Malayan Banking Berhad (3813-K)

TEL: (6)03 2070 8833 FAX: (6)03 2070 2611 www.maybank2u.com

ANNUAL REPORT 2005

CORPORATEVISION

COREVALUES

TO BECOME FIRST

CHOICE FINANCIAL

PARTNER IN THE

TARGET MARKETS

AND COUNTRIES

WE SERVE.

We serve our customers by:

• Enriching their experiences with us

• Developing long term and mutually beneficial

relationships with them

• Placing a high value on their privacy and

financial security

We value our people who are:

• Committed to excellence in everything they do

• Team players working together based on mutual

respect, leadership by example and dignity in their

dealings with everyone

• Ethical and uphold high levels of integrity

We are known as an organisation that:

• Consistently provides our shareholders

with superior returns

• Focuses on sustainable and superior growth

guided by sound financial discipline

• Operates in the most efficient and effective manner

The bank who Knows You Better

LETTER TOSHAREHOLDERS

PG18

MANAGEMENT’SDISCUSSIONAND

ANALYSISOFFINANCIAL

PERFORMANCE

PG40

FINANCIALHIGHLIGHTS

PG4

2

CHAIRMANTan Sri Mohamed Basir bin Ahmad– P.S.M., J.S.M., D.P.C.M.

VICE CHAIRMANDato’ Richard Ho Ung Hun – D.P.M.P.

PRESIDENT AND CEODatuk Amirsham A Aziz – P.J.N.

DEPUTY PRESIDENTSDato’ Mohammed Hussein – D.J.M.K.

Md Agil bin Mohd Natt

MEMBERSRaja Tan Sri Muhammad Alias bin RajaMuhd. Ali – P.J.K., P.P.T., K.M.N., S.M.P., J.M.N.,

D.P.S.K., D.I.M.P., D.P.J., P.S.M., S.J.J., S.P.N.S.

Mohammad bin Abdullah

Haji Mohd Hashir bin Haji Abdullah – J.M.N., S.M.S., P.P.T.

Teh Soon Poh

Datuk Abdul Rahman bin Mohd Ramli– P.J.N.

Tan Sri Dato’ Megat Zaharuddin binMegat Mohd Nor – D.P.C.M., P.J.N., P.S.M.

Datuk Zainun Aishah binti Ahmad(appointed on 13 July 2005)– P.J.N., J.S.M., D.D.M.P., P.M.P, K.M.N.

COMPANY SECRETARYMahiram Husin

REGISTERED OFFICE14th Floor, Menara Maybank100, Jalan Tun Perak50050 Kuala Lumpur, MalaysiaTelephone : (6)03-20708833Telex : MA 30438Facsimile : (6)03-20702611Cable : MAYBANKSWIFT : MBBEMYKLAWebsite : http://www.maybank2u.comE-Mail : publicaffairs@maybank.com.my

REGISTRARMaybank14th Floor, Menara Maybank100, Jalan Tun Perak50050 Kuala Lumpur, Malaysia

LISTED ONMain Board of Bursa Malaysia on 17 February 1962

COMPANY SECRETARYMahiram Husin155, Jalan BK 4/2, Bandar Kinrara58200 Kuala Lumpur

AUDITORSMessrs Ernst & YoungChartered Accountants

CORPORATEINFORMATION

VENUE:MAHKOTA II, BALLROOM LEVELHOTEL ISTANA73, JALAN RAJA CHULAN50200 KUALA LUMPUR

DATE:8 OCTOBER 2005, SATURDAY

TIME:11.30 A.M.

45thANNUAL GENERAL MEETING

CONTENTS

STATEMENT ONCORPORATE GOVERNANCEMaybank Group recognises that good corporate governancepractices form the cornerstone of an effective and responsibleorganisation. To promote and nurture the highest standards ofcorporate governance within the Maybank Group, the Board ofDirectors has put in place a framework designed to build asustainable financial performance and at the same time, ensurethat there is sufficient and credible transparency, integrity andaccountability in its operations.

STATEMENT ONINTERNAL CONTROLThe Board acknowledges their overall responsibility for the Group’sinternal control environment and its effectiveness. It is of the view thatthe internal control framework is designed to manage rather thaneliminate the risk of failure to achieve the policies, goals and objectives of the Group.

CODE OFETHICS AND CONDUCTMaybank, as a custodian of public funds, has a responsibility tosafeguard its integrity and credibility. It is on this understanding that the organisation sets out clearly the code of ethics and conduct for its staff.

page24

page27

page27

2 corporate information

3 notice of 45th annual general meeting

4 financial highlights

4 segment information

5 financial calendar

7 5-year group financial summary

8 board of directors

10 profile of directors

14 management

17 organisation structure

18 letter to shareholders

24 statement on corporate governance

27 code of ethics and conduct

27 statement on internal control

28 board committees

30 audit committee of the board

33 risk management

40 management’s discussion and analysis of financial performance

42 Maybank group awards

44 Maybank group and the community

47 group corporate highlights

50 analysis of shareholdings

50 classification of shareholders

51 changes in share capital

53 Maybank share price review

53 form of proxy

54 properties owned by Maybank group

55 Maybank group global network

56 group directory

ANNOUNCEMENT 3www.maybank2u.com

Notice of 45th AnnualGENERAL MEETINGNOTICE IS HEREBY GIVEN THAT THE 45TH ANNUAL GENERAL MEETING (AGM)OF THE SHAREHOLDERS OF MALAYAN BANKING BERHAD (3813-K) (MAYBANK)WILL BE HELD AT MAHKOTA II, BALLROOM LEVEL, HOTEL ISTANA, 73, JALANRAJA CHULAN, 50200 KUALA LUMPUR ON SATURDAY, 8 OCTOBER 2005 AT11.30 A.M. FOR THE PURPOSE OF TRANSACTING THE FOLLOWING BUSINESS:-

AS ORDINARY BUSINESS1. To receive the Reports of the Directors and Auditors and

the Audited Financial Statements for the financial yearended 30 June 2005. Resolution 1

2. To declare a final dividend of 25 sen per share less 28%income tax and a special dividend of 35 sen per share less28% income tax for the financial year ended 30 June 2005as recommended by the Board. Resolution 2

3. To re-elect the following directors who are retiring byrotation in accordance with Articles 96 and 97 of theArticles of Association of Maybank (the Company) andbeing eligible have offered themselves for re-election:-

(i) Tan Sri Mohamed Basir bin Ahmad; Resolution 3

(ii) Mohammad bin Abdullah; and Resolution 4

(iii) Datuk Abdul Rahman bin Mohd Ramli Resolution 5

4. To re-elect the following director who is retiring inaccordance with Article 100 of the Articles of Associationof Maybank and being eligible has offered herself for re-election:-

(i) Datuk Zainun Aishah binti Ahmad Resolution 6

5. To consider and if thought fit, pass the followingResolution in accordance with Section 129(6) of theCompanies Act, 1965:-

“That the following directors retiring in accordance withSection 129 of the Companies Act, 1965 be and are herebyre-appointed as directors of the Company to hold officeuntil the next AGM:-

(i) Dato’ Richard Ho Ung Hun; and Resolution 7

(ii) Raja Tan Sri Muhammad Alias bin Raja Muhd. Ali.”Resolution 8

6. To approve the directors’ fees of RM734,386.31 in respectof the financial year ended 30 June 2005. Resolution 9

7. To re-appoint Messrs. Ernst & Young as Auditors ofMaybank to hold office until the conclusion of the nextAGM in the year 2006 and to authorise the Board to fixtheir remuneration. Resolution 10

AS SPECIAL BUSINESS8. To consider and if thought fit, to pass the following

Ordinary Resolution:-

“That pursuant to Section 132D of the Companies Act,1965, the Directors be and are hereby authorised to issueshares in the Company at any time until the conclusion ofthe next AGM and upon such terms and conditions and forsuch purposes and to such person or persons as theDirectors may, in their absolute discretion, deem fitprovided that the aggregate number of shares to be issueddoes not exceed 10 per centum (10%) of the issued sharecapital of the Company for the time being, subject alwaysto the approvals of all the relevant regulatory authoritiesbeing obtained for such issue and allotment.”

Resolution 11

NOTICE OF DIVIDEND ENTITLEMENT AND CLOSURE OF BOOKSNOTICE IS HEREBY GIVEN that subject to the approval of theshareholders at the AGM to be held on 8 October 2005, a finaldividend of 25 sen per share less 28% income tax and a specialdividend of 35 sen per share less 28% income tax for thefinancial year ended 30 June 2005 will be paid on 23 November2005 to shareholders registered in the Register of Members atthe close of business on 9 November 2005.

NOTICE IS HEREBY GIVEN that the Register of Members will beclosed from 10 November 2005 to 11 November 2005, for thedetermination of shareholders’ entitlements to the final dividend.

A depositor shall qualify for the entitlements to the final dividendonly in respect of:-

a. Shares deposited into the Depositors’ Securities Accountsbefore 12.30 p.m. on 7 November 2005 (in respect ofshares exempted from mandatory deposit).

b. Shares transferred to the Depositors’ Securities Accountsin respect of ordinary transfers before 4.00 p.m. on 9 November 2005.

c. Shares bought on Bursa Malaysia Securities Berhad on acum entitlement basis according to the Rules of BursaMalaysia Securities Berhad.

By Order of the Board,

MAHIRAM HUSINLS007885Company Secretary

Kuala Lumpur16 September 2005 E

NOTES

1. The right of foreigners to vote in respect of securitiesis subject to Section 41(2) of the Securities Industry(Central Depositories) Act, 1991, the Securities Industry(Central Depositories) (Foreign Ownership) Regulations,1996 and the Articles of Maybank.

2. A member entitled to attend and vote at the 45th AGMis entitled to appoint a proxy to attend and on a showof hands or on a poll, to vote instead of him. A proxyshall be a member of the Company, an Advocate, anapproved company Auditor or a person approved bythe Companies Commission of Malaysia.

3. Form of Proxy of a corporation shall be given under itsCommon Seal.

4. Duly completed Form of Proxy must be deposited at14th Floor, Menara Maybank, 100, Jalan Tun Perak,50050 Kuala Lumpur, by 6 October 2005 at 11.30 a.m.

5. For a Form of Proxy executed outside Malaysia, thesignature must be attested by a Solicitor, NotaryPublic, Consul or Magistrate.

6. For scripless shareholders, only members registered inthe record of Depositors on or before 12.30 p.m. on 5 October 2005 shall be eligible to attend the AGM.

7. EXPLANATORY NOTE ON SPECIAL BUSINESSThe proposed Ordinary Resolution 11 if passed, is togive the directors of the company flexibility to issueand allot shares for such purposes as the directors intheir absolute discretion consider to be in the interestof the Company, without having to convene a generalmeeting. This authority will expire at the next AGM ofthe Company.

8. Bursa Malaysia Securities Berhad’s ListingRequirementsPursuant to Paragraph 8.28(2) of the Bursa MalaysiaSecurities Berhad’s Listing Requirements, appendedhereunder are:-

8.1 Details of directors standing for re-election as inAgenda 3, 4 and 5 of the Notice of the AGM areset out in the Directors’ Profile appearing in theAnnual Report.

8.2 For the financial year ended 30 June 2005, a totalof 17 meetings were held. Details of attendanceat Board Meetings held in the financial yearended 30 June 2005 being as follows:-

Name of Director No. of Meetings Attended

Tan Sri Mohamed Basir bin Ahmad 14/17Dato’ Richard Ho Ung Hun 16/17Datuk Amirsham A Aziz 16/17Raja Tan Sri Muhammad Alias bin Raja Muhd. Ali 15/17Mohammad bin Abdullah 13/17Haji Mohd Hashir bin Haji Abdullah 17/17Teh Soon Poh 16/17Datuk Abdul Rahman bin Mohd Ramli 17/17Dato’ Mohammed Hussein 15/17Tan Sri Dato’ Megat Zaharuddin bin Megat Mohd Nor 17/17Md Agil bin Mohd Natt (Appointed with effect from 4.9.2004) 13/14Hooi Lai Hoong (Retired with effect from 3.9.2004) 2/3

8.3 The dates, time and place of the meetings held:-

Meeting Dates Time Place

22.7.2004 2.30 p.m. Kuala Lumpur27.8.2004 2.30 p.m. Kuala Lumpur30.8.2004 2.30 p.m. Kuala Lumpur24.9.2004 9.00 a.m. Johor Bahru4.10.2004 2.30 p.m. Kuala Lumpur29.10.2004 9.00 a.m. Kuala Lumpur8.11.2004 4.30 p.m. Kuala Lumpur25.11.2004 10.00 a.m. Kuala Lumpur17.12.2004 2.45 p.m. Singapore27.1.2005 10.00 a.m. Kuala Lumpur18.2.2005 4.30 p.m. Kuala Lumpur25.2.2005 9.30 a.m. Kuala Lumpur24.3.2005 10.00 a.m. Kuala Lumpur29.4.2005 9.30 a.m. Manila, Philippines10.5.2005 4.00 p.m. Kuala Lumpur31.5.2005 2.30 p.m. Kuala Lumpur30.6.2005 10.00 a.m. Kuala Lumpur

FINANCIAL SUMMARY4

04 05 04 05 04 05 04 05

2004 2005

Banking and Finance 9,629,852 10,366,214

Investment Banking 454,125 518,973

Insurance and Takaful 247,931 269,555

Others 72,388 61,145

REVENUE(RM‘000)

0

2,500

5,000

7,500

10,000

12,500

PROFIT BEFORE TAXATION

04 05 04 05 04 05 04 05

2004 2005

Banking and Finance 3,000,680 3,204,984

Investment Banking 207,805 132,924

Insurance and Takaful 94,416 122,450

Others 55,696 34,134

(RM‘000)

0

700

1,400

2,100

2,800

3,500

04 05 04 05 04 05 04 05

2004 2005

Banking and Finance 168,395,558 177,473,628

Investment Banking 7,605,881 9,792,587

Insurance and Takaful 3,336,119 4,465,201

Others 169,869 163,844

TOTAL ASSETS EMPLOYED(RM‘000)

0

40,000

80,000

120,000

160,000

200,000

FINANCIALHIGHLIGHTS

SEGMENTINFORMATIONANALYSIS BY ACTIVITY

Group Bank2005 2004 2005 2004

PROFITABILITY (RM Million)

Operating revenue 11,216 10,404 12,619 8,302Operating profit 4,319 3,851 6,614 3,321Profit before taxation 3,494 3,359 5,318 2,883Profit after taxation and minority interests 2,502 2,425 3,810 2,092

KEY BALANCE SHEET DATA (RM Million)

Total assets 191,895 179,507 175,434 143,551Dealing and investment securities 28,261 29,003 22,128 22,864Loans, advances and financing* 119,594 109,070 115,482 86,718Total liabilities 175,042 164,445 160,255 131,452Deposits from customers 131,068 123,366 118,276 96,869Commitments and contingencies 109,452 92,377 107,616 86,909Paid-up capital 3,721 3,600 3,721 3,600Shareholders’ equity 16,401 14,623 15,179 12,099

SHARE INFORMATIONPer share (sen)

Basic earnings 68.4 67.3 104.1 58.1Diluted earnings 67.6 67.3 102.8 58.1Gross dividend 102.5 60.0 102.5 60.0Net tangible assets 440.8 406.2 407.9 336.1

FINANCIAL RATIOS (%)

Profitability RatiosNet interest margin on average interest-earning assets 2.9 2.9 3.0 2.6Net interest on average risk-weighted assets 3.3 3.8 3.4 3.5Net return on average shareholders’ funds 16.1 17.0 27.9 17.9Net return on average assets 1.3 1.4 2.4 1.5Net return on average risk-weighted assets 1.9 2.0 3.4 2.3Cost to income ratio 39.4 40.2 26.8 37.4

Capital Adequacy Ratios (%) (after deducting proposed final dividend)

Based on credit risk:Core capital ratio 10.5 10.3 10.0 10.8Risk-weighted capital ratio 14.2 15.1 12.8 14.0

Based on credit and market risk:Core capital ratio 10.3 ** 9.8 **Risk-weighted capital ratio 13.8 ** 12.6 **

Asset Quality RatiosNet non-performing loans ratio (3 month classification) (%)* 4.9 6.0 4.8 6.0Loan loss coverage (%)* 70.7 74.4 69.9 71.6Gross loan to deposit ratio (%)* 97.2 96.0 103.8 96.5Deposits to shareholders’ funds (times) 8.0 8.4 7.8 8.0

Valuations on ShareGross dividend yield (%) 9.4 5.9 — —Dividend payout ratio (%) 112.7 64.2 — —Price to earnings multiple (times) 15.9 15.0 — —Price to book multiple (times) 2.5 2.5 — —

* Comparative figures were reclassified to conform with current year presentation.** The Bank Negara Malaysia Guidelines on Market Risk Capital Adequacy Framework are effective from 1 April 2005.

2005 2004

REVENUE (RM’000)

1 Banking and Finance 10,366,214 9,629,8522 Investment Banking 518,973 454,1253 Insurance and Takaful 269,555 247,9314 Others 61,145 72,388

11,215,887 10,404,296

PROFIT BEFORE TAXATION (RM’000)

1 Banking and Finance 3,204,984 3,000,6802 Investment Banking 132,924 207,8053 Insurance and Takaful 122,450 94,4164 Others 34,134 55,696

3,494,492 3,358,597

TOTAL ASSETS EMPLOYED (RM’000)

1 Banking and Finance 177,473,628 168,395,5582 Investment Banking 9,792,587 7,605,8813 Insurance and Takaful 4,465,201 3,336,1194 Others 163,844 169,869

191,895,260 179,507,427

FINANCIAL SUMMARY 5www.maybank2u.com

FINANCIALCalendar20.7.2004Notice of the Extraordinary General Meeting

11.8.2004Extraordinary General Meeting

11.8.2004Announcement to Bursa Malaysia that all resolutions on theproposed ESOS at the Extraordinary General Meeting had beenapproved by the shareholders

30.8.2004Announcement of the audited results of Maybank and of theGroup and announcement of the final dividend for the yearended 30.6.2004

20.9.2004Notice of the 44th AGM, Notice of Dividend Payment and BookClosure and issuance of annual report for the financial yearended 30.6.2004

11.10.200444th Annual General Meeting

15 and 16.10.2004Book closure for determining the entitlement for the finaldividend

26.8.2005Announcement of the audited results of Maybank and of theGroup and announcement of the final and special dividend forthe year ended 30.6.2005

16.9.2005Notice of the 45th Annual General Meeting, Notice of DividendPayment and Book Closure and issuance of annual report forthe financial year ended 30.6.2005

Notice of Extraordinary General Meeting

8.10.200545th Annual General Meeting

Extraordinary General Meeting

10 and 11.11.2005Book closure for determining the entitlement of the dividend

23.11.2005Date of payment of the final dividend of 25 sen per share (less28% Malaysian Income Tax) and a special dividend of 35 senper share (less 28% Malaysian Income Tax) in respect of thefinancial year ended 30.6.2005 E

27.10.2004Date of payment of the final dividend of 25 sen per share (less28% Malaysian Income Tax) in respect of the financial yearended 30.6.2004

8.11.2004Announcement of the unaudited results of Maybank and of theGroup for the first quarter of the financial year ending 30.6.2005

18.2.2005Announcement of the audited results of Maybank and of theGroup and announcement of the interim and special dividendfor the half year of the financial year ended 31.12.2004

19 and 20.3.2005Book closure for determining the entitlement of the dividend

31.3.2005Date of payment of the interim dividend of 25 sen per share(less 28% Malaysian Income Tax), special dividend of 10 senper share (less 28% Malaysian Income Tax) and specialdividend of 7.5 sen per share (tax exempt) in respect of thefinancial year ended 30.6.2005

10.5.2005Announcement of the unaudited results of Maybank and of theGroup for the third quarter of the financial year ending 30.6.2005

REVENUE

04 05 04 05 04 05

2004 2005

Malaysia 9,167,354 9,725,402

Singapore 754,514 914,738

Other Location 482,428 575,747

0

2,000

4,000

6,000

8,000

10,000

(RM‘000)

PROFIT BEFORE TAXATION

04 05 04 05 04 05

2004 2005

Malaysia 3,137,461 3,209,085

Singapore 142,510 187,422

Other Location 78,626 97,985

0

800

1,600

2,400

3,200

4,000

(RM‘000)

TOTAL ASSETS EMPLOYED

04 05 04 05 04 05

2004 2005

Malaysia 154,300,974 160,440,734

Singapore 17,558,393 21,932,831

Other Location 7,648,060 9,521,695

0

3,500

70,000

105,000

140,000

175,000

(RM‘000)

SEGMENTINFORMATIONANALYSIS BY GEOGRAPHICAL LOCATION

2005 2004

REVENUE (RM’000)

1 Malaysia 9,725,402 9,167,3542 Singapore 914,738 754,5143 Other Locations 575,747 482,428

11,215,887 10,404,296

PROFIT BEFORE TAXATION (RM’000)

1 Malaysia 3,209,085 3,137,4612 Singapore 187,422 142,5103 Other Locations 97,985 78,626

3,494,492 3,358,597

TOTAL ASSETS EMPLOYED (RM’000)

1 Malaysia 160,440,734 154,300,9742 Singapore 21,932,831 17,558,3933 Other Locations 9,521,695 7,648,060

191,895,260 179,507,427

6

FINANCIAL SUMMARY 7www.maybank2u.com

OPERATING PROFIT

RM Million

05 04 03 02 01

2005

2004

2003

2002

2001

0

1,000

2,000

3,000

4,000

5,000

4,319

3,851

3,532

3,731

3,475

2005

2004

2003

2002

2001

PROFIT BEFORE TAXATION

RM Million

05 04 03 02 01

3,494

3,359

2,620

2,354

1,121

0

800

1,600

2,400

3,200

4,000

TOTAL ASSETS AND LOANS,ADVANCES AND FINANCING

RM Million

05 04 03 02 01

119,594

109,294

102,606

95,529

98,156

191,895

179,507

160,955

150,656

147,348

0

40,000

80,000

120,000

160,000

200,000

Loan and advancesTotal assets2005

2004

2003

2002

2001

2005

2004

2003

2002

2001

SHAREHOLDERS’ EQUITY

RM Million

05 04 03 02 01

16,401

14,623

13,485

12,658

11,052

0

4,000

8,000

12,000

16,000

20,000

5YEARGROUPFINANCIALSUMMARYYear ended 30 June 2005 2004 2003 2002 2001

OPERATING RESULTS (RM Million)

Operating profit 4,319 3,851 3,532 3,731 3,475Profit before taxation 3,494 3,359 2,620 2,354 1,121Profit after taxation and minority interests 2,502 2,425 1,996 1,659 819

KEY BALANCE SHEET DATA (RM Million)

Total assets 191,895 179,507 160,955 150,656 147,348Loans, advances and financing* 119,594 109,294 102,606 95,529 98,156Total liabilities 175,042 164,445 147,070 137,641 135,976Deposits from customers 131,068 123,366 109,535 102,592 97,076Commitments and contingencies 109,452 92,377 78,527 71,057 72,425Paid-up capital 3,721 3,600 3,589 3,550 2,352Shareholders’ equity 16,401 14,623 13,485 12,658 11,052

SHARE INFORMATIONPer share (sen)

Basic earnings 68.4 67.3 55.9 46.7 23.1Diluted earnings 67.6 67.3 55.9 46.4 23.0Gross dividend 102.5 60.0 52.0 12.0 12.0Net tangible assets 452.9 406.2 375.7 356.6 469.9

Share price as at 30 June (RM) 10.90 10.10 8.60 8.80 6.90Market capitalisation (RM Million) 40,559 36,360 30,865 31,240 16,088

FINANCIAL RATIOS (%)

Profitability Ratios/Market ShareNet interest margin on average interest-earning assets 2.9 2.9 3.0 3.1 3.3Net interest on average risk-weighted assets 3.3 3.8 3.7 3.9 4.2Net return on average shareholders’ funds 16.1 17.3 15.3 14.0 7.3Net return on average assets 1.3 1.4 1.3 1.1 0.6Net return on average risk-weighted assets 1.9 2.0 1.7 1.5 0.8Cost income ratio 39.4 40.2 39.9 36.9 37.7Gross loan to deposit ratio* 97.2 96.0 102.7 102.6 112.4Net non-performing loans ratio (3-month classification)* 4.9 6.0 6.2 7.2 7.8Domestic market share in:

Loans, advances and financing 20.4 20.6 21.1 20.8 22.6Deposits from customers – Savings Account 29.1 29.8 30.3 30.7 31.8Deposits from customers – Current Account 22.4 22.7 23.2 22.8 23.0

Capital Adequacy Ratios (%) (after deducting proposed final dividend)

Based on credit risk:Core capital ratio 10.5 10.3 10.2 10.3 9.1Risk-weighted capital ratio 14.2 15.1 15.3 15.6 13.0

Based on credit and market risk:Core capital ratio 10.3 ** ** ** **Risk-weighted capital ratio 13.8 ** ** ** **

Valuations on ShareGross dividend yield (%) 9.4 5.9 6.0 1.4 1.7Dividend payout ratio (%) 112.7 64.2 79.7 18.5 24.9Price to earnings multiple (times) 15.9 15.0 15.4 18.8 29.9

* Comparative figures were reclassified to conform with current year presentation.** The Bank Negara Malaysia Guidelines on Market Risk Capital Adequacy Framework are effective from 1 April 2005.

CORPORATE INFORMATION8

BOARDOFDIRECTORS

from left to right:

TEH SOON POH

HAJI MOHD HASHIR BIN HAJI ABDULLAH

MOHAMMAD BIN ABDULLAH from left to right:

RAJA TAN SRI MUHAMMADALIAS BIN RAJA MUHD. ALI

AGIL NATTDeputy President

TAN SRI MOHAMED BASIRBIN AHMADChairman

CORPORATE INFORMATION 9www.maybank2u.com

DATO’ RICHARD HO UNG HUNVice Chairman

from left to right:

DATUK ZAINUN AISHAH BINTI AHMAD

TAN SRI DATO’ MEGAT ZAHARUDDIN BIN MEGAT MOHD NOR

DATUK ABDUL RAHMAN BIN MOHD RAMLI

from left to right:

DATUK AMIRSHAM A AZIZPresident and CEO

DATO’ MOHAMMED HUSSEINDeputy President

CORPORATE INFORMATION10

PROFILEOFDIRECTORS

He worked with Bank Negara Malaysia from1965 and retired in 1993 as Advisor. He is aFellow member of the Malaysian Institute ofBankers since 1980.

Appointed as a director of Maybank on 19 August 1993 and as Chairman of Maybankon 9 October 1993. He serves as Chairman ofthe Strategic Planning and Credit ReviewCommittees of the Board.

Current directorships in public companiesinclude Mayban Fortis Holdings Berhad,Aseambankers Malaysia Berhad, Mayban AlliedBerhad, Mayban Takaful Berhad, PT BankMaybank Indocorp, Maybank PhilippinesIncorporated and PhileoAllied Securities(Philippines) Incorporated.

Attended 14 out of the 17 Board Meetingsheld in the financial year. No family relationshipwith any director and is a nominee of themajor shareholder of Maybank. There is noconflict of interest with Maybank and hasnever been charged for any offence. E

TAN SRIMOHAMED BASIR bin Ahmad

CHAIRMANNON-INDEPENDENT NON-EXECUTIVE DIRECTOR(67 years of age – Malaysian) B.A., AMP (Harvard) D. Com Sc (Hon)

DATUKAMIRSHAM A Aziz

PRESIDENT AND CEONON-INDEPENDENT EXECUTIVE DIRECTOR(54 years of age – Malaysian) B.Econs (Hons), Member of MICPA

DATO’MOHAMMED Hussein

DEPUTY PRESIDENTNON-INDEPENDENT EXECUTIVE DIRECTOR(54 years of age – Malaysian) Bachelor of Commerce (Accounting), AMP (Harvard)

DATO’RICHARD Ho Ung Hun

VICE CHAIRMANINDEPENDENT NON-EXECUTIVE DIRECTOR(78 years of age – Malaysian) Barrister at Law (Lincoln’s Inn)

He was a Member of Parliament from 1969 to 1982. He was appointed as Deputy Minister ofRoad Transport in 1974 and was subsequently appointed as Deputy Minister of Finance in1976. In 1978, he was appointed as Minister without Portfolio in the Prime Minister’sDepartment and subsequently as the then Minister of Labour and Manpower in the same year.

Appointed Vice Chairman of Maybank on 27 January 1983. He serves as Chairman of theEmployee Share Option Scheme and a member of the Credit Review Committees of the Board.

Current directorships in public companies include Aseambankers Malaysia Berhad, AseamleaseBerhad, Mayban Trustees Berhad, Mayban International Trust (Labuan) Berhad, Mayban UnitTrust Berhad, Maybank International (L) Ltd and Mayban Trust (Labuan) Ltd.

Attended 16 out of the 17 Board Meetings held in the financial year. No family relationship withany director and/or major shareholder of Maybank. Has a Tenancy Agreement with Maybank onthe rental of a four-storey shophouse used as branch premises. There is no conflict of interestwith Maybank and has never been charged for any offence. E

President and CEO of Maybank Group. He joined the Maybank Group in 1977 and has worked invarious capacities within the Group.

Appointed as executive director of Maybank on 18 August 1993 and as Managing Director ofMaybank on 1 May 1994. He serves as a member of the Strategic Planning and NominationCommittees of the Board. He is the Chairman of the Group Management Committee.

Current directorships in public companies include Aseambankers Malaysia Berhad, Mayban FortisHoldings Berhad, Credit Guarantee Corporation Malaysia Berhad, Cagamas Berhad, PerbadananUsahawan Nasional Berhad and AFC Merchant Bank Limited.

He is the Chairman/Director of Malaysian Electronic Payment System (1997) Sdn Berhad, aCouncil Member of the Association of Banks in Malaysia, Vice Chairman of the Institute of BankersMalaysia, a director of Islamic Banking and Finance Institute and Asian Pacific Bankers Club. Heis also a member of the Advisory Board of the Pacific Rim Bankers Program.

Attended 16 out of the 17 Board Meetings held in the financial year. No family relationship withany director and/or major shareholder of Maybank. There is no conflict of interest with Maybankand has never been charged for any offence. E

Deputy President of Maybank. He joined theMaybank Group in 1977 and has worked invarious capacities within the Group, includingas Managing Director of AseambankersMalaysia Berhad, the Investment Banking armof the Group.

Appointed as an executive director of Maybankon 1 November 2000. He serves as a memberof the Strategic Planning Committee of theBoard.

Current directorships in public companiesinclude Mayban Allied Berhad, AseambankersMalaysia Berhad, Pelaburan Hartanah NasionalBerhad, PT Bank Maybank Indocorp andFinancial Park (Labuan) Berhad.

Attended 15 out of the 17 Board Meetingsheld during the financial year. No familyrelationship with any director and/or majorshareholder of Maybank. There is no conflictof interest with Maybank and has never beencharged for any offence. E

CORPORATE INFORMATION 11www.maybank2u.com

PROFILEOFDIRECTORS

AGIL NattDEPUTY PRESIDENTNON-INDEPENDENT EXECUTIVE DIRECTOR(53 years of age – Malaysian) B.Sc Econ (Hons), Master of Science in Finance, AMP (Harvard)

MOHAMMAD bin AbdullahMEMBERINDEPENDENT NON-EXECUTIVE DIRECTOR(64 years of age – Malaysian) Member of MICPA, Member of MIA

HAJI MOHDHASHIR bin Haji Abdullah

MEMBERINDEPENDENT NON-EXECUTIVE DIRECTOR(69 years of age – Malaysian) ACA (Aust), ACIS (UK), Member of MICPA,FCMI (UK), FCIT (UK), AMP (Harvard)

RAJA TAN SRIMUHAMMAD ALIAS

bin Raja Muhd. AliMEMBERINDEPENDENT NON-EXECUTIVE DIRECTOR(73 years of age – Malaysian) B.A (Hons), AMP (Harvard), D.Sc. (Hon), D.Econ. (Hon)

Appointed as a director of Maybank on 17 March 1978. He serves as Chairman of the RiskManagement and Nomination Committees of the Board. He also serves as a member of theRemuneration and Establishment, Employee Share Option Scheme and Strategic PlanningCommittees of the Board.

Current directorships in public companies include Kuala Lumpur Kepong Berhad, Batu KawanBerhad, Sime Darby Berhad, Kumpulan Guthrie Berhad, Mayban Fortis Holdings Berhad andCerebos Pacific Ltd. He is also the Chairman of Highlands & Lowlands Berhad andConsolidated Plantations Berhad.

Attended 15 out of the 17 Board Meetings held in the financial year. No family relationship withany director and/or major shareholder of Maybank. There is no conflict of interest withMaybank and has never been charged for any offence. E

Deputy President of Maybank. He joined theMaybank Group in 1995.

Appointed as an executive director of Maybankon 4 September 2004. He serves as a memberof the Strategic Planning Committee of theBoard.

Current directorships in public companiesinclude Mayban Discount Berhad, Mayban UnitTrust Berhad and Mayban General AssuranceBerhad. He is currently the Chairman of theAdvisory Council of the International Centrefor Leadership in Finance (ICLIF).

Since his appointment as a director, heattended 13 out of the 14 Board Meetings heldduring the financial year. No family relationshipwith any director and/or major shareholder ofMaybank. There is no conflict of interest withMaybank and has never been charged for anyoffence. E

He was the Chairman of Coopers & LybrandMalaysia prior to his retirement in 1995 and he is currently the Chairman of NegaraProperties (M) Berhad, MNRB HoldingsBerhad (formally known as Malaysian NationalReinsurance Berhad), Malaysia RatingCorporation Berhad, Labuan Reinsurance (L)

Limited, Malaysian Reinsurance Berhad andMayban Discount Berhad.

Appointed as a director of Maybank on 11 January 1995. He serves as Chairman ofthe Remuneration and EstablishmentCommittee and a member of the Audit,Employee Share Option Scheme, CreditReview, Nomination and Strategic PlanningCommittees of the Board.

Current directorships in public companiesinclude Golden Hope Plantations Berhad,MIMOS Berhad, Maybank International (L)Ltd, Malaysian Bulk Carriers Berhad andAseambankers Malaysia Berhad.

Attended 13 out of the 17 Board Meetingsheld in the financial year. No familyrelationship with any director and/or majorshareholder of Maybank. There is no conflictof interest with Maybank and has never beencharged for any offence. E

He was the General Manager and Chief Executive Officer of Kelang Port Authority prior to hisretirement in 1991.

Appointed as a director of Maybank on 7 November 1996. Serves as a member of the Audit,Nomination, Credit Review and Risk Management Committees of the Board.

Current directorships in public companies include Mayban Unit Trust Berhad, Mayban TakafulBerhad, MFSL Ltd and PT Bank Maybank Indocorp.

Attended all the 17 Board Meetings held in the financial year. No family relationship with anydirector and/or major shareholder of Maybank. There is no conflict of interest with Maybank andhas never been charged for any offence. E

CORPORATE INFORMATION12

PROFILEOFDIRECTORS

He was the Group Chief Executive of GoldenHope Plantations Berhad prior to hisretirement in 1999.

Appointed as a director of Maybank on 17 November 1999. He serves as a memberof the Remuneration and Establishment, Audit,Credit Review, Nomination and StrategicPlanning Committees of the Board.

Current directorships in public companiesinclude Kuala Lumpur Kepong Berhad, MNIBerhad (formally known as Malaysia NationalInsurance Berhad), Maybank International (L)Ltd, Mayban International Trust (Labuan)Berhad, Mayban Trust (Labuan) Ltd andMaybank (PNG) Ltd. He is also the Chairmanof Johore Tenggara Oil Palm Berhad andTakaful Nasional Sdn Bhd.

Attended all the 17 Board Meetings held in thefinancial year. No family relationship with anydirector and is a nominee of the majorshareholder of Maybank. There is no conflictof interest with Maybank and has never beencharged for any offence. E

She was a director of Tenaga NasionalBerhad, Kulim Hi-Tech Park and KelantanIndustrial Development Authority. She wasalso the Director General of MalaysianIndustrial Development Authority untilSeptember 2004 and sits on variousCommittees/Authorities at National level,including being a member of the NationalCommittee on Business Competitiveness, amember of Malaysia Incorporated and theNational Project Director for MajlisPenyelarasan Perindustrian (ICC).

Appointed as a director of Maybank on 13 July 2005 and is also a director of MaybanDiscount Berhad. She serves as a member ofthe Risk Management Committee of the Board.

No family relationship with any director and/ormajor shareholder of Maybank. There is noconflict of interest with Maybank and hasnever been charged for any offence. E

He was the Regional Business CEO/ManagingDirector of Shell Exploration and ProductionInternational B.V. prior to his retirement inJanuary 2004 and is currently the non-executive Chairman and director of MaxisCommunication Berhad.

Appointed as a director of Maybank on 19 July 2004. He serves as a member of theNomination, Strategic Planning and EmployeeShare Option Scheme Committees of theBoard.

Current directorship in public companies includeMayban Fortis (Holdings) Berhad, Mayban LifeAssurance Berhad, Mayban General AssuranceBerhad and Mayban Life International (L) Ltd.He is also a Board member of the InternationalCentre for Leadership in Finance and theCapital Market Development Fund.

Attended all the 17 Board Meetings held in thefinancial year. No family relationship with anydirector and/or major shareholder of Maybank.There is no conflict of interest with Maybankand has never been charged for any offence.

E

TEH Soon PohMEMBERINDEPENDENT NON-EXECUTIVE DIRECTOR(69 years of age – Malaysian) Barrister at Law (Middle Temple)

He was the former General Manager of Credit Control Division of Maybank prior to hisretirement in 1992.

Appointed as a director of Maybank on 21 October 1997. He serves as Chairman of the AuditCommittee and a member of the Remuneration and Establishment, Risk Management andCredit Review Committees of the Board.

Current directorships in public companies include Mayban Trustees Berhad, MaybanInternational Trust (Labuan) Berhad, PhileoAllied Trustee Berhad, Maybank International (L) Ltd,

Maybank Philippines Incorporated,Mayban Trust (Labuan) Ltd, PT BankMaybank Indocorp, Maybank (PNG)Ltd and PhileoAllied Securities(Philippines) Incorporated.

Attended 16 out of the 17 BoardMeetings held in the financial year. Nofamily relationship with any directorand/or major shareholder of Maybank.There is no conflict of interest withMaybank and has never been chargedfor any offence. E

DATUKABDUL RAHMAN bin Mohd Ramli

MEMBERNON-INDEPENDENT NON-EXECUTIVE DIRECTOR(66 years of age – Malaysian) ACA (Aust), Member of MICPA, Member of MIA

DATUKZAINUN AISHAH binti Ahmad

MEMBERNON-INDEPENDENT NON-EXECUTIVE DIRECTOR(59 years of age – Malaysian) BA (Hons) (Econs)

TAN SRI DATO’MEGAT ZAHARUDDIN

bin Megat Mohd NorMEMBERINDEPENDENT NON-EXECUTIVE DIRECTOR(56 years of age – Malaysian) B.Sc (Hons) in Mining Engineering

13www.maybank2u.com

MANAGEMENT14

MANAGEMENT

DATUK AMIRSHAM A AZIZGraduated with a Bachelor of Economics(Honours) degree, majoring in Accounting,from the University of Malaya in 1973 andmember of the Malaysian Institute of CertifiedPublic Accountants (MICPA). Joined the Groupin 1977 and is currently the President andChief Executive Officer of Maybank.

DATO’ MOHAMMEDHUSSEINGraduated with a Bachelor of Commercedegree majoring in Accounting from theUniversity of Newcastle, Australia in 1972.Attended the Advanced Management Program,Harvard University, USA. Joined the Group in1977 and is currently the Deputy President.

AGIL NATTGraduated with a Bachelor of Science Degreein Economics from Brunel University, UnitedKingdom and Masters of Science in Financefrom City University Business School, London.Attended the Advanced Management Program,Harvard University, USA. Joined the Group in1995 as the General Manager of CorporateBanking. He is currently the Deputy President.

SPENCER LEE TIEN CHYEFellow of the Institute of CharteredAccountants (England and Wales). Joined theGroup in 1975. He is currently SeniorExecutive Vice President and Head ofInternational Business. He also headsMaybank Singapore operations.

from left to right:

1. Choo Yee Kwan

2. Muhamad Umar Swift

3. Oon Wee Jong

4. Spencer Lee Tien Chye

from left to right:

1. Dato’ Mohammed Hussein

2. Agil Natt

3. Datuk Amirsham A Aziz

JEYARATNAMTAMOTHARAM PILLAIFellow of the Institute of CharteredAccountants (England and Wales). Joined theGroup in 2003 as Deputy Chief ExecutiveOfficer of Aseambankers. He is currently Headof Investment Banking.

CHOO YEE KWANGraduated with a Bachelor of Economics(Honours) degree from the University of Malayaand honours degree in law from the Universityof London, United Kingdom. He is a Barrister-at-Law and was called to the Bar of Englandand Wales at Lincoln’s Inn in 1984. JoinedMaybank in 1992 as Head of Credit ControlDivision. He is Executive Vice President, Headof Risk Management and Chief Risk Officer forthe Group.

DATUK JOHAR CHE MATGraduated with a Bachelor of Economics(Honours) degree from the University of Malayain 1975. Joined the Group in 1975 and servedin various capacities and positions. He isSenior Executive Vice President and currently isHead of Retail Financial Services.

ASHRAF ALI ABDUL KADIRGraduated with a degree in BusinessAdministration from Ohio State University, USAand Masters in Business Administration fromTennesse State University, USA. Joined theGroup in 1996 as General Manager of ConsumerBanking. He is Executive Vice President and iscurrently Head of Cards Business.

from left to right:

1. Tong Hon Keong

2. Zulkifly Sulaiman

3. Jamaludin Nasir

4. Amirudin bin Abdul Halim

5. Jeyaratnam Tamotharam Pillai

MANAGEMENT 15www.maybank2u.com

TONG HON KEONGGraduated with a Bachelor’s Degree inEconomics from the University of Malaya in1974. Joined the Group in 1974 and served invarious capacities. He is Executive VicePresident and currently the Head of CentralOperations.

MOHD ZULKIFLI BIN ITAMGraduated with a Degree in Social Sciencefrom Universiti Sains Malaysia and a MastersDegree in Business Administration fromUniversity of Strathclyde, United Kingdom.Joined the Group in 2001. He is ExecutiveVice President and Head of Human Resource.

NIK NASIR MAJIDHolds a Bachelors Degree in Economics fromthe University of Malaya and a Masters Degreein Economics from Vanderbilt University, USA.Joined the Maybank Group in 1989. He isExecutive Vice President and currently Head ofCorporate and Strategic Planning.

JAMALUDIN NASIRHolds a Bachelor’s Degree in Economics andBachelor of Science in Finance and BusinessEconomics from Southern Illinois University,USA as well as a Masters Degree in BusinessAdministration from Texas A & M InternationalUniversity, USA. Joined Maybank in June 2005as Executive Vice President and Chief CreditOfficer.

AMIRUDIN BINABDUL HALIMGraduated with a Degree in Finance from St.Louis University, USA in 1984. Joined the Groupin 1988 and served in various capacities. He isExecutive Vice President and currently theHead of the Automobile Financing.

ZULKIFLY SULAIMANGraduated with a Bachelor of Economicsdegree from the University of Malaya. Joinedthe Maybank Group in 2001 and served in theRetail Financial Services. He is currently Headof the Insurance Business and Chief ExecutiveOfficer/Director of Mayban Fortis HoldingsBerhad. E

from left to right:

1. Datuk Johar Che Mat

2. Ashraf Ali Abdul Kadir

3. Mohd Zulkifli bin Itam

4. Nik Nasir Majid

MUHAMAD UMARSWIFTGraduated with a Degree in Economics fromMonash University Australia in 1986 andbecame a member of the Institute of CharteredAccountants Australia. He also holds a postgraduate Diploma in Finance from the SecuritiesInstitute of Australia. Joined the Group in 2004.He is Executive Vice President and currentlyHead of Enterprise Financial Services.

OON WEE JONGGraduated with a Bachelor of Applied Sciencedegree from Swinburne Institute of Technology,Australia in 1980, majoring in ComputerScience and Mathematics. Joined the Group inDecember 2004 as Executive Vice Presidentand Chief Information Officer.

16

MANAGEMENT 17www.maybank2u.com

• Credit Management & Quality• Corporate Remedial Management• Central Operations• International Business• Property, Security and Purchasing

• Information System• Accounting Services & Treasury Back Office• Financial and Business Analysis• Corporate Services• Legal Services

• Enterprise Financial Services• Cards Business• Automobile Financing• Islamic Banking• Custodial Services• Investment Banking• Insurance• Fund Management• Treasury & Dealing• Trustee Services

Human Resource

Risk Management

Company Secretary

Retail Financial Services

Chief Audit Executive Board of Directors

Chairman of the Board

President and CEO• Corporate and Strategic Planning• Total Quality Management• Public Affairs and Brand Management• Service Level Management

Deputy President Deputy President

ORGANISATIONSTRUCTURE

LETTER TO SHAREHOLDERS18

BusinessENVIRONMENT

The operating environment during the twelve-

month period to June 2005 was generally

positive. The global economy expanded at a

fairly robust pace, particularly in the United

States and China, where growth rates were

maintained at above 3% and 9.5% respectively. The main

concern during the period was the threat of inflation and this was

further aggravated by the uptrend in petroleum prices. During

this period, the price of petroleum in the world market rose by

slightly more than 40%.

At home, the economy maintained its growth momentum and

expanded at a healthy rate of 5.6%. The main sources of growth

were household spending and export demand. The former

recorded a growth of 9.7% whilst the latter increased by 11.5%.

The growth in investment spending was maintained at around

3.5% and this came largely from the private sector. Although

inflation was relatively mild, the pressure had been building up.

From 1.3% in June 2004, the consumer price index (CPI)

recorded a growth of 3.2% in June 2005. Significant increases

were recorded for food and transportation, where the indices

rose by 3.9% and 4.8% respectively in June 2005 against 2.4%

and 0.3% respectively a year ago.

Riding on the continuing expansion of domestic economic

activities, loans growth for the banking system grew by 8.3%.

The increase came primarily from the household segment and

the small and medium scale enterprises (SMEs). Loans to large

corporations contracted owing to the competition from the

capital market and increased reliance on internal funding.

Notwithstanding this, demand for short term trade financing and

working capital from this segment continued to expand in line

with the strong growth of the services and export sectors.

During the year, total deposits expanded by 14.5%, which was

almost twice as much as the increase in loans outstanding.

Hence, the loan-deposit ratio for the banking system fell to

75.8% from 80.2% a year ago. This situation created pressure

on banking institutions as substantial proportions of excess

deposits came from individual accounts with interest rates being

fixed above the market rates. Together with the declining trend in

the average loan yield, it resulted in further margin compression.

The performance of the domestic equity market was mixed, with

the composite index trending upwards during the first half of the

review period and turning softer during the second half. In

particular, the Kuala Lumpur Composite Index (KLCI) moved

from 828.1 points on 1 July 2004 to reach a peak of 937.56

points on 18 January 2005. With petroleum prices continuing to

firm up, the index turned directionless and by end of June 2005,

it closed at 888.32 points.

Tan Sri Mohamed Basir bin Ahmad – Chairman

DearSHAREHOLDERSIT IS WITH GREAT PLEASURE THAT WE PRESENT TO YOU THE ANNUALREPORT AND STATEMENT OFACCOUNTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2005.

CONTINUES ON PAGE 19

LETTER TO SHAREHOLDERS 19www.maybank2u.com

Datuk Amirsham A Aziz – President and CEO

Against a relatively healthyoperating environment, theMaybank Group registered acommendable performance.Operating profit of the Group

increased by 12.2%, reaching a record level ofRM4.32 billion. As a result of the provisionsarising from the aggressive write-off for legacynon-performing loans (NPLs) and losses fromshare margin financing, loan loss andprovisions charged for the year rose by66.6%. It was timely for us to clean up thebook from non-performing assets and focusour attention to generating productive loans.In fact, if this was not done, funding of thesenon-performing assets would increase withrising interest rates. Apart from the timingfactor, we had also considered our financialstrength and resources, so that the move towrite-off the legacy NPLs would not have asignificant impact on our stakeholders. Overthe years, the Group had been accumulatinggeneral provisions (GP) at a rate much higherthan all other banking institutions in thecountry. As a result, at the end of the previousfinancial year, every Ringgit of non-performingloans was backed by 74.5 sen of reserves. If the value of collateral was considered, thereserve coverage would have been more thanthe value of non-performing loans. In addition,the practice of maintaining a high GP ratio isdifficult to justify once the industry adopts fairvalue accounting principles. Together with ourproactive capital management, the resourcesreleased from the reduction in the GP ratiowas used to minimise the impact of the write

During the year, the Group maintained itsfocus of ensuring sustainable enhancement ofits shareholder value. The main drivers to thisstrategic focus were strengthening the revenuebase; enhancing operational efficiency andproductivity; improving risk management aswell as proactive capital management. Amongmajor achievements made during the yearwere:

• LEADERSHIP IN LENDING BUSINESSAND DEPOSIT MOBILISATION

Despite the stiff competition, the Group’smarket share for loans remained intact at20.4%. In the trade bills business, our market

share increased to 26.3% from 23.8% a yearearlier. We also maintained a sizeable marketshare in residential mortgages; automobilefinancing; cards business; financing ofSMEs as well as large enterprises; sharetrading; and issuance of private debts. In allthese business lines, the Group’s marketshare ranged from 10% for share trading to23.2% for card merchant sales.

Capitalising on the strength of our networkand product range, the Group maintained itsleadership position in deposit mobilisation.Our market share for savings deposits was29.1% whilst that of current account depositswas 22.4%. We also had a strong positionin the life and investment-linked insurancebusiness where the market share for newbusiness was about 13%. For the unit trustbusiness, our share was slightly above 6%.

• LEADERSHIP IN ISLAMIC BANKINGBUSINESS

With total assets of RM21.9 billion, theBank is the largest Islamic Banking operatorin the country. During the year, theoutstanding financing from commercialbanking operations grew by 17.3% to reachRM17.8 billion; representing a market shareof 22.5%. Market share for total depositswas even higher at 29.6%. We are alsostrong in non-banking areas with a marketshare of slightly above 10% for both theissuance of Islamic Private Debt Securitiesand Islamic Unit Trust. Through its window-based operations, the Maybank Grouprecorded strong growth in profitability. Netprofit from its commercial bankingoperations rose by more than three times toreach RM241.6 million.

off, hence protecting our shareholders’returns. The Group’s net profit for the yearwas RM2.50 billion, representing an averagereturn on equity of 16.1%. Its gross reservecoverage as at end of June 2005 remainedhigh, at 70.7% and the Bank’s capitaladequacy ratio after the proposed finaldividend was 12.6% against the minimumregulatory requirement of 8.0%.

Reviewof theGROUP Performance

CONTINUES ON PAGE 20

LETTER TO SHAREHOLDERS20

• DIVERSIFICATION OF REVENUE BASE

The revenue contribution from our overseasoperations increased from 12% to 13.2% asa result of strong revenue diversificationefforts. Notwithstanding this, the Malaysianoperations continued to account for a sizeableshare of the Group’s total revenue. Movingforward, the Group will continue to pursue

efforts to widen its income base, both fromthe perspective of geographical locations aswell as business activities outside ofbanking, which include insurance, securities,capital market and asset management.

• ENHANCED OPERATIONAL EFFICIENCYAND PRODUCTIVITY

In view of the rising cost of doing business,a strong emphasis was made to maintain ahigh level of operational efficiency andproductivity. During the year, growth inoverhead expenses was 8.4% against thegrowth in total income of 10.7%. With thisperformance, the cost to income ratio wasbrought down to 39.4% from 40.2% in thepreceding year. Much of the increase inoverhead expenses came from our efforts toenhance security of payment services,including the massive conversion of allMaybank credit cards into the EMV platformwhich amounted to RM28.9 million.

Significant achievements were made on theproductivity front. Revenue per staff costimproved to 5.3 times from 5.1 times and

profit before tax per head count increasedfrom RM150,000 to RM155,900. Thisimprovement can be attributed to ourworkforce who have shown a high degree ofdedication, innovativeness and a strongdetermination to excel.

The Group will continue to invest heavily onits human capital. Various tools were alreadyput in place to facilitate the process. Inparticular, during the year, we initiated anEmployee Engagement Survey. Data gatheredfrom this exercise provided useful feedbackin charting future policies and strategies ofthe Group. We continued to refine ourperformance management system, particularlyto incorporate and link the existing frameworkwith the stated long term strategic initiatives.We also recognised the importance ofcreating and building future leaders for theGroup. In this regard, assessment centreshave been rolled out so as to provide earlyscreening for top talents and those withleadership potential. We have also emplaceda succession planning framework in whichcurrent business leaders are required toidentify several high potential candidates tobe groomed as future leaders.

Training is another key focus area for theGroup. Apart from sending senior and middlelevel executives to renowned institutionsoverseas as well as highly regarded trainingprograms locally, the accessibility andquality of in-house training programs werefurther enhanced. In addition, severalknowledge-based systems capitalising onour IT infrastructure were deployed, includinga program known as ‘MyCampus’. Theprogram provides instant access to onlinelearning courses, schedules and details onall learning events and strategic solutionsfor planning, delivering and managinglearning activities.

• IMPROVED SERVICE QUALITY

Improving service quality has always been amajor focus of the Group. The testament ofour achievement in this aspect was thedominant market share in the key areas ofour business. A recent survey conducted byTaylor Sofres Nelson on Customer Satisfactionrevealed that our household customers havestrong relationships with the Group, whichwere encouraged by their past experiences.The strategy to enhance our service level isdirected on several fronts. In the householdmarket segment, the Group offer our largeand diversified customer touch points –comprising more than 350 sales and servicecentres, 55 specialised automobile financecentres, 2,000 self service terminals, phoneand internet banking facilities and all theseare backed by a state of the art contactcentre. We also offer a wide range ofproducts and services to meet the variousneeds of our household customers. Amongthe innovative products introduced duringthe year were an investment linked financialplan, Global Excel; a flexible repayment planfor mortgage financing; competitive hirepurchase financing packages; new insuranceprotection and unit trust products as well asimproved features for credit and debit cards.

• SUSTAINED GROWTH OF INCOMEFROM FEE-BASED ACTIVITIES

In line with sustained growth in transactionalactivities, fee income, a major component ofnon-interest income recorded a growth of13.3%. About 95% of the increase in feeincome came from commission and servicecharges. In fact, these two components roseby 15.5% on account of a wider range ofservices provided by the Group. As a shareof total income, total contribution from feeincome improved from 15.9% to 16.4%. Ifnot for the losses suffered by our securitiesbusiness, the ratio would have been higher.The contribution of fee income includingforeign exchange profit and net insurancepremium written, contributed to almost 24%of total income for the year. Overall the ratioof non interest income to total income ofthe Group rose to 31.1% against 28.5% inthe last financial year.

During the year, we took advantage torealise profits from our investment securities.Gains on disposal of investment securitiesamounted to RM244.4 mill ion againstRM158.3 million in the previous financialyear. The Group has yet to fully capitaliseon the potential of treasury trading activities.This explains the small contribution fromthis business, which for the year recorded anet gain of RM36.2 million. Looking ahead,this is an area of business which we wouldlike to expand.

CONTINUES ON PAGE 23

21www.maybank2u.com

22

During the year, the Group maintainedits focus of ensuring sustainableenhancement of its shareholder value.The main drivers to this strategic focuswere strengthening the revenue base;enhancing operational efficiency andproductivity; improving riskmanagement as well as proactivecapital management.

During the year, the Group maintainedits focus of ensuring sustainableenhancement of its shareholder value.The main drivers to this strategic focuswere strengthening the revenue base;enhancing operational efficiency andproductivity; improving riskmanagement as well as proactivecapital management.

LETTER TO SHAREHOLDERS 23www.maybank2u.com

For the business customers, customisedprogrammes were introduced for thoseinvolved in the automotive, electronic,furniture as well as oil and gas sectors.Besides providing direct funding to theSMEs, the Group also conducted trainingand seminars for them. In ensuring a highstandard of service to business clients, theGroup maintains 38 dedicated businesscentres and 15 trade finance centres locatedstrategically throughout the country. Thesecentres are manned by skilled personnel,capable of fulfilling the business needs ofthese customers.

The Group treats business process re-engineering as an on-going exercise, notonly to enhance efficiency but as an avenueto improve service quality. Arising fromthese continuous improvement efforts, wesucceeded in further improving the waitingtime for transactions at branch counters aswell as enhancing the turnaround time forvarious loan categories.

• ENHANCED ASSET QUALITY

A significant proportion of the Group’s NPLswere the legacy of the 1998 regional financialcrisis and they remained in the book as wewere working closely with our customers torehabilitate their business through variousprogrammes. In addition to this, we took abold decision during the year to write-offthe balance of these legacy NPLs. This moveresulted in higher loan loss provisions chargedfor the year. Despite this, our net NPL ratioimproved to 4.9% from 6.0% a year earlier.

The Group also took proactive measurestowards further enhancing its asset quality.Apart from a continuous review of creditpolicy and management of risk centrally,clear accountability and responsibility

among various constituents within theorganisation were emplaced. Our creditprofessionals were provided with extensivetraining and are required to be certified.

• INDUSTRY AND PUBLIC RECOGNITIONS

The Group continues to be recognised asthe premier financial services institution inthe country. Amongst the many awardsreceived from reputable parties during theyear included the Asiamoney Award for“Best Domestic Commercial Bank” and TheBanker Award for “Bank of the Year” inMalaysia. The Group was also acknowledgedfor its innovative online services,Maybank2u.com and Maybank2e.net, whichwere awarded the ‘Most User Friendly E-Commerce Portal’ and ‘Most InnovativeNew Service’ respectively. Apart from that,Maybank’s Cash Management servicesreceived the Asiamoney Award for “BestBank in Cash Management in Malaysia” fortwo years in a row while Aseambankers wasconferred the ‘Asia Pacific Bond Deal of theyear 2004’ and ‘Malaysian Deal of the Year’by Project Finance magazine and Asiamoneyrespectively. Maybank Group was alsoconferred the National Award forManagement Accounting (NAfMA) BestPractices and the Quality ManagementExcellence Award for its excellence in theareas of management accounting andquality management respectively.

The Group continued to be recognised asthe leading custody services provider inMalaysia with international recognition andnoted as a local specialist for DepositaryReceipts, in particular the AmericanDepositary Receipts (ADRs). For the periodunder review, assets under administrationby our Custodial Services grew by 50%.

ProspectsandSTRATEGICFocus

The operating environment over the next twelve months is expected to bechallenging, especially with the continuing uptrend in the price of petroleum andmoderate economic growth in major developed nations. These factors will havesignificant impact on the growth prospects of the domestic economy as expansionin export demand is likely to moderate. Notwithstanding this, we remain confident

that the growth momentum in the domestic economy will continue, especially with sustainedgrowth of the key services sector.

The Maybank Group will strive to maintain its pre-eminent position in the domestic financial sectorand will look at opportunities to strengthen its business, including in selected locations overseas.Towards this end, our strategic focus for the period will be to capitalise on our existing strengthsand use them as a platform to create new value drivers. In particular, our diversified channelsprovide a strong infrastructure for the distribution of financial products which have been provenby a high product cross-selling ratio. In light of a highly competitive market environment, servicequality and innovation will be key to the Group’s future growth. Supported by modern ITinfrastructure facilities and a vast customer information base, the Group will continue to be in theforefront of product and service innovation. The third focus area will be on risk management.Apart from looking at it as means of protecting our earnings base, a good risk managementframework serves as a foundation to enhance revenue growth. In fact, with greater ability tounderstand risks, greater values can be extracted from lines of businesses, which on the surfacemay appear to be risky. Finally, the Group will continue to invest in building future corecapabilities. Apart from investing in technology and systems, our resources will be channelled toenhance the quality of the Group’s human capital.

Finally, we will continue to expand the contribution of our non-banking businesses in line with ourstrategy to diversify the Group’s income base. In this regard, we have recently entered into anagreement to acquire MNI (Holdings). With this move, Maybank Group will position itself as aleading player in the domestic insurance industry and have the scope and scale to compete withforeign insurers.

ACKNOWLEDGEMENTIn closing, we are pleased with the overall achievements made during the financial year. It is theenduring relationships with our customers that have served as a cornerstone to the prosperity thatwe continue to enjoy today.

Our appreciation goes to all employees, the management team and our fellow Board members fortheir continued contribution to the growth and success of the Group. Our sincere thank you alsogoes to our business partners and vendors for their support and for working together with us todeliver outstanding results. We would also like to take this opportunity to welcome Datuk ZainunAishah binti Ahmad as a new member of the Maybank Board of Directors.

Above all, we sincerely thank you, our shareholders, for your trust, loyalty and confidence. It iswith your continuous support that the Maybank Group moves from strength to strength.

Tan Sri Mohamed Basir bin AhmadChairman of the Board

Amirsham A AzizPresident and CEO

E

CORPORATE GOVERNANCE24

Statement onCORPORATE GOVERNANCE

INTRODUCTIONMAYBANK GROUP RECOGNISES THAT GOOD CORPORATE GOVERNANCE PRACTICES FORM THE CORNERSTONE OF AN EFFECTIVE AND

RESPONSIBLE ORGANISATION. TO PROMOTE AND NURTURE THE HIGHEST STANDARDS OF CORPORATE GOVERNANCE WITHIN THE MAYBANK

GROUP, THE BOARD OF DIRECTORS HAS PUT IN PLACE A FRAMEWORK DESIGNED TO BUILD A SUSTAINABLE FINANCIAL PERFORMANCE AND AT

THE SAME TIME, ENSURE THAT THERE IS SUFFICIENT AND CREDIBLE TRANSPARENCY, INTEGRITY AND ACCOUNTABILITY IN ITS OPERATIONS.

THE GOAL IS TO ASCERTAIN THAT THE MAYBANK GROUP IS IN THE FOREFRONT OF GOOD GOVERNANCE CONDUCT AND IS RECOGNISED TO BE

AN EXEMPLARY ORGANISATION WHEN BENCHMARKED AGAINST BEST OF CLASS PRACTICES IN THIS AREA. THIS STRICTURE IS IMPOSED AND

OBSERVED UNIFORMLY THROUGHOUT THE GROUP INCLUDING OPERATING UNITS IN EXTERNAL JURISDICTIONS WHERE LOCAL REGULATORY

REQUIREMENTS ON THIS ISSUE MAY BE LESS STRINGENT.

• Identifying principal risks and approvingpolicies pertaining to the management ofall risk categories such as credit, market,liquidity, operational, legal and reputationalrisks.

• Scrutinising relevant credit approvals madeby Management which may have a materialimpact on the Group’s risk profile.

• Approving credit facilities which fall underthe Policy and Director related categories.The former refers to credit facilities thatexceed stipulated exposure limits and/orother limits set by the Board.

• Ensuring sufficient resources are devotedto capability development particularly inthe realms of human capital and technologyin order to support the expansion in theGroup’s business franchise.

• Reviewing the adequacy and integrity ofthe Group’s internal control systems andmanagement information systems, includingsystems for compliance with applicable laws,regulations, rules, directives and guidelines.

ROLES AND RESPONSIBILITIES OF THE BOARDThe Board’s overriding responsibility is tocreate and deliver sustainable shareholdervalue through effective oversight of themanagement of the Group’s businesses.

In discharging this role, the Board is entrustedwith the following responsibilities:

• Reviewing and approving the Group’s andSectors’ long term strategic goals andproviding stewardship to put them intoeffect. The scope encompasses theevaluation and endorsement of the longand medium term corporate targets, the annual budget, new investments/divestments as well as mergers andacquisitions.

• Ensuring the proper management of theGroup’s businesses including settingbusiness and operational objectives aswell as establishing clear policies withinwhich senior executives are to operate.

CONTINUES ON PAGE 25

AS AN ACTIVE, WELL-INFORMED AND INDEPENDENT BOARD IS DEEMED

TO BE A NECESSITY IN ENSURING THE HIGHEST STANDARDS OF

CORPORATE GOVERNANCE, THE MAYBANK GROUP BOARD CURRENTLY

COMPRISES PERSONNEL WITH DIFFERING EXPERTISE AND OF HIGH

STANDING IN SOCIETY.

CORPORATE GOVERNANCE 25www.maybank2u.com

The Board is assisted in its work by a numberof specialised Committees namely theNomination, Strategic Planning, Audit, CreditReview, Risk Management, Remuneration andEstablishment as well as the Employee ShareOption Scheme Committees. Hence, collectivelythis network forms an integral part of theGroup’s governance framework. The terms ofreference and membership of these Committeescan be found on pages 29 to 31.

EFFECTIVENESS OF THE BOARD OF DIRECTORS1. Division of Responsibilities Between

the Chairman and President/ChiefExecutive Officer (CEO)

The roles of the Chairman of the Boardand Group President/CEO are separateand this division of responsibilities isdocumented and endorsed by the Board.Apart from allowing for a more equitabledistribution of accountabilities, thisdistinction also reinforces the check andbalance proposition.

The Chairman of the Board is a Non-Executive Director and his mainresponsibility is to lead and manage thework of the Board in order to ensure thatit operates effectively and fullydischarges its legal and regulatoryresponsibilities. He serves as the mainliaison point between the Board andManagement. Together with the rest ofthe Non-Executive and IndependentDirectors, he leads the discussions onthe strategies and policies recommendedby Management. He also chairs themeetings of the Board, EGM and AGM,the Strategic Planning Committee, CreditReview Committee and the Boards of keysubsidiaries.

The responsibility for the day-to-daymanagement of the Group rests with theGroup President/CEO. He is accountablefor leading the management team,implementing the policies/decisionsapproved by the Board, building adynamic corporate culture and acting asthe Group’s official spokesperson. He isalso responsible for charting the futuredirection of the Group for the Board’sconsideration and approval as well as toidentify key individuals under the Group’ssuccession planning program. ThePresident/CEO chairs the GroupManagement, Asset-Liability Management,IT Steering and Credit Committees.

At the onset of each financial year, theBoard considers and approves a set ofmeasures and expectations on the basisof the Balanced Scorecard for the GroupPresident/CEO. This subsequently acts asa yardstick against which his performancewill be measured, evaluated and rewarded.

2. Board Structure

As an active, well-informed andindependent board is deemed to be anecessity in ensuring the highest standardsof corporate governance, the MaybankGroup Board currently comprises personnelwith differing expertise and of highstanding in society. There are presentlytwelve (12) members, comprising six (6)Independent Non Executive Directors,three (3) Non Independent ExecutiveDirectors and three (3) Non IndependentNon Executive Directors.

3. Appointments to the Board

Appointments to the Board is determinedbased on the recommendations of theNomination Committee, the operations ofwhich is described on page 29. Theselection criteria with regard to the desiredcandidate encompasses the combination ofcompetencies, the minimum qualificationsspecified by the regulatory authoritiesand relevant experience as previouslyagreed and sanctioned by the Board. Theassessment scope also includesascertainment of financial and commercialrelationships with the Group to avoidpotential conflict of interests. Theappointments are further subject toapproval by Bank Negara Malaysia (BNM).

Based on the foregoing, the Board ofDirectors have a broad range of skillsand credentials. Each brings a highdegree of independent judgement andknowledge to the Board’s discussions.They are individuals of high calibre andsocial standing with backgrounds in

and bonus payments are linked to attainedperformance standards when comparedto the specific and pre-determinedperformance hurdles as reflected in theirrespective Balanced Scorecards.

5. Induction and Training

On appointment to the Board and BoardCommittees, all new Directors receive acomprehensive induction to assist themin building a detailed understanding ofthe Group’s operations, the challenges itfaces, the longer term direction, the riskmanagement strategy and statutoryobligations. The induction programmeincludes meetings with senior executivesand key external advisors.

In compliance with Bursa MalaysiaListing Requirements, all members of theBoard have attended the mandatoryaccreditation-training program. Additionaltraining and updates on particular issuesof relevance are arranged by theCompany Secretary.

seek guidance and inputs from the Directorsto facilitate policy response and formulation.To aid this process, all Directors enjoyunrestricted access to any information/recordsand staff within the Group. In addition they alsohave access to the services of the CompanySecretary including independent professionaladvice at the expense of the Group.

For the year under review, all Directors compliedwith the attendance requirement as stipulated byBank Negara Malaysia and Bursa Malaysia.

OWNERSHIP STRUCTURE AND TRANSPARENCYThe shareholding structure of Maybank istransparent and its shares are quite widelyheld. However, as evidenced from globaltrends with regard to large conglomerates,there is a slight bias towards institutionalownership which is also in keeping with theGroup’s aspirations. The shareholding structure

is disclosed on page 50 and is available onrequest to the Company Secretary at all othertimes. The shareholdings of the Directors arealso disclosed on a name basis.

The existing share structure consists entirelyof common shares and there are no classes ofcommon shares. There is no foreignshareholding limits and the Memorandum andArticles of Association of the Company doesnot have any explicit provision(s) aimed atdiscouraging acquisition.

As part of the effort to further improve theliquidity of the shares and to broaden theshareholder base, Maybank established aSponsored Level 1 American DepositoryReceipt Program (ADR) in May 2005. TheADRs are traded Over-the-Counter on thebasis of 1 ADR to 2 MBB shares. As perBursa Malaysia Listing Rules, the issuance ofthe ADRs is capped at 5% of the Group’s totalissued shares. As at 30 July 2005, threemonths after its establishment, the totalnumber of ADRs sold under the programamounted to 333,300 (equivalent to 666,600ordinary shares). There were no cancellationsof any ADRs during the same period.

BOARD MEETINGSThe Board meets monthly (the dates are madeknown at the beginning of each year) withassessment of the Group’s financialperformance being a permanent item on theagenda. While it has a schedule of mattersreserved for its decision, other regular itemsdeliberated by the Board include structuralissues impacting the Group and itsbusinesses, strategy proposals, developmentsin the operating environment, risk mitigationmeasures including updates on the preparatoryefforts for compliance with Basel II covenants,remedial measures to address identifiedshortcomings in all facets of the Group’soperations, competitive analysis, acquisition/divestment strategies and status reports ofdecisions delegated to Management forimplementation. The Board also scrutinises theminutes of its Committees and that of theGroup Management Committee. The latterallows the Board to be continuously updatedon a “real time” basis of all Managementinitiatives.

The meetings are structured around a pre-setagenda and papers for deliberation arecirculated in advance of the meeting dates toensure sufficient time is given to understandthe key issues and contents.

The Chairman encourages open discussionsand frank debates at the meetings, therebyallowing the Directors to effectively probe andchallenge Management’s decisions andstrategies. The interaction is however two-way,with Management utilising the occasion to

banking, law, accounting and businessmanagement as well as experiencesdrawn from senior positions held in boththe private and public sectors.

One-third of the Directors for the timebeing must retire at each AGM and ifeligible, may offer themselves for re-election. The profiles of the currentDirectors are provided on pages 10 to 12.

4. Directors’ and Senior Management’sRemuneration

All directors who had served for thefinancial year are paid annual directors’fee upon the shareholders’ approval atthe AGM.

The Nomination Committee andRemuneration and EstablishmentCommittee (REC) make recommendationsto the Board with regard to theappointment, compensation and benefitsof the Executive Directors. In arriving atits decision, the REC takes into accountthe need to “attract and retain” talentsand at the same time strives to linkrewards to the Group and individualperformance as embodied in theindividual scorecards.

The remuneration package of all Directorsis subject to regular monitoring to ensurecompensation levels are appropriate andreflective of market conditions.

The remuneration/benefits package ofpersonnel in the Senior Management ranksis basically determined by their respectivejob band positions. Share optionentitlements (which have to be paid for)

STATEMENTONCORPORATEGOVERNANCE

CONTINUES ON PAGE 26

CORPORATE GOVERNANCE26

SHAREHOLDER AND INVESTOR RELATIONSThe Group recognises the significance of good communicationswith all its stakeholders. Towards this end, it is committed toproviding appropriate, timely and comprehensive informationto the market to enhance informed decision making and alsoin fulfillment of its transparency and accountability objectives.

An on-going dialogue is held with institutional shareholdersthrough regular meetings with Management while special butseparate briefing sessions are convened for the benefit ofmedia representatives and investment analysts/fundmanagers/rating agencies respectively on the occasion of therelease of the Group’s half year and full year results. Asidefrom the discussions on the financial performance itself,Management actively utilises these forums to update thewider audience on developments within the Group and toshare the broad direction and medium term strategies.

Every effort is also made to keep foreign stakeholdersinformed of the Group. This is executed principally throughthe participation of Senior Management in investment road-shows/forums organised by the leading global investmentbanks held in the major financial capitals of the world suchas New York, London, Singapore, Hong Kong and LosAngeles. In addition to this and to ensure impartiality in theflow of information, the Group has voluntarily invited ratingagencies to maintain an ongoing surveillance program on theCompany. As such, the Group is currently rated by Standard& Poor’s, Moody’s Investors Service, FitchRatings and theRating Agency Malaysia.

Interested parties can also access other relevant corporateinformation through the Group’s website www.maybank2u.com.Alternatively, they can source the same information from theCompany’s headquarters.

The Group also strives to utilise the AGM and EGM to establisha two-way communication channel with its shareholders. Inkeeping with the spirit of encouraging shareholder democracy/participation, shareholders’ approval is required on all materialmatters including the election/removal of Directors, mergers,acquisitions and disposals, appointment of Auditors, dividendpayments and amendments to the Memorandum and Articlesof Association. There are no substantive majority votingrequirements that effectively restrict shareholders rights.

As part of the effort to further strengthen the Investor RelationsProgram, the Group conducted a survey to assess stakeholderssentiments and expectations of the Group. The findings arebeing utilised as planning inputs for the implementation ofspecific initiatives in this area in the course of financial year2006. Among others, they include a customised investorrelations web site and improving the IT infrastructure with aview to expediting the flow of corporate information toexternal parties. The goal is to proactively shape and enhancethe trust and confidence of all stakeholders further.

CODE OF ETHICS AND CONDUCTThe Group has a Code of Ethics and Conduct relating tolawful and ethical dealings in the conduct of its business. Thegoverning principles are grounded in the Group’s Core Values.The Code expounds asset of behavioural principles that ismeant to act as a guide to all employees in their dealings withcustomers, employees and regulators in the communities inwhich the Group operates in. The Code is communicated toall employees upon recruitment.

FINANCIAL REPORTING AND DISCLOSUREMaybank is committed to providing a balanced and true viewof its financial performance/position and prospects in all itsreports to stakeholders and regulatory authorities. Towardsthis end, the financial statements of Maybank are prepared inaccordance with the Malaysian Accounting Standards Board,which is in line with International Accounting Standards (IAS).

The scope of the disclosures includes contributions by businesslines, geography, movements in asset quality parameters,financial strength/adequacy, review of past performance anddetailed explanatory notes to facilitate better understanding ofchanges in the data and overall comprehension. Related partytransactions are also listed.

As the Group operates in a number of foreign jurisdictions,the financial treatment of the combined accounts is based onthe more stringent requirements.

In discharging its fiduciary responsibility, the Board is assistedby the Audit Committee to oversee the financial reportingprocess and the quality the Group’s financial statements.

During the period under review, Maybank did not incur anypenalties for the erroneous or late submission of statutoryreports.

RISK MANAGEMENT AND INTERNAL CONTROLThe Board is entrusted with the ultimate responsibility ofmonitoring and supervising the Group’s business and financialactivities with a view to maximising value, enhancingprofitability and strengthening the business franchise. As eachof these objectives possesses its own inherent risk attributes,the Group has established a Group Risk ManagementFramework designed to facilitate the process of identifying,evaluating, quantifying and managing the associated risks.This framework is underpinned by policy statements, writtenprocedures and guidelines to manage the different riskdimensions. The effectiveness of the Group’s internal controlsystem is regularly reviewed by the Board, the RiskManagement Committee, Group Audit and the GroupManagement Committee.

The report on pages 33 to 39 describes in greater detail theGroup Risk Management structure.

AUDIT PROCESSMaybank has established a formal and transparent relationshipwith both the external and internal auditors through the AuditCommittee of the Board. The Committee receives reports onthe findings of external and internal audits and the status ofremedial actions taken in response to these findings.

The accounts of Maybank are audited by Messrs. Ernst andYoung. They are appointed by the shareholders on an annualbasis upon recommendation by the Audit Committee and theBoard of Directors. The external auditors finalise their auditplan for each year in consultation with the Audit Committee.They are also invited to attend meetings on special matters,when necessary. To ensure the independence and objectivityof the external auditors, the Audit Committee meets with theexternal auditors without any Management presence, at leastonce a year.

In the course of the financial year, other than the statutoryaudit, the external auditors provided tax advisory services.

CONCLUSIONHaving reviewed the practices and institutional framework/structures that are currently in place, the Board is of the viewthat with the exception of the disclosure of individualDirectors’ remuneration, Maybank has complied and observedthe substantive provisions of the Malaysian Code of CorporateGovernance. Throughout the course of the financial yearended 30 June 2005. The Board is of the opinion that, theinformation provided on pages A17 and A18 is sufficientlyadequate to establish Directors’ remuneration levels.

This statement is made in accordance to the resolution of theBoard of Directors dated 26 August 2005.

Tan Sri Mohamed Basir bin AhmadChairman of the Board

E

STATEMENTONCORPORATEGOVERNANCE

CORPORATE SOCIAL RESPONSIBILITYMaybank Group is committed to the communities andenvironment within which it operates. It is recognised that toensure the durability of the Group’s longer term relevance, itsstrategy orientation will need to look beyond the financialparameters.

In realisation of this objective, the Group leads and supportsimportant causes, such as education, community services,health, arts and culture, environment and sports. Theimportance of good corporate citizenship has beencommunicated to all employees and employee involvement infurthering social causes is encouraged. Plans are also afoot toincorporate a Community Index as a measure of publicperception of Maybank into the corporate Balanced Scorecard.

Further details on the discharge of the Group’s socialresponsibilities can be found on pages 44 and 45.

CORPORATE GOVERNANCE 27www.maybank2u.com

Statement onINTERNALCONTROLRESPONSIBILITY

THE BOARD ACKNOWLEDGES THEIR OVERALL

RESPONSIBILITY FOR THE GROUP'S INTERNAL CONTROL

ENVIRONMENT AND ITS EFFECTIVENESS. IT IS OF THE

VIEW THAT THE INTERNAL CONTROL FRAMEWORK IS

DESIGNED TO MANAGE RATHER THAN ELIMINATE THE

RISK OF FAILURE TO ACHIEVE THE POLICIES, GOALS

AND OBJECTIVES OF THE GROUP. IT CAN THEREFORE

ONLY PROVIDE REASONABLE ASSURANCE AND NOT

ABSOLUTE ASSURANCE OF EFFECTIVENESS AGAINST

MATERIAL MISSTATEMENT OF MANAGEMENT AND

FINANCIAL INFORMATION OR AGAINST FINANCIAL

LOSSES AND FRAUD.

The Board is additionally of theview that the system of internalcontrol in place for the year under review is sound and sufficient to safeguard

shareholders’ investments, customers’interests and the Group’s assets. The systemof internal control which has been institutedthroughout the Group is updated from time totime to suit the changes in the businessenvironment.

The role of Management is to implement the Board policies, on risk and control byidentifying and evaluating the risks faced anddesign, operate and monitor a suitable systemof internal controls and formulate relatedpolicies and procedures to manage these risks.

KEY PROCESSESThe key processes that the Directors haveestablished in reviewing the adequacy andintegrity of the system of internal control, areas follows:-

• An organisation structure with clearlydefined lines of responsibil ity andaccountability aligned to business andoperations requirements.

• The Group’s Code of Ethics which havebeen endorsed, documents formally themanner in which employees should conductthemselves in all business matters. Bookletsof the Code are distributed to all employees.

• The Group’s risk management principles,policies, procedures and practices aresystematically documented and madeavailable to all employees.

• Clear definition of limits of authority andresponsibilities has been approved by theboard and subject to regular reviews andenhancements.

• Under the Group’s Broad Principles for theManagement of Risks, Risk Taking Units,at the first level, are responsible for theday-to-day management of risks inherentin their business activities. Group RiskManagement, at the second level, isresponsible for setting the risk managementframework and developing tools andmethodologies for the identification,measurement, monitoring, control andpricing of risks. Complementing this, atthe third level, is Internal Audit, whichprovides independent assurance on theadequacy and effectiveness of the riskmanagement framework. Further informationon Group Risk Management, which includesOperational Risk Management, Credit RiskManagement and Market Risk Managementis highlighted on pages 33 to 39.

• The Board receives and reviews regularreports from the management on the keyoperating statistics, legal and regulatorymatters. The Board approves appropriateresponses or amendments in the Grouppolicies.

• The Group’s annual business plan andbudget are submitted to the Board forapproval. In addition, variances betweenactual and targeted results are alsoreviewed on a monthly basis. This wouldallow for timely responses and correctiveactions to be taken to mitigate risks.

CONTINUES ON PAGE 28

THE PURPOSE OF THE CODE IS TO:

1. Uphold the good name of Maybank and to maintain public confidence in Maybank;2. Maintain public confidence in the security and integrity of the banking system;3. Maintain an impartial and unbiased relationship between Maybank and its customers; and,4. Uphold the high standards of personal integrity and professionalism of Maybank staff.

THE CODE STIPULATES THAT STAFF SHOULD NOT:

1. Engage directly or indirectly in any business activity that competes or is in conflict with theBank’s interest.

2. Misuse or abuse their positions in the Bank for their personal benefit or for the benefit ofother persons.

3. Misuse information.

IN ADDITION TO THESE, STAFF SHOULD:

1. Ensure the integrity and accuracy of records and/or transactions2. Ensure fair and equitable treatment in all business dealings on behalf of the Bank.3. Maintain the highest standard of service in their relationship with customers.4. Maintain confidentiality of all relations and dealings between the Bank and its customers.

However, confidential information concerning a customer may be given or made available tothird parties only with prior written consent of the customer or when disclosure is authorisedunder the Banking and Financial Institutions Act, 1989.

5. Maintain the integrity of the banking system.6. Manage their financial matters well and not subject themselves to pecuniary embarrassment.7. Observe and comply with laws and regulations relating to the operations of the Bank. E

MAYBANK, AS A CUSTODIAN OF PUBLIC FUNDS, HASA RESPONSIBILITY TO SAFEGUARD ITS INTEGRITYAND CREDIBILITY. IT IS ON THIS UNDERSTANDINGTHAT THE ORGANISATION SETS OUT CLEARLY THECODE OF ETHICS AND CONDUCT FOR ITS STAFF. THECODE STIPULATES THE SOUND PRINCIPLES THATWILL GUIDE ALL MAYBANK STAFF IN DISCHARGINGTHEIR DUTIES. IT SETS OUT THE STANDARDS OFGOOD BANKING PRACTICE.

Code ofETHICS andCONDUCT

CORPORATE GOVERNANCE28

• The Group’s Internal Audit reports to theAudit Committee of the Board (ACB),performs regular reviews of the businessprocesses to assess the effectiveness ofthe control environment and highlightssignificant risks impacting the Group. Thescope and frequency of the audit activitiesare reviewed and endorsed by the ACBbased on the principles of risk based auditmethodology and regulatory requirements.The ACB has active oversight on theinternal audit’s independence, scope ofwork and resources.

• The ACB regularly reviews and holdsdiscussions with management on theactions taken on internal control issuesidentified in reports prepared by InternalAudit, the external auditors, regulatoryauthorities and the management.

• Besides the ACB, the Board has also setup several Board Committees to assist theBoard perform its oversight functions. For more details on the various BoardCommittees, please refer to pages 28 to 31.

• Management has also set up the GroupManagement Committee, Group ITSteering Committee, Internal AuditCommittee, Asset and Liability Committeeand Group Staff Committee as part of itsstewardship function to ensure effectivemanagement and supervision of the areasunder the respective Committee’s purview.

• Management, through the Internal AuditCommittee, is tasked to follow up andmonitor the status of actions onrecommendations made by the internaland external auditors. In addition, it candirect investigations in respect of anyspecific instances or events, which aredeemed to have violated internal policiespertaining to confidentiality or financialimpropriety, which has material impact onthe Group.

• The Group has set up a fraud reportinghotline where it is safe and acceptable forall employees to raise their concern

regarding fraud, dishonesty, abuse ofauthority, illegal acts or omissions, breachof duty or misconduct committed byanother employee or any persons who hasdealing with the Group. A person whowishes to raise a concern may do so viatelephone, email or write-in. All concerns/complaints lodged via the Fraud Hotlinewill be channeled to Risk Management andreceived by an employee of Grade VicePresident and above for further action, ifnecessary.

• There is a clearly defined framework ofempowerment approved by the Board foracquisitions and disposals of property,plant and equipment, awarding tenders,application for capital expenditure, writingoff operational and credit items, approvinggeneral expenses including donations aswell as operational expenses.

• The professionalism and competence ofthe Group’s human resources aremaintained through a rigorous recruitmentprocess, training and re-skilling programsand a performance appraisal system.There are proper guidelines drawn-up bythe Group for recruitment, promotion andtermination of staff.

MAYBANK MANAGEMENT CONTROLAND INTERNAL CONTROL POLICYThe Group Management Committee (GMC)had on 27 April 2005 adopted the ManagementControl Policy (MCP) and Internal ControlPolicy (ICP). The MCP is a written policy fromthe Management outlining the specificresponsibilities of the various parties pertainingto internal control for Maybank Group i.e theManagement, Internal Audit and AuditCommittee of the Board.

As for the ICP, it is to create awareness amongall the employees with regards to the internalcontrol components and the basic controlpolicy of Maybank Group. This would alsoserve as a guide to all employees as to whatis expected of them in the area of internalcontrols.

With the MCP and ICP, Maybank Group wouldbe able to articulate the seriousness ofManagement in maintaining a strong internalcontrol culture and framework. A strongmanagement and internal control culturewould set the right and appropriate controlenvironment for the Group.

REVIEW OF THE STATEMENT BY EXTERNAL AUDITORSThe external auditors have reviewed thisStatement on Internal Control for the inclusionin the annual report for the financial yearended 30 June 2005.

The external auditors conducted the review inaccordance with the “Recommended PracticeGuide 5: Guidance for Auditors on the Reviewof Directors’ Statement on Internal Control”(“RPG 5”) issued by the Malaysian Institute ofAccountants. The review has been conductedto assess whether the Statement on InternalControl is both supported by the documentationprepared by or for the Directors and

appropriately reflects the processes theDirectors had adopted in reviewing theadequacy and integrity of the system ofinternal controls for the Group.

RPG 5 does not require the external auditorsto consider whether the Directors’ Statementon Internal Control covers all risks andcontrols, or to form an opinion on theeffectiveness of the Group’s risk and controlprocedures. RPG 5 also does not require theexternal auditors to consider whether theprocesses described to deal with materialinternal control aspects of any significantmatters disclosed in the annual report will, infact, mitigate the risks identified or remedy thepotential problems.

Based on their review, the external auditorshave reported to the Board that nothing hadcome to their attention that caused them tobelieve that the Statement on Internal Controlis inconsistent with their understanding of theprocess the Board has adopted in the reviewof the adequacy and integrity of internalcontrol of the Group. E

Board CommitteesTHE BOARD HAS SET UP SEVERAL BOARD COMMITTEES TOASSIST THE BOARD AND CURRENTLY, THERE ARE SEVENBOARD COMMITTEES, EACH HAVING ITS OWN SUPPORTIVEROLE. TO KEEP THE BOARD INFORMED OF MATTERS TABLEDAND DISCUSSED AT THE RESPECTIVE BOARD COMMITTEES,THE CONFIRMED MINUTES OF EACH MEETING OF THEBOARD COMMITTEES ARE TABLED TO THE BOARD AT EACHBOARD MEETING. THIS IS ALSO TO PROVIDE THEOPPORTUNITY TO ANY MEMBER OF THE BOARD WHO DIDNOT SIT AS MEMBERS OF THE RESPECTIVE BOARDCOMMITTEES TO SEEK ANY CLARIFICATION, RAISE ANYQUERY OR PROVIDE HIS VIEWS ON THE MATTERSDISCUSSED BY THE SAID COMMITTEE.

COMPOSITION:In most Committees, the independent non-executive directors form the majority and mostindependent directors perform as Chairman ofthe various Committees. The Chairmanship ofRisk Management, Audit, Remuneration andEstablishment Committee and also theNomination Committees are headed byindependent non-executive directors.

It is the practice of the Board and the BoardCommittees that a member abstains from anyparticipation and decision of the Board or theBoard Committees which involved him, toavoid any conflict of interest.

ASSESSMENT OF EFFECTIVENESS:An assessment of the Board as a whole andalso the individual directors are made on anannual basis and in assessing theperformance of both the Board and theindividual directors, the effectiveness of theBoard Committees together with eachdirector’s contributions to the Board and theBoard Committees are considered as well.

1. The Strategic Planning Committee

The bank’s Chairman himself chairs theCommittee and the other membersconsist of four non executive directorsand the three executive directors.

STATEMENTONINTERNALCONTROL

CONTINUES ON PAGE 29

CORPORATE GOVERNANCE 29www.maybank2u.com

BOARDCOMMITTEES

Although the meetings are fixed for every two months, this Committee meets as and whennecessary. It is responsible for recommending to the Board the Group’s strategic direction,the operating plans, business strategies as well as the capital allocation by businesssegments, apart from being responsible for the management and policies relating toreputation, risk branding, public reputation as well as the bank’s image. This Committee alsomonitors the progress and benefit realisation of the key strategic initiatives undertaken bythe Group and the capital adequacy of the bank and its subsidiaries.

2. The Credit Review Committee

This Committee meets weekly to review loan applications above a certain level which hadbeen approved by the Credit Committee of the Management. The Credit Review Committeehas the right to veto any decision of the Credit Committee if necessary and also to look intoany required change in credit policy for recommendation to the Board. The Committee alsoreviews from time to time the total lending cap of companies which are granted facilities bythe bank and make its necessary recommendation to the Board.

3. The Risk Management Committee

The Committee is responsible for formulating policies, identifying, measuring, monitoring,managing and controlling the market risk, liquidity and operational risks. The responsibilitiesinclude ensuring policies and limit structures for Maybank.

This Committee meets at least every two months. The members of the Committee, thenumber of meetings held up to 30.6.2005 and their attendance were:-

Name of members Independent/Non-Independent No. of meetings and attendances

Raja Tan Sri Muhammad Alias bin Independent Non-Executive 9/9Raja Muhd. Ali Director (Chairman)

Tuan Haji Mohd Hashir bin Independent Non-Executive 9/9Haji Abdullah Director

Mr Teh Soon Poh Independent Non-Executive 9/9Director

4. The Nomination Committee

The Board delegates to this Committee, which functions on Group basis, the process forassessing existing directors and identifying, nominating, appointing and orientating newdirectors and thereafter making the necessary recommendation to the Board. The Committeealso recommends to the Board the appointment of any director as a member of any of theBoard Committees.

In line with the Code of Corporate Governance for reviewing of directors’ skills andexperience, the Committee looks into the effectiveness of a director’s contribution to theBoard, review the assessment of the Board’s performance and the individual director’sperformance are first discussed by this Committee prior to discussion at the Board level. Theassessment is to upgrade the effectiveness of Maybank Board and the Boards ofsubsidiaries. The Committee also recommends to the Board measures to be taken insituations where there are areas of conflict of interest with the directors.

This Committee meets as and when required and at an average of once for each financialquarter. The members of the Committee, the number of meetings held up to 30.6.2005 andtheir attendance being as follows:-

Name of members Independent/Non-Independent No. of meetings and attendances

Raja Tan Sri Muhammad Alias bin Independent Non-Executive 9/9Raja Muhd. Ali (Chairman)

Encik Mohammad bin Abdullah Independent Non-Executive 8/9

Datuk Abdul Rahman bin Non-Independent Non-Executive 9/9Mohd Ramli

Tuan Haji Mohd. Hashir bin Independent Non-Executive 8/9Haji Abdullah

Datuk Amirsham A Aziz Non-Independent Executive 8/9Director

Tan Sri Dato’ Megat Zaharuddin Independent Non-Executive 4/5bin Mohd Nor (appointed as a

member with effect from 25.11.2004)

5. The Remuneration and Establishment Committee

The Remuneration and Establishment Committee has a broad responsibility of recommendingto the Board, in line with corporate governance, the remuneration framework for thedirectors, the President and senior Management. This includes the determination ofremuneration packages for executive directors, to reflect their responsibility and commitment,based on the responsibilities undertaken and their contribution to the effective functioning ofthe Board. The Committee also recommends to the Board all policies relating to manpowerwithin Maybank Group, training programs for senior Management, the short and long termplan on incentives plans, performance management and management developmentprograms.

The Committee meets at an average of every two months to discuss various issues. Wherenecessary, special meetings are also held. The members of the committee, the number ofmeetings and their attendance for the financial year ended 30.6.2005 being as follows:-

Name of members Independent/Non-Independent No. of meetings and attendances

Encik Mohammad bin Abdullah Independent Non-Executive 9/10(Chairman)

Datuk Abdul Rahman bin Non-Independent Non-Executive 8/10Mohd Ramli

Raja Tan Sri Muhammad Alias bin Independent Non-Executive 10/10Raja Muhd. Ali

Mr Teh Soon Poh Independent Non-Executive 10/10

6. The Audit Committee

Headed by an independent non executive director as Chairman, this Committee meets at leastonce a month. Details of the Committee’s composition, roles and responsibilities and thenumber of meetings held during the financial year ended 30.6.2005 are provided in thisreport under the activities of the Audit Committee.

The composition of this Committee is reviewed every three years and it has been the bank’spractice to review and change the Chairman of this Committee every three years. The reviewalso covers the performance and terms of membership of the Committee.

7. The Employees Share Option Scheme (ESOS) CommitteeThis Committee assists the Board in determining all questions of policy and expediency thatmay arise in the administration of the ESOS and generally exercise all acts that are necessaryto promote the best interest of the Maybank Group. The Committee oversees theManagement’s implementation of the scheme and decides inter alia, on the offer, offer date,eligibility, basis of allotment, the exercise of the options, the administration, modification tothe scheme, dispute and termination issues in relation to the scheme, in line with the ESOSBye laws. Appeals by staff on ESOS issues are also looked into by the Committee. E