Financial Statements

Financial Statements
110 111 118 118 119 121 123 124 125 126 129 131 Statement of Board of Directors Responsibilities Directors Report Statement by Directors Statutory Declaration Independent Auditors Report Balance Sheets Income Statements Consolidated Statement of Changes in Equity Statement of Changes in Equity Consolidated Cash Flow Statement Cash Flow Statement Notes to the Financial Statements
Statement of Board of Directors Responsibilities

For preparing the Annual Audited Financial Statements
The Companies Act, 1965 requires Directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Group and the Company for the financial year. In preparing the financial statements, the Directors are responsible for the adoption of suitable accounting policies that comply with the provisions of the Companies Act, 1965, applicable Financial Reporting Standards in Malaysia as modified by Bank Negara Malaysia Guidelines. The Directors are also responsible to ensure their consistent use in the financial statements, supported where necessary by reasonable and prudent judgements. The Directors hereby confirm that suitable accounting policies have been consistently applied in the preparation of the financial statements. The Directors also confirm that the Company maintains adequate accounting records and an effective system of internal control to safeguard the assets of the Group and the Company and prevent and detect fraud or any other irregularities.
110
Directors Report
The Directors present their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 March 2010.
PRINCIPAL ACTIVITIES
The principal activities of the Company are investment holding and provision of management services to the subsidiaries. The principal activities of the subsidiaries are commercial banking and financing, Islamic banking, investment banking including provision of stockbroking services, unit trusts and fund management, and the provision of related financial services. There have been no significant changes in the nature of the principal activities during the financial year.
RESULTS
Group RM000 Profit before taxation and zakat Taxation and zakat Net profit after taxation and zakat Attributable to: Equity holders of the Company Minority interests Net profit after taxation and zakat 408,938 (107,438) 301,500 301,424 76 301,500 Company RM000 128,726 (27,993) 100,733 100,733 100,733
RESERVES AND PROVISIONS

There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements.
ALLIANCE FINANCIAL GROUP BERHAD (6627-X) 2010 ANNUAL REPORT
111
Directors Report
DIVIDENDS
The amount of dividends declared and paid by the Company since 31 March 2009 were as follows: RM000 (i) (ii) First interim dividend of 1.3 sen per share, tax exempt under the single tier tax system, on 1,548,105,929 ordinary shares of RM1.00 each, in respect of financial year ended 31 March 2010, was paid on 26 August 2009 Second interim dividend of 5.1 sen per share, tax exempt under the single tier tax system, on 1,548,105,929 ordinary shares of RM1.00 each, in respect of financial year ended 31 March 2010, was paid on 26 March 2010 19,904 77,980 97,884 Dividends paid on the shares held in Trust pursuant to the Companys ESS which are classified as shares held for ESS are not accounted for in the total equity. An amount of RM222,000 and RM973,000 being dividends paid for those shares were added back to the appropriation of retained profits in respect of the first and second interim dividends respectively. The Directors do not recommend the payment of any final dividend in respect of the current financial year.
EMPLOYEES SHARE SCHEME

The Alliance Financial Group Berhad Employees Share Scheme (ESS) is governed by the Bye-Laws approved by the shareholders at an Extraordinary General Meeting held on 28 August 2007. The ESS which comprises the Share Option Plan, the Share Grant Plan and the Share Save Plan took effect on 3 December 2007 and is in force for a period of 10 years. On 25 August 2009, the Company offered/awarded the following share options and share grants to Directors and employees of the Company and its subsidiaries who have met the criteria of eligibility for the participation in the ESS: (i) (ii) 10,189,800 share options under the Share Option Plan at an option price of RM2.38 per share which will be vested subject to the achievement of performance conditions. 2,620,800 share grants under the Share Grant Plan. The first 50% of the share grants are to be vested at the end of the second year and the remaining 50% of the share grants are to be vested at the end of the third year from the date on which an award is made.
There were no share options offered under the Share Save Plan during the financial year. The salient features of the ESS are disclosed in Note 30 to the financial statements.
SHARES HELD FOR EMPLOYEES SHARE SCHEME

During the financial year ended 31 March 2010, the Trustee of the ESS had purchased 5,581,700 ordinary shares of RM1.00 each fully paid in the Company from the open market at an average price of RM2.25 per share. The total consideration paid for the purchase including transaction costs was RM12,570,000. The shares purchased are being held in trust by the Trustee of the ESS in accordance with the Trust Deed dated 3 December 2007. During the financial year ended 31 March 2010, 816,900 shares have been vested and transferred from the Trustee to the eligible employees of the Company and its subsidiaries in accordance with the terms under the Share Grant Plan of the ESS. As at 31 March 2010, the Trustee of the ESS held 19,070,300 ordinary shares representing 1.23% of the issued and paid-up capital of the Company. Such shares are held at a carrying amount of RM46,697,000 and further relevant details are disclosed in Note 29 to the financial statements.
112
Directors Report
BUSINESS REVIEW FOR FINANCIAL YEAR ENDED ("FYE") 31 MARCH 2010

In response to global and local economic conditions, the Group focused on strengthening its risk management practices to maintain the credit quality of its loan portfolios, improve cost efficiencies and to ensure its liquidity and capital positions stay strong. For the 12 months ended 31 March 2010, the Group recorded profit before taxation of RM408.9 million, a growth of RM105.6 million or 35% compared to RM303.3 million in the corresponding period last year. During the year under review, the Group recorded loans growth of 9.3%, with the loans portfolio diversified in line with our desired mix. Net non-performing loans maintained as last year at 1.8%. The Groups risk-weighted capital ratio and core capital ratio improved to 15.4% and 11.1% from 14.6% and 10.3% respectively compared to 31 March 2009. For the year under review, the Group received several local and regional accolades as listed below for its branding and product innovation. 2009 National Award for Management Accounting (NAfMA 2009) Malaysias Top 30 Most Valuable Brands 2009 (MMVB 2009) The Best Equity Malaysia Islamic Fund in the 3-year category by The Edge-Lipper Malaysia Fund Awards 2009 Most Personalised Personalisation award (You:nique Picture Card) by Multos World Awards 2009 Excellence in Business Model Innovation Award 2009 by Asian Bankers Excellence in Retail Financial Services Awards Programme
ECONOMIC OUTLOOK AND PROSPECTS FOR FYE 31 MARCH 2011

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

We foresee an economic recovery and rising GDP in 2011. At the macro level, we are confident that the recently announced first phase of the New Economic Model (NEM) will be good for various sectors, ultimately impacting the man-on-the-streets financial planning and management. At the Group level, we approach the financial year with a renewed but cautious optimism. We are confident that our customer segmentation model will enable us to deepen our customer relationships. The Group has been steadily transforming its business model to enable the best delivery to our customers and to maximise synergies between our various lines of business. The small-to-medium enterprise (SME) sector is expected to be a strong growth driver in the countrys plans to achieve its goal of a high income nation, as supported by the NEM. The SME sector remains one of Alliance Banks areas of strength and we are well-positioned to take advantage of this renewed outlook for the sector. We also expect to benefit from the transformation journey that we have embarked on since 2007. Our top priority is to ensure that our underlying business momentum remains intact and sustains our growth momentum. Human capital development and talent management will continue to remain a key priority for the Group. The Group expects to continue to record satisfactory performance in the new financial year ending 31 March 2011.
113
Directors Report
RATING BY EXTERNAL RATING AGENCY

The banking subsidiary Alliance Bank Malaysia Berhad (ABMB) is rated by Rating Agency Malaysia Berhad (RAM). Based on RAMs rating in November 2009, ABMBs short-term and long-term ratings are reaffirmed at P1 and A1 respectively. RAM has classified these rating categories as follows: P1 Financial institutions in this category have superior capacities for timely payments of obligations. A1 Financial institutions rated in this category are adjudged to offer adequate safety for timely payments of financial obligations. This level of rating indicates financial institutions with adequate credit profiles, but which possess one or more problem areas, giving rise to the possibility of future riskiness. Financial institutions rated in this category have generally performed at industry average and are considered to be more vulnerable to changes in economic conditions than those rated in the higher categories.
DIRECTORS
The names of the Directors of the Company in office since the date of the last report and at the date of this report are: Datuk Oh Chong Peng Dato Thomas Mun Lung Lee Tan Yuen Fah Stephen Geh Sim Whye Phoon Siew Heng Megat Dziauddin Bin Megat Mahmud Kung Beng Hong Datuk Bridget Anne Chin Hung Yee Tee Kim Chan (resigned on 1 March 2010) (retired on 29 July 2009)
DIRECTORS BENEFITS
Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the Directors might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate, other than those arising from the share options and share grants under the ESS. Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the Directors or the fixed salary of a full-time employee of the Company or related corporations as shown in Note 34(b) and Note 46(c) to the financial statements of the Company or financial statements of related corporations) by reason of a contract made by the Company or a related corporation with any Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.
114
Directors Report
DIRECTORS INTERESTS
According to the Register of Directors' Shareholdings, the interests of Directors in office at the end of the financial year in shares, share options and share grants in the Company were as follows: 1.4.2009 The Company Megat Dziauddin Bin Megat Mahmud Direct Dato Thomas Mun Lung Lee Indirect (held through spouse, Datin Teh Yew Kheng) 3,000 35,000 3,000 35,000 Number of Ordinary Shares of RM1.00 Each Acquired Sold 31.3.2010
By virtue of their shareholdings in the Company, the above Directors are deemed to have beneficial interests in the shares of the subsidiary companies of the Company. None of the other Directors in office at the end of the financial year had any interest in shares, share options and share grants in the Company or its related corporations during the financial year.
ISSUE OF SHARES
There was no change in the issued and paid-up capital of the Company during the financial year.
BAD AND DOUBTFUL DEBTS

Before the balance sheets and income statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts. At the date of this report, the Directors are not aware of any circumstances which would render the amount written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent.
CURRENT ASSETS
Before the balance sheets and income statements of the Group and of the Company were made out, the Directors took reasonable steps to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise. At the date of this report, the Directors are not aware of any circumstances which would render the values attributed to the current assets in the financial statements of the Group and of the Company misleading.
115
Directors Report
VALUATION METHOD
At the date of this report, the Directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.
CONTINGENT AND OTHER LIABILITIES

At the date of this report, there does not exist: (i) (ii) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or any contingent liability in respect of the Group and of the Company which has arisen since the end of the financial year other than in the ordinary course of business.
No contingent or other liability of the Group and of the Company has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Group or of the Company to meet their obligations as and when they fall due.
CHANGE OF CIRCUMSTANCES
At the date of this report, the Directors are not aware of any circumstances, not otherwise dealt with in this report or financial statements of the Group and of the Company, which would render any amount stated in the financial statements misleading.
ITEMS OF AN UNUSUAL NATURE

In the opinion of the Directors: (i) (ii) the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature which is likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made.
SIGNIFICANT EVENTS DURING THE YEAR

The significant events during the financial year are disclosed in Note 50 to the financial statements.
SUBSEQUENT EVENT
There was no material event subsequent to the balance sheet date that require disclosure or adjustment to the financial statements.
116
Directors Report
AUDITORS
The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the Directors dated 15 June 2010.
Datuk Oh Chong Peng Kuala Lumpur, Malaysia
Dato Thomas Mun Lung Lee
117
Statement by Directors
Pursuant to Section 169(15) of the Companies Act, 1965
We, Datuk Oh Chong Peng and Dato Thomas Mun Lung Lee, being two of the Directors of Alliance Financial Group Berhad, do hereby state that, in the opinion of the Directors, the accompanying financial statements set out on pages 121 to 222 are drawn up in accordance with the provisions of the Companies Act, 1965 and the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and Bank Negara Malaysia Guidelines, so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 March 2010 and of the results and the cash flows of the Group and of the Company for the financial year then ended. Signed on behalf of the Board in accordance with a resolution of the Directors dated 15 June 2010.
Datuk Oh Chong Peng Kuala Lumpur, Malaysia
Dato Thomas Mun Lung Lee
Statutory Declaration
Pursuant to Section 169(16) of the Companies Act, 1965
I, Lee Eng Leong, being the officer primarily responsible for the financial management of Alliance Financial Group Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 121 to 222 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960. Subscribed and solemnly declared by the abovenamed Lee Eng Leong at Kuala Lumpur in the Federal Territory on 15 June 2010 Before me, Sivanason a/l Marimuthu Commissioner for Oaths Kuala Lumpur, Malaysia 15 June 2010
Lee Eng Leong
118
Independent Auditors Report

to the members of Alliance Financial Group Berhad (Incorporated in Malaysia)
Report on the financial statements

We have audited the financial statements of Alliance Financial Group Berhad, which comprise the balance sheets as at 31 March 2010 of the Group and of the Company, and the income statements, statements of changes in equity and cash flow statements of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 121 to 222. Directors responsibility for the financial statements The Directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with the Companies Act, 1965, the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the Bank Negara Malaysia Guidelines. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. 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 whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks 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 Companys preparation and fair presentation of the financial statements 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 Companys internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements have been properly drawn up in accordance with the Companies Act, 1965, the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and Bank Negara Malaysia Guidelines so as to give a true and fair view of the financial position of the Group and of the Company as at 31 March 2010 and of their financial performances and cash flows for the year then ended.
119
Independent Auditors Report

to the members of Alliance Financial Group Berhad (Incorporated in Malaysia)
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) (b) (c) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the Act. We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Companys 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. The audit reports on the financial statements of the subsidiaries did not contain any qualification and any adverse comment made under Section 174(3) of the Act.
Other matters
This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.
PricewaterhouseCoopers AF: 1146 Chartered Accountants Kuala Lumpur, Malaysia 15 June 2010
Mohammad Faiz Bin Mohammad Azmi No.2025/03/12 (J) Chartered Accountant
120
Balance Sheets
as at 31 March 2010
Group Note ASSETS Cash and short-term funds Deposits and placements with banks and other financial institutions Securities held-for-trading Securities available-for-sale Securities held-to-maturity Derivative financial assets Loans, advances and financing Balances due from clients and brokers Land held for investment Other assets Tax recoverable Statutory deposits Investments in subsidiaries Leasehold land Property, plant and equipment Intangible assets Deferred tax assets TOTAL ASSETS 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 2010 RM000 3,564,545 150,156 5,154,828 931,420 44,698 20,648,445 72,568 27,748 186,707 24,316 258,506 11,119 123,974 361,858 102,727 31,663,615 2009 RM000 4,990,686 198,523 46,055 6,320,122 314,620 40,858 18,718,097 44,680 27,748 235,626 71,397 199,024 12,136 137,567 368,512 120,517 31,846,168 2010 RM000 30,847 610,800 6,057 1,334 1,776,984 361 2,426,383
Company 2009 RM000 453,878 200,000 38,929 475 1,729,142 473 2,422,897
The accompanying notes form an integral part of the financial statements.
121
Balance Sheets
as at 31 March 2010
Group Note LIABILITIES AND EQUITY Deposits from customers Deposits and placements of banks and other financial institutions Derivative financial liabilities Amount due to Cagamas Berhad Bills and acceptances payable Balances due to clients and brokers Other liabilities Subordinated bonds Long term borrowings Provision for taxation Deferred tax liabilities TOTAL LIABILITIES Share capital Reserves Shares held for Employees Share Scheme CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS Minority interests TOTAL EQUITY TOTAL LIABILITIES AND EQUITY COMMITMENTS AND CONTINGENCIES 44(c) 27 28 29 19 20 8 21 22 23 24 25 26 18 2010 RM000 23,628,331 2,289,666 50,175 28,077 538,350 80,249 892,880 600,000 600,000 4,201 5 28,711,934 1,548,106 1,445,732 (46,697) 2,947,141 4,540 2,951,681 31,663,615 14,293,097 2009 RM000 25,575,441 1,183,387 49,564 58,391 2,215 51,856 956,532 600,000 600,000 2,213 31 29,079,630 1,548,106 1,249,906 (36,127) 2,761,885 4,653 2,766,538 31,846,168 15,081,294 2010 RM000 4,649 600,000 4 604,653
Company 2009 RM000 6,098 600,000 32 606,130 1,548,106 304,788 (36,127) 1,816,767 1,816,767 2,422,897
1,548,106 320,321 (46,697) 1,821,730 1,821,730 2,426,383
122
Income Statements
for the year ended 31 March 2010
Group Note Interest income Interest expense Net interest income/(expense) Net income from Islamic banking business Other operating income Net income Other operating expenses Operating profit Write-back of/(allowance for) losses on loans, advances and financing and other losses Allowance for impairment Profit before taxation and zakat Taxation and zakat Net profit after taxation and zakat Attributable to: Equity holders of the Company Minority interests Net profit after taxation and zakat Earnings per share (sen): Basic Diluted Net dividends per ordinary share in respect of the financial year (sen): 38(a) 38(b) 39 31 32 52 33 34 35 36 37 2010 RM000 1,094,407 (477,539) 616,868 245,821 862,689 201,830 1,064,519 (554,631) 509,888 31,931 (132,881) 408,938 (107,438) 301,500 2009 RM000 1,250,599 (595,975) 654,624 165,128 819,752 235,038 1,054,790 (559,406) 495,384 (115,131) (76,941) 303,312 (74,424) 228,888 229,121 (233) 228,888 14.9 14.8 6.20 2010 RM000
Company 2009 RM000 4,405 (2,460) 1,945 1,945 123,665 125,610 (3,685) 121,925 (691) 121,234 (25,436) 95,798 95,798 95,798
17,426 (20,017) (2,591) (2,591) 136,818 134,227 (3,446) 130,781 (2,055) 128,726 (27,993) 100,733
301,424 76 301,500
100,733 100,733
19.7 19.6 6.32
123
Consolidated Statement of Changes in Equity

Group At 1 April 2008 Unrealised net gain on revaluation of securities available-for-sale Transfer to income statement Deferred tax assets Income and expense recognised directly in equity Net profit/(loss) after taxation and zakat Total recognised income and expense for the year Transfer to statutory reserve Purchase of shares pursuant to ESS Share-based payment under ESS Dividends paid to shareholders Dividends paid to minority interests At 31 March 2009 At 1 April 2009 Unrealised net loss on revaluation of securities available-for-sale Deferred tax assets Income and expense recognised directly in equity Net profit after taxation and zakat Total recognised income and expense for the year Transfer to statutory reserve Transfer to PER Purchase of shares pursuant to ESS Share-based payment under ESS Dividends paid to shareholders Dissolution of subsidiaries ESS shares vested to: employees of subsidiaries own employees Transfer of ESS shares purchase price difference on shares vested At 31 March 2010
Note
Share Capital RM000 1,548,106 1,548,106 1,548,106 1,548,106
Share Premium RM000 304,289 304,289 304,289 304,289
Statutory Reserve RM000 366,910 63,005 429,915 429,915 63,562 493,477
Attributable to Equity Holders of the Company Non-Distributable Employees Share Profit Scheme Equalisation Capital Revaluation (ESS) Reserve Reserve Reserve Reserve (PER) RM000 RM000 RM000 RM000 7,013 7,013 7,013 7,013 (22,776) 10,704 46,562 (14,316) 42,950 42,950 20,174 20,174 (16,979) 4,245 (12,734) (12,734) 7,440 1,438 6,304 7,742 7,742 7,020 (1,978) (22) (421) 12,341 26,388 26,388
<Distributable> Shares held for ESS RM000 (26,254) (9,873) (36,127) (36,127) (12,570) 1,978 22 (46,697)
Retained Profits RM000 410,712 229,121 229,121 (63,005) (96,055) 480,773 480,773 301,424 301,424 (63,562) (26,388) (97,884) 421 594,784
Total RM000 2,589,438 10,704 46,562 (14,316) 42,950 229,121 272,071 (9,873) 6,304 (96,055) 2,761,885 2,761,885 (16,979) 4,245 (12,734) 301,424 288,690 (12,570) 7,020 (97,884) 2,947,141
Minority Interests RM000 4,950 (233) (233) (64) 4,653 4,653 76 76 (189) 4,540
Total Equity RM000 2,594,388 10,704 46,562 (14,316) 42,950 228,888 271,838 (9,873) 6,304 (96,055) (64) 2,766,538 2,766,538 (16,979) 4,245 (12,734) 301,500 288,766 (12,570) 7,020 (97,884) (189) 2,951,681
18
29 30 39
18
28 29 30 39
124
Statement of Changes in Equity

Attributable to Equity Holders of the Company Non-Distributable Employees Shares Scheme (ESS) Reserve RM000 14 64 78 78 14,684 (1,978) (22) (421) 12,341
< Distributable >
Company At 1 April 2008 Net profit after taxation Purchase of shares pursuant to ESS Share-based payment under ESS Dividends paid to shareholders At 31 March 2009 At 1 April 2009 Net profit after taxation Purchase of shares pursuant to ESS Share-based payment under ESS Dividends paid to shareholders ESS recharge amount received from subsidiaries ESS shares vested to employees of subsidiaries owned employees Transfer of ESS shares purchase price difference on shares vested At 31 March 2010
Note
Share Capital RM000 1,548,106 1,548,106 1,548,106 1,548,106
Share Premium RM000 304,289 304,289 304,289 304,289
Shares held for ESS RM000 (26,254) (9,873) (36,127) (36,127) (12,570) 1,978 22 (46,697)
Retained Profits RM000 678 95,798 (96,055) 421 421 100,733 (97,884) 421 3,691
Total Equity RM000 1,826,833 95,798 (9,873) 64 (96,055) 1,816,767 1,816,767 100,733 (12,570) 14,684 (97,884) 1,978 (1,978) 1,821,730
29 30 39
29 30 39
125
Consolidated Cash Flow Statement

2010 RM000 CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation and zakat Adjustments for: Accretion of discount less amortisation of premium of securities Depreciation of property, plant and equipment Dividends from securities held-to-maturity Gain on disposal of property, plant and equipment Loss on disposal of leasehold land Gain on disposal of foreclosed properties Net gain from redemption of securities held-to-maturity Net loss/(gain) from sale of securities held-for-trading Net gain from sale of securities available-for-sale Unrealised loss on revaluation of securities held-for-trading Unrealised (gain)/loss on revaluation of derivative instruments Interest expense on subordinated bonds Interest expense on long term borrowings Interest income from securities held-to-maturity Interest income from securities available-for-sale Interest income from deposits and placements with banks and other financial institutions Return on capital from investment Impairment on other assets Allowance for loan, advances and financing (net of recoveries) Allowance for other assets Allowances for commitments and contingencies Impairment net of write-back of securities available-for-sale Impairment net of write-back of securities held-to-maturity Impairment net of write-back of foreclosed properties Impairment of goodwill Amortisation of leasehold land Amortisation of computer software Profit Equalisation Reserve Share options/grants under Employees Share Scheme Property, plant and equipment written off Computer software written off Loss on liquidation of subsidiaries Operating profit before working capital changes carried forward 408,938 (27,127) 39,713 (6,321) (1,011) 649 (7,029) 228 (11,556) 5,152 (3,266) 36,540 20,017 (17,251) (177,797) 21,397 4,050 1,433 134,712 (3,900) (15) 2,084 138 16,307 (50,058) 7,020 1,160 1,589 50 395,846
2009 RM000
303,312 (99,244) 36,494 (5,390) (203) (7,414) (16,841) (420) (20,197) 1,154 4,823 36,540 2,460 (13,085) (111,492) (5) (88) 40 182,868 133 76,128 (42) 815 139 14,654 (1,867) 6,304 3,218 76 392,870
126

2010 RM000 Operating profit before working capital changes brought forward Changes in working capital: Deposits from customers Deposits and placements of banks and other financial institutions Bills and acceptances payable Balance due from clients and brokers Other liabilities Deposits and placements with banks and other financial institutions Securities held-for-trading Loans, advances and financing Other assets Statutory deposits with Bank Negara Malaysia Amount due to Cagamas Berhad Cash (used in)/generated from operations Taxes and zakat paid Net cash (used in)/generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Net dividends received from securities held-to-maturity Interest received from securities held-to-maturity Interest received from securities available-for-sale Interest received from deposits and placements with banks and other financial institutions Return on capital from investment Purchase of property, plant and equipment Purchase of computer software Purchase of shares from market Proceeds from disposal of property, plant and equipment Proceeds from disposal of leasehold land Return on capital from liquidation of subsidiaries Purchase of securities held-to-maturity, net of maturity and redemption proceeds Purchase of securities available-for-sale, net of sale proceeds Net cash generated from/(used in) investing activities 395,846 (1,947,110) 1,106,279 536,135 (47,158) (15,006) 48,367 40,722 (1,951,746) 51,591 (59,482) (30,314) (1,871,876) (35,573) (1,907,449)
2009 RM000 392,870 4,223,681 (264,136) (159,203) 16,843 (166,024) 334,312 50,001 (3,281,993) 35,070 423,062 (197,000) 1,407,483 (85,338) 1,322,145 4,678 13,085 111,492 5 88 (47,880) (29,577) (9,873) 419 566,600 (3,168,231) (2,559,194)
5,558 17,251 177,797 (28,458) (13,326) (12,570) 2,189 230 (38) (586,943) 1,026,285 587,975
127

2010 RM000 CASH FLOWS FROM FINANCING ACTIVITIES Drawdown of long term borrowings Interest paid on subordinated bonds Interest paid on long term borrowings Dividends paid to shareholders of the Company Dividends paid to minority interests Net cash (used in)/generated from financing activities NET CHANGE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR Cash and cash equivalents comprise the following: Cash and short-term funds Less: Monies held in trust (Note 3) (36,540) (20,017) (97,884) (154,441) (1,473,915) 4,944,211 3,470,296
2009 RM000 600,000 (36,540) (2,460) (96,055) (64) 464,881 (772,168) 5,716,379 4,944,211 4,990,686 (46,475) 4,944,211
3,564,545 (94,249) 3,470,296
128
Cash Flow Statement

2010 RM000 CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Adjustments for: Depreciation of property, plant and equipment Property, plant and equipment written off Interest income from deposits and placements with banks and other financial institutions Interest income from securities available-for-sale Accretion of discount less amortisation of premium of securities Interest expense on long term borrowings Return on capital from investment Impairment on other assets (Write-back of)/allowance for doubtful debts due from subsidiaries Gain on disposal of property, plant and equipment Net gain from sale of securities available-for-sale Share options/grants under Employees Share Scheme Gross dividend income from subsidiary Operating profit/(loss) before working capital changes Changes in working capital: Receivables Payables Deposits Subsidiaries Cash used in operations Taxes refund Net cash used in operating activities 128,726 81 31 (16,946) (695) 215 20,017 15,199 (13,144) 388 14,684 (136,321) 12,235 (3,730) (1,264) (410,800) (15,458) (419,017) 200 (418,817)
2009 RM000 121,234 98 (4,405) 2,460 (88) 40 651 (11) 64 (122,601) (2,558) (1,948) (664) (200,000) (805) (205,975) 479 (205,496)
129
Cash Flow Statement

2010 RM000 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment Interest received from deposits and placements with banks and other financial institutions Interest received from security available-for-sale Return on capital from investment Purchase of shares from market Purchase of securities available-for-sale, net of sale proceeds Net dividend received ESS recharge amount received from subsidiaries Proceed from disposal of property, plant and equipment Net cash generated from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Drawdown of long term borrowings Dividends paid Interest paid on long term borrowings Net cash (used in)/generated from financing activities NET CHANGE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR Cash and cash equivalents comprise the following: Cash and short-term funds 16,946 695 (12,570) (603) 107,241 1,978 113,687
2009 RM000 (30) 4,405 88 (9,873) 96,951 49 91,590 600,000 (96,055) (2,460) 501,485 387,579 66,299 453,878 453,878
(97,884) (20,017) (117,901) (423,031) 453,878 30,847
30,847
130
Notes to the Financial Statements

31 March 2010
1.
CORPORATE INFORMATION
The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at 3rd Floor, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur, Malaysia. The principal activities of the Company are investment holding and provision of management services to the subsidiaries. The principal activities of the subsidiaries are commercial banking and financing, Islamic banking, investment banking including provision of stockbroking services, unit trusts and fund management, and the provision of related financial services. There have been no significant changes in the nature of the principal activities during the financial year. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on 15 June 2010.
2.
SIGNIFICANT ACCOUNTING POLICIES

The accounting policies adopted by the Group are consistent with those adopted in the annual audited financial statements for the previous financial year. Standards, amendments to published standards and interpretations that are applicable to the Group and are effective There are no new accounting standards, amendments to published standards and interpretations to existing standards effective for the Groups financial year ended 31 March 2010 and applicable to the Group. Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group but not yet effective (i) The revised FRS 3 "Business Combinations" (effective prospectively from 1 July 2010). The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interests proportionate share of the acquirees net assets. All acquisition-related costs should be expensed. The application of this standard is not expected to have a material impact on the financial statements of the Group. FRS 8 "Operating Segments" (effective from 1 July 2009) replaces FRS 1142004 "Segment Reporting". The new standard requires a management approach, under which segment information is reported in a manner that is consistent with the internal reporting provided to the chief operating decision-maker. The improvement to FRS 8 (effective from 1 January 2010) clarifies that entities that do not provide information about segment assets to the chief operating decision-maker will no longer need to report this information. Prior year comparatives must be restated. The application of this standard is not expected to have a material impact on the financial statements of the Group. The revised FRS 101 Presentation of Financial Statements (effective from 1 January 2010) prohibits the presentation of items of income and expenses (that is, non-owner changes in equity) in the statement of changes in equity. Non-owner changes in equity are to be presented separately from owner changes in equity. All non-owner changes in equity will be required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). Where entities restate or reclassify comparative information, they will be required to present a restated balance sheet as at the beginning comparative period in addition to the current requirement to present balance sheets at the end of the current period and comparative period. The application of this standard is not expected to have a material impact on the financial statements of the Group, other than the presentation format of the balance sheets and the income statements.
(ii)
(iii)
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SIGNIFICANT ACCOUNTING POLICIES (contd)

(iv) FRS 123 "Borrowing Costs" (effective from 1 January 2010) which replaces FRS 1232004 "Borrowing Costs", requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs is removed. The improvement to FRS 123 clarifies that the definition of borrowing costs includes interest expense calculated using the effective interest method defined in FRS 139 "Financial Instruments: Recognition and Measurement". The application of this standard is not expected to have a material impact on the financial statements of the Group. The revised FRS 127 "Consolidated and Separate Financial Statements" (effective prospectively from 1 July 2010) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in the income statement. The application of this standard is not expected to have a material impact on the financial statements of the Group. FRS 139 Financial Instruments: Recognition and Measurement (effective from 1 January 2010) establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. Hedge accounting is permitted under strict circumstances. The amendments to FRS 139 provide further guidance on eligible hedged items. The amendment provides guidance for two situations. On the designation of a one-sided risk in a hedged item, the amendment concludes that a purchased option designated in its entirety as the hedging instrument of a one-sided risk will not be perfectly effective. The designation of inflation as a hedged risk or portion is not permitted unless in particular situations. The improvement to FRS 139 clarifies that the scope exemption in FRS 139 only applies to forward contracts but not options for business combinations that are firmly committed to being completed within a reasonable timeframe. IC Interpretation 9 "Reassessment of Embedded Derivatives" (effective from 1 January 2010) requires an entity to assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract, in which case reassessment is required. The improvement to IC Interpretation 9 (effective from 1 July 2010) clarifies that this interpretation does not apply to embedded derivatives in contracts acquired in a business combination, businesses under common control or the formation of a joint venture. FRS 7 Financial Instruments: Disclosures (effective from 1 January 2010) provides information to users of financial statements about an entitys exposure to risks and how the entity manages those risks. The improvement FRS 7 clarifies that entities must not present total interest income and expense as a net amount within finance costs on the face of the income statement.
(v)
(vi)
(vii)
(viii)
The Group has applied the transitional provision in the respective standards which exempts entities from disclosing the possible impact arising from the initial application of the following standards and interpretations on the financial statements of the Group. FRS 139, Amendments to FRS 139 on eligible hedged items, Improvement to FRS 139 and IC Interpretation 9 FRS 7 and Improvement to FRS 7
For banking institutions, Bank Negara Malaysia may prescribe the use of an alternative basis for collective assessment of impairment for a transitional period for purpose of complying with the collective assessment of impairment requirement in FRS 139. (ix) The amendment to FRS 1 "First-time Adoption of Financial Reporting Standards" and FRS 127 "Consolidated and Separate Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate" (effective from 1 January 2010) allows first-time adopters to use a deemed cost of either fair value or the carrying amount under previous accounting practice to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements. The amendment also removes the definition of the cost method from FRS 127 and requires investors to present dividends as income in the separate financial statements. The amendment to FRS 1 and FRS 127 are not expected to have a material impact on the financial statements of the Group.
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(x) The amendment to FRS 2 "Share-based Payment: Vesting Conditions and Cancellations" (effective from 1 January 2010) deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. These features would need to be included in the grant date fair value for transactions with employees and others providing similar services; they would not impact the number of awards expected to vest or valuation there of subsequent to grant date. All cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The improvement to FRS 2 (effective from 1 July 2010) clarifies that contributions of a business on formation of a joint venture and common control transactions are outside the scope of FRS 2. The application of this standard is not expected to have a material impact on the financial statements of the Group. The amendments to FRS 132 Financial Instruments: Presentation and FRS 101(revised) Presentation of Financial Statements Puttable financial instruments and obligations arising on liquidation (effective from 1 January 2010) require entities to classify puttable financial instruments and instruments that impose on the entity an obligation to deliver to another party a prorata share of the net assets of the entity only on liquidation as equity, if they have particular features and meet specific conditions. The application of this standard is not expected to have a material impact on the financial statements of the Group. IC Interpretation 10 "Interim Financial Reporting and Impairment" (effective from 1 January 2010) prohibits the impairment losses recognised in an interim period on goodwill and investments in equity instruments and in financial assets carried at cost to be reversed at a subsequent balance sheet date. The application of this standard is not expected to have a material impact on the financial statements of the Group. IC Interpretation 11 "FRS 2 Group and Treasury Share Transactions" (effective from 1 January 2010) provides guidance on whether share-based transactions involving treasury shares or involving group entities should be accounted for as equity-settled or cash-settled share-based payment transactions in the stand-alone accounts of the parent and group companies. The application of this standard is not expected to have a material impact on the financial statements of the Group. IC Interpretation 13 "Customer Loyalty Programmes" (effective from 1 January 2010) clarifies that where goods or services are sold together with a customer loyalty incentive, the arrangement is a multipleelement arrangement and the consideration receivable from the customer is allocated between the components of the arrangement using fair values. The application of this standard is not expected to have a material impact on the financial statements of the Group. IC Interpretation 14 "FRS 119 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction" (effective from 1 January 2010) provides guidance on assessing the limit in FRS 119 on the amount of the surplus that can be recognised as an asset. The application of this standard is not expected to have a material impact on the financial statements of the Group. IC Interpretation 17 "Distribution of non-cash assets to owners" (effective from 1 July 2010) provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. FRS 5 " Non-current Assets Held for Sale and Discontinued Operations" has also been amended to require that assets are classified as held for distribution only when they are available for distribution in their present condition and the distribution is highly probable. The application of this standard is not expected to have a material impact on the financial statements of the Group.
(xi)
(xii)
(xiii)
(xiv)
(xv) (xvi)
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The following amendments are part of the Malaysian Accounting Standards Boards (MASB) improvements project: (xvii) FRS 5 Non-current Assets Held for Sale and Discontinued Operations Improvement effective from 1 January 2010 clarifies that FRS 5 disclosures apply to non-current assets or disposal groups that are classified as held for sale and discontinued operations. Improvement effective from 1 July 2010 clarifies that all of a subsidiarys assets and liabilities are classified as held for sale if a partial disposal sale plan results in loss of control. Relevant disclosure should be made for this subsidiary if the definition of a discontinued operation is met. The application of this standard is not expected to have a material impact on the financial statements of the Group. (xviii) FRS 107 Statement of Cash Flows (effective from 1 January 2010) clarifies that only expenditure resulting in a recognised asset can be categorised as a cash flow from investing activities. The application of this standard is not expected to have a material impact on the financial statements of the Group. (xix) (xx) FRS 110 Events After the Balance Sheet Date (effective from 1 January 2010) reinforces existing guidance that a dividend declared after the reporting date is not a liability of an entity at that date given that there is no obligation at that time. The application of this standard is not expected to have a material impact on the financial statements of the Group. FRS 116 Property, Plant and Equipments (consequential amendment to FRS 107 Statement of Cash Flows) (effective from 1 January 2010) requires entities whose ordinary activities comprise of renting and subsequently selling assets to present proceeds from the sale of those assets as revenue and should transfer the carrying amount of the asset to inventories when the asset becomes held for sale. A consequential amendment to FRS 107 states that cash flows arising from purchase, rental and sale of those assets are classified as cash flows from operating activities. The application of this standard is not expected to have a material impact on the financial statements of the Group. FRS 117 Leases (effective from 1 January 2010) clarifies that the default classification of the land element in a land and building lease is no longer an operating lease. As a result, leases of land should be classified as either finance or operating, using the general principles of FRS 117. The application of this standard is not expected to have a material impact on the financial statements of the Group.
(xxi)
(xxii) FRS 118 Revenue (effective from 1 January 2010) provides more guidance when determining whether an entity is acting as a principal or as an agent. The application of this standard is not expected to have a material impact on the financial statements of the Group. (xxiii) FRS 119 Employee Benefits (effective from 1 January 2010) clarifies that a plan amendment that results in a change in the extent to which benefit promises are affected by future salary increases is a curtailment, while an amendment that changes benefits attributable to past service gives rise to a negative past service cost if it results in a reduction in the present value of the defined benefit obligation. The definition of return on plan assets has been amended to state that plan administration costs are deducted in the calculation of return on plan assets only to the extent that such costs have been excluded from measurement of the defined benefit obligation. The application of this standard is not expected to have a material impact on the financial statements of the Group. (xxiv) FRS 127 Consolidated & Separate Financial Statements (effective from 1 January 2010) clarifies that where an investment in a subsidiary that is accounted for under FRS 139 is classified as held for sale under FRS 5, FRS 139 would continue to be applied. The amendment will not have an impact on the Groups operations because it is the Groups policy for an investment in subsidiary to be recorded at cost in the standalone accounts of each entity. (xxv) FRS 128 Investments in Associates (effective from 1 January 2010) clarifies that an investment in an associate is treated as a single asset for impairment testing purposes. Reversals of impairment are recorded as an adjustment to the carrying amount of the investment to the extent that the recoverable amount of the associate increases. The application of this standard is not expected to have a material impact on the financial statements of the Group.
134

31 March 2010
2.

(xxvi) FRS 128 Investments in Associates" and FRS 131 "Interests in Joint Ventures (consequential amendments to FRS 132 Financial instruments: Presentation and FRS 7 Financial instruments: Disclosure (effective from 1 January 2010) clarify that where an investment in associate or joint venture is accounted for in accordance with FRS 139, only certain, rather than all disclosure requirements in FRS 128 or FRS 131 need to be made in addition to disclosures required by FRS 132 and FRS 7. The amendment will not have an impact on the Groups operations because it is the Groups policy for an investment in an associate to be equity accounted in the Groups consolidated accounts. On FRS 131, the amendment will not have an impact on the Groups operations as there are no interests held in joint ventures. (xxvii) FRS 134 Interim Financial Reporting (effective from 1 January 2010) clarifies that basic and diluted earnings per share (EPS) must be presented in an interim report only in the case when the entity is required to disclose EPS in its annual report. The application of this standard is not expected to have a material impact on the financial statements of the Group. (xxviii) FRS 136 Impairment of Assets (effective from 1 January 2010) clarifies that the largest cash-generating unit (or group of units) to which goodwill should be allocated for the purposes of impairment testing is an operating segment before the aggregation of segments with similar economic characteristics. The improvement also clarifies that where fair value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent to those for value in use should be made. The application of this standard is not expected to have a material impact on the financial statements of the Group. (xxix) FRS 138 "Intangible Assets". Improvement effective from 1 January 2010 clarifies that a prepayment may only be recognised in the event that payment has been made in advance of obtaining right of access to goods or receipt of services. This means that an expense will be recognised for mail order catalogues when the entity has access to the catalogues and not when the catalogues are distributed to customers. It confirms that the unit of production method of amortisation is allowed. The application of this standard is not expected to have a material impact on the financial statements of the Group. (xxx) FRS 140 Investment Property (effective from 1 January 2010) requires assets under construction/development for future use as investment property to be accounted as investment property rather than property, plant and equipment. Where the fair value model is applied, such property is measured at fair value. However, where fair value is not reliably measurable, the property is measured at cost until the earlier of the date construction is completed and fair value becomes reliably measurable. It also clarifies that if a valuation obtained for an investment property held under lease is net of all expected payments, any recognised lease liability is added back in order to determine the carrying amount of the investment property under the fair value model. The application of this standard is not expected to have a material impact on the financial statements of the Group. Standards, amendments to published standards and interpretations to existing standards that are not applicable to the Group and not yet effective FRS 4 FRS 120 FRS 129 IC Interpretation 12 IC Interpretation 15 IC Interpretation 16 Insurance Contracts Accounting for Government Grants Financial Reporting in Hyperinflationary Economies Service Concession Arrangements Agreements for Construction of Real Estates Hedges of a Net Investment in a Foreign Operation
135

31 March 2010
2.

(a) Basis of Preparation The financial statements have been prepared in accordance with the provisions of the Companies Act, 1965, the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities, Bank Negara Malaysia ("BNM") Guidelines and Shariah principles. The financial statements of the Group and the Company have also been prepared under the historical cost convention, except the following assets which are stated at fair value: securities held-for-trading, securities available-for-sale and derivative financial instruments. The financial statements incorporate all activities relating to the Islamic banking business which have been undertaken by the Group. Islamic banking business refers generally to the acceptance of deposits and granting of financing under the Shariah principles. The financial statements are presented in Ringgit Malaysia ("RM") and all numbers are rounded to the nearest thousand (RM000), unless otherwise stated. In the preparation of the financial statements, management is required to make certain judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the financial statements in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of critical judgements and estimation uncertainty in applying accounting policies that have the most significant effects on the amount recognised in the financial statements are described in the following notes: (i) Annual testing for impairment of goodwill and intangible assets (Note 17) the measurement of the recoverable amount of cash-generating units are determined based on the value-in-use method, which requires the use of estimates for cash flow projections approved by management covering a 5-year period, estimates growth rates for cash flows beyond the fifth year extrapolated in perpetuity and discount rates applied to the cash flow projections. Fair value estimation for securities held-for-trading (Note 5) and securities available-for-sale (Note 6) and derivative financial assets and liabilities (Note 8) the fair value of financial instruments that are not traded in active market are determined using valuation techniques based on assumptions of market conditions existing at the balance sheet date, including reference to quoted market prices and independent dealer quotes for similar financial instruments and discounted cash flows method. Income taxes (Note 37) significant management judgement is required in estimating the provision for income taxes, as there may be differing interpretations of tax law for which the final outcome will not be established until a later date. Liabilities for taxation are recognised based on estimates of whether additional taxes will be payable. The estimation process may involve seeking the advise of experts, where appropriate. Where the final liability for taxation assessed by the Inland Revenue Board is different from the amounts that were initially recorded, these differences will affect the income tax expense and deferred tax provisions in the period in which the estimate is revised or when the final tax liability is established. Deferred tax assets (Note 18) - deferred tax assets are recognised for all unutilised tax losses to the extent that it is probable that taxable profit will be available against which the tax losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. Allowance for losses on loans, advances and financing (Note 35) whilst the assessment of allowance for losses required for loans, advances and financing is made in accordance with the requirements of BNM/GP3 Guidelines on the Classification of Non-Performing Loans and Provisions for Substandard, Bad and Doubtful Debts, the Group exercise judgement in ascertaining the recoverable amount when assessing the levels of loan loss allowance required.
(ii)
(iii)
(iv)
(v)
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(a) Basis of Preparation (contd) (vi) Impairment of assets assessment of impairment of securities available-for-sale (Note 6) and securities held-to-maturity (Note 7) is made in line with the guidance in the revised BNM/GP8 Guidelines on Financial Reporting for Licensed Institutions to determine when the investment is impaired. Management judgement is required to evaluate the duration and extent by which the fair value of the financial instruments are below its carrying value and when there is indication of impairment in the carrying value of the financial instruments. The assessment of impairment of property, plant and equipment (Note 16) and foreclosed properties also requires management judgement in the assessment of whether negative fluctuations in values of similar properties in the same location represent an indication of impairment in the value of the properties. Fair value estimation and impairment assessment of certain unquoted shares (Note 6) ABMB received a free allocation of certain unquoted shares of which some had been subsequently redeemed by the said issuer. The issuer companys latest quoted share price, discounted at 10% was used as the proxy to estimate the fair value of the remaining unquoted shares.
(vii) (b)
Subsidiaries and Basis of Consolidation (i) Subsidiaries Subsidiaries are entities over which the Group has the ability to control the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity. In the Companys separate financial statements, investments in subsidiaries are stated at cost less impairment. The policy for recognition and measurement of impairment is in accordance with Note 2(k)(iv). On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in the income statement. (ii) Basis of Consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries are prepared for the same reporting date as the Company. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. In preparing the consolidated financial statements, intragroup balances, transactions and unrealised gains or losses are eliminated in full. Uniform accounting policies are adopted in the consolidated financial statements for like transactions and events in similar circumstances. Acquisitions of subsidiaries are accounted for using the purchase method. The purchase method of accounting involves allocating the cost of the acquisition to the fair value of the assets acquired and liabilities and contingent liabilities assumed at the date of acquisition. The cost of an acquisition is measured as the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the acquisition. Any excess of the cost of the acquisition over the Groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill. Any excess of the Groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in the income statement. Minority interests represent the portion of the income statement and net assets in subsidiaries not held by the Group. It is measured at the minorities share of the fair value of the subsidiaries identifiable assets and liabilities at the acquisition date and the minorities share of changes in the subsidiaries entity since then.
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2.

(c) Associates Associates are entities in which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not in control or joint control over those policies. Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting. Under the equity method, the investment in associate is carried in the consolidated balance sheet at cost adjusted for post-acquisition changes in the Groups share of net assets of the associate. The Groups share of the net profit or loss of the associate is recognised in the consolidated income statement. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of such changes. In applying the equity method, unrealised gains and losses on transactions between the Group and the associate are eliminated to the extent of the Groups interest in the associate. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment with respect to the Groups net investment in the associate. The associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. Any excess of the Groups share of the net fair value of the associates identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Groups share of the associates profit or loss in the period in which the investment is acquired. When the Groups share of losses in an associate equals or exceeds its interest in the associate, including any long term interests that, in substance, form part of the Groups net investment in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. The most recent available audited financial statements of the associates are used by the Group in applying the equity method. Where the dates of the audited financial statements used are not coterminous with those of the Group, the share of results is arrived at from the last audited financial statements available and management financial statements to the end of the accounting period. Uniform accounting policies are adopted for like transactions and events in similar circumstances. On disposal of such investments, the difference between net disposal proceeds and their carrying amount is included in the income statement.
138

31 March 2010
2.

(d) Intangible Assets (i) Goodwill Goodwill is measured at cost less accumulated impairment, if any. Goodwill is no longer amortised. Instead it is allocated to cash-generating units which are expected to benefit from the synergies of the business combination. Each cash-generating unit represents the lowest level at which the goodwill is amortised and is not larger than a reportable business segment. The carrying amount of goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. The policy for the recognition and measurement of impairment is in accordance with Note 2(k)(iii). (ii) Computer Software Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring the specific software to use. The costs are amortised over their useful lives which is five years and are stated at cost less accumulated amortisation and accumulated impairment, if any. Computer software is assessed for impairment whenever there is an indication that it may be impaired. The amortisation period and amortisation method are reviewed at least at each balance sheet date. The policy for the recognition and measurement of impairment is in accordance with Note 2(k)(iii). Costs associated with maintaining computer software programmes are recognised as expenses as incurred. Costs that are directly associated with production of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. These costs include software development employee costs and appropriate portion of relevant overhead. (iii) Other Intangible Assets Intangible assets acquired separately are measured at cost on initial recognition. The cost of intangible assets acquired in a business combination is their fair values as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised on a straight-line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each balance sheet date. Intangible assets with indefinite useful lives are not amortised but tested for impairment annually or more frequently if the events or changes in circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. The useful life of an intangible asset with an indefinite life is also reviewed annually to determine whether the useful life assessment continues to be supportable.
139

31 March 2010
2.

(e) Loans, Advances and Financing Loans, advances and financing are stated at cost less any allowance for losses on loans, advances and financing. Specific allowance for losses on loans, advances and financing are made with regard to specific risks and relate to those loans or trade receivables that have been individually reviewed and specifically identified as bad and doubtful debts. A general allowance based on a percentage of total outstanding loans and financing (including unearned interest/income), net of specific allowance for losses on loans, advances and financing, is maintained by the Group against risks which are not identified. An uncollectible loan/financing or portion of a loan/financing classified as bad is written off after taking into consideration the realisable value of collateral, if any, when in the judgement of the management, there is no prospect of recovery. Values assigned to collateral held for non-performing loans secured by properties is determined based on the realisable values of the properties, being the forced sale value provided by independent parties/valuers, on the following basis: (i) (ii) assigning only fifty percent (50%) of the realisable value of the properties held as collateral for non-performing loans which are in arrears for more than five (5) years but less than seven (7) years; and no value assigned to the realisable value of the properties held as collateral for non-performing loans which are in arrears for seven (7) years or more.
The allowance for losses on loans, advances and financing are computed in conformity with BNM/GP3. Consistent with previous years, the Group classified the loans, advances and financing as nonperforming when repayments are in arrears for more than three (3) months from the first day of the default or after maturity date. The Group has adopted a more stringent basis for specific allowances on non-performing loans by making a 100% specific allowance on the balance of the non-performing loans which are more than three (3) months-in-arrears and not covered by realisable value of collateral. The Directors are of the view that such treatment will reflect a more prudent provisioning policy on loans, advances and financing. Bank Negara Malaysia has granted indulgence to the Group and other local banks from complying with the requirement on the impairment of loans, advances and financing under the revised Guideline on Financial Reporting for Licensed Institutions ("BNM/GP8"). The Group will be deemed to be in compliance with the requirement on the impairment of loans, advances and financing under the revised BNM/GP8 if the allowances for non-performing loans, advances and financing are computed based on BNM/GP3 requirements, which is consistent with the accounting policy adopted in the previous financial year. For margin balances of the stockbroking business, the accounts are classified as non-performing loans when the closing market value of the counter(s) so financed has fallen below 130% of the outstanding balance, and 100% specific allowance is make on the non-performing loans, net of collateral held, if any.
140

31 March 2010
2.

(f) Provisions for Liabilities Provisions for liabilities are recognised when the Group and the Company have a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance cost. (g) Repurchase Agreements Securities purchased under resale agreements are securities which the Group have purchased with a commitment to resell at future dates. The commitment to resell the securities is reflected as an asset on the balance sheet. Conversely, obligations on securities sold under repurchase agreements are securities which the Group have sold from their portfolio, with a commitment to repurchase at future dates. Such financing transactions and the obligations to repurchase the securities are reflected as liabilities on the balance sheet. (h) Securities The holdings of securities portfolio of the Group are recognised based on the following categories and consequently their valuation methods: (i) Securities Held-for-trading Securities are classified as held-for-trading if they are acquired principally for the purpose of selling or repurchasing in the near term. Securities held-for-trading are stated at fair value and any gain or loss arising from a change in their fair values and the derecognition of securities held-for-trading are recognised in the income statement. Securities classified as held-for-trading are not reclassified to securities held-to-maturity or securities available-for-sale while they are held. However, for the period from 1 July 2008 to 31 December 2009, BNMs circular dated 20 October 2008 allows the reclassification of securities held-for-trading to securities available-for-sale and securities held-to-maturity under certain limited circumstances. (ii) Securities Held-to-maturity Securities held-to-maturity are financial assets with fixed or determinable payments and fixed maturity that the Group have the positive intent and ability to hold to maturity. Unquoted shares in organisations set up for socio-economic purposes and equity instruments received as a result of loan restructuring or loan conversion which do not have a quoted market price in an active market and whose fair value cannot be reliably measured are also classified as securities held-to-maturity as permitted by revised BNM/GP8. The securities held-to-maturity are measured at accreted/amortised cost based on the effective yield method. Amortisation of premium, accretion of discount and impairment as well as gain or loss arising from derecognition of securities held-to-maturity are recognised the income statement. Any sale or reclassification of a significant amount of securities held-to-maturity not close to their maturity would result in the reclassification of all securities held-to-maturity to securities availablefor-sale, and prevents the Group from classifying the similar class of securities as securities held-to-maturity for the current and following two (2) financial years. (iii) Securities Available-for-sale Securities available-for-sale are financial assets that are not classified as held-for-trading or held-to-maturity. The securities available-for-sale are measured at fair value. The return and cost of the securities available-for-sale are credited and charged to the income statement using accreted/amortised cost based on effective yield method. Any gain or loss arising from a change in fair value after applying the accreted/amortised cost method are recognised directly in equity through the statement of changes in equity, until the financial asset is sold, collected, disposed of or impaired, at which time the cumulative gain or loss previously recognised in equity will be transferred to the income statement.
141

31 March 2010
2.

(i) Investment Properties Investment properties are properties which are held either to earn rental income or for capital appreciation or both. Such property is initially measured at cost, including transaction costs. Subsequent to initial recognition, investment property is carried at cost less any accumulated depreciation and any accumulated impairment. The policy for the recognition and measurement of impairment is in accordance with Note 2(k)(iv). Freehold land has unlimited useful life and therefore, is not depreciated. Such property is derecognised when either it has been disposed and no future economic benefit is expected from its disposal. Any gain or loss on the retirement or disposal is recognised in the income statement in the year in which they arise. (j) Property, Plant and Equipment and Depreciation All items of property, plant and equipment are initially recorded at cost. Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Subsequent to initial recognition, property, plant and equipment except for freehold land are stated at cost less accumulated depreciation and accumulated impairment, if any. The policy for the recognition and measurement of impairment is in accordance with Note 2(k)(iv). Freehold land has an unlimited useful life and therefore, is not depreciated. Depreciation of other property, plant and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful life: Buildings Renovations Office equipment and furniture Computer equipment Motor vehicles 2% 20% 10% 33.3% 10% 16.6%
The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any and the net carrying amount is recognised in the income statement.
142

31 March 2010
2.

(k) Impairment of Assets The carrying amount of the Groups assets, except for deferred tax assets and financial assets (other than securities held-to-maturity and available-for-sale) are reviewed at each balance sheet date to determine whether there are any indications of impairment. If any such indications exist, the assets recoverable amount is estimated to determine the amount of impairment. The policy of the impairment of assets are summarised as follows: (i) Securities Held-to-maturity For securities carried at amortised cost in which there are objective evidence of impairment, impairment is measured as the difference between the securities carrying amount and the present value of the estimated future cash flows discounted at the securities original effective interest rate. The amount of the impairment is recognised in the income statement. Subsequent reversals in the impairment is recognised when the decrease can be objectively related to an event occurring after the impairment was recognised, to the extent that the securities carrying amount does not exceed its amortised cost if no impairment had been recognised. The reversal is recognised in the income statement. For securities carried at cost, impairment is measured as the difference between the securities carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for similar securities. The amount of impairment is recognised in the income statement and such impairment is not reversed subsequent to its recognition. (ii) Securities Available-for-sale For securities available-for-sale in which there are objective evidence of impairment, the cumulative impairment that had been recognised directly in equity shall be transferred from equity to the income statement, even though the securities have not been derecognised. The cumulative impairment is measured as the difference between the acquisition cost (net of any principal repayment and amortisation) and the current fair value, less any impairment previously recognised in the income statement. Impairment recognised on investment in equity instruments classified as available-for-sale is not reversed subsequent to its recognition. Reversals of impairment on debt instruments classified as available-for-sale are recognised in the income statement if the increase in fair value can be objectively related to an event occurring after the recognition of the impairment in the income statement. (iii) Goodwill/Intangible Assets Goodwill and intangible assets that have an indefinite useful life are tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired. For impairment testing, goodwill from business combinations or the intangible assets is allocated to cash-generating units ("CGU") which are expected to benefit from the synergies of the business combination or intangible asset. The recoverable amount is determined for each CGU based on its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment is recognised in the income statement when the carrying amount of the CGU, including the goodwill or intangible asset, exceeds the recoverable amount of the CGU. The total impairment is allocated, first, to reduce the carrying amount of goodwill or intangible assets allocated to the CGU and then to the other assets of the CGU on a pro-rata basis. An impairment on goodwill is not reversed in subsequent periods. An impairment for other intangible assets is reversed if and only if there has been a change in the estimates used to determine the intangible assets recoverable amount since the last impairment was recognised and such reversal is through the income statement to the extent that the intangible assets carrying amount does not exceed the carrying amount that would have been determined, net of amortisation, if no impairment had been recognised.
143

31 March 2010
2.

(k) Impairment of Assets (contd) (iv) Other Assets Other assets such as property, plant and equipment, investment properties, foreclosed properties and investments in subsidiaries and associate are reviewed for objective indications of impairment at each balance sheet date or whenever there is any indication that these assets may be impaired. Where such indications exist, impairment is determined as the excess of the assets carrying value over its recoverable amount (greater of value in use or fair value less costs to sell) and is recognised in the income statement. An impairment for an asset is reversed if and only if there has been a change in the estimates used to determine the assets recoverable amount since the last impairment was recognised. The carrying amount is increased to its revised recoverable amount, provided that the amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment been recognised for the asset in prior years. A reversal of impairment for an asset is recognised in the income statement. (l) Leases A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership. All leases that do not transfer substantially all the risks and rewards are classified as operating leases. (i) Finance Leases Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment. The corresponding liability is included in the balance sheet as borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Companys incremental borrowing rate is used. Any initial direct costs are also added to the carrying amount of such assets. Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the income statement over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period. The depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment as described in Note 2(j). The policy for the recognition and measurement of impairment is in accordance with Note 2(k)(iv). (ii) Operating Leases Operating lease payments are recognised in the income statement on a straight-line basis over the term of the relevant lease. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expenses over the lease term on a straight-line basis. The land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. Leasehold land that normally has an indefinite economic life and where title is not expected to pass to the lessee by the end of the lease term is treated as an operating lease. The payment made on entering into or acquiring a leasehold land is accounted for as prepaid lease payments at the balance sheet date. In the case of a lease of land and buildings, the prepaid lease payments or the upfront payments made are allocated, whenever necessary, between the land and buildings elements in proportion to the relative fair values for leasehold interest in the land element and buildings element of the lease at the inception of the lease. The prepaid lease payments are amortised over the lease term in accordance with the pattern of benefits provided.
144

31 March 2010
2.

(m) Bills and Acceptances Payable Bills and acceptances payable represent the Groups own bills and acceptances rediscounted and outstanding in the market. (n) Equity Instruments Ordinary shares and irredeemable convertible preference shares ("ICPS") are classified as equity. Dividends on ordinary shares and ICPS are recognised in equity in the period in which they are declared. The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided. (o) Subordinated Bonds The interest-bearing instruments are recognised as liability and are recorded at face value. Interest expense are accrued based on the effective interest rate method. (p) Interest-bearing Borrowings Interest-bearing bank borrowings are recorded at the amount of proceeds received. All the borrowing costs are recognised as expenses in the income statement in the period in which they are incurred. (q) Other Assets Other receivables are carried at anticipated realisable values. Bad debts are written off when identified. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date. (r) Liabilities Deposits from customers, deposits and placements of banks and other financial institutions are stated at placement values. Other liabilities are stated at fair value which is the consideration to be paid in the future for goods and services received. (s) Balances Due From Clients and Brokers In accordance with the Rules of Bursa Malaysia Securities Berhad (the "Bursa"), clients accounts for the Group are classified as non-performing (doubtful or bad) under the following circumstances: Criteria for classification as non-performing Types Contra losses Overdue purchase contracts Doubtful When account remains outstanding for 16 to 30 calendar days rom the date of contra transaction. When the account remains outstanding from T+5 market days to 30 calendar days. Bad When the account remains outstanding for more than 30 calendar days from the date of contra transaction. When the account remains outstanding for more than 30 calendar days.
Bad debts are written off when identified. Specific allowances are made for balances due from clients and brokers which are considered doubtful or which have been classified as non-performing after taking into consideration collateral held by the Group and deposits of and amounts due to dealers representative in accordance with the Rules of the Bursa. General allowance is made based on a certain percentage of balances due from clients and brokers (excluding outstanding purchase contracts which are not due for payment) net of specific allowances already made.
145

31 March 2010
2.

(t) Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of the revenue can be measured reliably. (i) Dividend Income Dividend income from securities held-to-maturity, securities available-for-sale and investment in subsidiaries and associates are recognised when the right to receive payment is established. (ii) Interest Income Interest income is recognised in the income statement for all interest-bearing assets on an accrual basis. Interest income includes the amortisation of premium or accretion of discount. Interest income on securities are recognised on an effective yield basis. Interest income on overdrafts, housing loans and term loans is accounted for on accrual basis by reference to rest periods as stipulated in the loan agreements, which are either monthly or daily. Interest income on hire purchase, block discounting and leasing business is recognised on the effective interest method. Income from the Islamic banking business is recognised on the accrual basis in accordance with the Shariah principles. Where an account is classified as non-performing, interest/income accrued and recognised as income prior to the date the loan is classified as non-performing is reversed out of interest income and set-off against the accrued interest/income receivable account in the balance sheet. Thereafter, interest/income on the non-performing loan shall be recognised as income on a cash basis. Customers accounts are deemed to be non-performing where repayments are in arrears for more than three (3) months from the first day of default or after maturity date. The policy on interest income recognition on non-performing loans is in conformity with the revised BNM/GP8 issued by BNM on 5 October 2004. (iii) Brokerage Income Brokerage fee are charged to the clients and is recognised on the day when the contracts are executed. (iv) Fees and Other Income Loan arrangement fees and commissions, management and participation fees and underwriting commissions are recognised as income when all conditions precedent are fulfilled. Commitment, guarantee and portfolio management fees which are material are recognised as income based on time apportionment basis. Corporate advisory fees are recognised as income on the completion of each stage of the assignment. As allowed under Bank Negara Malaysias Circular on "Accounting Treatment of Handling Fees for Hire Purchase Loans" dated 16 October 2006, the Group has continued to expense off upfront handling fees paid to hire purchase dealers for hire purchase loans and hire purchase financing to the income statement in the year which they are incurred.
146

31 March 2010
2.

(u) Recognition of Interest and Financing Expenses Interest expense and attributable profit (on activities relating to Islamic banking business) on deposits and borrowings of the Group are recognised on an accrual basis. (v) Derivative Financial Instruments Derivative financial instruments are initially recognised at fair value, which is normally zero or negligible at inception except for options and subsequently re-measured at their fair value. The fair value of options at inception is normally equivalent to the premium received (for options written) or paid (for options purchased). All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. Changes in the fair value are recognised in the income statement. Interest income and expenses associated with interest rate swaps are recognised over the life of the swap agreement as a component of interest income or interest expense. (w) Foreign Currency Translations Transactions in foreign currencies are initially recorded in Ringgit Malaysia at rates of exchange ruling at the date of the transaction. At each balance sheet date, foreign currency monetary items are translated into Ringgit Malaysia at exchange rates ruling at that date. All exchange rate differences are taken to the income statement. The financial statements are presented in Ringgit Malaysia, which is also the Groups and the Companys primary functional currency. (x) Income Tax Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the balance sheet date. Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit. Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised as income or an expense in the income statement for the period, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill. (y) Foreclosed Properties Foreclosed properties are stated at cost less impairment, if any, of such properties. The policy for the recognition and measurement of impairment is in accordance with Note 2(k)(iv). (z) Cash and Cash Equivalents Cash and cash equivalents as stated in the cash flow statements comprise cash and bank balances and short-term deposits maturing within one month that are readily convertible into cash with insignificant risk of changes in value.
147

31 March 2010
2.

(aa) Zakat This represents business zakat. It is an obligatory amount payable by the Group to comply with the Shariah principles. (ab) Profit Equalisation Reserve ("PER") PER refers to the amount appropriated out of the total Islamic banking gross income in order to maintain a certain level of return to depositors in conformity with BNMs "The Framework of the Rate of Return" (BNM/GP2-i). PER is appropriated from and written back to the total Islamic banking gross income in deriving the net distributable gross income. This amount appropriated is shared by the depositors and the Bank/Group. The PER is deducted at a rate which does not exceed the maximum amount of total of 15% monthly gross income, monthly net trading income, other income and irregular income. PER is maintained up to the maximum of 30% of total Islamic banking capital fund. (ac) Employee Benefits (i) Short-Term Benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group. Short-term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short-term nonaccumulating compensated absences such as sick leave are recognised when the absences occur. (ii) Defined Contribution Plans Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities or funds and will have no legal or constructive obligations to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. Such contributions are recognised as an expense in the income statement as incurred. As required by law, companies in Malaysia make contributions to the Employees Provident Fund ("EPF"). The ESS comprise the Share Option Plan, the Share Grant Plan and the Share Save Plan. The ESS are an equity-settled, share-based compensation plans, in which the Groups Directors and employees are granted or are allowed to acquire ordinary shares of the Company. The total fair value of the share options/share grants offered/awarded to the eligible Directors and employees are recognised as an employee cost with a corresponding increase in the share scheme reserve within equity over the vesting period and taking into account the probability that the scheme will vest. The fair value of the shares options/share grants are measured at grant date, taking into account, if any, the market vesting conditions upon which the share options/share grants were offered/awarded but excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of share options/share grants that are expected to become exercisable/to vest. At each balance sheet date, the Group revises its estimates of the number of share options/share grants that are expected to become exercisable/to vest. It recognises the impact of the revision of original estimates, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period. The equity amount is recognised in the share scheme reserve until the share options/share grants are exercised/vested. The proceeds received net of any directly attributable transaction costs are credited to equity when the options are exercised.
148

31 March 2010
2.

(ad) Contingent Liabilities and Contingent Assets The Group does not recognise a contingent liability but discloses its existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably. A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group. The Group does not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually certain. (ae) Segment reporting Segment reporting is presented for enhanced assessment of the Groups risks and returns. A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. Segment revenue, expense, assets and liabilities are those amounts resulting from the operating activities of a segment that are directly attributable to the segment and the relevant portion that can be allocated on a reasonable basis to the segment. Segment revenue, expense, assets and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between group enterprises within a single segment.
3.
CASH AND SHORT-TERM FUNDS

Group 2010 RM000 Cash and balances with banks and other financial institutions Money at call and deposit placements maturing within one month 558,376 3,006,169 3,564,545 Note: (i) (ii) (iii) Included in the cash and short-term funds are monies held in trust by a subsidiary amounting to RM94,249,000 (2009: RM46,475,000). There is an amount of RM29,850,000 (2009: RM453,690,000) being the deposits placement by the Company with its subsidiaries. An amount of RM991,000 (2009: RM182,000) being a bank account maintained by PB Trustee Services Berhad pursuant to the Companys ESS. 2009 RM000 457,254 4,533,432 4,990,686 2010 RM000 1,027 29,820 30,847 Company 2009 RM000 298 453,580 453,878
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31 March 2010
4.
DEPOSITS AND PLACEMENTS WITH BANKS AND OTHER FINANCIAL INSTITUTIONS

Group 2010 RM000 Licensed banks Licensed investment banks 150,156 150,156 The deposits of the Company with maturity more than one month amounting to RM610,800,000 (2009: RM200,000,000) are placed with its subsidiaries. 2009 RM000 198,523 198,523 2010 RM000 600,000 10,800 610,800 Company 2009 RM000 200,000 200,000
5.
SECURITIES HELD-FOR-TRADING
Group 2010 RM000 At fair value Money market instrument: Commercial papers Malaysia Gonernment securities Quoted securities in Malaysia: Shares Debt securities Quoted securities: Debt securities 9,951 24,690 2,470 8,942 2 46,055 2009 RM000
150

31 March 2010
6.
SECURITIES AVAILABLE-FOR-SALE
Group 2010 RM000 At fair value Money market instruments: Malaysian Government securities Malaysian Government investment certificates Malaysian Government treasury bills Bank Negara Malaysia bills Cagamas bonds Negotiable instruments of deposits Commercial papers Bankers acceptances Khazanah bonds Quoted securities in Malaysia: Shares [Note (a)] Debt securities Unquoted securities: Shares Debt securities 1,748,115 566,495 205,629 459,444 799,951 3,919 7,591 11,377 1,352,307 5,154,828 1,647,355 113,849 132,492 74,525 1,696,057 98,906 1,578,533 9,909 3,010 6,071 6,877 952,538 6,320,122 2009 RM000
151

31 March 2010
6.
SECURITIES AVAILABLE-FOR-SALE (contd)

(a) Disclosures of the reclassification from securities held-for-trading ("HFT") to securities available-for-sale ("AFS") portfolio in the financial statements of the Group is as follows: (i) Amount reclassified from securities HFT to AFS portfolio on 31 December 2008: Group RM000 Fair value of securities HFT reclassified to AFS portfolio as at reclassification date There was no new security reclassified during the financial year ended 31 March 2010. (ii) Carrying amount and fair value of securities HFT reclassified to AFS portfolio as at the end of the financial year: Group 2010 RM000 Securities HFT reclassified to AFS portfolio Carrying amount Fair value (iii) The fair value loss recognised in respect of the securities HFT reclassified to AFS portfolio during the financial year: Group 2010 RM000 Unrealised loss recognised in equity (iv) Effective interest rate for the security reclassified from HFT to AFS portfolio is not applicable as the security reclassified is an equity portfolio. 483 2009 RM000 409 3,902 3,902 2009 RM000 3,010 3,010 3,419
152

31 March 2010
7.
SECURITIES HELD-TO-MATURITY
Group 2010 RM000 At amortised cost Money market instruments: Malaysian Government securities Malaysian Government investment certificates Cagamas bonds Khazanah bonds At cost Quoted securities in Malaysia: Debt securities Unquoted securities: Shares Debt securities Accumulated impairment 4,902 22,021 152,248 1,029,747 (98,327) 931,420 4,902 22,021 266,865 421,454 (106,834) 314,620 811,208 39,368 53,770 20,000 53,896 2009 RM000
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31 March 2010
8.
DERIVATIVE FINANCIAL ASSETS/(LIABILITIES)

Derivative financial instruments are off-balance sheet financial instruments whose values change in response to changes in prices or rates (such as foreign exchange rates, interest rates and security prices) of the underlying instruments. These instruments allow the Group and the banking customers to transfer, modify or reduce their foreign exchange and interest rate risk hedge relationships. The Group also transacts in these instruments for proprietary trading purposes. The risks associated with the use of derivative financial instruments, as well as managements policy for controlling these risks are set out in Note 42. The table below shows the Groups derivative financial instruments as at the balance sheet date. The contractual or underlying notional amounts of these derivative financial instruments and their corresponding gross positive (derivative financial asset) and gross negative (derivative financial liability) fair values as at balance sheet date are analysed below. 2010 Contract/ Notional Amount RM000 432,551 1,810,451 142,983 66,418 1,050,000 3,502,403 Fair Value Assets RM000 5,037 33,075 224 252 6,110 44,698 Liabilities RM000 (10,194) (32,981) (179) (158) (6,663) (50,175) Contract/ Notional Amount RM000 209,230 1,924,698 335,480 4,815 1,050,000 3,524,223 2009 Fair Value Assets RM000 1,693 23,249 2,153 20 13,743 40,858 Liabilities RM000 (626) (29,048) (1,011) (11) (18,868) (49,564)
Group Foreign exchange contracts: Currency forwards Currency swaps Currency spots Currency options Interest rate related contracts: Interest rate swaps Total derivative assets/(liabilities)
154

31 March 2010
9.
LOANS, ADVANCES AND FINANCING

Group 2010 RM000 Overdrafts Term loans/financing Housing loans/financing Syndicated term loans/financing Hire purchase receivables Lease receivables Other term loans/financing Bills receivables Trust receipts Claims on customers under acceptance credits Staff loans [include RM182,000 loans to Directors of banking subsidiary (2009: RM1,437,000)] Credit/charge card receivables Revolving credits Other loans Less: Unearned interest and income Gross loans, advances and financing Less: Allowance for losses on loans, advances and financing Specific General Total net loans, advances and financing 1,632,204 9,081,024 259,826 1,070,593 104 7,261,555 56,173 161,254 2,025,751 102,583 685,003 1,115,275 339,071 23,790,416 (2,380,480) 21,409,936 (438,582) (322,909) 20,648,445 2009 RM000 1,610,636 7,842,479 314,794 1,360,731 104 5,858,653 71,906 154,941 1,735,910 117,974 645,058 995,713 257,432 20,966,331 (1,376,192) 19,590,139 (531,824) (340,218) 18,718,097
155

31 March 2010
9.
LOANS, ADVANCES AND FINANCING (contd)

Group 2010 RM000 (i) By maturity structure: Within one year One year to three years Three years to five years Over five years Gross loans, advances and financing (ii) By type of customer: Domestic non-bank financial institutions Stockbroking companies Others Domestic business enterprises Small and medium enterprises Others Government and statutory bodies Individuals Other domestic entities Foreign entities Gross loans, advances and financing (iii) By interest/profit rate sensitivity: Fixed rate Housing loans/financing Hire purchase receivables Other fixed rate loans/financing Variable rate Base lending rate plus Cost plus Other variable rates Gross loans, advances and financing 316,948 950,134 2,188,491 14,097,157 3,753,267 103,939 21,409,936 171,467 1,197,050 1,503,071 13,223,436 3,381,339 113,776 19,590,139 20,001 168,766 4,393,907 4,170,355 16,590 12,157,289 5,088 477,940 21,409,936 276,429 4,185,864 3,861,118 17,345 10,886,992 4,356 358,035 19,590,139 6,307,079 906,149 1,408,276 12,788,432 21,409,936 5,758,320 947,862 1,485,367 11,398,590 19,590,139 2009 RM000
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9.

Group 2010 RM000 (iv) By economic purposes: Purchase of securities Purchase of transport vehicles Purchase of landed property of which: Residential Non-residential Purchase of fixed assets excluding land and buildings Personal use Credit card Purchase of durable goods Construction Working capital Others Gross loans, advances and financing (v) Movements in non-performing loans, advances and financing ("NPL") are as follows: At beginning of year Non-performing during the year Reclassified as performing during the year Recoveries Amount written off At end of year Specific allowance on non-performing loans on performing loans Net non-performing loans, advances and financing Net NPL as % of gross loans, advances and financing less specific allowance Including specific allowance on performing loans Excluding specific allowance on performing loans 875,070 670,112 (412,025) (194,930) (131,948) 806,279 (438,582) (415,168) (23,414) 367,697 1,158,506 775,826 (493,941) (328,770) (236,551) 875,070 (531,824) (451,554) (80,270) 343,246 1.8% 2.2% 351,976 907,561 11,092,067 8,408,597 2,683,470 66,540 2,007,919 685,003 293,211 5,384,583 621,076 21,409,936 273,541 1,190,239 10,477,736 7,730,962 2,746,774 61,094 1,155,811 645,058 15 313,552 4,846,438 626,655 19,590,139 2009 RM000
1.8% 1.9%
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9.

Group 2010 RM000 (vi) Movements in the allowance for losses on loans, advances and financing are as follows: General Allowance At beginning of year Allowance made during the year Amount written back At end of year As % of gross loans, advances and financing less specific allowance Specific Allowance At beginning of year Allowance made during the year Amount written back in respect of recoveries Amount written off At end of year Included in specific allowance of the Group are allowances made for high risk accounts which are still performing amounting to RM23,414,000 (2009: RM80,270,000). (vii) Non-performing loan, advances and financing analysed by economic purposes are as follows: Purchase of securities Purchase of transport vehicles Purchase of landed property of which: Residential Non-residential Purchase of fixed assets excluding land and buildings Personal use Credit card Construction Working capital Others 16,399 13,992 336,433 240,152 96,281 198 40,451 14,188 14,905 321,637 48,076 806,279 16,347 26,376 399,985 273,500 126,485 630 55,927 17,518 22,674 307,833 27,780 875,070 340,218 59,732 (77,041) 322,909 1.5% 289,296 78,854 (27,932) 340,218 1.8% 636,429 416,100 (284,154) (236,551) 531,824 2009 RM000
531,824 331,471 (292,765) (131,948) 438,582
158

31 March 2010
10. BALANCES DUE FROM CLIENTS AND BROKERS

Group 2010 RM000 Due from clients Due from brokers Less: Allowance for bad and doubtful debts 89,050 89,050 (16,482) 72,568 2009 RM000 59,688 2,522 62,210 (17,530) 44,680
These represent amounts receivable by Alliance Investment Bank Berhad ("AIBB") from non-margin clients and outstanding contracts entered into on behalf of clients where settlements via the Central Depository System has yet to be made. AIBBs normal trade credit terms for non-margin client is three (3) market days in accordance with the Bursa Malaysia Securities Berhads Fixed Delivery and Settlement System ("FDSS") trading rules. Included in the balances due from clients and brokers are non-performing accounts, as follows: Group 2010 RM000 Classified as doubtful Classified as bad 691 16,150 16,841 The movements in allowance for bad and doubtful debts are as follows: At beginning of year Allowance made during the year Reversal of allowance Amount written off At end of year 17,530 848 (959) (937) 16,482 24,665 2,828 (5,789) (4,174) 17,530 2009 RM000 841 18,091 18,932
159

31 March 2010
11. LAND HELD FOR INVESTMENT

Group 2010 RM000 Freehold land, at cost Development costs Accumulated impairment: At beginning/end of year Carrying amount at end of year 23,114 8,943 32,057 (4,309) 27,748 2009 RM000 23,114 8,943 32,057 (4,309) 27,748
12. OTHER ASSETS

Group 2010 RM000 Other receivables, deposits and prepayments [Note (a)] Interest/income receivable Trade receivables Managers stocks [Note (b)] Foreclosed properties Amount due from subsidiaries [Note (c)] Less: Allowance for other assets 141,971 61,191 32 1,017 4,349 208,560 (21,853) 186,707 Note: (a) Other receivables, deposits and prepayments Included in other receivables, deposits and prepayments of the Group is an amount of RM28,077,000 (2009: RM33,004,000) being the principal balance of housing loans and hire purchase loans acquired by the banking subsidiary from a state owned entity and which have been sold to Cagamas Berhad, with recourse obligations. 2009 RM000 172,414 77,231 34 1,243 4,883 255,805 (20,179) 235,626 2010 RM000 234 5,805 714 6,753 (696) 6,057 Company 2009 RM000 419 1,889 50,460 52,768 (13,839) 38,929
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31 March 2010
12. OTHER ASSETS (contd)

Note: (contd) (b) Managers stocks The managers stock represent units held by the Group in the trust funds it manages and is stated at the lower of cost and market value. Cost is determined using the weighted average method of valuation. Market value of unit trust stock is determined by the Group as manager of the trust funds based on the underlying value of the trust funds. Group 2010 RM000 Managers stocks Market value The Group has no significant concentration of credit risk that may arise from the exposure to a single debtor or group of debtors. (c) Amount due from subsidiaries Company 2010 RM000 Non-interest bearing Less: Allowance for doubtful debts 714 (696) 18 The amounts due from subsidiaries of RM714,000 (2009: RM50,460,000) are unsecured, interest-free and have no fixed terms of repayment. 2009 RM000 50,460 (13,839) 36,621 1,017 1,026 2009 RM000 1,243 1,248
13. STATUTORY DEPOSITS

Statutory deposits comprise the following: (a) (b) Non-interest bearing statutory deposits of RM258,406,000 (2009: RM198,924,000) relating to the banking subsidiaries, maintained with Bank Negara Malaysia in compliance with Section 37(1)(c) of the Central Bank of Malaysia Act, 1958 (revised 1994), the amounts of which are determined as a set percentage of total eligible liabilities. Interest bearing statutory deposits of RM100,000 (2009: RM100,000) relating to a subsidiary, Alliance Trustee Berhad which is maintained with the Accountant-General in compliance with Section 3(f) of the Trust Companies Act, 1949.
161

31 March 2010
14. INVESTMENTS IN SUBSIDIARIES

Company 2010 RM000 Unquoted shares, at cost At beginning of year Subscription of additional shares in subsidiaries [Note (a)] Employee Share Scheme [Note (b)] Less: Accumulated impairment At end of year Note: (a) On 22 July 2009, the Company increased its cost of investment in its wholly-owned subsidiaries by way of capitalisation of amount owing from subsidiaries as follows: Company 2010 RM000 (i) (ii) (iii) (iv) Kota Indrapura Development Corporation Berhad Pridunia Sdn. Bhd. Setiu Integrated Resort Sdn. Bhd. Hijauan Setiu Sdn. Bhd. 42,391 7,534 257 258 50,440 (b) This amount is in respect of the services rendered by the employees of the Companys subsidiaries, pursuant to Employee Share Scheme. 1,767,198 50,440 12,601 1,830,239 (53,255) 1,776,984 2009 RM000 1,767,198 1,767,198 (38,056) 1,729,142
162

31 March 2010
14. INVESTMENTS IN SUBSIDIARIES (contd)

Details of the subsidiaries, which are incorporated in Malaysia, are as follows: Name Principal Activities Effective Equity Interest Held (%) 2010 Subsidiaries of the Company Alliance Bank Malaysia Berhad Hijauan Setiu Sdn. Bhd. Setiu Integrated Resort Sdn. Bhd. Pridunia Sdn. Bhd. Matrix Core Options & Futures Sdn. Bhd. Alliance Trustee Berhad Kota Indrapura Development Corporation Berhad Syabas Sutra Sdn. Bhd. Subsidiary of Syabas Sutra Sdn. Bhd. ABG Capital Management Sdn. Bhd. Subsidiaries of Alliance Bank Malaysia Berhad Alliance Investment Bank Berhad Alliance Islamic Bank Berhad Alliance Direct Marketing Sdn. Bhd. AllianceGroup Nominees (Asing) Sdn. Bhd. AllianceGroup Nominees (Tempatan) Sdn. Bhd. AllianceGroup Properties Sdn. Bhd. Alliance Investment Management Berhad AFB Nominees (Tempatan) Sdn. Bhd. Investment banking business including Islamic banking, provision of stockbroking services and related financial services Islamic banking and the provision of related financial services Dealing in sales and distribution of consumer and commercial banking products Nominee services Nominee services Real property investment Management of unit trusts funds, provision of fund management and investment advisory services Liquidated 100 100 100 100 100 100 70 100 100 100 100 100 100 70 100 Liquidated 100 Banking and finance business and the provision of related financial services Investment holding Investment holding Dormant Dormant Trustee services Property holding Liquidated 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 2009
163

31 March 2010
14. INVESTMENTS IN SUBSIDIARIES (contd)

Name Principal Activities Effective Equity Interest Held (%) 2010 Subsidiaries of Alliance Investment Bank Berhad Alliance Research Sdn. Bhd. AIBB Nominees (Tempatan) Sdn. Bhd. AIBB Nominees (Asing) Sdn. Bhd. KLCS Sdn. Bhd. Alliance Investment Futures Sdn. Bhd. Rothputra Nominees (Tempatan) Sdn. Bhd. (under members voluntary winding up) KLCity Ventures Sdn. Bhd. (under members voluntary winding up) KLCS Asset Management Sdn. Bhd. (under members voluntary winding up) KLCity Unit Trust Bhd. (under members voluntary winding up) Rothputra Nominees (Asing) Sdn. Bhd. Alliance Asset Management (L) Limited Alliance Merchant Nominees (Tempatan) Sdn. Bhd. Alliance Merchant Nominees (Asing) Sdn. Bhd. Alliance Capital Asset Management Sdn. Bhd. Unincorporated trust for ESS * Investment advisory Nominee services Nominee services Dormant Dormant Dormant Dormant Dormant Dormant Liquidated Liquidated Liquidated Liquidated Liquidated Special purpose vehicle for ESS 100 100 100 100 100 100 100 100 94.94 100 100 100 100 100 100 100 100 94.94 100 100 100 100 70 2009
* Deemed subsidiary pursuant to IC 112 Consolidation: Special Purpose Entities
164

31 March 2010
15. LEASEHOLD LAND

Group 2010 RM000 Long term leasehold land Cost At beginning of year Disposals At end of year Accumulated Amortisation At beginning of year Charge for the year Disposals At end of year Net Carrying Amount The leasehold land is stated at cost less accumulated amortisation and impairment, if any. 15,472 (1,055) 14,417 15,472 15,472 (3,197) (139) (3,336) 12,136 2009 RM000
(3,336) (138) 176 (3,298) 11,119
165

31 March 2010
16. PROPERTY, PLANT AND EQUIPMENT

Office equipment and furniture RM000
Group 2010 Cost At beginning of year Additions Disposals Written off At end of year Accumulated Depreciation At beginning of year Charge for the year Disposals Written off At end of year Accumulated Impairment At beginning/end of year Net Carrying Amount
Freehold land RM000
Buildings RM000
Renovations RM000
Computer equipment RM000
Motor vehicles RM000
Total RM000
2,962 2,962
50,442 (99) 50,343
127,453 20,074 (1,022) (30,595) 115,910
80,741 5,111 (3,443) (9,756) 72,653
140,188 3,273 (1,781) (10,485) 131,195
5,131 (2,016) 3,115
406,917 28,458 (8,361) (50,836) 376,178
13,875 981 (51) 14,805
80,589 16,357 (116) (29,519) 67,311
53,182 4,949 (3,435) (9,683) 45,013
114,895 17,202 (1,668) (10,474) 119,955
2,853 224 (1,913) 1,164
265,394 39,713 (7,183) (49,676) 248,248
2,962
3,956 31,582
48,599
27,640
11,240
1,951
3,956 123,974
166

31 March 2010
16. PROPERTY, PLANT AND EQUIPMENT (contd)

Group 2009 Cost At beginning of year Additions Disposals Written off At end of year Accumulated Depreciation At beginning of year Charge for the year Disposals Written off At end of year Accumulated Impairment At beginning/end of year Net Carrying Amount
Freehold land RM000
Buildings RM000
Renovations RM000
Computer equipment RM000
Total RM000
2,962 2,962 2,962
50,442 50,442 12,866 1,009 13,875 3,956 32,611
140,854 23,711 (81) (37,031) 127,453 100,643 14,848 (80) (34,822) 80,589 46,864
85,438 10,317 (1,516) (13,498) 80,741 62,897 4,557 (1,478) (12,794) 53,182 27,559
129,309 13,702 (7) (2,816) 140,188 101,590 15,823 (7) (2,511) 114,895 25,293
5,844 150 (859) (4) 5,131 3,282 257 (682) (4) 2,853 2,278
414,849 47,880 (2,463) (53,349) 406,917 281,278 36,494 (2,247) (50,131) 265,394 3,956 137,567
167

31 March 2010
16. PROPERTY, PLANT AND EQUIPMENT (contd)

Computer equipment RM000 Company 2010 Cost At beginning of year Written off At end of year Accumulated Depreciation At beginning of year Charge for the year Written off At end of year Net Carrying Amount 2009 Cost At beginning of year Additions Disposals At end of year Accumulated Depreciation At beginning of year Charge for the year Disposals At end of year Net Carrying Amount
Renovations RM000
Total RM000
276 276
567 (13) 554
396 396
629 (30) 599
1,868 (43) 1,825
258 11 269 7
496 12 (12) 496 58
101 32 133 263
540 26 566 33
1,395 81 (12) 1,464 361
276 276 232 26 258 18
567 567 483 13 496 71
492 (96) 396 127 32 (58) 101 295
599 30 629 513 27 540 89
1,934 30 (96) 1,868 1,355 98 (58) 1,395 473
168

31 March 2010
17. INTANGIBLE ASSETS

Group 2010 RM000 Goodwill Cost At beginning/end of year Accumulated impairment: At beginning of year Allowance for impairment (Note 36) At end of year Net carrying amount Computer software Cost At beginning of year Additions Written off At end of year Accumulated amortisation At beginning of year Charge for the year Written off At end of year Net carrying amount Total carrying amount of goodwill and computer software 166,590 13,326 (6,994) 172,922 137,654 29,577 (641) 166,590 (88,138) (14,654) 565 (102,227) 64,363 368,512 304,149 304,149 304,149 2009 RM000
(2,084) (2,084) 302,065
(102,227) (16,307) 5,405 (113,129) 59,793 361,858
169

31 March 2010
17. INTANGIBLE ASSETS (contd)

(a) Impairment Test on Goodwill Goodwill is reviewed annually for impairment, or more frequently when there are indications that impairment may have occurred. Goodwill has been allocated to the Groups cash-generating units ("CGU") that expected to benefit from the synergies of the acquisitions, identified according to the business segments as follows: Group 2010 RM000 Corporate banking Commercial banking Small and medium enterprise banking Consumer banking Treasury Corporate finance and equity capital market Stockbroking business Debt capital market Asset management 44,758 13,459 42,621 101,565 83,284 1,838 12,433 2,107 302,065 2009 RM000 44,758 13,459 42,621 101,565 83,284 1,838 12,433 2,084 2,107 304,149
For annual impairment testing purposes, the recoverable amount of the CGUs, which are reportable business segments, are determined based on their value-in-use. The value-in-use calculations apply a discounted cash flow model using cash flow projections based on financial budget and projections approved by management. The key assumptions for the computation of value-in-use include the discount rates, cash flow projection and growth rates applied are as follows: (i) Discount rate The discount rate of 10.2% (2009: 7.3%) are based on the pre-tax weighted average cost of capital plus an appropriate risk premium, that reflect specific risks relating to the Group. The pre-tax weighted average cost of capital is generally derived from an appropriate capital asset pricing model, which itself depends on inputs reflecting a number of financial and economic variables including the risk-free rate in the country. (ii) Cash flow projections and growth rate Cash flow projections are based on five-year financial budget and projections approved by management. Cash flows beyond the fifth year are extrapolated in perpetuity using a nominal long term growth rate of 6.5% (2009: 6.5%) based on average annual Gross Domestic Product growth rate forecasted for the 10 years from year 2011 to 2020 reported in the Third Industrial Master Plan. Cash flows are extrapolated in perpetuity due to the long term perspective of these businesses within the Group. Impairment is recognised in the income statement when the carrying amount of a CGU exceeds its recoverable amount. This annual impairment test review reveals that there was no evidence of impairment for the financial year, except for the impairment on debt capital market. (b) Sensitivity to Changes in Assumptions Any reasonable possible change in the key assumptions would not cause the carrying amount of the goodwill to exceed the recoverable amount of the CGU, which would warrant any impairment to be recognised.
170

31 March 2010
18. DEFERRED TAX

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The net deferred tax assets and liabilities shown on the balance sheet after appropriate offsetting are as follows: Group 2010 RM000 Deferred tax assets, net Deferred tax liabilities, net 102,727 (5) 102,722 At beginning of year Recognised in the income statement (Note 37) Recognised in equity At end of year Deferred tax assets and liabilities prior to offsetting are summarised as follows: Deferred tax assets Deferred tax liabilities 122,724 (20,002) 102,722 141,138 (20,652) 120,486 (4) (4) (32) (32) 120,486 (22,009) 4,245 102,722 2009 RM000 120,517 (31) 120,486 161,294 (26,492) (14,316) 120,486 2010 RM000 (4) (4) (32) 28 (4) Company 2009 RM000 (32) (32) (242) 210 (32)
171

31 March 2010
18. DEFERRED TAX (contd)

The components and movements of deferred tax assets and liabilities during the financial year prior to offsetting are as follows: Allowance for losses on loans, advances and financing RM000 120,088 (23,846) 96,242 (12,357) 83,885 Unabsorbed tax losses and capital allowances RM000 878 5,456 6,334 (1,836) 4,498 Other temporary differences RM000 53,110 (232) (14,316) 38,562 (8,466) 4,245 34,341 Property, plant and equipment RM000 12,782 7,870 20,652 (650) 20,002
Group Deferred tax assets: At 1 April 2008 Recognised in income statement Recognised in equity At 31 March 2009 Recognised in income statement Recognised in equity At 31 March 2010
Total RM000 174,076 (18,622) (14,316) 141,138 (22,659) 4,245 122,724
Group Deferred tax liabilities: At 1 April 2008 Recognised in income statement At 31 March 2009 Recognised in income statement At 31 March 2010
Total RM000 12,782 7,870 20,652 (650) 20,002
172

31 March 2010
18. DEFERRED TAX (contd)

Other temporary differences RM000 157 (187) (30) (19) (49) Property, plant and equipment RM000 85 (23) 62 (9) 53 Group 2010 RM000 Deferred tax assets of the Group have not been recognised in respect of: Unabsorbed tax losses 11,148 2009 RM000 26,280
Company Deferred tax liabilities: At 1 April 2008 Recognised in income statement At 31 March 2009 Recognised in income statement At 31 March 2010
Total RM000 242 (210) 32 (28) 4
173

31 March 2010
19. DEPOSITS FROM CUSTOMERS

Group 2010 RM000 Demand deposits Savings deposits Fixed/investment deposits Money market deposits Negotiable instruments of deposits Structured deposits [Note (a)] 8,122,263 1,679,449 12,215,318 1,160,946 409,092 41,263 23,628,331 Note: (a) Structured deposits represent foreign currency time deposits with embedded foreign exchange options. (i) The maturity structure of fixed/investment deposits, money market deposits and negotiable instruments of deposits are as follows: Due within six months Six months to one year One year to three years Three years to five years 9,608,666 4,041,324 105,240 30,126 13,785,356 (ii) The deposits are sourced from the following types of customers: Domestic financial institutions Government and statutory bodies Business enterprises Individuals Others 415,986 837,472 8,152,109 13,531,116 691,648 23,628,331 249,681 1,360,896 9,552,952 13,660,573 751,339 25,575,441 12,547,616 4,343,188 195,586 41,516 17,127,906 2009 RM000 6,815,306 1,628,580 14,085,022 2,063,280 979,604 3,649 25,575,441
174

31 March 2010
20. DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS

Group 2010 RM000 Licensed banks Licensed investment banks Licensed Islamic banks Bank Negara Malaysia 1,385,564 80,000 75,000 749,102 2,289,666 2009 RM000 425,996 140,000 617,391 1,183,387
21. AMOUNT DUE TO CAGAMAS BERHAD

This relates to proceeds received from conventional housing loans and hire purchase loans sold directly to Cagamas Berhad with recourse to the Group. Under the agreement, the Group undertakes to administer the loans on behalf of Cagamas Berhad and to buy back any loans which are regarded as defective based on pre-determined and agreed upon prudential criteria set by Cagamas Berhad.
22. BILLS AND ACCEPTANCES PAYABLE

Bills and acceptances payable represents the Groups own bills and acceptances rediscounted and outstanding in the market.
23. BALANCES DUE TO CLIENTS AND BROKERS

Group 2010 RM000 Due to clients Due to brokers 75,984 4,265 80,249 These mainly relate to amounts payable to non-margin clients and outstanding contracts entered into on behalf of clients where settlement via the Central Depository System has yet to be made. AIBBs normal trade credit terms for non-margin clients is three (3) market days according to Bursa Malaysia Securities Berhads FDSS trading rules. 2009 RM000 51,856 51,856
175

31 March 2010
24. OTHER LIABILITIES

Group 2010 RM000 Other payable and accruals Interest/income payable Remisiers accounts Profit equalisation reserve [Note (a)] Amount due to subsidiaries [Note (b)] 768,853 100,573 23,454 892,880 Note: (a) Profit equalisation reserve Group 2010 RM000 At beginning of year Provision made during the year Amount written back during the year At end of year 50,058 9,987 (60,045) 2009 RM000 51,925 6,125 (7,992) 50,058 2009 RM000 744,690 138,384 23,400 50,058 956,532 2010 RM000 1,489 1,699 1,461 4,649 Company 2009 RM000 3,181 1,271 1,646 6,098
The profit equalisation reserve has been fully written back during the current financial year and the Directors have subsequently appropriated an amount of RM26,388,000 out of retained profits to a profit equalisation reserve in the Statement of Changes in Equity as disclosed in Note 28. Profit equalisation reserve at the end of previous financial year which relates to the shareholders portion is RM5,513,000. (b) The amount due to subsidiaries are unsecured, interest-free and have no fixed terms of repayment.
176

31 March 2010
25. SUBORDINATED BONDS

Group 2010 RM000 At face value The following are the salient features of the said bonds: Issue date Tenor of the facility/issue Anniversary date Maturity date Interest coupon Revision of interest Redemption option Final redemption : 26 May 2006 : 10-year from the Issue Date on a non-callable 5 year basis : 26 May : 26 May 2016 : 6.09% per annum, subject to revision of rate in year six : The bonds, unless redeemed at the end of five (5) years from the settlement date, shall bear interest of 7.59% per annum from the sixth year onwards until the final redemption : The issuer may, at its option, redeem the subordinated bonds in part or in whole, at any anniversary date on or after five (5) years from the issue date : At par on maturity date 600,000 2009 RM000 600,000
26. LONG TERM BORROWINGS

Group/Company 2010 2009 RM000 RM000 Unsecured Fixed rate term loan [Note (a)] Floating rate term loan [Note (b)] 400,000 200,000 600,000 Note: (a) (b) The term loan bears a fixed interest rate at 3.5% per annum repayable by way of a bullet payment at the end of the third year with extension option of one (1) year. The term loan bears interest at Cost of Fund plus 0.5% per annum repayable by way of a bullet payment at the end of the fourth year. 400,000 200,000 600,000
177

31 March 2010
27. SHARE CAPITAL

Group/Company Number of Ordinary Shares of RM1 each Amount 2010 2009 2010 2009 000 000 RM000 RM000 Authorised At beginning/end of year Issued and fully paid At beginning/end of year 2,000,000 2,000,000 1,548,106 2,000,000 2,000,000 1,548,106
1,548,106
1,548,106
28. RESERVES
Group Note Non-distributable: Statutory reserve Capital reserve Revaluation reserve Employees share scheme reserve Share premium Profit equalisation reserve Distributable: Retained profits 2010 RM000 493,477 7,013 7,440 12,341 304,289 26,388 850,948 (f) 594,784 1,445,732 2009 RM000 429,915 7,013 20,174 7,742 304,289 769,133 480,773 1,249,906 2010 RM000 12,341 304,289 316,630 3,691 320,321 Company 2009 RM000 78 304,289 304,367 421 304,788
(a) (b) (c) (d) (e)
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31 March 2010
28. RESERVES (contd)

Note: (a) (b) (c) (d) (e) (f) The statutory reserve is maintained by the Group, in compliance with Section 36 of the Banking and Financial Institutions Act, 1989 and Section 15 of the Islamic Banking Act, 1983 and is not distributable as dividends. The capital reserve is in respect of retained profit capitalised for a bonus issue by a subsidiary company. The revaluation reserve is in respect of unrealised fair value gains and losses on securities available-for-sale. The employees share scheme reserve relates to the equity-settled share options/grants to Directors and employees. This reserve is made up of the estimated fair value of the share options/share grants based on the cumulative services received from Directors and employees over the vesting period. At the end of the financial year, the Directors appropriated an amount of RM26,388,000 (2009: RM Nil) out of retained profits to a profit equalisation reserve which is derived in accordance with the Framework of Rate of Return (BNM/GP2-i). The profit equalisation reserve at the end of the financial year which relates to the depositors portion is RM10,656,000. Prior to 1 January 2008, Malaysian companies adopted the full imputation system. In accordance with the Finance Act, 2007 which was gazetted on 28 December 2007, companies shall not be entitled to deduct tax on dividend paid, credited or distributed to its shareholders, and such dividends will be exempted from tax in the hands of the shareholders ("single tier system"). However, there is a transitional period of six years, expiring on 31 December 2013, to allow companies to pay franked dividends to their shareholders using their Section 108 balance under limited circumstances. Companies also have an irrevocable option to disregard their accumulated tax credit under Section 108 of the Income Tax Act, 1967 and opt to pay dividends under the single tier system. The change in the tax legislation also provides for the Section 108 balance to be locked-in as at 31 December 2007 in accordance with Section 39 of the Finance Act, 2007. The Company has elected to distribute dividends out of its entire retained earnings under the single tier tax system.
29. SHARES HELD FOR EMPLOYEES SHARE SCHEME

A trust has been established for the ESS and is administrated by an appointed trustee. The Trustee will be entitled from time to time to accept financial assistance from the Company upon such terms and conditions as stipulated in the Trust Deed dated 3 December 2007 and the Trustee may purchase the Companys shares from the open market for the purpose of the ESS. The Trustee shall refrain from exercising any voting rights attached to these shares. In accordance with FRS 132 Financial Statements - Presentation and Disclosure, the share purchased for the benefit of the ESS are recorded as Share Held for ESS in the equity on the balance sheet. During the financial year, the Trustee of the ESS had purchased 5,581,700 ordinary shares of RM1.00 each fully paid in the Company from the open market at an average price of RM2.25 per share. The total consideration paid for the purchase including transaction costs was RM12,570,000. The shares purchased are being held in trust by the Trustee of the ESS in accordance with the Trust Deed dated 3 December 2007. During the financial year ended 31 March 2010, 816,900 shares have been vested and transferred from the Trustee to the eligible employees of the Company and its subsidiaries in accordance with the terms under the Share Grant Plan of the ESS. As at 31 March 2010, the Trustee of the ESS held 19,070,300 ordinary shares representing 1.23% of the issued and paid-up capital of the Company.
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30. EMPLOYEES SHARE SCHEME ("ESS")

The Alliance Financial Group Berhad Employees Share Scheme (ESS) is governed by the Bye-Laws approved by the shareholders at an Extraordinary General Meeting held on 28 August 2007. The ESS which comprises of the Share Option Plan, the Share Grant Plan and the Share Save Plan took effect on 3 December 2007 and is in force for a period of 10 years. There were no share options offered under the Share Save Plan during the financial year. The salient features of the ESS are as follows: (i) (ii) The ESS is implemented and administered by the Employees Share Participating Scheme Committee (ESPS Committee) in accordance with the Bye-Laws. The total number of shares which may be available under the ESS shall not exceed in aggregate 10% of the total issued and paid-up share capital of the Company at any one time during the existence of the ESS and out of which not more than 50% of the shares available under the ESS shall be allocated, in aggregate, to Directors and senior management. In addition, not more than 10% of the shares available under the ESS shall be allocated to any individual Director or employee who, either singly or collectively through his/her associates, holds 20% or more in the issued and paid-up capital of the Company. The subscription price for each share under the Share Option Plan, Share Grant Plan and Share Save Plan may be at a discount (as determined by the ESPS Committee or such other pricing mechanism as may from time to time be permitted by Bursa Malaysia Securities Berhad or such other relevant regulatory authorities), provided that the discount shall not be more than 10% from the 5-day weighted average market price of the shares of the Company transacted on Bursa Malaysia Securities Berhad immediately preceding the date on which an offer is made or at par value of the shares, whichever is higher. The ESPS Committee may at its discretion offer to any Director or employee of a corporation in the Group to participate in the ESS if the Director or employee: (a) (b) (c) (d) has attained the age of 18 years; in the case of a Director, is on the board of directors of a corporation in the Group; in the case of an employee, is employed by a corporation in the Group; and is not a participant of any other employee share option scheme implemented by any other corporation within the Group which is in force for the time being
(iii)
(iv)
provided that the non-executive directors of the Group who are not employed by a corporation in the Group shall not be eligible to participate in the Share Save Plan. (v) (vi) (vii) (viii) Under the Share Option Plan and Share Grant Plan, the ESPS Committee may stipulate the performance targets, performance period, value and/or other conditions deemed appropriate. Under the Share Save Plan, the ESPS Committee may at its discretion offer Share Save Option(s) to any employees of the Group to subscribe for the shares of the Company and the employee shall authorise deductions to be made from his/her salary. The Company may decide to satisfy the exercise of options/awards of shares under the ESS through the issue of new shares, transfer of existing shares or a combination of both new and existing shares of the Company. The Company may appoint or authorise the trustee of the ESS to acquire the Companys shares from the open market to give effect to the ESS.
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30. EMPLOYEES SHARE SCHEME ("ESS") (contd)

The following table illustrates the number and weighted average exercise prices ("WAEP") of, and movements in, share options/grants during the financial year: Group 2010 At beginning of year 000 2008 Share Scheme 2009 Share Scheme 2010 Share Scheme 7,940 9,876 17,816 WAEP 2.86 Share Options Number of Share Options Offered/ awarded 000 10,190 10,190 2.38 At end of year 000 5,801 7,282 8,103 21,186 2.68 Share Grants Number of Share Grants At end of year 000 7,940 9,876 17,816 2.86 At beginning of year 000 1,985 1,985 Offered/ awarded 000 2,452 2,452 Vested/ exercised 000 At end of year 000 1,791 2,325 4,116 At beginning of year 000 1,791 2,325 4,116 Offered/ awarded 000 2,621 2,621 Share Grants Number of Share Grants Vested/ exercised 000 (817) (817) At end of year 000 713 1,846 2,278 4,837
Lapsed 000 (2,139) (2,594) (2,087) (6,820) 2.72
Lapsed 000 (261) (479) (343) (1,083)
2009 At beginning of year 000 2008 Share Scheme 2009 Share Scheme 8,669 8,669 WAEP 3.07
Share Options Number of Share Options Offered/ awarded 000 10,328 10,328 2.70
Lapsed 000 (729) (452) (1,181) 2.93
Lapsed 000 (194) (127) (321)
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31 March 2010

The following table illustrates the number and weighted average exercise prices ("WAEP") of, and movements in, share options/grants during the financial year (contd): Company 2010 At beginning of year 000 2008 Share Scheme 2009 Share Scheme 2010 Share Scheme 94 92 186 WAEP 2.89 Share Options Number of Share Options Offered/ awarded 000 111 111 2.38 At end of year 000 94 92 111 297 2.70 Share Grants Number of Share Grants At end of year 000 94 92 186 2.89 At beginning of year 000 18 18 Offered/ awarded 000 19 19 Vested/ exercised 000 At end of year 000 18 19 37 At beginning of year 000 18 19 37 Offered/ awarded 000 24 24 Share Grants Number of Share Grants Vested/ exercised 000 (9) (9) At end of year 000 9 19 24 52
Lapsed 000
Lapsed 000
2009 At beginning of year 000 2008 Share Scheme 2009 Share Scheme 94 94 WAEP 3.07
Share Options Number of Share Options Offered/ awarded 000 92 92 2.70
Lapsed 000
Lapsed 000
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31 March 2010

(a) Details of share options/grants at the end of financial year: WAEP RM 2008 Share Options 2009 Share Options 2010 Share Options 3.07 2.70 2.38 Exercise Period 12.12.2010 11.12.2014 02.09.2011 01.09.2015 25.08.2012 24.08.2016 Vesting Dates 2008 Share Grants 2009 Share Grants 2010 Share Grants First 50% of the share grants Second 50% of the share grants First 50% of the share grants Second 50% of the share grants First 50% of the share grants Second 50% of the share grants 12.12.2009 12.12.2010 02.09.2010 02.09.2011 25.08.2011 25.08.2012
(b) Fair value of share options/share grants offered/awarded: The fair value of share options/share grants under the Share Option Plan and the Share Grant Plan during the financial year was estimated by an external valuer using a binomial model, taking into account the terms and conditions upon which the share options/share grants were offered/awarded. The fair value of share options and share grants measured at offer/award date and the assumptions are as follows: 2008 Fair value of the shares as at grant date, 12 December 2007 (RM) 2 September 2008 (RM) 25 August 2009 (RM) Weighted average share price (RM) Weighted average exercise price (RM) Expected volatility (%) Expected life (years) Risk free rate (%) Expected dividend yield (%) 0.8072 3.1000 3.0696 0.2617 7 3.57 to 4.57 1.78 Share Options 2009 0.7040 2.6600 2.6989 0.2709 7 3.79 to 5.22 1.78 2010 0.7489 2.4000 2.3784 0.3403 7 2.04 to 4.61 1.78
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(b) Fair value of share options/share grants offered/awarded (contd): 2008 Fair value of the shares as at grant date, 12 December 2007 (RM) 2 September 2008 (RM) 25 August 2009 (RM) Weighted average share price (RM) Expected volatility (%) Risk free rate (%) Expected dividend yield (%) 2.9639 3.1000 0.2617 3.57 to 4.57 1.78 Share Grants 2009 2.5432 2.6600 0.2709 3.79 to 5.22 1.78 2010 2.2941 2.4000 0.3403 2.04 to 4.61 1.78
The expected life of the share options is based on the exercisable period of the share options and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of the share options/share grants were incorporated into the measurement of fair value. The risk-free rate is employed using a range of risk-free rates for Malaysian Government Securities ("MGS") tenure from 1-year to 20-year MGS.
31. INTEREST INCOME

Group 2010 RM000 Loans, advances and financing Interest other than recoveries from NPLs Recoveries from NPLs Money at call and deposit placements with financial institutions Securities held-for-trading Securities available-for-sale Securities held-to-maturity Others Accretion of discount less amortisation of premium Net interest suspended 777,276 51,796 55,936 684 177,797 17,251 6,024 1,086,764 27,127 (19,484) 1,094,407 2009 RM000 850,339 67,548 127,624 134 111,492 13,085 1,495 1,171,717 99,244 (20,362) 1,250,599 2010 RM000 16,946 695 17,641 (215) 17,426 Company 2009 RM000 4,405 4,405 4,405
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32. INTEREST EXPENSE

Group 2010 RM000 Deposits and placements of banks and other financial institutions Deposits from customers Loans sold to Cagamas Subordinated bonds Long term borrowings Others 39,176 370,620 254 36,540 20,017 10,932 477,539 2009 RM000 23,522 526,972 3,426 36,540 2,460 3,055 595,975 2010 RM000 20,017 20,017 Company 2009 RM000 2,460 2,460
33. OTHER OPERATING INCOME

Group 2010 RM000 (a) Fee income: Commissions [Note (i)] Service charges and fees Portfolio management fees Corporate advisory fees Underwriting commissions Brokerage fees Guarantee fees Processing fees Commitment fees Other fee income 14,251 36,204 6,290 1,130 26,613 7,256 6,000 13,768 20,976 132,488 22,921 31,379 6,044 3,638 81 13,842 8,674 11,015 13,259 22,144 132,997 2009 RM000 2010 RM000 Company 2009 RM000
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33. OTHER OPERATING INCOME (contd)

Group 2010 RM000 (b) Investment income: (Loss)/gain arising from sale/redemption of: Securities held-for-trading Securities available-for-sale Securities held-to-maturity Unrealised (loss)/gain from revaluation of: Securities held-for-trading Derivative instruments Realised gain on derivative instruments Gross dividend income from: Securities held-to-maturity Subsidiaries (228) 11,556 (5,152) 3,266 35,533 6,321 51,296 (c) Other income/(expense): Foreign exchange gain/(loss) Rental income Gain on disposal of property, plant and equipment Loss on disposal of leasehold land Loss on liquidation of subsidiaries Gain on disposal of foreclosed properties Return on capital from investment Others Total other operating income 11,673 88 1,011 (649) (50) 7,029 (1,056) 18,046 201,830 (10,740) 224 203 7,414 88 3,959 1,148 235,038 885 885 136,818 11 88 965 1,064 123,665 420 20,197 16,841 (1,154) (4,823) 64,022 5,390 100,893 (388) 136,321 135,933 122,601 122,601 2009 RM000 2010 RM000 Company 2009 RM000
Note (i): The commission income is net-of an amount of RM15,867,000 (2009: RM11,573,000) being sales commission expense which was amortised over the expected life of loan products.
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31 March 2010
34. OTHER OPERATING EXPENSES

Group 2010 RM000 Personnel costs Salaries, allowances and bonuses Contribution to EPF Share options/grants under ESS Others 255,630 40,246 7,020 28,936 331,832 Establishment costs Depreciation of property, plant and equipment Amortisation of computer software Amortisation of leasehold land Rental of premises Water and electricity Repairs and maintenance Information technology expenses Others 39,713 16,307 138 30,402 7,280 8,672 29,048 24,888 156,448 Marketing expenses Promotion and advertisement Branding and publicity Others 9,420 2,790 4,297 16,507 Administration and general expenses Communication expenses Printing and stationery Insurance Professional fees Others 11,849 4,493 4,530 11,538 17,434 49,844 Total other operating expenses 554,631 14,531 6,127 (2,250) 20,276 19,789 58,473 559,406 11 13 3 169 1,366 1,562 3,446 8 7 3 224 1,435 1,677 3,685 6,081 6,022 6,192 18,295 36,494 14,654 139 27,641 7,661 9,916 36,625 11,161 144,291 81 179 10 16 2 288 98 242 4 20 4 368 257,990 42,877 6,304 31,176 338,347 1,121 247 105 123 1,596 1,169 245 64 162 1,640 2009 RM000 2010 RM000 Company 2009 RM000
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31 March 2010
34. OTHER OPERATING EXPENSES (contd)

Group 2010 RM000 Included in the other operating expenses are the following: Auditors remuneration [Note (a)] Hire of equipment Property, plant and equipment written off Computer software written off (a) Auditors remuneration Statutory audit fee Audit related services Tax compliance work Other services Total (b) Directors remuneration Directors of the Company: Non-Executive Directors Allowances Fees Benefits-in-kind 812 1,356 62 2,230 Past Director Allowances Fees 702 1,227 62 1,991 292 480 38 810 325 432 38 795 765 483 145 494 1,887 595 197 65 857 38 26 13 5 82 27 17 44 1,887 3,865 1,160 1,589 857 1,710 3,218 76 82 10 31 44 10 2009 RM000 2010 RM000 Company 2009 RM000
146 111 257
22 20 42
188

31 March 2010

Group 2010 RM000 (b) Directors remuneration (contd) CEOs and Directors of Subsidiaries: Chief Executive Officers Salaries and allowances Bonuses Contribution to EPF Share options/grants under ESS Benefits-in-kind 3,253 158 413 536 67 4,427 Non-Executive Directors Allowances Fees 2,579 2,963 722 877 51 7,192 352 372 724 51 98 149 10,056 9,943 795 757 2009 RM000 2010 RM000 Company 2009 RM000
337 361 698
Past Directors Salaries and allowances Fees
1 4 5
852 814
Total Total Directors remuneration excluding benefits-in-kind
7,617 7,488
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31 March 2010

(b) Directors remuneration (contd) 2010 Executive Directors/ CEOs Directors of the Company: Below RM50,000 RM50,001 RM100,000 RM100,001 RM150,000 RM150,001 RM200,000 RM200,001 RM250,000 RM250,001 RM300,000 RM300,001 RM350,000 RM350,001 RM400,000 RM400,001 RM450,000 Above RM450,000 Directors of the Group: Below RM50,000 RM50,001 RM100,000 RM100,001 RM150,000 RM150,001 RM200,000 RM200,001 RM250,000 RM250,001 RM300,000 RM300,001 RM350,000 RM350,001 RM400,000 RM400,001 RM450,000 Above RM450,000 4 2 1 3 2 1 2 1 2 4 2 3 3 3 1 2 2 1 2 4 1 5 2 1 NonExecutive Directors Executive Directors/ CEOs 2009 NonExecutive Directors
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31 March 2010
35. (WRITE-BACK OF)/ALLOWANCE FOR LOSSES ON LOANS, ADVANCES AND FINANCING AND OTHER LOSSES
Group 2010 RM000 (Write-back of)/allowance for bad and doubtful debts and financing: (a) Specific allowance Made during the year Written back during the year (b) General allowance Made during the year Written back during the year (c) Bad debts on loans and financing Recovered Written off 59,732 (77,041) (59,246) 435 (37,414) 1,433 4,050 (31,931) 78,854 (27,932) (69,742) 1,872 114,998 133 115,131 331,471 (292,765) 416,100 (284,154) 2009 RM000
Allowance for commitments and contingencies Allowance for other assets
36 ALLOWANCE FOR IMPAIRMENT

Group 2010 RM000 Allowance for/(write-back of) impairment on securities: Securities available-for-sale [Note(a)] Securities held-to-maturity Allowance for impairment on goodwill (Note 17) (Write-back of)/allowance for impairment on foreclosed properties (Write-back of)/allowance for impairment on debt due from subsidiaries Impairment on other assets 134,712 (3,900) 2,084 (15) 132,881 Note: (a) During the financial year, the Group made impairment allowances of RM141,450,000 (2009: RM78,550,000) relating to a Collateralised Loan Obligations.
Company 2009 RM000 76,128 (42) 815 40 76,941 2010 RM000 (13,144) 15,199 2,055 2009 RM000 651 40 691
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31 March 2010
37. TAXATION AND ZAKAT

Group 2010 RM000 Income tax: Provision for current year Over provision in prior years Deferred tax (Note 18) Taxation Zakat 91,204 (5,868) 22,009 107,345 93 107,438 Income tax is calculated at the Malaysian Statutory tax rate of 25% (2009: 25%) of the estimated assessable profit for the year. A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company is as follows: Group 2010 RM000 Profit before taxation Taxation at Malaysian statutory tax rate of 25% (2009: 25%) Effect on deferred tax for reduction in income tax rate Effect of expenses not deductible for tax purposes Effect of income not subject to tax Reversal of deferred tax provided in prior years Over provision of tax expense in prior years Unabsorbed tax losses which deferred tax recognised during the year Tax expense for the year Tax savings during the year arising from: utilisation of current year tax losses utilisation of tax losses brought forward from previous year 408,938 102,234 10,145 (2,001) 6,387 (5,868) (3,552) 107,345 2009 RM000 303,312 75,828 (1) 7,492 (315) 44,788 (53,398) 74,394 804 2010 RM000 128,726 32,182 1,503 (5,000) 4 (696) 27,993 Company 2009 RM000 121,234 30,309 566 (5,025) (160) (254) 25,436 2009 RM000 101,300 (53,398) 26,492 74,394 30 74,424 2010 RM000 28,717 (696) (28) 27,993 27,993 Company 2009 RM000 25,900 (254) (210) 25,436 25,436
85 7,185
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31 March 2010
38. EARNINGS PER SHARE

(a) Basic The calculation of the basic earnings per share is based on net profit attributable to equity holders of the Company for the financial year divided by the weighted average number of ordinary shares of RM1.00 each in issue during the financial year excluding the weighted average shares held for ESS. Group 2010 Net profit attributable to equity holders of the Company (RM000) Weighted average number of ordinary shares in issue (000) Effect of shares bought back for ESS (000) 301,424 1,548,106 (17,424) 1,530,682 Basic earnings per share (sen) (b) Diluted The calculation of the diluted earnings per share is based on the net profit attributable to equity holders of the Company for the financial year divided by the weighted average number of ordinary shares of RM1.00 each in issue during the financial year, excluding the weighted average shares held for ESS and taken into account the assumed Share Grants to employees under ESS were vested to the employees as at 31 March 2010. Group 2010 Net profit attributable to equity holders of the Company (RM000) Weighted average number of ordinary shares in issue (000) Effect of shares bought back for ESS (000) Effect of Share Grants under ESS (000) 301,424 1,548,106 (17,424) 4,837 1,535,519 Diluted earnings per share (sen) 19.6 2009 229,121 1,548,106 (11,033) 4,116 1,541,189 14.8 19.7 2009 229,121 1,548,106 (11,033) 1,537,073 14.9
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31 March 2010
39. DIVIDENDS
Dividend in respect of financial year 2010 2009 RM000 RM000 Recognised during the financial year: First interim dividend 1.3 sen per share, tax exempt under the single tier tax system, on 1,548,105,929 ordinary shares of RM1.00 each, declared in the financial year ended 31 March 2010, paid on 26 August 2009 2.5 sen per share, tax exempt under the single tier tax system, on 1,548,105,929 ordinary shares of RM1.00 each, declared in the financial year ended 31 March 2009, paid on 27 August 2008 Second interim dividend 5.1 sen per share, tax exempt under the single tier tax system, on 1,548,105,929 ordinary shares of RM1.00 each, declared in the financial year ended 31 March 2010, paid on 26 March 2010 3.75 sen per share, tax exempt under the single tier tax system, on 1,548,105,929 ordinary shares of RM1.00 each, declared in the financial year ended 31 March 2009, paid on 3 March 2009 77,980 97,884 57,621 96,055 5.04 6.32 3.72 6.20 19,904 38,434 1.28 2.48 Net Dividends per Ordinary Share 2010 2009 Sen Sen
Dividends paid on the shares held in Trust pursuant to the Companys ESS which are classified as shares held for ESS are not accounted for in the equity. An amount of RM1,195,000 (2009: RM702,000) being dividends paid for those shares were added back to the appropriation of retained profits in respect of the dividends.
40. CAPITAL COMMITMENTS

Group 2010 RM000 Capital expenditure: Authorised and contracted for Authorised but not contracted for 22,942 21,376 44,318 2009 RM000 37,474 4,242 41,716
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31 March 2010
41. MATERIAL LITIGATIONS

(a) Alliance Bank Malaysia Berhads ("ABMB") wholly-owned subsidiary, Alliance Investment Bank Berhad (AIBB) was served with a Writ of Summons and Statement of Claim dated 10 July 2008 (the Suit) by Celcom (Malaysia) Berhad (Celcom). The Suit was filed by one Mohd Shuaib Ishak as a derivative action on behalf of Celcom pursuant to Section 181A(1) of the Companies Act, 1965. The Suit arises from the Amended and Restated Supplemental Agreement dated 4 April 2002 entered into between among others Celcom and DeTe Asia Holding GmbH (DeTeAsia), the acquisition of Celcom shares by Telekom Enterprise Sdn Bhd (TESB), the consequent Mandatory General Offer exercise implemented by Telekom Malaysia Berhad (TM) and the de-merger exercise of the mobile and fixed-line businesses of the TM Group. AIBB has been named as one of the 21 defendants in the Suit for its role as advisor to Celcom. Celcom is claiming against the defendants jointly and/or severally for the sum of US$232,999,745.80 plus damages and interest. The Court of Appeal had on 27 March 2009 allowed the appeal brought by Celcom against the leave granted to Mohd Shuaib Ishak to commence the derivative action on behalf of Celcom. Mohd Shuaib Ishak has since filed an application for leave to appeal to the Federal Court against the said decision and the same is fixed for hearing on 2 November 2009. Hearing adjourned to 19 January 2010. On 19 January 2010, the leave application was adjourned to another date to be confirmed by the Federal Court. Meanwhile, AIBB has filed an application to cease being a party to the proceedings on the ground that it has been improperly and unnecessarily been made a party to the proceedings on 16 July 2009. The application is fixed for mention on 6 November 2009 pending the exchange of affidavits between the parties. Parties have completed exchanging/filing of all the affidavits. The Court has fixed the application for hearing on 29 January 2010. The Court has adjourned the application for hearing on 23 March 2010. On 23 March 2010, the Court heard submissions from both parties and fixed 16 April 2010 to deliver decision. On 16 April 2010, the Court had granted AIBBs application to cease being a party to the proceedings. The Plaintiff had on 22 April 2010 filed on appeal against the decision and the matter has been fixed for case management on 22 June 2010. (b) A corporate borrower had issued a Writ of Summons in 2005 against an agent bank for a syndicate of lenders comprising three banks of which ABMB is one of them, claiming for general, special and exemplary damages alleging a breach of duty and contract. The credit facilities consist of a bridging loan of RM58.5 million and a revolving credit facility of RM4.0 million which were granted by the syndicate lenders of which ABMBs participation was RM18.5 million. In 2002, the credit facilities were restructured to a loan of RM30.0 million, of which ABMBs participation was RM8.31 million, payable over seven years. The syndicated lenders had also filed a suit against the corporate borrower for the recovery of the above-mentioned loan. The two suits were then consolidated and heard together. On 6 May 2009, judgment was delivered against the agent bank for special damages amounting to RM115.0 million together with interest at the rate of 6% per annum from date of disbursement to date of realisation with general damages to be assessed by the Court. The agent banks solicitors have since filed an appeal against the said decision. The Court had on 24 June 2009 granted a stay of execution of the judgment pending appeal to the Court of Appeal. The corporate borrower has since filed an appeal to the Court of Appeal against the stay order granted by the High Court. On 24 November 2009, the Court of Appeal dismissed the corporate borrowers appeal against the order for stay of execution granted by the High Court in favour of the agent Bank with cost of RM20,000. Next case management fixed for 29 July 2010 pending receipt of the Grounds of Judgment and Notes of Proceedings which are still not available for the agent bank to file the Record of Appeal. The advice from the agent banks solicitors is that they have a better than even chance of succeeding in the said appeal.
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31 March 2010
41. MATERIAL LITIGATIONS (contd)

(c) ABMB had in 1999 filed a suit against a corporate borrower, hereinafter referred to as the first defendant and the second defendant as guarantor (collectively called Defendants) for money outstanding due to a default in banking facility amounting to RM2.36 million. The Defendants in turn counter-claimed against the Bank for special damages amounting to RM15.5 million and general damages to be assessed by the Court for negligence and/or wrongful termination of the banking facilities, statutory interest on judgment sum, costs and such other and/or further relief deemed fit by the Court. On 4 May 2009, the High Court in Kota Kinabalu granted judgment in favour of the Defendants with damages to be assessed by the Deputy Registrar. At a clarification hearing held on 25 May 2009, the Court clarified that ABMBs liability to pay damages under the counter-claim is only in respect of general damages to be assessed by the Court and not special damages. ABMB has since filed its appeal and application for stay of execution against the said judgment. On 3 August 2009, the High Court dismissed ABMBs application for stay of execution of the judgment granted in favour of the Defendants. ABMB has since filed an appeal to the Court of Appeal against the said decision. On 16 November 2009, the Court of Appeal had dismissed the ABMBs appeal for stay of execution with no order as to cost and directed that an early hearing date would be scheduled for the ABMBs appeal proper. In light of the above, the High Court has fixed the matter for mention on 12 January 2010 in order to fix a hearing date for assessment of damages (counter claim). The Court fixed hearing for assesment of damages fixed from 17 May 2010 to 19 May 2010. On 17 May 2010, the Court fixed the matter for continued hearing of the assessment of damages from 21 June 2010 to 22 June 2010. Based on the advice from ABMBs solicitors, ABMB has a fair chance of success in its appeal. (d) (i) ABMB had commenced a civil suit against an individual borrower in March 2007 for recovery of an overdraft facility secured by shares from the individual borrower and shares from a third party. The individual borrower counter-claimed against ABMB for various declarations amongst others that ABMB had acted wrongfully or in bad faith in demanding repayment of the facility and that there was in existence a collateral contract between the individual borrower, ABMB and the third party. In addition, the individual borrower is also claiming for general damages to be assessed by the courts. ABMB filed its reply and defence to counter-claim on 7 July 2007. Case management has been fixed for 25 November 2009. The matter has been fixed for further case management on 18 January 2010 for parties to comply with the directions given by the Court. The Court has further adjourned the matter to 25 February 2010 for parties to comply with the directions given by the Court. On 25 February 2010, the Court suggested parties consider mediation as an alternative to the ordinary dispute resolution trial process and fixed the matter for continued case management on 24 March 2010. The matter has been fixed for further case management on 23 June 2010. ABMBs solicitors are of the firm view that ABMB has good defence to the counter-claim. (ii) Arising from the above-mentioned suit (Note 41 d(i)), the third party in September 2008 filed a separate suit against ABMB for force selling the shares pledged by the third party. The third party alleges amongst others that ABMB sold the pledged shares off-market without notice to them in breach of the collateral contract between the third party and ABMB. The third party is claiming for damages for loss of the benefit of the shares pledged to ABMB, damages for conversion, damages for misrepresentation and for breach of contract. ABMB had filed its defence to the suit on 13 November 2008. Pending setting down of the matter for trial by the Plaintiff. ABMBs solicitors are of the firm view that there is no such collateral contract and that ABMB has good defence to the claim brought by the third party.
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42. FINANCIAL RISK MANAGEMENT POLICIES

The Group manages risk within clearly defined guidelines that are approved by the Directors. In addition, the Board of Directors of the Group provides independent oversight to ensure that risk management policies are complied with, through a framework of established controls and reporting process. The guidelines and policies adopted by the Group to manage the main risks that arise in the conduct of its business activities are as follows: (a) Credit Risk Credit risk is the potential loss of revenue and/or principal arising from defaults by borrowers or counterparties through business activities in lending, trading, investing and hedging. Exposure to credit risk may be categorised as primary or secondary. Primary exposure to credit risk arises from loans, advances and financing. The amount of credit exposure is represented by the carrying amount of loans, advances and financing in the balance sheet. The lending activities in the Group are guided by the Groups Credit Policies and Guidelines, in line with Best Practices in the Management of Credit Risk, issued by Bank Negara Malaysia. These credit policies and guidelines also include an Internal Grading model adopted by the Group to grade its loan and financing accounts according to their respective risk profiles. On the other hand, secondary credit exposure arise from financial transactions with counterparties (including interbank market activities, derivative instruments used for hedging and debt instruments), of which the amount of credit exposure in respect of these instruments is equal to the carrying amount of these assets in the balance sheet. This exposure is monitored on an on-going basis against predetermined counterparty limits. The credit exposure arising from off-balance sheet activities, i.e. commitments and contingencies is set out in Note 44(c) to the financial statements. Credit risk arising from Treasury activities are managed by appropriate policies, counterparty limits and supported by the Groups Risk Management Framework. (b) Market Risk Market risk refers to the potential loss arising from the movement in the market rates or prices; the main components being interest rate risk and foreign exchange risk. The Group has developed an internal Risk Management Frameworks, which includes policies and guidelines to manage market risk in general. Market risk arising from the trading activities is controlled via position limits, sensitivity limits and regular revaluation of positions versus current market quotations. The Group is also susceptible to exposure to market risk arising from changes in prices of the shares quoted on Bursa Malaysia, which will impacts on the Groups balances due from clients and brokers. The risk is controlled by application of credit approvals, limits and monitoring procedures. (i) Interest Rate Risk As a subset of market risk, interest rate risk refers to the volatility in net interest income as a result of changes in interest rate levels and shifts in the composition of the assets and liabilities. Interest rate risk is managed through interest rate sensitivity analysis. The potential reduction in net interest income from an unfavourable interest rate movement is monitored and reported to Management. In addition to pre-scheduled meetings, Group Assets and Liabilities Committee ("ALCO") members will also deliberate on revising the Banks lending and deposit rates in response to changes in the benchmark rates set by the central bank. The effects of changes in the levels of interest rates on the market value of securities are monitored closely and mark-to-market valuations are regularly reported to Management. (ii) Foreign Currency Exchange Risk Foreign exchange risk refers to the potentially adverse movements in the exchange rates for foreign exchange positions taken by the Group from time to time. Foreign exchange risk is managed via approved risk limits and open positions are regularly revalued against current exchange rates and reported to Management.
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42. FINANCIAL RISK MANAGEMENT POLICIES (contd)

(c) Liquidity Risk Liquidity risk relates to the Groups ability to maintain adequate liquid assets so as to punctually meet its financial obligations and commitments when due. Market liquidity risk refers to the potential risk that the Group is unable to liquidate its assets/securities at or near the previous market price due to inadequate market depth or disruptions to the marketplace. The Groups liquidity risk profile is managed using Bank Negara Malaysias New Liquidity Framework, other internal policies and ALCO benchmarks. A contingency funding plan is also established by the Group as a forward-looking measure to ensure that liquidity risk can be addressed according to the degrees of key risk indicators, and which incorporates alternative funding strategies which are ready to be implemented on a timely basis to mitigate the impact of unforseen adverse changes in liquidity in the marketplace. (d) Operational Risk Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. Operational risk management identifies the inherent and residual risks in the Groups processes and activities, monitors and controls risk impacts. It analyses the risk profile of the Group, determines any causes of failure, assesses potential loss and enhances controls to reduce/avoid risks. Individual business and support departments are responsible for the management of their day-to-day operational risks while support, monitoring and reporting is provided by the Operational Risk Management Department. Group Internal Audit plays the role of providing independent compliance assurance to senior management and the Board. The main activities undertaken by the Group in managing operational risks includes the pre-identification of risks control and self assessments; key risk indicators, reviews of documentation of the Groups processes and procedures; conducting operational risk awareness internal training and managing potential crisis events via the mitigation resource of business continuity management. The Group has implemented regulatory and Basel II requirements for capital charge for operational risk under the Basic Indicator Approach. Ongoing monitoring and periodic policy/process changes are carried out to reduce the Groups exposure to unexpected losses, improve control and management of operational risk, to cultivate an organizational culture that places a high priority on effective operational risk management and adherence to sound operating controls and best practices.
43. INTEREST RATE RISK

In macro terms, interest rate risk refers to the overall sensitivity of the Groups earnings and/or economic values of the Groups portfolio to changes in interest rates. Interest rate risk is managed through various risk management techniques including re-pricing gap, net interest income simulation and stress testing. The Group is exposed to various risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. The effect of changes in the levels of interest rates on the market value of securities are monitored regularly and the outcome of mark-to-market valuations are escalated to Management regularly. The table below summarises the effective interest rates at the balance sheet date and the periods in which the financial instruments will re-price or mature, whichever is the earlier.
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43. INTEREST RATE RISK (contd)

Non-trading book Up to 1 month RM000 3,006,169 96,539 15,475,122 441 18,578,271 >1-3 months RM000 150,000 1,303,340 2,700 1,264,499 2,720,539 >3-6 months RM000 156 230,086 551,325 781,567 >6-12 months RM000 176,628 57,319 358,905 592,852 >1-5 years RM000 3,292,957 847,349 1,601,953 5,742,259 Over 5 years RM000 39,982 5,199 1,351,853 1,397,034 Non-interest/ profit sensitive RM000 558,376 15,296 18,853 44,788* 72,127 1,096,955 1,806,395 Trading book RM000 44,698 44,698 Effective interest/profit rate % 2.21 2.38 3.22 2.81 5.40 12.00
Group 2010 Assets Cash and short-term funds Deposits and placements with banks and other financial institutions Securities available-for-sale Securities held-to-maturity Loans, advances and financing Balances due from clients and brokers Other non-interest/profit sensitive balances Total assets Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Amount due to Cagamas Berhad Bills and acceptances payable Balances due to clients and brokers Subordinated bonds Long term borrowings Other non-interest/profit sensitive balances Total liabilities Equity Minority interests Total liabilities and equity On-balance sheet interest/profit sensitivity gap Off-balance sheet interest/profit sensitivity gap Total interest/profit sensitivity gap *
Total RM000 3,564,545 150,156 5,154,828 931,420 20,648,445 72,568 1,141,653 31,663,615
11,636,012 875,212 241,035 36,489 12,788,748 12,788,748 5,789,523 5,789,523
1,768,370 531,017 285,476 2,584,863 2,584,863 135,676 135,676
1,889,989 135,775 11,839 2,037,603 2,037,603 (1,256,036) (1,256,036)
3,680,162 1,700 3,681,862 3,681,862 (3,089,010) (3,089,010)
135,986 743,460 28,077 600,000 600,000 2,107,523 2,107,523 3,634,736 3,634,736
1,397,034 1,397,034
4,517,812 2,502 43,760 897,086 5,461,160 2,947,141 4,540 8,412,841 (6,606,446) (6,606,446)
50,175 50,175 50,175 (5,477) (5,477)
23,628,331 2,289,666 28,077 538,350 80,249 600,000 600,000 947,261 28,711,934 2,947,141 4,540 31,663,615
1.53 1.96 4.54 2.45 1.50 6.09 3.33
Non-performing loans, specific allowance and general allowance of the Group are classified as non-interest/profit sensitive.
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Non-trading book Up to 1 month RM000 29,820 29,820 >1-3 months RM000 10,800 10,800 >3-6 months RM000 >6-12 months RM000 >1-5 years RM000 600,000 600,000 Over 5 years RM000 Noninterest sensitive RM000 1,027 1,784,736 1,785,763 Effective interest rate % 2.03 2.75
Company 2010 Assets Cash and short-term funds Deposits and placements with banks and other financial institutions Other non-interest sensitive balances Total assets Liabilities Long term borrowings Other non-interest sensitive balances Total liabilities Equity Total liabilities and equity On-balance sheet interest sensitivity gap Off-balance sheet interest sensitivity gap Total interest sensitivity gap
Total RM000 30,847 610,800 1,784,736 2,426,383
29,820 29,820
10,800 10,800
600,000 600,000 600,000
4,653 4,653 1,821,730 1,826,383 (40,620) (40,620)
600,000 4,653 604,653 1,821,730 2,426,383
3.33
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Non-trading book Up to 1 month RM000 4,533,432 682,878 15,000 13,724,402 880 18,956,592 >1-3 months RM000 195,860 1,915,832 116,000 929,957 3,157,649 >3-6 months RM000 2,663 951,476 40,130 512,891 1,507,160 >6-12 months RM000 233,214 26,366 618,787 878,367 >1-5 years RM000 2,306,065 93,044 2,131,856 4,530,965 Over 5 years RM000 220,770 5,227 797,176 1,023,173 Non-interest/ profit sensitive RM000 457,254 9,887 18,853 3,028* 43,800 1,172,527 1,705,349 Trading book RM000 46,055 40,858 86,913 Effective interest/profit rate % 2.00 1.57 3.30 3.11 4.79 5.45 12.00
Group 2009 Assets Cash and short-term funds Deposits and placements with banks and other financial institutions Securities held-for-trading Securities available-for-sale Securities held-to-maturity Loans, advances and financing Balances due from clients and brokers Other non-interest/profit sensitive balances Total assets Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Amount due to Cagamas Berhad Bills and acceptances payable Balances due to clients and brokers Subordinated bonds Long term borrowings Other non-interest/profit sensitive balances Total liabilities Equity Minority interests Total liabilities and equity On-balance sheet interest/profit sensitivity gap On-balance sheet interest/profit sensitivity gap Total interest/profit sensitivity gap *
Total RM000 4,990,686 198,523 46,055 6,320,122 314,620 18,718,097 44,680 1,213,385 31,846,168
12,796,023 443,236 2,097 30,680 13,272,036 13,272,036 5,684,556 5,684,556
2,115,330 127,973 12,051 45 2,255,399 2,255,399 902,250 902,250
2,295,656 5,367 15,914 73 2,317,010 2,317,010 (809,850) (809,850)
4,212,964 4,883 30,426 4,248,273 4,248,273 (3,369,906) (3,369,906)
237,102 594,781 600,000 600,000 2,031,883 2,031,883 2,499,082 2,499,082
1,023,173 1,023,173
3,918,366 7,147 21,176 958,776 4,905,465 2,761,885 4,653 7,672,003 (5,966,654) (5,966,654)
49,564 49,564 49,564 37,349 37,349
25,575,441 1,183,387 58,391 2,215 51,856 600,000 600,000 1,008,340 29,079,630 2,761,885 4,653 31,846,168
2.22 1.43 3.66 2.91 2.50 6.09 3.33
Non-performing loans, specific allowance and general allowance of the Group are classified as non-interest/profit sensitive.
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Non-trading book Up to 1 month RM000 453,580 453,580 453,580 453,580 >1-3 months RM000 200,000 200,000 200,000 200,000 >3-6 months RM000 >6-12 months RM000 >1-5 years RM000 600,000 600,000 600,000 (600,000) (600,000) Over 5 years RM000 Noninterest sensitive RM000 298 1,769,019 1,769,317 6,130 6,130 1,816,767 1,822,897 (53,580) (53,580) Effective interest rate % 2.22 2.63
Group 2009 Assets Cash and short-term funds Deposits and placements with banks and other financial institutions Other non-interest sensitive balances Total assets Liabilities Long term borrowings Other non-interest sensitive balances Total liabilities Equity Total liabilities and equity On-balance sheet interest sensitivity gap Off-balance sheet interest sensitivity gap Total interest sensitivity gap
Total RM000 453,878 200,000 1,769,019 2,422,897 600,000 6,130 606,130 1,816,767 2,422,897
3.33
44. CAPITAL ADEQUACY

The capital adequacy ratios of the ABMB group are computed in accordance with Bank Negara Malaysias revised Risk-Weighted Capital Adequacy Framework (RWCAF-Basel II). The ABMB group has adopted the Standardised Approach for credit risk and market risk, and the Basic Indicator Approach for operational risk. The detailed disclosure on the risk-weighted assets, as set out in Note 44(a), (b), (c) and (d) are presented in accordance with paragraph 4.3 of Bank Negara Malaysias Concept Paper, Risk-Weighted Capital Adequacy Framework (Basel II) and Capital Adequacy Framework of Islamic Bank (CAFIB) Disclosure requirements (Pillar 3).
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44. CAPITAL ADEQUACY (contd)

The capital adequacy ratios of the ABMB group are as follows: 2010 Before deducting proposed dividends Core capital ratio Risk-weighted capital ratio After deducting proposed dividends Core capital ratio Risk-weighted capital ratio Components of Tier-I and Tier-II capital are as follows: 2010 RM000 Tier-I capital (Core Capital) Paid-up share capital Irredeemable convertible preference shares Share premium Retained profits Statutory reserves Other reserves Minority interests Less: Purchased goodwill/goodwill on consolidation Deferred tax assets Total Tier-I capital Tier-II capital Subordinated bonds General allowance for losses on loans, advances and financing Total Tier-II capital Total Capital Less: Investment in subsidiaries Total Capital Base 596,517 4,000 597,517 882,471 735,515 10,018 4,539 2,830,577 (302,065) (99,347) 2,429,165 600,000 322,933 922,933 3,352,098 (12,760) 3,339,338 2009 RM000 596,517 4,000 597,517 772,867 671,953 10,035 4,652 2,657,541 (304,149) (119,305) 2,234,087 600,000 340,246 940,246 3,174,333 (7,066) 3,167,267 11.39% 15.65% 11.13% 15.40% 2009 10.41% 14.76% 10.30% 14.65%
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(a) The breakdown of RWA by exposures in each major risk category are as follows: Group 2010 Exposure Class (i) Credit Risk On-balance sheet exposures: Sovereigns/Central banks Public sector entities Banks, Development Financial Institutions ("DFIs") and Multilateral Development Banks ("MDBs") Insurance companies, Securities Firms and Fund Managers Corporates Regulatory retail Residential mortgages Higher risk assets Other assets Equity exposures Defaulted exposures Total on-balance sheet exposures Off-balance sheet exposures: Credit-related off-balance sheet exposures Derivative financial instruments Total off-balance sheet exposures Total on and off-balance sheet exposures (ii) Market Risk [Note 44(d)] Foreign Currency Risk (iii) Operational Risk Total RWA and capital requirements 5,182,234 50,809 2,821,041 20,204 7,432,449 7,946,216 6,669,658 7,522 747,641 34,317 359,469 31,271,560 5,182,234 50,809 2,821,042 20,204 7,149,098 7,446,260 6,657,174 7,530 747,640 34,317 357,170 30,473,478 10,162 582,524 20,204 6,197,422 5,580,751 2,949,854 11,296 548,695 46,761 441,834 16,389,503 813 46,602 1,616 495,794 446,460 235,988 904 43,895 3,741 35,347 1,311,160 Gross Exposures RM000 Net Exposures RM000 RiskWeighted Assets RM000 Capital Requirements RM000
3,154,545 86,119 3,240,664 34,512,224

Short Long Position Position 9,074 (19,663)
3,147,948 86,119 3,234,067 33,707,545
2,766,939 33,275 2,800,214 19,189,717
221,355 2,662 224,017 1,535,177
19,663 33,707,545 2,126,663 21,336,043
1,573 170,133 1,706,883
34,512,224
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(a) The breakdown of RWA by exposures in each major risk category are as follows (contd): Group 2009 Exposure Class (i) Credit Risk On-balance sheet exposures: Sovereigns/Central banks Banks, DFIs and MDBs Insurance companies, Securities Firms and Fund Managers Corporates Regulatory retail Residential mortgages Higher risk assets Other assets Equity exposures Defaulted exposures Total on-balance sheet exposures Off-balance sheet exposures: Credit-related off-balance sheet exposures Derivative financial instruments Total off-balance sheet exposures Total on and off-balance sheet exposures (ii) Market Risk Interest Rate Risk Equity Risk Foreign Exchange Risk Total [Note 44(d)] (iii) Operational Risk Total RWA and capital requirements 4,337,191 6,093,539 261 6,781,201 7,164,206 5,806,677 7,306 774,965 31,782 445,132 31,442,260 3,437,216 95,147 3,532,363 34,974,623
Short Long Position Position 34,651 11,413 4,240 (19,620) 50,304 (19,620)
Gross Exposures RM000
Net Exposures RM000
RiskWeighted Assets RM000
Capital Requirements RM000
4,337,191 6,093,539 261 6,582,929 6,800,280 5,795,702 7,307 774,965 31,782 466,391 30,890,347 3,407,295 95,147 3,502,442 34,392,789
1,310,282 261 6,052,013 5,096,510 2,692,680 10,958 554,030 47,673 567,277 16,331,684 2,986,797 35,124 3,021,921 19,353,605
104,823 21 484,161 407,721 215,414 877 44,322 3,814 45,382 1,306,535 238,944 2,810 241,754 1,548,289
8,896 31,386 19,620 59,902 34,392,789 2,041,388 21,454,895
712 2,511 1,569 4,792 163,311 1,716,392
34,974,623
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(b) The breakdown of credit risk exposures by risk-weights are as follows:
Disclosures by risk-weights Exposures after netting and Credit risk mitigation Insurance companies, Securities Firms and Fund Regulatory Residential Managers Corporates retail mortgages RM000 RM000 RM000 RM000 20,468 20,468 20,468 100% 1,182,762 6,618 7,585,506 103,685 8,878,571 7,980,895 90% 15,326 8,964,756 44,448 93,973 9,118,503 6,916,637 76% 3,505,236 2,571,166 586,082 82,879 6,745,363 3,034,856 45% Total exposures after netting and Credit risk mitigation RM000 5,391,179 4,044,857 3,505,236 2,686,655 9,550,838 8,291,425 237,355 33,707,545 19,189,717 57%
Group 2010 Risk-Weights
Sovereigns/ Central banks RM000 5,192,234 5,192,234
Public Sector entities RM000 50,809 50,809 10,162 20%
Banks, DFIs and MDBs RM000 2,811,286 93,545 2,904,831 609,030 21%
Higher risk assets RM000 14,809 14,809 22,213 150%
Other assets RM000 198,945 548,695 747,640 548,695 73%
Equity Exposures RM000 9,429 24,888 34,317 46,761 136%
Total RiskWeighted Assets RM000 808,972 1,226,833 1,343,327 7,163,128 8,291,425 356,032 19,189,717
0% 20% 35% 50% 75% 100% 150% Total exposures Risk-weighted assets by exposures Average risk-weight Deduction from Capital base 2009 0% 20% 35% 50% 75% 100% 150% Total exposures Risk-weighted assets by exposures Average risk-weight Deduction from Capital base
4,347,191 4,347,191
5,842,950 343,282 6,186,232 1,340,231 22%
336 27 363 377 104%
643,684 44,459 7,649,228 133,697 8,471,068 8,000,740 94%
21,288 8,469,612 51,332 121,445 8,663,677 6,596,352 76%
2,795,907 2,158,656 852,225 97,893 5,904,681 2,794,957 47%
12,830 12,830 19,245 150%
220,935 554,030 774,965 554,030 71%
31,782 31,782 47,673 150%
4,568,126 6,486,634 2,795,907 2,567,685 9,321,837 8,352,819 299,781 34,392,789 19,353,605 56%
1,297,327 978,567 1,283,843 6,991,378 8,352,819 449,671 19,353,605
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(c) The off-balance sheet exposures and their related counterparty credit risk of the Group are as follows: Positive Fair Value of Derivative Contracts RM000 Credit Equivalent Amount RM000 RiskWeighted Assets RM000
Principal Amount RM000 Group 2010 Credit-related exposures Direct credit substitutes Transaction-related contingent items Short-term self-liquidating trade-related contingencies Irrevocable commitments to extent credit: maturity exceeding one year maturity not exceeding one year 501,940 456,421 167,968 1,526,427 8,137,938 10,790,694 Derivative financial instruments Foreign exchange related contracts: less than one year Interest rate related contracts: one year or less over one year to five years over five years 2,452,403 560,000 430,000 60,000 3,502,403 14,293,097
501,940 228,211 33,594 763,214 1,627,586 3,154,545
501,940 228,211 33,594 626,319 1,376,875 2,766,939
38,588 491 4,864 755 44,698 44,698
64,501 2,745 13,030 5,843 86,119 3,240,664
28,951 549 2,606 1,169 33,275 2,800,214
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(c) The off-balance sheet exposures and their related counterparty credit risk of the Group are as follows (contd): Positive Fair Value of Derivative Contracts RM000 Credit Equivalent Amount RM000 RiskWeighted Assets RM000
Principal Amount RM000 2009 Credit-related exposures Direct credit substitutes Transaction-related contingent items Short-term self-liquidating trade-related contingencies Irrevocable commitments to extent credit: maturity exceeding one year maturity not exceeding one year 448,370 505,920 112,406 2,051,099 8,439,276 11,557,071 Derivative financial instruments Foreign exchange related contracts: less than one year Interest rate related contracts: over one year to five years over five years 2,474,223 990,000 60,000 3,524,223 15,081,294
448,370 252,960 22,481 1,025,549 1,687,856 3,437,216
448,370 252,960 22,481 825,344 1,437,642 2,986,797
27,115 2,123 11,620 40,858 40,858
58,004 30,124 7,019 95,147 3,532,363
27,695 6,025 1,404 35,124 3,021,921
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(d) The RWA and capital requirements for the various categories of risk under market risk are as follows: Group Risk-Weighted Assets RM000 Equity risk General interest rate risk Specific interest rate risk Foreign exchange risk Capital Requirements RM000
2010 Interest rate risk General interest rate risk Specific interest rate risk
19,663 19,663
1,573 1,573
2009 Interest rate risk General interest rate risk Specific interest rate risk 8,586 310 8,896 Equity risk General interest rate risk Specific interest rate risk Foreign exchange risk 11,412 19,974 31,386 19,620 59,902 687 25 712 913 1,598 2,511 1,569 4,792
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45. LEASE COMMITMENTS

The Group and the Company have lease commitments in respect of equipment on hire and premises, all of which are classified as operating leases. A summary of the non-cancellable long term commitments is as follows: Group 2010 RM000 Within one year Between one and five years 30,077 21,194 51,271 2009 RM000 34,710 50,289 84,999 2010 RM000 297 159 456 Company 2009 RM000 410 626 1,036
The operating leases for the Group and the Company's other premises typically cover for an initial period of three years with options for renewal. These leases are cancellable but are usually renewed upon expiry or replaced by leases on other properties. Future minimum lease commitments are anticipated to be not less than the rental expense for 2010.
46. SIGNIFICANT RELATED PARTY TRANSACTIONS

In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are the Groups and the Companys other significant related party transactions and balances: Group 2010 RM000 (a) Transactions Interest income subsidiaries key management personnel Dividend income subsidiary Overhead expenses recharged subsidiaries Interest expenses key management personnel Management fees paid related companies 2009 RM000 2010 RM000 Company 2009 RM000
(42) 1,875 173
(26) 1,973 129
(16,946) (136,321) (1,341)
(4,399) (122,601) (1,372)
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46. SIGNIFICANT RELATED PARTY TRANSACTIONS (contd)

Group 2010 RM000 (b) Balances Amount due to deposits from customers key management personnel Money at call and deposit placements with financial institutions subsidiaries Loans, advances and financing key management personnel Other assets subsidiaries Other liabilities subsidiaries (i) (ii) (iii) 2009 RM000 2010 RM000 Company 2009 RM000
(66,111) 1,468
(63,779) 1,950
640,650 5,824 (1,452)
653,690 38,510 (1,646)
The above transactions have been entered into the normal course of business based on negotiated and mutually agreed terms, and have been established on terms and conditions that are not materially different from those obtainable in transactions with unrelated parties. Related companies refer to member companies of Alliance Financial Group Berhad. Key management personnel refer to those persons having authority and responsibility for planning, directing and controlling the activities of the Group and the Company, directly or indirectly, including Executive Directors and Non-Executive Directors of the Group and the Company (including close members of their families). Other members of key management personnel of the Group are the Group Chief Executive Officer, Group Chief Operating Officer, Group Chief Financial Officer, Group Chief Risk Officer, Group Chief Credit Officer and Group Company Secretary.
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46. SIGNIFICANT RELATED PARTY TRANSACTIONS (contd)

(c) Compensation of key management personnel Remuneration of Directors and other members of key management for the year is as follows: Group 2010 RM000 Short-term employee benefits Fees Salary and other remuneration, including meeting allowances Contribution to EPF Share options/grants under ESS Benefits-in-kind 1,717 6,709 702 779 131 10,038 Included in the total key management personnel are: Directors remuneration (Note 34) 2009 RM000 1,599 10,162 1,213 1,346 124 14,444 9,907 2010 RM000 480 577 42 68 38 1,205 Company 2009 RM000 432 678 50 40 38 1,238 795
7,355
810
Executive Directors of the Group and other members of key management have been offered/awarded the following number of share options/share grants under the ESS: Share Options 2010 2009 000 000 Group At beginning of year Directors/Key management personnel appointed during the year Offered/awarded Vested Lapsed At end of year Company At beginning of year Offered/awarded Vested At end of year 4,693 2,609 (5,013) 2,289 1,556 621 2,516 4,693 68 66 134 Share Grants 2010 2009 000 000 683 363 (132) (605) 309 219 87 377 683 9 10 19
134 87 221
19 15 (5) 29
The above share options/share grants were offered/awarded on the same terms and conditions as those offered to other employees of the Group (Note 30).
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47. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The carrying amounts and the fair value of the financial assets and liabilities of the Group and of the Company are as follows: 2010 Carrying amount RM000 Group Financial assets Cash and short-term funds Deposits and placements with banks and other financial institutions Securities held-for-trading Securities available-for-sale Securities held-to-maturity Derivative financial assets Loans, advances and financing Balances due from clients and brokers Financial liabilities Deposits from customers Deposits and placements of banks and other financial institutions Derivative financial liabilities Amount due to Cagamas Berhad Bills and acceptances payable Balances due to clients and brokers Subordinated bonds Long term borrowings Company Financial assets Cash and short-term funds Deposits and placements with banks and other financial institutions Financial liability Long term borrowings 30,847 610,800 30,847 610,800 453,878 200,000 600,000 453,878 200,000 600,000 3,564,545 150,156 5,154,828 931,420 44,698 20,648,445 72,568 3,564,545 150,156 5,154,828 961,176 44,698 20,993,406 72,568 4,990,686 198,523 46,055 6,320,122 314,620 40,858 18,718,097 44,680 25,575,441 1,183,387 49,564 58,391 2,215 51,856 600,000 600,000 4,990,686 198,523 46,055 6,320,122 373,207 40,858 19,058,314 44,680 25,498,242 1,155,980 49,564 56,985 2,215 51,856 612,420 600,000 Fair value RM000 Carrying amount RM000 2009 Fair value RM000
23,628,331 2,289,666 50,175 28,077 538,350 80,249 600,000 600,000
23,627,035 2,257,623 50,175 24,478 538,350 80,249 611,400 602,000
600,000
602,000
Note: The fair value of the other assets and other liabilities, which are considered short-term in nature, are estimated to be approximately their carrying values.
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31 March 2010
47. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (contd)

The methods and assumptions used in estimating the fair values of financial instruments are as follows: (i) Cash and short-term funds The carrying amounts approximate fair values due to the relatively short maturity of the financial instruments. (ii) Deposits and placements with banks and other financial institutions The fair values of these financial instruments with remaining maturity of less than one year approximate their carrying amounts due to the relatively short maturity of the financial instruments. For those financial instruments with maturity of more than one year, the fair values are estimated based on discounted cash flows using applicable prevailing market rates for placements of similar credit risk and similar remaining maturity as at the balance sheet date. (iii) Securities held-for-trading, Securities available-for-sale and Securities held-to-maturity The fair values are estimated based on quoted or observable market prices at the balance sheet date. Where such quoted or observable market prices are not available, the fair values are estimated 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 a similar instrument at the balance sheet date. (iv) Derivative financial instruments The fair values of derivative financial instruments are obtained from quoted market rates in active market, including recent market transactions and valuation techniques, such as discounted cash flow models, as appropriate. (v) Loans, advances and financing The fair values of fixed rate loans with remaining maturity of less than one year and variable rate loans are estimated to approximate their carrying values. For fixed rate loans and Islamic financing with remaining maturity of more than one year, the fair values are estimated based on expected future cash flows of contractual instalment payments and discounted at applicable prevailing rates at balance sheet date offered to new borrowers with similar credit profiles. In respect of non-performing loans, the fair values are deemed to approximate the carrying values, net of specific allowance for losses on loans, advances and financing. (vi) Deposits from customers The fair values of deposit liabilities payable on demand (demand and savings deposits), or deposits with maturity of less than one year are estimated to approximate their carrying amounts. The fair values of fixed deposits with remaining maturities of more than one year are estimated based on expected future cash flows discounted at applicable prevailing rates offered for deposits of similar remaining maturities. For negotiable instruments of deposits, the fair values are estimated based on quoted or observable market prices as at the balance sheet date. Where such quoted or observable market prices are not available, the fair values of negotiable instruments of deposits are estimated using the discounted cash flow technique. (vii) Deposits and placements of banks and other financial institutions and Bills and acceptances payable The carrying values of these financial instruments with remaining maturity of less than one year approximate their carrying amounts due to the relatively short maturity of the financial instruments.
214

31 March 2010
47. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (contd)

(viii) Amount due to Cagamas Berhad The fair values of amount due to Cagamas Berhad are determined based on the discounted cash flows of future instalment payments at applicable prevailing Cagamas rates as at the balance sheet date. (ix) Long term borrowings The fair values of variable rate borrowings are estimated to approximate carrying values. For fixed rate borrowings, the fair values are estimated based on discounted cash flow techniques using a current yield curve approximate for the remaining term to maturity. (x) Subordinated bonds The fair value of the subordinated bonds is estimated based on discounted cash flow techniques using a current yield curve appropriate for the remaining term to maturity. (xi) Balances due from/due to clients and brokers The carrying amounts are reasonable estimates of the fair values because of their short tenor.
215

31 March 2010
48. SEGMENTAL REPORTING

2010 Inter-segment eliminations/ consolidation adjustments RM000 (186,955) (186,955)
Commercial Banking RM000 REVENUE External revenue Inter-segment Total revenue RESULTS Segment results Finance costs Write-back of/(allowance for) losses on loans, advances and financing and other losses Allowance for impairment Profit before taxation and zakat Taxation Zakat Profit after taxation and zakat Minority interests Net profit for the year 1,176,182 43,273 1,219,455
Investment Banking RM000 99,087 2,300 101,387
Islamic Banking RM000 241,133 (19,341) 221,792
Others* RM000 19,427 160,723 180,150
Consolidated RM000 1,535,829 1,535,829
387,855 (36,540) 5,263 (103,358) 253,220
36,390 61,923 (33,568) 64,745
148,193 (34,929) 113,264
156,617 (20,017) (326) (2,055) 134,219
(162,610) 6,100 (156,510)
566,445 (56,557) 31,931 (132,881) 408,938 (107,345) (93) 301,500 (76) 301,424
* Category "Others" consist of businesses from investment holding (the Company), unit trust, asset management and non-banking subsidiaries within the Group. Included in the revenue and segment results under category "Others" for the financial year ended 31 March 2010, an amount of RM136,321,000 being the dividend income received by the Company from its subsidiary, Alliance Bank Malaysia Berhad. The dividend amounts were eliminated as inter-segment consolidation adjustments to derive the Groups revenue and profit before tax.
216

31 March 2010
48. SEGMENTAL REPORTING (contd)

2010 Commercial Banking RM000 Assets Segment assets Unallocated corporate assets Intangible assets 24,419,921 Investment Banking RM000 1,855,936 Islamic Banking RM000 4,861,728 Others* RM000 37,129 Consolidated RM000 31,174,714 127,043 361,858 31,663,615 Liabilities Segment liabilities Unallocated corporate liabilities
23,379,635
1,210,307
3,507,380
610,406
28,707,728 4,206 28,711,934
Other information Capital expenditure Depreciation of property, plant and equipment Amortisation of leasehold land Amortisation of computer software Other non-cash expenses/(income)
40,738 35,204 138 15,784 113,965
874 4,157 220 (21,888)
169 193 206 40,014
3 159 97 543
41,784 39,713 138 16,307 132,634
* Category "Others" consist of businesses from investment holding (the Company), unit trust, asset management and non-banking subsidiaries within the Group.
217

31 March 2010

2009 Inter-segment eliminations/ consolidation adjustments RM000 (161,076) (161,076) (146,244) (146,244)
Commercial Banking RM000 REVENUE External revenue Inter-segment Total revenue RESULTS Segment results Finance costs (Allowance for)/write-back of losses on loans, advances and financing and other losses Allowance for impairment Profit/(loss) before taxation and zakat Taxation Zakat Profit after taxation and zakat Minority interests Net profit for the year 1,359,043 39,628 1,398,671 462,783 (36,540) (53,873) (58,318) 314,052
Investment Banking RM000 105,953 2,500 108,453 13,379 (22,697) (17,471) (26,789)
Islamic Banking RM000 163,059 (25,708) 137,351 80,684 (38,250) 42,434
Others* RM000 12,331 144,656 156,987 123,782 (2,460) (311) (1,152) 119,859
Consolidated RM000 1,640,386 1,640,386 534,384 (39,000) (115,131) (76,941) 303,312 (74,394) (30) 228,888 233 229,121
* Category "Others" consist of businesses from investment holding (the Company), unit trust, asset management and non-banking subsidiaries within the Group. Included in the revenue and segment results under category "Others" for the financial year ended 31 March 2009, an amount of RM122,601,000 being the dividend income received by the Company from its subsidiary, Alliance Bank Malaysia Berhad. The dividend amounts were eliminated as inter-segment consolidation adjustments to derive the Groups revenue and profit before tax.
218

31 March 2010

2009 Commercial Banking RM000 Assets Segment assets Unallocated corporate assets Intangible assets 26,477,579 Investment Banking RM000 1,620,010 Islamic Banking RM000 3,147,934 Others* RM000 40,219 Consolidated RM000 31,285,742 191,914 368,512 31,846,168 Liabilities Segment liabilities Unallocated corporate liabilities 24,903,699 1,602,477 1,957,084 614,126 29,077,386 2,244 29,079,630 Other information Capital expenditure Depreciation of property, plant and equipment Amortisation of leasehold land Amortisation of computer software Other non-cash expenses 66,797 31,413 139 13,993 68,235 9,651 4,727 340 50,647 882 84 174 23,565 127 270 147 18,211 77,457 36,494 139 14,654 160,658
* Category "Others" consist of businesses from investment holding (the Company), unit trust, asset management and non-banking subsidiaries within the Group.
219

31 March 2010
49. COMPARATIVE FIGURES

The presentation and classifications of items in the current years financial statements are consistent with the previous financial year except for the following comparative figures which have been restated to conform with current years presentation: Group As previously reported Reclassification RM000 RM000 As restated RM000
Note (i) Balance sheet as at 31 March 2009 Cash and short-term funds Derivative financial assets Balances due from clients and brokers Land held for investment Other assets Deposits and placements of banks and other financial institutions Derivative financial liabilities Balances due to clients and brokers Other liabilities Deferred tax liabilities (ii) Income statement for the financial year ended 31 March 2009 Interest income Interest expense Net income from Islamic banking business Other operating income Other operating expenses Allowance for losses on loans, advances and financing and other losses Allowance for impairment (vi) (vi), (vii) (vii), (viii) (viii), (ix) (vii) (viii) (ix) (i) (ii) (iii) (iv) (i), (v) (i) (ii) (iii) (i), (v) (iv)
4,998,175 17,310 69,525 28,922 233,930 (1,190,782) (26,016) (76,701) (954,930) (1,205)
(7,489) 23,548 (24,845) (1,174) 1,696 7,395 (23,548) 24,845 (1,602) 1,174
4,990,686 40,858 44,680 27,748 235,626 (1,183,387) (49,564) (51,856) (956,532) (31)
1,250,187 (588,618) 163,935 232,618 (564,429) (112,042) (78,339)
412 (7,357) 1,193 2,420 5,023 (3,089) 1,398
1,250,599 (595,975) 165,128 235,038 (559,406) (115,131) (76,941)
220

31 March 2010
49. COMPARATIVE FIGURES (contd)

Note: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) The reclassification is in relation to certain balances which were previously classified as cash and short-term funds and deposits and placements of banks and other financial institutions, now classified as other assets or other liabilities respectively. The reclassification is to present transaction balances on derivative financial instruments on a gross basis arising from certain counterparties which were previously presented on a net basis. The reclassification is to present the amounts due from/to brokers that are settled on a net basis. The reclassification is in relation to deferred tax liability on the land held by a subsidiary previously recognised at Group level, but is now reversed as this is no longer deemed necessary. The reclassification is to net-off certain allowance for impairment on other assets against the outstanding balances. The reclassification is to present interest income/expense from interest rate swaps on a net basis, as interest income/expense from interest rate swaps are settled on a net basis on each reset date. The reclassification is in relation to certain expenses which were previously classified as interest expense and net income from Islamic banking business, now classified as other operating expenses. The reclassification is to present the provision for certain legal expenses from other operating income and net income from Islamic banking business to allowance for losses on loans, advances and financing and other losses. The reclassification is in relation to mark-to-market loss on securities held-for-trading which were previously classified as allowances for impairment now classified as unrealised loss on revaluation of securities held-for-trading under other operating income.
50. SIGNIFICANT EVENTS DURING THE YEAR

Dissolution of subsidiaries The following subsidiaries of the Company were dissolved pursuant to Section 272(5) of the Companies Act, 1965: (a) Subsidiary of the Company (i) (ii) (b) (c) (i) (i) (ii) (iii) (iv) (v) ABG Capital Management Sdn Bhd (subsidiary of Syabas Sutra Sdn. Bhd.) was dissolved on 1 July 2009; and Syabas Sutra Sdn. Bhd. was dissolved on 2 July 2009. AFB Nominees (Tempatan) Sdn. Bhd. was dissolved on 2 July 2009. Alliance Capital Asset Management Sdn. Bhd. was dissolved on 1 April 2009; Alliance Asset Management (L) Limited was dissolved on 6 April 2009; Alliance Merchant Nominees (Tempatan) Sdn. Bhd. was dissolved on 2 July 2009; Alliance Merchant Nominees (Asing) Sdn. Bhd. was dissolved on 2 July 2009; and Rothputra Nominees (Asing) Sdn. Bhd. was dissolved on 2 July 2009.
Subsidiary of Alliance Bank Malaysia Berhad Subsidiaries of Alliance Investment Bank Berhad
221

31 March 2010
51. SUBSEQUENT EVENT

There was no material event subsequent to the balance sheet date that require disclosure or adjustment to the financial statements.
52. NET INCOME FROM ISLAMIC BANKING BUSINESS

Group 2010 RM000 Income derived from investment of depositors funds and others Income derived from investment of Islamic Banking funds Transfer from profit equalisation reserve Income attributable to depositors and financial institutions Other expenses directly attributable to the investment of the depositors and shareholders funds Add: Income due to head office eliminated at Group level 212,251 25,212 50,058 (59,130) (1,911) 226,480 19,341 245,821 Note: Net income from Islamic banking business comprises income generated from both Alliance Islamic Bank Berhad ("AIS") and Islamic banking business currently residing in Alliance Investment Bank Berhad ("AIBB"). Both AIS and AIBB are wholly-owned subsidiaries of Alliance Bank Malaysia Berhad, which in turn is a wholly owned subsidiary of the Company. 2009 RM000 186,724 22,543 1,867 (69,564) (2,949) 138,621 26,507 165,128
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Financial Statements

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Financial Statements

Statement of Board of Directors Responsibilities

RESERVES AND PROVISIONS

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

EMPLOYEES SHARE SCHEME

SHARES HELD FOR EMPLOYEES SHARE SCHEME

BUSINESS REVIEW FOR FINANCIAL YEAR ENDED ("FYE") 31 MARCH 2010

ECONOMIC OUTLOOK AND PROSPECTS FOR FYE 31 MARCH 2011

BUSINESS OUTLOOK FOR FYE 31 MARCH 2011

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

RATING BY EXTERNAL RATING AGENCY

BAD AND DOUBTFUL DEBTS

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

CONTINGENT AND OTHER LIABILITIES

ITEMS OF AN UNUSUAL NATURE

SIGNIFICANT EVENTS DURING THE YEAR

Datuk Oh Chong Peng Kuala Lumpur, Malaysia

Dato Thomas Mun Lung Lee

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

Datuk Oh Chong Peng Kuala Lumpur, Malaysia

Dato Thomas Mun Lung Lee

Lee Eng Leong

Independent Auditors Report

Report on the financial statements

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

Independent Auditors Report

Report on other legal and regulatory requirements

Mohammad Faiz Bin Mohammad Azmi No.2025/03/12 (J) Chartered Accountant

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

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

1,548,106 320,321 (46,697) 1,821,730 1,821,730 2,426,383

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

19.7 19.6 6.32

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

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

Consolidated Statement of Changes in Equity

Share Capital RM000 1,548,106 1,548,106 1,548,106 1,548,106

Share Premium RM000 304,289 304,289 304,289 304,289

Statutory Reserve RM000 366,910 63,005 429,915 429,915 63,562 493,477

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

Statement of Changes in Equity

< Distributable >

Share Capital RM000 1,548,106 1,548,106 1,548,106 1,548,106

Share Premium RM000 304,289 304,289 304,289 304,289

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

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

Consolidated Cash Flow Statement

Consolidated Cash Flow Statement

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

Consolidated Cash Flow Statement

3,564,545 (94,249) 3,470,296

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

Cash Flow Statement

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

Cash Flow Statement

(97,884) (20,017) (117,901) (423,031) 453,878 30,847

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

Notes to the Financial Statements

SIGNIFICANT ACCOUNTING POLICIES

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

Notes to the Financial Statements

SIGNIFICANT ACCOUNTING POLICIES (contd)