Annual Report 2010such as Shariah compliant financing,sales and marketing, consultancy, advisory and other areas. This was identifiedas a key component of the CIP. We will continue

I n t e r n a l S t r e n g t h , G l o b a l O u t l o o k

Exp

ort-Imp

ort Bank of M

alaysia Berhad

(357198-K) • A

nnual Rep

ort 2010

Level 1, EXIM Bank, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia l Tel : +603-2601 2000 l Fax : +603-2601 2100

w w w . e x i m . c o m . m y

Export-Import Bank of Malaysia Berhad (357198-K)

Contents

Vision, Mission & Shared Values 2Corporate Information 4EXIM Bank in Brief5Message from The Chairman 6Managing Director’s Operations Review9Board of Directors 13Shariah Committee18Management Team 20Organisational Structure21Banking and Credit Insurance Exposure 22Corporate Governance Disclosure Report24Banking Portfolio 2010 28Credit Insurance Portfolio 201029Corporate Events 30Financial Statements32

2

Mission• Asadevelopmentfinancialinstitutionwe

strivetofacilitateMalaysia’sglobalbusinessesbyprovidingbankingandcreditinsuranceproductsandservices;

• ProvidedevelopmentaladvisoryservicesinnurturingMalaysiancross-borderbusinessventures.

• TobealeadingfinancialinstitutionforMalaysiancross-borderventures.

Indefiningthevision;• LeadingmeansbeingapreferredfinancialinstitutionforMalaysians

seekingfinancingfacilities,insurancecoverandadvisoryserviceswhenventuringbusinessabroad.

• Malaysiancross-borderventuresmeansalltypesofbusinessventuresabroadparticipatedbyMalaysiansthatmeettherequirementasspecifiedundertheBank’sbusinessrules.

3

Efficientandprofessionaldeliveryofproductsandservices.

eXcellenceinservicingourcustomerswithfullintegrity.

innovativeinprovidingsolutionstoglobalfinancialneedsofourcustomers.

Mutualrespectamongallstaffanddisciplinedteamworkinmeetingtheexpectationsofstakeholders.

sharEdValuEs

4Corporate Information

Directors

DatukMohdHashimbinHassan(Chairman)

AdissadikinbinAli(appointed as Managing Director/Chief Executive Officer w.e.f 28/09/2010)

MohdFauzibinRahmat(resigned as Managing Director/Chief Executive Officer w.e.f 21/09/2010)

Hj.Ab.GanibinHaron

Hj.ZakariabinIsmail

Dato’KamaruddinbinIsmail(resigned w.e.f 18/10/2010)

SitiZauyahbintiMohdDesa(resigned w.e.f 29/04/2011)

Dato’MohammedHussein

Ir.RoslibinMohamedNor

YBhg.Dato’Dr.MohdIsabinHussain(appointed w.e.f 03/05/2011)

Shariah Committee

Dato’Hj.MohdMokhtarbinHj.Shafii(Chairman)

Hj.AbdulRasidbinAbdulKadir

Dr.MohdSabribinZakaria

Hj.AzizbinMustapha

Managing Director/Chief Executive Officer

AdissadikinbinAli

Company Secretary

JulinabintiMohdSalleh(LS0008055)

Auditors

Ernst&YoungLevel23A,MenaraMileniumJalanDamanlelaPusatBandarDamansara50490KualaLumpur,MALAYSIA

Registered Office

Level16,EXIMBankJalanSultanIsmail50250KualaLumpur,MALAYSIA

Representative Office

PulauPinangNo.2,GroundFloor,LebuhTenggiriDuaPusatBandarSeberangJaya13700SeberangJayaPenang,MALAYSIA

JohorDarulTakzimTingkat2,95JalanDamaiTamanSeriSetiaOffJalanStulangDarat80300JohorBharuMALAYSIA

5EXIM Bank in Brief

BackgroundExport-ImportBankofMalaysiaBerhad(EXIM Bank) was incorporated on 29August 1995 as a government owneddevelopment financial institutionthrough a wholly owned subsidiary ofthe Minister of Finance Incorporated.The Bank was established to promotereverse investment and export ofstrategicsectorssuchascapitalgoods,infrastructure projects, shipping, valueadded manufactured products andto facilitate the entry of Malaysiancompanies tonewmarkets,particularlytothenon-traditionalmarkets.

Mandated RoleAs an agency under the purview ofthe Ministry of Finance, EXIM Bank’smandated role as specified by theGovernmentisasfollows:-

• To provide credit facilities to financeand support exports and imports ofgoods,servicesandoverseasprojectswith emphasis on non-traditionalmarkets as well as the provision ofexport credit insurance services,export financing insurance, overseasinvestments insuranceandguaranteefacilities.

ClienteleThe Bank’s clientele consists oflarge corporations, SMEs, foreigngovernmentsandforeigncompaniesandcover all sectors ranging from trading,manufacturingandinfrastructure.

Strategic Alliances• EXIM Bank continues to pursue

allianceswithinternationalassociationsandmultilateralorganisationsandhavealso executed several agreements tofurtherboostitsbusinessandmarketoutlook.

• Asattodate,EXIMBankisamemberof the Berne Union, an internationalorganisation for Export CreditAgencies; a member of Asian EXIMBanks Forum, an association of 9EXIMBanksinAsia;TheAmanUnionand Association of DevelopmentFinancing Institutions inAsia and thePacific.

• EXIM Bank in its export promotioneffortalsocollaborateswithMalaysiangovernment agencies includingMinistry of International Trade andIndustry (MITI), Malaysia ExternalTrade Development Corporation(MATRADE), Malaysian IndustrialDevelopment Authority (MIDA), SmallAnd Medium Enterprise CorporationMalaysia(SMECorp),andConstructionIndustryDevelopmentBoardMalaysia(CIDB).

Current Facilities Offered by EXIM Bank1. Banking Facilitiesa.Conventional

• OverseasProjectFinancing• OverseasContractFinancing• BuyerCredit

• ExportofServicesFinancing• SupplierCredit• Guarantee• Export Credit Refinancing (ECR)

Scheme• EXIMOverseasGuaranteeFacility(EOGF)

• MalaysiaKitchenFinancing• ImportFinancing• ForwardForex

b.Islamic• BuyerFinancing-i• SupplierFinancing-i• TermFinancing-i• MalaysiaKitchenFinancing-i• IDBCo-Financing• LetterofCredit-i• OverseasProjectFinancing-i• OverseasContractFinancing-i• BankGuarantee-i• ImportFinancing-i• ForwardForex-i• ECR-i

2. Credit Insurance Facilities• ComprehensivePolicy(Shipments/ Contracts)• SpecificPolicy(Contracts/ ConstructionalWorks/Services)• BankLetterofCreditPolicy(BLCP)• OverseasInvestmentInsurance (PoliticalRisksInsuranceCover)• BuyerCreditGuarantee• MultiCurrencyTradeFinancing (MCTF)Scheme• IndirectExporters’Financing Scheme(IEFS)• BondRiskInsurance• BondIndemnitySupport

6MESSAGE FROM THE CHAIRMAN

Datuk Mohd Hashim bin HassanChairman

7MESSAGE FROM THE CHAIRMAN

On behalf of the Board of Directors, IherebypresenttoyoutheAnnualReportand the audited financial statements fortheyearending2010.

Despite decreasing revenues, the Bankmanaged to record an operating profitofRM102.6million for the financial year.However, earnings were offset by thelargeprovisioningallowancesneeded forimpairedlegacyloanassets,thusresultingintheBankregisteringanetloss.

The Bank performedwell in other areasnamely, we achieved a new record inloan recovery during the financial year –RM424.1million in loans– tripleofwhatwas recovered in 2009. In addition, theBank registered an encouraging 17%growth in loansand financingcomparedto2009.

Ourkeygoalfor2010wasthecompletionof our Corporate Improvement Program(CIP) where there was improvedsustainability in our operations. The aimwas to transform thebank intoone thatadopts better financial practices withstrictercontrolsandgovernanceinplace.

Financial Performance For the year ending 2010, the BankregisteredanoperatingprofitofRM102.6milliononthebackofRM134.6milliontotaloperating revenue.After the provisioningforimpairedloanassets,wehavedeclaredalossaftertaxofRM300million.

The decision to allow such a largeprovisioning was made after carefuldeliberation and in view of EXIM Bank’sinterestsgoingforward.

Itwasevident,thatinorderforthebanktooperateeffectivelyinitsprimarybusinessofdisbursingloans,theissueofbaddebt/non-performingloans(NPL)needstobeaddressedquicklyandpermanently.

Webelievethatthisdecisionisnecessarytowards enabling the Bank to focus itsresourcesinbuildingsustainablebusinesswhilsteffectivelydischargingitsmandatedrolegoingforward.

It is also noteworthy to highlight theachievement of Exim Bank to procuresovereign equivalent ratings of “A-” and“A3” from Fitch and Moody’s ratingsrespectively.

The ratings from these leadingagencies are a reflection of our strongfundamentals, based on the corporatetransformationthatwehaveundertakenandourfutureprospectsintermsofourimportance in providing financing forimport-exportactivitiesinMalaysia.

DevelopmentsDuringtheyearunderreview,EXIMBanksaw the official appointment of EncikAdissadikinAliasManagingDirector/ChiefExecutiveOfficer(CEO)on28September2010.

Encik Adissadikin was previously theBank’sChiefOperatingOfficer,apositionhehasheld since2008.Hewaspartofthe Management team responsible forthe bank’s transformation process andoperationalisingofourCIPinitiatives.

Based on his extensive track record inthebankingindustry,thecorporateworldandhispreviousexperienceastheCOO,AdissadikiniswellversedwiththeBank’soperationsandhastherequiredcapabilityto fulfill the responsibilities of his newposition.

8

Moving ForwardLooking to the future, EXIM Bank willfocus on further building the quality ofits asset base, whilemaking continuousimprovementsintermsofpreservationofcapitalandliquidity.Wewillalsoensureathoroughandstricter assessingof creditrisks, repayment viability, proper riskmanagement and better monitoring ofrepaymentschedules.

Withtheserequirementsinplace,weareconfidentofseeingalmostallloansbeingrepaidaspertheagreedschedule.

Equally important is the development ofourhumancapital.Wearecertainthattheimplementation of the various policies inthe Bank to develop the human capitalwillserveuswell,particularlyinnewareassuchasShariahcompliantfinancing,salesandmarketing,consultancy,advisoryandotherareas.

Thiswas identified as a key componentoftheCIP.Wewillcontinuetoemphasisehuman capital development as a vitalstrategygoingforward.

AcknowledgementsOnbehalfoftheBoard,IwishtoexpressmythankstothemanagementandmembersoftheBoard,fortheircontributionsduringthe yearunder review,andwelcome theBank’snewManagingDirector/CEOandDirectors.

Last, but not least, I wish to extendmygratitudetotheGovernmentofMalaysia,BankNegaraMalaysia,my fellowBoardmembers for their counsel, the relevantBoardCommittees,managementandstaffand the shareholders for their steadfastsupportthroughoutthefinancialyear.


MESSAGE FROM THE CHAIRMAN

9MANAGING DIRECTOR’S OPERATIONS REVIEW

“Culminating from the restructuring efforts during the year under review, the Bank is now able to focus fully on growing its business and be more aggressive in the market. For the year 2011, the Bank moves into the final phase of its transformation plan – acceleration.”

Adissadikin bin AliManaging Director / Chief Executive Officer


TheyearunderreviewsawourCorporateImprovement Program (CIP) initiatives(whichwasinitiatedbeginning4thquarterof2008)cametoaconclusion.Theobjectiveof theCIPwas to rectify andstrengthenour internal operations toward ensuringthelong-termviabilityandsustainabilityofEXIMBank.

For the year ending 2010, efforts werefocusedontheadoptionofbetterfinancialmanagement – implementing strictermechanismsfortheassessmentofcredit,risks and repayment viability, enhancingexistingmarketpracticesaswellasvigilantmonitoringofrepaymentschedules.

Underpinnedbytheseimprovements,theBankhassuccessfullydeliveredonseveralnoteworthyachievements:

• The successful recovery ofRM424.1 million in impaired loans.The continued implementationof aggressive recovery efforts forimpaired financing exposures suchas rehabilitation, rescheduling andrestructuring or outright recoverieswas instrumental in the Bank’sextraordinaryloanrecovery.

• The accumulation of quality, newloan assets amounting to RM530millionduring theyearunder review.This represents a 17% increasecompared to2009.Whileour focuswas completing our internal re-organisationfortheyearunderreview,wecontinuedtopromoteEXIMBankin the market. This enabled us toachieveamoderateloangrowthandwith the stricter controls in place,ensure thatassetsacquiredwereofbetterquality.

• The continuing development ofadvisory and research unit. Thishas allowed the bank to producedetailedandtimelyreportsthatcoverthe socio-economic and politicalsituationsinmarketsorcountries.Theavailabilityofsuchmarketintelligencehasgreatlyimprovedthebank’sabilityto strategically assess scenarios inrelation to the risks mitigation andoperations.

• The continued close collaborationwith Malaysian Trade DevelopmentCorporation(MATRADE),ConstructionIndustry Development Board (CIDB)and other strategic partners saw usventuring intonewmarketsandgainnew customers in various industries.Leveragingontheirstrengthsofwidemarket access and customer base,wehavebeen successful in creatinggreaterawarenessof theEXIMBankbrandandourfinancialofferings.

• The growth of Shariah compliantproducts to an asset size of RM50million. While this amount may stillbeafractionofthetotalassetsizeofEXIMBank, thegrowth fromalmostzero base signals promising futureprospects for Shariah compliantproducts.

Although the Bank registered manynoteworthy highlights, it could not avoidthe effects of global developments,especially in relation to economic andtradegrowth.

Despiteworldtradereboundingstronglyby14.5%(aftera12%slumpinthepreviousyear), during the year under review the

reboundwasnotstrongenoughtoreturntheglobaleconomytoitspre-crisisgrowthpath.Inaddition,recoveryinglobaloutputwas still small at 3.6%. The effects ofthe financial crisis and global recessioncontinuedtobefelt.

Many countries adopted spending cutsand fiscal consolidation measures.Unemployment remained high and GDPgrowth was small. These factors limitedincomegrowthandimportdemand.

Againstsuchabackdrop,manyMalaysiancompanies were reluctant to ventureabroad or reduced their export output,citinglackofbuyersentimentabroad.

The nature of EXIM Bank’s businessmeansthatit isalsonotsparedfromtheeffectsofsuchexternaldevelopments.

TheBank’seffortsinmitigatingtheimpactwererewardedwithencouragingsuccesssuchascontinuedgrowthof itsbankingbusinesswhichcontributedtoitstopandbottom-lines. Despite declining revenue,theBankcontinued tomaintain itsprofitmargin.

In light of the sluggish economy, thebank was able to ring-fence impairedloans, helping it to reduce the effects ofthe external environment on the Bank’sbusiness.

Banking Business For the year under review, the bankingdivision continued to be the biggestcontributor to operating income with afigureofRM78.07million. This amountedto58%oftheBank’stotalincome.


Total loandisbursement reachedRM530million to eligible exporters, importersand investors. The Bank’s portfolio hasnot changed considerably compared tothe previous financial year with the bulkof new financing contributed by Project/ContractFinancing,BuyerFinancingandGuarantees.

AsiaremainedtheBank’sbiggestmarketdestination – providing 60% of totalbusiness, followed by the Middle East(20%)andthefinalportionsourced fromtherestoftheworld.Asignificantportionof the business during the year underreview was derived from constructionat 46% andmanufacturing at 22%withothersmakinguptherest.

A notable development in the Bank’sbankingdivisionwasthespecialprovisionfor losses on loans, advances andfinancingswhichstoodatRM391million–a379.4%risefromFY2009.

The need to allocate such a provisionaroseduetobadloansfromthepreviousyears,whichwereonlynowbeginningtoappearonourradar.

A final and permanent solution wasrequiredtoaddressthisissueinamannerthatwillnotimpactthebank’sfutureabilitytodisburseloans.Disbursementof loansis the primary business activity of EXIMBank. It is imperative that the Bank’scan execute this function without anyhindrancesgoingforward.

Whiletheprovisionwaslarge,thereisthepossibility that due to on-going, activerecoveryefforts,aportionoftheprovisionmayberecovered.

On a more positive note, contributionfrom recovery to operating income wasRM45.76millionor34%.

Trade Credit Insurance BusinessTheTradeCreditInsurance(TCI)businesswas also influenced by general globaleconomicconditions.For theyearunderreview, the TCI business recorded aninsurance income of RM10.7 millionamounted to 8% contribution to totaloperatingincome.

Despitethelessthanfavourablescenario,EXIM Bank continued its endeavour tooffer insurance facilities in support ofMalaysian businesses venturing abroad.Regardless of whether exporting goodsorservices,theBankcontinuedtoassistwhere possible – offering short-term aswellasmediumandlongtermtradecreditinsuranceproductstoexporters.

Going forward Culminatingfromtherestructuringeffortsduring the year under review, the Bankis nowable to focus fully ongrowing itsbusiness andbemore aggressive in themarket.Fortheyear2011,theBankmovesinto the final phase of its transformationplan–acceleration.

The Bank has identified severalmarketswhereMalaysianbusinessescanventureinto and accordingly provides thenecessary support as it pursues greatergrowth. The Bank is also looking tovarious set ofKPIs not just the toplines,bottomlinesandloans,butalsothenon-numericalKPIs.Thismaycoverareassuchas number ofMalaysianbusinesses thattheBank assists to go abroad and also

number of jobs creation in the economymade possible through EXIM financingsand/ortradecreditinsurance.

Inanefforttoexpanditscustomerbase,EXIM Bank is poised to tap the importmarket, particularly importers who arelooking to re-export goods or buyers ofstrategic imports such as staple fooditems. This is an untapped market thatoffers promising prospects for the Bankgoingforward.

With the rise in demand for Shariahproducts, the Bank hopes to see moretake-upofsuchofferingsinthemarket.AstheMiddleEastregioncontinuestogrowinimportanceforMalaysianexporters,thepreference for Shariah financing, as wellastradecreditTakafulisexpectedtogrowtoo.

World trade growth is forecasted to seea6.5%expansion in the year2011withglobal GDP growing by 3.1% at marketexchange rates. But there is still somemeasure of uncertainty with the recentinstability in the Middle East, naturaldisasters in Japan and the surge in oilprices.

The continued positive effect of AFTA isalsohoped to spur greater intra-regionaltrade growth and attract higher foreigndirectinvestments(FDI)intotheregion.

While the Bank’s advisory unit currentlygeneratesreportsforinternaluse,itisalsolookingintothepossibilityofreportsbeingproduced for the external consumption.TheplanistobroadentheBank’sservicesintotheareaofconsultancyandadvisory.

12

Intermsofstrategicgoals,theBank’saimis to increase its contribution to nationalGDP. At present, contribution to GDPstands at 0.7%. In the next 5-10 years,the Bank has set a target of increasingits contribution to GDP to 3-5%. Thestrengtheningoffundamentalsandmarketreadiness to move forward, EXIM Bankcanrealisethisgoal.

With aggressive marketing andpromotional efforts both locally andoverseas,theBankiscertaintoreturntoprofitability,withthesupportofitspartnersfrom the government, the private sectorandcommercialbanks.

Regionally, the Bank welcomes avenuesformutualcollaborationwithmultilateralssuch as the Asian Development Bank(ADB) and other EXIM Banks as andwhen such opportunities arise. Facilitiessuch as, co-financing & underwritingwouldmitigate the risks through sharingand further cushioning the impact ofimpairmentinassets.

Malaysia’s economyhasbeen an exportoriented economy for many years andis set to remain as such. In fact, theimportance of export may be morepronouncedinlightoftheNewEconomicModelandthe10thMalaysiaPlan.

WithMalaysia’s relatively small domesticconsumption,exportsareregardedasvitaltothenation’sGDPgrowth,whichinturnwillsupportMalaysia’stransitiontoahighincome nation. Under the 10thMalaysiaPlanandtheNewEconomicModel,thereare calls for the capability of EXIMBanktobeenhancedfurther insupportingthegovernment’seffortstobolsterexports.

Inansweringthiscall,EXIMBankstandsready to play its role diligently in thebest interest of the nation. The Bankwill continue to fulfil its responsibilities –providing credit facilities and insuranceservices to Malaysians venturing abroadand realise our vision to be a leadingFinancial Institution forMalaysian Cross-BorderVentures.

AcknowledgementsLooking back on what has been achallenging but positive tour of duty, ithasbeenbothaprivilegeanda learningexperience to have been at the helmof EXIM Bank. I express my heartfeltappreciationtotheGovernmentandBankNegaraMalaysiafortheircontinuedbelief,trust and support and to the Board ofDirectors for their guidance and adviceduringtheyearunderreview.

Ialsowishtoexpressmysinceregratitudetothecommitmentanddedicationofthemanagement and staff of theBankwhohave delivered another year of excellentcontribution. With your continuedsupport for the future, we look forwardwith optimism to a better operatingachievementsandfinancial results in thenextfinancialyear.

Adissadikin bin AliManaging Director/Chief Executive Officer

MANAGING DIRECTOR’S OPERATIONS REVIEW

13

Datuk Mohd Hashim bin Hassan possesses a Bachelor degree inAgricultural Science (Honours) from theUniversity of Malaya, a Masters degreeinFoodSciencefromtheMichiganStateUniversity, United States and a Mastersdegree in Business Administration fromtheOhioUniversity,UnitedStates.

He has a vast working experience withprivatecompaniesaswellasgovernmentlinkedcorporations.Duringhisearlycareerdevelopment,DatukMohdHashimworkedwith theMalaysianAgricultural ResearchandDevelopment Institute (MARDI) from1970to1985asaFoodTechnologyOfficerand later Principle Research Officer andDirectoroftheFoodTechnologyDivision.He joined Kumpulan FIMA Berhad asits General Manager in 1985. In 1990,Datuk Mohd Hashim was appointed astheExecutiveDirectorofFimaMetalBoxbeforeservingKedahStateDevelopmentCorporation in1993to1996as itsChiefExecutive Officer. At the same time, hewas appointed as Managing Director ofKulimTechnologyParkCorporation from1994to1996andtheExecutiveChairmanofBinaDarulamanBerhadtill1997.DatukMohd Hashim joined Putrajaya HoldingsSdn Bhd as its Chief Executive OfficerandDirector in1996andwasappointedChairmanofthecompanyin2002.Hewas

alsoappointedasChairmanofPadiberasNasionalBerhadfrom2004to2006andChairman of Juta Asia Properties Sdn.Bhd. from 2005 to April 2009. He wasamember of the InvestmentCommitteeand subsequentlyDirector ofEmployeesProvident Fund Board from June 2005to September 2008 and Amanah RayaBerhadfromApril2005toApril2011.

Currently,he isaDirectorofLebarDaunBerhad and Chairman of Amanah RayaDevelopment Sdn Bhd. Datuk MohdHashim bin Hassan was appointed asChairmanofEXIMBankinMay2008.

BOARD OF DIRECTORS


14BOARD OF DIRECTORS

Adissadikin bin Ali holds a MastersDegree in Business Administration(Finance)fromUniversityofMalaya,KualaLumpur, a Bachelor Degree in Business(Banking & Finance) from MonashUniversity, Melbourne, Australia andDiploma in Investment Analysis, UiTM,ShahAlam.

Adissadikin started his career as theManagement Trainee Executive withRenongBerhadin1995.Duringhis4-yeartenorwith theGroup, he served variousdepartmentswithin a fewsubsidiariesofthe Group namely Prolink DevelopmentSdn Bhd, HBN Management Sdn Bhdand Projek Lebuhraya Utara SelatanBerhadintheareasofcorporatefinance,internal audit, sales and marketing andprojectmanagement.

In April 1999, he joined PengurusanDanahartaNasionalBerhadandservedthenational asset management corporationfor four years in the areas of Non-Performing Loans (NPLs) Recovery andCorporate Recovery & Reconstruction.InMarch 2003, Encik Adissadikin joinedBankMuamalatMalaysia Berhad as theSpecial Assistant to the Chief ExecutiveOfficer and later became the Head ofCorporatePlanninginJanuary2005.

Adissadikin bin AliManaging Director/Chief Executive Officer

In June 2005, he joined Bank IslamMalaysia Berhad as Assistant GeneralManager, Managing Director’s Office. In2006, he was promoted to assume theposition of Chief Financial Officer cumGeneralManager,SpecialProjects.Hewasresponsible for managing NPL carving-out and bank-wide cost rationalizationprograminBankIslam.

Prior to his appointment as the MD/CEO of EXIMBank in September 2010,AdissadikinwastheChiefOperatingOfficerofEXIMBanksince2008.Currently,heisalsoaDirectorofMalaysiaExternalTradeDevelopment Corporation (MATRADE)and Malaysia Export Credit InsuranceBerhad(MECIB).

Hj. Ab. Gani bin Haron Director

Hj. Ab. Gani bin Haron holds aBachelor of Economics (Hons) from theUniversity Malaya. He began his careeras Accountant, Accountant GeneralDepartment, Headquarters in 1977before serving as an Assistant Director,Accountant General Department, PerakBranchin1978andDirector,AccountantGeneral Department for Malacca andPahangBranchin1980.In1982,Hj.Ab.Gani served as an Assistant TreasureratStateTreasuryofSabahand lateron,appointedasDeputyHeadofAccountantat Ministry of Education and Director ofAccountantGeneralDepartment,KelantanandSelangorBranchfrom1986to1997.

Between 1999 to 2007, Hj. Ab. GaniwasappointedasDirectorfortheCentralOperations & Agency Services Divisionin Accountant General Department &AccountingDevelopment&ManagementDivisionandthereafterthepostofDeputyAccountant General (Corporate) &(Operations) in the Accountant GeneralDepartment,Headquarters.

He is currently theChairmanofAmanahRaya Capital Sdn Bhd and Director ofYLI Holdings Berhad, Century SoftwareHoldings Berhad, Amanah RayaInvestment Bank Bhd, Amanah RayaTrusteesBhd,AmanahrayaCapitalGroupSdnBhd,AmanahRaya(Labuan)Limitedand Al-Jewar Ltd. Hj. Ab. Gani wasappointed as Director of EXIM Bank inMay2008.


Hj. Zakaria bin Ismail holdsaMasterofArtsinEconomicsandMaster inBusinessAdministrationfromBostonUniversity,USA.Graduated with a Bachelor of Economics(Honours) from University of Malaya, heis also an Associate of The Institute ofBankers, London. Beginning his careerin1974withBankNegaraMalaysia in theBanking Supervision Department, he wastemporarily attached to the South-EastAsia Group International Monetary Fund,Washington DC, USA as Assistant to theExecutiveDirectorbetween1984to1986.

Between1986to2002,heassumedvariouspositions at various departments withinBank Negara Malaysia from Economics,Banking,Investment,InsuranceSupervisionandInsuranceRegulation,holdingpositionsfromManager,DeputyDirectorandDirector.HewasalsoaDirectorofCreditGuaranteeCorporation Malaysia Berhad in 1995 to1996andTheMalaysianInsuranceInstitutein 1999 to2001. From2002 to2004, hewas seconded as Managing Director forthe Entrepreneurs Rehabilitation Fund, afundestablishedbyBankNegaraMalaysiatoassistsmallandmediumentrepreneurs.Subsequently,hewassecondedasDirectorof Training and Administration for theSouthEastAsiaCentralBankTrainingandResearchCentre (TheSEACENCentre) tillNovember2007.Hj.Zakariawasappointedas Director of EXIM Bank in September2008. Currently, he is also a Director ofSyarikatTakafulMalaysiaBerhad.

Dato’ Kamaruddin bin IsmailgraduatedfromUniversityofMalaya in1977withaBachelorsofArts.Hestartedhiscareerasan Assistant Director, International TradeDivision,MinistryofInternationalTradeandIndustryin1978beforeservingasSeniorPrivateSecretarytotheMinister inPrimeMinister’s Department in 1982. Dato’Kamaruddin has held various positionsin theMinistryof International TradeandIndustry. He was appointed Director ofDomesticTradeDivision,NorthernBranchin 1983, Principal Assistant Director,Industries Division in 1990, Director ofIndustrialPolicyDivisionin2001,DirectorofIndustrialServicesDivisionin2002andSenior Director of Sectoral Policy andIndustrial Services from 2003 to 2008.He is currently the Deputy SecretaryGeneral(Industry).Dato’Kamaruddinwasappointed as Director of EXIM Bank inOctober2008.

Hj. Zakaria bin IsmailDirector

Dato’ Kamaruddin bin IsmailDirector

16

Siti Zauyah binti Md Desa graduatedwithaMBAinInternationalBanking(Boardof Directors List) from the University ofManchester,UnitedKingdom,BSc(Hons)in Quantity Surveying from Universityof Reading, UK and GCE ‘A’ Levelsfrom Aston College, Wrexham, Wales,UK. She also holds a Diploma in PublicAdministrations fromNational InstituteofPublicAdministration(INTAN).

Siti Zauyah currently serves as DeputySecretary, (Economy), Investment,MOF (Inc) & Privatisation Division. Shehad served the Ministry of Finance for20 years in various capacities suchas Deputy Secretary (Infrastructure),Investment, MOF (Inc) & PrivatisationDivision; Head of Section (ExternalFunding), Loan Management, FinancialMarkets and Actuary Division; PrincipleAssistant Secretary (Multilateral Unit),Loan Management, Financial Markets &Actuary Division; Assistance Secretary(Multilateral and Bilateral Unit), LoanManagement & Financial Policy Division;Assistance Secretary (Privatisation Unit),Finance Division; Assistance Secretary(Free Trade Zone & Service Tax Unit),Tax Analysis Division and AssistanceSecretary (Armed Forces Unit), ContractManagementDivision.

SitiZauyahwasappointedasDirectorofEXIMBankinJanuary2009.Currentlysheis also Director of Bank PembangunanMalaysia Berhad, UDA Holdings Berhadand Aerospace Technology SystemsCorporationSdnBhd.

Siti Zauyah Binti Md DesaDirector

Throughout her career, Siti Zauyah haspreviouslyservedasanAlternateDirectorforMalaysiaAirportHoldingBhd,Directorof Malaysia Airports (Sepang) Sdn Bhd,MalaysiaAirportsManagement&TechnicalServices Sdn Bhd, Alternate Directorfor Jambatan Kedua Sdn Bhd, SocialSecurity Fund of Malaysia and NationalDefence University of Malaysia. Shehas also served as a Quantity Surveyorin Public Works Department, AssistantLecturer in University Teknology MARA(UiTM), Quantity Surveyor in Hashim &Lim Consultancy and Director’s AdvisortotheconstituencybelongingtoMalaysia,Myanmar,Nepal,SingaporeandThailandinAsianDevelopmentBank,Manila.

Dato’ Mohammed HusseinDirector

Dato’ Mohammed Hussein holds aBachelorofCommerce(Accounting)fromtheUniversityofNewcastle,Australiaandhas completed the Harvard BusinessSchoolAdvancedManagementPrograminBoston,USA.

He has had a long-standing career of31 years with Maybank Group in whichhe held various management positions.TheyincludeHeadofCorporateBanking,Head of Commercial Banking, Head ofMalaysianOperations,ManagingDirectorofAseambankersMalaysiaBerhad,Headof Investment Banking and ExecutiveDirector.Priorto2008,hewastheDeputyPresident / Executive Director / ChiefFinancialOfficer.

Currently, he is a Director of Hap SengConsolidated Bhd, Ancom Berhad,Danajamin Nasional Berhad, PNBPropertyHoldingsSdnBhd,QuillCapitalManagementSdnBhd,PNBCommercialHoldings Sdn Bhd, CapitaCommercialManagement Pte Ltd, MalaysiaCommercial Development Fund Pte Ltd,MCBBankLimitedandPTBankMaybankSyariahIndonesia.

He is also on the Board of Directorsof University Malaysia Kelantan andCorporateDebtRestructuringCommittee,acommitteesponsoredbyBankNegaraMalaysia to resolve and restructurecorporate debts. Dato’ MohammedHussein was appointed as Director ofEXIMBankinNovember2009.

BOARD OF DIRECTORS


Ir. Rosli bin Mohamed Nor holds aBachelor of Science in Civil EngineeringfromBrightonUniversity,UnitedKingdom.

He began his career in 1982 as aDesign Engineer with Engineering andEnvironmental Consultants Sdn Bhd. Heheld various positions in the design firmbefore joiningUnitedEngineers (M)Bhd in1988asaSeniorManager.

In 1992, he started his own constructionbusiness by forming Benar Antara SdnBhd, aPKKClassA,CIDBG7 registeredBumiputera Contractor. The companyundertook various projects that includehighways,LRTtunnels,waterreservoirs,raillines andmanyothers. The companyhassincebeensoldtoapubliclistedcompany,butheremainedastheirManagingDirectortill2000.

Thenonwardshemovedontodevelopnewbusinesses,ofwhichhehasshareholdingsinKMKPlusSdnBhd(construction),LandasIdaman Sdn Bhd (property development),GuomaraSdnBhd(coaltrader)andafewothers.

Presently,heisalsoBusinessDevelopmentDirectorofacompanywhollyownedbyTRCSynergyBerhad,listedonBursaMalaysia.IrRoslibinMohamedNorwasappointedasDirectorofEXIMBankinSeptember2009.

Dato’ Dr. Mohd Isa Hussain graduatedwithaPhDinFinancefromUniversityPutraMalaysia.HealsoholdsaMBAinFinancefromtheUniversityKebangsaanMalaysia,Bachelors of Economics (Honours)(AppliedStatistics)fromUniversityMalayaandDiplomainPublicManagementfromNational InstituteofPublicAdministration(INTAN).

He commenced his career withfirst appointment of Diplomatic andAdministrative Officer (PTD) as AssistantDirector, Prime Minister’s Department in1983beforeservingasAssistantDirector,EconomicPlanningUnitofPahang(UPEN)in1985.HehasheldvariouspositionsintheMinistryofFinance.TheyincludeAssistantSecretary, Government ProcurementDivisionin1990,SeniorAssistantDirector,BudgetManagementDivisionin1995andDeputy Undersecretary of Investment,MKD (Inc.) and Privatization Divisionin 2004. He had moved to Ministry ofTransport Malaysia in 2008 as DeputySecretary General (Operation) before hewas appointed as Head of The PublicLandTransportationCommission(SPAD),EconomicPlanningUnit,PrimeMinister’sDepartmentin2009.

Currently,heisaDeputyUnderSecretaryofInvestment,MKD(Inc.)andPrivatizationDivision,MinistryofFinanceMalaysia.HeisalsoontheBoardofDirectorsofFelcraBhd,AssetGlobalNetworkSdnBhd,K.LInternational Airport Bhd, Penang PortHoldings Bhd, Pelaburan Hartanah Bhd(PHB)andProkhasSdnBhd.Dato’DrIsawasappointedasDirectorofEXIMBankinMay2011.

Ir. Rosli bin Mohamed NorDirector

Dato’ Dr. Mohd Isa HussainDirector

18SHARIAH COMMITTEE

Dato’ Hj. Mohd Mokhtar bin Hj. ShafiiChairman

Dr. Mohd. Sabri bin Zakaria Member

Hj. Abdul Rasid bin Abdul KadirMember

Hj. Aziz bin MustaphaMember

From left to right :

19

Dato’ Hj. Mohd Mokhtar bin Hj. ShafiiChairman

Dato’ Hj. Mohd Mokhtar bin Hj. ShafiiholdsaDiploma inEducation fromKolejIslam Malaya and Master of Arts andBachelorofArts(Hons)inIslamicStudies-majoringShariah fromUniversityMalaya.HehasbeentheChairmanofEXIMBank’sShariahCommitteesince2006.

He has served as a Shariah CommitteeMember inseveralorganisations forover25yearsincludingBankKerjasamaRakyatMalaysia,LembagaTabungHajiaswellasamemberofExpertConsultationPanelsof Jabatan Kemajuan Islam Malaysia(JAKIM).

Presently, he is theChairmanofShariahCommitteeforTakafulIkhlasSdnBhd,andShariahCommitteememberforMalaysianRating Corporation Berhad (MARC) andOCBC Al-Amin Kuala Lumpur. He is amemberoftheFatwaCouncilforPahangandSelangorandalsoaseniormemberoftheIslamicReligiousCouncilforPahang.

Hj. Abdul Rasid bin Abdul KadirMember

Hj. Abdul Rashid bin Abdul Kadirholds a Masters Degree in BusinessAdministration (MBA),aBachelorofArts(Hons) in Economics and Diploma inEducation and Islamic Studies from theNational University of Malaysia. He alsoobtained a professional qualification in

Islamic Financial Planner (Professional)fromIslamicBankingandFinanceInstituteMalaysia (IBFIM), a programme jointlyconducted with the Financial PlanningAssociation of Malaysia (FPAM). He hasbeenamemberofEXIMBank’sShariahCommitteesince2008.

HehadservedBankBumiputraMalaysiaBerhad (BBMB) and Bank MuamalatMalaysiaBerhad (BMMB),collectively for30 years. His last appointment was asan Executive Vice President ConsumerBankingDivisionatBMMB.Heiscurrentlyattached to the International Center ofEducationonIslamicFinance(INCEIF)asa Teaching Fellowand aMember of theSteeringCommitteeforthesettingupofanewIslamicBank(2010).

Dr. Mohd. Sabri bin ZakariaMember

Dr. Mohd. Sabri Zakaria is an AssistantProfessor at the Department Fiqh &Usul Fiqh, Kulliyyah of Islamic RevealedKnowledge & Human Sciences,International Islamic University Malaysia.HereceivedhisfirstdegreeinShariahfromUniversityofAl-Azhar.Hethensuccessfullycompleted his Master Degree in IslamicEconomic from Yarmouk University,Jordan and obtained his PhD. in Fiqh &Usul Fiqh from the International IslamicUniversity Malaysia. He teaches severalsubjects such as Islamic Jurisprudence,ContemporaryFiqhIssues,IslamicLawofTransactionandIslamicFinance.

In July 2010, he was appointed as aMember of Board Directors, Instituteof Islamic Banking & Finance (IIBF),International Islamic University Malaysia.HeistheacademicadvisortoAl-MadinahInternational University (MEDIU) and amemberofMalaysianQualificationAgency(MQA).He isalso theShariahAdvisor tobothEXIMBankandGreatEasternTakafulSdn.Bhd.(GETSB).

Hj. Aziz bin MustaphaMember

TuanHajiAzizbinMustaphaholdsBachelorin Economics (Hons) in Accounting andaDiploma in Accounting fromUniversityMalaya.HehasbeenamemberofEXIMBank’sShariahCommitteesince2006.

Hehasvastexperienceinfinance,bankingandcapitalmarket.Hebeganhiscareerwith the Bank of America and went onto become an Assistant Vice Presidentbefore resigning to join Promet Bhd. asGroup Corporate Treasurer and FinanceDirectorofthePropertyDivision.

HewasaRemisierfirstwithTASecuritiesSdn. Bhd. then Capital Corp SecuritiesSdn.Bhd.andlastlyMohaiyaniSecuritiesSdn.Bhd.HewasalsoaShareholderandDirectorofMercurySecuritiesSdn.Bhd.

SHARIAH COMMITTEE

20MANAGEMENT TEAM

Standing from left to right :

Norzilah binti MohammedChief Credit Officer

Norlela binti Sulaiman Chief Financial Officer

Adissadikin bin Ali Managing Director/Chief Executive Officer

Badrul Hisham bin Mohd Salleh Chief Risk Officer

21ORGANISATIONAL STRUCTURE

MANAGING DIRECTOR/CHIEF EXECUTIVE

OFFICER

COMpANy SECRETARy

OFFICE OF THE MANAGING

DIRECTOR / CHIEF EXECUTIVE OFFICER

bUSINESS CREDIT & ASSET MANAGEMENT

FINANCE, TREASURy & SERVICES

RISK MANAGEMENT

bOARD OF DIRECTORS SHARIAH COUNCIL

AUDIT EXAMINATION COMMITTEE

bOARD RISK MGMT COMMITTEE

INDEpENDENTS

HUMAN CAPITAL MANAGEMENT

BANKING SPECIAL ASSET MANAGEMENT

FINANCE RISK STRATEGY & ANALYSIS

PLANNING & COMMUNICATIONS

INSURANCE CREDIT ADMINISTRATION

TREASURY RISK ANALYSIS

LEGAL

PRODUCT DEVELOPMENT

INSURANCE UNDERWRITING

IT/PQM RISK MANAGEMENT COMPLIANCE

CORPORATE SECRETARIAL

BUSINESS SUPPORT

CAM TECHNICAL ANALYSIS

ADMINISTRATION

GLOBAL ADVISORY & RESEARCH

INTERNAL AUDIT

BUSINESS TECHNICAL ANALYSIS

1

2

3

BOD/CEO

INDEPENDENTS

DIVISION

DEPARTMENT

Secretariat:BusinessDivision Secretariat:InternalAudit Secretariat:RiskManagement

ReportingLinetoBoardAdministrativelyreporttoCEO’sOffice

1

2

3

22BANKING AND CREDIT INSURANCE EXPOSURE

01 Canada02 United State of America03 Mexico04 Honduras05 Cuba06 Peru07 Argentina08 Brazil09 Portugal10 Spain11 Switzerland12 United Kingdom13 Belgium14 Ireland15 Netherland

01

02

0304

05

06

07

08

16 Germany17 Austria18 Denmark19 Norway20 Sweden21 Poland22 Morocco23 France24 Italy25 Greece26 Czech Republic27 Bosnia28 Libya29 South Africa30 Hungary

2

23BANKING AND CREDIT INSURANCE EXPOSURE

14

13

1211

10

09

22

15

16

17

18

1971

20

21

23

2425

2627

30

31

32

3334

3536

37

38

41 72

42

43

39

40

44

45

46

47

4849

5051

52

54

5558

56

57

59

60

61

67

68

69

70

63

62

64

65

66

53

29

28

31 Egypt32 Jordan33 Ethiopia34 Sudan35 Turkey36 Syria37 Saudi Arab38 Oman39 Seychelles40 Mauritius41 Bahrian42 UAE43 Yemen44 Iran

45 Uzbekistan46 Pakistan47 India48 Maldives49 Sri Lanka50 Nepal51 Bangladesh52 Myanmar53 Russia54 Thailand55 Laos56 Indonesia57 Singapore58 Cambodia

59 Vietnam60 Brunei61 Philippines62 Hong Kong63 China64 Taiwan65 South Korea66 Japan67 Australia68 Papau New Guines69 New Zealand70 Fiji71 Finland72 Qatar

24Corporate Governance Disclosure Report

TheBoardofDirectorsofExport-ImportBankofMalaysiaBerhad(EXIMBank) have always placed good corporate governancepracticesasoneof itshighestprioritieswhenconducting thebank’sbusinessactivities.Assuch,EXIMBankputstheutmosteffortintoobservingthebestcorporategovernancepracticestoensurethatnotonlyitsshareholders,butalsootherstakeholders,arewellprotectedatalltimes.

Hence,EXIMBank is fullycommittedandfirmlysubscribestothePrinciplesandBestPracticesinCorporateGovernanceassetout in theBankNegaraMalaysia’sGarisPanduan (BNM/DFI/GP4)–GuidelineonCorporateGovernanceStandardsonDirectorshipfortheDevelopmentFinancialInstitutions,wherebytheinternalcontrolsarefurtherstrengthenedtoensureproperchecks and balances are formed as an integral part of EXIMBank’soperations.

BOARD OF DIRECTORS

The Board of EXIMBank consists of seven (7) directors, outofwhichsix (6)arenon-executivedirectors.AllDirectorshavetheskillsandexperienceintheirrespectiveareasofexpertise,which have contributed significantly to the decision-makingprocessof theBoard.ThestructureofEXIMBankprovidesaclearseparationonfunctions,rolesandresponsibilitiesbetweenthe Chairman of the Board and the Managing Director/ChiefExecutiveOfficer.

The Board of Directors meets at least once a month todeliberateon,interalia,policyandstrategicissuesandreviewofthefinancialperformanceaswellascreditoperationsoftheBank.Inaddition,asprescribedbytheCompaniesCommissionofMalaysia,allDirectorshaveattendedtheCorporateDirectors’TrainingProgramme.

The appointments of all Directors are in compliancewith theBNM/DFI/GP4andtheArticlesofAssociationoftheCompany.

BOARD COMMITTEES

AsrequiredbytheBNM/DFI/GP4,EXIMBankhasestablishedthefour(4)requiredcommitteesatBoardlevelnamely,Audit&ExaminationCommittee,BoardRiskManagementCommittee,RemunerationCommitteeandNominationCommitteetoassisttheBoardintheexecutionofitsdutiesandresponsibilities.

ThedetailsoftheBoardCommitteesarepresentedasfollows:

AUDIT & EXAMINATION COMMITTEE

1. ObjectiveTheAECtoreviewthefinancialconditionof theBank, itsinternalcontrols,performanceandfindingsof the internalauditors, and to recommend appropriate remedial actionregularly,preferablyatleastonceinthree(3)months.

2. CompositionMembersoftheCommitteeare:

No. ofNo Name of Director

Meetings Attended*

1. Hj.Ab.GaniHaron(Chairman) 9/92. Dato’KamaruddinIsmail (resigned w.e.f. 18/10/2010) 2/73. PuanSitiZauyahMdDesa 6/94. Dato’MohammedHussein 4/95. Ir.RosliMohamedNor 9/9

* Reflects the number of meetings attended during thetimethedirectorheldoffice

3. Functions and responsibilitiesTheresponsibilitiesoftheAECareasfollows:

i. Ensure that the accounts are prepared in a timelyand accurate manner with frequent reviews of theadequacy of provisions against contingencies, andbad and doubtful debts. Review the balance sheetandprofitandlossaccountforsubmissiontothefullboardofdirectorsandensurethepromptpublicationofannualaccounts.

ii. Review internal controls, including the scope of theinternal audit programme, the internal audit findings,andrecommendactiontobetakenbymanagement.ThereportsofinternalauditorsandAECshouldnotbesubjecttotheclearanceofthechiefexecutiveofficerorexecutivedirectors.

iii. Review with the external auditors, the scope oftheir audit plan, the system of internal accountingcontrols, the audit reports, the assistance given bythemanagementanditsstafftotheauditorsandanyfindings and actions to be taken. The AEC shouldalso select external auditors for appointment by theBoardeachyearandtoreviewtheircompensation,thescopeandqualityoftheirworkandtheirdischargeorresignation.

iv. Ensureco-ordinationwheremorethanoneauditfirmisinvolved.

v. Reviewany relatedparty transactions thatmayarisewithintheEXIMgroup.

25Corporate Governance Disclosure Report

vi. ApprovetheAuditCharterbeforebeingendorsedbytheBoard,sothat the internalaudit functionmaybeeffectivelydischarged.

vii. Approve the audit plan for the internal audit andshouldbeflexibletorespondtochangingprioritiesandneeds.

viii. Ensure that adequate and appropiate resourcesaremadeavailable to the internal audit function andthe compensation scheme of internal auditors areconsistentwiththeobjectivesanddemandsofinternalauditfunction.

ix. Ensure that the continuingprofessional developmentfor internal audit staff and to ensure that they havesufficient up to date knowledge of auditing and theactivitiesoftheBank.

BOARD RISK COMMITTEE

1. ObjectivePrimarilyresponsibleforeffectivefunctioningoftheBank’sriskmanagementfunction.



Meetings Attended*

1. Hj.ZakariaIsmail(Chairman) 6/62. Ir.RosliMohamedNor 6/63. Dato’KamaruddinIsmail (resigned w.e.f. 18/10/2010) 0/64. Hj.Ab.GaniHaron 6/6


3. ResponsibilitiesThe Committee shall have the following specificresponsibilitieson:

a. Strategy • Reviewing and recommending riskmanagement

philosophyandstrategytotheBoardforBoard’sapproval.

• Reviewing and approving the risk managementpolicies, controls and systems of the Bank inline with the Board approved risk managementphilosophyandstrategy.

• Reviewing and proposing the setting of the riskappetite/toleranceof theBankatenterpriseandatstrategicbusinessunitlevelstotheBoard.

• Approving new products/services, which arefundamentally different from the Bank’s existingproducts/services, based on advice from theAsset Liability Committe and Risk ManagementDivision. In case of approval granted, to notifytheBoardof the same in accordancewith localregulatoryrequirements.

MaintainingcontinuedawarenessofanychangesintheBank’sriskprofiletoensurethattheBank’sbusinessactivitiesare in linewiththeoverall riskstrategy.

b. Organisation• Overseeing the overall management of all risks

covering market risk management, asset andliability management, credit risk management,country risk management and operational riskmanagement.

• Ensuring that there are clear and independentreporting linesand responsibilities for theoverallbusinessactivitiesandriskmanagementfunctionsand recommending risk management derivedorganisationalalignmentswherenecessarytotheBoard.

• Cultivating a proactive risk management culturewithin the Bank so that risk managementprocessesareappliedintheday-to-daybusinessandactivities.

• Appropriating independent review of the Bank’srisk management infrastructure, capabilities,environmentandprocesseswherenecessary.

c. Measurement• Approvingriskmethodologiesformeasuringand

managing risksarising fromtheBank’sbusinessandoperationalactivities.

• Ensuring the appropriateness of the riskmeasurement methodologies (includingassumptions made within the methodologies)undertheprevailingbusinessenvironment.

• Engagingexternalandindependentreviewersforthevalidationofriskmeasurementmethodologiesandoutputs;

• Reviewing and recommending broad-based risklimitstotheBoardforapprovalandensuringtherisklimitsareappropriatefortheBank’sbusinessactivities;

• Approvingdetailrisklimitsbasedonbroad-basedrisklimitsasapprovedbytheBoardandensuringthe riks limits are appropriate for the Bank’sbusinessactivities.

26

d. Processes and Technology Enabler• Ensuringsufficientinternalcontrolstodetectany

deficiencies in the internal control environmentin a timelymanner; reviewing the independenceand robustnessof riskmanagementprocessessand internal controls throughout the Bank;and approving the Bank’s key risk control andmitigationprocesses.

• PeriodicallyreviewingriskexposuresoftheBankinlinewithitsriskstrategyandobjectives;

• Determining and empowering (to the AssetLiabilityCommitteeormembersofmanagement)theauthoritytoapprovedeviationsfromlimitsandtheextentofdeviationsfromlimits.

• Approving the contingency plan for dealingwith various extreme internal/ external eventsdisasters.

• Ensuring the adequacy of tools, systems andresourcesforthesuccessfulmanagementofriskmanagementfunctionswithintheBank.

• ReviewingtheprogressofallcoreriskmanagementinitiativeswithintheBank.

REMUNERATION COMMITTEE

1. ObjectiveThe primary objective of the Remuneration Committee(‘RC’)istoprovideaformalandtransparentprocedurefordevelopinga remunerationpolicy forDirectors,ManagingDirector/ChiefExecutiveOfficer(MD/CEO),CFO,CBO,CROandCCOandensuring thatcompensation iscompetitiveand consistent with the Bank’s culture, objectives andstrategies.

IntheeventthatthepositionoftheChiefOperatingOfficerandHeadofDivisionoritsequivalentiscreated/recreated,theRemunerationCommitteewillbeempoweredtooverseetheremunerationpolicyforthesaidposition/s.



Meetings Attended*

1. Dato’MohammedHussein (Chairman) 6/62. Ir.RosliMohamedNor 6/63. Hj.Ab.GaniHaron 6/64. PuanSitiZauyahMdDesa 5/65. Hj.ZakariaIsmail 6/6


3. Functions and Responsibilitiesa) To propose and recommend to the Board the

remuneration policy and guidelines for theDirectors,MD/CEO,CFO,CBO,CROandCCOofEXIMBank.Theremunerationpolicyshould:-

i) Bedocumentedandapprovedbytheboardandany changes thereto should be subject to theendorsementoftheboard;

ii) Reflect theexperienceand levelof responsibilityborne by individual Directors, MD/CEO, CFO,CBO,CROandCCO.

iii) Besufficient toattractand retainDirectors,MD/CEO,CFO,CBO,CROandCCOofcaliberneededtomanagetheBanksuccessfully;and

iv) Be balanced against the need to ensure thatthe fundsof theBankarenotused tosubsidizeexcessive remuneration package and to ensurethat theremunerationare in linewiththecurrentindustrybestpractices.

b) To propose or review and recommend to the BoardthespecificremunerationpackagesforDirectors,MD/CEO,CFO,CBO,CROandCCOofEXIMBANK.Theremunerationpackagesshould:-

i) Be based on an objective consideration andapprovedbytheBoard;

ii) Takedueconsiderationoftheassessmentsofthenominating committee of the effectiveness andcontributionoftheDirector,MD/CEO,CFO,CBO,CROandCCOconcerned;

iii) Notbedecidedbytheexerciseofsolediscretionofanyoneindividualorrestrictedgroupofindividual;and

iv) BecompetitiveandisconsistentwiththeBank’sculture,objectiveandstrategy.

c) To recommend to the Board with regards to thepayment guideline for staff bonus and annual salaryincrementofthecompany.

d) To formulate, review and recommend to the Boardin respect of human resource development (training)policies and human resource management policies,including the terms & conditions of service of thecompany.

e) To oversee the recommendation by theMD/CEO totheBoardonthepromotionand/orupgradingthestaffofEXIMBANK.

Corporate Governance Disclosure Report

27

NOMINATION COMMITTEE

1. ObjectiveTheprimaryobjectiveoftheNominationCommittee(NC)istoestablishadocumented,formalandtransparentprocedurefortheappointmentofDirectors,ManagingDirector/ChiefExecutiveOfficer (MD/CEO),ChiefFinancialOfficer (CFO),ChiefBusinessOfficer(CBO),ChiefRiskOfficer(CRO)andChief Credit Officer (CCO) (or its equivalent respectively)andtoassesstheeffectivenessofindividualdirectors,theBoardasawholeandthevariouscommitteesoftheBoard,theMD/CEO,CFO,CBO,CROandCCO.

IntheeventthatthepositionoftheChiefOperatingOfficerandHeadofDivisionsoritsequivalentiscreated/recreatedtheNominationCommitteewillbeempoweredtooverseetheappointmentforthesaidposition/s.



Meetings Attended*

1. Ir.RosliMohamedNor (Chairman) 9/92. Hj.ZakariaIsmail 9/93. Hj.Ab.GaniHaron 7/94. PuanSitiZauyahMdDesa 7/95. Dato’MohammedHussein 7/9


3. Functions and ResponsibilitiesThe functions and responsibilities of the NominationCommitteeareasfollows:

i) ToestablishminimumrequirementsfortheboardandtheMD/CEOtoperformtheirresponsibilitieseffectively.It is also responsible for overseeing the overallcompositionoftheboardintermsoftheapproriatesizeand skills, the balance between executive directors,non-executiveand independentdirectors,andmixofskillsandothercorecompetencies required, throughannualreviews;

ii) To recommend and assess the nominees fordirectorship, the directors to fill board committees,aswell as nominees for theMD/CEO. This includesassessing directors and MD/CEO proposed forreappointment,beforeanapplicationforverificationissubmittedtoBankNegaraMalaysia;

iii) Toestablishamechanismforformalassessmentandassess the effectiveness of the board as a whole,thecontributionbyeachdirector to theeffectivenessof the board, the contribution of the board’s variouscommittees and the performance of the board’svariouscommitteesand;

iv) TorecommendtotheboardonremovalofadirectororMD/CEO if he is ineffective, errant or negligent indischarginghisresponsibilities;

v) ToensurethatallDirectorsundergoapproriateinductionprogrammesandreceivecontinuoustraining;

vi) To oversee appointment, management successionplanning and performance evaluation of CFO, CBO,CROandCCO,andrecommendingtotheboardtheremoval of CFO, CBO, CRO and CCO, if they areineffective, errant and negligent in discharging theirresponsibilities.

4. Assessment of mix of skills, experience and other qualities of directorsThe Board of Directors of EXIM Bank is comprised of agoodmix of members with the necessary expertise andexperiencerelevanttosupportthegrowthoftheBank.

Corporate Governance Disclosure Report

28BANKING PORTFOLIO 2010

Loans and Guarantees

Loan and Guarantee Exposure - Facilities

Buyer Credit 17%

Overseas Project Financing 18%

Overseas Contract Financing 9%

Guarantees 11%

ECR 40%

Supplier Credit 4%

Govt Funded Scheme 1%

Loan Outstanding - Region

Asean 32%

Other 10%

Mena 26% Asia 32%

Loan Outstanding - Sector

Manufacturing 22%

Other 8%

Tourism 5%

Government 12%

Construction 46%

Transportation & Comm. 7%

29CREDIT INSURANCE PORTFOLIO 2010

Region

Credit Insurance businessMlt Insurance : By Regions and Sectors

Credit Insurance businessshort-term Insurance : By Regions and Sectors

Region

Sector

Sector

Others 2%Automotive 6%

Paper 7%

Chemical 8%

Electronics 17%

Edible Oil 16%

Construction 14%

Rubber 12%

Wood 10%

Food & Beverages 8%

Africa 3%

Mena 14%

Oceania 9%

Americas 18%

Asean 17%Europe 19%

Asia 20%

Aviation 2%Construction 12%

Shipbuilding 40%Utilities 37%

Manufacturing 9%

Mena 51%Europe 40%

Asean 9.00%

30Corporate events

23 February 2010NationalDomesticInvestmentDialogue&Seminar2010.

14 January 2010SeminaronFinancingforOverseasProject.

7-9 April 2010The13thTrainingProgrammeoftheAsianEximBanksForumonRiskManagement:APracticalApproach.

14 January 2010SeminaronFinancingforOverseasProject.

27 January 2010LuncheonReceptionforarranger&lendersfortheUSD100.00millionTermLoanFacility.

15 January 2010Staff’sChildrenEducationIncentive.

31Corporate events

7-9 April 2010The13thTrainingProgrammeoftheAsianEximBanksForumonRiskManagement:APracticalApproach.

18 May 2010VisitbyNigeriaExport-ImportBank(NEXIM).

20 August 2010CSRProject:RumahAnakYatim/MiskinTamanBaiduri.

August - December 2010StaffBirthdayGathering.

1-3 June 2010SMIDEX2010.

18 May 2010VisitbyNigeriaExport-ImportBank(NEXIM).

32Corporate events

25 November 2010SigningofSales&PurchaseAgreementbetweenEXIMBankMalaysiaandChinaCAMCEngineeringCo.Ltd.

3-5 December 2010MovingexercisefromUBNTowertoEXIMBanknewbuilding.

9-11 November 2010IntradeMalaysia2010

25 November 2010SigningofSales&PurchaseAgreementbetweenEXIMBankMalaysiaandChinaCAMCEngineeringCo.Ltd.

29 October 2010LongServiceAwardCeremony,2010

25 August 2010MajlisDoaSelamat.

FinancialStatements

Directors’ Report34Statement by Directors37Statutory Declaration37Independent Auditors’ Report38Statements of Financial Position40Statements of Income41Statements of Comprehensive Income42Statements of Changes in Equity43Statements of Cash Flows44Notes to the Financial Statements46

34directors’ report

The Directors hereby present their report and the audited financial statements of the Group and of the Bank for the year ended 31 December 2010.

Principal activitiesThe principal activities of the Bank are to operate business of banking in the promotion and support of export, import and investment for the country’s development by granting credit, issuing guarantees and providing other related services.

The Bank is also engaged in the provision of export and domestic credit insurance facilities and trade related guarantees to Malaysian companies.

The principal activities of the subsidiaries are as disclosed in Note 12 to the financial statements.

There have been no other significant changes in the nature of the Group’s and Bank’s principal activities during the financial year.

Results Group Bank RM’000 RM’000

Loss for the year 300,013 300,009

There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the statements of changes in equity.

In the opinion of the Directors, the results of the operations of the Group and of the Bank during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature.

DividendsSince the end of the previous financial year, the Bank paid a final ordinary dividend of 0.10 sen per ordinary share less tax at 25% totalling RM2,031,499 (0.075 sen net per ordinary shares) in respect of the year ended 31 December 2009 on 30 July 2010.

The Directors do not recommend any dividend payment for the current financial year.

DirectorsThe names of the Directors of the Bank in office since the date of the last report and at the date of this report are:

Datuk Mohd Hashim bin Hassan - Chairman Haji Abdul Gani bin HaronHaji Zakaria bin Ismail Puan Siti Zauyah binti Md Desa Encik Ir. Rosli bin Mohamed NorDato’ Mohammed Hussein Encik Adissadikin bin Ali (appointed on 28 September 2010)Encik Mohd Fauzi bin Rahmat (resigned on 21 September 2010)Dato’ Kamaruddin bin Ismail (resigned on 18 October 2010)

None of the Directors at the end of the financial year held any direct interest in the shares of the Bank or its related companies during the financial year.


Directors’ benefitsSince the end of the previous financial year, no Director of the Bank has received nor become entitled to receive a benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in Note 28 to the financial statements) by reason of a contract made by the Bank or a related company with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Bank to acquire benefits by means of the acquisition of shares in, or debentures of the Bank or any other body corporate.

Issue of shares and debenturesThere were no changes in the issued and paid up capital of the Group and of the Bank during the year.

There were no issuance of debentures during the year.

Options granted over unissued sharesNo options were granted to any person to take up unissued shares of the Group and of the Bank during the year.

Other statutory information(a) Before the balance sheets and income statements of the Group and of the Bank were made out, the Directors took reasonable steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and

(ii) 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.

(b) At the date of this report, the Directors are not aware of any circumstances which would render:

(i) the amount written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Bank inadequate to any substantial extent; and

(ii) the values attributed to current assets in the financial statements of the Group and of the Bank misleading.

(c) 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 Bank misleading or inappropriate.

(d) 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 Bank which would render any amount stated in the financial statements misleading.

(e) As at the date of this report, there does not exist:

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

(ii) any contingent liability in respect of the Group and of the Bank which has arisen since the end of the financial year.

(f) In the opinion of the Directors:

(i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group and of the Bank to meet its obligations as and when they fall due; and

(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group and of the Bank for the financial year in which this report is made.


Significant eventsDuring the year, the Bank has procured sovereign equivalent rating of ‘A-’ and ‘A3’ from Fitch Ratings and Moody’s respectively. These ratings reflect its Government ownership, its important role in providing financial services to local companies, and Malaysia’s strong track record of supporting financial institutions.

On 3rd December 2010, the Bank had also moved to its own building located at Jalan Sultan Ismail, 50250 Kuala Lumpur.

AuditorsThe auditors, Ernst & Young, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 24 February 2011.

Datuk Mohd Hashim bin Hassan Adissadikin bin Ali

37

We, Datuk Mohd Hashim bin Hassan and Adissadikin bin Ali, being the Directors of Export-Import Bank of Malaysia Berhad, do hereby state that, in the opinion of the Directors, the accompanying financial statements set out on pages 40 to 104 are drawn up in accordance with Financial Reporting Standards as modified by Bank Negara Malaysia/Development Financial Institutions Guidelines and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Bank as at 31 December 2010 and of the results and cash flows of the Group and of the Bank for the year then ended.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 24 February 2011.

Datuk Mohd Hashim bin Hassan Adissadikin bin Ali

We, Datuk Mohd Hashim bin Hassan and Adissadikin bin Ali, being the Directors primarily responsible for the financial management of Export-Import Bank of Malaysia Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 40 to 104 are in our opinion correct, and we 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 Datuk Mohd Hashim bin Hassan and Adissadikin bin Aliat Kuala Lumpur in the Federal Territory Datuk Mohd Hashim bin Hassanon 24 February 2011

Before me,

Adissadikin bin Ali

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

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

Section 73(1)(e) of the Development Financial Institutions Act, 2002

38Independent auditors’ report to the member of Export-Import Bank of Malaysia Berhad (Incorporated in Malaysia)

Report on the financial statementsWe have audited the financial statements of Export-Import Bank of Malaysia Berhad, which comprise the statements of financial position as at 31 December 2010 of the Group and of the Bank, and the income statements, statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Bank for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 40 to 104.

Directors’ responsibility for the financial statementsThe Directors of the Bank are responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards as modified by Bank Negara Malaysia/Development Financial Institutions Guidelines and the Companies Act 1965 in Malaysia. 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’ responsibilityOur 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 Bank’s 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 Bank’s 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.

OpinionIn our opinion, the financial statements have been properly drawn up in accordance with the Financial Reporting Standards as modified by Bank Negara Malaysia/Development Financial Institutions Guidelines and the Companies Act 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Bank as at 31 December 2010 and of the financial performance and cash flows of the Group and of the Bank for the year then ended.

39Independent auditors’ report

to the member of Export-Import Bank of Malaysia Berhad (Incorporated in Malaysia)

Report on other legal and regulatory requirementsIn accordance with the requirements of the Companies Act 1965 in Malaysia, we also report the following:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Bank and its subsidiaries have been properly kept in accordance with the provisions of the Act.

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

(c) The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the Act.

Other mattersThis report is made solely to the member of the Bank, as a body, in accordance with Section 174 of the Companies Act 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

Ernst & Young Abdul Rauf bin RashidAF: 0039 No. 2305/05/12(J)Chartered Accountants Chartered Accountant

Kuala Lumpur, Malaysia24 February 2011

40Statements of financial positionas at 31 December 2010

Group Bank 2010 2009 2010 2009 Note RM’000 RM’000 RM’000 RM’000 Restated Restated

AssetsCash and bank balances 4 70,116 11,582 70,116 11,582 Deposits and placements with banks and other financial institutions 5 1,945,641 2,639,097 1,945,641 2,639,097 Investment securities 6 430,102 370,047 430,102 370,047 Amount due from Export Credit Refinancing (“ECR”) debtors 7 1,708,137 757,950 1,708,137 757,950 Loan, advances and financing 8 1,303,504 1,809,346 1,303,504 1,809,346 Insurance receivables 9 628 2,828 628 2,828 Other receivables, deposits and prepayments 10 34,388 47,706 34,388 47,706 Deferred tax assets 11 8,075 8,075 10,385 10,385 Investment in subsidiaries 12 - - 64,173 64,176 Investment properties 13 545 1,859 545 1,859 Intangible assets 14 335 933 335 933 Property and equipment 15 101,279 73,994 101,279 73,994

Total assets 5,602,750 5,723,417 5,669,233 5,789,903

LiabilitiesBorrowings 16 2,802,509 2,690,977 2,802,509 2,690,977Other payables and accruals 17 121,680 96,396 121,680 96,396 Deferred income 18 25,698 23,716 25,698 23,716 Provision for guarantee and claims 19 65,960 27,744 65,960 27,744 Amount due to subsidiaries 35 - - 64,169 64,176

Total liabilities 3,015,847 2,838,833 3,080,016 2,903,009

Financed by:Share capital 20 2,708,665 2,708,665 2,708,665 2,708,665 Reserves 4,846 - 4,846 - (Accumulated losses)/Retained profits 21 (126,608) 175,919 (124,294) 178,229

Shareholder’s funds 2,586,903 2,884,584 2,589,217 2,886,894

Total liabilities and shareholder’s funds 5,602,750 5,723,417 5,669,233 5,789,903

Commitments and contingencies 34 1,586,852 1,830,013 1,586,852 1,830,013

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

41Statements of Income

For the year ended 31 December 2010

Group Bank 2010 2009 2010 2009 Note RM’000 RM’000 RM’000 RM’000 Restated Restated

Operating revenue 22 134,550 212,317 134,550 212,317

Interest income 23 173,466 188,839 173,466 188,839 Interest expense 24 (35,769) (38,980) (35,769) (38,980)

Net interest income 137,697 149,859 137,697 149,859 Underwriting results 25 (923) 36,744 (923) 36,744 Income from Islamic Banking Business 38 7,408 2,105 7,408 2,105 Other income 26 4,177 5,612 4,177 5,612

Net income 148,359 194,320 148,359 194,320 Overhead expenses 27 (45,735) (48,945) (45,728) (48,905)

Operating profit 102,624 145,375 102,631 145,415 (Impairment losses)/writeback of impairment losses of investment securities (10,904) 10,231 (10,904) 10,231Allowance for diminution in value of investment in a subsidiary - - (3) (9,243)Allowance for losses on loans, advances and financing 30 (391,257) (103,102) (391,257) (103,102)

(Loss)/profit before taxation (299,537) 52,504 (299,533) 43,301 Taxation 31 - (25,556) - (13,622)Zakat (476) - (476) -

Net (loss)/profit for the year (300,013) 26,948 (300,009) 29,679

(Loss)/Earnings per share (sen) 32 (11.08) 0.99 (11.08) 1.10


42Statements of comprehensive incomeFor the year ended 31 December 2010

Group Bank 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

Net (loss)/profit for the year (300,013) 26,948 (300,009) 29,679

Other comprehensive income Fair value changes on available-for-sale investments securities 6,214 - 6,214 -

6,214 - 6,214 -

Total comprehensive income for the year, net of tax (293,799) 26,948 (293,795) 29,679


43Statements of changes in equity

for the year ended 31 December 2010

Distributable Non- Retained distributable profits/ Fair value Share (Accumulated adjustment capital losses) reserve Total RM’000 RM’000 RM’000 RM’000

Group

At 1 January 2009 2,708,665 148,971 - 2,857,636 Net profit for the year - 35,664 - 35,664

At 31 December 2009, as previously stated 2,708,665 184,635 - 2,893,300

Effect of adopting FRS 4 (Note 2.2) - (8,716) - (8,716)

At 31 December 2009, as restated 2,708,665 175,919 - 2,884,584

At 1 January 2010, as restated 2,708,665 175,919 - 2,884,584 Effect of adopting FRS 139 (Note 2.2) - (483) (1,368) (1,851)

At 1 January 2010, as restated 2,708,665 175,436 (1,368) 2,882,733 Total comprehensive income - (300,013) 6,214 (293,799)Dividend paid (Note 33) - (2,031) - (2,031)

At 31 December 2010 2,708,665 (126,608) 4,846 2,586,903

Bank

At 1 January 2009 2,708,665 148,550 - 2,857,215 Net profit for the year - 38,395 - 38,395

At 31 December 2009, as previously stated 2,708,665 186,945 - 2,895,610 Effect of adopting FRS 4 (Note 2.2) - (8,716) - (8,716)

At 31 December 2009, as restated 2,708,665 178,229 - 2,886,894

At 1 January 2010, as restated 2,708,665 178,229 - 2,886,894 Effect of adopting FRS 139 (Note 2.2) - (483) (1,368) (1,851)

At 1 January 2010, as restated 2,708,665 177,746 (1,368) 2,885,043 Total comprehensive income - (300,009) 6,214 (293,795)Dividend paid (Note 33) - (2,031) - (2,031)

At 31 December 2010 2,708,665 (124,294) 4,846 2,589,217


44Statements of cash flowsFor the year ended 31 December 2010

Group Bank 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Restated Restated

Cash flows from operating activities(Loss)/profit before taxation (299,537) 52,504 (299,533) 43,301 Adjustments for: Impairment losses/(writeback) of impairment losses of investment securities 10,904 (10,231) 10,904 (10,231) Individual allowance - Charge for the year 392,408 - 392,408 - - Written back (21,928) - (21,928) - Specific allowance - Charge for the year - 174,313 - 174,313 - Written back - (74,795) - (74,795) Collective allowance - Written back for the year (7,718) - (7,718) - General allowance - Charge for the year - 3,584 - 3,584 Provision/(write-back) of provision for claims and guarantees - Insurance contract 11,886 (3,137) 11,886 (3,137) - Bank guarantee 28,495 - 28,495 - Depreciation - Property and equipment 2,863 1,510 2,863 1,510 - Investment properties 18 34 18 34 Amortisation of intangible assets 620 1,249 620 1,249 Impairment of investment properties - 180 - 180 Allowance for diminution in value of investment in a subsidiary - - 3 9,243 Dividend income (658) (520) (658) (520) Loss/(gain) on - Disposal of investment properties (190) - (190) - - Disposal of equipment (3) - (3) - - Assets written off 1,256 - 1,256 - Unrealised foreign exchange loss 19,012 3,636 19,012 3,636 (Gain)/loss on disposal of investment (451) 308 (451) 308 Amortisation of premium less accretion of discount (10,086) (329) (10,086) (329) Sundry debtors written off - 102 - 102 Premium liabilities (2,040) 6,300 (2,040) 6,300

Operating profit before changes in working capital 124,851 154,708 124,858 154,748


45Statements of cash flows

For the year ended 31 December 2010

Group Bank 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Restated Restated

Cash flows from operating activities (cont’d)Changes in working capital: Loans, advances and financing 122,217 (434,537) 122,217 (434,537) Other assets 20,122 (10,397) 20,122 (10,397) Other liabilities 28,830 (27,941) 28,830 (27,941) Amount due to subsidiaries - - (7) (9,664)

Cash generated from/(used in) operations 296,020 (318,167) 296,020 (327,791)Claims paid for insurance contract (2,165) (2,608) (2,165) (2,608)Income tax paid (4,604) (25,874) (4,604) (16,250)Income tax refund - 23,153 - 23,153

Net cash generated from/(used in) operating activities 289,251 (323,496) 289,251 (323,496)

Cash flows from investing activitiesDividend received 658 520 658 520 Proceeds from disposal of investment 7,871 11,651 7,871 11,651 Proceeds from disposal of - Property and equipment 2 - 2 - - Investment properties 1,486 - 1,486 - Purchase of property and equipment (31,425) (71,766) (31,425) (71,766)Purchase of intangible assets - (140) - (140)Purchase of investments (62,079) (35,345) (62,079) (35,345)

Net cash used in investing activities (83,487) (95,080) (83,487) (95,080)

Cash flows from financing activitiesNet drawdown of borrowings 111,532 186,060 111,532 186,060 Net (drawdown)/repayment from ECR debtors (950,187) 1,102,972 (950,187) 1,102,972 Dividend paid (2,031) - (2,031) -

Net cash (used in)/generated from financing activities (840,686) 1,289,032 (840,686) 1,289,032

Net (decrease)/increase in cash and cash equivalents (634,922) 870,456 (634,922) 870,456

Cash and cash equivalents at beginning of the year 2,650,679 1,780,223 2,650,679 1,780,223

Cash and cash equivalents at end of the year 2,015,757 2,650,679 2,015,757 2,650,679

Cash and cash equivalents included in the cash flow statements comprise the following balance sheet amounts:


Cash and bank balances 70,116 11,582 70,116 11,582 Deposits and placements with financial institutions 1,945,641 2,639,097 1,945,641 2,639,097

2,015,757 2,650,679 2,015,757 2,650,679


46Notes to the financial statements31 December 2010

1. Corporate information

Export-Import Bank of Malaysia Berhad is a public limited liability company, incorporated and domiciled in Malaysia. The registered office and principal place of business of the Bank is located at Level 16, Exim Bank, Jalan Sultan Ismail, 50250 Kuala Lumpur.

The Bank is principally engaged in the business of banking in the promotion and support of export, import and investment for the country’s development by granting credit, issuing guarantees and providing other related services. The Bank is also engaged in the provision of export and domestic credit insurance facilities and trade related guarantees to Malaysian companies.

The principal activities of the subsidiaries are as stated in Note 12.

There have been no other significant changes in nature of the Group’s and Bank’s principal activities during the year.

The financial statements were approved by the Board of Directors on 24 February 2011.

2. Significant accounting policies

2.1 Basis of preparationThe consolidated financial statements of the Group and of the Bank have been prepared in accordance with Financial Reporting Standards (“FRSs”) as modified by Bank Negara Malaysia/Development Financial Institutions (“BNM/DFIs”) Guidelines and the provisions of the Companies Act, 1965 in Malaysia.

The Bank is exempted from the requirement to be licensed under the Insurance Act, 1996 as approved by Minister of Finance.

The financial statements disclosed those activities relating to Islamic Banking Business in Note 38 to the financial statements. Those activities generally refer to the provision of banking activities under the principles of Shariah.

The consolidated financial statements of the Group and of the Bank have been prepared under the historical cost convention unless otherwise indicated in the accounting policies below.

The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the functional currency of the Group and of the Bank.

2.2 Changes in accounting policiesThe accounting policies adopted are consistent with those of the previous financial years, except as follows:

On 1 January 2010, the Group and the Bank adopted the following new and amended FRS and IC Interpretations mandatory for annual financial periods beginning on or after 1 January 2010.

FRS 4 Insurance ContractsFRS 7 Financial Instruments: DisclosuresFRS 8 Operating SegmentsFRS 101 Presentation of Financial Statements (revised) FRS 123 Borrowing Costs (revised)FRS 139 Financial Instruments: Recognition and MeasurementAmendments 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 AssociateAmendments to FRS 2 Share-based Payment: Vesting Conditions and CancellationsAmendments to FRS 132 Financial Instruments: PresentationAmendments to FRS 139 Financial Instruments: Recognition and Measurement, FRS 7 Financial Instruments: Disclosures and IC Interpretation 9 Reassessment of Embedded Derivatives

Notes to the financial statements31 December 2010

47

2. Significant accounting policies (cont’d)

2.2 Changes in accounting policies (cont’d)Amendments to FRS 139 Financial Instruments: Recognition and Measurement Collective Assessment of Impairment for Banking Institutions Improvements to FRSs (2009)IC Interpretation 9 Reassessment of Embedded DerivativesIC Interpretation 10 Interim Financial Reporting and ImpairmentIC Interpretation 11 FRS 2 - Group and Treasury Share TransactionsIC Interpretation 13 Customer Loyalty ProgrammesIC Interpretation 14 FRS 119 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction

Adoption of the above standards and interpretations do not have any effect on the financial performance or position of the Group and the Bank except for those discussed below:

FRS 4: Insurance Contracts (“FRS 4”)FRS 4 specifies the financial reporting requirements for the issuers of insurance contracts. In particular, it requires disclosures that identify and explain the amounts in an insurer’s financial statements arising from insurance contracts and helps users of those financial statements understand the amount, timing and uncertainty of future cash flows from insurance contracts. The adoption of FRS 4 requires expanded disclosure requirements in the financial statements and results to a change in the policy for recognition of premium liabilities for the Bank’s insurance contracts. The Group and the Bank have applied FRS 4 retrospectively and the effect on the adoption of FRS 4 has been restated as disclosed below.

The following are effects arising from the above changes in accounting policies:

As at 31 Effects of As at 31 December 2009 FRS4 December 2009 RM’000 RM’000 RM’000

Statement of financial positions

Group

Deferred incomePremium liabilities 14,878 8,716 23,594

Shareholder’s fundsRetained earnings 184,635 (8,716) 175,919

Bank

Deferred incomePremium liabilities 14,878 8,716 23,594

Shareholder’s fundsRetained earnings 186,945 (8,716) 178,229

Statement of income

GroupUnderwriting results 45,460 (8,716) 36,744 Net profit for the year 35,664 (8,716) 26,948

BankUnderwriting results 45,460 (8,716) 36,744 Net profit for the year 38,395 (8,716) 29,679


48


2.2 Changes in accounting policies (cont’d)FRS 7 Financial Instruments: Disclosures (“FRS 7”)Prior to 1 January 2010, information about financial instruments was disclosed in accordance with the requirements of FRS 132 Financial Instruments: Disclosures and Presentation. FRS 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk.

The Group and the Bank have applied FRS 7 prospectively in accordance with the transitional provisions. Hence, the new disclosures have not been applied to the comparatives. The new disclosures are included throughout the Group’s and the Bank’s financial statements for the year ended 31 December 2010.

FRS 101 Presentation of Financial Statements (Revised) (“FRS 101”)The revised FRS 101 introduces changes in the presentation and disclosures of financial statements. The revised Standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with all non-owner changes in equity presented as a single line. The Standard also introduces the statement of comprehensive income, with all items of income and expenses recognised in profit and loss, together with all other items of recognised income and expense recognised directly in equity, either in one single statement, or in two linked statements. The Group and the Bank have elected to present this statement as two linked statements.

In addition, a statement of financial position is required at the beginning of the earliest comparative period following a change in accounting policy, the correction of an error or the classification of items in the financial statements.

The revised FRS 101 also requires the Group and the Bank to make new disclosures to enable users of the financial statements to evaluate the Group objective’s, policies and processes for managing capital (see Note 36).

The revised FRS 101 was adopted retrospectively by the Group and the Bank.

FRS 139 Financial Instruments: Recognition and Measurement (“FRS 139”)FRS 139 establishes the principles for recognising and measuring financial assets, financial liabilities and some contract to buy and sell non-financial items. The Group and the Bank have adopted FRS 139 prospectively on 1 January 2010 in accordance with the transitional provisions. The effect arising from the adoption of this Standard has been accounted for by adjusting the opening balance to retained earning as at 1 January 2010. Comparatives are not restated. The details of the changes in accounting policies and the effect from adoption of FRS 139 are discussed below:

(i) Equity instrumentsPrior to 1 January 2010, the equity investments were carried at the lower of cost or market value. Upon adoption of FRS 139, these investments are designated at 1 January 2010 as available-for-sale financial assets and accordingly are stated at their fair value as at the date amounting to RM29,792,000. The adjustments to their previous carrying amounts are recognised as adjustments to opening balance of retained earnings as at 1 January 2010.

(ii) Debt securitiesPrior to 1 January 2010, investments in debt securities were stated at amortised cost using the effective interest rate method. Upon adoption of FRS 139, these investments are designated at 1 January 2010 as available-for-sale or classified as held-to-maturity investments. The fair value of available for sale debt securities and carrying values of held-to-maturity debt securities as at 1 January 2010 amounted to RM340,022,000 respectively. The adjustments to the previous carrying amounts of available-for-sale debt securities are recognise as adjustments to the opening balance of retained earnings at 1 January 2010.


49


2.2 Changes in accounting policies (cont’d)FRS 139 Financial Instruments: Recognition and Measurement (“FRS 139”) (cont’d)

(iii) Impairment of losses on loans, advances and financingThe adoption of FRS 139 has resulted in a change in the accounting policy relating to the assessment for impairment of financial assets, particularly loans , advances and financing. Prior to the adoption of FRS 139, allowances for impaired loans and advances (previously referred to as non-performing loans) were computed in conformity with the Bank Negara Malaysia/Development Financial Institutions Guidelines (“BNM/DFI/GP3”) Guidelines on Classification of Non-Performing Loans and Provision for Substandard, Bad and Doubtful Debts.

Upon adoption of FRS 139, the Group and the Bank assess at the end of each reporting period whether there is objective evidence that a loan or group of loans is impaired. The loan or group of loans is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after initial recognition of the loan (an incurred ‘loss event’) and that the loss event has an impact on future estimated cash flows of the loan or group of loans that can be reliably estimated.

The Group or the Bank first assess individually whether objective of impairment exists individually for loans which are individually significant, and collectively for loans which are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed loan, the loan is included in a group of loans with similar risk characteristics and collectively assessed for impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the loan’s carrying amount and the present value of the estimated future cash flows. The carrying amount of the loan is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement.

In the Amendments to FRS 139 listed above, MASB has included an additional transitional arrangement for entities in the banking sector, whereby BNM may prescribe an alternative basis for collective assessment of impairment by banking institutions. This transitional arrangement is prescribed in BNM’s guidelines on Classification and Impairment Provisions for Loans/Financing, whereby banking institutions are required to maintain collective assessment impairment allowances of at least 1.5% of total outstanding loans/financing, net of individual allowance. Subject to the written approval by BNM, banking institutions are allowed to maintain a lower collective allowance. The collective allowance of the Bank as at the reporting date has been arrived at, based on this transitional arrangement issued by BNM.

The changes in accounting policy above have been accounted for prospectively, in line with the transitional arrangements under para 103AA of FRS 139, with adjustments to the carrying values of financial assets affecting the income statement as at the beginning of the current financial year being adjusted to retained earnings at 1 January 2010.

Any further collective allowance and individual allowance charged subsequent to the initial adoption of FRS 139 is recognised as allowance for losses on loans, advances and financing in the income statements.

As a result of the adoption of FRS 139 and the transitional arrangement under BNM’s guidelines on Classification and Impairment Provisions for Loans/Financing, the Bank has recognised an additional allowance of RM1,851,000 against the retained earnings at 1 January 2010. Any further allowances charged subsequent to the initial adoption of FRS 139 is recognised as allowance for losses on loans, advances and financing in the income statements.


50


2.2 Changes in accounting policies (cont’d)FRS 139 Financial Instruments: Recognition and Measurement (“FRS 139”) (cont’d)

The following summarises the effects arising from the above changes in accounting policies:

As at 31 Effects of As at 1 December 2009 FRS139 January 2010 RM’000 RM’000 RM’000

Statements of financial positions

Group

AssetsLoans, advances and financing 1,809,346 (1,851) 1,807,495

Shareholder’s fundsAFS reserves - (1,368) (1,368)Retained earnings 184,635 (483) 184,152

Bank

AssetsLoans, advances and financing 1,809,346 (1,851) 1,807,495

Shareholder’s fundsAFS reserves - (1,368) (1,368)Retained earnings 186,945 (483) 186,462

Statement of income

Group and BankAllowance for losses on loans, advances and financing (174,313) (1,851) (176,164)

2.3 Standards issued but not yet effectiveThe Group and the Bank have not adopted the following standards and interpretations that have been issued but not yet effective:

Effective for annual periods beginning onDescription or after

FRS 1 First-time Adoption of Financial Reporting Standards 1 July 2010FRS 3 Business Combinations (revised) 1 July 2010Amendments to FRS 2 Share-based Payment 1 July 2010Amendments to FRS 5 Non-current Assets Held for Sale and Discontinued Operations 1 July 2010Amendments to FRS 127 Consolidated and Separate Financial Statements 1 July 2010Amendments to FRS 138 Intangible Assets 1 July 2010Amendments to IC Interpretation 9 Reassessment of Embedded Derivatives 1 July 2010IC Interpretation 12 Service Concession Arrangements 1 July 2010IC Interpretation 15 Agreements for the Construction of Real Estate 1 July 2010IC Interpretation 16 Hedges of a Net Investment in a Foreign Operation 1 July 2010 IC Interpretation 17 Distributions of Non-cash Assets to Owners 1 July 2010


51


2.3 Standards issued but not yet effective (cont’d)The Group and the Bank have not adopted the following standards and interpretations that have been issued but not yet effective:(cont’d)

Effective for annual periods beginning onDescription or after

Amendments to FRS 132 Classification of Rights Issues 1 March 2010 Amendments to FRS 1 Limited Exemption from Comparative FRS 7 Disclosures for First-time Adopters 1 January 2011 Amendments to FRS 7 Improving Disclosures about Financial Instruments 1 January 2011 Amendments to FRS 7 Financial Instruments: Disclosure 1 January 2011 Amendments to FRS 101 Presentation of Financial Statements 1 January 2011 Amendments to FRS 121 The Effects of Changes in Foreign Exchange Rates 1 January 2011 Amendments to FRS 128 Investments in Associates 1 January 2011 Amendments to FRS 131 Interests in Joint Ventures 1 January 2011 Amendments to FRS 132 Financial Instruments: Presentation 1 January 2011 Amendments to FRS 134 Interim Financial Reporting 1 January 2011 Amendments to FRS 139: Financial Instruments: Recognition and Measurement 1 January 2011 IC Interpretation 4 Determining Whether an Arrangement Contains a Lease 1 January 2011 IC Interpretation 18 Transfers of Assets from Customers 1 January 2011 Amendments to IC Interpretation 13 Customer Loyalty Programmes 1 January 2011 TR 3 Guidance on Disclosures of Transition to IFRSs 1 January 2011 TR i-4 Shariah Compliant Sale Contracts 1 January 2011 IC Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments 1 July 2011 Amendments to IC Interpretation 14 Prepayments of a Minimum Funding Requirement 1 July 2011 FRS 124 Related Party Disclosures 1 January 2012 IC Interpretation 15 Agreements for the Construction of Real Estate 1 January 2012

The Directors expect that the adoption of the standards and interpretations above will have no material impact on the financial statements in the period of initial application.

2.4 Summary of significant accounting policies(a) Subsidiaries and Basis of consolidation

(i) SubsidiariesA subsidiary is an entity over which the Group has power to govern the financial and operating policies so as to obtain benefits from its activities.

In the Bank’s separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses.

(ii) Basis of consolidationThe consolidated financial statements comprise the financial statements of the Bank and its subsidiaries as at the reporting date. The financial statements used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Bank. Consistent accounting policies are applied to like transactions and events in similar circumstances.


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2.4 Summary of significant accounting policies (cont’d)(a) Subsidiaries and Basis of consolidation (cont’d)

(ii) Basis of consolidation (cont’d)All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

Acquisitions of subsidiaries are accounted for by applying the purchase method. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in other comprehensive income. The cost of a business combination 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 business combination.

Any excess of the cost of business combination over the Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities is recorded as goodwill on the statement of financial position. Any excess of the Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities over the cost of business combination is recognised as income in profit or loss on the date of acquisition. When the Group acquires a business, embedded derivatives separated from the host contract by the acquiree are reassessed on acquisition unless the business combination results in a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required under the contract.

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 such control ceases.

(b) Property and equipmentAll items of property and equipment are initially recorded at cost. The cost of an item of property and equipment is recognised as an asset if, and only if, 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.

Subsequent to recognition, property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. When significant parts of property and equipment are required to be placed in intervals, the Group recognises such parts as individuals assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the property and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.

Freehold land has an unlimited useful life and therefore is not depreciated. Depreciation of other property and equipment is provided for on a straight-line basis over the estimated useful lives, at the following annual rates:

Building 50 years Office equipment 5 years Renovation and improvement 10 years Motor vehicles 5 years Furniture, electrical fittings and equipment 10 years Computers 3 years

Assets under construction/work-in-progress included in property and equipment are not depreciated as these assets are not yet available for use.


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2.4 Summary of significant accounting policies (cont’d)(b) Property and equipment (cont’d)

The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the profit or loss in the year the asset is derecognised.

(c) Intangible Assets: Computer SoftwareAcquired computer software licenses 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 of three (3) years and are stated at cost less accumulated amortisation and accumulated impairment losses, 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 2.2(iii).

Costs associated with maintaining computer software programmes are recognised as expenses when incurred. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group and the Bank, 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 overheads.

(d) Investment propertiesInvestment properties are properties which are owned to earn rental income or for capital appreciation or for both. These include land held for a currently undetermined future use.

Investment properties are stated at cost less accumulated depreciation and impairment losses, consistent with the accounting policy for property and equipment as stated in accounting policy Note 2.2(b).

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of fifty (50) years for buildings. Freehold land is not depreciated.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gain or loss on the retirement or disposal of an investment property is recognised in profit and loss in the year of retirement or disposal.

(e) Impairment of non-financial assetsThe carrying amount of the assets, other than deferred tax assets, non-current asset held for sales and financial assets (other than investments in subsidiaries), are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated to determine the amount of impairment loss.

An impairment loss is recognised in the income statement in the period in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is accounted for as a revaluation decrease to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for the same asset.


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2.4 Summary of significant accounting policies (cont’d)(f) Financial assets

Financial assets are recognised in the statements of financial position when, and only when, the Group and the Bank become a party to the contractual provisions of the financial instrument.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction cost.

The Group and the Bank determine the classification of their financial assets at initial recognition, and the categories include financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets.

(i) Financial assets at fair value through profit or lossFinancial assets are classified as financial assets at fair value through profit or loss if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at fair value through profit or loss are recognised separately in profit or loss as part of other losses or other income.

Financial assets at fair value through profit or loss could be presented as current or non-current. Financial assets that are held primarily for trading purposes are presented as current whereas financial assets that are not held primarily for trading purposes are presented as current or non-current based on the settlement date.

(ii) Loans and receivablesLoans and receivables with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.

Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, through the amortisation process.

Loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the reporting date which are classified as non-current.

(iii) Held-to-maturity investmentsFinancial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group and the Bank has the positive intention and ability to hold the investment to maturity.

Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the held-to-maturity investments are derecognised or impaired, and through the amortisation process.

Held-to-maturity investments are classified as non-current assets except for those having maturity within twelve (12) months after the reporting date which are classified as current.


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2.4 Summary of significant accounting policies (cont’d)(f) Financial assets (cont’d)

(iv) Available-for-sale investmentsAvailable-for-sale financial assets are financial assets that are designated as available for sale or are not classified in any of the three preceding categories.

After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on an available-for-sale equity instrument are recognised in profit or loss when the Group and the Bank’s right to receive payment is established.

Investment in equity instruments whose fair value cannot be reliable measured are measured at cost less impaired loss.

Available-for-sale financial assets are classified as non-current assets unless they are expected to be realised within twelve (12) months after the reporting date.

A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirely, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised as profit or loss.

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group and the Bank commit to purchase or sell the asset.

(g) Financial liabilitiesFinancial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability.

Financial liabilities, within the scope of FRS 139, are recognised in the statement of financial position when, and only when, the Group and the Bank become a party to the contractual provisions of the financial instrument.

Financial liabilities are recognised at amortised cost. Financial liabilities measured at cost include deposits and placements, debt securities issued and other borrowed fund.

A financial liability is derecognised when they are redeemed or extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.


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2.4 Summary of significant accounting policies (cont’d)(h) Impairment of financial assets

The Group and the Bank assesses at each statement of financial position date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, the probability that they will enter bankruptcy or other financial reorganisation, default or delinquency in interest or principal payments and where observable data indicates that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

(i) Loans and receivablesFor loans and receivables carried at amortised cost, the Group and the Bank first assess individually whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group and the Bank determine that no objective evidence of impairment exists for an individually assessed financial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Financial assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. Where appropriate, the calculation of the present value of the estimated future cash flows of a collateralised loans or receivable reflect the cash flows that may result from foreclosure less costs of obtaining and selling the collateral, whether or not foreclosure is probable.

Interest income continues to be accrued on the reduced carrying amount based on the original effective interest rate of the asset. The interest income is recorded as part of ‘Interest income’.

Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to the income statement.

For loans, advances and financing that are collectively assessed, the Group and the Bank have applied the transitional provision issued by Bank Negara Malaysia via its guidelines on Classification and Impairment Provision for Loans/Financing, whereby collective assessment impairment allowance is maintained at a minimum of 1.5% of total loan outstanding, net of total individual allowance.

(ii) Held-to-maturity investmentsThe Group and the Bank assess at each reporting date whether objective evidence of impairment of held-to-maturity investments exists as a result of one or more loss events and that loss event has an impact on the estimated future cash flows of the investments that can be realiably estimated.

Where there is objective evidence of impairment, an impairment loss is recognised as the difference between the amortised cost and the present value of the estimated future cash flows, less any impairment loss previously recognised.


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2.4 Summary of significant accounting policies (cont’d)(h) Impairment of financial assets (cont’d)

(iii) Available-for-sale investmentsThe Group and the Bank assess at each reporting date whether objective evidence that a financial asset classified as available-for-sale is impaired.

In the case of equity investments classified as available-for-sale, an objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. Where such evidence exists, the cumulative loss is measured as the difference between the acquisition cost and the current fair value, less any impairment loss previously recognised in the income statement, is removed from equity and recognised in the income statement. Impairment losses on equity investments are not reverse through income statement; increase in their fair value after impairment are recognised directly in equity.

Certain unquoted equity instruments are stated at cost less impairment as the fair value cannot be reliably measured.

In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as other available-for-sale investments. Where impairment losses have been previously recognised in the profit or loss, if there is a subsequent increase in the fair value of the debt instruments that can be objectively related to a credit event occurring after the impairment losses was recognised in the profit or loss, the impairment loss is reversed through income statement.

(i) Cash and cash equivalentsCash and cash equivalents consist of cash in hand and bank balances, deposits with banks and highly liquid investments which have an insignificant risk of changes in value.

For the purpose of the cash flow statements, cash and cash equivalents are presented net of bank overdrafts and pledged deposits, if any.

(j) ProvisionsProvisions are recognised if, as a result of past event, the Group and the Bank have a present legal and constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flow at a pre-tax rate that reflects current market assessment of the time value of money and the risks specific to the liability. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

Where the Group and the Bank enter into financial guarantee contracts to guarantee the indebtedness of other companies, the Group and the Bank treat the guarantee contract as a contingent liability until such time as it becomes probable that the Group and the Bank will be required to make a payment under the guarantee.


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2.4 Summary of significant accounting policies (cont’d)(k) Employee benefits

Short-term employee benefits obligation in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided.

A provision is recognised for the amount expected to be paid under short-term cash bonus if the Group and the Bank have a present legal or constructive obligation to pay this amount as a result of past service provided by the employees and the obligation can be estimated reliably.

The Group’s and the Bank’s contribution to statutory pension funds is charged to the income statements in the year to which they relate. Once the contributions have been paid, the Group and the Bank have no further payment obligations.

(l) Insurance contract liabilitiesThese liabilities comprise premium liabilities and claims liabilities.

(i) Premium liabilitiesProvision for premiums is the higher of the aggregate of the Unearned Premium Reserves (“UPR”) for all lines of business and the best estimate value of the Unexpired Risk Reserves (“URR”) with a provision of risk margin for adverse deviation.

For the purpose of disclosure in the financial statements, premium liabilities and deferred income arising from bank guarantee are classified as deferred income.

Unearned premium reservesUPR represent the portion of the net premiums of insurance policies written that relate to the unexpired periods of policies at the end of the financial year. In determining the UPR at the balance sheet date, the following methods are used:

- In respect of short term comprehensive policies, 75% of the premium is recognised in the financial year in which the policies are issued. The remaining 25% of the premium is transferred to the unearned premium reserves and is recognised in the following financial year.

- In respect of medium and long term policies, the premium is recognised over the period of risk on a straight-line basis.

Unexpired risk reservesAt each reporting date, the Group and the Bank review the unexpired risks and a liability adequacy test is performed by an independent actuarial firm. URR is the prospective estimate of the expected future payments arising from future events insured under policies in force as at the valuation date and also includes allowance for the insurer’s expenses, including overheads and cost of reinsurance, expected to be incurred during the unexpired period in administering these policies and settling the relevant claims, and expected future premium refunds.

(ii) Claims liabilitiesClaims liabilities are recognised when a claimable event occurs and/or the Group and the Bank are notified. The amount of outstanding claims provision are based on the estimated ultimate cost of all claims incurred but not settled at the end of the reporting period, whether reported or not, together with related claims handling costs less other recoveries. Delays can be experienced in the notification and settlement of certain types of claims, therefore, the ultimate cost of these claims cannot be known with certainty at the end of reporting period.

The liability is calculated at the reporting date by an independent actuarial firm using projection techniques that included risk margin for adverse deviation. The liabilities are derecognised when the contract expires, is discharged or cancelled.


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2.4 Summary of significant accounting policies (cont’d)(m) Deferred income arising from guarantee facility

Income arising from guarantee facility is recognised over the period of risk on a straight-line basis. Should a claim be paid or provided for in respect of such policies, the balance of the premium shall be recognised in the financial year in which the claim is made.

(n) Government Fund - Malaysian Kitchen Financing Facility (“MKFF” or “the Fund”)The primary objective of the Fund is to encourage Malaysian citizens and Malaysian companies involved in the food and beverages industry to venture abroad. In this respect, the Bank received funds from the Government of Malaysia (“the Government”) to be disbursed as loans.

The total placement amount and the interest income shall be refunded to the Government upon expiry of the agreement. The interest income earned on the loans financed by the Government funds and from the investment of the unutilised fund are recognised as amount payable to Government in accordance with the placement agreement.

The Bank received in return, a management fee of 1.5% of total placement amount. The fee income is recognised in the income statement in accordance with Note 2.4(o)(iii). Credit losses or charges as a result of loan default are shared based on agreed ratio between the Bank and the Government of Malaysia. The portion of allowance for loan losses borne by the Bank is recognised in the income statement in accordance with Note 2.4(h)(i).

(o) Revenue recognitionRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the Bank and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or measured.

(i) Interest and similar income and expenseFor all financial instruments measured at amortised cost and interest/profit bearing financial assets classified as available-for-sale, interest income or expense is recorded using the effective interest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument (for example, repayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the effective interest rate, but not future credit losses.

For impaired financial assets where the value of the financial asset have been written down as a result of an impairment loss, interest/financing income continues to be recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

(ii) Dividend incomeDividend income is recognised when the right to receive payment is established.

(iii) Fee incomeFee income from bank guarantee arrangement and letter of credit is recognised on an accrual basis.

(iv) Premium incomePremium income is recognised as income in the financial year in respect of risks assumed during that particular financial year. Method of deferral of premium income is as stated in Note 2.4(m).

Premium income from reinsurance is recognised based on periodic advices received from ceding insurers.


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2.4 Summary of significant accounting policies (cont’d)(p) Income tax

Income tax on the profit or loss for the year comprises current and deferred taxes. 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 rate that has been enacted at the balance sheet date.

Deferred tax is provided for, using the liability method. 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 rate that is expected to apply in the year when the asset is realised or the liability is settled, based on tax rate that has been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised as income or an expense and included in the income statement for the year, 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 or negative goodwill.

(q) ZakatThis represents business zakat payable by the Bank in compliance with the principles of Shariah and as approved by the Shariah Supervisory Council.

(r) Foreign currency transactionsTransactions in foreign currencies are translated to the functional currencies of Group entities at exchange rate at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the financial position date are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies are translated at exchange rate at the date of the transactions except for those that are measured at fair value, which are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in the income statement.

3. Significant accounting estimates and judgement

3.1 Key Sources of Estimation UncertaintyIn the preparation of financial statements, management has been required to make judgements, estimates and assumptions that affect the application of policies and reported amounts 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 estimates is revised and in the future periods affected.

Significant areas of estimation, uncertainty and critical judgement used in applying accounting policies that have significant effect on the amount recognised in the financial statements include the following:

(a) Allowance for impairment on loans, advances and financingPrior to the adoption of FRS 139, allowances for impaired loans and advances were computed in conformity with the BNM/DFI/GP3 Guidelines on Classification of Non-Performing Loans and Provision for Substandard, Bad and Doubtful debts. Upon the adoption of FRS139, the Bank assesses at the end of each reporting period whether there is objective evidence that a loan is impaired. Loans and advances that are individually significant are assessed individually. Those not individually significant are grouped together based on similar credit risks and assessed as a portfolio.


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3. Significant accounting estimates and judgement (cont’d)

3.1 Key Sources of Estimation Uncertainty (cont’d)(a) Allowance for impairment on loans, advances and financing (cont’d)

The amendments to FRS139 also include additional transitional arrangement for entities in the banking sector, whereby BNM may prescribe the use of an alternative basis for collective assessment of impairment for banking institutions. This transitional arrangement is prescribed in BNM’s guidelines on Classification and Impairment Provision for Loan/Financing, whereby banking institutions are required to maintain collective impairment provisions of at a minimum of 1.5% of total outstanding loans/financing, net of total individual allowance.

(b) Uncertainty in accounting estimates for credit insurance businessThe principal uncertainty in the credit insurance business arises from the technical provisions which include the premium liabilities and claims liabilities. The premium liabilities comprise unearned premium reserves and unexpired risk reserves while claim liabilities comprise provision for outstanding claims. The estimation bases for unearned premium reserves and unexpired risk reserves are explained in the related accounting policy statement.

Generally, claims liabilities are determined based upon previous claims experience, existing knowledge of events, the terms and conditions of the relevant policies and interpretation of circumstances. Particularly relevant is past experience with similar cases, historical claims development trends, legislative changes, judicial decisions and economic conditions. It is certain that actual future premiums and claims liabilities will not exactly develop as projected and may vary from the projections.

The estimates of premiums and claims liabilities are therefore sensitive to various factors and uncertainties. The establishment of technical provisions in an inherently uncertain process and, as a consequence of this uncertainty, the eventual settlement of premiums and claims liabilities may vary from the initial estimates.

There may be significant reporting lags between the occurrence of an insured event and the time it is actually reported. Following the identification and notification of an insured loss, there may still be uncertainty as to the magnitude of the claim. There are many factors that will determine the level of uncertainty such as inflation, inconsistent judicial interpretations, legislative changes and claims handling procedures.

4. Cash and bank balances

Group and Bank 2010 2009 RM’000 RM’000

Cash and bank balances 70,116 11,582

5. Deposits and placements with banks and other financial institutions


Deposits and placements with: Licensed banks 1,183,658 1,743,597 Licensed finance companies 231,607 563,933 Other financial institutions 530,376 331,567

1,945,641 2,639,097

Included in deposits and placements with banks and other financial institutions are placements of the unutilised fund from the Government of Malaysia under MKFF Scheme amounting to RM158,575,000 (2009: RM158,861,000). The accounting policy in respect of MKFF Scheme is disclosed in Note 2.4(n).


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6. Investment securities

Group and Bank 2010 RM’000

Available-for-sale investments Quoted shares in Malaysia 25,163 Unquoted debt securities 309,982

335,145 Held-to-maturity investments Unquoted debt securities 94,957

430,102

Group and Bank 2009 Market At cost value RM’000 RM’000

Quoted securities Quoted shares in Malaysia 56,646 29,792 Allowance for diminution in value (26,854)

29,792

Unquoted securities: Bonds 10,000 Private debt securities 333,000

343,000 Accretion of discount (2,745)

340,255

370,047

7. Amount due from Export Credit Refinancing (“ECR”)


Amount due from participating licensed banks under ECR Scheme 1,708,137 757,950

The maturity structure of the ECR debtors are as follows: Maturity within one year 1,708,137 757,950

The amount represents block discounting of bills facility provided to participating banks in Malaysia granted under ECR Scheme. The primary objective of the Scheme is for the promotion of Malaysian export by offering competitive rates to banks participating in the ECR Scheme for on-lending to exporters.


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8. Loans, advances and financing

Group and Bank 2010 2009 At amortised cost RM’000 RM’000

Loans, advances and financing 2,057,272 2,365,139 Loans under MKFF Scheme 14,209 12,951 Staff loans and advances 9,503 12,671 Interest-in-suspense - (130,837)

Gross loans, advances and financing 2,080,984 2,259,924 Less: Allowance for impaired loans, advances and financing: - Individual allowance (757,469) - - Collective allowance (20,011) - - Specific allowance - (422,820) - General allowance - (27,758)

Net loans, advances and financing 1,303,504 1,809,346

(i) Loans, advances and financing analysed by facility are as follows:


Buyer credit 729,855 767,151 Overseas contract financing 396,594 421,453 Overseas project financing 693,358 771,930 Supplier credit 132,166 216,031 Istisna’ financing 58,363 - Murabahah financing 42,744 37,207 Export finance 4,192 20,530 Malaysian Kitchen Financing Facility 14,209 12,951 Staff loans and advances 9,503 12,671

2,080,984 2,259,924

(ii) Loans, advances and financing analysed by contractual maturity are as follows:


Within one year 217,981 439,756 One year to three years 365,098 298,115 Three years to five years 50,443 123,222 Over five years 1,447,462 1,398,831

2,080,984 2,259,924


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8. Loans, advances and financing (cont’d)

(iii) Movements of impaired loans, advances and financing (“impaired loans”) are as follows:


At 1 January 961,085 617,262 Impaired during the year 460,588 489,607 Reclassified as non-impaired (183,159) (97,493)Recoveries (43,806) (33,211)Amount written off (144,657) (10,992)Exchange differences (9,242) (4,088)

At 31 December 2010 1,040,809 961,085

Gross impaired loans as a percentage of gross loans, advances and financing - with ECR debtors 27.5% 31.8% - without ECR debtors 50.0% 42.5% Net impaired loans as a percentage of gross loans, advances and financing - with ECR debtors 7.5% 17.8% - without ECR debtors 13.6% 23.8%

(iv) Movements in the allowance for impaired loans, advances and financing are as follows:


Individual allowanceAt 1 January, as previously stated - - Effect of adopting FRS 139 555,537 -

At 1 January, as restated 555,537 - Allowance made during the year (Note 30) 392,408 - Amount written back (Note 30) (21,928) - Net charge to income statements 370,480 - Amount written off (144,657) - Allowance recoverable from the Government of Malaysia for MKFF Scheme 4,912 - Forex revaluation gain (28,803) -

Balance at 31 December 757,469 -

Collective allowanceAt 1 January, as previously stated - - Effect of adopting FRS 139 27,729 -

At 1 January, as restated 27,729 - Allowance made during the year (Note 30) (7,718) -

Balance at 31 December 20,011 -

% of net loans, advances and financing 1.54% -


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8. Loans, advances and financing (cont’d)

(iv) Movements in the allowance for impaired loans, advances and financing are as follows: (cont’d)


Specific allowanceAt 1 January, as previously stated 422,820 332,077 Effect of adopting FRS 139 (422,820) -

At 1 January, as restated - 332,077 Allowance made during the year (Note 30) - 174,313 Amount written back (Note 30) - (74,795)Net charge to income statements - 99,518 Amount written off - (10,992)Allowance recoverable from the Government of Malaysia for MKFF Scheme - 2,217

Balance at 31 December - 422,820

General allowanceAt 1 January, as previously stated 27,758 24,174 Effect of adopting FRS 139 (27,758) -

At 1 January, as restated - 24,174 Allowance made during the year (Note 30) - 3,584

Balance at 31 December - 27,758

% of net loans, advances and financing - 1.51%

9. Insurance receivables


Amount due from agents, brokers and co-insurers 3,188 4,379 Less: Allowance for doubtful debts (2,560) (1,551)

628 2,828

10. Other receivables, deposits and prepayments


Interest receivables 10,184 34,683 Other receivables, deposits and prepayments 12,072 5,495 Tax recoverables 12,132 7,528

34,388 47,706


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11. Deferred tax assets

Recognised deferred tax assetsDeferred tax assets of the Group:

Accelerated capital Other allowance on deductible Unabsorbed property and temporary Unutilised capital equipment differences tax losses allowances Total RM’000 RM’000 RM’000 RM’000 RM’000

GroupAt 1 January 2009 (1,036) 4,485 6,839 974 11,262 Recognised in income statement 10 4,616 (6,839) (974) (3,187)

At 31 December 2009 (1,026) 9,101 - - 8,075

At 1 January 2010/At 31 December 2010 (1,026) 9,101 - - 8,075

BankAt 1 January 2009 (1,036) 4,485 6,839 974 11,262 Recognised in income statement 10 6,926 (6,839) (974) (877)

At 31 December 2009 (1,026) 11,411 - - 10,385

At 1 January 2010/At 31 December 2010 (1,026) 11,411 - - 10,385

Unrecognised deferred tax assetsNo deferred tax has been recognised for the following items:


Other deductible temporary differences 18,532 - 18,535 - Unabsorbed capital allowances 7,607 - 7,607 - Unutilised tax losses - bank 281,037 - 281,030 - - subsidiary 67,296 67,332 - -

374,472 67,332 307,172 - Tax rate 25% 25% 25% 25%

93,618 16,833 76,793 -

The deductible temporary differences do not expire under current tax legislation unless there is a substantial change in shareholders (more than 50%). If there is substantial change in shareholders, unutilised tax losses carried-forwards amounting to RM67,296,000 (2009:RM67,332,000) will not be available to the Group. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits there from.


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12. Investment in subsidiaries

Bank 2010 2009 RM’000 RM’000

Unquoted shares - at cost 73,419 73,419 Less: Allowance for diminution in value (9,246) (9,243)

64,173 64,176

The subsidiaries, all incorporated in Malaysia, are as follows:

Name of company Principal Country of Effective ownership activities incorporation interest (%) 2010 2009

Malaysian Export Credit Insurance Berhad Dormant Malaysia 100 100

Pengkalan Megaria Sdn Bhd Dormant Malaysia 100 100

Malaysian Export Credit Insurance Berhad, a wholly owned subsidiary of the Bank was formerly engaged in the provision of export and domestic credit insurance facilities and guarantees. The Company is currently dormant.

Pengkalan Megaria Sdn Bhd, a wholly owned subsidiary of the Bank was set up to act as a trustee for a vessel which was previously assigned as a collateral for a financing given by the Bank to a borrower. The Company is currently dormant.

13. Investment properties


CostAt 1 January 2,850 2,850 Disposal (1,460) -

At 31 December 1,390 2,850

Accumulated depreciation and impairment lossesAt 1 January Accumulated depreciation 461 427 Accumulated impairment losses 530 350

991 777 Charge for the year 18 34 Impairment loss - 180 Disposal (164) -

At 31 December 845 991

Carrying amount 545 1,859


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13. Investment properties (cont’d)


Included in the above are: Freehold land 400 1,130 Buildings 84 667 Long term leasehold building with unexpired lease period of more than 50 years 61 62

545 1,859

Fair value of investment properties 750 2,140

Investment properties were valued by Raine & Horne International Zaki & Partners Sdn. Bhd., an independent professional valuer as at 31 December 2009. Fair value is determined by reference to open market values based on an existing use basis.

14. Intangible assets

Group and Bank Computer software

2010 2009 RM’000 RM’000

CostAt 1 January 2,356 1,828 Additions - 140 Transfer from property and equipment (Note 15) 22 388

At 31 December 2,378 2,356

Accumulated depreciationAt 1 January 1,423 174 Charge for the year 620 1,249

At 31 December 2,043 1,423

Carrying amounts 335 933


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15. Property and equipment

Furniture Renovation electrical Freehold Office and Motor fittings and Work-in- Group and Bank Land Building equipment improvements vehicles equipment Computer progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

CostAt 1 January 2010 30,000 33,000 804 2,169 658 1,539 9,632 7,798 85,600 Additions - - 12 - 9 45 358 31,001 31,425 Transfers - - 393 18,691 - 3,731 23 (22,838) - Transfer to intangible assets (Note 14) - - - - - - - (22) (22)Reclassifications - - 23 (97) - 74 - - - Disposals - - (267) (1,740) (36) (1,114) (4,505) - (7,662)

At 31 December 2010 30,000 33,000 965 19,023 631 4,275 5,508 15,939 109,341

Accumulated depreciationAt 1 January 2010 - 330 578 609 396 1,196 8,497 - 11,606 Charge for the year - 660 95 343 82 1,027 656 - 2,863 Disposal - - (232) (735) (36) (915) (4,489) - (6,407)

At 31 December 2010 - 990 441 217 442 1,308 4,664 - 8,062

Carrying amountsAt 31 December 2010 30,000 32,010 524 18,806 189 2,967 844 15,939 101,279

CostAt 1 January 2009 - - 726 1,674 427 1,302 8,539 1,554 14,222 Additions 30,000 33,000 78 495 231 237 618 7,107 71,766 Transfer - - - - - - 475 (475) - Transfer to intangible assets (Note 14) - - - - - - - (388) (388)

At 31 December 2009 30,000 33,000 804 2,169 658 1,539 9,632 7,798 85,600

Accumulated depreciationAt 1 January 2009 - - 491 422 297 945 7,941 - 10,096 Charge for the year - 330 87 187 99 251 556 - 1,510

At 31 December 2009 - 330 578 609 396 1,196 8,497 - 11,606

Carrying amountsAt 31 December 2009 30,000 32,670 226 1,560 262 343 1,135 7,798 73,994


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16. Borrowings


Term loans - unsecured Repayable within one year 375,930 807,896 One year to two years 29,549 31,544 Two years to five years 1,164,339 611,955 Over five years 1,232,691 1,239,582

2,802,509 2,690,977

Term loans contractual repayment based on the currencies of the borrowings are as follows:

Group and Bank

Year of Carrying Under 1 1 - 2 2 - 5 Over 5 maturity amount year years years years RM’000 RM’000 RM’000 RM’000 RM’000

2010- USD 2022 1,384,016 165,479 21,982 1,138,702 57,853 - RM 2021 1,215,175 7,133 7,567 25,637 1,174,838 - EURO 2011 203,318 203,318 - - -

2,802,509 375,930 29,549 1,164,339 1,232,691

2009- USD 2022 1,176,274 508,370 24,411 587,813 55,680 - RM 2021 1,256,896 41,719 7,133 24,142 1,183,902 - YEN 2010 10,148 10,148 - - - - EURO 2010 247,659 247,659 - - -

2,690,977 807,896 31,544 611,955 1,239,582

Term loans consist of the following facilities:

(a) Loan principal of RM35,000,000 (2009 - RM35,000,000) by way of a deposit placement, repayable after a period of 15 years.

The loan was obtained on 17 November 1995. Interest on the loan is charged at the rate of 2.50% (2009 - 2.50%) per annum. The loan has been fully repaid in 2010.

(b) Revolving multi-currency loan of 1 year up to an aggregate of USD120,000,000 (approximately RM370,260,000) (2009 -USD 120,000,000 (approximately RM411,180,000)) renewable after one year.

The loan was obtained on 14 September 2006 in the amount of USD100,000,000 and was subsequently renewed on 6 September 2010 with an additional amount of USD20,000,000 and will be renewable after one year. Interest rate on the loan is charged at the rate of 0.65% per annum above the cost of fund (“COF”).


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16. Borrowings (cont’d)

(c) Revolving US dollar loan of 3 years up to an aggregate of USD50,000,000 (approximately RM154,275,000) (2009 - USD50,000,000 (approximately RM171,325,000)) renewable after three years. The loan was obtained on 27 December 2006. Interest on the loan is charged at the rate of 0.39% (2009 - 0.39%) above Singapore Inter Bank Offer Rate (“SIBOR”) per annum. The loan has been fully repaid in 2010.

(d) Revolving US dollar loan up to an aggregate of USD11,000,000 (approximately RM33,940,000) (2009 - USD11,000,000 (approximately RM37,692,000)). The loan was obtained on 31 March 2000. Interest on the loan is charged at the rate of 0.40% (2009 - 0.40%) per annum above COF.

(e) Term loan of USD12,000,000 (approximately RM37,026,000) (2009 - USD12,000,000 (approximately RM41,118,000)) repayable within a period of three years. The loan was obtained on 3 November 2006. Interest on the loan is charged at the rate of 0.50% (2009 - 0.50%) above London Interbank Offer Rate (“LIBOR”) per annum. The loan has been fully repaid in 2010.

(f) Term loan of USD10,250,000 (approximately RM31,626,000) (2009 - USD10,250,000 (approximately RM35,122,000)) repayable by 20 scheduled quarterly instalments commencing May 2006.

The loan was obtained on 5 August 2005. Interest on the loan is charged at the rate of 0.48% (2009 - 0.48%) above LIBOR per annum.

(g) Term loan of USD13,980,000 (approximately RM43,135,000) (2009 - USD13,980,000 (approximately RM47,902,000)) repayable by 27 scheduled quarterly instalments commencing March 2006.

The loan was obtained on 5 August 2005. Interest on the loan is charged at the rate of 0.56% (2009 - 0.56%) above LIBOR per annum.

(h) Term loan of USD20,000,000 (approximately RM61,710,000) (2009 - USD20,000,000 (approximately RM68,350,000)) repayable by 32 quarterly instalments commencing September 2007.

The loan was obtained on 30 June 2006. Interest on the loan is charged at the rate of 0.33% (2009 - 0.33%) above LIBOR per annum.

(i) Term loan of USD3,500,000 (approximately RM10,799,000) (2009 - USD3,500,000 (approximately RM11,993,000)) repayable by 8 scheduled semi-annual instalments commencing September 2006.

The loan was obtained on 30 June 2006. Interest on the loan is charged at the rate of 0.22% (2009 - 0.22%) above LIBOR per annum. The loan has been fully repaid in 2010.

(j) Term loan of RM1,000,000,000 (2009 - RM1,000,000,000) from the Ministry of Finance (“MOF”) and Bank Negara Malaysia (“BNM”) repayable after a period of 15 years.

The loan was obtained on 18 December 2006. Interest on the loan is charged at the fixed rate of 1.00% (2009 - 1.00%) per annum.


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(k) Term loan of USD35,000,000 (approximately RM107,993,000) (2009 - USD35,000,000 (approximately RM119,928,000)). The loan is repayable semi-annually within 28 semi-annual instalments from 12 August 2008 and ending on 12 February 2022.

The loan was obtained on 25 April 2006. Interest on the loan is charged at 0.395% (2009 - 0.395%) above LIBOR per annum.

(l) Syndicated term loan of USD150,000,000 (approximately RM462,825,000) (2009 - USD150,000,000 (approximately RM513,975,000)) repayable within a period of five years.

The loan was obtained on 14 November 2007. Interest on loan is charged at 0.20% (2009 - 0.20%) above LIBOR per annum.

(m) Revolving loan up to an aggregate of USD40,000,000 (approximately RM123,420,000) (2009: USD40,000,000 (approximately RM137,060,000)) renewable after 3 years.

The loan was obtained on 16 May 2007. Interest on loan is charged at the rate of 0.48% (2009 - 0.48%) above LIBOR per annum. The loan has been fully repaid in 2010.

(n) Term loan of USD25,000,000 (approximately RM77,138,000) (2009: USD25,000,000 (approximately RM85,663,000)) repayable within a period of one year.

The loan was renewed on 14 December 2009. Interest on the loan is changed at the rate of 1.30% (2009 - 1.30%) above Singapore Interbank Offer Rate (“SIBOR”) per annum. The loan has been fully repaid in 2010.

(o) Term financing of RM55,000,000 repayable after a period of 5 years.

The financing was obtained on 8 April 2009. Profit on the financing is charged at the rate of 0.50% above the Bank’s Base Financing Rate per annum.

(p) Revolving Yen loan of 6 months up to an aggregate of USD20,000,000 (approximately RM61,710,000) (2009: USD 20,000,000 (approximately RM68,530,000)).

The loan was obtained on 25 June 2009. Interest on the loan is charged at the rate of 1.00% (2009 - 1.00%) above Yen London Inter Bank Offer Rate (“YenLIBOR”) per annum. The loan has been fully repaid in 2010.

(q) Term loan up to an aggregate of USD100,000,000 (approximately RM308,550,000) (2009: USD100,000,000 (approximately RM342,650,000)).

The loan is repayable semi-annually after a grace period of 30 months from 21 April 2012 and ending on 21 October 2014. The loan was obtained on 22 October 2009. Interest on the loan is charged at 0.60% (2009 - 0.60%) above LIBOR per annum.

(r) Term loan of EUR25,000,000 (approximately RM105,163,000 ) repayable within a period of one year (2009- EUR25,000,000 (approximately RM123,465,000)). The loan was obtained on 2 December 2009. Interest on the loan is charged at the rate of 0.80% (2009 - 0.80%) above Euro Interbank Offer Rate (“EURIBOR”) per annum. The loan has been fully repaid during the year.

(s) Syndicated term loan of USD100,000,000 (approximately RM 308,550,000) repayable within a period of three years.

The loan was obtained on 14 January 2010. Interest on loan is charged at 1.00% above LIBOR per annum.


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(t) Commodity Murabahah Revolving Credit - i of 1 year up to an aggregate of USD50,000,000 (approximately RM154,275,000) renewable after one year.

The financing was obtained on 27 October 2010. Profit rate on the financing is charged at the rate of 0.50% above the Cost Of Fund (“COF”).

(u) Commodity Murabahah Revolving Credit - i up to an aggregate of USD30,000,000 (approximately RM92,565,000) renewable after one year.

The financing was obtained on 10 November 2010. Profit rate on the financing is charged at the rate of 1.00% above LIBOR per annum.

(v) Included in the term loan is a placement from the Government of Malaysia for Malaysian Kitchen Financing Facility Scheme amounting to RM170,100,000 for the purpose of providing loans to qualified applicants under the Malaysia; The Truly Asian Kitchen or Malaysia Kitchen Program.

The placement is interest-free and repayable after a period of 15 years from dates of disbursement of 31 December 2007 and 15 January 2009.

17. Other payables and accruals


Sinking fund and debt services reserve accounts 64,742 65,916 Deposit 11,299 - Interest payable 10,038 3,517 Amount due to the Government of Malaysia for MKFF Scheme 2,782 3,018 Provision for zakat 476 - Others 32,343 23,945

121,680 96,396

18. Deferred income

2010 Gross Reinsurance Net RM’000 RM’000 RM’000

Arising from:

(i) Guarantee from banking activities At 1 January 124 - 124 Addition during the year 10,789 - 10,789 Recognised in income statement (6,767) - (6,767)

At 31 December 4,146 - 4,146

(ii) Premium liabilities At 1 January 23,592 - 23,592 Decrease in reserve (Note 25) (1,705) (335) (2,040)

At 31 December 21,887 (335) 21,552

26,033 (335) 25,698


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18. Deferred income (cont’d)

2009 Gross Net RM’000 RM’000 Restated Restated

Arising from:

(i) Guarantee from banking activities At 1 January 12,725 12,725 Addition during the year (3,758) (3,758) Recognised to income statement (8,843) (8,843)

At 31 December 124 124

(ii) Premium liabilities At 1 January 17,292 17,292 Increase in reserve (Note 25) 6,300 6,300

At 31 December 23,592 23,592

23,716 23,716

19. Provision for guarantee and claims

2010 Gross Net RM’000 RM’000

Arising from:

(i) Guarantee from banking activities At 1 January - - Addition during the year 28,495 28,495

At 31 December 28,495 28,495

(ii) Insurance claims At 1 January 27,744 27,744 Addition during the year 11,886 11,886 Paid during the year (2,165) (2,165)

At 31 December 37,465 37,465

65,960 65,960

2009 Gross Net RM’000 RM’000

Arising from:

(i) Insurance claims At 1 January 33,489 33,489 Reversal during the year (3,137) (3,137) Paid during the year (2,608) (2,608)

At 31 December 27,744 27,744


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20. Share capital

Group and Bank Number Number of shares Amount of shares Amount 2010 2010 2009 2009 RM RM

Authorised 3,000,000,000 3,000,000,000 3,000,000,000 3,000,000,000 Ordinary shares of RM1 each Special Rights Redeemable (Preference share of RM1 each) 1 1 1 1

At 31 December 3,000,000,001 3,000,000,001 3,000,000,001 3,000,000,001

Issued and fully paid 2,708,665,283 2,708,665,283 2,708,665,283 2,708,665,283 Ordinary shares of RM1 each Special Rights Redeemable (Preference share of RM1 each) 1 1 1 1

At 31 December 2,708,665,284 2,708,665,284 2,708,665,284 2,708,665,284

The Special Rights Redeemable Share (“Special Right”) may be held or transferred only to the Minister of Finance (Incorporated) or it successors or any Minister, representative or any person acting on behalf of the Government of Malaysia.

The Special Rights shareholder shall have the right from time to time to appoint any person to be an appointed Director (“Government Appointed Director”), so that there shall not be more than four (“4”) Government appointed Directors at any time.

The Special Rights shareholder or any person acting on its behalf shall be entitled to receive notice of and to attend and speak at all general meetings of any meeting of any class of shareholders of the Bank, but the Special Share shall carry neither right to vote nor any other rights at any such meeting.

In a distribution of capital in a winding up of the Bank, the Special Rights shareholder shall be entitled to repayment of the capital paid up on the Special Share in priority to any repayment of capital to any other member. The Special Share shall confer no other right to participate in the capital or profits of the Bank.

The Special Rights shareholder may subject to the provision of the Companies Act, 1965, require the Bank to redeem the Special Share at par at any time by serving written notice upon the Bank and delivering the relevant share certificate.

The Special Rights shareholder shall determine on general guidelines pertaining to lending, investments and divestment by the Bank from time to time as deemed appropriate.

21. (Accumulated losses)/Retained profits

Prior to the year of assessment 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 under limited circumstances. Companies also have an irrevocable option to disregard the Section 108 balance 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 Bank did not elect for the irrevocable option to disregard the Section 108 balance. Accordingly, during the transitional period, the Bank may utilise the credit in the section 108 balance as at 31 December 2010 to distribute cash dividend payments to ordinary shareholders as defined under the Finance Act, 2007.

22. Operating revenue

Operating revenue of the Group and the Bank comprises gross interest income, fee and commission income, investment income and income from insurance operation.


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23. Interest income


Loans, advances and financing- Interest income for non-impaired/performing loans 53,365 81,603 - Recoveries from impaired/non-performing loans 30,566 32,047 - Interest income for impaired/non-performing loans 15,198 - Money at call and deposit placements with banks and financial institutions 57,431 58,368 Investment securities 6,820 16,492 Amortisation of premium less accretion of discount 10,086 329

173,466 188,839

24. Interest expense


Borrowings 35,769 38,980

25. Underwriting results

Group and Bank 2010 2009 RM’000 RM’000 Restated

Gross premium 13,026 14,851 Reinsurance (4,520) (4,401)

Net premium 8,506 10,450 Decrease in premium liabilities reserves (Note 18) 2,040 (6,300)

Net earned premium (Note 25 (i)) 10,546 4,150 Other fee income 801 888

11,347 5,038 Net claims (incurred) / recovered (Note 25 (ii)) (12,270) 31,706

Underwriting results (923) 36,744

(i) Net earned premium Gross premium 13,026 14,851 Change in premium liabilities reserves 2,040 (6,300)

15,066 8,551 Premium ceded (4,520) (4,401)

Net earned premium 10,546 4,150


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25. Underwriting results (cont’d)

Group and Bank 2010 2009 RM’000 RM’000 Restated

(ii) Net claims (incurred)/recovered Gross claims paid less salvage (2,165) (2,608) Recoveries 426 28,970 Bad debt written off (810) (401)

Net claims (paid) /recovered (2,549) 25,961 Net outstanding claims - 1 January 27,744 33,489 - 31 December (37,465) (27,744)

Net claims (incurred) / recovered (12,270) 31,706

26. Other income


Fee income 17,397 15,745 Dividend income from shares quoted in Malaysia 658 520 Foreign exchange gain/(loss) - realised 5,721 (9,963) - unrealised (19,012) (3,636)Gain on disposal of investment property 190 - Gain on disposal of equipment 3 - Assets written off (1,256) - Rental income 30 2,159 Others 446 787

4,177 5,612

27. Overhead expenses


Personnel costs (i) 26,140 27,758 26,140 27,758 Establishment related expenses (ii) 8,110 8,800 8,110 8,800 Promotion and marketing expenses (iii) 717 804 717 804 General administrative expenses (iv) 10,768 11,583 10,761 11,543

45,735 48,945 45,728 48,905


78

27. Overhead expenses (cont’d)


(i) Personnel costs Salaries, allowances and bonuses 20,876 22,101 Defined contribution plan 2,705 2,675 Other staff related expenses 2,559 2,982

26,140 27,758

(ii) Establishment related expenses Depreciation: - Property and equipment 2,863 1,510 - Investment properties 18 34 Amortisation of intangible assets 620 1,249 Impairment of investment properties - 180 Rental of leasehold land and premises 3,317 3,202 Repairs and maintenance of property and equipment 1,292 2,625

8,110 8,800

(iii) Promotion and marketing expenses Advertisement and publicity 717 804


(iv) General administrative expenses Administrative expenses 2,457 1,761 2,457 1,761 Auditors’ remuneration - statutory audit 169 161 165 155 - others 50 - 50 - General expenses 6,275 7,840 6,272 7,806 Professional fees 1,210 1,634 1,210 1,634 Sundry debtors written off - 102 - 102 Others 607 85 607 85

10,768 11,583 10,761 11,543


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28. Directors’ fees and remuneration


Directors of the Bank:

Executive Directors:

Salary and other remuneration, including meeting allowances 573 551 Pension cost - defined contribution plan 70 82

643 633

Non-executive Directors:

Fees 367 307

Total 1,010 940

Total (excluding benefits-in-kind) 1,010 940

Number of Directors of the Bank whose remuneration falls into the following bands:

Number of Executive Directors:RM600,001 to RM650,000 1 1

Number of Non-executive Directors:RM50,001 to RM100,000 3 2 RM0 to RM50,000 4 7

8 10

29. Key management personnel compensation

The key management personnel compensation is as follows:


Directors fees 367 307

Other key management personnel:- Short-term employee benefits 1,053 984 - Contributions to Employees Provident Fund 143 145

1,196 1,129

Total compensation 1,563 1,436

Key management personnel comprise persons having authority and responsibility for planning, directing and controlling the activities of the entity either directly or indirectly. They comprise members of the Board of Directors, the Managing Director/ Chief Executive Officer and the Chief Operating Officer of the Group and the Bank.


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30. Allowance for losses on loans, advances and financing


(a) Claims guarantee - Charge for the year 28,495 -

(b) Individual allowance - Charge for the year 392,408 - - Written back (21,928) -

(c) Collective allowance - Written back (7,718) -

(d) Specific allowance - Charge for the year - 174,313 - Written back - (74,795)

(e) General allowance - Charge for the year - 3,584

391,257 103,102

31. Taxation


Income tax expense- Current year - 12,745 - 12,745 - Under provision in prior years - 9,624 - - Deferred tax - Origination and reversal of temporary differences - 3,187 - 877

- 25,556 - 13,622

Income tax is calculated at the Malaysian statutory tax rate of 25% (2009: 25%) of the estimated assessable profit for the year. The computation of deferred tax as at 31 December 2010 has reflected these changes.


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31. Taxation (cont’d)


Reconciliation of effective tax expense

(Loss)/profit before taxation (299,537) 52,504 (299,533) 43,301

Income tax using Malaysian tax rate of 25% (2009 : 25%) (74,884) 13,126 (74,883) 10,825 Non-deductible expenses 125 218 125 209 Effect of deferred tax asset not recognised 75,184 2,179 75,182 2,179 Other items (425) 409 (424) 409

- 15,932 - 13,622 Underprovision in prior years - 9,624 - -

- 25,556 - 13,622

32. Earnings per share


Issued ordinary share at 31 December 2,708,665 2,708,665 2,708,665 2,708,665 (Loss)/Profit after taxation (RM’000) (300,013) 26,948 (300,009) 29,679

Basic earnings per share (sen) (11.08) 0.99 (11.08) 1.10

The basic earnings per ordinary share has been calculated based on the (loss)/profit after taxation and the weighted average number of ordinary shares during the period.

33. Dividends

Since the end of the previous financial year, the Bank paid a final ordinary dividend of 0.10 sen per ordinary share less tax at 25% totalling RM2,031,499 (0.075 sen per ordinary shares) in respect of the year ended 31 December 2009 on 30 July 2010.

34. Commitments and contingencies


Banking operation commitmentsContracted but not provided for: Guarantee facility 747,735 932,713 Letter of credit 6,318 4,732

754,053 937,445


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34. Commitments and contingencies (cont’d)


Insurance operation commitments Contracted but not provided for: Within one year 389,045 518,329 One year or later and no later than five years 418,690 317,495

807,735 835,824

Operational commitmentsApproved but not contracted for: Within one year 25,064 56,744

Total capital and other commitments 1,586,852 1,830,013

35. Related parties

For the purposes of these financial statements, parties are considered to be related to the Group, if the Group or the Bank has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Bank and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

The Group has related party relationships with its subsidiaries (see Note 12), Directors and key management personnel.

Key management personnel is defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel includes the Managing Director/ Chief Executive Officer and Chief Operating Officer of the Group and the Bank. The key management personnel compensation is disclosed in Note 29.

The significant outstanding balances of the Bank with the related companies are as follows:


Amount due to subsidiaries:Payables 64,169 64,176

36. Financial instruments

Exposure to market, asset liability management and credit risk arises in the normal course of the Group’s business.

Financial risk management policiesThe Group’s and the Bank’s financial risk management policies seek to enhance shareholder’s value. The Group and the Bank focus on the unpredictability of financial markets and seek to minimise potential adverse effects on the financial performance of the Bank.

The Risk Management Division of the Group is responsible for formulating policies and the oversight of credit, market liquidity and operational risks.


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36. Financial instruments (cont’d)

Financial risk management policies (cont’d)Financial risk management is carried out through risk assessment and reviews, internal control systems and adherence to Group’s financial risk management policies, which are reported to and approved by the Board of Directors. The Board also approves the treasury practices which cover the management of these risks.

The main areas of financial risks faced by the Group and the Bank and the policies are set out as follows:

a. Capital ManagementCapital Management refers to continuous, proactive and systematic process to ensure the Group and the Bank have sufficient capital in accordance to its risk profile and regulator’s requirements.

b. Market RiskMarket risk refers to the potential loss arising from adverse movements in the market variables such as market rate, foreign exchange rate, equity price and commodity price. In other words, it is the risk that the Group’s and the Bank’s earnings or capital position will be affected by fluctuation in market rates or prices.

c. Asset Liability Management RiskAsset Liability Management (ALM) risk comprises:

(i) Interest rate risksThis refers to the exposure of the Group’s and the Bank’s financial condition due to adverse movements in interest rates.

(ii) Liquidity risksDefined as the risk of not being able to obtain sufficient funds in a timely manner at a reasonable cost to meet financial commitments when due.

d. Credit RiskCredit risk is defined as risk due to uncertainty in the customers or the counterparties ability to meet its obligations or failure to perform according to the terms and conditions of the credit-related contract.

Oversight and OrganisationA stable enterprise-level organisational structure for risk management is necessary to ensure a uniform view of risk across the Group and the Bank. It is also important to have clear roles and responsibilities defined for each functions.

The Board of Director has the overall responsibility for understanding the risk undertaken by the Group and the Bank and ensuring that the risk are properly managed.

While the Board of Directors is ultimately responsible for risk management of the Group, it has entrusted the Board Risk Committee (“BRC”) to carry out its functions. Although the responsibilities have been delegated, the Board still remains accountable. BRC, which is chaired by an independent Director of the Board, oversees the overall management of all risks covering credit risk management, country risk management, market risk management, asset liability management and operational risk management.

Executions of the Board’s risk strategies and policies are the responsibilities of the Group’s and the Bank’s management and the conduct of these functions are being exercised under a committee structure, namely Management Risk Committee (“MRC”). The Managing Director/Chief Executive Officer chairs MRC. The Committee focuses on the overall business strategies and daily business operations of the Group and the Bank in respect of risk management.

To carry out the day-to-day risk management function, a dedicated Risk Management Division (“RMD”) that is independent of profit and volume targets supports the Committee. RMD reports functionally to the BRC and administratively to the Managing Director/Chief Executive Officer.


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Capital ManagementCapital PolicyThe overall objective of capital management is to maintain a strong capital position in order to provide opportunities for business growth and able to provide cushion for any potential losses. In line with this objective, the Group and the Bank view capital position as an important key barometer of financial health.

Regulatory capitalIn order to support its mandated roles, the Group and the Bank must have strong and adequate capital to support its business activities on an on-going basis. In lieu to this, Bank Negara Malaysia has imposed several regulatory capital requirements whereby, the Bank must have an absolute minimum capital of RM300,000,000 and a minimum Risk Weighted Capital Ratio (“RWCR”) of 8% at all times. The minimum capital funds refer to paid-up capital and reserves as defined in Section 3 of Development Financial Institution Act 2002.

In order to further strengthen the capital position of the Group and the Bank through a progressive and systematic building up of the reserve fund, the Group and the Bank are required to maintain a reserve fund and transfer a certain percentage of its net profits to the reserve fund once the RWCR falls below the threshold of 16%.

The following table set forth capital resources and capital adequacy for the Bank as at 31 December 2010.

RM’000

Ordinary share capital 2,708,665 Fair Value Adjustment Reserve 4,846 Retained profit 177,746 Current year loss (302,040)

Eligible Tier 1 capital 2,589,217

Collective allowance on loans, advances and financing* 20,011 Provision for guarantee and claims 7,889

Eligible Tier 2 capital 27,900

Investment subsidiary company (64,173)

Total capital base 2,552,944

Risk weighted assets 3,822,764

Risk weighted capital ratio 66.8%

* Based on the revised BNM/GP3 transitional provisions

Capital monitoringThe Group and the Bank’s capital are closely monitored and actively managed. Beside the regulatory capital requirement of 8%, the Group and the Bank have set an internal capital requirement limit that would act as a buffer to the regulatory capital and as an indicator that affords the Group and the Bank a “well capitalised” status. The MRC shall be responsible in managing and monitoring both the internal capital limit and regulatory capital requirement.


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Market Risk ManagementApproach and risk strategyThe principal objectives of the market risk management are to assume an appropriate balance between the level of risk and the level of return desired in order to maximise the return to shareholder’s funds and to ensure prudent management of the Group and the Bank’s resources to support the growth of the Group’s and the Bank’s economic value.

The Groups’ market risk management strategies are to identify measure, monitor and manage the Group’s and the Bank’s earnings and capital against market risk inherent in all activities of the Group and the Bank and ensure all relevant personnel clearly understand the Group and the Bank’s approach in managing market risk. Risk IdentificationThe Group’s and the Bank’s market risk arises due to changes in market rates, prices and volatilities which lead to a decline in the value of the Group’s and Bank’s investment securities, foreign exchange and equity position.

MeasurementsThe Group’s and the Bank’s policy are to minimise the exposures to foreign currency risk arising from lending activities by monitoring and obtaining the Board’s approval for funding requisitions that involve foreign currencies.

The table below shows the Group’s and the Bank’s foreign currency sensitivity based on reasonable possible movements in foreign exchange (FX) rates.

Changes in foreign exhange Effect on profit/loss Effect on equity rates Increase Decrease Increase Decrease (+/-) in FX rate in FX rate in FX rate in FX rate % RM’000 RM’000 RM’000 RM’000

AED 10 (2,756) 2,756 (2,756) 2,756 EUR 5 (218) 218 (218) 218 GBP 5 455 (455) 455 (455)JPY 10 10 (10) 10 (10)SGD 5 (8) 8 (8) 8 USD 10 (19,664) 19,664 (19,664) 19,664

(22,181) 22,181 (22,181) 22,181

Asset Liability ManagementApproach and risk strategyThe main objective is to proactively manage the Group’s and the Bank’s financial position which includes assets, liabilities and capital, in order to maximise earnings and attain its strategic goal, within the overall risk/return preferences.

The Group’s and the Bank’s Asset and Liability Management strategies are to:

• Ensure that the Group and the Bank achieve its financial objective through strategic business plan which shall be developed within the risk tolerance level;

• Ensure that Group’s and Bank’s pricing and funding are adequately maintain to support a sound capital base through strategic management of balance sheet; and


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Asset Liability Management (cont’d)Approach and risk strategy (cont’d)• Ensure the Group and the Bank are able to sustain its capital against ALM risk inherent in all activities of the Group and the Bank.

Risk identificationWhen analysing whether or not an activity introduces a new element of ALM risks exposure, the Group and the Bank should be aware that changes to an instrument’s maturity, repricing or repayment terms could materially affect the product’s ALM risks characteristics.

Measurements The Group and the Bank face interest rate risks arising from re-pricing mismatches of assets and liabilities from its banking businesses. These risks are monitored through economic value of equity limit and net interest income changes.

The Group and the Bank perform regular net interest income simulation to better understand the sensitivity to changes in interest rates on the net interest income. In addition, MRC will actively manage the re-pricing mismatches with the aid of monthly re-pricing gap and Earning-at-Risk (“EAR”) reports.

The table below shows the Bank’s interest rate risk exposure based on contractual re-pricing gap.

2010 Less Than 3 to 12 1 to 5 Over 5 Non-interest 3 Months Months years years bearing Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

AssetsCash and bank balances - - - - 70,116 70,116 Deposits and placement with banks and other financial institutions 1,945,641 - - - - 1,945,641 Investment securities 65,000 190,000 140,000 10,000 - 405,000 Amount due from ECR debtors 1,115,853 592,284 - - - 1,708,137 Loans, advances and financing 548,096 391,737 4,917 985,164 - 1,929,914 Other assets - - - - 418,170 418,170

Total assets 3,674,590 1,174,021 144,917 995,164 488,286 6,476,978

LiabilitiesLoans and borrowings 1,258,854 371,684 - 1,171,971 - 2,802,509 Other liabilities - - - - 1,085,252 1,085,252 Shareholder’s fund - - - - 2,589,217 2,589,217

Total liabilities and equity 1,258,854 371,684 - 1,171,971 3,674,469 6,476,978

Period Gap 2,415,736 802,337 144,917 (176,807) (3,186,183) -

Cumulative Gap 2,415,736 3,218,073 3,362,990 3,186,193 - -


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Asset Liability Management (cont’d)Analysis of net interest income (“NII”) sensitivityThe table below shows the Bank’s net interest income sensitivity based on possible incremental and parallel shift in interest rate.

Impact on Impact on profit equity RM’000 RM’000

Interest rate - incremental shift + 50 basis points 399 399 - 50 basis points (399) (399)

Interest rate - parallel shift + 50 basis points 11,855 11,855 - 50 basis points (11,855) (11,855)

Liquidity Risk ManagementApproach and risk strategyThe inability to create liquidity would cause serious repercussion to the Group and the Bank in term of its reputation and even its continued existence. In view of this, the Group and the Bank pays particular attention to liquidity risk management approach and strategy.

The objective of liquidity risk management is to ensure the availability of sufficient liquidity to honour all financial obligations and able to meet any stressful events. The Group’s and the Bank’s liquidity risk management strategies involves:-

• EstablishappropriatepoliciestooverseethemanagementofliquidityriskoftheGroupandtheBank;• EstablishprudentliquidityrisklimitstoensuretheGroupandtheBankmaintainasafelevelofassetliquidity;and• DevelopcontingencyfundingplanstomanagetheGroup’sandtheBank’sfundingrequirementduringliquiditycrisis.

Risk IdentificationThere are two types of liquidity risk i.e. funding liquidity risk and market liquidity risk. Funding liquidity risk refers to the potential inability of the Group and the Bank to meet its funding requirements arising from cash flow mismatches at a reasonable cost. While market liquidity risk refers to the Group’s and the Bank’s potential inability to liquidate positions quickly and in sufficient volumes, at a reasonable price.

MeasurementLiquidity is measured by the Group’s and the Bank’s ability to efficiently and economically accommodate decrease in deposits/funding (such as funds obtained from the Government) and other purchased liabilities and to fund increases in assets to ensure continued growth of the Group and the Bank.

The Group and the Bank maintain large capital base, sufficient liquid assets, diversified funding sources, and regularly accesses the long-standing relationship with traditional fund providers. These processes are subject to regular reviews to ensure adequacy and appropriateness.

In addition, the Group’s and the Bank’s liquidity position are monitored and managed through structural liquidity indicators, such as loan to purchase funds and offshore revolving funds utilisation rate ratios to maintain an optimal funding mix and asset composition.


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Liquidity Risk Management (cont’d)Measurement (cont’d)Table below analyses assets and liabilities of the Bank based on undiscounted cash flows according to their contractual maturity.

2010 Non- Up to 2 to 3 4 to 6 7 to 12 2 to 5 Over 5 contractual 1 Months Months Months Months years years maturity Total (RM’000) (RM’000) (RM’000) (RM’000) (RM’000) (RM’000) (RM’000) (RM’000)

AssetsCash and bank balances 70,116 - - - - - - 70,116 Deposits and placement with banks and other financial institutions 1,305,088 640,553 - - - - - 1,945,641 Investment securities - 65,000 77,000 113,000 140,000 10,000 - 405,000 Amount due from ECR debtors 572,436 543,417 592,284 - - - - 1,708,137 Loans, advances and financing 190,964 50,927 37,288 20,677 250,770 1,379,288 - 1,929,914 Other assets - - - - - - 418,170 418,170

Total assets 2,138,604 1,299,897 706,572 133,677 390,770 1,389,288 418,170 6,476,978

LiabilitiesLoans and borrowings - 5,400 - 364,323 1,173,978 1,258,808 - 2,802,509 Other liabilities - - - - - - 1,085,252 1,085,252 Shareholder’s fund - - - - - - 2,589,217 2,589,217

Total liabilities and equity - 5,400 - 364,323 1,173,978 1,258,808 3,674,469 6,476,978

Period Gap 2,138,604 1,294,497 706,572 (230,646) (783,208) 130,480 (3,256,299) -

Cumulative Gap 2,138,604 3,433,101 4,139,673 3,909,027 3,125,819 3,256,299 - -

Credit risk managementApproach and risk strategyThe Group and the Bank recognise that credit risk is inherent in its banking and insurance activities. The main objective of the Group’s and the Bank’s credit risk management is to ensure that exposure to credit risk is always kept within its capability and financial capacity to withstand potential future losses.

The Group and the Bank strategies in credit risk management are:-

• Consistentcreditapprovingstandardsareappliedineachofitscreditdecisionprocesses;• AllcreditdecisionsarewithincreditrisktolerancethattheGroupandtheBankarewillingtotakeinmeetingitsmandatedrole;• AllcreditriskinherentinbusinessactivitiesoftheGroupandtheBankarecomprehensivelyidentified,measuredandmanaged;• EnsuretheGroupandtheBankholdadequatecapitalagainstcreditriskandadequatelycompensatedforrisksassumed;• Regularcreditreviewisperformasaneffectivetooltoconstantlyevaluatethequalityofcreditsgivenandadherencetothecreditprocess;• The composition and quality of the Group’s and the Bank’s credit portfolio are constantly monitored to identify and manage

concentrations risk; and• Conductstress testingon theGroup’sand theBank’screditportfolio to identifypossibleeventsor futurechanges ineconomic

conditions that could have unfavourable effects to its credit exposures and assess the Group’s and the Bank’s ability to withstand such changes.


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Credit risk management (cont’d)Risk IdentificationThe Group and the Bank take into account the sources of credit risks identified from all lines of businesses on a bank-wide basis such as direct financing risk, contingent financing risk, issuer risk, pre-settlement risk and settlement risk.

As a developmental financial institution, the Group and the Bank are expected primarily to fill the gaps in the supply of financial services that are not normally provided by other banking institutions. Therefore, the Group and the Bank are exposed to credit risk mainly from credit facilities to finance and support exports and imports of goods, services and overseas projects with emphasis on non-traditional markets, provision of export credit insurance services, export financing insurance, overseas investment insurance and guarantee facilities. However, the Group and the Bank are also exposed to credit risk from investment in securities and other financial market transactions.

MeasurementThe Group and the Bank monitor actual exposures against established limits and have in place procedures for the purpose of monitoring and taking appropriate actions when such limits are breached. If exceeded limits, such occurrences must be reported to the MRC and subsequently, corrective measures are taken to avoid recurrence of such breaches.

Internal credit rating system is an integral part of the Group’s and the Bank’s credit risk management. It provides a good means of differentiating the degree of credit risk in the different credit exposures of the Group and the Bank. This will allow more accurate determination of the overall characteristics of the credit portfolio, concentrations, problem credits and the adequacy of allowances for losses on loans, advances and financing.

Impairment of financial assetsThe Group and the Bank individually assesses its financial assets for any objective evidence of impairment as a result of one or more loss events that occurred after the initial recognition. In determining that there is objective evidence of an impaired loss the Group and the Bank adopted a systematic mechanism for a prompt trigger of impairment test whereby the triggers are based on obligatory and judgmental event triggers.

When there is objective evidence of impairment of the financial assets, the classification of these assets as impaired shall be endorsed and approved by Management Committee (“MC”). Impairment losses are recorded as charges to the statement of income. The carrying amount of impaired loan on the statement of financial position is reduced through the use of impaired allowance account. Losses expected from future events are not recognised.

Credit Risk ExposureExposures to credit risk for the Bank are as follows:

2010 Collateral Maximum Reported value exposures RM’000 RM’000 RM’000

On-Balance Sheet exposuresDeposit and placement with banks and other financial institutions 1,945,641 - 1,945,641 Investment securities Available-for-sale 263,000 - 263,000 Held-to-maturity 142,000 - 142,000 Amount due from ECR debtors 1,708,137 1,708,137 - Loans, advances and financing 1,929,914 2,248,940 -

5,988,692 3,957,077 2,350,641


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Credit Risk Exposure (cont’d)Exposures to credit risk for the Bank are as follows: (cont’d)

2010 Collateral Maximum Reported value exposures RM’000 RM’000 RM’000

Off-Balance Sheet exposuresBanking operations commitments 754,053 - 754,053 Insurance operations commitments Short term 389,045 - 389,045 Medium/long term 418,690 146,870 271,820

1,561,788 146,870 1,414,918

Total credit risk exposures 7,550,480 4,103,947 3,765,559

Collateral and Credit EnhancementCollateral represents the asset pledged by a customer and/or a third party on behalf of the customer, in whole or in part, to secure a credit exposure and/or potential credit exposure with the Group and the Bank, and subject to seizure in the event of default. Collateral provides the Group and the Bank with a secondary source of repayment, i.e. a source of fund to help recover its investment should the customer is unable to repay the facility obtained from the Group and the Bank.

The Group and the Bank shall consider accepting the collateral based on its marketability, measurability, stability, transferability, speed in realising the collateral value, enforceability and free from encumbrances. The collateral types and amounts held by the Group and the Bank are as follows:

2010 Collateral type RM’000

Secured by cash 158,370 Secured by property 2,090,570

2,248,940


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Geographical AnalysisExposures to credit risk by geographical region are as follows:

On-balance sheet exposure

2010 Deposit and placement with banks Amount Loans, and other due to advances financial Investment ECR and institutions securities debtors financing Total RM’000 RM’000 RM’000 RM’000 RM’000

Malaysia 1,945,641 405,000 1,708,137 460,043 4,518,821 East Asia - - - 766,784 766,784 South Asia - - - 179,564 179,564 Middle East - - - 276,100 276,100 Africa - - - 130,064 130,064 Europe - - - 37,770 37,770 America - - - 57,766 57,766 Oceania - - - 21,823 21,823

1,945,641 405,000 1,708,137 1,929,914 5,988,692

Off-balance sheet exposure

Insurance Banking Insurance operation operation operation Medium/ commitments Short-Term Long Term Total RM’000 RM’000 RM’000 RM’000

Malaysia 43,098 17,000 - 60,098 East Asia 402,857 97,475 - 500,332 South Asia - 9,700 - 9,700 Central Asia - 500 - 500 Middle East 57,387 35,400 - 92,787 Africa 244,385 31,700 229,330 505,415 Europe 5,958 114,570 189,360 309,888 America 137 36,700 - 36,837 Oceania 231 46,000 - 46,231

754,053 389,045 418,690 1,561,788


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Industrial AnalysisExposures to credit risk by industry are as follows:

On-Balance Sheet exposure 2010 Deposit and placement with banks Amount Loans, and other due from advances financial Investment ECR and institutions securities debtors financing Total RM’000 RM’000 RM’000 RM’000 RM’000

Agriculture, hunting and forestry - - - 15,957 15,957 Mining and manufacturing - 30,000 - 479,750 509,750 Transport, storage and communication - 40,000 - 122,348 162,348 Construction - 55,000 - 404,208 459,208 Wholesale and retail trade, and restaurants and hotels - - - 304,695 304,695 Finance, insurance, real estate and business activities 1,945,641 195,000 1,708,137 - 3,848,778 Electricity, gas and water - 85,000 - - 85,000 Government - - - 289,570 289,570 Others - - - 313,386 313,386

1,945,641 405,000 1,708,137 1,929,914 5,988,692

Off-balance sheet exposure

2010 Insurance Banking Insurance operation operation operation Medium/ commitments Short-Term Long Term Total RM’000 RM’000 RM’000 RM’000

Manufacturing 61,103 370,720 - 431,823 Transport, storage and communication - - 189,364 189,364 Construction 513,694 - 229,326 743,020 Wholesale and retail trade and restaurant and hotels 10,335 18,325 - 28,660 Government 160,812 - - 160,812 Others 8,109 - - 8,109

754,053 389,045 418,690 1,561,788


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Credit Quality by Class of Financial AssetsCredit quality for treasury credit risk exposuresThe table below shows treasury credit risk exposures by the current counterparties’ rating.

2010 RM’000

Available-for-sale investment securitiesShort term P1/MARC-1 78,000 Long term AAA 10,000 AA 170,000 A 5,000

263,000

Held-to-maturity investments securitiesShort term P1/MARC-1 37,000 Long term AAA 10,000 AA 95,000

142,000

Credit quality by loans, advances and financingFor commercial exposures, the Group and the Bank use nine risk grades with rating ‘1’ representing the lowest risk. Meanwhile for Sovereign exposures, the Group and the Bank use five risk grades with rating ‘A’ representing the lowest risk. The exposure under each of these risk grades is as follows:

2010 Neither Past due past due but not nor impaired impaired Impaired Total RM’000 RM’000 RM’000 RM’000

Commercial customer Risk Rating 1 - - - - Risk Rating 2 54,684 - - 54,684 Risk Rating 3 12,800 5,527 - 18,327 Risk Rating 4 17,739 129 - 17,868 Risk Rating 5 289,737 - - 289,737 Risk Rating 6 136,112 2,899 - 139,011 Risk Rating 7 115,711 - - 115,711 Risk Rating 8 31,111 - - 31,111 Risk Rating 9 - - - - Impaired - - 990,118 990,118

657,894 8,555 990,118 1,656,567


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Credit Quality by loans, advances and financing (cont’d)


Sovereign Risk Rating A - - - - Risk Rating B 13,352 - - 13,352 Risk Rating C 203,179 - - 203,179 Risk Rating D 22,165 - - 22,165 Risk Rating E 3,766 - - 3,766 Impaired - - 30,885 30,885

242,462 - 30,885 273,347

900,356 8,555 1,021,003 1,929,914

Credit Quality for GuaranteesSimilar to loans, advances and financing, for commercial exposures, the Group and the Bank use nine risk grades with rating ‘1’ representing the lowest risk. Meanwhile for Sovereign exposures, the Group and the Bank use five risk grades with rating ‘A’ representing the lowest risk. The exposure under each of these risk grades is as follows:


Commercial customer Risk Rating 1 - - - - Risk Rating 2 - - - - Risk Rating 3 51,042 - - 51,042 Risk Rating 4 56,281 - - 56,281 Risk Rating 5 5,573 - - 5,573 Risk Rating 6 - - - - Risk Rating 7 201,898 - - 201,898 Risk Rating 8 24,684 - - 24,684 Risk Rating 9 - - - - Impaired - - 28,495 28,495

339,478 - 28,495 367,973


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Credit Quality for InsuranceFor insurance exposures, the Group and the Bank use nine risk grades with rating ‘1’ representing the lowest risk. The exposure under each of these risk grades is as follows:


Risk Rating 1 21,234 - - 21,234 Risk Rating 2 1,120 - - 1,120 Risk Rating 3 12,517 - - 12,517 Risk Rating 4 18,603 - - 18,603 Risk Rating 5 117,025 - - 117,025 Risk Rating 6 79,391 - - 79,391 Risk Rating 7 88,652 532 - 89,184 Risk Rating 8 7,407 - - 7,407 Risk Rating 9 4,504 - - 4,504 Impaired - - 27,650 27,650 Unrated 440,498 16,250 - 456,748

790,951 16,782 27,650 835,383

Aging analysis of past due but not impaired loans, advances and financingAnalysis of loans, advances and financing that are past due but not impaired based on the Group’s and the Bank’s internal credit rating system are as follows:

RM’000

1 Month Overdue - 2 Months Overdue 6,673 3 Months Overdue 129 4 Months Overdue - 5 Months Overdue - 6 Months Overdue 1,753

8,555

Restructured ItemsRestructured loans refer to the financial assets that would otherwise be past due or impaired where there is fundamental revision in the principal terms and conditions of the facility. Restructuring shall be considered when the customer’s business is still viable and is expected to remain viable after the restructuring. The total restructured loans held by the Group and the Bank stood at RM139.5 million.


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Fair valuesThe carrying amounts of cash and cash equivalents, other receivables and other payables and short term borrowings approximate fair values due to the relatively short term nature of these financial instruments.

The fair values of financial assets and liabilities together with the carrying amount shown in the statement of financial position are as follows:

2010 2009 Carrying Fair Carrying Fair Group and Bank amount value amount value RM’000 RM’000 RM’000 RM’000

Financial assetsDeposits and placements 1,945,641 1,945,641 2,639,097 2,639,097 Amount due from ECR debtors 1,708,137 1,708,137 757,950 757,950 Loans, advances and financing 1,303,504 1,299,841 1,809,346 1,814,618 Quoted securities - - 29,792 29,792 Unquoted securities - - 340,255 340,022 AFS securities 335,145 335,145 - - HTM securities 94,957 97,042 - -

Financial liabilitiesLong term loans 2,802,509 2,765,311 2,690,977 2,663,047

The fair value of quoted securities is their quoted bid price at the financial position date. The method and assumption used in estimating the fair values of other financial instruments are as follows;

(a) Loans, advances and financingThe fair values of fixed loans with remaining maturity of less than one year and variable rate loans are estimated to approximate their carrying values. For fixed rate loans with maturities of more than one year, the fair values are estimated based on expected future cash flows of contractual instalment payments and discounted at prevailing rates at statement of financial position date offered for similar loans to new borrowers with similar credit profiles, where applicable. For impaired loan, the fair values are deemed to approximate the carrying values, net of collective and individual allowance.

(b) Long term loansThe fair values of Government loans, fixed loans with remaining maturity of less than one year and variable rate loans are estimated to approximate their carrying values. For fixed rate loans with maturities of more than one year, the fair values are estimated based on expected future cash flows of contractual instalment payments and discounted at prevailing rates at statement of financial position date obtained for similar loans with similar maturities, where applicable.

37. Insurance risks

The principal underwriting risk to which the Bank is exposed is credit risk in connection with credit, guarantee and political risk insurance underwriting activities. Management has established underwriting processes and limits to manage this risk by performing credit review on its policy holders and buyers. The underwriting function undertakes qualitative and quantitative risk assessments on all buyers and clients before deciding on an approved insured amount. Policies in riskier markets may be rejected or charged at a higher premium rate accompanied by stringent terms and conditions to commensurate the risks.


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37. Insurance risks (cont’d)

Concentration limits are set to avoid heavy concentration within a specific region or country. Maximum limits are set for buyer credit limits and client facility limits for prudent risk mitigation.

For the monitoring of buyer risks, the Bank takes into consideration both qualitative and quantitative factors and conducts regular reviews on the buyers` credit standing and payment performance to track any deterioration in their financial position that may result in a loss to the Bank.

On country risk, the Bank periodically reviews the economic and political conditions of the insured markets so as to revise its guidelines, wherever appropriate. In order to mitigate the insurance risk, the Bank may cede or transfer the risk to another insurer company. The ceding arrangement minimizes the net loss to the Bank arising from potential claims.

Key assumptionsThe sensitivity analysis is based upon the assumptions set out in the actuarial report and is subject to the reliances and limitations contained within the report. One particular reliance is that the net sensitivity results assume that all reinsurance recoveries are receivable in full.

The sensitivity items shown are independent of each other. In practice a combination of adverse and favourable changes could occur.

The sensitivity results are not intended to capture all possible outcomes. Significantly more adverse or favourable results are possible.

Sensitivity AnalysisThe independent actuarial firm engaged by the Group and the Bank re-runs its valuation models on various bases. An analysis of sensitivity around various scenarios provides an indication of the adequacy of the Group’s and the Bank’s estimation process in respect of its insurance contracts. The table presented below demonstrates the sensitivity of the insurance contract liabilities estimates to particular movements in assumptions used in the estimation process.

The analysis below is performed for reasonably possible movements in key assumptions with all other assumptions held constant, showing the impact on gross and net liabilities, profit before tax and equity. The correlation of assumptions will have a significant effect in determining the ultimate claims liabilities, but to demonstrate the impact due to changes in assumptions, assumptions had to be changed on an individual basis.

Claim Liability Sensitivity Analysis

Net RM’000

Estimated claim liabilities 26,820

a. Change in claim costsAssumed an average claim cost of RM350,000 net of non-reinsurance recoveries for the Comprehensive Policy Shipments and adopted the Group’s and the Bank’s specific provisions for the other types of contracts where applicable. Changing the average claims cost and specific provisions by 10% gives the following results.

Net RM’000 RM’000 High Low

+10% -10%

Estimated claim liabilities 29,501 24,138


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b. Change in average number of claims

Assumed 7 IBNR claims for Comprehensive Policy Shipments. Changing this by 10% to 8 claims and 6 claims gives the following results.


+10% -10%


c. Change in Claims Handing Expenses (“CHE”)Assumed claims handling expenses of 20% of IBNR and 10% of the specific provisions. Changing this by 10% points gives the following results.


+10% -10%


d. Change in PRAD %Assumed a claim Provision of Risk Margin for Adverse Deviation (“PRAD”) of 15%. Changing this by 10% (to 16.5% and 13.5% respectively) gives the following results.


+10% -10%


Premium Liability Sensitivity Analysis

Net RM’000

Estimated premium liabilities 21,552


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Sensitivity Analysis (cont’d.)Premium Liability Sensitivity Analysis (cont’d.)a. Change in Probability of Default

Assumed probability of default of ranging from 1% to 5%, depending on the type of contract. Increasing and decreasing this by 0.25% points gives the following results.

Net High Low +0.25% -0.25%

points points

Estimated premium liabilities 25,180 17,924

b. Change in recovery ratesOn the premium liability front, assumed nil recovery rates for all the products. Increasing this to 10% gives the following results.

Net High Low

N/A +10%

Estimated premium liabilities N/A 19,575

c. Change in Claim Handling Expenses (“CHE”)Assumed CHE of 10%. Changing this by 10% points gives the following results.

Net High Low

+10% -10%


d. Change in PRAD %Assumed a premium PRAD of 50%. Changing this by 10% (to 55% and 45% respectively) gives the following results.

Net High Low

+10% -10%



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38. Islamic banking business

Statement of financial position as at 31 December

Group and Bank 2010 2009 Note RM’000 RM’000

AssetsCash and bank balances (a) 1,346 505 Deposits and placements with banks and other financial institutions (b) 55,583 39,482 Amount due from ECR-i debtors (c) 10,307 - Investments securities (d) - 24,699 Advances and financing (e) 99,591 36,648 Other receivables 2,025 222

Total assets 168,852 101,556

LiabilitiesFinancing payable 60,566 - Other liabilities 1,703 52

Total liabilities 62,269 52

Financed by:Islamic banking funds 100,000 100,000 Reserves 6,583 1,504

Islamic banking funds 106,583 101,504

Total liabilities and Islamic banking funds 168,852 101,556

Statement of Income for the financial year ended 31 December

Group and Bank 2010 2009 Note RM’000 RM’000

Income derived from Islamic Banking Funds (f) 7,859 2,105 Financing cost (451) -

Net income from Islamic banking funds 7,408 2,105 Administrative expenses (896) (42)

Operating profit before taxation and zakat 6,512 2,063 Allowance for losses on advances and financing (g) (957) (559)

Profit for the year before Zakat 5,555 1,504 Zakat (476) -

Profit for the year 5,079 1,504


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38. Islamic banking business (cont’d)

Statement of changes in Islamic Banking Fund for the year ended 31 December

Islamic Banking Retained Fund profits Total RM’000 RM’000 RM’000

Group and Bank

Transfer of fund 100,000 - 100,000 Net profit for the year - 1,504 1,504

At 31 December 2009 100,000 1,504 101,504 Net profit for the year - 5,079 5,079

At 31 December 2010 100,000 6,583 106,583

Statement of Cash flow for the financial year ended 31 December


Cash flows from operating activitiesProfit before taxation and zakat 5,555 1,504 Adjustments for: Allowance for losses on advances and financing 957 559 Accretion of discount (301) (699)

Operating profit before working capital changes 6,211 1,364 Changes in working capital: Other assets (1,803) (222) Other liabilities 1,175 52 Advances and financing (63,900) (37,207)

Net cash used in operating activities (58,317) (36,013)

Cash flow from investing activitiesProceed from disposal of investments 25,000 - Purchase of investments - (24,000)

Net cash used in investing activities 25,000 (24,000)

Cash flows from financing activitiesIncrease in Islamic banking fund - 100,000 Net drawdown of financing payable 60,566 - Net drawdown of ECR-i debtors (10,307) -

Net cash generated from financing activities 50,259 100,000


102


Statement of Cash flow for the financial year ended 31 December (cont’d)


Net increase in cash and cash equivalents 16,942 39,987 Cash and cash equivalents at beginning of year 39,987 -

Cash and cash equivalents at end of year 56,929 39,987

Cash and cash equivalents comprise: Cash and bank balances 1,346 505 Deposits and placements with banks and other financial institutions 55,583 39,482

56,929 39,987

Notes to the financial statements for the financial year ended 31 December 2010(a) Cash and bank balances


Cash and bank balances 1,346 505

(b) Deposits and placements with banks and other financial institutions


Deposits are placed with: Licensed banks 55,583 14,482 Other financial institution - 25,000

55,583 39,482

(c) Amount due from ECR-i debtors


Amount due from participating licensed banks under ECR-i Scheme 10,307 -

The maturity structure of the ECR-i debtors are as follows: Maturity within one year 10,307 -


103


(d) Investment securities


Unquoted investments: Private debt securities - 25,000 Amortisation of premiums less accretion of discounts - (301)

- 24,699

(e) Advances and financing


Murabahah 43,125 37,657 Istisna’ 260,157 - Unearned income (202,175) (450)

101,107 37,207 Allowance for losses on advances and financingCollective allowance (1,516) - General allowance - (559)

Net advances and financing 99,591 36,648

The maturity structure of the advances and financing are as follows:

Within one year 42,745 37,207 More than 5 years 58,362 -

101,107 37,207

Group and Bank 2010 RM’000

Collective AllowanceBalance at 1 January - Effect of Adopting FRS 139 559 Allowance made during the year 957

Balance at 31 December 1,516

2009 RM’000

General AllowanceBalance at 1 January - Allowance made during the year 559

Balance at 31 December 559


104


(f) Income derived from investment of Islamic Banking Fund


Advances and financing: Murabahah 2,087 241 Istisna’ 1,681 - ECR-i debtors 112 - Deposit and placement with banks and other financial institutions 1,251 1,145 Accretion of discount 327 699 Others 2,401 20

7,859 2,105

(g) Allowance for losses on advances and financing


Collective allowance made during the year 957 - General allowance made during the year - 559

I n t e r n a l S t r e n g t h , G l o b a l O u t l o o k

Exp

ort-Imp

ort Bank of M

alaysia Berhad

(357198-K) • A

nnual Rep

ort 2010

Level 1, EXIM Bank, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia l Tel : +603-2601 2000 l Fax : +603-2601 2100

w w w . e x i m . c o m . m y

Export-Import Bank of Malaysia Berhad (357198-K)

Documents

Annual Report 2010such as Shariah compliant financing,sales and marketing, consultancy, advisory and other areas. This was identifiedas a key component of the CIP. We will continue