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CONTENTS

2 3 4 9 10 14 19 20 Corporate Information Chairmans Statement CEOs Statement Board of Directors Board of Directors - Profile Statement of Corporate Governance Risk Management Statement of Internal Audit and Internal Control 21 22 24 25 26 29 Management Reports Shariah Committee Ratings Statement Awards & Accolades Corporate Citizenship at Citi Valuing Our People 32 35 36 37 38 39 40 41 42 44 Directors Report Statement by Directors Statutory Declaration Shariah Committees Report Independent Auditors Report Statements of Financial Position Statements of Comprehensive Income Statements of Changes in Equity Statements of Cash Flows Notes to the Financial Statements

CORPORATE INFORMATION
Registered office 45th Floor Menara Citibank 165 Jalan Ampang 50450 Kuala Lumpur Date of incorporation 22 April 1994 Auditors KPMG

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CHAIRMANS STATEMENT
It is my pleasure to present the Bank's annual report for the financial year ending 31 December 2011. I would like to thank the members of the board and staff of Citibank for their commitment and support as we further strengthen our position as a leading financial institution in Malaysia. We can look back on 20 11 and be proud of a number of achievements. Our parent company Citigroup reported net income of $1 1 .1 billion for the full year 2011, an increase of 4% over 20 1 0. It was a solid full-year performance despite a very challenging fourth quarter due to depressed global market conditions. In Asia Pacific, our operational model has weathered tough times to deliver revenues of over $ 15 billion and net income of $4 billion for 2011. Our revenue was up by 5% over 20 1 0 and we remained the largest regional contributor to global revenue outside North America. In Malaysia, we operated under stable economic conditions as the fourth quarter of 2011 exceeded our expectations with 5. 2 % year-on-year GDP growth. Fiscal spending provided an effective buffer against the export slowdown and external supply disruptions. Government consumption growth accelerated to a 12-year high, private consumption remained buoyant and fixed investments growth continued to accelerate, driven by private sector and non-financial public enterprise capital spending. It is with great sadness that I report we lost one of our longest-serving directors of Citibank Berhad, Allahyarham YBhg Dato Haji Syed Sidi Idid who passed away in February 2012. Allahyarham joined Citibank Berhad in 2000 and was also the chairman of the Audit Committee and a member of the Risk Management and Nominating Committees. Apart from his outstanding work with Citibank Berhad, he also proudly worked in the civil service of Malaysia. On behalf of Citibank Berhad, we express our deepest sympathies and sincere condolences to YBhg Datin Noorashikin Abdullah and her family. In 20 1 2 , the Malaysian Government looks set to continue focusing on domestic demand and spending to maintain economic growth momentum and rebalance risk in response to an uncertain global economy. One significant development is Bank Negara Malaysias Guidelines on Responsible Financing. The Guidelines came into effect on 1 January to promote prudent, responsible and transparent retail financing practices, to ensure the credit market remains resilient, and to curb household debt. Measures include pegging loans to people's disposable net (instead of gross) income and limiting the tenure of car loans. These measures will likely cause the consumer loans sector slowdown to continue as Malaysians adjust their spending habits on big ticket items such as property and cars. 20 1 2 marks Citi's 200th anniversary. This milestone is our golden opportunity to further build trust and confidence in Citi's proud legacy and core principles that have stood us in good stead through two centuries. We will continue to drive excellence by being the bank that connects better - bringing people the best ideas and resources anywhere in an increasingly dynamic world. This means strengthening client relationships, reducing costs while remaining productive and efficient, and delivering the earnings that contribute to our capital strength. With our world-class team of employees and the right controls in place to protect our brand and reputation, I am confident we will deliver on our goals.

Jonathan Christian Larsen Chairman

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CEOS STATEMENT
Overview
In 20 11, the Malaysian Government responded to the deteriorating external outlook by supporting domestic demand with fiscal policy, with a renewed focus on consumer spending. Bank Negara Malaysia (BNM) took prudent pre-emptive measures to tighten mortgage lending to curb speculative property purchases and risky lending by banks. It also signalled BNMs concerns over the countrys high household debt. New credit card rules also came into effect for lower-income earners. The local banking sector demonstrated continued profitability, high levels of capitalisation and healthy growth in the loans sector. Overall, the industry remained relatively unscathed by the global financial crisis and widespread recession due to the strong fundamentals already in place. capital base as at 31 December 20 1 1 . The Bank's net interest income was RM1.20 billion in 20 1 1 while non-interest income increased to RM659 million in 20 1 1 from RM573 million in 2010.

Business Highlights in 20 11
Citibank achieved many business successes in 20 11 despite increased competition following the introduction of more liberalisation measures in the financial industry in 2010. We continued our relentless drive to implement major innovation and campaigns across our different product lines and financial services that cemented our position as one of the leading foreign banks in the country. Citi acted as the joint book runner for the multiple award winning Wakala Global Sukuk issued by Government of Malaysia. With a total issuance size of USD 2.0 billion in two separate tranches, the Wakala Global Sukuk is the largest sovereign Sukuk ever issued. Citibank went live on the Malaysian Electronic Payment System Sdn Bhd (MEPS) network for the first time in February. In addition to 1 .9 million Citibank and Visa ATMs in over 200 countries, customers now enjoy added convenience through access to over 1 1 ,000 ATMs nationwide through 20 MEPS member banks covering 2,000 locations nationwide. This completed the process started in 2005 when Citibank became the first foreign bank in Malaysia to gain complete access to the MEPS Interbank GIRO. We continued to strengthen the Citibank brand reputation for innovation in customer service with the launch of our first state-of-the-art Smart Banking branch, underlining our commitment to customers and its continued investments in Malaysia. The Citibank Smart Banking branch in Malaysia is also Citis largest smart banking branch in the region.

The Year in Review


Citibank registered a positive performance in 2011. The Banks strong performance was contributed by high levels of capital, liquidity and operating cash flows. For the financial year ended 31 December 2011, the Bank registered a pre-tax profit of RM855 million, compared with RM834 million achieved the previous year. We focused our initiatives mainly on investing in infrastructure, growing talent and building our brand. Total net income was RM1.89 billion in 2011, a marginal increase from 2010. The Bank's return on equity before tax decreased to 22.4% for the financial period ended 31 December 20 1 1 compared with 24.2% in 2010. Our liquidity continues to be exceptionally strong, with cash and short-term funds and placements with financial institutions in excess of RM13.5 billion. The bank's risk weighted capital adequacy ratio stood at a comfortable 15.3% (before dividend), based on its audited

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C E O S S TAT E M E N T
For more than 50 years, we have retained our position as one of the leading foreign banks in Malaysia by engaging and listening to our customers and bringing unparalleled value to our Malaysian clients. As a franchise, we strategically leverage on our global reach, expertise and capabilities to adapt, innovate and provide best-in-class financial solutions and services. We retained our leadership positions in credit cards, FX Options, Government Bond Trading, Securities Clearing & Settlement, and Cash Management. We are also amongst the top three in the Wealth Management segment. 10 pairs of flight tickets with Premium Flatbeds to Korea. Another 10 members won Sen Heng vouchers worth a total of RM2,000 while another 10 card members were given 300,000 AirAsia-Citibank Rewards Points. We kept the benefits our customers expect as part of the Citibank lifestyle coming, starting with giving a pair of exclusive backstage passes each to 4 winners of the Citibank Meet Maroon 5 Backstage contest. In Johor Baru, 2 customers won a pair of tickets each to Seoul, Korea as part of the Citibank Credit Card JB City Square Shopping Campaign Contest. We partnered with MPH Group Malaysia to offer exclusive deals to our customers at the MPH 20 1 1 Carnival. We also collaborated with group-discount website, I Love Discounts on the three-month Big Deals Thursday campaign aimed at our customers and Facebook fans. Launched in conjunction with the year-end holidays and festivities, Citis Year End Rewards campaign marked the first time Citibank was concurrently present in 9 of the countrys biggest shopping malls in one campaign. Treats included premium gifts; instant redemption of gifts at Citibank booths with discounts of up to 55% at KLCC Suria and Queensbay Mall; and shopping, dining and entertainment offers at over 1 , 360 outlets nationwide. Customers with insufficient Rewards Points could charge the remaining balance to their credit cards to save on cash towards their holiday purchases. New customers who signed up during the campaign collected their card within an hour of application. They also enjoyed a RM150 cash back offer if they signed up for Citibank PremierMiles, Platinum, Cash Back Platinum or Shell Citibank Gold Credit Card. In recognition of our initiatives and performance in 2011, Citibank credit cards won 4 awards in the Visa Malaysia Bank Awards. Awards included excellence and innovation in launching new Visa products, effective marketing programmes and campaigns, highest purchase volume growth for both credit and debit products and best Visa programme innovation. Along with all the business improvements to its customer value proposition, the entire Cards industry had to adapt to significant changes as a result of new regulatory guidelines issued by the central bank. Majority of the changes have already been implemented, and the business is managing the policy changes while ensuring business growth momentum. Our ongoing leadership position can be attributed to our comprehensive range of payment product suite, innovative value propositions, compelling promotions and discounts, exemplary service, solid brand, strong and talented people as well as our global and regional presence.

Consumer Banking Credit Cards


Citibank Credit Cards maintained its leadership position in cards usage by enhancing its value proposition in two ways: introducing new products in line with the impact of the economic realities on our customers, and improving existing products to help them get more out of their credit card. Based on customers expectations and needs, we increased our value proposition with the introduction of two timely and relevant market leading products: the Shell Citibank Gold Credit Card and the Giant-Citibank Credit Card. These products have been designed to meet our customers increasing price sensitivity and demand for value for money in their shopping habits. With petrol being a compulsory item in most household budgets, our new Shell Citibank Gold Credit Card helped customers save and stretch their monthly budgets by offering the highest fuel rebate in the market. Malaysian drivers using the card could accumulate up to 8% rebate in savings on Shell fuels and all purchases in Shell Select or Kedai. We targeted the impact of rising food prices with the launch of the Giant-Citibank Credit Card which set new industry benchmarks with the highest rebates for daily grocery purchases in the market. By consolidating their monthly spend on the Giant-Citibank Credit Card, customers earned up to 5% rebate on purchases made at Giant stores and up to 2% rebate on selected utilities and dining spending. Additional benefits include exclusive member prices, extra rebates during special occasions, festive seasons and new store openings; and discounts and privileges at over 40,000 local and global merchant partners outlets. Citibank also continued our commitment to building lasting credit card partnerships with major Malaysian brands. We started the year by strengthening our long-running partnership with Sen Heng, Malaysias leading consumer electrical and electronics retail chain store, with the Sen Heng Double Awards promotion. Through this promotion, Citibank card customers earned 2 to 3 times the number of Rewards Points which helped them obtain other products without spending additional cash. In May, we celebrated the third anniversary of the AirAsia-Citibank credit card by presenting 10 winners with

Retail Banking
In an increasingly competitive market, we have consistently stayed one step ahead of our competitors through our unparalleled expertise in and commitment to understanding customers needs and matching our products to their needs. We increased our revenue and client base by double digits, which helped further strengthen our market share and

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C E O S S TAT E M E N T

ranking in the Wealth Management industry. We remain the market leader for unit trust among the institutional unit trust agents in the country and we continue to take steps to enhance our Global Banking capabilities through services including Global View of Accounts (GVA) and Citi Global Transfer (CGT) in order to continue meeting our clients needs in this area. In July, Citigroup First Investment Management Ltd. and HwangDBS Investment Management Bhd. launched the HwangDBS China Select Fund. This first-of-its-kind feeder fund allowed qualified Malaysian investors who were risk tolerant, seek capital appreciation and have a long-term investment horizon, to benefit from the expertise of Chinas leading asset management company and the growth opportunities of China companies listed locally and globally. The HwangDBS China Select Fund was exclusively distributed by Citibank Berhad during the initial offer period from 11 July to 31 July. Our first Smart Banking branch at Menara Citibank redefined the way we interact with our clients, aligned with our commitment to be at forefront of innovation leveraging new technologies to make banking simpler, more informative and readily accessible when and where customer need or want it. The Smart Banking branch is equipped with cutting edge facilities such as the Citi Interactive Media Wall that displays a diverse range of information; the Citi Work Bench that allows customers to conduct certain banking transactions independently; and Citi video conferencing facility that customers can use to obtain expert opinion from Citibank specialists. We also built a state-of-the-art Citigold centre with 17 private consultation rooms and dedicated tellers to exclusively service the wealth management needs of Citigold clients.

Institutional Clients Group Global Transaction Services Treasury and Trade Solutions
Citis corporate clients continued to benefit from the operational efficiency, control and security offered by our cash management platforms and solutions. Momentum remained strong and we leveraged our global network and ongoing investment in technology to build and deepen our wallet share across a broad segment of clients including local corporate, multinational corporations and financial institutions. Citi continued to play an important role in the drive to migrate to electronic payment channels, launching new services for SOCSO and Lembaga Hasil Dalam Negeri statutory payments. Citi experienced significant growth in trade financing volume by facilitating intra-Asia trade for our clients. Citi was able to offer our corporate clients innovative, end-to-end trade solutions which enabled our clients to expand their own sales network and better manage their working capital cycles. The bank once again won accolades for Best Foreign Cash Management Bank in Malaysia by Asiamoney and Best Domestic Trade Finance Bank by Euromoney in industry polls conducted by these publications respectively.

Securities Services
Citis Securities and Fund Services (SFS) experienced strong growth in both Asset Under Custody (AUC) and transaction volumes with improved market condition and various local mandates won. SFS continued its success in the public sector which saw 2 more significant deals implemented, elevating Citis standing as the preferred custodian in this category. During the year Citi participated actively in the development of a number of market initiatives, including the Central Matching Facility and Securities Borrowing and Lending Negotiated Transaction program. On the client service front, Citi was top-rated in the 2011 Global Custodian Emerging Markets survey. Citi was the only Malaysian custodian to achieve top scores in all the client segments (Leading Clients, Cross Border Clients and Domestic Clients) in the survey.

Mortgage
Bank Negaras 20 10 introduction of measures to regulate the mortgage industry with new regulations such as Product Transparency guidelines and LTV controls to ensure the mortgage industry stayed relatively healthy, stable and fair. As the regulators become more conscious about household debt, we observe prudent lending guidelines slowly being introduced to the market. In 20 11, we continued our strategy to focus on cross-selling of Mortgages into our existing customer base, building relationship with prime developers, improving the value-added proposition of our mortgage products and sustaining a high performing direct sales force. In October, we celebrated the first anniversary of LifeStyle, a unique value proposition to our Citibank Home Loan customers that gives home owners opportunities to save, enjoy, meet, learn, access and manage funds between accounts effectively. We will continue leveraging on LifeStyle to build customer loyalty, satisfaction and line usage.

Securities and Banking Global Markets


The markets business continued to deliver strong revenues on the back of trade and capital flows in 2011. Market conditions were challenging with the frequent risk-off sentiment triggered by the unravelling of further contagion with the European nations. Local conditions fortunately were for the most part unfazed by the European debt episode and with BNM continued to hike with a 0.25% increase in the OPR rate. FX & bond trading revenues enjoyed the lift from significant foreign portfolio inflows into the Malaysian bond markets, but

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C E O S S TAT E M E N T

our investment book was affected by further narrowing the interest-carry returns for MYR bonds. The bank continued its focus on providing innovative, leading-edge solutions to its clients, both for investments and hedging, resulting in continued healthy growth in derivatives and structured investments. Notable progress was made in 2011 on structured credit investments, namely credit linked notes which saw promising demand from our institutional investor clients. We continued to help customers in various services and industries manage commodity, FX and interest rate risks through the volatilities and event driven risk that was evident in much of 20 11. Our efforts also entailed affording unparalleled access to our clients to leverage our unique global footprint and harness the prowess of our network and various product platforms as clients considered investment opportunities around the globe across various product classes. Our preeminent position in government bonds and FX services was also reaffirmed by our clients in industry surveys.

Introduce 540 high school students from Kuala Lumpur and Penang to the basics of stock market and raise their financial management capabilities along side with investment knowledge through the Citi Stock Challenge. Equip low-income families living in poor housing in Kuala Lumpur with practical financial knowledge as part of a home improvement initiative led by Habitat for Humanity.

Our People
Our work would not be possible without the strength of a diverse and skilled workforce. Citibank ensures that our people are equipped with the support systems needed to realise their professional growth, make meaningful contributions and develop pride in their work. Throughout the year, we made good progress on delivering The Citibanker Differencer for our employees. The Leadership Enhancement & Accelerated Development (L.E.A.D) programme provided accelerated career development opportunities for 169 top-of-class employees across the board whose performance ranks in the 95th percentile. We hired 14 Management Associates and 27 Graduate Executives as part of our ongoing goal to attract the very best talent. Both mandatory functional and technical training was conducted totalling more than 23,000 training hours for 1,328 employees achieved. Apart from formal professional development, the success of the VOE programmes held throughout the year led to improvements across the franchise from 77% to 79%. The distinct perspectives of our employees all bring added value to our clients and customers, and with Citibanks strong tradition of employee volunteerism ensures that our collective passion and talents are put to use outside the workplace as well.

Islamic Banking Division


In 2011, Citi acted as the joint book runner for the multiple award winning Wakala Global Sukuk issued by Government of Malaysia. With a total issuance size of USD 2.0 billion in two separate tranches, the Wakala Global Sukuk is the largest sovereign Sukuk ever issued. The offering was well subscribed by investors globally, providing the Government of Malaysia with a diversified and attractive source of funding. For Global Transaction Services, Citi successfully inducted its first client for its Shariah compliant Custody and Fund Administration Services. It also successfully completed the implementation of a multi country Shariah compliant cash management solution for a Malaysian financial institution, further complementing the Governments effort to make Malaysia an international centre for Islamic Finance by providing critical support infrastructure to its participants.

Key Business Priorities for 20 12


Our key business priorities are as follows: Ensure diligent risk management practices with continuous emphasis on asset quality. Focus our investments on driving innovations and relevant value propositions for our customers. Drive operational efficiencies. Leverage our competitive advantage in global and emerging markets by providing intraregional connectivity through treasury, transactions services and wealth management. Strengthen our leadership positions in credit cards, and the affluent segment. Build our brand strategy to present our company in a powerful, consistent way and enhance customer delivery, satisfaction and retention. Continue to identify, build and develop talent.

Significant Events & Accolades


The bank achieved several firsts and a list of accolades, which is mentioned later in this report on page 25.

The Community We Work and Live In


A large aspect of our corporate citizenship in Malaysia focuses on helping consumers build their own financial capability by pairing financial education with access to appropriate products and services so they can save, wisely manage their money and weather setbacks. We received an investment in excess of USD200,000 from Citi Foundation and worked with partners to: Educate 24 million Malaysians through our Stretching Your Ringgit series of financial infomercials on ASTRO. In addition, we expanded this programme to include workshops on basic financial education for over 500 kindergarten children.

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Outlook for 20 1 2
Strong domestic demand, increased government spending and major projects will be the growth drivers for Malaysias economy this year. This is similar to the last three years where the economy had been driven by domestic demand. Malaysia has not been spared by global developments, especially those in Europe and the US, but with more than 50% of the countrys trade is with Asia, its export demand has been somewhat sustained. Household debt seems to be a more important factor driving rate decisions, as policymakers reiterate that macro-prudential measures will be ineffective if interest rates are not normalised. While headline inflation is expected to moderate in 2012, there is still upside risks to inflation emerging from supply disruptions as well as higher energy and commodity prices. Private consumption will be supported by stable employment conditions, income growth and public sector measures. Investment activity will be supported by the domestic-oriented industries, the commodity sector and the public sector. Citi is well-positioned to seize the opportunities rising from the market trends for our clients benefit and for the overall Malaysian economy. We will continue to maximise the value we already have such as our unmatched global presence and by creating new value through investments in people, technology and services.

Sanjeev Nanavati Chief Executive Officer

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BOARD OF DIRECTORS

From left to right - Ms. Khairatul Ilyana Kamaruddin (Company Secretary), Ms. Tang Wan Chee (Company Secretary), Mr. Terence Kent Cuddyre, Tan Sri Dato Hj Omar B. Ibrahim, Mr. Sanjeev Nanavati, Mr. Jonathan Christian Larsen, Ms. Agnes Liew Yun Chong, Dato Siow Kim Lun and Ms. Ho Li Chin (Company Secretary)

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Board of Directors - Profile

Mr. Jonathan Larsen is Citis Head of Consumer Banking for Asia Pacific. Citibank is Asia Pacific's pre-eminent retail bank and credit card issuer with over 32 million customer accounts and close to 700 branches in Asia Pacific in 14 countries. In 2011, Citibank reported revenues in its Asia Pacific Consumer Business of US$8 billion, accounting for close to 25% of Citis consumer banking revenues globally. Net income was US$1.9 billion, representing over 30% of Citibanks Consumer Banking net income globally. Citibank is the leading financial services brand in Asia. It has industry leading positions in credit cards and personal wealth management across the region. Mr Larsen also has oversight of Citi's Local Commercial Banking business covering the small and medium enterprises across Asia Pacific with sales of up to US$500 million. Appointed to his current role in October 2009, Mr Larsen is a member of Citi's Asia Pacific Executive Committee and Citis Global Consumer Management Committee. Mr. Larsen joined Citi in 1998 and has held various leadership roles across Asia Pacific. Prior to his current role, Mr Larsen was the Country Head and Citi Country Officer for Singapore and CEO of Citibank Singapore Limited, with oversight of the Institutional Clients Group, Consumer Banking and Global Wealth Management businesses. He assumed this role in September 2008, and concurrently held the position of Product Head for Consumer Banking in the ASEAN region. Under Mr Larsens leadership, Citi was named the Best Bank in Singapore by Euromoney in 2007 and 2009. During his tenure, Citi in Singapore also won the Best Bank Award from The Asset, the Best Foreign Commercial Bank Award from FinanceAsia and the Best Retail Bank Award from The Asian Banker. He was appointed in April 2005 as the Country Business Manager and CEO for Citibank Singapore Ltd. In this role, he was instrumental in transforming Citibanks presence from five customer touch points to over 800 and repositioning Citibank as a mainstream retail bank in Singapore. From August 2007, he assumed the additional role of Head of Citis Global Consumer Business across South East Asia. Prior to these roles, he was Head of Retail Banking in Asia Pacific and Head of Business Development. In this latter role he led a number of M&A transactions to expand Citi's business in Korea (acquisition of Koram Bank in 2004), China (investment in and strategic alliance with the Shanghai Pudong Development Bank in 2002) and Japan (acquisition of Diners Club Japan, 2000).

Before joining Citi, Mr. Larsen was a Principal in the Financial Services Group of global management consultancy firm Booz, Allen & Hamilton (now Booz & Co). Mr Larsen spent eight years with Booz, Allen, advising major financial institutions across Asia, Europe and the United States and was a recipient of the firms Professional Excellence Award. Mr. Larsen began his career at the insurance and banking operations of the National Mutual Group in Australia and New Zealand (now part of AXA). Mr. Larsen is Chairman of Citibank Berhad in Malaysia and a Director of Citibank Singapore Limited. He has also served as a member of the Advisory Board of the National University of Singapore Business School. In 2011 Mr Larsen was named by The Asian Banker magazine as Retail Banker of the Year for Asia Pacific. Mr. Larsen holds a Bachelor of Arts with Honours (First Class) from the University of Melbourne where he was awarded the Enid Derham Prize for 1987.

Mr. Jonathan Christian Larsen

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Board of Directors - Profile

Mr. Sanjeev Nanavati was appointed the Banks Chief Executive Officer on 5 October 2007. He is responsible for Citis retail banking, credit cards, corporate banking, investment banking, global transaction services, equities, fixed income and treasury activities in Malaysia. Prior to this appointment, he was Citi Malaysias Country Head for its Institutional Clients Group since 2005. Before moving to Malaysia, he was Managing Director and Global Head of Citigroup Depository Receipt Services based in New York and Hong Kong, responsible for all aspects of the ADR/GDR product offering globally. Mr. Nanavati joined the Citigroup Depository Receipt Services Management team in July 2001 and strategically repositioned the business, creating a differentiated value proposition for clients. Prior to joining Citigroup, he was the Head of Corporate and Investment Banking for 6 years at one of the largest international banks in India and prior to that worked for 12 years with a major U.S. bank in M&A and Capital Markets, working in the United States and Hong Kong. Mr. Nanavatis product experience extends across debt and equity capital markets; M&A and advisory; lending, cash management and trade; and more recently securities services. Mr. Nanavati holds an MBA Degree from Syracuse University in the United States. At present, he is the President for the American Malaysian Chamber of Commerce and also a Council member of the Association of Banks in Malaysia.

Tan Sri Dato' Hj Omar joined the Bank on 3 May 2000 as an Independent Non Executive Director. He serves as the Chairman of the Nominating Committee and the Audit Committee, and a member of the Risk Management Committee of the Bank. He is a Non-Executive Director of UEM Group Berhad and UEM Builders Berhad and also serves as a Non-Executive Director on the Board of KLCC (Holdings) Sdn Bhd, Cyberview Sdn Bhd, PNB Commercial Sdn Bhd and Selia Senggara Sdn Bhd. He has spent more than three decades serving the government as a civil engineer in the Public Works Department (PWD) of Malaysia and during this long tenure, he held many positions in the department, culminating in the position of PWD's Director-General from 1 9 96 to 1 9 9 9. Tan Sri Dato' Hj Omar has particular expertise in structural engineering and water supply engineering, his professional work experience has been varied though, including design assignments as well as project management to general management. He has been the President of The Board of Engineers Malaysia, The Malaysian Water Association and Malaysian Structural Steel Association at various times between 1988 and 1999. Tan Sri Dato' Hj Omar holds a Master of Science from the University of Southampton and a Bachelor of Engineering from the University of Malaya. He is a Fellow of the Institution of Engineers Malaysia and a professional engineer registered with the Board of Engineers Malaysia.

Mr. Sanjeev Nanavati

Tan Sri Dato Hj Omar B. Ibrahim

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Board of Directors - Profile

Dato Siow Kim Lun

Ms. Agnes Liew Yun Chong

Dato Siow Kim Lun is currently a board member of Kumpulan Wang Persaraan, UMW Holdings Berhad, W Z Steel Berhad, Eita Resources Berhad, Hong Leong Assurance Berhad and MainStreet Advisers Sdn Bhd. He is also a member of the Land Public Transport Commission. From 1993 to 2006, Dato Siow was with the Securities Commission (SC), where he has served as the Director of its Issues and Investment Division and the Director of its Market Supervision Division. He has also served as a member of the Listing Committee of Bursa Malaysia Securities Berhad from May 2007 to May 2009. Prior to joining the SC, Dato Siow has worked in the investment banking and financial services industry in Malaysia for over 12 years. Dato Siow holds an MBA from the Catholic University of Leuven, Belgium and a Bachelor of Economics (Hons) from the National University of Malaysia. He has also attended the Advanced Management Program at Harvard Business School. Dato Siow has been a director of Citibank Berhad since April 2007. He is presently the Chairman of the Banks Risk Management Committee and a member of the Nominating Committee and Audit Committee.

Ms. Agnes Liew Yun Chong was appointed as the Banks Non Independent Non Executive Director on 1 November 2010. She is also a member of the Risk Management Committee and Nominating Committee of Citibank Berhad. Ms. Agnes Liew is responsible for the Corporate Bank in Asia Pacific (excluding Japan and India). The Asia Pacific Corporate Bank is the coverage organization that delivers the full spectrum of product solutions and Citis extensive global network that spans over 100 countries, to institutional clients in Asia, including large public and private corporations. Ms. Agnes Liew joined Citi as a Management Associate in 1982 and during her career with Citi, has held a number of diverse key management positions in Risk and Banking in Asia Pacific. Between 2000 and 2003, she was the Corporate Bank Head of Singapore. In 2003, she was appointed Country Risk Manager of the Corporate and Investment Bank, Citi Taiwan. She subsequently moved into the Regional Risk Management Office in Asia Pacific and assumed the role of Head of Risk, ASEAN, Corporate and Investment Bank in 2005. Between 2007 and 2010, Ms. Agnes Liew led Global Subsidiaries Group in Asia Pacific (excluding Japan) and was responsible for the relationship coverage of global multinational subsidiaries across 16 markets. Under her leadership, the Global Subsidiaries Group in Asia has grown to be a significant pillar of the Global Banking franchise. During that time, she was also the Global Banking Head of ASEAN (ex Singapore), responsible for the relationship coverage of large corporate clients, including financial institutions. Ms. Agnes Liew holds an LL.B (Hons) from the University of Singapore and is a member of the Supreme Court of Singapore.

B b

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Board of Directors - Profile

Mr. Terence Cuddyre joined the Bank on 14 December 201 0 as a Non Independent Non Executive Director. He serves on the Audit Committee and Risk Management Committee of the Bank. He is currently Citigroup Country Officer for Brunei, a position which he assumed on 1 July 2009 and cluster head for Bangladesh, Sri Lanka and Brunei. Prior to that, he spent 4 years as the Head of Training for the Asia Pacific region (Citi Centre for Advanced Learning). He has also served as Citigroup Country Officer for Thailand (2002 2005) and was North Asia Regional Risk Officer (2000 2001 ). Mr. Cuddyre joined Citigroup in 2000 after 23 years with Bank of America. He held numerous international roles including Country Head of Ireland, Korea, Hong Kong and China. He also held several risk position in North America and Asia. He has also been active in the American Chamber of Commerce, serving on the boards in Hong Kong, Korea and China. In Thailand, he served as Chairman. Mr. Cuddyre holds a B.A. in Economics from University of California, Santa Barbara and a MBA from the Wharton Business School, University of Pennsylvania.

Mr. Terence Kent Cuddyre

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Statement of Corporate Governance


Statement of Corporate Governance
The Bank aspires to achieve the highest standards in ethical conduct by delivering our promise to clients, reporting our financial results accurately and transparently and maintaining full compliance with all laws, rules and regulations governing the Bank's business operations. The Bank has also taken the necessary steps to ensure conformity with Bank Negara Malaysia's (BNM) Guidelines on Corporate Governance for Licensed Institutions (Revised BNM/GP1).

Roles and Responsibilities


The primary responsibility of the Board of Directors is to provide effective governance in terms of the Bank's affairs for the benefit of all shareholders and also to balance the interests of different constituencies such as customers, employees, suppliers and the local community. Among other things, the Board also reviews and approves the Bank's strategic business plans annually, oversees the management of the business and monitors the Bank's actual performance against projections. The Board also ensures that the infrastructure, internal controls and risk management processes within the Bank remain robust and are implemented in a consistent and timely manner. In addition, the Board carries out various other functions and responsibilities as stipulated in the guidelines and directives issued by BNM from time to time. In relation to the requirements stated under the revised BNM/GP1, the Bank has submitted an application to BNM for deviation of Principle 10 (shareholders should be entirely independent of the management and that the CEO should derive authority only from the Board) and Principle 12 (regular communication to be held with shareholders). On 3 May 2006, BNM approved the Banks official request for the above-mentioned deviations. As the Bank falls under the global structure of Citi, the Board also ensures that the Bank adopts applicable Citi policies in relation to credit approval processes and operational manuals. As a mean to ensure the Bank has a beneficial influence on the economy of the local community, the Directors have a continuous responsibility to provide banking services and facilities that are conducive to a well-balanced economic growth.

Board Composition
The Board comprises six members. The following is the board line-up: Mr. Jonathan Christian Larsen Non-Independent Non-Executive Director/Chairman Mr. Sanjeev Nanavati Non-Independent Executive Director/Chief Executive Officer Tan Sri Dato' Hj Omar B. Ibrahim Independent Non-Executive Director Dato' Siow Kim Lun Independent Non-Executive Director Ms. Agnes Liew Yun Chong Non-Independent Non-Executive Director Mr. Terence Kent Cuddyre Non-Independent Non-Executive Director The individual profiles of the above mentioned directors are set out on pages 10 to 13 of this report. The composition of the Bank's Board of Directors is in compliance with the Revised BNM/GP1, which requires at least one-third of the board members to be independent directors. The presence of three non-independent non-executive directors and two independent non-executive directors enables the Bank to view all relevant issues objectively and in a balanced manner. This further enhances the accountability of the decision making process within Citibank Berhad. The presence of the non-executive directors is also beneficial as it provides room for new perspectives and ideas that could help improve the effectiveness and efficiency of the Board on the whole. The revised BNM/GP1 guideline stipulates the need for a maximum of one Executive Director in the Bank's Board of Directors line-up.

Frequency and Conduct of Board Meetings and Attendance


The Board of Directors meet at least six times a year in order to effectively discharge their duties as well as to comply with the revised BNM/GP1 guideline requirements. During Board meetings, the Directors are provided with an agenda, papers on the Bank's most recent financial performance, risk management reports, budgets, new business initiatives or product launches, Board committees meetings' minutes and updates on industry regulations or policy changes. The Board also receives business presentations on topical matters, subject to such requests. The Board meeting agenda and papers are distributed to all Directors prior to the scheduled meetings so as to grant them sufficient time to review all materials/issues that will be discussed during the actual meeting. This procedure goes a long way in ensuring that all Board meeting discussions as well as decisions made/taken, are meaningful and based on accurate facts and figures.

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Statement of Corporate Governance

The proceedings of all Board meetings are also taken down as official minutes and such minutes are later circulated for the Directors' perusal prior to confirmation during the following meetings. The attendance record for each of the Board member for the financial year ended 31 December 2011 is as shown below:
Number of Board Meetings Name of Director Mr. Jonathan Christian Larsen Mr. Sanjeev Nanavati Tan Sri Dato' Hj Omar B. Ibrahim Dato Siow Kim Lun Ms. Agnes Liew Yun Chong Mr. Terence Kent Cuddyre Dato' Syed Sidi Idid B. Syed Abdullah Idid
(Deceased on 2 February 2012 )

Number of Meetings Name of Audit Committee Member Tan Sri DatoHj Omar B. Ibrahim (Chairman)
(Appointed as Chairman of Audit Committee on 1 March 20 12 )

Held

Attended

5 5 4*

5 5 3

Dato Siow Kim Lun Mr. Terence Kent Cuddyre


(Appointed as Audit Committee member on 1 March 20 11)

Mr. Jonathan Christian Larsen


(Resigned as Audit Committee member on 28 February 20 12 )

Held 6 6 6 6 6 6 6

Attended 6 6 6 6 4 6 5

5 5

5 4

Dato Syed Sidi Idid B. Syed Abdullah Idid


(Deceased on 2 February 20 12 )

* Reflects the number of meetings held during the time the Director held office

All the Audit Committee members are non-executive directors of the Bank.

Terms of Reference
The Board has approved the terms of reference for the Audit Committee. The main objective of the Audit Committee is to review the financial position of Citibank Berhad, its internal controls, performance and findings of the internal and external auditors as well as to recommend appropriate remedial action (if necessary). The Audit Committee's main responsibilities are as follows:

Board Committees
The Board of Directors established several Board Committees to assist them in the overall management and supervision of the Bank's business operations. The committee members shall be appointed by the Board upon recommendation of the Nominating Committee. Each committee has its own written charter, clearly outlining the mission and responsibilities of the respective committee as well as well-defined terms of reference approved by the Board. Pursuant to the revised BNM/GP1 guideline, the Board is also required to establish the following additional committees besides the existing Audit Committee then: Nominating Committee Remuneration Committee Risk Management Committee

a. Ensure that the financial accounts are prepared in a timely and accurate manner with frequent reviews on the adequacy of provisions for contingencies, and bad and doubtful debts. b. Review the balance sheet and profit and loss account for submission to the Board of Directors and ensure the prompt publication of annual accounts. c. Review the annual financial statements before submission to the Board, focusing on: 1. Compliance with accounting standards and other legal requirements Changes in accounting policies and practices Significant issues and unusual events arising from the audit Going concern assumption Major judgemental areas

The Bank has since set up the Nominating Committee and Risk Management Committee. The Bank submitted an application to BNM for a waiver from establishing the Remuneration Committee. On 3 May 2006, BNM granted the Bank approval on the above application.

2. 3.

4. 5.

Audit Committee Composition and Frequency of Meetings


The Audit Committee was established in 1994. The attendance record for each Audit Committee member for the financial year ended 31 December 2011 is as shown below:

d. Conduct a complete review prior to publishing the annual report to ensure compliance with regulatory requirements. e. Review the effectiveness of internal controls, including the scope of the internal audit programme, its role, resources of the internal audit functions and ensure it has the

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Statement of Corporate Governance

necessary authority to carry out its work, internal audit findings as well as recommend action to be taken by management, whenever necessary. The reports of internal auditors and the Audit Committee should not be subject to the clearance of the Board of Directors. f. Evaluate appointment, performance and provide appraisal and feedback on the remuneration package offered to the chief internal auditor.

Number of Meetings Name of Nominating Committee Member Tan Sri DatoHj Omar B. Ibrahim (Chairman) Mr. Jonathan Christian Larsen Mr Sanjeev Nanavati Dato Siow Kim Lun Ms. Agnes Liew Yun Chong Dato Syed Sidi Idid B. Syed Abdullah Idid
(Deceased on 2 February 20 12 )

Held 2 2 2 2 2 2

Attended 2 2 2 2 2 2

g. Leverage on the Banks performance management and talent inventory development process in overseeing the performance evaluation of the internal auditors. h. Review with the external auditors, the scope of their audit plan, internal accounting controls, audit reports, assistance given by the management and its staff to the auditors as well as their findings and recommended action(s) to be taken. Select and recommend external auditors for appointment by the Board annually. i. Discuss problems and reservations arising from the interim and final external audits, including any matters the external auditors may wish to deliberate (in the absence of management, where necessary). Review external auditors letter to management and the latters response to the same.

The constitution of the Nominating Committee comprises four non-executive directors and one executive director.

Terms of Reference
The Board has approved the terms of reference for the Nominating Committee. The main objective of the Nominating Committee is to provide a formal and transparent procedure for the appointment of directors as well as assessing the effectiveness of individual directors, the Board as a whole and also the performance of the CEO along with other key senior management staff. The Nominating Committees main responsibilities are as follows: a. Review and assess the adequacy of the Banks Code of Conduct and other internal policies and guidelines and monitor that the principles described therein are being incorporated into the Banks culture and business practices. b. Establish minimum requirements for the Board, i.e. required mix of skills, experience, qualification and other core competencies required of a director. The Committee is also responsible for establishing minimum requirements for the CEO. The requirements and criteria should be approved by the full Board. c. Review the appropriateness of the size of the Board relative to its various responsibilities. Review the overall composition of the Board, taking into consideration factors such as business experience and specific areas of expertise of each Board member and make recommendations to the Board as necessary. d. Review and assess that the directors do not have any directorship(s) which could potentially result in conflict of interest(s). e. Recommend to the Board the number of committees required, identify their respective responsibilities, propose a suitable Chairperson as well as suggest ordinary members for the different committees. This includes advising the Board on committee member appointments and removal of such members from the relevant committees or from the Board, rotation of the committee members and Chairperson as well as proposals on individual committee structures and operations.

j.

k. Review related party transactions and identify any potential conflict of interest situation(s) that may arise within the Bank including any transactions, procedure or course of conduct which questions the integrity of the management. l. Review resignation letters from the external auditors of Citibank Berhad.

m. Select external auditors to be appointed by the Board, unless otherwise advised (such as not suitable for re-appointment supported by valid justifications/grounds). n. Review any external experts terms and scope of engagement, working arrangement with the internal auditors and reporting requirements to ensure these are clearly established. o. Leverage on the oversight provided by Regional Compliance Control or engage any external party to perform assessment on the continuing effectiveness of the internal audit function

Nominating Committee Composition and Frequency of Meetings


The Nominating Committee was established in 2006. The attendance record for each Nominating Committee member for the financial year ended 31 December 2011 is as shown below:

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Statement of Corporate Governance

f.

Assist the Board in developing criteria to identify and select qualified individuals who may be nominated for election to the Board, which shall reflect, at a minimum, all applicable laws, rules and governing regulations. This includes assessing directors for re-appointment before an application for approval is submitted to BNM. The actual decision as to who shall be nominated should be the responsibility of the full Board. Recommend to the Board qualified individuals to become members of the Board.

Risk Management Committee Composition and Frequency of Meetings


The Risk Management Committee was established in 2006. The attendance record for each Risk Management Committee member for the financial year ended 31 December 2011 is as shown below:
Number of Meetings Name of Risk Management Committee Member Dato Siow Kim Lun (Chairman) Tan Sri DatoHj Omar B. Ibrahim Ms. Agnes Liew Yun Chong Held 4 4 4 Attended 4 4 3

g.

h. Review and recommend periodically to the Board, the compensation structure for non-executive directors. i. Recommend to the Board the removal of a director/CEO from the Board/Management, if the director/CEO is ineffective, errant and negligent in discharging his responsibilities. Assess annually the effectiveness of the Board as a whole in meeting its responsibilities and the contribution of each director to the effectiveness of the Board, contribution of the Boards various committees and the performance of the CEO.

Mr. Terence Kent Cuddyre


(Appointed as Audit Committee member on 1 March 20 11)

3* 4

3 3

Dato Syed Sidi Idid B. Syed Abdullah Idid


(Deceased on 2 February 20 12 )

j.

* Reflects the number of meetings held during the time the Director held office

All the Risk Management Committee non-executive directors of the Bank.

members

are

k. Report annually to the Board with an assessment of the Boards performance and such assessment is conducted based on an objective performance criteria. Such performance criteria to be approved by the full Board. l. Leveraging on the Banks Performance Management and Talent Inventory development process in overseeing the appointment, management succession planning and performance evaluation of key senior management staff, except that (as recommended by Bank Negara Malaysia) the Committee shall play an active role in reviewing and recommending the nominees for the position of Chief Executive Officer, Chief Financial Officer and Chief Risk Officer.

Terms of Reference
The Board has approved the terms of reference for the Risk Management Committee. The main objective of the Risk Management Committee is to oversee the senior managements activities in managing credit, market, liquidity, operational, legal and other risk(s) while ensuring proper risk management process is properly in place and functioning well. The Risk Management Committees main responsibilities are as follows: a. Ratify the adoption of Citi risk management strategies, policies, and risk tolerance; and recommend the same for the Boards approval. b. Discuss with Management the Banks major credit, market, liquidity and operational risk exposures and steps that the Management has taken to monitor and control such exposures, including the Banks risk assessment and risk management policies. c. Assess the adequacy of risk management policies and framework in identifying, measuring, monitoring and controlling risks and the extent to which these are operating effectively. d. Ensure appropriate infrastructure, resources and systems are in place for actual risk management implementation, i.e. ensure staff responsible for implementing the risk management system perform their duties independently of the Banks risk taking activities.

m. Assess annually to ensure the directors and key senior management staff are not disqualified under section 56 of the Banking and Financial Institution Act 1989 (BAFIA). n. Plan and ensure all directors receive appropriate and continuous training program in order to keep abreast with the latest developments in the industry. o. Conduct an annual review of the Committees performance and report the results to the Board periodically, assess the adequacy of its charter and recommend changes to the Board as needed. p. Report regularly to the Board on the Committees activities. q. Perform any other duties and responsibilities expressly delegated to the Committee by the Board from time to time.

018

Statement of Corporate Governance

e. Periodically review management reports on risk exposure, risk portfolio, composition and other risk management activities. f. Review periodically with management, including independent Risk Officer, Head of Compliance and Legal Counsel, any correspondence(s) with or action by, regulators or governmental agencies, any material legal affairs of the Bank and the Banks compliance with applicable laws and regulations.

g. Report regularly to the Board on the Committees activities. h. Review annually and report to the Board on its own performance. i. Review and assess the adequacy of its charter annually and recommend any proposed changes to the Board for approval.

019

Risk Management
Please refer to Pillar 3 disclosure.

020

Statement of Internal Audit and Internal Control


Citibank Berhad's Board of Directors is responsible to establish and maintain adequate internal control over financial reporting standards and related issues. The Bank's internal control system is designed to provide reasonable assurance to the company's management and Board of Directors regarding the preparation and fair presentation of published financial statements in accordance with the provisions under the Companies Act 1965 and other applicable approved standards in Malaysia. All internal control systems no matter how well designed and implemented have inherent limitations. In view of the limitations, therefore, even the best of systems determined to be effective can only provide a reasonable assurance in relation to the preparation and presentation of financial statements. A comprehensive system of controls is maintained to ensure that all transactions are executed in accordance with the management's authorization, assets are safeguarded and that the financial records are reliable. The management also takes relevant steps to see that information and communication flows are effective and monitor the performance of internal control procedures. Citibank Berhad's risk management policies, procedures and practices set out the foundation to the risk architecture governing its business activities. The management conducts business monitoring initiatives and periodic self-assessment in accordance with the Risk and Control Self-Assessment/Operational Risk policy for all applicable businesses. Control system weaknesses resulting in corrective actions will be documented and escalated to the management for tracking purposes. Citibank Berhad's Internal Audit reports to the Audit Committee. It performs regular reviews of the business processes to assess the effectiveness of the control environment and highlights significant risks affecting the company. The scope of the audit activities are reviewed and endorsed by the Audit Committee while audits are carried out on a risk-based approach, to provide an independent and objective report on operational and management activities. The Audit Committee regularly reviews and deliberates with management on the actions taken on internal control issues identified in reports prepared by Internal Audit, the external auditors, regulatory authorities and the management themselves. The management of Citibank Berhad has also set up a Country Coordinating Committee, Business Risk Compliance and Control Committee, Legal Vehicle Committee, Asset and Liability Committee, Country Legal and Compliance Committee and Management Committee as part of its monitoring function to ensure effective management and supervision of the areas under the respective Committee's purview. Citibank Berhad has also adopted the Citi Code of Conduct which expresses the values that each employee is expected to appreciate and apply in their respective working life. Ethics hotlines are made available to employees who wish to voice concerns about suspected violations of law or industry regulation as well as actions that may fail to live up to the Bank's high standards of ethical conduct. The Bank has an internal policy prohibiting retaliatory actions against any individual for raising legitimate concerns or questions regarding ethical matters, or for reporting suspected violations.

021

Management Reports
The pre-set agenda, management reports and other ad-hoc proposals or applications are circulated to the Directors prior to the actual Board meetings. This enables the Board of Directors to assess the overall performance of the Bank and make sound management decisions. Management reports presented to the Board comprise the following: Economic Updates Business Plans Year to date Financial Performance Report Financial performance by major business segments Quarterly Performance Scorecard Comparative analysis of banks Semi-annual BNM Stress Tests Results Credit Risk Management Report Liquidity & Market Risk Management Report Quarterly Derivative Outstanding Report Minutes of Audit Committee meetings Minutes of Risk Management Committee meetings Minutes of Nominating Committee meetings Minutes of Shariah Committee meetings

022

Shariah Committee
Citibank Berhad's Shariah Committee is responsible for the provision of Shariah oversight in relation to Citibank Berhads Islamic Banking business operations and activities. For the year 20 11, the Shariah Committee met nine times. Additionally, individual Shariah Committee members participated in various business discussions where Shariah advice was required prior to full submission to the Shariah Committee. During the year, the Shariah Committee was expanded to 5 members in order to comply with the requirement of Bank Negara Malaysias new Shariah Governance Framework for Islamic Financial Institutions. The Shariah Committee also approved a new Shariah Control Manual in order to incorporate additional requirements of the new framework for Shariah governance. With regards to Shariah compliance review, Citibank Berhads Islamic Banking Division was subjected to a full Shariah audit conducted jointly by Citibank Berhads Country Compliance and Control unit together with the Citis Global Islamic Control unit. The Shariah Committee reviewed the findings of the Shariah audit and was satisfied with the report and its findings. No major compliance issues were identified. Citibank Berhads Shariah Committee effective from 1 June 20 1 1 included the following distinguished members: Al-Hadith, capital adequacy standard for Islamic Banks, and the workings of monetary policy in a dual banking system. He holds a Ph.D from the University of Southampton, England.

Professor Dr. Norhashimah Mohd Yasin


Dr. Norhashimah Mohd Yasin is a Professor of Comparative Banking Law at the Civil Law department, Ahmad Ibrahim Kulliyah of Law, International Islamic University of Malaysia. She regularly lectures, researches and presents papers at local and international seminars and conferences on the areas of Islamic Banking, Islamic insurance (Takaful), money laundering and terrorism financing. She has published articles in national and international journals. Her articles on Islamic Banking have also appeared in a book edited by Dato Syed Idid called Judicial Decisions Affecting Bankers and Financiers (published by the Malayan Law Journal). She is the author of two books, Legal Aspects of Money Laundering from the Common Law Perspective (published in 2007 by LexisNexis) and Islamisation/Malaynisation: The Role of Islamic Law in the Economic Development of Malaysia (published in 1996 by A.S. Noordeen). She is a contributing editor of the Annotated Statute on Anti-Money Laundering and Anti-Terrorism Financing Act 2001 and the Takaful Act 1984. She is a member of the Advocates and Solicitors Disciplinary Board and also sits on the Board of Trustees for Yayasan Asnita, a Non Governmental Organisation. She also conducts training for Bank Negara Malaysia, Labuan Financial Services Authority, commercial banks, developing financial institutions, insurance companies and legal firms in Malaysia and Brunei Darussalam. Professor Dr. Norhashimah holds a Ph.D in Law from the University of Warwick, England, and is a qualified Advocate and Solicitor of the High Court of Malaysia. She is also a certified legal translator.

Professor Dr. Abdul Ghafar Ismail/Chairman


Dr. Abd Ghafar Ismail has been a Professor in the Banking and Finance faculty of Universiti Kebangsaan Malaysia (UKM) since 2003. He is currently the Head of the Research Center for Islamic Economics and Finance and AmBank Group Resident Fellow for Perdana Leadership Foundation. A lecturer since 1987, he has vast experience in teaching Islamic economics courses such as Islamic banking; risk management in Islamic banking; financial economics; advanced macroeconomics; money, Zakat and real economy; money and capital market in Islam; Islamic economic system; Islamic economic analysis; and deposits and the financing operations of Islamic banking institutions. His work has been extensively published in several referred journals, among others, Review of Islamic Economics, Journal of Islamic Economics, Banking and Finance, Humanomics, International Journal of Islamic and Middle Eastern Finance and Management, Journal of Financial Services Marketing, International Research Journal of Finance and Economics and Qualitative Research in Financial Markets. His most recent book is Money, Islamic Banks and Real Economy, published by Cengage Learning. His papers have been presented in many international and local conferences including the International Seminar on Islamic Economics and Finance, IRTI International Conference and Malaysia Finance Association Conference. Professor Dr. Abdul Ghafar Ismails research interests include the learning process and growth theory, inter-temporal allocation of resources, learning economics from Al-Quran and

Associate Professor Dr. Shofian bin Ahmad


Dr. Shofian bin Ahmad is currently an Associate Professor with the Shariah Department at Universiti Kebangsaan Malaysia (UKM) where he specialises in Islamic transactions (Muamalat) and the Islamic economy. He is the Head of the Department of Shariah at the Faculty of Islamic Studies and has served in various administrative positions at the faculty since 1994. He supervises Ph.D. and Masters candidates at UKM and conducts doctoral and Masters level thesis assessments. He is also actively involved in research and is a Research Fellow at UKMs Institut Kajian Rantau Asia Barat. He is also extensively involved in publications as an article assessor for several academic journals. Associate Professor Dr. Shofian holds a Ph.D in Shariah and Law from the University of Malaya, Kuala Lumpur.

023

Shariah Committee

Mat Noor Mat Zain


Mat Noor Mat Zain is a member of the Citibank Berhads Shariah Committee where he has contributed his specialist knowledge of Fiqh Muamalah, Islamic contract law and Islamic family law and extensive research experience in the area of Islamic finance since May 2011. He is also a consultant for the Pakarunding initiative at Universiti Kebangsaan Malaysia (UKM) and an expert consultant for the Malaysian Governments JAWHAR programmes related to the provision of Fidyah and Kafarah manuals. He has presented numerous papers related to Islamic Banking and finance at both domestic and international levels and has been appointed consulting editor for The Journal Of Muamalat And Islamic Finance Research published by the Islamic Science University of Malaysia. In addition to his consulting and editorial work, he is a lecturer at the Department of Shariah at UKMs Faculty of Islamic Studies. He teaches several courses related to Muamalah and Islamic jurisprudence including Fiqh Muamalat, Islamic Finance, and The Principles of Islamic Jurisprudence. He has a Bachelors degree in Shariah Studies from the Islamic University of Medina, Saudi Arabia as well as a Masters in Islamic Studies (specialising in Muamalat) from the Faculty of Islamic Studies at UKM. He is currently pursuing his studies in the field of Islamic Contracts and is researching topics including Instruments of Islamic Hedging and Terms and Conditions in Standard Form Contracts.

regular speaker for Renungan, a religious programme that airs on THR Gegar radio. Fluent in Arabic, Nik Abdul Rahim bin Nik Abdul Ghani holds a Masters Degree in Shariah from UKM and a B.A (Hons) in Shariah from the Islamic University of Medina, Saudi Arabia. He is currently a doctoral candidate in the field of Islamic Finance at INCEIF.

Nik Abdul Rahim bin Nik Abdul Ghani


Nik Abdul Rahim Nik Abdul Ghani is a lecturer and former tutor at Universiti Kebangsaan Malaysia (UKM)s Department of Shariah at the Faculty of Islamic Studies. He is an expert consultant and speaker for the UKMs Centre for Islam and UKMs Islamic law-related training programmes. He is also a member of the committee of Klinik Hukum Syarak and Guaman Syarie, Department of Shariah. He is a member of the Research Center for Islamic Economics and Finance and has written in-depth research papers and articles on Shariah issues arising in Islamic Banking and finance. He is a published author featured in national and international journals, seminar proceedings and books. His most recent article, Maslahah as a Source of Islamic Transactions (Muamalat) has been recently published in UKMs Journal of Islamiyyat. He has written books on Islamic teaching and motivation and is a regular columnist for the popular magazine SOLUSI by Telaga Biru for which he writes the Maqasid Syariah (Objectives of Islamic Law) column. Apart from teaching, research and writing, he is actively involved in religious and academic activities, especially those related to economics and Islamic law, He participates in seminars and discussions conducted by Government agencies and Non Governmental Organisations (NGOs), gives religious speeches in the state of Selangor and appears on religious television programmes by major Malaysian broadcast networks including RTM, Media Prima and ASTRO. He is also a

024

Ratings Statement
RAM Rating Services Berhad (RAM) has, on 13 February 20 1 2, reaffirmed Citibank Berhads respective long and short term financial institution ratings of AAA and P1 with an outlook on the long term ratings remaining stable. Citibank Berhads ratings are premised on its entrenched market position in the consumer banking arena, strong funding and liquidity profile, sturdy profitability, and healthy capitalization.

Bank Rating Symbols and Definitions:


AAA A financial institution rated AAA has a superior capacity to meet its financial obligations. This is the highest long-term FIR assigned by RAM Ratings. A financial institution rated P1 has a strong capacity to meet its short-term financial obligations. This is the highest short-term FIR assigned by RAM Ratings.

P1

025

Awa r d s a n d Ac c o l a d e s
The following is a list of accolades received by the Bank throughout 20 1 1 :

Banking & Payments Asia Trailblazer Awards 2011


Product Excellence Awards (Citibank Premier Miles Credit Card)

Trade Finance
Best International Trade Bank in Malaysia (Highly Commended)

Readers Digest
Readers Digest Trusted Brands Award (Cards)

Visa Malaysia Bank Awards 2011


Largest Largest Highest Highest Payment Volume Visa Consumer Credit Payment Volume Visa Platinum Purchase Volume Growth Visa Platinum Purchase Volume Growth Visa Super Premium

Asiamoney Cash Management Poll


Best Foreign Cash Management Bank for Small Corporates Best Foreign Cash Management Bank for Medium Corporates Best Foreign Cash Management Bank for Large Corporates

Asiamoney FX Poll
Best Best Best Best for Overall FX Services for Innovative FX Products & Structured Ideas FX Prime Broking Services Single-Bank Electronic Trading Platform

Contact Centre Association of Malaysia & Frost & Sullivan


Best People Contact Centre (Gold Award) Best Contact Centre Professional (CPO Aria Putera Kamal) Best In-House Inbound Contact Centre above 100 seats (Silver Award)

Euromoney Trade Finance Survey


Best Domestic Trade Finance Provider (Malaysia)

20 1 1 Global Custodian Agent Banks in Emerging Markets Survey


Top Rated in all 3 client segments (Leading, Cross-Border/Non-Affiliated and Domestic)

Islamic Finance News Award 2011


Malaysia Deal of The Year- Wakalah Global Sukuk Sovereign Deal of The Year-Wakalah Global Sukuk

IFR Asia
Islamic Deal of The Year Award 2011

Finance Asia
Finance Asias Best Islamic Financing Award 2011

026

Corporate Citizenship at Citi

Managing money and using financial services can be complex and confusing for the average person because people have different financial priorities at different stages of their lives. Nevertheless, financial planning is essential for people who wish to remain financially stable and to build their assets. As a long-established advocate and practitioner of financial capability programmes, Citibank Berhads priorities balance the interests of our stakeholders with the risks and opportunities that affect our business. We continually engage with our stakeholders to keep abreast with their changing needs while keeping a constant watch on local and global economic conditions and concerns. We also collaborate with local partners to design relevant, timely and actionable programmes that offer support and accountability for consumers working towards their financial goals. In 2011, Citibank Malaysia received a philanthropic investment of US$210,000 from Citi Foundation to continue our efforts to provide free financial education for Malaysians. Our financial education programmes enable Malaysians to make the right financial decisions and develop effective financial habits to maintain and improve their standard of living and the future of their families in the face of rising costs of living.

Stretching Your Ringgit (Season 3)


In 2009, Citi launched our flagship financial education programme, Stretching Your Ringgit in collaboration with ERA Consumer Malaysia, Stretching Your Ringgit is a series of financial infomercials aired on national TV and radio stations which is now in its fourth season. 2011 saw the third season of Stretching Your Ringgit focusing on strengthening consumer financial literacy in line with the current global and national economic realities of rising costs of living in relation to stagnated incomes. It covered the basics of smart money management which audiences of previous years identified as priorities. A series of financial infomercials was aired on ASTRO television stations. Topics included Making do in-between Paychecks, Household Budgeting, Other Ways to Earn and Retirement Planning. These episodes were aired for a total of 122 times across eight major channels from August to the end of October to coincide with two festivals - Ramadhan leading up to Hari Raya and Deepavali. The radio infomercials covering Educating Children About Money, Keeping Credit in Check and Making Your Financial Plan were also broadcasted for a total of 164 times on three ASTRO radio channels. In total, Stretching Your Ringgit reached nearly 24 million Malaysians in 2011. A pre and post evaluation survey was conducted. On average, the survey showed an increase of 27.3% in participants recognition of the importance of, intent to take action, or positive behavioural change related to the 4 financial topics. Focus group discussions were conducted in several states in Peninsular Malaysia and participants agreed on the importance of financial education and improving their financial knowledge. The issues varied according to demographic groups. For housewives, their priority was inculcating financial literacy in their children. Young workers, on the other hand, worry about the increase in debt and have admitted to spending beyond their means. This years programme also expanded beyond the media campaign to include two additional components aimed at reaching the younger generation. One component was the pilot run of the My First Ringgit workshops which provided financial education classes for 598 kindergarten children. After the workshops, the kindergarten teachers facilitated conversations with parents to gauge improvements in their childrens financial behaviour. The post survey showed a 40.5% increase in children's ability to demonstrate basic financial knowledge. 31% of parents also reported an example of their children's improved financial behaviour such as the willingness to start saving. The second component was aimed at young workers. ERA conducted a baseline survey targeted at 1,002 young working adults to gain insight into the current status of financial literacy and behaviour which may lead them into bankruptcy. The survey results enabled stakeholders to identify opportunities and develop financial literacy programmes targeted at this segment. These programmes will be implemented in 2012. The survey data showed that many young workers were making choices that led them into financial problems. Some of the key findings from the survey indicated that 30 % of the respondents did not save regularly, 70 % of the respondents could only sustain for 4 months with their savings if they had to stop working, 37% never thought of retirement, more than 50 % of the respondents are not familiar with Credit Counselling and Debt Management Agency (AKPK), Central Banks website, and the Financial Mediation Bureau, 47% of the respondents can be considered as in serious debt and only 1 1 % of the respondents acquired financial knowledge from the education system.

027

Corporate Citizenship at Citi

Citi Stock Challenge


The Citi Stock Challenge programme is designed to introduce high school students in Malaysia to stock market fundamentals and to increase their financial literacy and investment knowledge. Every year, the Citi Stock Challenge provides hundreds of 16-year-old students with a golden opportunity to role-play as stockbrokers after learning the fundamentals of trading, market trends, and taking positions on counters. Teams of students form brokerage houses which use RM1,000 in seed money to trade in a simulated stock market comprising 20 stocks in the energy, manufacturing, trade, communications and hospitality sectors. Sekolah Menengah Kebangsaan Pusat Bandar Puchong from Kuala Lumpur, and Chung Ling High School and Sekolah Menengah Jenis Kebangsaan Convent Datuk Keramat from Penang emerged as the winners of the annual Citi Stock Challenge 2011. The three winning teams out-invested 33 schools and 540 students who participated in this years six-day programme held in Kuala Lumpur and Penang. 70% of the 250 students surveyed through the pre and post surveys demonstrated a significant increase in skills and knowledge on how a company operates and provides shares for public purchase, how stock prices change, the impact of news events and business trends on stock prices and the ability to analyse and interpret information when making investment decisions. Since the launch of Citi Stock Challenge in 2004, over 2,000 students from all over Malaysia have taken part in this challenge. The programme partner was Learning Society, a local non-profit organisation that promotes active learning. We would also like to thank American Chamber of Commerce for assisting us in the enrolment of the schools under their Young Enterprise programme.

028

Corporate Citizenship at Citi

The Habitat for Humanity Family Financial Education Programme


Habitat for Humanity Malaysia (HFH Malaysia) has been developing their Family Financial Education programme in partnership with Citi Foundation since 2010. This programme is designed to equip low-income Malaysian families with practical financial knowledge to help improve their home finances. The goal of HFH Malaysias programme is to inculcate two distinct financial capabilities in their target demographic. The first is the ability create and utilise a family and home improvement budget. The second is the ability to plan, save and use credit responsibly. Results from the impact assessment should see a 70% increase in the number of families utilising a family budget and demonstrating a commitment to saving part of their income. To achieve this goal, HFH Malaysia is leveraging on Citi Foundations expertise and guidance to develop a core financial curriculum that is tailor-made for the low-income Malaysian family. HFH Malaysia will then deliver this financial education curriculum to beneficiaries in partner communities. HFH Malaysia aims to roll out the Family Financial Education programme to their targeted households by the end of 2012. At present, a needs-based assessment is being conducted. A pilot test for a total of 50 families seeking housing improvement in the Klang Valley is also currently underway.

Global Community Day


More than 500 Citi Volunteers went out on streets to feed over 800 homeless citizens around the country in conjunction with Global Community Day on October 21, 2011. In their effort of feeding the poor, our Citi Volunteers together with our community partner Pertiwi collected donations for used clothes to be distributed to the homeless. They were fed hot meals, drinks, snacks and even provided with toiletries and medicine. Despite the heavy downpour of rain, it was a real eye-opener for the Citi Volunteers as they made way to reach out to the elderly, drug users and even children. Citi Volunteers from Penang branch partnered with KAWAN that was set up as a drop in center in 2007 to address the pressing needs of the homeless street based community.

029

Va l u i n g O u r P e o p l e

Best in Talent, Culture of Innovation, Attractive Rewards, Unparalleled Opportunities and Leading Edge Training these are the five distinct advantages of The Citibanker Difference that have made Citi the Employer of Choice for the best and the brightest. Throughout 2011, we continued our focus on delivering The Citibanker Difference for our employees. Now in its third year, the Leadership Enhancement & Accelerated Development (L.E.A.D) programme provided accelerated career development opportunities for 169 top-of-class employees across the board whose performance ranks in the 95th percentile. We help these star performers reach their fullest potential by providing unfettered access to mentors, cutting-edge training and development, networking opportunities, cross-functional/cross-business team challenges and personalised guidance from management. Our Management Associate (MA) and Graduate Executive (GE) programmes, which are designed to build general management and functional leadership pipelines, continue to attract the best talent in the market. This is due to their distinctive edge in ensuring that high potential hires have access to the best-in-class learning opportunities and development. In 20 11, we hired 14 Management Associates and 27 Graduate Executives. The Graduate Executives joined Citibank divisions as diverse as Cards, Customer Experience & Quality, Finance, Marketing, Operations & Technology, Retail Banking and Risk Management. As a genuine meritocracy, our reward and recognition structure is competitive, transparent, tied to quality of performance and

tailored to the needs of our people. This strategy saw employee turnover in our Cards division decrease in 20 1 1 as a result of an enhanced focus on employee value proposition, hiring, on-boarding and development. 20 1 1 was also the first year non-sales employees at levels G1 3, Q and R levels received bonuses through the newly implemented Success Sharing plan. At Citi, our key strengths are our global reach and diversity of businesses. Citibankers have unparalleled opportunities to hone their skills and talents within diverse international settings, making them some of the most versatile and well-rounded professionals in the world. To date, over 500 Malaysian Citibankers have pursued (or are currently pursuing) their careers overseas in various businesses and functions within the Citi world. In 2011, there were approximately 150 internal employee moves under Citis 2+3 policy. Of these moves, one Malaysian Citibanker was placed in Thailand for 6 months in the Mortgage division; Another moved to The Philippines for 6 months to train under the Risk Management division. We also successfully placed two candidates in Operations & Technologys Leadership Development Program in Dalian, China for their first-year assignment, followed by a move to Singapore for their second assignment. At present, overseas assignments are ongoing for eXcel, Fast-Trax and Tiger programme candidates in Hong Kong and Singapore. Investing in learning has always been the cornerstone of Citis approach to talent development. Citis consistent approach to training and development across the company ensures that we

030

Va l u i n g O u r P e o p l e

have a unified culture and set of standards that transcend business and product lines. Our developmental framework is driven by 3 core strategies: i. ii. On-the-Job experiences (70% of learning occurs by doing); Learning from others (20% learning occurs through relationships/exposure); and iii. Training programs (10% of learning occurs through formal education) Citibankers are also encouraged to identify areas for their personal career development through a structured Individual Development Planning (IDP) process. Citi also holds career events such as Career Week which provide information to Citibankers to help them to make informed decisions about their career with us. Citibankers are then furnished with customised training and opportunities in line with their professional needs under Citis human resource development framework. In 2011, Citis Human Resource department facilitated 102 training programmes totalling 23,448 training hours for 1,328 employees. This is over and above the mandatory functional and technical training that we already provide for all employees.

Apart from formal professional development, Citi culture is about working hard and playing hard. Throughout the year, a committee of dedicated Citibankers, many of whom are Voice of Employee (VOE) champions, organise employee engagement activities that strengthen the spirit of camaraderie amongst Citibankers. The popularity of the VOE programme of events is seen as VOE event attendance and involvement improved across the franchise from 77% to 79%. The 2011 events organised by the VOE were balanced between charitable efforts and social events. Charity projects included The Chariton initiative raised RM25,000 for Down Syndrome kids and Citis Breast Cancer Awareness Week raised more than RM10,000 for PRIDE, a NGO campaigning against breast cancer. Social events where Citibankers had the opportunity to show our care and support for each other in a relaxed and fun environment included Staff Appreciation Week, the Sports Carnival and the Treasure Hunt. At Citi, we do not simply settle for the best. We aim to make the best better.

FINANCIAL STATEMENT CONTENTS


32 35 36 37 38 39 40 41 42 44 Directors Report Statement by Directors Statutory Declaration Shariah Committees Report Independent Auditors Report Statements of Financial Position Statements of Comprehensive Income Statements of Changes in Equity Statements of Cash Flows Notes to the Financial Statements

032

Directors Report
for the year ended 31 December 2011 The Directors have pleasure in submitting their report and the audited financial statements of the Group and the Bank for the year ended 31 December 2011.

Current assets
Before the financial statements of the Group and the Bank were made out, the Directors took reasonable steps to ascertain that the value of any current assets, other than debts and financing, which were unlikely to be realised in the ordinary course of business, as shown in the accounting records of the Group and the Bank, have been written down to an amount which they might be expected to realise. At the date of this report, the Directors are not aware of any circumstances which would render the values attributed to the current assets in the financial statements of the Group and the Bank misleading.

Principal activities
The Bank is principally engaged in banking and related financial services that also include Islamic Banking business whilst the principal activities of the subsidiaries are stated in Note 12 to the financial statements. There has been no significant change in the nature of these activities during the financial year.

Results
Group and Bank RM000 Profit before taxation Taxation Profit after taxation 855,193 (165,330) 689,863

Valuation methods
At the date of this report, the Directors are not aware of any circumstances which have arisen which would render adherence to the existing methods of valuation of assets or liabilities in the financial statements of the Group and the Bank misleading or inappropriate.

Contingent and other liabilities Reserves and provisions


There were no material transfers to or from reserves and provisions during the year under review except as disclosed in the financial statements. At the date of this report, there does not exist: (a) any charge on the assets of the Group or the Bank which has arisen since the end of the financial year and which secures the liabilities of any other person, or any contingent liabilities in respect of the Group or of the Bank that has arisen since the end of the financial year other than in the ordinary course of business.

Dividends
Since the end of the previous financial year, the Bank paid a final ordinary dividend of 329 sen per ordinary share less tax at 25% totaling RM300 million (247 sen net per ordinary share) in respect of the year ended 31 December 2010 on 28 June 20 11. The final ordinary dividend recommended by the Directors in respect of the year ended 31 December 2011 is 329 sen per ordinary share less tax at 25% totaling RM300 million (247 sen net per ordinary share).

(b)

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

Bad and doubtful debts and financing


Before the financial statements of the Group and the Bank were made out, the Directors took reasonable steps to ascertain that actions had been taken in relation to the writing off of bad debts and financing and the making of provisions for impaired loans and financing, and satisfied themselves that all known bad debts and financing had been written off and adequate provisions made for impaired loans, advances and financing. At the date of this report, the Directors are not aware of any circumstances, which would render the amount written off for bad debts and financing, or the amount of the provision for impaired loans, advances and financing, in the financial statements of the Group and the Bank inadequate to any substantial extent.

Change of circumstances
At the date of this report, the Directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements of the Group and the Bank, that would render any amount stated in the financial statements misleading.

Items of an unusual nature


The results of the operations of the Group and the Bank for the financial year were not, in the opinion of the Directors, substantially affected by any item, transaction or event of a material and unusual nature. There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect substantially the results of the operations of the Group and the Bank for the current financial year in which this report is made.

033

Directors Report
for the year ended 31 December 201 1

Compliance with Bank Negara Malaysias expectations on financial reporting


In the preparation of the financial statements, the Directors have taken reasonable steps to ensure that Bank Negara Malaysias expectations on financial reporting have been complied with, including those as set out in the Guidelines on Financial Reporting for Financial Institutions and the Guidelines on Classification and Impairment Provisions for Loans/Financing.

Directors of the Bank


Directors who served since the date of the last report are: Jonathan Christian Larsen Sanjeev Nanavati Tan Sri Dato Hj. Omar Bin Ibrahim Dato Siow Kim Lun @ Siow Kim Lin Agnes Liew Yun Chong Terence Kent Cuddyre Dato Syed Sidi Idid Bin Syed Abdullah Idid (Deceased on 2 February 20 1 2 )

Directors interests in shares


The interests in the ordinary shares and options over shares of the Bank and of its related corporations of those who were Directors at year end as recorded in the Register of Directors Shareholdings are as follows: Number of ordinary shares of USD1 each At At 1 .1 . 20 1 1 * Bought Sold 31.12.2011 Shares in Citigroup Inc. Direct interests Sanjeev Nanavati Jonathan Christian Larsen Dato Siow Kim Lun @ Siow Kim Lin Agnes Liew Yun Chong Terence Kent Cuddyre Deemed interests Jonathan Christian Larsen

13,664 23,172 ** 900 8,576 1,786 **

8,561 17,516 1,536 199

6,730 29

22,225 33,958 900 10,112 1,956

38,792

6,730

45,522

Number of ordinary shares of USD1 each At 1.1.2011* Capital Accumulation Program/ Supplementary CAP/SEA in Citigroup Inc. Sanjeev Nanavati Agnes Liew Yun Chong Terence Kent Cuddyre 4,376 5,644 193 6,972 9,833 1,007 (8,561) (1,536) 114 2,787 13,941 1,086 Granted Vested At 31.12.2011

Number of options over ordinary shares of USD1 each At 1.1.2011/ date of appointment* Stock Option Plan in Citigroup Inc. Sanjeev Nanavati Jonathan Christian Larsen Agnes Liew Yun Chong Terence Kent Cuddyre 6,995 41,082 4,174 3,078 268 (295) 797 6,727 41,082 3,879 2,281 Granted Forfeited At 31.12.2011

None of the other Directors holding office at 31 December 20 1 1 had any interest in the ordinary shares and options over shares of the Bank and of its related corporations during the financial year. * Reverse stock split in May 2011, share numbers divided by 1 0. ** Opening balance has been restated

034

Directors Report
for the year ended 31 December 2011

Directors benefits
Since the end of the previous financial year, no Director of the Bank has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements or the fixed salary of a full time employee of the Bank) by reason of a contract made by the Bank or a related company with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest. There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Bank to acquire benefits by means of the acquisition of shares in or debentures of the Bank or any other body corporate apart from the Directors above who were granted options to subscribe for shares in the ultimate holding company under various stock incentive and purchase schemes where the price and terms are as determined by the said schemes.

Issue of shares and debentures


There were no changes in the issued and paid-up capital of the Bank during the financial year. There were no debentures issued during the financial year.

Options granted over unissued shares


No options were granted to any person to take up unissued shares of the Bank during the financial year.

Auditors
The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Sanjeev Nanavati

Tan Sri Dato Hj. Omar Bin Ibrahim Kuala Lumpur Date: 1 March 2012

035

Statement By Directors
pursuant to Section 1 69 ( 1 5 ) of the Companies Act, 1965 In the opinion of the Directors, the financial statements set out on pages 39 to 133 are drawn up in accordance with the Companies Act, 1965 in Malaysia and Financial Reporting Standards issued by the Malaysian Accounting Standards Board as modified by Bank Negara Malaysia Guidelines so as to give a true and fair view of the financial position of the Group and the Bank at 31 December 2011 and of their financial performance and cash flows for the year then ended on that date. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Sanjeev Nanavati

Tan Sri Dato Hj. Omar Bin Ibrahim Kuala Lumpur Date: 1 March 2012

036

Declaration Pursuant
to Section 169 ( 16 ) of the Companies Act, 1965 I, Tang Wan Chee, the officer primarily responsible for the financial management of Citibank Berhad, do solemnly and sincerely declare that the financial statements set out on pages 39 to 133 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960. Subscribed and solemnly declared by the above named in Kuala Lumpur on 1 March 2012.

Tang Wan Chee

Before me:

Commissioner for Oaths

037

S h a r i a h Co m m i tte es Re p o r t
In the name of Allah, the Beneficent, the Merciful In compliance with the letter of appointment, we are required to submit the following report: We have reviewed the principles and the contracts relating to the transactions and applications introduced by Citibank Berhads Islamic Banking Division during the year ended 31 December 20 1 1 . We have also conducted our review to form an opinion as to whether the Citibank Berhads Islamic Banking Division has complied with the Shariah principles and with the Shariah rulings issued by the Shariah Advisory Council of Bank Negara Malaysia, as well as Shariah decisions made by us. The management of Citibank Berhads Islamic Banking Division is responsible for ensuring that the financial institution conducts its business in accordance with Shariah principles. It is our responsibility to form an independent opinion, based on our review of the operations of the Citibank Berhads Islamic Banking Division, and to report to you. We have assessed the work carried out by Shariah review and Shariah audit which included examining, on a test basis, each type of transaction, the relevant documentation and procedures adopted by the Citibank Berhads Islamic Banking Division. We planned and performed our review so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Citibank Berhads Islamic Banking Division has not violated the Shariah principles. In our opinion: 1. the contracts, transactions and dealings entered into by the Citibank Berhads Islamic Banking Division during the year ended 31 December 2011 that we have reviewed are in compliance with the Shariah principles; the allocation of profit and charging of losses relating to investment accounts conform to the basis that had been approved by us in accordance with Shariah principles;

2.

We, the members of the Shariah Committee of Citibank Berhads Islamic Banking Division, do hereby confirm that the operations of the Citibank Berhads Islamic Banking Division for the year ended 31 December 20 1 1 have been conducted in conformity with the Shariah principles.

On behalf of the Shariah Committee Chairman of the Shariah Committee:

Professor Dr. Abdul Ghafar Ismail Kuala Lumpur Date: 1 March 2012

038

Independent Auditors Report


to the members of Citibank Berhad

Report on the Financial Statements


We have audited the financial statements of Citibank Berhad, which comprise the statements of financial position as at 31 December 20 11 of the Group and the Bank, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and the Bank for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 39 to 133. Directors Responsibility for the Financial Statements The Directors of the Bank are responsible for the preparation of these financial statements that give a true and fair view in accordance with the Companies Act, 1965 and Financial Reporting Standards in Malaysia as modified by Bank Negara Malaysia Guidelines, and for such internal control as the Directors determine is necessary to enable the preparation relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entitys preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements have been properly drawn up in accordance with the Companies Act, 1965 and Financial Reporting Standards in Malaysia as modified by Bank Negara Malaysia Guidelines so as to give a true and fair view of the financial position of the Group and the Bank as of 31 December 2011 and of their financial performance and cash flows for the year then ended.

Report on Other Legal and Regulatory Requirements In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following: a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Bank and its subsidiaries have been properly kept in accordance with the provisions of the Act. We are satisfied that the accounts of the subsidiaries that have been consolidated with the Banks financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes. Our audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 1 74(3) of the Act.

b)

c)

Other Matters This report is made solely to the members of the Bank, as a body, in accordance with Section 1 74 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

KPMG Firm Number: AF 0758 Chartered Accountants

Ahmad Nasri bin Abdul Wahab Approval Number: 2919/03/12(J) Chartered Accountant

Petaling Jaya, Malaysia Date: 1 March 2012

039

Statements Of Financial Position


as at 31 December 2011 Group 20 1 1 N ote Assets Cash and short term funds Deposits and placements with banks and other financial institutions Securities purchased under resale agreements Financial assets held-for-trading Financial investments available-for-sale Loans, advances and financing Other assets Statutory deposits with Bank Negara Malaysia Deferred tax assets Investments in subsidiary companies Plant and equipment Total assets 5 6 7 9 10 11 12 13 3 4 11,968,440 1,516,673 1,218,993 2,336,849 5,225,508 20,357,257 1,306,012 398,080 796 120,905 44,449,513 10,481,033 811,660 404,417 1,852,463 3,105,488 19,480,745 1,317,760 59,300 108,781 37,621,647 11,968,420 1,516,673 1,218,993 2,336,849 5,225,508 20,357,257 1,306,012 398,080 796 20 120,905 44,449,513 10,481,013 811,660 404,417 1,852,463 3,105,488 19,480,745 1,317,760 59,300 20 108,781 37,621,647 RM000 20 1 0 RM000 20 1 1 RM000 Bank 2010 RM000

Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Bills and acceptances payable Other liabilities Total liabilities Equity Share capital Reserves Total equity attributable to equity holder of the Bank Total liabilities and equity Off-balance sheet exposures 36 17 18 121,697 3,897,658 4,019,355 44,449,513 79,632,078 121,697 3,493,778 3,615,475 37,621,647 81,239,637 121,697 3,897,658 4,019,355 44,449,513 79,632,078 121,697 3,493,778 3,615,475 37,621,647 81,239,637 16 14 15 30,051,586 7,777,097 63,761 2,537,714 40,430,158 28,788,863 2,322,925 47,982 2,846,402 34,006,172 30,051,586 7,777,097 63,761 2,537,714 40,430,158 28,788,863 2,322,925 47,982 2,846,402 34,006,172

The notes on pages 44 to 133 are an integral part of these financial statements.

040

Statements Of Comprehensive Income


for the financial year ended 31 December 2011 Group and Bank 20 1 1 Note Revenue Interest income Interest expense Net interest income Net income from Islamic banking operations Other operating income Total net income Other operating expenses Operating profit Allowance for loans, advances and financing Profit before taxation Tax expense Profit for the year Other comprehensive expense, net of income tax Net profit/(loss) on revaluation of financial investments available-for-sale Other comprehensive income/(expense) for the year, net of income tax Total comprehensive income for the year Profit for the year attributable to: Owner of the Bank Total comprehensive income attributable to: Owner of the Bank Earnings per share - basic (sen) 26 703,880 566 623,143 525 689,863 639,253 14,017 14,017 703,880 (16,110) (16,110) 623,143 25 24 23 37(o) 22 2(b) 20 21 RM000 2,402,424 1,713,571 (514,644) 1,198,927 29,670 659,183 1,887,780 (887,846) 999,934 (144,741) 855,193 (165,330) 689,863 2010 RM000 2,184,681 1,575,460 (391,890) 1,183,570 35,991 573,230 1,792,791 (758,190) 1,034,601 (200,995) 833,606 (194,353) 639,253

The notes on pages 44 to 133 are an integral part of these financial statements.

041

Statements Of Changes In Equity


for the financial year ended 31 December 2011 Attributable to owner of the Bank Non-distributable Share Note Group and Bank At 1 January 20 1 0 Fair value of available-for-sale financial assets Total other comprehensive expense for the year Profit for the year Total comprehensive (expense)/ income for the year Dividends to owner of the Bank Total contribution to owner 27 Capital RM000 121,697 Share Premium RM000 380,303 Statutory Fair Value Reserve RM000 121,697 Reserve RM000 9,480 (16,110) (16,110) (16,110) Distributable Retained Profits RM000 2,609,155 639,253 639,253 (250,000) (250,000) Total Reserves RM000 3,120,635 (16,110) (16,110) 639,253 623,143 (250,000) (250,000) Total RM000 3,242,332 (16,110) (16,110) 639,253 623,143 (250,000) (250,000)

At 31 December 20 1 0

121,697

380,303

121,697

(6,630)

2,998,408

3,493,778

3,615,475

At 1 January 20 1 1 Fair value of available-for-sale financial assets Total other comprehensive income for the year Profit for the year Total comprehensive income for the year Dividends to owner of the Bank Total contribution to owner At 31 December 20 1 1 27

121,697 -

380,303 -

121,697 -

(6,630) 14,017 14,017 14,017

2,998,408 689,863 689,863 (300,000) (300,000) 3,388,271

3,493,778 14,017 14,017 689,863 703,880 (300,000) (300,000) 3,897,658 Note 18

3,615,475 14,017 14,017 689,863 703,880 (300,000) (300,000) 4,019,355

121,697 Note 17

380,303

121,697

7,387

The notes on pages 44 to 133 are an integral part of these financial statements.

042

Statements Of Cash Flows


for the financial year ended 31 December 2011 Group 20 1 1 RM000 Cash flows from operating activities Profit before taxation Adjustments for: Amortisation of premium less accretion of discount of financial investments available-for-sale Allowance for bad and doubtful debts (net of write-back) Profit equalisation reserve Depreciation Dividends from unquoted investment securities Unrealised gain from revaluation of financial assets held-for-trading Gain from disposal of financial investments available-for-sale Loss on disposal of plant and equipment Operating profit before working capital changes Changes in working capital: Deposits and placements with banks and other financial institutions Securities purchased under resale agreements Financial assets held-for-trading Loans, advances and financing Other assets Statutory deposits with Bank Negara Malaysia Deposits from customers Deposits and placements of banks and other financial institutions Bills and acceptances payable Other liabilities Cash generated from/(used in) operating activities Income taxes paid Net cash generated from/(used in) operating activities 4,088,753 (162,621) (1,574,846) (222,611) 4,088,753 (162,621) (1,574,846) (222,611) (705,013) (814,576) (483,409) (1,021,253) 70,252 (398,080) 1,262,723 5,454,172 15,779 (314,601) 516,792 (404,417) 475,226 (1,235,317) (251,758) 5,200 (1,040,220) (1,371,985) (28) 716,483 (705,013) (814,576) (483,409) (1,021,253) 70,252 (398,080) 1,262,723 5,454,172 15,779 (314,601) 516,792 (404,417) 475,226 (1,235,317) (251,758) 5,200 (1,040,220) (1,371,985) (28) 716,483 144,741 3,204 35,713 (28) (977) (13,063) 1,023 1,022,759 200,995 9,164 32,775 (58) (917) (58,470) 178 1,015,178 144,741 3,204 35,713 (28) (977) (13,063) 1,023 1,022,759 200,995 9,164 32,775 (58) (917) (58,470) 178 1,015,178 855,193 833,606 855,193 833,606 20 1 0 RM000 20 1 1 RM000 Bank 2010 RM000

(3,047)

(2,095)

(3,047)

(2,095)

3,926,132

(1,797,457)

3,926,132

(1,797,457)

The notes on pages 44 to 133 are an integral part of these financial statements.

043

Statements Of Cash Flows


for the financial year ended 31 December 201 1

Group 20 1 1 RM000 Cash flows from investing activities Dividend from investment securities Purchase of plant and equipment Proceeds from disposal of plant and equipment Purchase of financial investments available-for-sale Redemption of financial investments available-for-sale Proceeds from disposal of financial investments available-for-sale Net cash (used in)/generated from investing activities 28 (49,183) 324 (7,311,535) 499,387 4,722,254 58 (79,781) 711 (7,068,298) 9,361,821 28 (49,183) 324 (7,311,535) 499,387 4,722,254 20 1 0 RM000 20 1 1 RM000

Bank 2010 RM000 58 (79,781) 711 (7,068,298) 9,361,821

(2,138,725)

2,214,511

(2,138,725)

2,214,511

Cash flows from financing activities Dividend paid to owner Repayment of subordinated loan Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December (Note 3) 11,968,440 10,481,033 11,968,420 10,481,013 (300,000) (300,000) (250,000) (400,000) (650,000) (300,000) (300,000) (250,000) (400,000) (650,000)

1,487,407 10,481,033

(232,946) 10,713,979

1,487,407 10,481,013

(232,946) 10,713,959

The notes on pages 44 to 133 are an integral part of these financial statements.

044

N o t e s To T h e F i n a n c i a l S t a t e m e n t s
Citibank Berhad is a public limited liability company, incorporated and domiciled in Malaysia. The address of both its principal place of business and registered office of the Bank is as follows: 45th Floor, Menara Citibank 1 65 Jalan Ampang 50450 Kuala Lumpur The consolidated financial statements of the Bank as at and for the year ended 31 December 2011 comprise the Bank and its subsidiaries (together referred to as the Group). The Bank is principally engaged in banking and related financial services that also include Islamic Banking business whilst the principal activities of the subsidiaries are as stated in Note 12 to the financial statements. The immediate holding company is Citigroup Holdings (Singapore) Pte. Ltd., a company incorporated in Singapore and the ultimate holding company is Citigroup Inc., a company incorporated in the United States of America. The financial statements were authorised for issue by the Board of Directors on 1 March 2012. Amendments to FRS 7, Financial Instruments: Disclosures Transfers of Financial Assets Amendments to FRS 1 1 2 , Income Taxes Deferred Tax: Recovery of Underlying Assets FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 20 12 Amendments to FRS 101, Presentation of Financial Statements Presentation of Items of Other Comprehensive Income FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 20 13 FRS 10, Consolidated Financial Statements FRS 11, Joint Arrangements FRS 12, Disclosure of Interests in Other Entities FRS 13, Fair Value Measurement FRS 119, Employee Benefits (2011) FRS 127, Separate Financial Statements (2011) FRS 128, Investments in Associates and Joint Ventures (2011) IC Interpretation 20, Stripping Costs in the Production Phase of a Surface Mine Amendments to FRS 7, Financial Instruments: Disclosures Offsetting Financial Assets and Financial Liabilities Amendments to FRS 7, Financial Instruments: Disclosures Mandatory Date of FRS 9 and Transition Disclosures FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 20 14 Amendments to FRS 132, Financial Instruments: Presentation Offsetting Financial Assets and Financial Liabilities FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 20 15 FRS 9, Financial Instruments (2009) FRS 9, Financial Instruments (2010) The Groups and the Banks financial statements for annual period beginning on 1 January 2012 will be prepared in accordance with the Malaysian Financial Reporting Standards (MFRSs) issued by the MASB and International Financial Reporting Standards (IFRSs). As a result, the Group and the Bank will not be adopting the above FRSs, Interpretations and amendments. B. Basis of measurement The financial statements have been prepared on the historical cost basis except as mentioned in the respective accounting policies notes. Functional and presentation of currency The financial statements are presented in Ringgit Malaysia (RM), which is the Groups and the Banks functional currency. All financial information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated.

1. Basis of preparation
A. Statement of compliance The financial statements of the Group and the Bank have been prepared in accordance with Financial Reporting Standards (FRS) as modified by Bank Negara Malaysia Guidelines, accounting principles generally accepted and the Companies Act, 1965 in Malaysia. The financial statements also incorporate those activities relating to Islamic Banking which have been undertaken by the Bank. Islamic Banking refers generally to the acceptance of deposits and granting of financing under the Shariah principles. The Group and the Bank have not applied the following accounting standards, amendments and interpretations that have been issued by the Malaysian Accounting Standards Board (MASB) but are not yet effective for the Group and the Bank: FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 July 20 1 1 IC Interpretation 19, Extinguishing Financial Liabilities with Equity Instruments Amendments to IC Interpretation 14, Prepayments of a Minimum Funding Requirement FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2012 FRS 124, Related Party Disclosures (revised) Amendments to FRS 1, First-time Adoption of Financial Reporting Standards Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters

C.

045

N o t e s To T h e F i n a n c i a l S t a t e m e n t s 1. Basis of preparation (continued)


D. Use of estimates and judgements The preparation of financial statements in conformity with the FRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements other than those disclosed in the following notes: Note 2(g) - Impairment losses on loans, advances and financing Collective impairment allowance for loan losses represents management's estimate of probable losses inherent in the portfolio. The allowance is available to absorb probable loan losses inherent in the overall portfolio. The allowance attributed to these loans is established via a process that estimates the probable losses inherent in the portfolio based upon various analysis. These include migration analysis, in which historical delinquency and credit loss experience is applied to the current aging of the portfolio, together with analysis that reflect current trends and conditions. Note 2(f) - Fair value estimation for financial assets and liabilities The determination of fair value for financial assets and liabilities for which there is no observable market price that requires the use of valuation techniques as described in accounting policy in Note 2(f)(vi). Note 19 - Actuarial valuation for employee benefits The liability for the defined benefit plan is recognised as the present value of the defined benefit obligation less the fair value of the Plans assets, plus unrecognised actuarial gain, less unrecognised past service cost and unrecognised actuarial losses as described in Note 2(o)(iii).

2. Significant accounting policies


The accounting policies set out below have been applied consistently to the periods presented in the financial statements, and have been applied consistently by the Group and the Bank, unless otherwise stated. A. Basis of consolidation i. Subsidiaries Subsidiaries are entities, including unincorporated entities, controlled by the Group and the Bank. Control exists when the Group and the Bank have the ability to exercise its power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. Investments in subsidiaries are measured in the Companys statements of financial position at cost less any impairment losses, unless the investment is held for sale or distribution. The cost of investments includes transaction costs. The accounting policies of subsidiaries are changed when necessary to align them with the policies adopted by the Group and the Bank. ii. Accounting for business combinations Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group and the Bank. The Group and the Bank have changed its accounting policy with respect to accounting for business combinations. From 1 January 20 1 1 the Group and the Bank have applied FRS 3, Business Combinations (revised) in accounting for business combinations. The change in accounting policy has been applied prospectively in accordance with the transitional provisions provided by the standard and does not have impact on earnings per share. Acquisitions on or after 1 January 20 11 For acquisitions on or after 1 January 2011, the Group and the Bank measure goodwill at the acquisition date as: The fair value of the consideration transferred; plus The recognised amount of any non-controlling interests in the acquiree; plus If the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; plus The net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

046

N o t e s To T h e F i n a n c i a l S t a t e m e n t s 2. Significant accounting policies (continued)


A. Basis of consolidation (continued) ii. Accounting for business combinations (continued)

iii. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. B. Revenue Revenue comprises of gross interest income, commission and other income derived from banking operations. C. Interest and financing income and expense Interest income and expense are recognised in the profit or loss using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or liability. The effective interest rate is established on initial recognition of the financial asset and liability and is not revised subsequently. The calculation of the effective interest rate includes all fees and points paid or received, transaction costs, and discounts or premiums that are an integral part of the effective interest rate. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or liability. Interest income and expense presented in the statements of comprehensive income include: Interest on financial assets and liabilities at amortised cost on an effective interest rate basis Interest on available-for-sale investment securities on an effective interest rate basis D. Fee and commission income Fee and commission income and expenses that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate. Other fees and commission income, including placement fees, account servicing fees, investment management fees, sales commission, are recognised as the related services are performed. When a loan commitment is not expected to result in the draw-down of a loan, loan commitment fees are recognised on a straight-line basis over the commitment period. When it is probable that a loan commitment will result in a specific lending arrangement, commitment fees are included in the measurement of the effective interest rate. Other fees and commission expense relates mainly to management and service fees, which are expensed as the services are received.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group and the Bank incur in connection with a business combination are expensed as incurred. Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. When share-based payment awards (replacement awards) are required to be exchanged for rewards held by the acquirees employees (acquirees awards) and relate to past services, then all or a portion of the amount of the acquirers repayment awards is included in measuring the consideration transferred in the business combination. The determination is based on the market-based value of the replacement awards compared with the market-based value of the acquirees awards and the extent to which the replacement awards relate to past and/or future service. Acquisitions between 1 January 2006 and 1 January 2011 For acquisitions between 1 January 2006 and 1 January 2011, goodwill represents the excess of the cost of the acquisition over the Groups and the Banks interest in the recognised amount (generally fair value) of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess was negative, a bargain purchase gain was recognised immediately in profit or loss. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group and the Bank incurred in connection with business combinations were capitalised as part of the cost of the acquisition. Acquisitions prior to 1 January 2006 For acquisitions prior to 1 January 2006, goodwill represents the excess of the costs of the acquisition over the Groups and the Banks interest in the fair values of the net identifiable assets and liabilities.

047

N o t e s To T h e F i n a n c i a l S t a t e m e n t s 2. Significant accounting policies (continued)


E. Net trading income Net trading income comprises gains less losses related to trading assets and liabilities, and includes all realised and unrealised fair value changes, interest, dividends and foreign exchange differences. F. Financial assets and liabilities i. Initial recognition and measurement A financial instrument is recognised in the statements of financial position when, and only when, the Group or the Bank becomes a party to the contractual provisions of the instrument. A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument. An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract. ii. Financial instrument subsequent measurement categories and Financial assets categorised as held-to-maturity investments are subsequently measured at amortised cost using the effective interest method. c. Loans and receivables Loans and receivables category comprises debt instruments that are not quoted in an active market. Financial assets categorised as loans and receivables are subsequently measured at amortised cost using the effective interest method. d. Available-for-sale financial assets Available-for-sale category comprises investment in equity and debt securities instruments that are not held for trading. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost. Other financial assets categorised as available-for-sale are subsequently measured at their fair values with the gain or loss recognised in other comprehensive income, except for impairment losses, foreign exchange gains and losses arising from monetary items which are recognised in profit or loss. On derecognition, the cumulative gain or loss recognised in other comprehensive income is reclassified from equity into profit or loss. Interest calculated for a debt instrument using the effective interest method is recognised in profit or loss. All financial assets, except for those measured at fair value through profit or loss, are subject to review for impairment (see Note 2(g)). Financial liabilities All financial liabilities are subsequently measured at amortised cost other than those categorised as fair value through profit or loss. Fair value through profit or loss category comprises financial liabilities that are held for trading, derivatives or financial liabilities that are specifically designated into this category upon initial recognition. Financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair value with the gain or loss recognised in profit or loss.

The Group and the Bank categorise financial instruments as follows: Financial assets a. Financial assets at fair value through profit or loss Fair value through profit or loss category comprises financial assets that are held for trading, including derivatives or financial assets that are specifically designated into this category upon initial recognition. Financial assets categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss. b. Held-to-maturity investments Held-to-maturity investments category comprises debt instruments that are quoted in an active market and the Group or the Bank has the positive intention and ability to hold them to maturity.

048

N o t e s To T h e F i n a n c i a l S t a t e m e n t s 2. Significant accounting policies (continued)


F. Financial assets and liabilities (continued)

v. Offsetting Financial assets and liabilities are offset and the net amount reported in the statements of financial position when, and only when, the Group and the Bank have a legal right to set off the amounts and intend either to settle on a net basis or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and losses arising from a group of similar transactions such as in the Groups and the Banks trading activity. vi. Fair value measurement Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arms length transaction on the measurement date. The determination of fair values of financial assets and financial liabilities is based on quoted market prices or dealer price quotation, for financial instruments traded in active markets without any deduction for transaction cost. The Group and the Bank also use widely recognised valuation models for determining the fair value of common and simpler financial instruments such as options and interest rate and currency swaps. For these financial instruments, inputs into models are market observable. The Group and the Bank use valuation techniques to determine the fair value of financial assets and liabilities where quoted prices in an active market are not available. The valuation techniques used for different financial instruments are selected to reflect how the market would be expected to price the instruments, using inputs that reasonably reflect risk-return factors inherent in the instruments. Depending upon the characteristics of the financial instruments, observable market factors are available for use in most valuations, while other valuations may involve a greater degree of judgement and estimation. The value produced by a model or other valuation technique is adjusted to allow for a number of factors as appropriate, because valuation techniques cannot appropriately reflect all factors market participants take into account when entering into a transaction. Valuation adjustments are recorded to allow for model risks, bid-ask spreads, liquidity risks, as well as other factors. Management believes that these valuation adjustments are necessary and appropriate to fairly state financial instruments carried at fair value on the statements of financial position.

iii. Regular way purchase or sale of financial assets A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned. A regular way purchase or sale of financial assets is recognised and derecognised, as applicable, using trade date accounting. Trade date accounting refers to: a. the recognition of an asset to be received and the liability to pay for it on the trade date, and derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a receivable from the buyer for payment on the trade date.

b.

iv. Derecognition The Group and the Bank derecognise a financial asset when the contractual rights to the cash flows from the financial assets expire, or when they transfer the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in which the Group and the Bank neither transfer nor retain substantially all the risks and rewards of ownership and they do not retain control of the financial asset. Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Group and the Bank are recognised as a separate asset or liability in the statements of financial position. On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset transferred), and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in profit or loss. The Group and the Bank derecognise a financial liability when the contractual obligation is discharged or cancelled or expired. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

049

N o t e s To T h e F i n a n c i a l S t a t e m e n t s 2. Significant accounting policies (continued)


G. Impairment i. Financial assets (excluding subsidiary companies) investment in For the purposes of the collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics by using a grading process that considers obligor type, industry, geographical location, collateral type, past-due status and other relevant factors. These characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the likelihood of receiving all amounts due under a facility according to the contractual terms of the assets being evaluated. In assessing the collective impairment, the Group and the Bank use methods as listed below depending on the loan portfolio:i) Statistical modeling of historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for managements judgement as to whether the current economic and credit conditions are such that the actual losses incurred are likely to be greater or less than suggested historical modeling. Default rates, loss rates and expected timing of future recoveries are regularly benchmarked against actual outcomes to ensure they remain appropriate; Based upon historical delinquency flow rates, charge-off statistics and loss severity, adjusted for managements judgement as to whether current economic and credit conditions are such that actual losses are likely to be greater or less than suggested by historical modeling.

At each reporting date, the Group and the Bank assess whether there is objective evidence that financial assets not carried at fair value through profit or loss are impaired. Financial assets categorised as held to maturity and loans and receivables are impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset, and that the loss event has an impact on the future cash flows on the asset that can be estimated reliably. Impairment losses are measured as the difference between the carrying amount of the financial assets and the present value of estimated cash flows discounted at the assets original effective interest rate. The Group and the Bank assess whether objective evidence of impairment exists individually for financial assets that are individually significant. For financial assets that are not individually significant, assessment of objective evidence of impairment is done individually or/and collectively. Objective evidence that a loan or a loan portfolio is impaired includes observable data that could include the following loss events: significant financial difficulty of the issuer or obligor; a breach of contract, such as a default or delinquency in interest or principal payments; it becomes probable that the borrower will enter bankruptcy or other financial reorganisation; observable data relating to a portfolio of financial assets such as: i) adverse changes in the payment status of borrowers in the portfolio; and ii) national or local economic conditions that correlate with defaults on the assets in the portfolio. the disappearance of an active market for a security.

ii)

Losses are recognised in the profit or loss and reflected in an allowance account against loans and advances. Under the revised policy issued by BNM on Classification and Impairment Provisions for Loan Financing, if the repayment conduct of the loan is past due for more than 90 days of either principal, interest or both, the loan shall be classified as impaired. The Group and the Bank apply this policy in addition to the above when determining if a loan is impaired. An impairment loss in respect of financial investments available-for-sale is recognised in profit or loss and is measured as the difference between the assets acquisition cost (net of any principal repayment and amortisation) and the assets current fair value, less any impairment loss previously recognised. Where a decline in the fair value of an available-for-sale financial asset has been recognised in the other comprehensive income, the cumulative loss in other comprehensive income is reclassified from equity and recognised to profit or loss.

If the Group and the Bank determine that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a separate collective assessment of impairment.

050

N o t e s To T h e F i n a n c i a l S t a t e m e n t s 2. Significant accounting policies (continued)


G. Impairment (continued) i. Financial assets (excluding investment in subsidiary companies) (continued)

An impairment loss in respect of unquoted equity instrument that is carried at cost is recognised in profit or loss and is measured as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Impairment losses recognised in profit or loss for an investment in an equity instrument is not reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, to the extent that the assets carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss. ii. Other assets The carrying amounts of other assets (except for deferred tax asset and assets arising from employee benefits) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the assets recoverable amount is estimated. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit). The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the profit or loss. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the other assets in the unit (groups of units) on a prorata basis. Impairment J. H.

losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised. Repurchase and resale agreement Securities purchased under resale agreements are securities which the Group and the Bank had purchased with a commitment to resell at future dates. The commitment to resell the securities is reflected as an asset on the statements of financial position. Conversely, obligations on securities sold under repurchase agreements are securities which the Group and the Bank have sold from its portfolio, with a commitment to repurchase at future dates. Such financing transactions and the obligations to repurchase the securities in its entirety are reflected as a liability on the statements of financial position. The securities sold under repurchase agreements are treated as pledged assets and continue to be recognised as assets in the statements of financial position. I. Cash and cash equivalents Cash and cash equivalents consist of cash and bank balances and short term funds that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value, with original maturity within one month. Cash and cash equivalents are categorised and measured as loans and receivables in accordance with policy Note 2(f) and carried at amortised cost in the statements of financial position. Plant and equipment i. Recognition and measurement Items of plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to its location and working condition for its intended use, and the costs of dismantling and removing the assets and restoring the site on which the assets are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

051

N o t e s To T h e F i n a n c i a l S t a t e m e n t s 2. Significant accounting policies (continued)


J. Plant and equipment (continued) i. Recognition and measurement (continued)

When significant parts of an item of plant and equipment have different useful lives, they are accounted for as separate items (major components) of plant and equipment. Gains and losses on disposal of an item of plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of plant and equipment and are recognised net within other income or other operating expenses respectively in the profit or loss. ii. Subsequent costs The cost of replacing part of an item of plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and the Bank and its cost can be measured reliably. The carrying amount of the replaced part is derecognised to profit or loss. The costs of the day-to-day servicing of plant and equipment are recognised in the profit or loss as incurred. iii. Depreciation Depreciation is calculated on the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group and the Bank will obtain ownership by the end of the lease term. The estimated useful lives for the current and comparative periods are as follows: building 40 years - 50 years installations 8 years - 14 years furniture and equipment 2 years - 10 years Depreciation methods, useful lives and residual values are reviewed, and adjusted as appropriate at end of the reporting period. K. Assets under lease i. Finance lease Leases in terms of which the Group or the Bank assumes substantially all the risks and rewards of ownership are classified as finance leases. On initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. ii. Operating lease Leases, where the Group or the Bank does not assume substantially all the risks and rewards of the ownership are classified as operating leases and, the leased assets are not recognised on statements of financial position. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred. L. Bills and acceptances payable Bills and acceptances payable represent the Groups and the Bank's own bills and acceptances rediscounted and outstanding in the market. M. Foreign currency Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at reporting period are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting date except for those that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments, which are recognised in other comprehensive income.

052

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

2. Significant accounting policies (continued)


N. Income tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in the profit or loss except to the extent that it relates to items recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statements of financial position and their tax bases. Deferred tax is measured at the tax rates that are expected to apply to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. A tax incentive that is not a tax base of an asset is recognised as a reduction of the expense in profit or loss as and when it is granted or claimed. Any unutilised portion of the tax incentive is recognised as a deferred tax asset to the extent that it is probable that future taxable profits will be available against which the unutilised tax incentive can be utilised. O. Employee benefits i. Short-term employee benefits Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short-term cash bonus or profit sharing plans if the Group and the Bank have a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. The Group and the Bank contribute to the Employees Provident Fund (EPF) for eligible employees on a monthly basis. Obligations for contributions to EPF are recognised as an expense in the statements of comprehensive income in the year to which they relate. Once the contributions have been paid, the Group and the Bank have no further payment obligations. ii. Defined contribution plan In addition to the contribution requirement by law, the Group and the Bank are contributing additional amounts for those employees eligible under the defined contribution plan. The contribution is made to Citibank Malaysia Official Staff Retirement Plan ("the Plan") and is recognised as an expense in the statements of comprehensive income as incurred. iii. Defined benefit plan The Bank and certain related companies contribute to the Citibank Malaysia Official Staff Retirement Plan ("the Plan") for eligible officers. Contributions are made based on an external actuarial report to the Plan, which is a defined benefit scheme and defined contribution scheme (as explained in item (ii) above), and is funded to the extent permitted by tax allowable Bank contributions. The amount recognised in the statements of financial position represents the present value of the defined benefit obligations adjusted for unrecognised actuarial gains and losses and unrecognised past service costs, and reduced by the fair value of the Plans assets. The benefit is calculated using the Projected Unit Credit Method in order to determine its present value. Any asset resulting from this calculation is limited to the net total of any unrecognised actuarial losses and past service costs, and the present value to any economic benefits in the form of refunds or reductions in future contributions to the fund. Amortisation of unrecognised gains or losses are included as a component of the annual expense for a year if, as of the beginning of the year, that cumulative net unrecognised gains or losses exceeds 10% of the greater of the Plans liability or value of the Plans assets. If amortisation is required, the amortisation is that excess divided by the expected average remaining working lives of the employees participating in the Plan.

053

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

2. Significant accounting policies (continued)


O. Employee benefits (continued) iii. Defined benefit plan (continued)

P.

Foreclosed properties Foreclosed properties are those acquired in full or partial satisfaction of debts, are stated at cost less accumulated impairment losses.

When the benefits of the Plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefit vests immediately, the expense is recognised in profit or loss. iv. Share-based compensation The Group and the Bank participate in equity-settled and cash-settled share based compensation plan for the employees that is offered by the ultimate holding company, Citigroup Inc.. The fair value of the services received in exchange for the grant of the options is recognised as an expense in the profit or loss over the vesting periods of the grant The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each reporting date, the Group and the Bank revise its estimates of the number of options that are expected to vest. It recognises the impact of the revision of original estimates, if any, in the profit or loss.

Q.

Provisions A provision is recognised if, as a result of a past event, the Group and the Bank have a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

R.

Deposits from customers and deposits and placements of banks and financial institutions Deposits from customers are stated at placement values and adjusted for accrued interest. Deposits and placements of banks and financial institutions are stated at placement values.

S.

Profit equalisation reserves (PER) PER is the amount appropriated out of the total Islamic Banking gross income in order to maintain a certain level of return to depositors which is as stipulated by Bank Negara Malaysia Circular on The Framework of the Rate of Return. PER is deducted from the total Islamic Banking gross income in deriving the net distributable gross income. The amount appropriated is shared by the depositors and the Group or the Bank.

3. Cash and short term funds


Group 20 1 1 RM000 Cash and balances with banks and other financial institutions Money at call and deposit placements maturing within one month 61,830 11,906,610 11,968,440 20 1 0 RM000 61,683 10,419,350 10,481,033 20 1 1 RM000 61,810 11,906,610 11,968,420 Bank 2010 RM000 61,663 10,419,350 10,481,013

4. Deposits and placements with banks and other financial institutions


Group and Bank 2011 RM000 Licensed banks 1,516,673 2010 RM000 811,660

054

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

5. Financial assets held-for-trading


Group and Bank 20 1 1 At fair value Malaysian Government Treasury Bills Malaysian Government Securities Malaysian Government Investment Issues Bank Negara Malaysia Bills/Notes Corporate Notes/Private debt securities RM000 101,468 1,004,580 13,572 1,217,229 2,336,849 2010 RM000 101,520 130,739 136,604 1,468,506 15,094 1,852,463

6. Financial investments available-for-sale


Group and Bank 2011 At fair value Malaysian Government Treasury Bills/Securities* Bank Negara Malaysia Bills Malaysian Government Investment Issues Yankee bonds/US bonds RM000 3,368,908 1,849,101 5,218,009 At cost Unquoted securities 7,499 5,225,508 7,499 3,105,488 2010 RM000 2,202,157 227,218 537,506 131,108 3,097,989

Malaysian Government Securities of the Group and the Bank amounting to RM130 million at 31 December 20 1 0 was utilised to meet the Statutory Reserve Requirement as further explained in Note 1 0.

055

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

7. Loans, advances and financing


i. By type Group and Bank 20 1 1 RM000 Overdrafts Term loans/financing - housing loans/financing - hire purchase receivables - lease receivables - other term loans/financing Bills receivable Trust receipts Claims on customers under acceptance credits Staff loans Share margin financing Credit cards receivables Revolving credit Other loans 298,496 9,192,709 1,592 698 1,474,378 954,240 15,671 1,125,751 94,091 182,814 5,951,843 1,676,429 3,491 20,972,203 Unearned interest and income Gross loans, advances and financing Less: Allowance for impaired loans, advances and financing - Collective assessment allowance - Individual assessment allowance Net loans, advances and financing (365,325) (219,436) 20,357,257 (369,357) (229,542) 19,480,745 (30,185) 20,942,018 2010 RM000 243,261 9,827,111 3,175 3,678 1,266,750 458,410 14,147 1,111,455 101,585 189,523 5,702,121 1,197,043 20,118,259 (38,615) 20,079,644

ii. By type of customer Domestic non-bank financial institutions - others Domestic business enterprises - small and medium enterprises - others Individuals Foreign entities 454,908 3,662,378 15,958,134 217,025 20,942,018 408,123 2,727,556 16,365,585 278,524 20,079,644 649,573 299,856

056

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

7. Loans, advances and financing (continued)


iii. By interest/profit rate sensitivity Group and Bank 20 1 1 RM000 Fixed rate Housing loans/financing Hire purchase receivables Other fixed rate loans/financing Variable rate BLR plus Cost plus 9,229,388 859,003 20,942,018 iv. By sector Primary agriculture Mining and quarrying Manufacturing (including agriculture based) Electricity, gas and water Construction Wholesale, retail trade, restaurants and hotels Transport, storage and communication Finance, insurance, real estate and business services Education, health and others Household - consumption credit - residential - purchase of securities - others Other sectors 6,501,532 9,001,842 182,813 271,947 277,365 20,942,018 6,246,231 9,623,221 189,523 306,610 371,754 20,079,644 105,178 18,991 2,409,876 86,890 45,704 921,901 301,573 800,246 16,160 35,022 7,708 1,710,646 32,295 46,104 840,970 137,600 512,027 19,933 9,825,153 385,803 20,079,644 823,612 1,592 10,028,423 887,577 3,175 8,977,936 2010 RM000

v.

By purpose Purchase of securities Purchase of landed property Purchase of fixed assets excluding land and building Personal use Credit card Construction Working capital Other purposes 182,813 9,584,491 5,406 660,946 5,951,859 22,009 4,446,136 88,358 20,942,018 189,523 10,243,017 9,545 698,800 5,702,122 8,562 3,214,786 13,289 20,079,644

057

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

7. Loans, advances and financing (continued)


vi. Residual contractual maturity Group and Bank 20 1 1 RM000 Maturing within one year One to five years Over 5 years 10,620,013 714,320 9,607,685 20,942,018 2010 RM000 6,711,434 3,099,068 10,269,142 20,079,644

vii. By geographical distribution Within Malaysia 20,942,018 20,079,644

8. Impaired loans, advances and financing


i. Movements in impaired loans, advances and financing are as follows: Group and Bank 20 1 1 RM000 At 1 January Classified as impaired during the year Reclassified as performing during the year Amount recovered Amount written off At 31 December Individual assessment allowance Net impaired loans, advances and financing Ratio of net impaired loans and financing to gross loans and financing less individual assessment allowance 1.31% 1.57% 540,814 727,676 (384,262) (231,379) (162,312) 490,537 (219,436) 271,101 2010 RM000 491,317 724,457 (325,418) (178,916) (170,626) 540,814 (229,542) 311,272

058

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

8. Impaired loans, advances and financing (continued)


ii. Movements in impairment provisions for loans, advances and financing are as follows (continued):

Group and Bank 20 1 1 RM000 Collective assessment allowance At 1 January (Written back)/Allowance made during the year, net At 31 December As % of gross loans, advances and financing less individual assessment allowance 369,357 (4,032) 365,325 360,407 8,950 369,357 2010 RM000

1.76%

1.86%

Individual assessment allowance At 1 January Allowance made during the period Written back during the year Written off during the year At 31 December 229,542 16,888 (19,418) (7,576) 219,436 221,588 34,644 (12,984) (13,706) 229,542

iii. Impaired loans, advances and financing by sector Primary agriculture Mining and quarrying Manufacturing (including agriculture based) Construction Wholesale, retail trade, restaurants and hotels Transport, storage and communication Finance, insurance, real estate and business services Household - consumption credit - residential - purchase of securities Other purposes 86,539 299,025 20,475 1,686 490,537 iv. Impaired loans, advances and financing by geographical distribution Within Malaysia 490,537 540,814 116,112 307,265 20,795 2,246 540,814 7,328 373 32,041 14,934 18,082 84 9,970 8,937 36,178 17,026 20,070 104 12,081

059

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

9. Other assets
Group and Bank 20 1 1 RM000 Interest/Income receivable Other debtors, deposits and prepayments Derivative assets (Note 30) Tax recoverable 66,174 414,094 820,647 5,097 1,306,012 2010 RM000 45,880 264,640 1,007,240 1,317,760

10. Statutory deposits with Bank Negara Malaysia


The non-interest bearing statutory deposits are maintained with Bank Negara Malaysia (BNM) in compliance with Section 37(1)(c) of the Central Bank of Malaysia Act 1958 (revised - 1994) to satisfy the Statutory Reserve Requirement (SRR), the amount of which is determined as a set percentage of total eligible liabilities. In accordance with BNMs circular titled Regulatory Treatment related to the Statutory Reserve Requirement Incentive for Principal Dealers and Islamic Principal Dealers issued on 10 July 2009, the Bank being a principal dealer appointed by BNM, is allowed to utilise Malaysia Government Securities (MGS) holdings to meet the SRR. As at 31 December 2010, MGS of the Group and the Bank with nominal amount of RM130 million are utilised for SRR determination purposes. These securities are classified under financial investments available-for-sale (Note 6).

11. Deferred tax assets


Deferred tax assets and liabilities are attributable to the followings: Plant and equipment Capital allowances RM000 At 1 January 2010 Recognised in profit or loss Recognised in other comprehensive income At 31 December 2010 (8,539) (11,055) (19,594) Reserves - Available -for-sale securities RM000 (3,149) 5,627 2,478

Provisions RM000 66,830 9,586 76,416

Total RM000 55,142 (1,469) 5,627 59,300

060

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

11. Deferred tax assets (continued)


Plant and equipment Capital allowances RM000 At 1 January 2011 Recognised in profit or loss Recognised in other comprehensive income At 31 December 2011 (19,594) (260) (19,854) Reserves - Available -for-sale securities RM000 2,478 (4,940) (2,462)

Provisions RM000 76,416 (53,304) 23,112

Total RM000 59,300 (53,564) (4,940) 796

Deferred tax assets and liabilities are offset above as there is a legally enforceable right to set off current tax assets against current tax liabilities. The recognised deferred tax assets and liabilities are as follows: Group and Bank 20 1 1 RM000 Plant and equipment - capital allowances Provisions Fair value of available-for-sale securities (19,854) 23,112 (2,462) 796 2010 RM000 (19,594) 76,416 2,478 59,300

12. Investments in subsidiary companies


Bank 20 1 1 RM000 Unquoted shares at cost in Malaysia 20 2010 RM000 20

Details of the wholly owned subsidiaries are as follows: Effective Ownership Interest 20 1 1 Citigroup Nominee (Malaysia) Sdn. Bhd. Citigroup Nominees (Tempatan) Sdn. Bhd.* Citigroup Nominees (Asing) Sdn. Bhd.* Nominee company Nominee company Nominee company Malaysia Malaysia Malaysia 100% 100% 100% 2010 100% 100% 100%

Name of subsidiary

Principal activity

Country of incorporation

* Wholly owned by Citigroup Nominee (Malaysia) Sdn. Bhd. All income and expenditure arising from the activities of the subsidiaries have been recognised in the Banks statement of comprehensive income.

061

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

13. Plant and equipment


Building on leasehold land RM000 5,877 357 6,234 347 6,581 Furniture and equipment RM000 247,073 69,997 (3,502) 133 313,701 26,347 (9,261) (843) 329,944

Group and Bank Cost At 1 January 20 10 Additions Disposals Write offs Reclassification At 31 December 2010/1 January 2011 Additions Disposals Write offs At 31 December 2011 Depreciation At 1 January 2010 Charge for the year Disposals Written offs Reclassification At 31 December 2010/1 January 2011 Charge for the year Disposals Written offs At 31 December 2011 Carrying amounts At 1 January 2010 At 31 December 2010/1 January 2011 At 31 December 2011

Installations RM000 88,041 9,427 (142) (56) (133) 97,137 22,489 (5,499) 114,127

Total RM000 340,991 79,781 (3,644) (56) 417,072 49,183 (14,760) (843) 450,652

3,644 367 4,011 462 4,473

79,696 5,420 (112) (56) (35) 84,913 6,490 (5,412) 85,991

194,987 26,988 (2,643) 35 219,367 28,761 (8,002) (843) 239,283

278,327 32,775 (2,755) (56) 308,291 35,713 (13,414) (843) 329,747

2,233 2,223 2,108

8,345 12,224 28,166

52,086 94,334 90,631

62,664 108,781 120,905

062

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

14. Deposits from customers


i. By type of deposit Group and Bank 20 1 1 RM000 Demand deposits Saving deposits Fixed deposits Other deposits Negotiable instruments of deposit Others - cash collateral 10,026,162 935,372 9,559,230 9,444,737 75,917 10,168 30,051,586 2010 RM000 9,869,460 837,370 11,583,915 6,393,953 80,002 24,163 28,788,863

ii. Maturity structure of fixed deposits, other deposits and negotiable instruments of deposit are as follows: Group and Bank 20 1 1 RM000 Due within six months Six months to one year One year to three years Three years to five years Over five years 15,085,525 3,395,429 372,522 226,408 19,079,884 2010 RM000 13,005,161 4,412,942 338,543 101,224 200,000 18,057,870

iii. By type of customer Group and Bank 20 1 1 RM000 Government and statutory bodies Business enterprises Individuals Others 177,664 17,418,167 9,795,376 2,660,379 30,051,586 2010 RM000 27,368 15,065,326 10,241,578 3,454,591 28,788,863

063

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

15. Deposits and placements of banks and other financial institutions


Group and Bank 20 1 1 RM000 Licensed banks Licensed finance companies 7,777,097 7,777,097 2010 RM000 2,046,727 276,198 2,322,925

16. Other liabilities


Group and Bank 20 1 1 RM000 Interest/Profit payable Other creditors and accruals Provision for retirement benefits (Note 19) Profit Equalisation Reserve (Note 37(l)) Taxation Derivative liabilities (Note 30) 81,090 1,673,582 701 12,391 769,950 2,537,714 2010 RM000 106,294 1,640,664 372 9,187 45,765 1,044,120 2,846,402

17. Share capital


Amount 20 1 1 RM000 Ordinary shares of RM1 each: Authorised Issued and fully paid 500,000 121,697 500,000 121,697 500,000 121,697 500,000 121,697 Group and Bank Number of shares Amount 20 1 1 000 20 1 0 RM000 Number of shares 2010 000

18. Reserves
Group and Bank 20 1 1 RM000 Share premium Statutory reserve Fair value reserve Retained profits 380,303 121,697 7,387 3,388,271 3,897,658 2010 RM000 380,303 121,697 (6,630) 2,998,408 3,493,778

064

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

18. Reserves (continued)


The share premium arose from the issuance of 12 1,696 ,972 ordinary shares of RM1 each at an issue price of RM4.125 per share. The statutory reserve is maintained in compliance with Section 36 of the Banking and Financial Institutions Act 1989 and is not distributable as cash dividends. No transfers were made to the statutory reserve during the year as the Bank has met the reserve requirements. The fair value reserve is in respect of unrealised fair value gains and losses on financial investments available-for-sale. Subject to agreement by the Inland Revenue Board, the Bank has Section 1 08 tax credit and tax exempt income to frank approximately RM1.66 billion of its distributable reserves at 31 December 20 1 1 if paid out as dividends. The Finance Act 2007 introduced a single tier company income tax system with effect from year of assessment 2008. As such, the Section 108 tax credit balance as at 31 December 2007 will be available to the Bank until such time the credit is fully utilised or upon expiry of the six-year transitional period on 31 December 2013, whichever is earlier.

19. Employee benefits


i. Retirement benefits The amounts recognised in the statements of financial position are as follows: Group and Bank 20 1 1 RM000 Present value of the funded obligation Fair value of plan assets 35,439 (37,343) (1,904) Unrecognised past service costs Unrecognised actuarial gains Liability recognised in statements of financial position (12) 2,617 701 2010 RM000 34,633 (37,488) (2,855) (20) 3,247 372

The Group and the Bank make contributions to a fully funded defined benefit scheme for its employees. Contributions to the fund are made to a separately administered fund. Under the fund, eligible employees are entitled to one and a half month of the final/last drawn salary multiplied by the Plan service not in excess of 40 upon attainment of the retirement age of 55. For employees who leave before the attainment of the retirement age, the retirement benefit will be computed based on the scale rate stipulated in the rules of the Fund. On 1 January 2007, majority of the Plan members benefits accrued under the Defined Benefit Plan were converted to the new Defined Contribution Plan. Only those staff who satisfied the criteria below, will continue to be maintained under the Defined Benefit Plan. a. b. c. Age as at 31 December 2006: at least 40 years Years of service as at 31 December 2006: at least 5 years Sum of age and years of service as at 31 December 2006: at least 55 years

065

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

19. Employee benefits (continued)


i. Retirement benefits (continued)

Plan assets comprise: Group and Bank 20 1 1 RM000 Equities Property Securities Others 9,709 15,796 9,971 1,867 37,343 2010 RM000 10,984 15,782 9,597 1,125 37,488

Movement in the present value of the defined benefit obligations: Group and Bank 20 1 1 RM000 Defined benefit obligations at 1 January Benefits paid by the plan Current service costs and interest Actuarial gains Defined benefit obligations at 31 December 34,633 (2,315) 3,323 (202) 35,439 2010 RM000 34,093 (2,002) 3,376 (834) 34,633

Movement in the fair value of plan assets: Group and Bank 20 1 1 RM000 Fair value of plan assets at 1 January Contributions paid into the plan Benefits paid by the plan Expected return on plan assets Actuarial (losses)/gains Fair value of plan assets at 31 December 37,488 426 (2,315) 2,577 (833) 37,343 2010 RM000 25,972 2,151 (2,002) 1,765 9,602 37,488

066

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

19. Employee benefits (continued)


i. Retirement benefits (continued)

The amounts recognised in the statements of comprehensive income are as follows: Group and Bank 20 1 1 RM000 Current service costs Interest cost Expected return on plan assets Net actuarial loss recognised in the year Prior service costs Amount included under personnel costs Actual return on plan assets 1,559 1,764 (2,577) 9 755 1,745 2010 RM000 1,583 1,793 (1,765) 618 11 2,240 11,367

Movement in the net liability recognised in the statements of financial position are as follows: Group and Bank 20 1 1 RM000 Opening net liability as at 1 January Recommended expenses as above Contributions paid 372 755 (426) 701 2010 RM000 283 2,240 (2,151) 372

The latest valuation of the Defined Benefit Plan as at 31 December 2011 was conducted by Towers Watson (Malaysia) Sdn. Bhd.. The unfunded portion of the total liability will continue to be borne by Citibank Berhad. Projected unit credit method is used to calculate the actuarial present value of promised retirement benefits. Principal actuarial assumptions used at the reporting date (expressed as weighted averages): Group and Bank 20 1 1 Discount rate Rate of increase in salary levels Expected long-term rate of return on plan assets Price inflation 5.00% 7.00% 6.50% 3.50% 2010 5.25% 7.00% 7.00% 3.50%

Assumptions regarding future mortality are based on published statistics and mortality tables. The average life expectancy of an individual retiring is at the age of 55 years. The overall expected long-term rate of return on assets is 6.5% per annum. The expected long-term rate of return is based on the portfolio as a whole and not on the sum of the returns on individual asset categories. The return is based exclusively on historical returns, without adjustments.

067

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

19. Employee benefits (continued)


i. Retirement benefits (continued)

Historical information Group and Bank Present value of the defined benefit obligation Fair value of plan assets (Surplus)/Deficit in the plan Experience adjustments arising on plan assets - losses/(gains) Experience adjustments arising on plan liabilities - (gains)/losses Assumption adjustment on plan liabilities - losses 20 1 1 RM000 35,439 (37,343) (1,904) 20 1 0 RM000 34,633 (37,488) (2,855) 20 0 9 RM000 34,093 (25,972) 8,121 20 0 8 RM000 26,926 (18,991) 7,935 2007 RM000 25,282 (21,295) 3,987

833

(9,602)

(2,127)

2,774

(1,132)

(686) 484

(1,342) 508

4,850 566

36 1,262

1,037 1,251

The Group and the Bank expected RM865,040 contribution to be paid to the funded defined benefit plan in year 2012.

ii. Share option plan

The Group and the Bank have a number of stock option programmes for its officers and employees as part of a discretionary award package. Options are granted on Citigroup Inc. stock at the market value denominated in US dollar at the time of grant. Option granted in October 2011 has a six year term and will vest 33% each year over a three years period, provided the staff remains continuously employed in the Group and the Bank. Group and Bank 20 1 1 Outstanding at 1 January Granted Exercised Transfer in/(out) Lapsed/Cancelled Outstanding at 31 December 677,773 (393) 21,388 (36,833) 661,935 2010 763,500 (17,956) (67,771) 677,773

068

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

19. Employee benefits (continued)


ii. Share option plan (continued)

Details of share options granted during the year: Group and Bank 20 1 1 Expiry dates Average grant price per ordinary share (RM) Aggregated proceeds if shares are issued (RM000) Details of share options exercised during the year: Year of expiry Average exercise price per ordinary share (RM) Aggregated issue proceeds (RM000) Fair value at date of vesting (RM000) 2014 12.97 5 2,399 2010 -

Terms of the options outstanding at 31 December: Group and Bank 20 1 1 Expiry dates Jan 2011 Aug 2011 Jan 2012 Jan 2012 Feb 2012 Feb 2012 Feb 2012 Feb 2012 Aug 2012 Jan 2013 Jan 2013 Jan 2014 Jan 2014 Oct 2015 Oct 2015 Exercise price RM 152.78 RM 136.32 RM 155.47 RM 150.84 RM 133.82 RM 144.33 RM 129.19 RM 129.85 RM 107.74 RM 167.68 RM 172.82 RM 75.39 RM 77.70 RM 12.58 RM 12.97 415 26,980 1,839 750 635 11,188 620,128 661,935
iii. Share capital accumulation plan (CAP)

2010 26,401 2,681 414 1,839 28,220 635 11,992 605,591 677,773

The Group and the Bank have a number of capital accumulation programmes for its officers and employees. The Core CAP is a discretionary award of restricted shares. The number of CAP shares in a Core CAP award is calculated using a 25% discount from the market price of Citigroup common stock. Supplemental CAP is a discretionary retention award programme composed of an award of CAP shares. The difference between Supplemental CAP award and a Core CAP award is that generally, a Supplementary CAP is given in addition to the discretionary award package and the number of shares awarded will not be based on a discount from the market price of Citigroup common stock. CAP granted in 2011 typically vest 25% each year for four years, with the first vesting date occurring 12 months after the grant date. Shares acquired upon exercise of a CAP option generally may not be sold for two years following the exercise date.

069

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

19. Employee benefits (continued)


iii. Share capital accumulation plan (CAP) (continued)

Group and Bank 20 1 1 Outstanding at 1 January Granted Vested Lapsed/cancelled Net transferred out Outstanding at 31 December Details of CAP granted during the year: Group and Bank 20 1 1 Expiry dates Average grant price per ordinary share (RM) Aggregated proceeds if shares are issued (RM000) Details of CAP vested during the year: Average exercise price per ordinary share (RM) Aggregated issue proceeds (RM000) Fair value at date of vesting (RM000) 25.02 6,171 2,745 13.44 10,629 4,076 Jan 17, 2015 15.95 4,748 2010 Oct 19, 2014 12.54 5,781 606,369 297,605 20,438 (220,324) (218,563) 485,525 2010 445,663 460,841 8,299 (303,233) (5,201) 606,369

Terms of the CAP outstanding at 31 December: Group and Bank 20 1 1 Year of expiry Jan 2011 Jan 2012 Jan 2012 Jan 2012 Oct 2012 Oct 2012 Jan 2013 Jan 2013 Jan 2014 Jan 2014 Jan 2015 Jan 2015 Grant price RM 167.93 RM 62.76 RM 83.68 RM 81.19 RM 47.96 RM 46.53 RM 14.85 RM 14.41 RM 11.17 RM 10.84 RM 15.95 RM 12.86 19,602 7,004 497 94,804 140,932 222,686 485,525 41,071 133,553 1,990 194,155 209,405 26,195 606,369 2010

070

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

20. Interest income


Group and Bank 20 1 1 RM000 Loans and advances - Interest income other than recoveries from impaired loans - Recoveries from impaired loans Money at call and deposit placements with financial institutions Financial assets held-for-trading Financial investments available-for-sale Securities purchased under resale agreements 1,217,598 45,277 247,359 50,702 84,187 28,367 1,673,490 Accretion of discount Total interest income 40,081 1,713,571 1,209,905 36,087 158,914 39,944 109,320 2,138 1,556,308 19,152 1,575,460 2010 RM000

21. Interest expense


Group and Bank 20 1 1 RM000 Deposits and placements of banks and other financial institutions Deposits from customers Others 31,535 478,134 4,975 514,644 2010 RM000 25,592 350,546 15,752 391,890

071

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

22. Other operating income


Group and Bank 20 1 1 RM000 Fee income: Commission Service charges and fees Guarantee fees Bankcard fees Insurance premium and referral Other fee income 138,542 15,202 6,698 167,817 19,578 36,995 384,832 Trading income: Unrealised gain from revaluation of financial assets held-for-trading Net gain from sales of securities - Financial assets held-for-trading - Financial investments available-for-sale Gross dividends from financial investments available-for-sale 27,571 7,332 28 35,908 Other income: Foreign exchange profit - unrealised gain - realised gain Gain/(Loss) from derivatives Loss on disposal of plant and equipment 161,916 30,393 47,157 (1,023) 238,443 659,183 112,533 33,224 (21,282) (178) 124,297 573,230 16,989 58,470 58 76,434 977 917 177,756 3,428 7,267 143,294 16,290 24,464 372,499 2010 RM000

072

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

23. Other operating expenses


Group and Bank 20 1 1 RM000 Personnel costs - Salaries, allowances and bonuses - Contributions to Employees Provident Fund - Staff benefits and other compensations - Others 323,600 37,592 41,300 6,927 409,419 Establishment costs - Depreciation - Rental of premises - Hire of equipments - Utilities - Others 35,713 21,526 2,603 6,677 18,436 84,955 Marketing expenses - Advertisement and promotional expenses - Others 44,560 1,518 46,078 Administrative and general expenses - Processing cost - Auditors remuneration - Statutory audit - Other services - Stationeries and supplies - Communication expenses - Maintenance of office equipment - Others 346 191 6,748 16,055 4,385 139,866 347,394 Total other operating expenses 887,846 338 182 6,049 17,058 3,641 162,687 271,170 758,190 179,803 81,215 42,641 1,744 44,385 32,775 9,530 25,583 5,593 3,398 76,879 2010 RM000 235,173 33,648 86,950 9,985 365,756

073

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

23. Other operating expenses (continued)


Group and Bank 20 1 1 RM000 i. CEO and Directors remuneration Executive Directors (including CEO) Salary and other remuneration, including meeting allowances Bonuses Benefits-in-kind Share-based payment Non-executive Directors Fees 2,314 971 392 830 300 4,807 2,114 2,315 318 (489) 225 4,483 2010 RM000

ii. Other key management personnel: - short-term employee benefits 3,144 3,534

Salary and others remunerations RM000 Executive Directors and CEO Sanjeev Nanavati Non-executive Directors Jonathan Christian Larsen Tan Sri Dato Hj Omar Ibrahim Dato Syed Sidi Idid Bin Syed Abdullah Idid Dato Siow Kim Lun @ Siow Kim Lin Agnes Liew Yun Chong Terence Kent Cuddyre 2,314 2,314

Fees RM000

Bonuses RM000

Benefitsinkind RM000

Total RM000

971

392

3,677

100 100 100 300

971

392

100 100 100 3,977

074

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

24. Allowance for loans, advances and financing


Group and Bank 20 1 1 RM000 Allowance for loans, advances and financing: Individual assessment - allowance made during the year - written back Collective assessment - (written back)/allowance made during the financial year, net Impaired loans, advances and financing - written back - written off (79,678) 230,981 144,741 (68,042) 238,427 200,995 (4,032) 8,950 16,888 (19,418) 34,644 (12,984) 2010 RM000

25. Taxation
Group and Bank 20 1 1 RM000 Malaysian income tax - current year - prior year over provision 220,302 (108,536) 111,766 Deferred tax expense - Origination and reversal of temporary differences - Prior year over provision (13,956) 67,520 165,330 1,469 194,353 207,671 (14,787) 192,884 2010 RM000

A reconciliation of the income tax expense between the statutory tax expense and effective tax expense is as follows:Group and Bank 20 1 1 RM000 Profit before taxation Income tax using Malaysian tax rate of 25% Non-deductible expenses Others 855,193 213,798 431 (7,883) 206,346 Over provision in prior year (41,016) 165,330 2010 RM000 833,606 208,402 715 23 209,140 (14,787) 194,353

075

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

26. Earnings per share


The earnings per ordinary share has been calculated based on the net profit after taxation of RM6 89, 86 3,0 0 0 (2010 RM6 39, 253,000) divided by the number of ordinary shares of RM 1 each in issue during the year of 1 2 1 , 696 ,972.

27. Dividends
Dividends recognised in the current year by the Bank are: Sen per share (net of tax) 20 11 Final 2010 ordinary 20 10 Final 2009 ordinary 247 Total amount RM000 300,000

Date of payment 28 June 2011

205

250,000

25 June 2010

After the reporting period, the following dividend was proposed by the Directors. This dividend will be recognised in subsequent financial period upon approval by the equity holder of the Bank. Sen per share (net of tax) Final ordinary - 31 December 2011 247 Total amount RM000 300,000

28. Significant related party transactions and balances


For the purpose of these financial statements, parties are considered to be related to the Group or the Bank if the Group or the Bank has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Bank and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. The related parties of the Group and the Bank are: (i) Parent companies Parent companies of the Group and the Bank are Citigroup Holdings (Singapore) Pte. Ltd. and Citigroup Inc. (ii) Other related companies Entities which are related by virtue of having Citigroup Holdings (Singapore) Pte. Ltd. or Citibank Overseas Investment Corporation as the holding companies and having Citigroup Inc. as the ultimate holding company. (iii) Key management personnel Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group or the Bank either directly or indirectly. The key management personnel of the Group or the Bank includes all the Directors and certain members of senior management of the Group or the Bank. Key management personnel compensation is disclosed in Note 23.

076

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

28. Significant related party transactions and balances (continued)


Transactions and balances with parent companies and other related companies Group and Bank 20 1 1 RM000 Parent companies Income Interest on interest bearing deposits Other income 66,901 24,042 90,943 Expenditure Interest on interest bearing deposits Other expenses 14,309 14,309 Amount due from Interest bearing deposits Current account balances Other balances 124,982 124,982 Amount due to Interest bearing deposits Current account balances Other balances 147,870 134,169 282,039 7,531,210 248,537 250,231 8,029,978 279,177 151,790 430,967 180,915 236,308 1,630,408 2,047,631 7,542,592 1,522,230 1,059,365 10,124,187 126,092 126,092 4,876,540 641,124 242,572 5,760,236 27,803 559,225 587,028 39,640 39,640 14,785 305,173 319,958 49,251 348,784 398,035 48,733 17,824 66,557 70,600 185,027 255,627 RM000 Other related companies RM000 Parent companies Group and Bank 20 1 0 RM000 Other related companies

All related party transactions are conducted at arms length basis and on normal commercial terms which are not more favourable than those generally available to public.

077

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

29. Credit transactions and exposures with connected parties


Group and Bank 20 1 1 RM000 Outstanding credit exposures with connected parties of which: Total credit exposure which is non-performing or in default Total credit exposures Percentage of outstanding credit exposures to connected parties - as a proportion of total credit exposures - as a proportion of capital base - which is non-performing or in default 3.55% 57.20% 0.00% 2.03% 32.20% 0.00% 68,594,284 60,288,251 2,438,114 1,224,100 2010 RM000

The disclosure on Credit Transactions and Exposures with Connected Parties above are presented in accordance with para 9.1 of Bank Negara Malaysias revised Guidelines on Credit Transactions and Exposures with Connected Parties, which became effective on 1 January 2008. Based on these guidelines, a connected party refers to the following: i. ii. iii. Directors of the Bank and their close relatives; Controlling shareholder and his close relatives; Executive Officer, being a member of management having authority and responsibility for planning, directing and/or controlling the activities of the Bank, and his close relatives; Officers who are responsible for or have the authority to appraise and/or approve credit transactions or review the status of existing credit transactions, either as a member of a committee or individually, and their close relatives; Firms, partnerships, companies or any legal entities which control, or are controlled by any person listed in (i) to (iv) above, or in which they have an interest, as a director, partner, executive officer, agent or guarantor, and their subsidiaries or entities controlled by them; Any person for whom the persons listed in (i) to (iv) above is a guarantor; and Subsidiary of or an entity controlled by the Bank and its connected parties.

iv.

v.

vi. vii.

Credit transactions and exposures to connected parties as disclosed above include the extension of credit facilities and/or off-balance sheet credit exposures such as guarantees, trade-related facilities and loan commitments. They also include holdings of equities and private debt securities issued by the connected parties. The credit transactions with connected parties above are all transacted on an arms length basis and on terms and conditions no more favourable than those entered into with other counterparties with similar circumstances and creditworthiness. Due care has been taken to ensure that the creditworthiness of the connected party is not less than that normally required of other persons.

078

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

30. Derivative financial instruments


2011 Contract amount RM000 Foreign exchange related contracts: - Forwards - Cross currency interest rate swaps - Options Interest rate contracts: - Futures - Swaps - Options Equity related contracts Others 3,915,000 22,286,981 474,793 178,235 785,672 79,389,282 298,967 397 7,893 7,519 820,647 Note 9 351,462 2,494 7,893 14,200 769,950 Note 16 7,384,086 28,199,721 1,082,406 1,321,876 731,077 91,362,347 281,970 2,026 14,927 17,377 1,007,240 Note 9 372,410 5,275 14,956 26,839 1,044,120 Note 16 44,501,232 5,212,667 2,034,702 202,448 294,397 9,026 96,410 294,535 2,956 44,990,550 6,948,760 703,871 264,681 423,054 3,205 310,204 311,223 3,213 Positive fair value RM000 Negative fair value RM000 Contract amount RM000 2010 Positive fair value RM000 Negative fair value RM000

079

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management


The Groups and the Banks risk management framework are designed to monitor, evaluate and manage the principal risk they assume in conducting its activities. These risks include the following: 1. credit risk market risk operational risk Credit Risk Credit risk is the potential for financial loss resulting from the failure of a borrower or counter party to honour its financial or contractual obligations. Credit arises in lending, trading, and derivatives transactions, securities transactions, settlement and when the Bank acts as an intermediary on behalf of its clients and other third parties. The credit risk management process of the Bank relies on corporate-wide standards to ensure consistency and integrity, with business-specific policies and practices to ensure applicability and ownership. While business managers and independent risk management are jointly responsible for managing risk/return trade offs as well as establishing limits and risk management practices, the origination and approval roles are clearly defined and segregated. In addition to conforming to established corporate standards, independent credit risk management is responsible for establishing policies that comply with local regulations and any other relevant legal requirements. Independent credit risk management is also responsible for implementing portfolio limits, including obligor limits through risk rating, maturity and business segments limits to ensure diversification of portfolios, monitoring business risk management performance, providing on-going assessment of portfolio credit risk and approving new products. Continuous monitoring of credit behaviour aided by sophisticated scoring modules, plus portfolio delinquency performance allows independent credit risk management to constantly assess the health of the credit portfolio. The Group and the Bank secure various forms of collateral to mitigate credit risk exposures. The main types of collateral obtained by the Group and the Bank to mitigate credit risk are as follows: o o o o for residential mortgages - charges over residential properties for commercial property loans - charges over the properties being financed for share margin financing - pledges over quoted securities for other loans - charges over business assets such as premises, inventories, trade receivable or deposits

080

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


A. Credit risk exposures and credit risk concentration The following tables present the Groups maximum exposure to credit risk of its on and off balance sheet financial instruments at 31 December 2011, by industry and geographical analysis, before taking into account collateral held or other credit enhancements. i. By Industry analysis

Group 2011 On-Balance Sheet Cash and short term funds Deposits and placements with bank and other financial institutions Securities purchased for resale agreements Financial assets heldfor-trading Financial investments available-for-sale Loans, advances and financing Other assets Statutory deposits with Bank Negara Malaysia

Financial Services, Wholesale Government Insurance, Electricity, & Retail and House- Real Estate Gas & Trade, Transport, Social & Central hold & Business Services, Mining & Water Restaurants Storage & Community Other Banks Loans Services Agriculture Quarrying Manufacturing Supply Construction & Hotels Communication Services Sectors RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000

Total

RM000 RM000 RM000

2,141,000

9,827,440

11,968,440

1,218,993 2,336,849 5,218,009

1,516,673 800,246 947,626 -

105,178 10,816 115,994 -

18,991 747 19,738 -

2,409,876 67,573 2,477,449 -

86,890 835 87,725 -

45,704 20 45,724 -

921,901 14,156 936,057 -

301,573 5,997 307,570 -

16,160 16,160 -

7,499

1,516,673 1,218,993 2,336,849 5,225,508

- 15,958,134 398,080 -

277,365 20,942,018 258,242 1,306,012 398,080

11,312,931 15,958,134 13,091,985 Contingent liabilities Commitments 2,267,554 2,822,702

543,106 44,912,573 2,267,554

- 21,974,557

- 24,797,259

Total Credit Exposures

11,312,931 37,932,691 18,182,241

115,994

19,738

2,477,449

87,725

45,724

936,057

307,570

16,160

543,106 71,977,386

081

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


A. Credit risk exposures and credit risk concentration (continued) i. By Industry analysis (continued)

Group 2010 On-Balance Sheet Cash and short term funds Deposits and placements with bank and other financial institutions Securities purchased for resale agreements Financial assets heldfor-trading Financial investments available-for-sale Loans, advances and financing Other assets

Financial Services, Wholesale Government Insurance, Electricity, & Retail and House- Real Estate Gas & Trade, Transport, Social & Central hold & Business Services, Mining & Water Restaurants Storage & Community Other Banks Loans Services Agriculture Quarrying Manufacturing Supply Construction & Hotels Communication Services Sectors RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000 RM000

Total

RM000 RM000 RM000

4,576,600

5,904,433

10,481,033

404,417 1,837,368 3,097,989

16,365,585

811,660

35,022 1,802

7,708 2,042

1,710,646 87,229

10,095

46,104 21

5,000

137,600 17,822

19,933 3

7,499
371,754 570,698

811,660 404,417 1,852,463 3,105,488 20,079,644 1,317,760

512,027 624,296

32,295 173

840,970 13,674

9,916,374

16,365,585

7,852,416

36,824

9,750

1,797,875

42,563

46,125

859,644

155,422

19,936

949,951

38,052,465

Contingent liabilities Commitments

617

21,912,163

2,307,478 1,632,020

1,114

2,309,209 23,544,183

Total Credit Exposures

9,916,991

38,277,748

11,791,914

36,824

9,750

1,797,875

42,563

46,125

860,758

155,422

19,936

949,951

63,905,857

082

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


A. Credit risk exposures and credit risk concentration (continued)

ii.

By Geographical analysis

Group 2011 On-Balance Sheet Cash and short term funds Deposits and placements with banks and other financial institutions Securities purchased for resale agreements Financial assets heldfor-trading Financial investments available-for-sale Loans, advances and financing Other assets Statutory deposits with Bank Negara Malaysia

Malaysia RM000

Hong Kong & Singapore China PRC Japan RM000 RM000 RM000

Australasia RM000

North America RM000

United Other Kingdom countries RM000 RM000

Total RM000

5,232,143

3,902,079

144,827

6,436

12,527

702,090

444,941

1,523,397

11,968,440

1,251,495 1,218,993 2,336,849 5,225,508 20,942,018 758,583 398,080 37,363,669

106,278 14,533 4,022,890 19,180 -

681 145,508 469,849 -

158,900 4,904 170,240 -

1,520 14,047 1,624 -

126,964 829,054 63,232 -

240,823 685,764 36,688 -

158,004 1,681,401 49,212 -

1,516,673 1,218,993 2,336,849 5,225,508 20,942,018 1,306,012 398,080 44,912,573 2,267,554 24,797,259

Contingent liabilities Commitments

1,627,769 24,797,259

Total Credit Exposures

63,788,697

4,042,070

615,357

170,240

15,671

892,286

722,452

1,730,613

71,977,386

083

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


A. Credit risk exposures and credit risk concentration (continued) ii. By Geographical analysis (continued)

Group 2010 On-Balance Sheet Cash and short term funds Deposits and placements with banks and other financial institutions Securities purchased for resale agreements Financial assets heldfor-trading Financial investments available-for-sale Loans, advances and financing Other assets

Malaysia RM000

Hong Kong & Singapore China PRC Japan RM000 RM000 RM000

Australasia RM000

North America RM000

United Other Kingdom countries RM000 RM000

Total RM000

6,884,986

3,113,155

8,654

48,309

61,220

13,639

76,082

274,988

10,481,033

495,159 404,417 1,847,463 2,974,380 20,079,644 792,891 33,478,940

162,326 12,958 3,288,439 29,560 -

277 8,931 285,447 -

154,175 5,000 20,162 227,646 -

513 61,733 2,653 -

131,108 126,856 271,603 67,602 -

208,795 284,877 33,459 -

155,308 430,296 148,263 -

811,660 404,417 1,852,463 3,105,488 20,079,644 1,317,760 38,052,465 2,309,209 23,544,183

Contingent liabilities Commitments

1,742,225 23,544,183

Total Credit Exposures

58,765,348

3,317,999

294,378

227,646

64,386

339,205

318,336

578,559

63,905,857

The disclosures represented the Banks exposures except for RM20,000 cash and cash equivalents being deposited by the subsidiaries were eliminated in the above tables.

084

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


B. Deposits and placements with banks and other financial institutions i. Deposits and placements with banks and other financial institutions analysis by credit rating

Group and Bank 20 1 1 RM000 AAA AA to AAA+ to AUnrated 320,000 1,196,673 1,516,673 2010 RM000 300,000 100,000 316,501 95,159 811,660

ii.

Deposits and placements with banks and other financial institutions analysis by geographical location where the credit risk of issuers reside, regardless of where the assets are booked, is as follows: Group and Bank 20 1 1 RM000 Malaysia Other 1,251,495 265,178 1,516,673 2010 RM000 495,159 316,501 811,660

C.

Other securities Group and Bank 20 1 1 RM000 Financial assets held-for-trading Financial investments available-for-sale 2,336,849 5,225,508 7,562,357 2010 RM000 1,852,463 3,105,488 4,957,951

085

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


C. Other securities (continued)

i.

Other securities analysis by credit rating At the reporting date, the credit quality of investment in other securities by designation of an external credit assessment institution is as follows:Group and Bank 20 1 1 RM000 AAA A+ to AUnrated 6,500 4,427,380 3,128,477 7,562,357 2010 RM000 11,500 4,804,249 142,202 4,957,951

ii.

Other securities analysis by geographical location where the credit risk of issuers reside, regardless of where the assets are booked, is as follows: Group and Bank 20 1 1 RM000 Malaysia Other 7,562,357 7,562,357 2010 RM000 4,821,844 136,107 4,957,951

086

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


D. Credit quality of Loans, advances and financing

Group and Bank 20 1 1 RM000 Loans, advances and financing - neither past due nor impaired - past due but not impaired - impaired Gross amount Individual assessment allowance Collective assessment allowance Carrying amount 18,732,135 1,719,346 490,537 20,942,018 (219,436) (365,325) 20,357,257 17,498,466 2,040,363 540,815 20,079,644 (229,542) (369,357) 19,480,745 2010 RM000

Neither past due nor impaired Included in the total loans, advances and financing neither past due nor impaired are renegotiated loans. The analysis below represents the carrying amount of loans that would otherwise be past due or impaired if their terms had not been renegotiated. These renegotiated loans are considered neither past due not impaired after they have been monitored as impaired loans until a minimum number of payments have been received under the new terms. Group and Bank 20 1 1 RM000 Renegotiated loans Past due but not impaired Analysis of loans, advances and financing to customers that are past due but not impaired analysed based on aging are as follows: Group and Bank 20 1 1 RM000 1 - 29 dpd 30 - 59 dpd 60 - 89 dpd 90 - 119 dpd 120 - 118 dpd >180 dpd 1,228,861 331,993 158,492 1,719,346 2010 RM000 1,419,750 437,370 183,243 2,040,363 876,855 2010 RM000 846,099

087

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


D. Credit quality of Loans, advances and financing (continued)

Impaired Loans and advances are classified as impaired when they meet one of the following criteria: i. ii. iii. principal or interest or both are past due for three (3) months or more; where there is an individual impairment provision on the loan; impaired loans that have been rescheduled or restructured that have not met the continuous repayment behavior based on the revised rescheduled and/or restructured terms over the observation period.

Loans and advances to customers that are individually impaired analysed by age are as follows: Group and Bank 20 1 1 RM000 2010 RM000

Current 1 - 29 dpd 30 - 59 dpd 60 - 89 dpd 90 - 119 dpd 120 - 180 dpd >1 80 dpd

10,957 8,319 12,305 31,738 74,426 104,047 248,745 490,537

15,786 13,959 12,688 34,317 57,572 118,518 287,975 540,815

Estimated value of collaterals against past due but not impaired and impaired loans are RM76 6 ,0 45,0 0 0 (2010 RM7 11, 249,000).

088

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


2. Market Risk Market risk encompasses price risk and liquidity risk, both arising in the normal course of business operations of the Group and the Bank. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising the return on risk. Market risk in the Group and the Bank are managed through corporate-wide standards and business-specific policies and procedures with the help of responsible personnel and committees delegated by the Board of Directors such as the Risk Management Committee, Asset and Liability Committee and Market Risk Management. The business is required to establish risk measures, limits and controls, clearly defining approved risk profiles within the parameters of the Group and the Banks overall risk appetite and for operating within the established market risk limit framework. Independent market risk management establishes policies and procedures, approves limits and monitors exposures against limits. Price Risk Price risk is the risk associated to earnings arising from changes in interest rate, foreign exchange rates, equity and commodity prices and in their implied volatilities. Price risk arises in non-trading as well as trading portfolios. Price risk in non-trading portfolio is measured predominantly through earnings-at-risk and factor sensitivities supplemented with additional tools such as stress testing and cost-to-close analysis. Price risk in trading portfolios is measured through tools such as factor sensitivities, value-at-risk and stress testing. Interest rate risk primarily results from the timing differences in the repricing of interest bearing assets, liabilities and commitments. It is also related to positions from non-interest bearing liabilities including shareholders funds and current accounts, as well as from certain fixed rate loans and liabilities. The Group and the Bank are exposed to such risks associated with the effects of the fluctuations in the prevailing market interest rates on its financial positions and cash flows. Factor sensitivities are expressed as the change in the value of a position for a defined change in a market risk factor. For the sensitivity analysis provided in this section, the Group and the Bank have used a 100 basis points movement for interest rates and a 6% movement in foreign exchange rates to measure the impact of these market risk movements on the Group and the Bank. Interest rate risk Sensitivity analysis At 31 December 2011, it is estimated that a general increase of 100 basis points in interest rate, with all other variables held constant, would decrease the Banks profit before tax by approximately RM1 1 7, 588,1 1 5 whereas a general decrease of 100 basis points in interest rate, with all other variables held constant, would have an equal but opposite effect.

The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the reporting date and had been applied to the exposure to interest rate risk for both derivative and non-derivative financial instruments in existence at that date and that all other variables, in particular foreign exchange rates, remain constant. The above basis point increase or decrease represents managements assessment of a reasonably possible change in interest rates over the period until the next annual reporting date. Foreign currency risk Sensitivity analysis As at 31 December 2011, it is estimated that a movement of 6% in Ringgit Malaysia (RM) against foreign currencies, with all other variables held constant, would result in maximum loss of approximately RM2,276,286. The sensitivity analysis has been determined assuming that the change in foreign exchange rates had occurred at the reporting date and had been applied to the Groups and the Banks exposure to currency risk for both derivative and non-derivative financial instruments in existence at that date, and that all other variables, in particular interest rate, remains constant. The sensitivity analysis includes balances where the denomination of the balances is in a currency other than the Ringgit Malaysia (RM). The stated changes represent managements assessment of reasonably possible changes in foreign exchange rates over the period until the next annual reporting date. Results of the analysis represent an aggregation of the effects on the Groups and the Banks profit before tax measured in the respective functional currencies, translated into Ringgit Malaysia (RM) at the exchange rate ruling at the balance sheet date for presentation purposes.

089

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


2. Market Risk (continued)

Liquidity Risk Liquidity risk is the risk that the Group and the Bank will not be able to meet its financial commitments when due. Under the Groups and the Banks internal liquidity risk management policy, there is a set of standards for the measurement of liquidity risk in order to ensure consistency, stability in methodologies and transparency of risk. Management of liquidity is performed on a daily basis and is monitored by the Treasurer. The Asset and Liability Committee and the Treasurer undertake the joint responsibility of overall liquidity risk management which covers establishing and endorsing the annual funding and liquidity plan, liquidity limits, liquidity ratios, market triggers and periodic stress tests. The Group and the Bank include the net cash flow position for derivatives as part of their daily liquidity reports under off balance sheet items, which are consolidated together with the on balance sheet items to monitor the overall liquidity position of the Group and the Bank. The daily report prepared to monitor the daily liquidity position is known as the Market Access Report (MAR). It is prepared by major currencies and it has maturity analysis ranging from overnight to more than 2 years and limits are set for each tenor bucket. Maturity mismatches are monitored through the daily MAR report for necessary treasury actions on funding and gapping. Limits are determined by the ultimate holding company and are reviewed as often as on a quarterly basis and is done in conjunction with the liquidity stress testing. The following table indicates the effective interest rate at the balance sheet date and periods in which the financial instruments reprice or mature, whichever is earlier.
i. Interest/profit rate risk

Group 2011 Assets Cash and short term funds Deposits and placements with banks and other financials institutions Securities purchased under resale agreements

Up to 1 month RM000

>1-3 months RM000

> 3 - 12 months RM000

>1-5 years RM000

Over 5 years RM000

Non-interest sensitive RM000

Trading book RM000

Total RM000

Effective interest rate %

10,324,608

1,643,832

11,968,440

1.55%

1,218,993 -

733,854 307,638

619,328 -

163,491 -

673,760

2,336,849 -

1,516,673 1,218,993 2,336,849 5,225,508

2.67% 2.10% 3.04% 2.78%

Financial assets held-for-trading Financial investments available-for-sale Loans, advances and financing - performing - impaired Other assets Statutory deposits with Bank Negara Malaysia Deferred tax assets Plant and equipment

1,436,145 2,807,965

1,725,044 -

1,422,520 -

6,993,639 -

632,761 -

9,677,517 -

(365,325) 271,101 485,360 398,080 796 120,905

820,652 -

20,086,156 271,101 1,306,012 398,080 796 120,905

6.60%

Total assets

13,268,645

2,464,012

9,049,112 3,604,217 10,351,277

2,554,749

3,157,501

44,449,513

090

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


i. Interest/profit rate risk (continued)

Group 2011 Liabilities and Shareholders equity Deposits from customers Deposits and placements of banks and other financial institutions Bills and acceptances payable Other liabilities

Up to 1 month RM000

>1-3 months RM000

> 3 - 12 months RM000

>1-5 years RM000

Over 5 years RM000

Non-interest sensitive RM000

Trading book RM000

Total RM000

Effective interest rate %

24,011,170

1,485,000 3,956,486

598,930

30,051,586

1.66%

3,365,590
-

3,485,651
-

802,972
-

122,884
-

63,761

7,777,097
63,761

0.40%

1,767,764

769,950

2,537,714

Total liabilities Shareholders equity

27,376,760 -

4,970,651 4,759,458 -

721,814 -

1,831,525 4,019,355

769,950 -

40,430,158 4,019,355

Total liabilities and shareholders' equity On-balance sheet interest sensitivity gap Off-balance sheet interest sensitivity gap

27,376,760

4,970,651 4,759,458

721,814

5,850,880

769,950

44,449,513

(14,108,115) (2,506,639) 4,289,654 2,882,403 10,351,277 (3,296,131) 2,387,551 (223,464) (467,705) 811,510 92,589 95,340 -

(14,331,579) (2,974,344) 5,101,164 2,974,992 10,446,617 (3,296,131) 2,387,551

091

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


i. Interest/profit rate risk (continued)

Group 2010 Assets Cash and short term funds Deposits and placements with banks and other financial institutions Securities purchased under resale agreements Financial assets held-for-trading Financial investments available-for-sale Loans, advances and financing - performing - impaired Other assets Deferred tax assets Plant and equipment

Up to 1 month RM000

>1-3 months RM000

> 3 - 12 months RM000

>1-5 years RM000

Over 5 years RM000

Non-interest sensitive RM000

Trading book RM000

Total RM000

Effective interest rate %

9,763,380

717,653

10,481,033

1.50%

404,417 -

578,355 -

51,793 -

181,512 -

108,745

1,852,463 -

811,660 404,417 1,852,463 3,105,488

4.29% 1.35% 2.69% 3.39%

277,443 2,719,300

1,385,476 -

975,383 -

6,324,229 -

246,547 10,607,195 -

(369,357) 311,272 310,520 59,300 108,781

1,007,240 -

19,169,473 311,272 1,317,760 59,300 108,781

6.71%

Total assets

11,553,273

1,553,738

6,653,465 3,147,359 10,715,940

1,138,169

2,859,703

37,621,647

092

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


i. Interest/profit rate risk (continued)

Group 2010 Liabilities and Shareholders equity Deposits from customers Deposits and placements of banks and other financial institutions Bills and acceptances payable Other liabilities

Up to 1 month RM000

>1-3 months RM000

> 3 - 12 months RM000

>1-5 years RM000

Over 5 years RM000

Non-interest sensitive RM000

Trading book RM000

Total RM000

Effective interest rate %

19,323,608

2,472,684

6,352,805

639,766

28,788,863

1.27%

512,996 -

1,438,808 -

256,016 -

115,105 -

47,982 1,802,282

1,044,120

2,322,925 47,982 2,846,402

0.89%

Total liabilities Shareholders equity Total liabilities and Shareholders' equity On-balance sheet interest sensitivity gap Off-balance sheet interest sensitivity gap

19,836,604 19,836,604

3,911,492 3,911,492

6,608,821 6,608,821

754,871 754,871

1,850,264 3,615,475 5,465,739

1,044,120 1,044,120

34,006,172 3,615,475 37,621,647

(8,283,331) (2,357,754) (21,735) (666,608)

44,644 2,392,488 10,715,940 4,069 844,350 (61,670)

(4,327,570) (4,327,570)

1,815,583 1,815,583

(8,305,066) (3,024,362)

48,713 3,236,838 10,654,270

093

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


ii. Foreign currency risk Foreign currency risk results in the Group's exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. The tables below summarise the RM equivalent amount of the Group's exposure to foreign currency exchange rate risk as at reporting date:

MYR Group 20 1 1 Assets Cash and short term funds Deposits and placements with banks and other financial institutions Securities purchased under resale agreements Financial assets heldfor-trading Financial investments available-for-sale Loans, advances and financing Other assets Statutory Deposits with Bank Negara Malaysia Deferred tax assets Plant and equipment Total assets Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Bills and acceptances payable Other liabilities Total liabilities Shareholders equity Total liabilities and Shareholders equity 24,420,783 2,980,351 20 1 1 RM000

USD 20 1 1 RM000

JPY 20 1 1 RM000

Others 20 1 1 RM000 Total RM000

6,930,088

170,487

1,887,514

11,968,440

505,000 1,218,993 2,336,849 5,225,508 18,652,984 (3,083,640) 398,080 796 120,905 28,355,826

742,652 1,537,447 4,901,670 14,111,857

167,942 156,882 868,509 1,363,820

101,079 9,944 (1,380,527) 618,010

1,516,673 1,218,993 2,336,849 5,225,508 20,357,257 1,306,012 398,080 796 120,905 44,449,513

4,054,517

38,882

1,537,404

30,051,586

187,698 913 (530,137) 24,079,257 4,019,355

7,138,063 57,499 3,382,608 14,632,687 -

438,673 2,372 885,192 1,365,119 -

12,663 2,977 (1,199,949) 353,095 -

7,777,097 63,761 2,537,714 40,430,158 4,019,355

28,098,612

14,632,687

1,365,119

353,095

44,449,513

094

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


ii. Foreign currency risk (continued)

Foreign currency risk results in the Group's exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. The tables below summarise the RM equivalent amount of the Group's exposure to foreign currency exchange rate risk as at reporting date:

MYR Group 20 1 0 Assets Cash and short term funds Deposits and placements with banks and other financial institutions Securities purchased under resale agreements Financial assets heldfor-trading Financial investments available-for-sale Loans, advances and financing Other assets Deferred tax assets Plant and equipment Total assets Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Bills and acceptances payable Other liabilities Total liabilities Shareholders equity Total liabilities and Shareholders equity 22,095,674 5,175,951 20 1 0 RM000

USD 20 1 0 RM000

JPY 20 1 0 RM000

Others 20 1 0 RM000 Total RM000

4,275,961

165,662

863,459

10,481,033

400,000 404,417 1,852,463 2,974,380 18,793,386 9,906,252 59,300 108,781 39,674,930

214,965 131,108 500,705 (9,071,471) (3,948,732)

56,762 165,477 985,692 1,373,593

139,933 21,177 (502,713) 521,856

811,660 404,417 1,852,463 3,105,488 19,480,745 1,317,760 59,300 108,781 37,621,647

5,676,701

28,576

987,912

28,788,863

539,841 911 12,317,226 34,953,652 3,615,475

1,499,724 31,405 (10,018,370) (2,810,540) -

273,162 2,706 1,064,106 1,368,550 -

10,198 12,960 (516,560) 494,510 -

2,322,925 47,982 2,846,402 34,006,172 3,615,475

38,569,127

(2,810,540)

1,368,550

494,510

37,621,647

095

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


iii. Analysis of assets and liabilities by remaining maturity The following maturity profile is based on the remaining period at the balance sheet date to the contractual maturity.

Less than 7 days 2011 Assets Cash and short term funds Deposits and placements with banks and other financial institutions Securities purchased under resale agreements Financial assets held-for-trading Financial investments available-for-sale Loans, advances and financing Other assets Statutory Deposits with Bank Negara Malaysia Deferred tax assets Plant and equipment RM'000

7 days to 1 month RM'000

1 to 3 months RM'000

3 to 6 months RM'000

6 to 12 months RM'000

1 to 3 years RM'000

3 to 5 years RM'000

Over 5 years RM'000

No specific maturity RM'000

Total RM'000

6,423,830

3,900,778

- 1,643,832 11,968,440

733,854

354,781

264,547

162,597

894

1,516,673

372,100 476,993 -

1,218,993

293,885 811,937

390,371

446,387

(97,677) 1,048,521

77,735 673,760

1,218,993 2,336,849 5,225,508

127,356 1,098,792 307,638

624,208 1,759,444 323,064 315,181 -

1,372,220 1,466,563 1,130,554 6,070,508 87,648 75,400 92,727 35,722 -

404,260 9,731,856 (513,868) 20,357,257 56,571 100,344 65,426 398,080 796 120,905 1,306,012 398,080 796 120,905

Total assets

7,272,923

6,706,995 3,682,247 2,683,884 7,385,356 3,006,673

1,412,569 10,583,695 1,715,171 44,449,513

096

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


iii. Analysis of assets and liabilities by remaining maturity (continued)

Less than 7 days 2011 Liabilities and Shareholders funds Deposits from customers Deposits and placements of banks and other financial institutions Bills and acceptances payable Other liabilities 14,856,097 RM'000

7 days to 1 month RM'000

1 to 3 months RM'000

3 to 6 months RM'000

6 to 12 months RM'000

1 to 3 years RM'000

3 to 5 years RM'000

Over 5 years RM'000

No specific maturity RM'000

Total RM'000

9,155,073

1,485,000

561,057

3,395,429

372,522

226,408

30,051,586

1,432,250 1,016,844 1,773,033

1,933,340 (250,384) 51,804

3,485,651 (366,546) 43,039

638,927 (336,153) 44,453

164,045 20,287

122,884 384,451

84,553

93,170

42,924

7,777,097 63,761 2,537,714

Total liabilities

19,078,224

10,889,833

4,647,144

908,284

3,579,761

879,857

310,961

93,170

42,924

40,430,158

Share capital Reserves

121,697

121,697 3,897,658

- 3,897,658

Total equity attributable to equity holder of the bank Total liabilities and equity

19,078,224

10,889,833

4,647,144

908,284

3,579,761

879,857

310,961

- 4,019,355 93,170 4,062,279

4,019,355 44,449,513

097

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


iii. Analysis of assets and liabilities by remaining maturity

The following maturity profile is based on the remaining period at the balance sheet date to the contractual maturity.

Less than 7 days 2010 Assets Cash and short term funds Deposits and placements with banks and other financial institutions Securities purchased under resale agreements Financial assets held-for-trading Financial investments available-for-sale Loans, advances and financing Other assets Deferred tax assets Plant and equipment RM'000

7 days to 1 month RM'000

1 to 3 months RM'000

3 to 6 months RM'000

6 to 12 months RM'000

1 to 3 years RM'000

3 to 5 years RM'000

Over 5 years RM'000

No specific maturity RM'000

Total RM'000

8,557,099

1,018,710

905,224 10,481,033

578,355

19,707

32,085

178,875

2,638

811,660

205,476 323,798 -

404,417 20,329 -

666,005 -

546,891 49,986

388,186

192,269

193,534 709,339

(154,751) 108,745

404,417 1,852,463 3,105,488

227,458 2,009,960 119,013 283,367 -

971,738 1,022,388 72,516 138,915 -

452,409 6,093,780 230,998 32,102 -

369,641 10,352,473 (106,173) 19,480,745 107,563 69,729 58,772 59,300 108,781 1,317,760 59,300 108,781

Total assets

9,086,373

2,487,710 2,405,663 1,299,991 6,773,611 2,783,484

1,382,715 10,376,196 1,025,904 37,621,647

098

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


iii. Analysis of assets and liabilities by remaining maturity (continued)

Less than 7 days 2010 Liabilities and Shareholders funds Deposits from customers Deposits and placements of banks and other financial institutions Bills and acceptances payable Other liabilities 11,988,182 RM'000

7 days to 1 month RM'000

1 to 3 months RM'000

3 to 6 months RM'000

6 to 12 months RM'000

1 to 3 years RM'000

3 to 5 years RM'000

Over 5 years RM'000

No specific maturity RM'000

Total RM'000

7,335,425

2,472,684

1,928,144

4,424,662

368,565

271,201

28,788,863

303,475 1,019,456 1,835,756

209,521 (289,259) 75,224

1,438,808 (497,553) 154,836

226,531 (184,662) 94,731

29,484 84,948

1,582 275,760

113,524 197,010

60,481

67,656

2,322,925 47,982 2,846,402

Total liabilities

15,146,869

7,330,911

3,568,775

2,064,744 4,539,094

645,907

581,735

60,481

67,656

34,006,172

Share capital Reserves

121,697

121,697 3,493,778

- 3,493,778

Total equity attributable to equity holder of the bank Total liabilities and equity

15,146,869

7,330,911

3,568,775

2,064,744

4,539,094

645,907

581,735

- 3,615,475 60,481 3,683,131

3,615,475 37,621,647

099

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


iv. Analysis of financial liabilities by contractual undiscounted cash flows

The table below details the remaining contractual maturities at the balance sheet date of the Groups financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or if floating, based on rates current at the balance sheet date) and the earliest date the Group can be required to pay.

Group 2011 Financial liabilities Deposits from customers Deposits and placements of banks and other financial institutions Bills and acceptances payable Other liabilities Total

Carrying Amount RM000

Total contractual undiscounted cash flows RM000

1 month or less RM000

Over 1 month to 3 months RM000

Over 3 months to 1 year RM000

Over 1 year to 5 years RM000

Over 5 years RM000

30,051,586

30,207,246

24,131,510

1,405,722

4,060,241

609,773

7,777,097 63,761 2,537,714 40,430,158

7,781,241 63,761 2,537,714 40,589,962

3,365,836 756,769 1,847,240 30,101,355

3,487,778 (359,864) 50,237 4,583,873

804,141 (333,144) 72,927 4,604,165

123,486 472,592 1,205,851

94,718 94,718

Group 2010 Financial liabilities Deposits from customers Deposits and placements of banks and other financial institutions Bills and acceptances payable Other liabilities Total

Carrying Amount RM000

Total contractual undiscounted cash flows RM000

1 month or less RM000

Over 1 month to 3 months RM000

Over 3 months to 1 year RM000

Over 1 year to 5 years RM000

Over 5 years RM000

28,788,863

28,932,550

21,242,320

1,512,703

5,523,671

623,834

30,022

2,322,925 47,982 2,846,402 34,006,172

2,323,975 47,982 2,846,402 34,150,909

2,164,426 730,196 1,978,637 26,115,579

605 (497,553) 154,835 1,170,590

42,985 (184,661) 179,679 5,561,674

115,959 472,770 1,212,563

60,481 90,503

100

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

31. Financial risk management (continued)


3. Operational Risk Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events. It includes reputation and franchise risk associated with business practices or market conduct that the Group and the Bank may undertake and includes the risk of failing to comply with applicable laws, regulations and Citigroup policies. Operational risk is inherent in the Groups and the Banks business activities and is managed through an overall framework with checks and balances that include recognised ownership of the risk by businesses and independent risk management oversight. The Group and the Bank mitigate their operational risk by setting up its key controls and assessments according to Citigroups and Regulators standards. They are also evaluated, monitored, and managed by its sound governance structure. The Group and the Banks Self Assessments and Operational Risk Framework include the Risk and Control Self-Assessment and the Operational Risk Policy, and define the Groups and the Banks approach to operational risk management. The objective of the policy is to establish a consistent approach to assessing relevant risks and the overall control environment across the Group and the Bank, to facilitate adherence to regulatory requirements and other corporate initiatives.

32. Financial assets and liabilities


32.1 Categories of financial instruments The table below provides an analysis of financial instruments categorised as follows: a. b. c. d. Loans and receivables (L&R); Fair value through profit or loss (FVTPL): - Held for trading (HFT); Available-for-sale financial assets (AFS); Other liabilities (OL).

101

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

32. Financial assets and liabilities (continued)


32.1 Categories of financial instruments (continued)

Carrying amount Group 2011 Financial Assets Cash and short-term funds Deposits and placements with banks and other financial institutions Securities purchased under resale agreements Financial assets held-for-trading Financial investments available-for-sale Loans, advances and financing Derivatives financial assets Interest/Income receivable Total financial assets 1,218,993 2,336,849 5,225,508 20,357,257 820,647 66,174 43,510,541 1,516,673 11,968,440 RM000

L&R/ (OL) RM000

FVTPL -HFT RM000 AFS RM000

11,968,440

1,516,673 1,218,993 20,357,257 66,174 35,127,537

2,336,849 820,647 3,157,496

5,225,508 5,225,508

Financial Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Bills and acceptances payable Derivatives financial liabilities Interest/Profit payable Total financial liabilities 769,950 81,090 38,743,484 81,090 37,973,534 769,950 769,950 7,777,097 63,761 7,777,097 63,761 30,051,586 30,051,586 -

102

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

32. Financial assets and liabilities (continued)


32.1 Categories of financial instruments (continued)

Carrying amount Group 2010 Financial Assets Cash and short-term funds Deposits and placements with banks and other financial institutions Securities purchased under resale agreements Financial assets held-for-trading Financial investments available-for-sale Loans, advances and financing Derivatives financial assets Interest/Income receivable Total financial assets 10,481,033 RM000

L&R/ (OL) RM000

FVTPL -HFT RM000 AFS RM000

10,481,033

811,660 404,417 1,852,463 3,105,488 19,480,745 1,007,240 45,880 37,188,926

811,660 404,417 19,480,745 45,880 31,223,735

1,852,463 1,007,240 2,859,703

3,105,48 3,105,488

Financial Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Bills and acceptances payable Derivatives financial liabilities Interest/Profit payable Total financial liabilities 28,788,863 28,788,863 -

2,322,925 47,982 1,044,120 106,294 32,310,184

2,322,925 47,982 106,294 31,266,064

1,044,120 1,044,120

103

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

32. Financial assets and liabilities (continued)


32.2 Fair value of financial instruments

The following table summarises the fair values of the financial assets and liabilities carried on the statements of financial position as at 31 December of the Group. Group Carrying value 2011 RM000 Cash and short term funds Deposits and placements with banks and other financial institutions Securities purchased under resale agreements Financial assets held-for-trading Financial investments available-for-sale Loans, advances and financing Other assets Deposits from customers Deposits and placements of banks and other financial institutions Bills and acceptances payable Other liabilities 11,968,440 1,516,673 1,218,993 2,336,849 5,225,508 20,357,257 1,306,012 30,051,586 7,777,097 63,761 2,537,714 Fair value 2011 RM000 11,968,440 1,516,534 1,218,993 2,336,849 5,225,508 20,234,356 1,306,012 30,051,442 7,777,097 63,761 2,537,714 Carrying value 2010 RM000 10,481,033 811,660 404,417 1,852,463 3,105,488 19,850,102 1,317,760 28,788,863 2,322,925 47,982 2,846,402 Fair value 2010 RM000 10,481,033 822,904 404,417 1,852,463 3,105,488 19,018,880 1,317,760 28,790,690 2,322,930 47,982 2,846,402

The methods and assumptions used in estimating the fair values of financial instruments are as follows: a. Cash and Short Term Funds, and Securities Purchased under Resale Agreements The carrying amounts are a reasonable estimate of the fair values because of their short-term nature. b. Deposits and Placements with Financial Institutions The fair values of deposits and placements with remaining maturities less than one year are estimated to approximate their carrying values. For deposits and placements with maturities of more than one year, the fair values are estimated based on discounted cash flows using the prevailing market rates of similar remaining maturities. c. Financial Assets Held-for-Trading, Financial Investments Available-for-Sale and Financial Investments Held-to-Maturity The fair values are estimated based on quoted or observable market prices as at statements of financial position date. Where such quoted or observable market prices are not available, the fair values are estimated using pricing models or discounted cash flow techniques. Where discounted cash flow technique is used, the expected future cash flows are discounted using prevailing market rates for similar instruments as at statements of financial position date.

104

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

32. Financial assets and liabilities (continued)


32.2 Fair value of financial instruments (continued)

d.

Loans, Advances and Financing The fair values of fixed rate loans with remaining maturity of less than one year and variable rate loans are estimated to approximate their carrying values. For fixed rate loans and Islamic loans with maturities of more than one year, the fair values are estimated based on expected future cash flows of contractual instalment payments and discounted at prevailing rates at statements of financial position date offered for similar loans to new borrowers with similar credit profiles, where applicable. In respect of impaired loans, the fair values are deemed to approximate the carrying values, net of individual assessment allowance for bad and doubtful debts and financing. Collective assessment allowance is excluded from the carrying value.

e.

Deposits from Customers and Deposits and Placements of Banks and Other Financial Institutions The fair values for deposit liabilities payable on demand (demand and savings deposits) or with remaining maturities of less than one year are estimated to approximate their carrying values at statements of financial position date. The fair values of fixed deposits with remaining maturities of more than one year are estimated based on discounted cash flows using rates currently offered for deposits of similar remaining maturities. The fair values of Islamic deposits are deemed to approximate their carrying values as at statements of financial position date as the profit rates are determined at the end of their holding periods based on the profit generated from the assets invested. For negotiable instrument of deposits, the estimated fair values are based on quoted or observable market prices at the statements of financial position date. Where such quoted or observable market prices are not available, the fair values of negotiable instruments of deposits are estimated using discounted cash flow techniques.

f.

Bills and Acceptances Payable The carrying amounts are a reasonable estimate of their fair values because of their short-term nature.

g.

Subordinated Loan The carrying amount of the subordinated loan approximates fair value due to its variable interest rate.

h.

Other Assets and Other Liabilities The fair values of other assets and other liabilities are assumed to approximate their carrying values due to the short term nature of these financial instruments or the fact that they are derived by using the market rates at reporting date.

105

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

32. Financial assets and liabilities (continued)


32.3 Fair value hierarchy

Comparative figures have not been presented for 31 December 2010 by virtue of paragraph 44G of FRS 7. The table below analyses financial instruments carried at fair value by valuation method. The different levels have been defined as follows: Level 1: Level 2: Level 3: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Level 1 Group and Bank 2011 Financial assets Financial investments available-for-sale Financial assets held-for-trading Derivative financial assets 5,218,009 2,336,849 7,554,858 Financial liabilities Derivative financial liabilities RM000

Level 2 RM000

Level 3 RM000

Total RM000

830,208 830,208

11,392 11,392

5,218,009 2,336,849 841,600 8,396,458

1,404,357 1,404,357

10,006 10,006

1,414,363 1,414,363

106

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

32. Financial assets and liabilities (continued)


32.3 Fair value hierarchy (continued)

The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy:

Group and Bank 2011 Financial assets Balance at 1 January Total lossed recognised in profit or loss: Attributable to losses relating to assets or liabilities that: - have not been realised Balance at 31 December 14,148 RM000

(2,756) 11,392

Group and Bank 2011 Financial liabilities Balance at 1 January Total gains recognised in profit or loss: Attributable to gains relating to assets or liabilities that: - have not been realised Balance at 31 December 2,850 RM000

7,156 10,006

The unrealised gains/(losses) have been recognised in other operating income/expenses in profit or loss. Changing one or more of the inputs to reasonable alternative assumptions would not change the value significantly for the financial assets in Level 3 of the fair value hierarchy.

107

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

33. Lease commitments


The Group and the Bank have lease commitments in respect of rented premises and equipment for hire, all of which are classified as operating leases. A summary of the non-cancellable long term commitments, net of sub leases are as follows: Group and Bank 20 1 1 RM000 Within 1 year Between 1 and 5 years 25,953 6,199 2010 RM000 24,355 27,570

34. Capital commitments


Group and Bank 20 1 1 RM000 Capital expenditures: Authorised and contracted for 21,181 49,627 2010 RM000

108

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

35. Capital adequacy


A. The capital adequacy ratios are as follows:

Group and Bank 20 1 1 RM000 Computation of Total Risk Weighted Assets (RWA) Total credit RWA Total market RWA Total operational RWA Total Risk Weighted Assets Computation of Capital Ratios Tier 1 Capital Capital Base* Before deducting proposed dividends: Core capital ratio Risk weighted capital ratio After deducting proposed dividends: Core capital ratio Risk weighted capital ratio 13.33% 14.24% 12.61% 13.52% 14.41% 15.32% 13.76% 14.67% 4,008,709 4,262,475 3,565,282 3,801,235 22,272,830 2,019,640 3,525,964 27,818,434 19,954,371 2,398,682 3,550,272 25,903,325 2010 RM000

In arriving at the capital base used in the ratio calculations of the Group and the Bank, the proposed dividends were not deducted. Detailed information on the risk exposures above are disclosed in the Pillar 3 disclosures of the annual report as prescribed under BNMs Risk Weighted Capital Adequacy Framework (Basel II) Disclosures requirements (Pillar 3).

109

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

35. Capital adequacy (continued)


With effect from 1 January 2010, the capital adequacy ratios of the Group and the Bank are computed in accordance with Bank Negara Malaysias revised Risk-Weighted Capital Adequacy Framework (RWCAF-Basel II). The Group and the Bank have adopted the Standardised Approach for Credit Risk and Market Risk, and the Basic Indicator Approach for Operational Risk. The minimum regulatory capital adequacy requirement is 8% for the risk-weighted capital ratio.
B. The components of Tier I and Tier II Capital are as follows:

Group and Bank 20 1 1 RM000 Tier I Capital Paid up ordinary share capital Share premium Retained profits Other reserves Less: Deferred tax assets Total Tier I Capital (Core Capital) Tier II Capital Collective assessment allowance* Total Tier II Capital Total Eligible Tier II Less: Investments in subsidiary companies Capital Base 253,786 253,786 253,786 (20) 4,262,475 235,973 235,973 235,973 (20) 3,801,235 121,697 380,303 3,388,271 121,697 (3,259) 4,008,709 121,697 380,303 2,998,408 121,697 (56,823) 3,565,282 2010 RM000

Excludes collective assessment allowance on impaired loans restricted from Tier II Capital by BNM of RM1 11.5 million (20 10: RM133.4 million).

110

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

36. Off-balance sheet exposures


The off-balance sheet exposures and their related counterparty credit risk of the Group and the Bank are as follows: 20 1 1 Group and Bank Nature of item Direct credit substitutes Transaction related contingent items Short term self liquidating trade related contingencies Forward asset purchases Foreign exchange related contracts: One year or less Over one year to five years Over five years Interest/Profit rate related contracts: One year or less Over one year to five years Over five years Equity related contracts: One year or less Over one year to five years Over five years Debt security contracts and other commodity contracts: One year or less Over one year to five years Over five years Other commitments, such as formal standby facilities and credit lines, with an original maturity up to one year Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year Any commitments that are unconditionally cancelled at any time by the Bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrowers creditworthiness Unutilised credit card lines Total 210,358 3,687 27,579 1,843 23,095 54,639 123,596 4,577 16,482 1,648 8,593 6,343,210 14,940,969 2,342,535 18,265 474,983 248,393 7,496 158,715 110,993 24,279,480 4,180,829 91,650 568,900 532,616 18,855 387,454 322,054 18,855 Credit equivalent amount RM000 1,707,320 199,865 29,657 12,220 Risk weighted assets RM000 1,410,933 158,071 22,854 6,110

Principal amount RM000 1,707,320 399,731 148,283 12,220

990,462

198,092

198,092

598,618

299,309

227,000

5,376,095 17,832,083 79,632,078

3,566,418 7,927,218

2,677,910 5,741,716

111

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

36. Off-balance sheet exposures (continued)


The Off-balance sheet exposures and their related counterparty credit risk of the Group and the Bank are as follows: (continued) 2010 Group and Bank Nature of item Direct credit substitutes Transaction related contingent items Short term self liquidating trade related contingencies Forward asset purchases Foreign exchange related contracts: One year or less Over one year to five years Over five years Interest/Profit rate related contracts: One year or less Over one year to five years Over five years Equity related contracts: One year or less Over one year to five years Over five years Debt security contracts and other commodity contracts: One year or less Over one year to five years Over five years Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year Any commitments that are unconditionally cancelled at any time by the Bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrowers creditworthiness Unutilised credit card lines Total 175,461 34,810 32,976 388,457 153,686 25,785 24,797 12,867 12,399 7,896,887 16,604,797 1,800,014 37,105 586,871 191,416 13,589 255,311 64,169 24,729,003 3,637,939 758,795 539,734 561,289 321,023 Credit equivalent amount RM000 1,489,992 197,985 84,526 617 Risk weighted assets RM000 1,288,190 180,418 127,781 -

Principal amount RM000 1,489,992 395,970 422,631 617

421,905

210,952

158,455

5,014,737 18,107,541 81,239,637

3,621,508 7,804,893

2,722,693 5,751,160

112

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

37. The operations of Islamic Banking


Statements of financial position as at 31 December 201 1

Group and Bank 20 1 1 RM000 Assets Cash and short term funds Financial assets held-for-trading Financial investments available-for-sale Financing, advances and other loans Deferred tax assets Other assets Total assets Liabilities Deposits from customers Deferred tax liabilities Other liabilities Total liabilities Islamic banking funds Total liabilities and Islamic banking funds Off-balance sheet exposures (s) (i) (h) (g) 649,448 85,107 734,555 226,092 960,647 658,992 1,089,505 382,071 1,471,576 204,050 1,675,626 1,534,730 (f) (a) (b) (c) (d) 68,863 431,792 444,160 239 15,593 960,647 394,301 343,179 271,553 500,800 1,142 164,651 1,675,626 2010 RM000

The notes on pages 116 to 133 are an integral part of these financial statements.

113

N o t e s To T h e F i n a n c i a l S t a t e m e n t s 37. The operations of Islamic Banking (continued)


Statements of comprehensive income for financial year ended 31 December 201 1

Group and Bank 20 1 1 RM000 Income derived from investment of depositors funds and others Provision for financing, advances and other loans Transfer to Profit Equalisation Reserve Total attributable income Income attributable to depositors Total attributable to the Bank Income derived from investment of Islamic Banking Capital Funds Total net income Other operating expenses Profit before taxation Tax expense Profit for the year Other comprehensive income/(loss), net of income tax Net gain/(loss) on revaluation of financial investments available-for-sale Other comprehensive income/(loss) for the year, net of income tax Total comprehensive income for the year Profit for the year attributable to: Equity holder of the Bank Total comprehensive income attributable to: Equity holder of the Bank 22,042 21,843 20,836 23,392 (q) (p) (n) (m) 2010 RM000

(j) (k) (l)

41,732 822 (3,204) 39,350 (14,240) 25,110 5,382 30,492 (2,857) 27,635 (6,799) 20,836

41,197 309 (9,164) 32,342 (8,461) 23,881 12,419 36,300 (4,696) 31,604 (8,212) 23,392

1,206

(1,549)

1,206 22,042

(1,549) 21,843

The notes on pages 116 to 133 are an integral part of these financial statements.

114

N o t e s To T h e F i n a n c i a l S t a t e m e n t s 37. The operations of Islamic Banking (continued)


Statements of changes in Islamic Banking Funds for the year ended 31 December 201 1

Group and Bank Capital funds RM000 At 1 January 2010 Fair value of available-for-sale financial assets Total other comprehensive expense for the year Profit for the year Total comprehensive (expense)/ income for the year At 31 December 2010/ 1 January 2011 Fair value of available-for-sale financial assets Total other comprehensive income for the year Profit for the year Total comprehensive income for the year At 31 December 2011 20,000 20,000 20,000 Fair value reserve RM000 885 (1,549) (1,549) (1,549) (664) 1,206 1,206 1,206 542 Retained profits RM000 161,322 23,392 23,392 184,714 20,836 20,836 205,550 Total RM000 182,207 (1,549) (1,549) 23,392 21,843 204,050 1,206 1,206 20,836 22,042 226,092 Note 37(i)

The notes on pages 116 to 133 are an integral part of these financial statements.

115

N o t e s To T h e F i n a n c i a l S t a t e m e n t s 37. The operations of Islamic Banking (continued)


Statements of cash flows for financial year ended 31 December 2011

Group and Bank 20 1 1 RM000 Cash flows from operating activities Profit before taxation Adjustments for: Amortisation of premium less accretion of discount of investment securities Allowance for bad and doubtful debts (net of write-back) Profit Equalisation Reserve Gain from disposal of financial investments available-for-sale Mark-to-market gain on financial assets held-for-trading Operating profit before working capital changes Changes in working capital: Financial assets held-for-trading Financing, advances and other loans Other assets Deposits from customers Other liabilities Cash used in operating activities Income taxes paid Net cash used in operating activities Cash flows from investing activities Purchase of financial investments available-for-sale Proceeds from disposal of financial investments available-for-sale Net cash (used in)/from investing activities Net decrease in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December (Note 37(a)) (424,780) 267,995 (156,785) (325,438) 394,301 68,863 (273,805) 402,387 128,582 (484,159) 878,460 394,301 343,267 57,462 149,058 (440,057) (298,864) (159,659) (8,994) (168,653) (275,128) 26,511 (72,935) (542,911) 222,917 (604,529) (8,212) (612,741) 491 (822) 3,204 (945) (88) 29,475 208 (309) 9,164 (996) (2,654) 37,017 27,635 31,604 2010 RM000

The notes on pages 116 to 133 are an integral part of these financial statements.

116

N o t e s To T h e F i n a n c i a l S t a t e m e n t s 37. The operations of Islamic Banking (continued)


a. Cash and short term funds

Group and Bank 20 1 1 RM000 Cash and balances with banks and other financial institutions Money at call and deposit placements maturing within one month 2,863 66,000 68,863 2010 RM000 4,301 390,000 394,301

b.

Financial assets held-for-trading

Group and Bank 20 1 1 RM000 At fair value Bank Negara Malaysia Islamic Bills Malaysian Government Treasury Bills 336,868 6,311 343,179 2010 RM000

c.

Financial investments available-for-sale

Group and Bank 20 1 1 RM000 At fair value Malaysian Government Investment Issues 431,792 431,792 271,553 271,553 2010 RM000

117

N o t e s To T h e F i n a n c i a l S t a t e m e n t s 37. The operations of Islamic Banking (continued)


d. Financing, advances and other loans

i.

By type Group and Bank 20 1 1 RM000 Term financing - Housing loans/financing - Hire purchase receivables - Lease receivables - Other term loans/financing 475,960 1,592 631 478,183 Unearned income Gross financing, advances and other loans Less: Allowance for impaired financing, advances and other loans - Collective assessment allowance - Individual assessment allowance Total net financing, advances and other loans (6,764) (2,119) 444,160 (7,626) (2,084) 500,800 (25,140) 453,043 536,474 3,175 2,878 42 542,569 (32,059) 510,510 2010 RM000

ii.

By contract BaiBithamin Ajil Ijarah Muntahia Bittamilik Diminishing Musharakah 34,701 2,223 416,119 453,043 42,101 6,095 462,314 510,510

iii. By type of customer Domestic business enterprises - Small and medium enterprises - Others Individuals 2,206 2,419 448,418 453,043 5,812 2,829 501,869 510,510

118

N o t e s To T h e F i n a n c i a l S t a t e m e n t s 37. The operations of Islamic Banking (continued)


d. Financing, advances and other loans (continued)

iv.

By profit rate sensitivity Group and Bank 20 1 1 RM000 Fixed rate - Housing loans/financing - Hire purchase receivables - Other fixed rate/financing 450,820 1,592 631 453,043 504,416 3,174 2,920 510,510 2010 RM000

v.

By sector Manufacturing (including agriculture based) Wholesale, retail trade, restaurants and hotels Transport, storage and communication Finance, insurance, real estate and business services Household - residential Other sectors 2,156 67 448,418 2,402 453,043 3,923 98 2,040 33 501,869 2,547 510,510

vi.

By purpose Purchase of landed property Purchase of fixed assets excluding land and building 450,820 2,223 453,043 504,416 6,094 510,510

119

N o t e s To T h e F i n a n c i a l S t a t e m e n t s 37. The operations of Islamic Banking (continued)


e. Impaired financing, advances and other loans

i.

Movements in impaired financing, advances and other loans are as follows: Group and Bank 20 1 1 RM000 At 1 January Classified as impaired during the year Amount recovered Amount written off At 31 December Individual assessment allowance Net impaired financing, advances and other loans Ratio of net impaired financing, advances and other loans to total gross financing, advances and other loans less individual assessment allowance 13,257 57 (3,685) 9,629 (2,119) 7,510 2010 RM000 10,215 8,987 (3,200) (2,745) 13,257 (2,084) 11,173

1.67%

2.20%

ii.

Movements in impaired financing, advances and other loans are as follows: Group and Bank 20 1 1 RM000 Collective assessment allowance At 1 January Allowance written back during the year At 31 December 7,626 (862) 6,764 8,026 (400) 7,626 2010 RM000

As % of gross financing, advances and other loans less individual assessment allowance

1.50%

1.50%

120

N o t e s To T h e F i n a n c i a l S t a t e m e n t s 37. The operations of Islamic Banking (continued)


e. Impaired financing, advances and other loans (continued)

ii.

Movements in impaired financing, advances and other loans are as follows (continued):

Group and Bank 20 1 1 RM000 Individual assessment allowance At 1 January Allowance made during the year Amount recovered Amount written off At 31 December 2,084 40 (6) 2,118 4,743 203 (117) (2,745) 2,084 2010 RM000

iii. Impaired financing, advances and other loans by sector

Group and Bank 20 1 1 RM000 Manufacturing (including agriculture based) Household - residential 1,380 8,249 9,629
f. Other assets

2010 RM000 1,446 11,811 13,257

Group and Bank 20 1 1 RM000 Profit receivables Other debtors, deposits and prepayments Revaluation gain on profit rate undertaking contracts (Note 37(t)) 4,440 8,529 2,624 15,593 2010 RM000 3,666 14,760 146,225 164,651

121

N o t e s To T h e F i n a n c i a l S t a t e m e n t s 37. The operations of Islamic Banking (continued)


g. Deposits from customers i. By type of deposit

Group and Bank 20 1 1 RM000 Non-Mudharabah Fund Demand deposits Saving deposits Other deposits Mudharabah Fund General investment deposits 36,054 649,448 37,772 1,089,505 495,235 69,912 48,247 878,181 69,203 104,349 2010 RM000

ii.

By type of customer

Group and Bank 20 1 1 RM000 Government and statutory bodies Business enterprises Individuals Others 8,339 208,987 333,959 98,163 649,448 2010 RM000 24 642,811 302,084 144,586 1,089,505

122

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

37. The operations of Islamic Banking (continued)


h. Other liabilities

Group and Bank 20 1 1 RM000 Profit payable Other creditors and accruals Profit Equalisation Reserve (see Note 37(l)) Revaluation loss on profit rate undertaking contracts (Note 37(t)) 8,846 61,246 12,391 2,624 85,107
i. Islamic banking funds

2010 RM000 11,783 214,876 9,187 146,225 382,071

Group and Bank 20 1 1 RM000 Fund allocated Fair value reserve Retained earnings 20,000 542 205,550 226,092 2010 RM000 20,000 (664) 184,714 204,050

j.

Income derived from investment of depositors funds and others

Group and Bank 20 1 1 RM000 Income derived from investment of: (i) General investment deposits 39,397 2,335 41,732 36,582 4,615 41,197 (ii) Other deposits 2010 RM000

123

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

37. The operations of Islamic Banking (continued)


j. Income derived from investment of depositors funds and others (continued)

i.

Income derived from investment of general deposits

Group and Bank 20 1 1 RM000 Finance income and hibah Financing, advances and other loans Money at call and placements with financial institutions Income from financial investments available- for-sale 18,916 8,245 10,046 37,207 Accretion of discount less amortisation of premium Total finance income and hibah 1,966 39,173 18,120 5,217 9,205 32,542 3,010 35,552 2010 RM000

Other operating income Fee income Income from general investment deposits 224 39,397 1,030 36,582

124

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

37. The operations of Islamic Banking (continued)


j. Income derived from investment of depositors funds and others (continued)

ii.

Income derived from investment of other deposits

Group and Bank 20 1 1 RM000 Finance income and hibah Financing, advances and other loans Money at call and placements with financial institutions Income from financial investments available- for-sale 1,121 489 596 2,206 Accretion of discount less amortisation of premium Total finance income and hibah Other operating income Fee income Income from investment of other deposits 13 2,335 130 4,615 116 2,322 2,286 658 1,161 4,105 380 4,485 2010 RM000

k.

Provision for financing, advances and other loans

Provision for financing, advances and other loans: Individual assessment allowance - made in the financial year - written back Collective assessment allowance - reversal during the year Impaired financing, advances and other loans - written off (822) 5 (309) (863) (400) 179 (138) 203 (117)

125

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

37. The operations of Islamic Banking (continued)


l. Profit Equalisation Reserve

The movement in Profit Equalisation Reserve is as follows: Group and Bank 20 1 1 RM000 At 1 January Movement in the financial year At 31 December 9,187 3,204 12,391 2010 RM000 23 9,164 9,187

m.

Income attributable to depositors

Group and Bank 20 1 1 RM000 Deposits from customers - Mudharabah Fund - Non-Mudharabah Fund Deposits and placements of banks and other financial institutions - Non-Mudharabah Fund Others 24 57 14,240 66 269 8,461 11,272 2,887 4,902 3,224 2010 RM000

n.

Income derived from investment of Islamic Banking Capital Funds

Group and Bank 20 1 1 RM000 Financing, advances and other loans Money at call and placements with financial institutions Income from financial investments available-for-sale 2,386 1,040 1,267 4,693 Accretion of discount less amortisation of premium Total finance income and hibah (235) 4,458 2010 RM000 2,194 632 1,115 3,941 324 4,265

126

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

37. The operations of Islamic Banking (continued)


n. Income derived from investment of Islamic Banking Capital Funds (continued)

Group and Bank 20 1 1 RM000 Other operating income Gain/(Loss) from financial assets held-for-trading Gain from financial investments available-for-sale Fee income (Loss)/Income from trading activities 88 945 1,628 (1,737) 924 Income from Islamic Banking Capital Funds 5,382 (91) 2,690 877 4,678 8,154 12,419 2010 RM000

o.

Income from Islamic banking operations

For consolidation with the conventional operations, income from Islamic banking operations comprises the following: Group and Bank 20 1 1 Note Income derived from investment of depositors funds and others Profit Equalisation Reserve Income attributable to depositors Income derived from investment of Islamic Banking Capital Funds RM000 2010 RM000

(j) (l) (m) (n)

41,732 (3,204) (14,240) 5,382 29,670

41,197 (9,164) (8,461) 12,419 35,991

127

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

37. The operations of Islamic Banking (continued)


p. Other operating expenses

Group and Bank 20 1 1 RM000 Personnel costs - Salaries, allowances and bonuses - Contributions to Employees Provident Fund - Staff benefits and other compensations - Others Establishment costs - Depreciation - Rental Administrative and general expenses - Others 2,596 2,857 3,674 4,696 1 1 3 222 23 14 1 951 23 14 30 2010 RM000

Included in other operating expenses is the Syariah Committees remuneration of RM139,000 (2010 - RM108,000).
q. Taxation

Group and Bank 20 1 1 RM000 Current tax expense Deferred tax expense 9,884 (3,085) 6,799 2010 RM000 7,161 1,051 8,212

128

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

37. The operations of Islamic Banking (continued)


r. Capital adequacy i. The capital adequacy ratios are as follows:

Group and Bank 20 1 1 RM000 Computation of Total Risk Weighted Assets (RWA) Total credit RWA Total market RWA Total operational RWA Total Risk Weighted Assets Computation of Capital Ratios Tier 1 Capital Capital Base Core capital ratio Risk weighted capital ratio 225,131 231,517 74.02% 76.12% 203,761 210,955 33.48% 34.66% 199,050 20,319 84,785 304,154 436,946 79,687 92,001 608,634 2010 RM000

With effect from 1 January 2010, the capital adequacy ratios of the Group and the Bank are computed in accordance with Bank Negara Malaysias revised Risk-Weighted Capital Adequacy Framework (RWCAF-Basel II). The Group and the Bank have adopted the Standardised Approach for Credit Risk and Market Risk, and the Basic Indicator Approach for Operational Risk. The minimum regulatory capital adequacy requirement is 8% for the risk-weighted capital ratio.
ii. The components of Tier I and Tier II Capital are as follows:

Group and Bank 20 1 1 RM000 Tier I Capital Fund allocated Retained earnings Less: Deferred tax assets Total Tier I Capital (Core Capital) 20,000 205,550 (419) 225,131 20,000 184,714 (953) 203,761 2010 RM000

129

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

37. The operations of Islamic Banking (continued)


r. Capital adequacy (continued)

Group and Bank 20 1 1 RM000 Tier II Capital Collective assessment allowance* Capital Base * 6,386 231,517 7,194 210,955 2010 RM000

Excludes collective assessment allowance on impaired loans restricted from Tier II Capital by BNM of RM378,000 (2010 - RM432,000).

s.

Off-balance sheet exposures

The off-balance sheet exposures and their related counterparty credit risk of the Group and the Bank of the current year are as follows: 2011 Group and Bank Nature of item Interest/Profit rate related contracts: One year or less Over one year to five years Over five years Other commitments, such as formal standby facilities and credit lines, with an original maturity of up to one year Other commitments, such as formal standby facilities and credit lines with an original maturity of over one year Total 350,000 300,000 9,000 19,721 4,200 11,144 Credit equivalent amount RM000 Risk weighted assets RM000

Principal amount RM000

158

32

32

8,834 658,992

4,416 33,169

3,275 18,651

130

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

37. The operations of Islamic Banking (continued)


s. Off-balance sheet exposures (continued)

The off-balance sheet exposures and their related counterparty credit risk of the Group and the Bank for previous year were as follows: 2010 Group and Bank Nature of item Foreign exchange related contracts: One year or less Over one year to five years Over five years Interest/Profit rate related contracts: One year or less Over one year to five years Over five years Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year Any commitments that are unconditionally cancelled at any time by the Bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrowers creditworthiness Total 138,758 550,000 139 20,842 139 14,546 828,235 152,975 152,975 Credit equivalent amount RM000 Risk weighted assets RM000

Principal amount RM000

16,736

8,341

3,312

1,001 1,534,730

182,297

170,972

131

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

37. The operations of Islamic Banking (continued)


t. Derivative financial instruments

2011 Contract Amount RM000 Foreign exchange related contracts: - Cross currency Islamic profit rate undertaking Others - Islamic profit rate undertaking 800,000 800,000 2,624 2,624 Note 37(f) 2,624 2,624 Note 37(h) 927,515 2,449,264 1,521,749 Positive fair value RM000 Negative fair value RM000 Contract amount RM000

2010 Positive fair value RM000 Negative fair value RM000

139,724 6,501 146,225 Note 37(f)

139,724 6,501 146,225 Note 37(h)

u.

Profit rate risk

Effective Up To 1 Group and Bank 2011 Assets Cash and short term funds Financial investments available-for-sale Financing, advances and other loans - performing - impaired Deferred tax assets Others assets Total assets Month RM000 >1-3 Months RM000 > 3 - 12 Months RM000 >1-5 Years RM000 Over 5 Non-interest Trading Years RM000 Sensitive RM000 Book RM000 Total RM000 Interest Rate %

66,000 -

80,000

351,792

2,863 -

68,863 431,792

2.82% 2.81%

1,446 67,446

422 80,422

2,065 353,857

439,481 439,481

(6,764) 7,510 239 12,969 16,817

2,624 2,624

436,650 7,510 239 15,593 960,647

4.80%

132

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

37. The operations of Islamic Banking (continued)


u. Profit rate risk (continued)

Effective Up To 1 Group and Bank 2011 Liabilities and Islamic Banking Funds Deposits from customers Deferred tax liability Other liabilities 592,768 592,768 8,432 8,432 48,248 48,248 82,483 82,483 226,092 2,624 2,624 649,448 85,107 734,555 226,092 1.53% Month RM000 >1-3 Months RM000 > 3 - 12 Months RM000 >1-5 Years RM000 Over 5 Non-interest Trading Years RM000 Sensitive RM000 Book RM000 Total RM000 Interest Rate %

Total liabilities Islamic Banking Funds

Total liabilities and Islamic Banking Funds On-balance sheet profit sensitivity gap

592,768

8,432

48,248

308,575

2,624

960,647

(525,322)

71,990

305,609

439,981 (291,758)

Effective Up To 1 Group and Bank 2010 Assets Cash and short term funds Financial assets held-for-trading Financial investments available-for-sale Financing, advances and other loans - performing - impaired Deferred tax assets Others assets Total assets Month RM000 >1-3 Months RM000 > 3 - 12 Months RM000 >1-5 Years RM000 Over 5 Non-interest Trading Years RM000 Sensitive RM000 Book RM000 Total RM000 Interest Rate %

390,000 -

271,553

4,301 -

343,179 -

394,301 343,179 271,553

2.12% 13.98% 10.57%

214 390,214

210 210

1,598 1,598

1,215 272,768

494,016 494,016

(7,626) 11,173 1,142 18,426 27,416

146,225

489,627 11,173 1,142 164,651

4.36%

489,404 1,675,626

133

N o t e s To T h e F i n a n c i a l S t a t e m e n t s

37. The operations of Islamic Banking (continued)


u. Profit rate risk (continued)

Effective Up To 1 Group And Bank 2010 Month RM000 >1-3 Months RM000 > 3 - 12 Months RM000 >1-5 Years RM000 Over 5 Non-interest Trading Years RM000 Sensitive RM000 Book RM000 Total RM000 Interest Rate %

Liabilities and Islamic Banking Funds Deposits from customers Other liabilities Total liabilities Islamic Banking Funds Total liabilities and Islamic Banking Funds On-balance sheet profit sensitivity gap

973,532 973,532 -

5,567 5,567 -

49,057 49,057 -

61,349 61,349 -

235,846 235,846 204,050

- 1,089,505 146,225 382,071 146,225 1,471,576 - 204,050

0.76%

973,532

5,567

49,057

61,349

439,896

146,225 1,675,626

(583,318)

(5,357)

(47,459)

211,419

494,016 (412,480)

343,179