position or business.

(b) in respect of litigation, claims and arbitration arising not in the ordinary course of

business:-

(i) our Company and our relevant subsidiary companies are not engaged in any material litigation, claims and arbitration either as plaintiff or defendant; and

(ii) our Boards do not know of any pending or threatened proceedings against

us and/or any of our relevant subsidiary companies that is likely to have a material adverse effect on our or our relevant subsidiary’s financial position or business.


Company No. 8515-D

APPENDIX I

INTERIM FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

1 APRIL 2008 TO 30 SEPTEMBER 2008

Company No. 8515-D

AmBank (M) Berhad (Company No. 8515-D)

(Incorporated in Malaysia) And Its Subsidiary Companies

Interim Financial Statements For the Financial Period

1 April 2008 to 30 September 2008

(In Ringgit Malaysia)

Company No. 8515-D AmBank (M) Berhad (Incorporated in Malaysia) And Its Subsidiary Companies

2

CONDENSED INTERIM FINANCIAL STATEMENTS UNAUDITED BALANCE SHEETS AS AT 30 SEPTEMBER 2008 The Group The Bank

Merged 30 Sept 31 March 30 Sept 31 March 2008 2008 2008 2008 Note RM’000 RM’000 RM’000 RM’000 ASSETS Cash and short-term funds 10,215,466 10,837,946 7,191,170 8,275,239 Securities purchased under resale

agreements 791,502

– 791,502 – Deposits and placements with banks

and other financial institutions 1,129,125

1,329,700 1,137,718 1,338,293 Securities held-for-trading A8 1,177,569 6,540,970 828,430 5,981,489 Securities available-for-sale A9 5,456,793 1,252,533 5,013,363 1,251,636 Securities held-to-maturity A10 894,455 1,156,536 850,119 1,115,364 Derivative financial assets 245,034 307,651 245,034 307,651 Loans, advances and financing A11 54,754,925 52,090,100 45,571,722 44,002,993 Other assets 719,786 920,983 659,833 840,159 Statutory deposit with Bank Negara

Malaysia 1,978,597

1,660,197

1,684,418

1,388,497 Deferred tax assets 467,406 645,067 333,212 483,873 Investment in subsidiary companies – – 839,869 846,869 Investment in associated companies 782 740 137 137 Prepaid land lease payments 4,354 4,404 3,153 3,193 Property and equipment 156,034 169,274 130,694 143,292 Intangible assets 69,020 61,486 68,478 60,876 TOTAL ASSETS 78,060,848 76,977,587 65,348,852 66,039,561 The Condensed Interim Financial Statements should be read in conjunction with the audited financial statements of the Group and the Bank for the year ended 31 March 2008.


3

CONDENSED INTERIM FINANCIAL STATEMENTS UNAUDITED BALANCE SHEETS AS AT 30 SEPTEMBER 2008 The Group The Bank 30 Sept 31 March 30 Sept 31 March 2008 2008 2008 2008 Note RM’000 RM’000 RM’000 RM’000 LIABILITIES AND EQUITY Deposits from customers A12 48,931,783 47,618,331 41,652,908 41,261,431 Deposits and placements of banks

and other financial institutions

A13 17,090,639 16,335,926 13,524,810 13,557,812 Derivative financial liabilities 241,424 352,007 241,424 352,007 Obligations on securities sold under

repurchase agreements

68,846

– 68,846

– Bills and acceptances payable 2,370,933 1,909,243 1,581,206 1,361,896 Recourse obligation on loans sold to

Cagamas Berhad

163,991

243,979 163,991 243,979 Other liabilities 1,432,954 1,497,186 1,245,178 1,357,513 Subordinated term loans – 460,000 720,692 1,149,469 Hybrid securities 720,692 689,469 – – Medium term notes 1,460,000 860,000 1,460,000 860,000 Subordinated bonds 400,000 600,000 – 200,000 Exchangeable bonds 575,000 575,000 575,000 575,000 Irredeemable Convertible Unsecured

Loan Stocks

–

131,604

–

131,604 Irredeemable Non-Cumulative

Convertible Preference shares

150,000

150,000

150,000

150,000 Term loan 292,463 271,490 292,463 271,490 Total Liabilities 73,898,725 71,694,235 61,676,518 61,472,201 Share capital 670,364 610,364 670,364 610,364 Reserves 3,491,723 4,672,947 3,001,970 3,956,996 Shareholder’s Equity 4,162,087 5,283,311 3,672,334 4,567,360 Minority interests 36 41 – – Total Equity 4,162,123 5,283,352 3,672,334 4,567,360 TOTAL LIABILITIES AND EQUITY 78,060,848 76,977,587 65,348,852 66,039,561 COMMITMENTS AND

CONTINGENCIES A29 53,696,873

75,008,692

49,162,722

69,091,380 NET ASSETS PER SHARE (RM) 6.21 8.66 5.48 7.48 The Condensed Interim Financial Statements should be read in conjunction with the audited financial statements of the Group and the Bank for the year ended 31 March 2008.


4

CONDENSED INTERIM FINANCIAL STATEMENTS UNAUDITED CONSOLIDATED INCOME STATEMENTS FOR THE FINANCIAL HALF-YEAR ENDED 30 SEPTEMBER 2008 The Group Ind ividual Quarter Cumulative Quarter 30 Sept 30 Sept 30 Sept 30 Sept 2008 2007 2008 2007 Note RM’000 RM’000 RM’000 RM’000 Revenue 1,177,427 1,194,514 2,364,336 2,425,027 Interest income A14 933,299 865,809 1,868,331 1,759,644 Interest expense A15 (502,194) (516,499) (1,014,002) (1,047,378) Net interest income 431,105 349,310 854,329 712,266 Net income from Islamic Banking

business A16 148,445 127,858 274,572 282,208 Other operating income A17 (15,579) 95,578 28,060 214,456 Net income 563,971 572,746 1,156,961 1,208,930 Other operating expenses A18 (216,609) (212,144) (461,344) (415,216) Operating profit 347,362 360,602 695,617 793,714 Allowance for losses on loans and

financing A19 (37,422) (208,739) (81,880) (368,651) Provision for commitments and

contingencies (1,410) 2 (14,842) 299 Impairment loss A20 (8,085) (8,922) (35,308) (17,447) Profit before share in results of

associated company and taxation 300,445 142,943 563,587 407,915 Share in results of associated

company (9) 50 43 35 Profit before zakat and taxation 300,436 142,993 563,630 407,950 Zakat (127) (304) (29) (304) Taxation A21 (77,752) (89,090) (145,593) (172,783) Profit after zakat and taxation 222,557 53,599 418,008 234,863 Attributable to: Equity holder of the Bank 222,566 53,605 418,014 234,869 Minority interests (9) (6) (6) (6) Profit after zakat and taxation 222,557 53,599 418,008 234,863 Earnings per share (sen) A22 Basic 33.20 8.21 62.47 36.18 Fully diluted 27.13 6.71 51.05 30.92 The Condensed Interim Financial Statements should be read in conjunction with the audited financial statements of the Group and the Bank for the year ended 31 March 2008.


5

CONDENSED INTERIM FINANCIAL STATEMENTS UNAUDITED INCOME STATEMENTS FOR THE FINANCIAL HALF-YEAR ENDED 30 SEPTEMBER 2008 The Bank Individual Quarter Cumulative Quarter Legal Entity 30 Sept 30 Sept 30 Sept 30 Sept 2008 2007 2008 2007 Note RM’000 RM’000 RM’000 RM’000 Revenue 915,055 966,827 1,890,504 1,975,088 Interest income A14 931,319 862,882 1,864,575 1,752,302 Interest expense A15 (501,252) (515,026) (1,012,131) (1,042,724) Net interest income 430,067 347,856 852,444 709,578 Other operating income A17 (16,264) 93,870 25,929 212,666 Net income 413,803 441,726 878,373 922,244 Other operating expenses A18 (163,736) (162,431) (352,539) (317,267) Operating profit 250,067 279,295 525,834 604,977 Allowance for losses on loans and

financing A19 (15,621) (175,505) (32,403) (295,831) Provision for commitments and

contingencies 334 2 4 299 Impairment loss A20 (8,084) (8,922) (42,265) (17,447) Profit before taxation 226,696 94,870 451,170 291,998 Taxation A21 (58,660) (64,940) (118,479) (127,128) Profit after taxation 168,036 29,930 332,691 164,870 Earnings per share (sen) A22 Basic 25.07 4.68 49.74 25.50 Fully diluted 20.48 3.82 40.65 21.79 The Condensed Interim Financial Statements should be read in conjunction with the audited financial statements of the Group and the Bank for the year ended 31 March 2008.

Com

pany

No.

851

5-D

Am

Ban

k (M

) B

erha

d (I

ncor

pora

ted

in M

alay

sia)

A

nd It

s S

ubsi

diar

y C

ompa

nies

6

CO

ND

EN

SE

D IN

TE

RIM

FIN

AN

CIA

L S

TA

TE

ME

NT

S

UN

AU

DIT

ED

CO

NS

OLI

DA

TE

D S

TA

TE

ME

NT

S O

F C

HA

NG

ES

IN E

QU

ITY

F

OR

TH

E F

INA

NC

IAL

HA

LF-Y

EA

R E

ND

ED

30

SE

PT

EM

BE

R 2

008

Attr

ibut

able

to E

quity

Hol

der

of th

e B

ank

Non

-dis

trib

utab

le

Dis

trib

utab

le

ICU

LS

Ava

ilabl

e E

xcha

nge

U

napp

ro-

S

hare

(e

quity

S

hare

S

tatu

tory

M

erge

r C

apita

l F

or-S

ale

F

luct

uatio

n

pr

iate

d M

inor

ity

Tot

al

The

Gro

up

Cap

ital

com

pone

nt)

P

rem

ium

R

eser

ve

Res

erve

R

eser

ve

Res

erve

R

eser

ve

P

rofit

s In

tere

st

Equ

ity

R

M’0

00

RM

’000

R

M’0

00

RM

’000

R

M’0

00

RM

’000

R

M’0

00

RM

’000

RM

’000

R

M’0

00

RM

’000

Bal

ance

as

at 1

Apr

il 20

07

61

0,36

4

–

710,

660

633,

222

1,72

7,83

0

377,

492

6,00

7 –

40

6,59

1

57

4,

472,

223

Issu

e of

Irre

deem

able

Con

vert

ible

U

nsec

ured

Loa

n S

tock

s –

200,

792

–

–

–

– –

– –

– 20

0,79

2 U

nrea

lised

net

loss

on

reva

luat

ion

of s

ecur

ities

ava

ilabl

e-fo

r-sa

le

– –

– –

–

– (8

,097

) –

– –

(8,0

97)

Pro

fit/(

loss

) fo

r th

e ye

ar

– –

– –

– –

– –

618

,450

(1

6)

618,

434

Effe

cts

aris

ing

from

the

pool

ing

of

inte

rest

s –

– –

– 15

2,30

5 –

– –

(1

52,3

05)

– –

Tra

nsfe

r to

sta

tuto

ry r

eser

ve

– –

– 13

7,67

6

– –

– –

(137

,676

) –

–

B

alan

ce a

s at

31

Mar

ch 2

008

61

0,36

4 20

0,79

2 71

0,66

0 77

0,89

8 1,

880,

135

377,

492

(2,0

90)

–

735,

060

41

5,28

3,35

2

B

alan

ce a

s at

1 A

pril

2008

61

0,36

4 20

0,79

2 71

0,66

0 77

0,89

8 1,

880,

135

377,

492

(2,0

90)

–

735,

060

41

5,28

3,35

2 C

onve

rsio

n o

f Irr

edee

mab

le

Con

vert

ible

Uns

ecur

ed L

oan

Sto

cks

60,0

00

(200

,792

) 23

2,18

4 –

– –

– –

–

91,3

92

Unr

ealis

ed n

et lo

ss o

n re

valu

atio

n of

sec

uriti

es a

vaila

ble-

for-

sale

–

– –

– –

– (1

54,4

52)

–

– –

(154

,452

) E

xcha

nge

fluct

uatio

n ad

just

men

ts

– –

– –

– –

– 6,

390

–

– 6,

390

Effe

cts

aris

ing

from

the

pool

ing

of

inte

rest

s –

– –

– (1

,482

,569

) –

– –

–

– (1

,482

,569

) P

rofit

for

the

perio

d –

– –

– –

– –

–

418,

015

(5)

418,

010

B

alan

ce a

s at

30

Sep

tem

ber

2008

67

0,36

4 –

942,

844

770,

898

397,

566

377,

492

(156

,542

) 6,

390

1,

153,

075

36

4,16

2,12

3

The

Con

dens

ed In

terim

Fin

anci

al S

tate

men

ts s

houl

d be

rea

d in

con

junc

tion

with

the

audi

ted

finan

cial

sta

tem

ents

of t

he G

roup

and

the

Ban

k fo

r th

e ye

ar e

nded

31

Mar

ch

2008

.

Com

pany

No.

851

5-D

Am

Ban

k (M

) B

erha

d (I

ncor

pora

ted

in M

alay

sia)

A

nd It

s S

ubsi

diar

y C

ompa

nies

7

CO

ND

EN

SE

D IN

TE

RIM

FIN

AN

CIA

L S

TA

TE

ME

NT

S

UN

AU

DIT

ED

ST

AT

EM

EN

TS

OF

CH

AN

GE

S IN

EQ

UIT

Y

FO

R T

HE

FIN

AN

CIA

L H

ALF

-YE

AR

EN

DE

D 3

0 S

EP

TE

MB

ER

200

8

Attr

ibut

able

to E

quity

Hol

der

of th

e B

ank

N

on-d

istr

ibut

able

D

istr

ibut

able

ICU

LS

A

vaila

ble

Exc

hang

e

Una

ppro

-

S

hare

(e

quity

S

hare

S

tatu

tory

M

erge

r F

or-S

ale

Flu

ctua

tion

pria

ted

T

he B

ank

Cap

ital

com

pone

nt)

Pre

miu

m

Res

erve

R

eser

ve

Res

erve

R

eser

ve

P

rofit

s T

otal

RM

’000

R

M’0

00

RM

’000

R

M’0

00

RM

’000

R

M’0

00

RM

’000

RM

’000

R

M’0

00

Bal

ance

as

at 1

Apr

il 20

07

610,

364

710,

660

5

85,8

32

1,04

4,82

0 6,

007

–

918,

628

3,87

6,31

1 Is

sue

of Ir

rede

emab

le C

onve

rtib

le

Uns

ecur

ed L

oan

Sto

cks

–

200,

792

–

–

–

–

–

– 20

0,79

2 U

nrea

lised

net

loss

on

reva

luat

ion

of

secu

ritie

s av

aila

ble-

for-

sale

–

–

–

–

(8,0

97)

–

–

(8,

097)

P

rofit

for

the

year

–

–

–

–

–

–

498,

354

498,

354

Effe

cts

aris

ing

from

the

pool

ing

of

inte

rest

s –

– –

119,

847

–

–

(1

19,8

47)

– T

rans

fer

to s

tatu

tory

res

erve

–

–

94

,627

–

–

–

(94,

627)

–

B

alan

ce a

s at

31

Mar

ch 2

008

610,

364

200,

792

71

0,66

0

680

,459

1,1

64,6

67

(2,0

90)

–

1,20

2,50

8 4,

567,

360

Bal

ance

as

at 1

Apr

il 20

08

610,

364

200,

792

71

0,66

0

680

,459

1,1

64,6

67

(2,0

90)

–

1,20

2,50

8 4,

567,

360

Effe

cts

aris

ing

frm

the

pool

ing

of

inte

rest

s

– –

– –

(1,1

64,6

67)

– –

–

(1,1

64,6

67)

Con

vers

ion

of Ir

rede

emab

le

Con

vert

ible

Uns

ecur

ed L

oan

Sto

cks

60,0

00

(200

,792

) 23

2,18

4 –

– –

–

– 91

,392

U

nrea

lised

net

loss

on

reva

luat

ion

of

secu

ritie

s av

aila

ble-

for-

sale

–

– –

– –

(154

,437

) –

– (1

54,4

37)

Exc

hang

e flu

ctua

tion

adju

stm

ents

–

– –

– –

– (5

)

– (5

) P

rofit

for

the

perio

d –

– –

– –

– –

332,

691

332,

691

Bal

ance

as

at 3

0 S

epte

mbe

r 2

008

670,

364

– 94

2,84

4 68

0,45

9 –

(156

,527

) (

5)

1,

535,

199

3,67

2,33

4 T

he C

onde

nsed

Inte

rim F

inan

cial

Sta

tem

ents

sho

uld

be r

ead

in c

onju

nctio

n w

ith th

e au

dite

d fin

anci

al s

tate

men

ts o

f the

Gro

up a

nd th

e B

ank

for

the

year

end

ed 3

1 M

arch

20

08.


8

CONDENSED INTERIM FINANCIAL STATEMENTS UNAUDITED CONDENSED CASH FLOW STATEMENTS FOR THE FINANCIAL HALF-YEAR ENDED 30 SEPTEMBER 2008

The Group The Bank 30 Sept 30 Sept 30 Sept 30 Sept 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000

Profit before zakat and taxation 612,145 407,949 451,170 291,998 Adjustments for non-cash items (876,657) 524,270 (573,461) 507,257 Operating Profit / (Loss) Before Working

Capital Changes (264,512) 932,219 (122,291) 799,255 Changes in working capital: Net changes in operating assets 1,503,013 (2,061,156) 2,459,014 (2,778,233) Net changes in operating liabilities 2,317,920 (2,970,301) 319,419 (3,027,166) Tax (paid)/refund (114) (41,757) – 200,558 Net Cash Generated From/(Used in)

Operating Activities 3,556,307 (4,140,995) 2,656,142 (4,805,586)

Net Cash Generated From/(Used in) Investing Activities (4,118,787) 258,565 (3,680,211) 243,711

Net Cash Generated From/(Used in)

Financing Activities (60,000) 1,023,590 (60,000) 1,023,590 Net Increase/(Decrease) In Cash And Cash

Equivalents (622,480) (2,858,840) (1,084,069) (3,538,285) Cash And Cash Equivalents At Beginning Of

The Period 10,837,946 9,810,285 8,275,239 7,957,447 Cash And Cash Equivalents At End Of The

Period 10,215,466 6,951,445 7,191,170 4,419,162 The Condensed Interim Financial Statements should be read in conjunction with the audited financial statements of the Group and the Bank for the year ended 31 March 2008.


9

Explanatory Notes A1. Basis of Preparation

The interim financial statements have been prepared in accordance with Financial Reporting Standards (“FRS”) 134 Interim Financial Reporting issued by Malaysian Accounting Standards Board (“MASB”) and should be read in conjunction with the Annual Financial Statements for the year ended 31 March 2008. The accounting policies and methods of computation applied in the unaudited condensed interim financial statements are consistent with those adopted in the previous audited annual financial statements except for the adoption of the following which are effective for the Group and the Bank’s annual reporting date, 31 March 2009: FRS 107: Cash Flow Statements FRS 112: Income Taxes FRS 118: Revenue FRS 119: Employee Benefits FRS 134: Interim Financial Reporting FRS 137: Provisions, Contingent Liabilities and Contingent Assets Amendments to FRS 121: The Effects of Changes in Foreign Exchange Rates- Net Investment in a Foreign

Operation IC Interpretation 8: Scope of FRS 2 Share-based Payments The adoption of the above did not result in significant changes in accounting policies of the Group and the Bank. Standards and IC Interpretations to existing standards that are not relevant or material for the Group and Bank operations: FRS 111: Construction Contract FRS 120: Accounting for Government Grants and Disclosure of Government Assistance IC Interpretation 1: Changes in Existing Decommissioning, Restoration and Similar Liabilities IC Interpretation 2: Members’ Shares in Co-operative Entities and Similar Instruments IC Interpretation 5: Rights to Interests arising from Decommissioning, Restoration and Environmental

Rehabilitation Funds IC Interpretation 6: Liabilities arising from Participating In a Specific Market-Waste Electrical and Electronic

Equipment IC Interpretation 7: Applying the Restatement Approach to FRS 129 Financial Accounting in Hyperinflationary

Economies


10

Explanatory Notes A1. Basis of Preparation (cont’d)

During the 2nd quarter of financial year ending 31 March 2009, the Group implemented the following changes in accounting policy on treatment of: (i) certain incidental expenses incurred as part of the “Zero Entry cost” package offered for housing loans

and commercial property loans. These expenses which were previously expensed off to the Income Statement upon incurrence are now capitalized and amortised over the average lock-in period of the loans. The rationale for this change is to match the expenses against the returns earned over the period of the loans. The impact of this change to the preceding years’ financial results was not material. Arising from this change, certain comparative figures have been restated as mentioned in Note A35.

(ii) employee costs in respect of software development. The change in accounting policy involves the

capitalization of directly attributable employee costs for employees involved in the application development stage of a project and such costs will be amortised over the estimated useful life of the computer software which is classified as intangible assets. Previously, costs of employees directly involved in the development of software were expensed off to the Income Statement upon incurrence. This change in accounting policy will be effective for new projects launched from the financial year ending 31 March 2009 and does not have any impact to the financial results ended 30 September 2008.

Pursuant to the Business Transfer Agreement dated 11 March 2008 and the Vesting Order granted by the High Court of Malaya on 9 April 2008, the Bank acquired the assets and assumed the liabilities relating to AmInvestment Bank Berhad’s (AmInvestment Bank) conventional/Islamic Fund-Based Activity (including AmInvestment Bank’s 100% shareholding interest in AmInternational (L) Ltd, a licensed offshore bank). As the vesting of assets and assumption of liabilities were carried by entities under common control, the transaction has been accounted for via the pooling of interest method (‘Merger”). Under the pooling of interest method, the results of the business transferred from AmInvestment Bank, together with the assets and liabilities are included into the financial statements of the Bank as if the merger had been effected prior to and throughout the current financial year/period. Pursuant to the Business Transfer, certain Held-for-Trading securities were reclassified to Securities Available for Sale and arising from the Merger, comparative figures of the Bank and the Group have been restated. During the financial period, the Bank adopted the guidelines issued by Bank Negara Malaysia (BNM) “Reclassification of Securities under Specific Circumstances”. The provisions in the above Guideline shall override the existing requirements of BNM/GP8 in relation to the reclassification of securities into or out of the Held-For-Trading category and are effective from 1 July 2008 to 31 December 2009. As permitted by the above guideline, the Bank had reclassified securities from the Held for Trading category to Available for Sale effective 1 July 2008. The effects of this reclassification are as disclosed in note A34. The specific and general allowances for loans, advances and financing of the Bank are computed based on BNM’s guidelines on the “Classification of Non-Performing Loans and Provisions for Substandard, Bad and Doubtful Debts” (“BNM/GP3”) requirements. However, the Bank has adopted a more stringent classification policy on non-performing loans, whereby loans are classified as non-performing and sub-standard when repayments are in arrears for more than three (3) months from the first day of default or after maturity date.


11

Consistent with previous year, the Group and the Bank has also adopted a more stringent basis for specific allowances on non-performing loans as follows: (i) Values assigned to collateral held for non-performing loans secured by properties is determined based on

the realisable values of the properties on the following basis:

(a) 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

(b) no value assigned to the realisable value of the properties held as collateral for non performing loans

which are in arrears for more than seven (7) years. (ii) Specific allowance of 20% is provided on non-performing loans which are four (4) to less than six (6)

months-in-arrears.

A2. Audit Qualification

The auditors’ report on the audited annual financial statements for the financial year ended 31 March 2008 was not qualified.

A3. Seasonality or Cyclicality of Operations

The operations of the Group are not subject to seasonal or cyclical fluctuation in the current financial quarter and period.

A4. Unusual Items There were no unusual items during the current financial quarter and period.

A5. Use of Estimates There was no material change in estimates of amounts reported in prior financial years that have a material effect on the financial period ended 30 September 2008.


12

A6. Issuance, Cancellation, Repurchase, Resale and Repa yment of Debt and Equity Securities

a) Issuance of Sixth Tranche of RM600 million Mediu m Term Notes (MTN)

On 9 April 2008, the Bank issued the Sixth Tranche of MTN amounting to RM600 million which is for a tenor of 15 years Non-callable 10 years and bear interest at 6.25% per annum. The proceeds raised was utilized for the refinancing of existing subordinated debts and general working capital requirements. To date, the Bank had issued a total of RM1,460 million MTN under the RM2.0 billion nominal value MTN Programme.

b) Repayment of RM200 million Subordinated Bonds

Pursuant to a Trust Deed dated 24 April 2003, the Bank had issued RM200 million Subordinated Bonds for a period of ten years maturing on 30 April 2013. On 30 April 2008, the Bank had early redeemed the RM200 million Subordinated Bonds with the approval of Bank Negara Malaysia.

c) Conversion of RM300 million Irredeemable Convertibl e Unsecured Loan Stocks (“ICULS”)

On 20 May 2008 the holding company, AMFB Holdings Berhad, exercised its conversion right to convert the entire RM300 million ICULS into 60,000,000 fully paid ordinary shares of RM1.00 each. The ICULS was converted to new shares in the Bank and credited as fully paid on the basis of one new share for every Ringgit Malaysia Five (RM5.00) nominal amount of ICULS tendered. With the conversion of ICULS, the issued and fully paid-up ordinary share capital of the Bank increased to 670,363,762 ordinary shares of RM1.00 each. The resultant share premium arising from the conversion of ICULS amounting to RM232,183,993 was credited to the Share Premium account.

d) Repayment of RM460 million Subordinated Term Loa n

On 30 September 2008, the Bank repaid the RM460 million Subordinated term loan which was drawndown on 30 September 2003. This loan which was obtained from a related company was novated to Quanto Assets Berhad, a special purpose vehicle on 19 May 2006.

There were no share buy-backs, share cancellations, shares held as treasury shares nor resale of treasury shares by the Bank during the financial period.

A7. Dividends Paid The directors do not recommend the payment of any dividend in respect of the financial period ended 30 September 2008 and no dividends were paid in the current financial period.


13

A8. Securities Held-for-trading

The Group The Bank 30 Sept 31 March 30 Sept 31 March 2008 2008 2008 2008 RM’000 RM’000 RM’000 RM’000

At fair value Money Market Securities:

Treasury bills 44,441 26,566 44,441 26,566 Islamic Treasury bills – 78,224 – – Malaysian Government Securities 263,267 160,705 263,267 160,705 Malaysian Government

Investment Certificates 12,486 323,014 12,486 287,793 Cagamas bonds – 25,057 – 25,057 Cagamas Mudharabah Bearer

Bonds 7,522 37,167 – 35,076 Khazanah bonds – 59,359 – 45,857 I-Khazanah bonds 965 – – – Negotiable Islamic debt certificate 23,471 313,742 – – Negotiable instruments of deposit – 15,368 – 15,368 Islamic Bank Negara Malaysia

monetary notes – 134,107 – 134,107 Bank Negara Malaysia

Monetary Notes 344,027 274,645 344,027 274,645 696,179 1,447,954 664,221 1,005,174 Quoted Securities in Malaysia:

Shares and Unit Trusts 45,008 82,534 45,008 82,464 Quoted Securities Outside Malaysia:

Shares – 69,236 – 69,236 Unquoted Securities Outside

Malaysia: Private debt securities 14,884 – 14,884 –

Unquoted Securities in Malaysia:

Private debt securities 421,498 4,763,484 104,317 4,646,853 Guaranteed private debt securities – 177,762 – 177,762

421,498 4,941,246 104,317 4,824,615 Total securities held-for-trading 1,177,569 6,540,970 828,430 5,981,489


14

A9. Securities Available-for-sale


At fair value Money Market Securities:

Malaysian Government Investment Certificates

34,625

–

–

–

Negotiable Islamic Debt Certificate 69,339 – – – Islamic Khazanah bonds 58,391 – 44,109 – Negotiable instruments of deposit 68,307 69,762 93,281 69,762

230,662 69,762 137,390 69,762 Quoted Securities In Malaysia:

Shares 139,959 22,817 139,905 22,817 Shares with options and/or

collateral 13,069 19,570 13,069 19,570 153,028 42,387 152,974 42,387 Quoted Securities Outside Malaysia:

Shares 49,870 78 49,870 78 Unquoted Securities Outside Malaysia:

Shares 967 – – – Unquoted Securities In Malaysia:

Private debt securities 4,685,081 1,043,777 4,335,944 1,043,777 Guaranteed private debt securities 337,185 96,529 337,185 95,632 5,022,266 1,140,306 4,673,129 1,139,409

Total securities available-for-sale 5,456,793 1,252,533 5,013,363 1,251,636


15

A10. Securities Held-to-maturity


At amortised cost Quoted Securities In Malaysia:

Shares 40 218 40 121 Debt securities 36,288 – 1,881 – Debt securities with options and/or

collateral 178,262 251,113 177,291 218,202 Warrants – 15 – 15

214,590 251,346 179,212 218,338 Unquoted Securities In Malaysia:

Shares 92,445 126,920 90,252 126,503 Debt securities 347,368 427,592 325,982 406,061 Debt securities with options and/or

collateral 645,169 631,444 645,169 631,444 1,084,982 1,185,956 1,061,403 1,164,008

Unquoted Securities Outside Malaysia: Private debt securities – 190,331 – 190,331 Shares 17 6,441 17 6,441 17 196,772 17 196,772

Total 1,299,589 1,634,074 1,240,632 1,579,118 Less: Accumulated impairment losses (405,134) (477,538) (390,513) (463,754) Total securities held-to-maturity 894,455 1,156,536 850,119 1,115,364


16

A11. Loans, Advances and Financing


Overdrafts 1,596,507 1,632,538 1,486,641 1,491,602 Term loan facilities

– Housing loans/financing 11,450,535 11,314,355 10,670,809 10,502,152 – Hire-purchase receivables 30,424,049 29,984,270 22,735,138 22,283,759 – Other loans/financing 13,338,944 12,080,012 9,335,191 8,757,092

Credit card receivables 1,872,734 1,901,162 1,559,189 1,597,794 Bills receivables 58,173 33,524 49,671 29,762 Trust receipts 537,302 325,968 485,226 279,895 Claims on customers under

acceptance credits 2,700,625 2,301,379 1,828,376 1,615,003 Revolving credits 3,174,424 2,984,973 2,961,315 2,825,260 Staff loans 155,202 156,451 154,646 155,954 Total 65,308,495 62,714,632 51,266,202 49,538,273 Unearned interest and unearned

income (6,764,273) (6,482,805) (3,753,443) (3,658,470) 58,544,222 56,231,827 47,512,759 45,879,803 Less: Islamic financing sold to

Cagamas Berhad (1,532,705) (1,956,022) – – Gross loans, advances and financing 57,011,517 54,275,805 47,512,759 45,879,803 Allowance for bad and doubtful debts

and financing: –General (874,144) (836,845) (707,651) (681,403) –Specific (1,382,448) (1,348,860) (1,233,386) (1,195,407)

Net loans, advances and financing 54,754,925 52,090,100 45,571,722 44,002,993


17

A11. Loans, Advances and Financing (continued) A11a. By type of customer


Domestic banking institutions 8,259 131 8,259 131 Domestic non-bank financial institutions 847,366 832,795 840,583 832,134 Domestic business enterprises

– Small medium enterprises 6,409,768 5,447,766 5,460,747 4,698,418 – Others 12,041,647 11,269,932 10,638,496 10,281,199

Government and statutory bodies 80,956 111,581 80,956 90,270 Individuals 37,526,454 36,496,661 30,408,750 29,900,143 Other domestic entities 28,281 32,566 25,217 29,384 Foreign entities 68,786 84,373 49,751 48,124 Gross loans, advances and financing 57,011,517 54,275,805 47,512,759 45,879,803

A11b. By interest/profit rate sensitivity


Fixed rate

– Housing loans/financing 2,371,132 2,342,552 1,961,847 1,923,634 – Hire purchase receivables 23,875,706 23,104,400 19,009,679 18,648,791 – Other fixed rate loan/financing 8,246,965 8,136,290 4,201,995 4,713,358

Variable rate – Base lending rate plus 14,891,392 14,688,695 14,891,392 14,687,528 – Cost plus 7,151,536 5,636,487 6,989,490 5,539,111 – Other variable rates 474,786 367,381 458,356 367,381

Gross loans, advances and financing 57,011,517 54,275,805 47,512,759 45,879,803


18

A11. Loans, Advances and Financing (continued) A11c. By loan purpose

The Group The Bank 30 Sept 31 March 30 Sept 31 March 2008 2008 2008 2008 RM’000 RM’000 RM’000 RM’000 Purchase of securities 1,777,762 1,147,252 1,770,021 1,137,836 Purchase of transport vehicles 24,398,582 24,124,934 18,058,500 17,756,772 Purchase of landed property

– Residential 11,150,828 10,980,122 10,740,657 10,560,017 – Non-residential 2,673,643 2,312,866 2,427,591 2,167,498

Purchase of fixed assets other than land and building 1,837,762 1,751,237 1,697,658 1,624,960

Personal use 2,209,023 2,079,883 367,905 377,780 Credit card 1,846,426 1,872,322 1,533,618 1,569,270 Purchase of consumer durables 3,746 3,892 2,558 2,708 Construction 1,088,496 838,616 994,435 811,149 Mergers and acquisitions 386,214 278,877 386,214 278,877 Working capital 9,497,688 9,260,766 8,128,221 8,135,256 Other purpose 1,674,052 1,581,060 1,405,381 1,457,680 58,544,222 56,231,827 47,512,759 45,879,803 Less: Islamic financing sold to

Cagamas Berhad (1,532,705) (1,956,022) – – Gross loans, advances and financing 57,011,517 54,275,805 47,512,759 45,879,803

A11d. Non-performing loans by purpose


Purchase of securities 91,083 97,862 90,393 96,949 Purchase of transport vehicles 398,309 428,615 289,242 303,707 Purchase of landed property

– Residential 962,860 962,785 885,051 881,418 – Non-residential 277,546 334,169 252,445 305,131

Purchase of fixed assets other than land and building 33,437 44,119 30,962 36,916

Personal use 27,588 35,246 26,810 34,794 Credit card 57,119 66,011 48,121 55,432 Purchase of consumer durables 632 485 632 485 Construction 210,169 201,276 188,914 179,398 Working capital 836,144 941,624 810,510 916,777 Other purpose 144,422 180,492 141,314 176,356

3,039,309 3,292,684 2,764,394 2,987,363


19

A11. Loans, Advances and Financing (continued) A11e. Movements in non-performing loans, advances and financing (“NPL”) are as follows:


Gross Balance at 1 April 3,292,684 5,152,411 2,987,363 4,649,327 Non-performing during the period/year 660,242 1,319,462 560,166 1,113,394 Reclassification to performing loans,

advances and financing (514,690) (757,158) (456,295) (653,641) Amount recovered (166,159) (513,158) (149,036) (442,281) Debt equity conversion – (86,725) – (86,725)

Amount written off (232,768) (1,274,107) (177,804) (1,044,670) Sale of non-performing loans – (547,859) – (547,859) Exchange fluctuation adjustment – (215) – (215) Reclassification from trade receivable – 33 – 33 Balance at end of period/year 3,039,309 3,292,684 2,764,394 2,987,363 Less: Specific allowance (1,382,448) (1,348,860) (1,233,386) (1,195,407) Non-performing loans, advances and

financing - net 1,656,861 1,943,824 1,531,008 1,791,956 Gross loans, advances and financing 57,011,517 54,275,805 47,512,759 45,879,803 Add: Islamic financing sold to

Cagamas Berhad 1,532,705 1,956,022 – – Balance as the end of period/year 58,544,222 56,231,827 47,512,759 45,879,803 Less: Specific allowance (1,382,448) (1,348,860) (1,233,386) (1,195,407)

Loans, advances and financing

(including Islamic financing sold to Cagamas Berhad) 57,161,774 54,882,967 46,279,373 44,684,396

Ratio of net non-performing loans,

advances and financing to total loans, advances and financing (including Islamic financing sold to Cagamas Berhad) - net 2.90% 3.54% 3.31% 4.01%


20

A11. Loans, Advances and Financing (continued) A11f. Movements in the allowance for bad and doubtful debts (and financing) accounts are as follows:

The Group The Bank 30 Sept 31 March 30 Sept 31 March 2008 2008 2008 2008

RM’000 RM’000 RM’000 RM’000

General Allowance Balance at 1 April 836,845 769,828 681,403 629,071 Allowance made during the period/year 37,265 67,251 26,248 52,566 Exchange fluctuation adjustments 34 (234) – (234)

Balance at end of period/year 874,144 836,845 707,651 681,403

% of total loans less specific allowance 1.53% 1.53% 1.53% 1.53%

Specific Allowance Balance at 1 April 1,348,860 2,083,017 1,195,407 1,829,318 Allowance made during the period/year 469,958 1,181,796 392,495 964,114 Amount written back in respect of

recoveries during the period/year (193,966) (413,905) (168,045) (335,003)

Net charge to income statements 275,992 767,891 224,450 629,111 Debt equity conversion – (17,190) – (17,190) Amount written off/ Adjustment to

Asset Deficiency Account (242,404) (1,265,864) (186,471) (1,026,838) Reclassification from sundry

receivables –

838 –

838 Sale of non-performing loans – (219,832) – (219,832) Balance at end of period/year 1,382,448 1,348,860 1,233,386 1,195,407


21

A12. Deposits from Customers


Demand deposits 3,077,458 2,908,460 2,454,158 2,387,896 Savings deposits 3,416,162 3,340,718 2,554,502 2,539,686 Other deposits 6,086,683 4,047,540 6,050,583 4,047,540 Fixed/Investment deposits 36,334,753 37,304,961 30,583,378 32,276,206 Negotiable certificates of deposits 16,727 16,652 10,287 10,103

48,931,783 47,618,331 41,652,908 41,261,431

By type of customers Individuals 24,491,186 23,634,465 22,714,797 22,010,689 Business enterprises 17,201,773 15,576,434 13,864,015 12,641,127 Government and other statutory bodies 6,395,026 6,358,023 4,471,788 4,968,233 Others 843,798 2,049,409 602,308 1,641,382

48,931,783 47,618,331 41,652,908 41,261,431

A13. Deposits and Placements of Banks and Other Financia l Institutions


Licensed banks 3,627,162 1,723,106 2,752,250 1,158,483 Licensed merchant banks 2,182,288 1,409,898 1,713,608 716,019 Licensed finance companies – 803,632 – 803,632 Non-banking institutions 9,964,343 11,012,892 7,744,240 9,495,703 Bank Negara Malaysia (“BNM”) 1,316,846 1,386,398 1,314,712 1,383,975

17,090,639 16,335,926 13,524,810 13,557,812


22

A14. Interest Income

Individual Quarter Cumulative Quarter 30 Sept 30 Sept 30 Sept 30 Sept 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 The Group Loans and advances

– Interest income other than recoveries from NPLs 737,134 682,499 1,461,811 1,360,701

– Recoveries from NPLs 61,084 64,608 123,700 136,408 Money at call, deposit and placements

with financial institutions 77,414 46,777 154,894 128,346 Securities held-for-trading 12,701 69,064 35,413 124,790 Securities available-for-sale 59,805 19,238 110,836 39,319 Securities held-to-maturity 5,639 12,940 21,722 22,417 Others 167 79 183 448 953,944 895,205 1,908,559 1,812,429 Interest suspended (25,883) (32,783) (47,686) (57,315) Amortisation of premium less

accretion of discount - net 5,238 3,387 7,458 4,530 933,299 865,809 1,868,331 1,759,644

The Bank Loans and advances

– Interest income other than recoveries from NPLs 736,774 680,734 1,461,045 1,357,034

– Recoveries from NPLs 61,084 64,608 123,700 136,408 Money at call, deposits and

placements with financial institutions 75,833 44,843 151,950 123,585

Securities held-for-trading 12,701 68,795 35,424 124,790 Securities available-for-sale 59,805 19,238 110,836 39,227 Securities held-to-maturity 5,639 12,940 21,722 21,807 Others 128 78 126 188 951,964 891,236 1,904,803 1,803,039 Interest suspended (25,883) (31,741) (47,686) (55,267) Amortisation of premium less

accretion of discount - net 5,238 3,387 7,458 4,530 931,319 862,882 1,864,575 1,752,302


23

A15. Interest Expense

Individual Quarter Cumulative Quarter 30 Sept 30 Sept 30 Sept 30 Sept 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 The Group Deposits from customers 345,698 349,222 674,792 696,844 Deposits and placements of banks and

other financial institutions 109,214 89,321 224,693 183,603 Recourse obligation of loans sold to

Cagamas Berhad 1,261 4,600 2,920 10,600 Subordinated term loans 7,885 7,971 15,770 15,856 Subordinated bonds (44) 4,007 1,263 7,971 Hybrid securities 11,135 11,747 22,012 23,342 Medium term notes 20,837 – 40,626 – Exchangeable bonds 7,566 7,566 15,049 11,184 Irredeemable Convertible Unsecured

Loan Stocks – 1,943 995 2,872 Others (1,358) 40,122 15,882 95,106 502,194 516,499 1,014,002 1,047,378

The Bank Deposits from customers 344,645 348,646 672,525 693,093 Deposits and placements of banks and

other financial institutions 109,196 88,625 224,929 180,910 Recourse obligation of loans sold to

Cagamas Berhad 1,261 4,600 2,920 10,600 Subordinated term loans 19,073 19,719 37,782 39,199 Subordinated bonds (44) 4,007 1,263 7,971 Medium term notes 20,837 – 40,626 – Exchangeable bonds 7,566 7,566 15,049 11,184 Irredeemable Convertible Unsecured

Loan Stocks – 1,943 995 2,872 Others (1,282) 39,920 16,042 96,895 501,252 515,026 1,012,131 1,042,724


24

A16. Net Income from Islamic Banking Business

Individual Quarter Cumulative Quarter 30 Sept 30 Sept 30 Sept 30 Sept 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 The Group Income derived from investment of

depositors’ funds and others 189,726 178,076 371,054 355,827 Income derived from investment of

shareholders’ funds 61,684 43,924 96,891 95,100 Transfer from profit equalisation

reserve 740 2,285 6,805 28,136 Income attributable to depositors (98,866) (90,952) (190,552) (185,268) Finance cost (4,839) (5,475) (9,626) (11,587) 148,445 127,858 274,572 282,208


25

A17. Other Operating Income

Individual Quarter Cumulative Quarter 30 Sept 30 Sept 30 Sept 30 Sept 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000

The Group (a) Fee Income :

Commissions 16,143 11,549 30,137 21,625 Guarantee fees 6,990 5,206 13,186 9,342 Other fee income 39,821 30,069 75,141 60,371

62,954 46,824 118,464 91,338

(b) Investment income:

Net gain/(loss) on sale of: Securities held-for-trading (24,659) 5,655 (64,590) 74,966 Securities available-for-sale (444) 2,576 10,032 23,945 Securities held-to-maturity 7,684 26,827 22,344 30,464

Net loss on revaluation of securities held-for-trading 17,729 (22,900) (26,078) (69,948)

Net gain/(loss) on revaluation of derivatives (78,599) 24,727 (33,930) 42,231

Gross dividend income from: – Securities held-for-trading 2,533 3,502 4,551 6,948 Securities available-for-sale 803 774 803 774 Securities held-to-maturity 3,213 2,336 5,010 4,657

Others 6 – 6 –

(71,734) 43,497 (81,852) 114,037 (c) Other Income :

Rental income 869 1,060 1,798 1,881 Gain on disposal of property and

equipment 103 5 511 12 Gain on disposal of foreclosed

property 33 – 33 – Foreign exchange gain/(loss) (8,000) 4,006 (11,525) 6,877 Other operating income 196 186 631 311

(6,799) 5,257 (8,552) 9,081 (15,579) 95,578 28,060 214,456


26

A17. Other Operating Income (continued)

Individual Quarter Cumulative Quarter 30 Sept 30 Sept 30 Sept 30 Sept 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000

The Bank (a) Fee Income :

Commissions 16,143 11,549 30,137 21,625 Guarantee fees 6,631 4,414 12,072 8,274 Other fee income 39,757 29,884 74,977 59,927

62,531 45,847 117,186 89,826

(b) Investment income:

Net gain/(loss) on sale of: Securities held-for-trading (24,659) 5,696 (64,590) 74,687 Securities available-for-sale (444) 2,575 10,032 46,937 Securities held-to-maturity 7,684 26,827 22,344 7,473 Net gain/(loss) on revaluation of

securities held-for-trading 17,729 (23,544) (26,078) (69,722) Net gain/(loss) on revaluation of

derivatives (78,599) 25,121 (33,930) 42,813 Gross dividend income from:

Securities held-for-trading 2,533 3,502 4,551 6,948 Securities available-for-sale 803 775 803 775 Securities held-to-maturity 3,213 2,336 5,010 4,655

Others 6 – 6 – (71,734) 43,288 (81,852) 114,566

(c) Other Income : Rental income 650 827 1,360 1,506 Gain on disposal of property and

equipment 45 (1) 453 1 Gain on disposal of foreclosed

property 33 – 33 – Foreign exchange gain/(loss) (7,850) 3,909 (11,312) 6,767 Other operating income 61 – 61 – –

(7,061) 4,735 (9,405) 8,274 (16,264) 93,870 25,929 212,666


27

A18. Other Operating Expenses

Individual Quarter Cumulative Quarter 30 Sept 30 Sept 30 Sept 30 Sept 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 The Group Personnel costs

– Salaries, allowances and bonuses 106,474 95,314 221,618 192,391 – Others 7,716 5,631 13,345 11,278

Establishment costs – Depreciation 9,584 9,149 19,040 19,158 – Rental 12,346 11,677 24,645 23,059 – Cleaning, maintenance and security 4,795 5,527 9,188 9,743 – Computerisation cost 14,290 12,860 28,217 20,044 – Amortisation of intangible assets 5,983 5,231 11,639 9,872 – Amortisation of prepaid land lease

payments 25 54

50 54 – Others 5,041 4,831 9,746 9,483

Marketing and communication expenses – Commission 2,470 1,873 4,846 3,423 – Advertising and marketing 797 12,801 22,103 22,551 – Communication 10,192 12,192 20,895 24,378 – Others 1,899 1,999 3,549 3,824

Administration and general expenses – Professional services 17,071 11,070 37,662 25,362 – Shared service cost charged 13,213 18,840 25,388 33,343 – Others 4,713 3,095 9,413 7,253

216,609 212,144 461,344 415,216 The Bank Personnel costs

– Salaries, allowances and bonuses 104,410 93,538 217,488 206,711 – Others 7,597 5,397 13,024 11,876

Establishment costs – Depreciation 9,424 8,997 18,723 19,110 – Rental 12,568 11,949 25,089 24,355 – Cleaning, maintenance and security 4,578 5,303 8,847 9,492 – Computerisation cost 14,172 12,780 27,201 21,313 – Amortisation of intangible assets 5,948 5,205 11,568 9,842 – Amortisation of prepaid land lease

payments 20 44 40 44 – Others 4,836 4,574 9,294 9,199

Marketing and communication expenses – Commission 2,470 1,872 4,846 3,418 – Advertising and marketing (604) 11,232 19,553 21,756 – Communication 10,039 11,834 20,120 23,520 – Others 1,854 1,988 3,463 3,775

Administration and general expenses – Professional services 17,031 10,196 37,172 26,161 – Shared service cost charged 12,700 17,614 24,351 6,312 – Shared service cost recoveries

(Subsidiary) (47,461) (43,023) (96,947) (85,314) – Others 4,154 2,931 8,707 5,697

163,736 162,431 352,539 317,267


28

A19. Allowance for Losses on Loans, Advances and Financi ng

Individual Quarter Cumulative Quarter 30 Sept 30 Sept 30 Sept 30 Sept 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 The Group Allowance for bad and doubtful debts

and financing:

Specific allowance – made in the financial period 183,763 387,020 469,958 735,840 – written back (93,373) (129,788) (193,966) (225,518)

General allowance 30,093 20,173 37,265 25,061 Bad debts and financing recovered -

net

(83,061)

(68,666)

(231,377)

(166,123) Amount recovered from Danaharta – – – (609) 37,422 208,739 81,880 368,651

The Bank Allowance for bad and doubtful debts

and financing:

Specific allowance – made in the financial period 147,209 331,790 392,495 614,852 – written back (80,459) (104,376) (168,045) (178,399)

General allowance 24,733 13,571 26,248 20,159 Bad debts and financing recovered -

net

(75,862)

(65,480)

(218,295)

(160,172) Amount recovered from Danaharta – – – (609) 15,621 175,505 32,403 295,831


29

A20. Impairment loss

Individual Quarter Cumulative Quarter 30 Sept 30 Sept 30 Sept 30 Sept 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 The Group Securities (8,489) (6,911) (34,886) (8,295) Impairment on amount recoverable

under asset-backed securitisation transaction –

– – (7,000) Sundry receivables 404 (2,011) (422) (2,152) (8,085) (8,922) (35,308) (17,447) The Bank Securities (8,489) (6,911) (34,886 ) (8,295) Impairment on subsidiary company – – (7,000) – Impairment on amount recoverable

under asset-backed securitisation transaction – – – (7,000)

Sundry receivables 405 (2,011) (379) (2,152) (8,084) (8,922) (42,265)_ (17,447)

A21. Taxation

Individual Quarter Cumulative Quarter 30 Sept 30 Sept 30 Sept 30 Sept 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000 The Group Estimated current tax payable 92 7,706 114 27,093 Net transfer from deferred taxation 77,660 81,384 145,479 145,964 77,752 89,090 145,593 173,057 Tax recovered in respect of prior year – – – (266) Prior year tax expense in respect of

business vested over – – – (8) 77,752 89,090 145,593 172,783 The Bank Estimated current tax payable – 5,587 – 21,729 Net transfer from deferred taxation 58,660 59,353 118,479 105,665 Tax recovered in respect of prior year – – – (266) 58,660 64,940 118,479 127,128

The total tax charge for the Group and the Bank for the period ended 30 September 2007 reflects an effective tax rate which is higher than the statutory tax rate due mainly to the effect on deferred taxes as a result of reduction in statutory tax rate from 27.0% to 26.0% for year of assessment 2008 and disallowances of certain expenses.


30

A22. Earnings Per Share (EPS)

(a) Basic

Individual Quarter Cumulative Quarter 30 Sept 30 Sept 30 Sept 30 Sept 2008 2007 2008 2007

RM’000 RM’000 RM’000 RM’000 The Group Net profit attributable to shareholder

of the Bank 222,566 53,605 418,014 234,869 Effect of savings on interest on

ICULS (net of tax) –

1,438

746

2,125 222,566 55,043 418,760 236,994 Number of ordinary shares at

beginning of year 610,364

610,364

610,364

610,364 Effect of the conversion of ICULS 60,000 60,000 60,000 44,590 Weighted average number of

ordinary shares in issue 670,364

670,364

670,364

654,954 Basic earnings per share (sen) 33.20 8.21 62.47 36.18 RM’000 RM’000 RM’000 RM’000 The Bank Net profit attributable to

shareholders of the Bank 168,036 29,930 332,691 164,870 Effect of savings on interest on

ICULS (net of tax) –

1,438

746

2,125 168,036 31,368 333,437 166,995

’000 ’000 ’000 ’000 Number of ordinary shares at

beginning of year 610,364

610,364

610,364

610,364 Effect of the conversion of ICULS 60,000 60,000 60,000 44,590 Weighted average number of

ordinary shares in issue 670,364 670,364 670,364 654,954 Basic earnings per share (sen) 25.07 4.68 49.74 25.50


31

(b) Fully diluted Fully diluted earnings per share is calculated by dividing the adjusted net profit attributable to equity holder of the Bank by the adjusted weighted average number of ordinary shares in issue and issuable during the financial quarter and period. The Bank has one category of dilutive potential ordinary shares: i) Irredeemable Non-Cumulative Convertible Preference shares (“INCPS”)

Individual Quarter Cumulative Quarter 30 Sept 30 Sept 30 Sept 30 Sept 2008 2007 2008 2007

RM’000 RM’000 RM’000 RM’000 The Group Net profit attributable to shareholder of

the Bank (as in (a) above) 222,566 55,043 418,760 236,994 ‘000 ‘000 ‘000 ‘000 Weighted average number of ordinary

shares in issue (as in (a) above) 670,364

670,364

670,364

654,954 Adjusted for the effect of the INCPS 150,000 150,000 150,000 111,475 Adjusted weighted average number of

ordinary shares in issue 820,364

820,364

820,364

766,429 Fully diluted earnings per share (sen) 27.13 6.71 51.05 30.92 RM’000 RM’000 RM’000 RM’000 The Bank Net profit attributable to shareholder of

the Bank (as in (a) above) 168,036 31,368 333,437 166,995 ‘000 ‘000 ‘000 ‘000 Weighted average number of ordinary

shares in issue (as in (a) above) 670,364

670,364

670,364

654,954 Adjusted for the effect of the INCPS 150,000 150,000 150,000 111,475 Weighted average number of ordinary

shares in issue 820,364 820,364 820,364 766,429 Fully diluted earnings per share (sen) 20.48 3.82 40.65 21.79


32

A23a. Performance Review for the period ended 30 Se ptember 2008

The Group registered a profit before zakat and taxation (“pre-tax profit”) of RM563.6 milllion representing a 38% increase compared to the pre-tax profit for the corresponding period last year. The significant increase in pre-tax profit was attributable to increase in net interest income arising from loan growth and a 79% reduction in loan loss provision due to intensive recovery efforts.

The performance for the quarter was however impacted by rising interest rates. Accordingly, the Group incurred loss on disposal and revaluation loss on securities held for trading amounting to RM90.7 million. Operating expenses increased by 11% principally due to the growing scale of business operations. Net non-performing loans of the Group continue to improve to 2.9% from 3.54% in March 2008 and the risk weighted capital ratio of the Bank remains strong at 12.17% as at 30 September 2008. In the opinion of the Directors, the results of operations of the Group and the Bank for the financial period have not been substantially affected by any item, transaction or event of a material and unusual nature.

A23b. Prospects for 31 March 2009 Economic development has been impacted by the hike in petrol price of 40.6% in June 2008. Current inflation rate is at high of 7.7%. This has impacted original national GDP growth target for this year from 6.5% in early January 2008 to the current consensus of 5.7% growth. Full impact of the current economic and financial meltdown in the USA is yet to fully precipitate in the region and nationally. Given the backdrop of the general economic outlook, business and growth opportunities are generally currently locked on niche and profitable markets. Retail and Business Banking are expected to be the growth engines. The Bank is well positioned today to weather global, regional and domestic volatilities. Over the past year, the AMMB Holdings Berhad Group has taken steps to strengthen its position, including sealing the strategic partnership collaboration with ANZ and internal restructuring of business activities to facilitate business growth. As we forge ahead, the Bank will continue to build on its brand recognition to grow customer base and assets portfolio. Added emphasis will be given to harnessing low-cost deposits and improving the cost of funding framework. Despite a slower start to the first quarter of financial year ending 31 March 2009 (“FY2009”), we are comfortable with the market consensus profit estimates for FY2009, barring major negative economic impacts lasting deeper and longer.


33

A24. Segment Information on Operating Revenue, Profit Be fore Tax Expense and Assets

By Business Segments Conventional Islamic The Group Banking Banking Others Elimination Consolidated30 September 2008 RM’000 RM’000 RM’000 RM’000 RM’000 Revenue External revenue Interest income 1,868,759 – – (428) 1,868,331 Fee income 118,387 – 77 – 118,464 Investment and other

operating income (90,970) – 368 (177) (90,779) Income from Islamic Banking

Financing income – 446,198 – – 446,198 Investment and Fees on

financing – 21,747 – – 21,747 Others (Subsidiaries) – Rental – – 375 – 375 1,896,176 467,945 820 (605) 2,364,336 Inter-segment revenue Interest Income – – 22,460 (22,460) – Others (Subsidiaries) – Rental – – 947 (947) – – – 23,407 (23,407) – Total revenue 1,896,176 467,945 24,227 (24,012) 2,364,336 Results Profit before share in results

of associated company and taxation 430,289 103,115 989 29,194 563,587

Share of profits of associated company – – – 43

43

Profit before zakat and

taxation 430,289 103,115 989 29,237

563,630 Zakat – (29) – – (29) Taxation (118,489) (27,000) (104) – (145,593) Profit after zakat and

taxation 311,800 76,086 885 29,237

418,008 Total Assets 65,665,013 13,348,599 753,953 (1,706,717) 78,060,848


34

A24. Segment Information on Operating Revenue, Profit Be fore Tax Expense and Assets (continued)

Conventional Islamic The Group Banking Banking Others Elimination Consolidated 30 September 2007 RM’000 RM’000 RM’000 RM’000 RM’000 Revenue External revenue Interest income 1,759,644 – – – 1,759,644 Fee income 91,210 – 128 – 91,338 Investment and other

operating income 122,723 – 222 – 122,945 Income from Islamic Banking

Financing income – 354,521 – – 354,521 Investment and Fees on

financing – 96,406 – – 96,406 Others (Subsidiaries) – Rental – – 173 – 173 1,973,577 450,927 523 – 2,425,027 Inter-segment revenue Interest income – – 23,811 (23,811) – Others (Subsidiaries) – Rental – – 947 (947) – – – 24,758 (24,758) – Total revenue 1,973,577 450,927 25,281 (24,758) 2,425,027 Results Profit before share in results

of associated company and taxation 294,625 112,145 1,160 (15) 407,915

Share of profits of associated company – – – 35

35

Profit before zakat and

taxation 294,625 112,145 1,160 20

407,950 Zakat – (304) – – (304) Taxation (127,138) (45,495) (150) – (172,783) Profit after zakat and

taxation 167,487 66,346 1,010 20

234,863 Total Assets 62,434,747 10,748,670 771,727 (1,580,542) 72,374,602 The directors are of the opinion that all inter-segment transactions have been entered into in the normal course of business and have been established under terms and conditions that are no less favourable than those arranged with independent parties. The financial information by geographical segment is not presented as the Group's activities are principally conducted in Malaysia.


35

A25. Valuation of Property and Equipment

The Group’s and the Bank’s property and equipment are stated at cost or valuation less accumulated depreciation and accumulated impairment losses.

A26. Events Subsequent To Balance Sheet Date There has not arisen in the interval between the end of the financial period and the date of this report any items, transaction or event of a material and unusual nature likely, in the opinion of the directors, to affect substantially the results of the operations of the Group for the current period.

A27. Significant Events A) The Bank and AmInvestment Bank Berhad (“AmInvestment”) had on 11 March 2008 entered into a

business transfer agreement for the transfer of the assets and liabilities relating to the investment, treasury and credit/lending activities or businesses (the “Fund-Based Activity”) of AmInvestment to the Bank. The assets vested includes AmInvestment’s 100% shareholding in AmInternational (L) Ltd, a licensed off-shore bank. The transfer of the Fund-Based Activity was in relation to a group restructuring exercise approved by the Minister of Finance as announced by AMMB Holdings Berhad, the Bank’s ultimate holding company, on 11 March 2008 to Bursa Malaysia Securities Berhad. The transfer of the Fund-Based Activity was effected pursuant to section 50 of the Banking and Financial Institutions Act, 1989 by way of vesting orders obtained from High Courts. The vesting of the Fund-Based Activity, came into effect on 12 April 2008 and the net assets vested amounted to RM1,370 million. The amounts of assets and liabilities vested by AmInvestment Bank Berhad are as follows: The Group* The Bank RM’000 RM’000 Assets Cash and short-term funds 2,105,829 1,659,609 Deposit and placements with banks and other financial institutions

521,540 521,540

Securities held-for-trading 4,349,470 4,006,728 Securities available-for-sale 1,132,260 1,132,260 Securities held-for-maturity 458,799 458,799 Derivative financial assets 278,964 278,964 Loans, advances and financing 4,092,282 4,020,873 Other assets 202,550 199,747 Statutory deposit with Bank Negara Malaysia 130,090 115,590 Deferred tax assets 15,439 15,344 Investment in subsidiary company 33,020 33,020 Total assets 13,320,243 12,442,474


36

A27. Significant Events (continued)

The Group* The Bank RM’000 RM’000 Liabilities Deposits from customers 6,760,077 6,285,951 Deposits and placements of banks and other financial institutions

4,473,165 4,388,240

Derivative financial liabilities 317,266 317,266 Recourse obligation on loans sold to Cagamas Berhad 34,837 34,837 Other liabilities 72,277 68,413 Term loans 267,920 267,920 Total liabilities 11,925,542 11,362,627 Reserves 24,153 24,153 Total liabilities and reserves 11,949,695 11,386,780 Cash paid for net assets vested 1,370,548 1,055,694

Commitments and contingencies vested 46,950,718 45,302,157

*The Group comprise the Bank and AmIslamic Bank Berhad. The amounts of assets and liabilities relating to AMIL vested over to the Bank are as follows:

RM’000 Assets Cash and short-term funds 535,393 Securities available-for-sale 897 Securities held-to-maturity 40,954 Loans, advances and financing 32,146 Other assets 1,294 Property and Equipment 510 Intangible assets 2 Total assets 611,196

Liabilities Deposits from customers 503,510 Deposits and placements of banks and other financial institutions 24,115 Other liabilities 2,036 Total liabilities 529,661 Net assets vested 81,535 Cash paid (33,020) Excess of net assets vested over amount paid 48,515


37

B) During the financial period, the Bank set-up an offshore branch in Labuan upon obtaining a licence to carry on

offshore banking business in Labuan. The Bank also entered into a Business Transfer agreement with AmInvestment Bank Berhad (AmInvestment) which involves the transfer of assets and liabilities in relation to the business carried on by the Labuan Offshore Branch of AmInvestment to the Bank’s newly set-up offfshore branch in Labuan. On 26 September 2008, AmInvestment transferred assets and liabilities relating to its Asian Equity Fund to the Bank as follows :

RM’000 Assets Cash and short-term funds 30,358 Securities held-for-trading 52,666

Total assets 83,024

Liability Other liability (1,374)

Net assets vested 81,650

A28. Changes in the composition of the Group

There were no significant changes in the composition of the Group for the financial period ended 30 September 2008.


38

A29. Commitments and Contingencies

In the normal course of business, the Group and the Bank make various commitments and incur certain contingent liabilities with legal recourse to its customers. No material losses are anticipated as a result of these transactions. The commitments and contingencies are not secured against the Group’s and the Bank’s assets.

The risk-weighted exposure of the Group and the Bank is as follows:

The Group As at As at

30 September 2008 31 March 2008 Credit Risk Credit Risk Principal Equivalent Weighted Principal Equivalent Weighted Amount Amount* Amount Amount Amount* Amount

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Direct credit substitutes 2,143,426 2,143,426 1,942,405 1,826,396 1,602,082 1,483,023 Certain transaction-

related contingent items 1,266,971 633,486 592,564 595,159 297,580 296,855 Short-term self-liquidating

trade-related contingencies 671,587 134,317 134,632 584,432 116,886 113,419

Obligations under underwriting agreements 1,374,000 687,000 839,000 2,057,000 1,028,500 945,300

Unpaid portion of partly paid shares 250 250 250 150 150 150

Irrevocable commitments to extend credit: – maturing less than

one year 8,928,022 1,785,604 1,843,648 8,639,981 1,558,976 1,422,930 – maturing more than

one year 3,360,175 1,680,088 1,076,839 2,526,822 1,263,411 1,138,013 – unutilised credit card

lines 4,089,653 817,931 611,279 4,006,449 801,290 598,888 Forward purchase

commitments – less than one year 303,715 884 177 338,081 338,081 30,108

Foreign exchange related contracts: – less than one year 4,011,943 151,597 73,008 5,762,191 102,655 34,932

Cross currency swap – less than one year 246,414 15,507 3,363 145,123 13,628 2,725 – maturing more than

one year to less than five years 545,499 47,902 9,580 479,524 62,515 12,503

Interest rate swap contracts: – maturing within one

year 6,371,736 14,054 2,795 24,396,063 58,439 18,936 – maturing more than

one year to less than five years 16,251,935 493,063 98,613 18,257,202 547,171 132,707

– maturing more than five years 2,164,638 214,932 46,586 2,005,988 302,666 116,500


39

A29. Commitments and Contingencies (continued)

As at As at 30 September 2008 31 March 2008 Credit Risk Credit Risk Principal Equivalent Weighted Principal Equivalent Weighted Amount Amount* Amount Amount Amount* Amount RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Interest rate futures:

– maturing within one year 40,000 27,923 13,961 120,000 163,256 81,628

– maturing more than one year to less than five years 60,000 28,865 14,432 150,000 31,554 15,776

Sell and buy back agreement 333,448 2,102 1,570 1,216,782 1,216,782 879,744

Islamic financing sold to Cagamas Berhad with recourse 1,484,024 1,484,024 1,119,234 1,863,857 1,863,857 1,404,403

Equity options – – – 13,867 – – Any commitments that are

unconditionally cancelled at any time by the Group 49,437 – – 23,625 – –

Total 53,696,873 10,362,955 8,423,936 75,008,692 11,369,479 8,728,540


40


The Bank As at As at

30 September 2008 31 March 2008 Credit Risk Credit Risk

Principal Equivalent Weighted Principal Equivalent Weighted Amount Amount* Amount Amount Amount* Amount

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Direct credit substitutes 1,751,405 1,751,405 1,552,625 1,630,287 1,405,973 1,310,289 Certain transaction-

related contingent items 1,091,943 545,971 505,050 519,315 259,658 258,933 Short-term self-liquidating

trade-related contingencies 598,275 119,655 119,970 511,855 102,371 98,922

Obligations under underwriting agreements 1,374,000 687,000 839,000 1,720,000 860,000 776,800

Unpaid portion of partly paid shares 150 150 150 150 150 150

Irrevocable commitments to extend credit: – maturing less than

one year 7,653,382 1,530,676 1,594,715 7,372,281 1,320,436 1,187,891 – maturing more than

one year 3,075,919 1,537,960 958,181 2,195,808 1,097,904 1,001,434 – unutilised credit card

lines 3,585,219 717,044 535,915 3,454,995 690,999 516,523 Forward purchase

commitments – less than one year 303,715 884 177 338,081 338,081 30,108

Foreign exchange related contracts: – less than one year 4,011,943 151,597 73,008 5,762,191 102,655 34,932

Cross currency swap – less than one year 246,414 15,507 3,363 145,123 13,628 2,725 – maturing more than

one year to less than five years 545,499 47,902 9,580 479,524 62,515 12,503

Interest rate swap contracts: – maturing within one

year 6,371,736 14,054 2,795 24,396,063 58,439 18,936 – maturing more than

one year to less than five years 16,251,935 493,063 98,613 18,257,202 547,171 132,707

– maturing more than five years 2,164,638 214,932 46,586 2,005,988 302,666 116,500


41


As at As at 30 September 2008 31 March 2008 Credit Risk Credit Risk Principal Equivalent Weighted Principal Equivalent Weighted Amount Amount* Amount Amount Amount* Amount

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Interest rate futures:

– maturing within one year 40,000 27,923 13,961 120,000 163,256 81,628

– maturing more than one year to less than five years 60,000 28,865 14,432 150,000 31,554 15,776

Equity options – – – 13,867 – – Any commitments that are

unconditionally cancelled at any time by the Bank 36,549 – – 18,650 – –

Total 49,162,722 7,884,588 6,368,121 69,091,380 7,357,456 5,596,757 * The credit equivalent amount is arrived at using the credit conversion factors as specified by Bank Negara

Malaysia. The Bank has given a continuing guarantee to Bank Negara Malaysia to meet all the liabilities and financial obligations and requirements of its new subsidiary company, AmInternational (L) Ltd.


42

A30. Risk Management Policy on Financial Derivatives

Purpose of engaging in financial derivatives Financial derivative instruments are contracts whose value is derived from one or more underlying financial instruments or indices. They include swaps, forward rate agreements, futures, options and combinations of these instruments. Derivatives are contracts that transfer risks, mainly market risks. Financial derivatives is one of the financial instruments engaged by the Group both for revenue purposes as well as to manage the Group’s own market risk exposure. The Group’s involvement in financial derivatives is currently focused on interest rate derivatives and foreign exchange rate derivatives. The principal exchange rate contracts used are forward foreign exchange contracts and cross currency swaps. Forward foreign exchange contracts are agreements to buy or sell a specified quantity of foreign currency on a specified future date at an agreed rate. A cross currency swap generally involves the exchange, or notional exchange, of equivalent amounts of two currencies and a commitment to exchange interest periodically until the principal amounts are re-exchanged on a future date. The principal interest rate contracts used are interest rate swaps, interest rate futures and forward rate agreements. Interest rate swap transactions generally involve the exchange of fixed and floating interest payment obligations without the exchange of the underlying principal amounts. An interest rate futures is an exchange traded contract whose value is based on the difference between a specific interest rate and a reference rate on a notional deposit or fixed income security at a future settlement date. Forward rate agreements are contracts for the payment of the difference between a specified interest rate and a reference rate on a notional deposit at a future settlement date. There is no exchange of principal. For revenue purposes, the Group maintains trading positions in these instruments and engages in transactions with customers to satisfy their needs in managing their respective interest rate and foreign exchange rate exposure. Derivative transactions generate income for the Group from the buy-sell spreads. The Group also takes conservative exposures, within acceptable limits, to carry an inventory of these instruments in order to provide market liquidity and to earn potential gains on fluctuations in the value of these instruments. As part of the asset and liability exposure management, the Group uses derivatives to manage the Group’s market risk exposure. As the value of these financial derivatives are principally driven by interest rate and foreign rate factors, the Group uses them to reduce the overall interest rate and foreign exchange rate exposures of the Group. These are performed by entering into an exposure in derivatives that produces opposite value movements vis-à-vis exposures generated by other non-derivative activities of the Group. The Group manages these risks on a portfolio basis. Hence, exposures on derivatives are aggregated or netted against similar exposures arising from other financial instruments engaged by the Group. Risk associated with financial derivatives As derivatives are contracts that transfer risks, they expose the holder to the same types of market and credit risk as other financial instruments, and the Group manages these risks in a consistent manner under the overall risk management framework. Market risk of derivatives used for trading purpose s Market risk arising from the above interest rate-related and foreign exchange-related derivatives contracts measures the potential losses to the value of these contracts due to changes in market rate/prices. Exposure to market risk may be reduced through offsetting on and off-balance sheet positions.


43

Market risk of derivatives used for trading purpose s (continued) The contractual amounts of these contracts provide only a measure of involvement in these types of transactions and do not represent the amounts subject to market risk. Value at risk method is used to measure the market risk from these contracts. Value at risk, is a statistical measure that estimates the potential changes in portfolio value that may occur brought about by potential changes in market rates over a defined period at a 99% confidence level under normal market conditions. As at 30 September 2008, value at risk of foreign exchange-related derivative contracts used for trading purposes of the Group and the Bank was RM 10,835,000 (RM 5,824,000 as at 31 March 2008). The value at risk of the interest rate derivative related contracts used for trading purposes of the Group and the Bank was RM72,852,000 (RM 22,382,000 as at 31 March 2008). The value at risk of the equity derivative related contracts used for trading purposes of the Group and the Bank was RM337,000 (RM Nil as at 31 March 2008). The value at risk of the options related contracts used for trading purposes was RM Nil (RM Nil as at 31 March 2008) for the Group and the Bank. The use of these instruments to hedge underlying exposures arising from funding or for fixed income instruments acquired for investment purposes are not included in the market risk numbers. Credit risk of derivatives Counterparty credit risk arises from the possibility that a counterparty may be unable to meet the terms of the derivatives contract. Unlike conventional asset instruments, the Group’s financial loss is not the entire contracted principal value of the derivatives, but rather a fraction equivalent to the cost to replace the defaulted contract with another in the market. The cost of replacement is equivalent to the difference between the original value of the derivatives at time of contract with the defaulted counterparty and the current fair value of a similar substitute at current market prices. The Group will only suffer a replacement cost if the contract carries a fair value gain at time of default. As at 30 September 2008, the Group and the Bank has a counterparty credit risk of RM75,199,000 (RM102,867,000 as at 31 March 2008) being the cost to replace the positive value contracts. This may vary over the life of the contracts, mainly as a function of movement in market rates and time. The Group limits its credit risk within a conservative framework by dealing with creditworthy counterparties, setting credit limits on exposures to counterparties, and obtaining collateral where appropriate. Derivative Financial Instruments and Hedge Accounti ng Derivative financial instruments are measured at fair value and are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Any gain or loss arising from the change in the fair value of the derivative instrument is recognised in the income statements unless they are part of a hedging relationship which qualifies for hedge accounting where the gain or loss is recognised as follows: (i) Fair value hedge

Where a derivative financial instrument hedges the changes in fair value of a recognised asset or liability, any gain or loss on the hedging instruments is recognised in the income statement. The hedged item is also stated at fair value in respect of the risk being hedged, with any gain or loss being recognised in the income statement.


44

Derivative Financial Instruments and Hedge Accounti ng (continued) (ii) Cash flow hedge

Gains and losses on the hedging instruments, to the extent that the hedge is effective, are deferred in the separate component of equity. The ineffective part of any gain or loss is recognised in the income statement. The deferred gains and losses are then released to the income statement in the periods when the hedged item affects the income statement.

(iii) Derivatives that do not qualify for hedge accounting

Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement.


45

A31. Capital Adequacy

Bank Negara Malaysia (“BNM”) guideline on capital adequacy requires the Bank to maintain an adequate level of capital to withstand any losses which may result from credit and other risks associated with financing operations. The capital adequacy ratio is computed based on the eligible capital in relation to the total risk weighted assets as determined by BNM. With effect from 1 January 2008, the capital adequacy ratios of the Group are computed in accordance with Bank Negara Malaysia's revised Risk-weighted Capital Adequacy Framework: Standardised Approach for Credit Risk and Market Risk, and Basic Indicator Approach for Operational Risk (Basel II). The risk weighted capital adequacy ratio of the Bank of 12.17% (31 March 2008: 12.96%) exceeds the minimum requirements of BNM.

The Bank 30 Sept 31 March 2008 2008* RM’000 RM’000

Tier 1 capital Paid-up share capital 670,364 610,364 Irredeemable Non-Cumulative Convertible Preference

Shares

150,000

150,000 Innovative Tier 1 capital 653,452 515,197 Share premium 942,844 710,660 Statutory reserve 680,459 680,459 Exchange fluctuation reserve 15,854 – Unappropriated profit 1,575,970 1,202,508 4,688,943 3,869,188 Less: Deferred tax asset (333,212) (435,028) Total Tier 1 capital 4,355,731 3,434,160 Tier 2 capital Irredeemable Convertible Unsecured Loan Stocks – 291,586 Innovative Tier 1 capital 96,648 234,903 Subordinated term loans – 460,000 Medium term notes 1,460,000 860,000 Subordinated bonds – 200,000 Exchangeable bonds 575,000 575,000 General allowance for bad and doubtful debts and financing 708,126 620,566 Total Tier 2 capital 2,839,774 3,242,055 Less: Excess Tier 2 Capital – (377,920) Maximum allowable Tier 2 Capital 2,839,774 2,864,135 7,195,505 6,298,295 Less: Investment in subsidiary companies (806,849) (813,849) Less: Other deduction (36) (11) Capital base 6,388,620 5,484,435 Risk weighted assets 52,505,947 42,302,146


46

A31. Capital Adequacy (continued)

Capital Ratios Core capital ratio 8.30% 8.12% Risk-weighted capital ratio 12.17% 12.96%

30 Sept 2008 31 March 2008 Risk - Risk - Principal Weighted Principal Weighted RM’000 RM’000 RM’000 RM’000

Breakdown of gross risk weighted assets in the various categories of risk weights:

Categories

0% 8,441,374 – 8,728,568 10% – – – 20% 4,964,117 992,823 1,496,469 299,294 35% 2,885,963 1,010,087 2,786,942 975,430 50% 5,419,504 2,709,752 3,552,309 1,776,154 75% 25,809,856 19,357,392 25,533,893 19,150,419 100% 19,815,735 19,815,735 13,004,428 13,004,428 150% 1,617,033 2,425,550 1,967,650 2,951,478

68,953,582 46,311,339 57,070,259 38,157,203 Add: Total Risk Weighted Assets

Equivalent for market risks 2,679,721

1,346,789Add: Total Risk Weighted Assets

Equivalent for operational risks 3,500,786

2,783,680Add: Large Exposure Risk

Requirements for equity holdings 14,101

14,474 52,505,947 42,302,146


47

The risk weighted capital adequacy ratio of the Group are as follows:

The Group 30 Sept 31 March 2008 2008* RM’000 RM’000

Tier 1 capital Paid-up share capital 670,364 610,364 Irredeemable Non-Cumulative Convertible Preference

Shares

150,000

150,000 Innovative Tier 1 capital 750,100 548,463 Share premium 942,844 710,660 Statutory reserve 770,898 770,898 Capital reserve 377,492 377,492 Merger reserve 397,566 349,050 Exchange fluctuation reserve 6,390 – Unappropriated profit 1,702,975 735,060 Minority interests – 41 5,768,629 4,252,028 Less: Deferred tax asset (464,006) (596,127) Total Tier 1 capital 5,304,623 3,655,901

Tier 2 capital Irredeemable Convertible Unsecured Loan Stocks – 291,586 Innovative Tier 1 capital – 201,637 Subordinated term loans – 460,000 Medium term notes 1,460,000 860,000 Subordinated bonds 400,000 600,000 Exchangeable bonds 575,000 575,000 General allowance for bad and doubtful debts and financing 874,144 775,232 Total Tier 2 capital 3,309,144 3,763,455 Less: Excess Tier 2 Capital – (667,050) 3,309,144 3,096,405 Less: Investment in subsidiary companies (22,779) – Less: Other deduction (36) (11) Capital base 8,590,952 6,752,295 Risk weighted assets 63,305,495 51,602,922 Capital Ratios Core capital ratio 8.38% 7.08% Risk-weighted capital ratio 13.57% 13.09%


48

30 Sept 2008 31 March 2008 Risk - Risk - Principal Weighted Principal Weighted RM’000 RM’000 RM’000 RM’000

Breakdown of gross risk-weighted assets in the various categories of risk weights:

Categories

0% 11,668,289 – 10,458,252 – 10% – – – – 20% 5,246,542 1,049,308 1,554,816 310,963 35% 3,051,275 1,067,946 2,954,558 1,034,095 50% 5,590,376 2,795,188 3,654,044 1,827,022 75% 34,199,125 25,649,344 33,860,931 25,395,698 100% 22,589,873 22,589,873 14,973,469 14,973,469 150% 1,888,355 2,832,532 2,059,953 3,089,929

84,233,835 55,984,191 69,516,023 46,631,176 Add: Total Risk Weighted Assets

Equivalent for market risks 3,059,029 1,384,350 Add: Total Risk Weighted Assets

Equivalent for operational risks 4,248,174 3,572,922 Add: Large Exposure Risk

Requirements for equity holdings 14,101 14,474 63,305,495 51,602,922 * The capital ratios are compliance ratios, as such the comparative are not adjusted for prior year

adjustments and restatement of comparatives.

Com

pany

No.

851

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k (M

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d (I

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band

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nex

t rep

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the

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men

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Com

pany

No.

851

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k (M

) B

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alay

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No.

851

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alay

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57

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481

5,

981,

489

6,

540,

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Sec

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–

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85

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79

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rtib

le P

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e S

hare

s –

–

–

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–

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150,

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– O

ther

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sitiv

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–

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–

–

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1,

497,

186

–

1,

497,

186

–

Tot

al L

iabi

litie

s 25

,081

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9,18

3,82

68,

360,

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8,

568,

434

3,

632,

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842,

518

14

,024

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–

71,6

94,2

35

Min

ority

inte

rest

s –

–

–

–

–

– 41

–

41

S

hare

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Equ

ity

–

– –

–

–

20

0,79

2

5,08

2,51

9

–

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1

TOT

AL

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ND

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Y

25,0

81,5

74

9,

183,

826

8,36

0,89

8

8,56

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4

3,63

2,73

2

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0

19,1

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13

–

76

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On-

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nce

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t se

nsiti

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gap

1,

706,

271

(5,6

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51)

(7,6

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14)

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60,3

95)

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6,67

8 12

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(3

,041

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) 5,

981,

489

–

Off-

bala

nce

shee

t int

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t se

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90

6,93

6

5,47

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0 (2

,559

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(1,6

54,6

58)

(2

,811

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628,

176

–

–

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6)

Tot

al in

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st s

ensi

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2,

613,

207

(1

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41)

(10,

226,

648)

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53)

1,

585,

022

12

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5,

981,

489

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Com

pany

No.

851

5-D

Am

Ban

k (M

) B

erha

d (I

ncor

pora

ted

in M

alay

sia)

A

nd It

s S

ubsi

diar

y C

ompa

nies

52

30

Sep

tem

ber 2

008

Non

-Tra

ding

Boo

k

Th

e B

ank

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p to

1

mon

th

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to 3

m

onth

s

>3

to 6

m

onth

s

>6

to 1

2

mon

ths

>1 to

5

year

s

Ove

r 5

year

s

N

on-

inte

rest

se

nsiti

ve

Trad

ing

Boo

k

Tota

l

Effe

ctiv

e in

tere

st

rate

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00

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Cas

h an

d sh

ort-

term

fund

s 6,

733,

892

–

–

–

–

–

45

7,27

8

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0

3.38

S

ecur

ities

pur

chas

e un

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resa

le

agre

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t 79

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2

–

–

–

–

–

–

–

791,

502

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00

Dep

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and

pla

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ks

and

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r fin

anci

al in

stitu

tions

–

24

2,50

0

665,

686

39

,879

189,

653

–

–

–

1,

137,

718

3.

54

Sec

uriti

es h

eld-

for-

trad

ing

–

–

–

–

–

–

–

828,

430

82

8,43

0

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S

ecur

ities

ava

ilabl

e-fo

r-sa

le

–

80,5

39

11

3,08

4

188,

663

1,

386,

862

3,

054,

440

18

9,77

5

–

5,01

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3

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S

ecur

ities

hel

d-to

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urity

–

2,

484

5,

000

13

9,48

7

369,

416

22

2,67

1

111,

061

–

85

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9

5.08

D

eriv

ativ

e fin

anci

al a

sset

s –

–

–

–

–

–

24

5,03

4

–

245,

034

–

Loan

s, a

dvan

ces

and

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cing

– P

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g 21

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8

683,

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36

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5

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8

14,5

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80

–

–

44

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6.99

–

Non

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ing*

–

–

–

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–

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82

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–

823,

357

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Am

ount

due

from

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inat

ors

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–

–

–

27,2

27

–

–

–

27

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5.74

O

ther

non

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rest

sen

sitiv

e ba

lanc

es

–

–

–

–

–

–

3,69

2,56

7

–

3,69

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7

–

TOT

AL

AS

SE

TS

28,7

86,1

94

1,

491,

321

1,

467,

604

73

4,11

4

8,71

9,22

6

17,8

02,8

91

5,

519,

072

82

8,43

0

65,3

48,8

52

LIA

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ITIE

S A

ND

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D

epos

its fr

om c

usto

mer

s 17

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,271

6,46

7,55

1

4,96

3,40

2

8,46

1,36

8

2,00

4,49

7

–

2,50

2,81

9

–

41,6

52,9

08

3.

27

Dep

osits

and

pla

cem

ents

of b

anks

an

d ot

her

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cial

inst

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ns

7,24

2,54

9

1,84

8,20

9

1,18

4,22

7

1,13

9,32

8

1,36

4,91

0

728,

000

17

,587

–

13,5

24,8

10

3.

44

Obl

igat

ions

on

secu

ritie

s so

ld u

nder

re

purc

hase

agr

eem

ents

68

,846

–

–

–

–

–

–

–

68,8

46

–

Der

ivat

ive

finan

cial

liab

ilitie

s –

–

–

–

–

–

24

1,42

4

–

241,

424

–

Bill

s an

d ac

cept

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s pa

yabl

es

464,

633

82

6,55

9

290,

014

–

–

–

–

–

1,

581,

206

3.

66

Rec

ours

e ob

ligat

ion

of lo

an s

old

to

Cag

amas

Ber

had

–

–

–

–

163,

991

–

–

–

16

3,99

1

4.69

T

erm

loan

–

–

29

2,46

3

–

–

–

–

–

292,

463

2.

91

Sub

ordi

nate

d te

rm lo

ans

–

–

–

–

–

720,

692

–

–

72

0,69

2

6.13

M

ediu

m te

rm n

otes

–

–

–

–

–

1,

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–

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66

Exc

hang

able

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ds

–

–

–

–

575,

000

–

–

–

57

5,00

0

5.22

Ir

rede

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le N

on-C

umul

ativ

e C

onve

rtib

le P

refe

renc

e sh

ares

–

–

–

–

–

–

15

0,00

0

–

150,

000

– O

ther

non

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rest

sen

sitiv

e ba

lanc

es

–

–

–

–

–

–

1,24

5,17

8

–

1,24

5,17

8

–

Tot

al L

iabi

litie

s 25

,029

,299

9,14

2,31

9

6,73

0,10

6

9,60

0,69

6

4,10

8,39

8

2,90

8,69

2

4,15

7,00

8

–

61,6

76,5

18

–

Com

pany

No.

851

5-D

Am

Ban

k (M

) B

erha

d (I

ncor

pora

ted

in M

alay

sia)

A

nd It

s S

ubsi

diar

y C

ompa

nies

53

30

Sep

tem

ber

2008

N

on-T

radi

ng B

ook

The

Ban

k

U

p to

1

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th

>1

to 3

m

onth

s

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to 6

m

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s

>6

to 1

2

mon

ths

>1 to

5

year

s

Ove

r 5

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s

N

on-

inte

rest

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ve

Trad

ing

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k

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l

Effe

ctiv

e in

tere

st

rate

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00

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00

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00

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Tot

al L

iabi

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s 25

,029

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9

6,73

0,10

6

9,60

0,69

6

4,10

8,39

8

2,90

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2

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7,00

8

–

61,6

76,5

18

Min

ority

inte

rest

s –

–

–

–

–

–

–

–

–

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Equ

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–

–

–

–

–

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4

–

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4

– TO

TA

L LI

AB

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AN

D

E

QU

ITY

25

,029

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9

6,73

0,10

6

9,60

0,69

6

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8

2,90

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2

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2

–

65,3

48,8

52

O

n-ba

lanc

e sh

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est s

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tivity

ga

p 3,

756,

895

(7

,650

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)

(5,2

62,5

02)

(8

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)

4,61

0,82

8

14,8

94,1

99

(2

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,270

)

828,

430

–

Off-

bala

nce

shee

t int

eres

t sen

sitiv

ity

gap

414,

764

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700,

000

(9

02,4

66)

(1

,355

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)

(2,5

71,9

35)

75

4,63

7

–

–

40,0

00

Tot

al in

tere

st s

ensi

tivity

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4,

171,

659

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68)

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0,22

1,58

2)

2,

038,

893

15

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82

8,43

0

40,0

00

Com

pany

No.

851

5-D

Am

Ban

k (M

) B

erha

d (I

ncor

pora

ted

in M

alay

sia)

A

nd It

s S

ubsi

diar

y C

ompa

nies

54

31 M

arch

200

8 N

on-T

radi

ng B

ook

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k

U

p to

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th

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to 3

m

onth

s

>3

to 6

m

onth

s

>6

to 1

2

mon

ths

>1 to

5

year

s

Ove

r 5

year

s

N

on-

inte

rest

se

nsiti

ve

Trad

ing

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k

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l

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ctiv

e in

tere

st

ra

te

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00

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M’0

00

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M’0

00

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M’0

00

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A

SS

ETS

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ash

and

shor

t-te

rm fu

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2

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–

–

–

39

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7

–

8,27

5,23

9

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D

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its a

nd p

lace

men

ts w

ith b

anks

an

d ot

her

finan

cial

inst

itutio

ns

–

1,26

5,82

0 69

,351

2,50

0

622

–

–

–

1,

338,

293

5.

58

Sec

uriti

es h

eld-

for-

trad

ing

–

– –

–

–

–

–

5,

981,

489

5,

981,

489

3.

55

Sec

uriti

es a

vaila

ble-

for-

sale

–

–

–

85,7

26

52

4,80

7

598,

639

42

,464

–

1,25

1,63

6

4.89

Sec

uriti

es h

eld-

to-m

atur

ity

40,7

60

–

43,2

01

7,

540

52

2,24

1

357,

727

14

3,89

5

–

1,11

5,36

4

3.91

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ivat

ive

finan

cial

ass

ets

–

– –

–

–

–

30

7,65

1

–

307,

651

–

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s, a

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ces

and

finan

cing

–

Per

form

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86,5

91

2,

267,

111

554,

040

50

1,53

0

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7

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09,0

66

–

–

42

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6.63

–

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–

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–

–

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1,

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488

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111,

488

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ount

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inat

ors

–

6,43

0 26

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–

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8

–

–

–

35,1

40

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33

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st s

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–

–

–

–

–

–

3,73

1,75

6

–

3,73

1,75

6

–

TOT

AL

AS

SE

TS

26,2

11,7

63

3,

539,

361

692,

634

59

7,29

6

8,02

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5

15,2

65,4

32

5,

728,

081

5,

981,

489

66

,039

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s 16

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6,32

4,09

1 5,

784,

561

7,

272,

421

2,

549,

721

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2,

394,

641

–

41

,261

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3.37

D

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nd p

lace

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ts o

f ban

ks

and

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al in

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7,

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803

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8,09

2

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4,62

3

935,

144

58

9,20

0

31,0

11

–

13

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3.36

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eriv

ativ

e fin

anci

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ties

–

– –

–

–

–

352,

007

–

352,

007

–

Bill

s an

d ac

cept

ance

s pa

yabl

es

415,

618

67

6,83

0 26

9,44

8

–

– –

–

–

1,

361,

896

3.

59

Rec

ours

e ob

ligat

ion

of lo

ans

sol

d to

Cag

amas

Ber

had

–

70,0

70

26,0

42

–

14

7,86

7

–

–

–

243,

979

3.

94

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m lo

an

–

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27

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0

–

– –

–

27

1,49

0

5.45

Sub

ordi

nate

d te

rm lo

ans

–

– 46

0,00

0

–

–

689,

469

–

–

1,

149,

469

6.

82

Med

ium

term

not

es

–

– –

–

–

86

0,00

0

–

–

860,

000

5.

27

Sub

ordi

nate

d bo

nds

200,

000

–

–

–

–

–

–

–

200,

000

7.

95

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hang

eabl

e bo

nds

–

– –

–

–

57

5,00

0

–

–

575,

000

5.

22

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deem

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Con

vert

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ed

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cks

–

– 2,

755

–

–

12

8,84

9

–

–

131,

604

5.

75

Irre

deem

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vert

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fere

nce

shar

es

–

– –

–

–

–

15

0,00

0

–

150,

000

–

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er n

on-in

tere

st s

ensi

tive

bala

nces

–

–

–

–

–

–

1,35

7,51

3

–

1,35

7,51

3

–

Tot

al L

iabi

litie

s 24

,600

,553

9,18

1,79

4 8,

360,

898

8,

568,

534

3,

632,

732

2,

842,

518

4,

285,

172

–

61

,472

,201

S

hare

hold

er’s

Equ

ity

–

– –

–

–

20

0,79

2

4,36

6,56

8

–

4,56

7,36

0

TO

TA

L LI

AB

ILIT

IES

AN

D E

QU

ITY

24

,600

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9,18

1,79

4 8,

360,

898

8,

568,

534

3,

632,

732

3,

043,

310

8,

651,

740

–

66

,039

,561

O

n-ba

lanc

e sh

eet i

nter

est s

ensi

tivity

gap

1,

611,

210

(5,6

42,4

33)

(7,6

68,2

64)

(7,9

71,2

38)

4,39

0,77

3 12

,222

,122

(2

,923

,659

) 5,

981,

489

–

O

ff-ba

lanc

e sh

eet i

nter

est s

ensi

tivity

ga

p 90

6,93

6

5,47

0,31

0 (2

,559

,534

)

(1,6

54,6

58)

(2

,811

,656

)

628,

176

–

–

(2

0,42

6)

Tot

al in

tere

st s

ensi

tivity

gap

2,

518,

146

(1

72,1

23)

(10,

227,

798)

(9,6

25,8

96)

1,

579,

117

12

,850

,298

(2,9

23,6

59)

5,

981,

489

(2

0,42

6)

*Thi

s is

arr

ived

at a

fter

dedu

ctin

g th

e ge

nera

l allo

wan

ce, s

peci

fic a

llow

ance

and

inte

rest

/inco

me-

in-s

uspe

nse

from

gro

ss n

on-p

erfo

rmin

g lo

ans

outs

tand

ing.

Company No. 8515-D

55

A33. Credit Exposures Arising From Credit Transact ions With Connected Parties

30 Sept 2008

Outstanding credit exposures with connected parties (RM’000))

521,979

Percentage of outstanding credit exposures to connected parties as proportion of total credit exposures

0.93%

Percentage of outstanding credit exposures with connected parties which is non-performing or in default

0.58%

The credit exposures above are derived based on Bank Negara Malaysia’s revised Guidelines on Credit Transactions and Exposures with Connected Parties, which are effective on 1 January 2008.

A34. Reclassification of securities

The Bank adopted Bank Negara Malaysia’s Circular on the Reclassification of Securities under Specific Circumstances which allow banking institutions to reclassify securities in held-for-trading category under the Revised Guidelines of Financial reporting for Licensed Institutions (BNM/GP 8). The provisions in this Circular shall override the existing requirements of BNM/GP8 in relation to the reclassification of securities into or out of the held-for-trading category and are effective from 1 July 2008 until 31 December 2009.The effects of the reclassification is as follows: The Group

Before reclassification

Increase/(Decrease) BNM Guidelines on reclassification of securities

After reclassification

RM’000 RM’000 RM’000 Effect on Balance Sheet Securities held-for-trading 1,678,356 (500,787) 1,177,569 Securities available for sale 4,956,006 500,787 5,456,793 Available for sale reserve (134,342) (22,200) (156,542) Unappropriated profits 1,135,875 17,200 1,153,075 Effect on Income Statement for the period ended 30 September 2008

Revenue 2,342,136 22,200 2,364,336 Other operating income 5,860 22,200 28,060 Taxation (140,593) (5,000) (145,593) Profit after taxation 400,808 17,200 418,008

Company No. 8515-D

56

A34. Reclassification of securities (cont’d)

The Bank

Before reclassification

Increase/(Decrease) BNM Guidelines on reclassification of securities

After reclassification

RM’000 RM’000 RM’000 Effect on Balance Sheet Securities held-for-trading 1,329,217 (500,787) 828,430 Securities available for sale 4,512,576 500,787 5,013,363 Available for sale reserve (134,327) (22,200) (156,527) Unappropriated profits 1,517,999 17,200 1,535,199 Effect on Income Statement for the period ended 30 September 2008

Revenue 1,868,304 22,200 1,890,504 Other operating income 3,729 22,200 25,929 Taxation (113,479) (5,000) (118,479) Profit after taxation 315,491 17,200 332,691

Company No. 8515-D

57

A35. Restatement of Comparatives

The Group and the Bank had reviewed and changed the presentation of certain balances as follows: During the 4 th quarter of financial year 2008

i) non-recoverable expenses for financing accounts. The non-recoverable expenses comprise expenses incurred for financing accounts written off and incentive and fees payable on recovery of financing accounts. These expenditure items which were previously included in other operating expenses are now presented with Allowances for losses on loans, advances and financing.

ii) interest income and interest expense for interest rate swap for the same counterparty. This income and expenditure items which were previously presented on a gross basis is now set off and presented on a net basis in either interest income(net gain) or interest expense (net loss).

During the 2 nd quarter of financial year 2009

i) certain balances which represent cash held by outsourcers and were previously included in Other assets are now reclassified and presented as part of cash and short term funds

ii) credit card receivables under instalment payment scheme which were previously classified under Other Assets have been reclassified as part of Loans, advances and financing

iii) certain incidental expenses which were incurred in the acquisition of housing loans and commercial property loans and were previously taken up under Other operating expenses are now deducted against interest income earned from the said loans.

On 12 April 2008, the Group had completed the Business Transfer based on the book value of the assets and liabilities as at 11 April 2008 pursuant to the Business Transfer Agreement dated 11 March 2008 entered into with AmInvestment Bank Berhad.

As the vesting of assets and assumption of liabilities were carried by entities under common control, the transaction has been accounted for via the pooling of interest method. Under the pooling of interest method, the results and financial position of the business transferred from AmInvestment Bank, together with the assets and liabilities arising thereto, are included into the financial statements of the Group and the Bank as if the merger had been effected prior to and throughout the current financial year/period. Accordingly comparative figures of the Group and the Bank have been restated.

Company No. 8515-D

58

The comparative amounts which have been restated are as follows: As previously

stated Effect of change

arising from pooling of

interest method

Effect of other

reclassification

As restated

RM’000 RM’000 RM’000 RM’000

The Group Balance Sheet as at 31 March 2008

ASSETS Cash and short-term funds 8,933,353 1,817,531 87,062 10,837,946 Deposits and placements with banks

and other financial institutions 1,968,500 (638,800) - 1,329,700 Securities held for trading 1,771,247 4,769,723 - 6,540,970 Securities available-for-sale 119,413 1,133,120 - 1,252,533 Securities held-to-maturity 656,680 499,856 - 1,156,536 Derivative financial assets 71,663 235,988 - 307,651 Loans, advances and financing 47,949,516 4,045,948 94,636 52,090,100 Other assets 863,115 239,566 (181,698) 920,983 Statutory deposit with Bank Negara

Malaysia 1,526,507 133,690 - 1,660,197 Deferred tax asset 629,628 15,439 - 645,067 Property and equipment 168,764 510 - 169,274 Intangible assets 61,484 2 - 61,486 LIABILITIES Deposits from customers 41,535,545 6,082,786 - 47,618,331 Deposits and placements of banks

and other financial institutions 12,316,385 4,019,541 - 16,335,926 Derivative financial liabilities 85,659 266,348 - 352,007 Recourse obligation on loans sold to

Cagamas Berhad 208,839 35,140 - 243,979 Other liabilities 1,451,003 46,183 - 1,497,186 Term loan - 271,490 - 271,490 Reserves 3,141,862 1,531,085 - 4,672,947

Income Statement for the financial period ended 30 September 2007

Interest Income 1,742,515 225,860 (208,731) 1,759,644 Interest Expense (1,085,810) (164,005) 202,437 (1,047,378) Net income from Islamic Banking 260,028 22,240 (60) 282,208 Other operating income 181,647 32,809 - 214,456 Other operating expenses (403,750) (34,807) 23,341 (415,216) Allowance for losses on loans,

advances and financing (373,177) 21,513 (16,987) (368,651) Impairment loss (28,149) 10,702 - (17,447) Provision for commitments and

contingencies - 299 - 299 Taxation (145,848) (26,935) (172,783)

Company No. 8515-D

59

The comparative amounts which have been restated are as follows (cont’d)

As previously stated

Effect of change arising from pooling of

interest method

Effect of other

reclassification

As restated

RM’000 RM’000 RM’000 RM’000 The Bank Balance Sheet as at 31 March 2008

Cash and short-term 7,411,342 776,835 87,062 8,275,239 Deposits and placements with banks

and other financial institutions 1,977,093 (638,800) - 1,338,293 Securities held for trading 1,671,478 4,310,011 - 5,981,489 Securities available-for-sale 119,413 1,132,223 - 1,251,636 Securities held-to-maturity 656,462 458,902 - 1,115,364 Derivative financial assets 71,663 235,988 - 307,651 Loans, advances and financing 39,948,718 3,994,954 59,321 44,002,993 Other assets 751,059 235,483 (146,383) 840,159 Statutory deposit with Bank Negara

Malaysia 1,269,307 119,190 - 1,388,497 Deferred tax asset 468,529 15,344 - 483,873 Investment in subsidiary companies 813,849 33,020 - 846,869 LIABILITIES Deposits from customers 36,106,940 5,154,491 - 41,261,431 Deposits and placements of banks

and other financial institutions 9,816,197 3,741,615 - 13,557,812 Derivative financial liabilities 85,659 266,348 - 352,007 Recourse obligation on loans sold to

Cagamas Berhad 208,839 35,140 - 243,979 Other liabilities 1,318,114 39,399 - 1,357,513 Term loans - 271,490 - 271,490 Reserves 2,792,329 1,164,667 - 3,956,996 Income Statement for the financial period ended 30 September 2007 Interest Income 1,742,349 218,684 (208,731) 1,752,302 Interest Expense (1,086,111) (159,050) 202,437 (1,042,724) Other operating income 181,111 31,555 - 212,666 Other operating expenses (305,721) (31,112) 19,566 (317,267) Allowance for losses on loans,

advances and financing (303,069) 20,510 (13,272) (295,831) Impairment loss (28,149) 10,702 - (17,447) Provision for commitments and

contingencies - 299 - 299 Taxation (105,399) (21,729) - (127,128)

Company No. 8515-D

THE ISSUERS

AmBank (M) Berhad 22nd Floor, Bangunan AmBank Group

55 Jalan Raja Chulan 50200 Kuala Lumpur

Malaysia

AmPremier Capital Berhad 22nd Floor, Bangunan AmBank Group


Malaysia

PRINCIPAL ADVISER, LEAD MANAGER & FACILITY AGENT

AmInvestment Bank Berhad 22nd Floor, Bangunan AmBank Group


Malaysia

TRUSTEE

Pacific Trustees Berhad Unit A-9-8, 9th Floor, Megan Avenue I

No. 189, Jalan Tun Razak Off Persiaran Hampshire

50400 Kuala Lumpur Malaysia

LEGAL COUNSEL

Adnan Sundra & Low Level 21, Menara Olympia No. 8 Jalan Raja Chulan


RATING AGENCY

RAM Rating Services Berhad 19-G, The Boulevard, Mid Valley City

Lingkaran Syed Putra 59200 Kuala Lumpur

Malaysia

CENTRAL DEPOSITORY AND PAYING AGENT

Bank Negara Malaysia Jalan Dato’ Onn
