INFORMATION MEMORANDUM IN RELATION TO THE MEDIUM …

AmBank (M) Berhad

(Company Number: 8515-D)

(Incorporated in Malaysia under the Companies Act, 1965)

INFORMATION MEMORANDUM

IN RELATION TO THE MEDIUM TERM NOTES

PROGRAMME OF UP TO RM2.0 BILLION IN

NOMINAL VALUE

________________

Principal Adviser and Lead Arranger

AmInvestment Bank Berhad (Company No: 23742-V)

(a member of AmInvestment Group Berhad)

Information Memorandum dated 21 January 2008

________________

AmBank (M) Berhad Information Memorandum

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IMPORTANT NOTICE

The Securities Commission of Malaysia (“SC”) has approved this proposal pursuant to section 212 of the Capital Markets and Services Act, 2007, as amended from time to time (“CMSA”). Please note that the SC‟s approval of this proposal shall not be taken to indicate that the SC recommends the proposal. AmBank (M) Berhad (“Issuer” or “AmBank”) has prepared this Information Memorandum, which is being provided on a confidential basis to potential investors of the medium term notes (“MTN”) of up to RM2.0 billion in nominal value to be issued by the Issuer under a MTN programme (“MTN Programme”). The MTN may not be issued, offered, sold, transferred or otherwise disposed of, directly or indirectly, nor may any document or other material in connection therewith including this Information Memorandum be distributed, in Malaysia other than to persons, whether as principal or agent, falling within any one of the categories of persons specified in Schedule 6 or section 229(1)(b) or Schedule 7 or section 230(1)(b) and Schedule 9 or section 257(3) of the CMSA subject to any law, order, regulation or official directive of Bank Negara Malaysia (“BNM”), the Securities Commission (“SC”) and/or any other regulatory authority from time to time. This Information Memorandum may not be, in whole or in part, reproduced or used for any other purpose, or shown, given, copied to or filed with any other person including, without limitation, any government or regulatory authority except with the prior consent of AmBank or as required under Malaysian laws, regulations or guidelines. The persons preparing this Information Memorandum have made all enquiries as were reasonable in the circumstances and after making such enquiries have reasonable grounds to believe and do believe up to the time of the issue of this Information Memorandum that the information herein is true and not misleading and there is no material omission therein. This Information Memorandum should not be construed as a recommendation by AmBank or any other party to subscribe for or purchase the MTN. Further, the information contained herein should not be read as a representation or warranty, expressed or implied, as to the merits of the MTN or the purchase thereof. This Information Memorandum is not a substitute for, and should not be regarded as, an independent evaluation and analysis. Each recipient should perform and is deemed to have made his/its own independent investigation and analysis of AmBank, the MTN and all other relevant matters, including but not limited to the information and data set out in this Information Memorandum, and each recipient should consult its own professional advisers. AmBank, confirms that to the best of its knowledge, information and belief: (a) this Information Memorandum contains all information with respect to AmBank and its subsidiary companies that is material in the context of the purpose for which this Information Memorandum is issued, (b) the information and data contained in this Information Memorandum are true, accurate and not misleading in all material respects, and (c) there is no material omission of any information and data from this Information Memorandum. This Information Memorandum has not been and will not be made to comply with the laws of any jurisdiction outside Malaysia (“Foreign Jurisdiction”), and has not been and will not be lodged, registered or approved pursuant to or under any legislation of (or with or by any


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regulatory authorities or other relevant bodies of) any Foreign Jurisdiction and it does not constitute an offer of, or an invitation to subscribe for or purchase the MTN or any other securities of any kind by any party in any Foreign Jurisdiction. This Information Memorandum is not and is not intended to be a prospectus. By accepting delivery of this Information Memorandum, each recipient agrees to the terms upon which this Information Memorandum is provided to such recipient as set out in this Information Memorandum, and further agrees and confirms that: (a) it will keep confidential all of such information and data, (b) it is lawful for the recipient to receive this Information Memorandum and to subscribe for, purchase or in any other way to receive the MTN under all jurisdictions to which the recipient is subject, (c) the recipient will comply with all the applicable laws in connection with such subscription, purchase or acceptance of the MTN, (d) AmBank and all other parties involved in the preparation of this Information Memorandum and their respective directors, officers, employees, agents and professional advisers are not and will not be in breach of the laws of any jurisdiction to which the recipient is subject as a result of such subscription, purchase or acceptance of the MTN and they shall not have any responsibility or liability in the event that such subscription or acceptance of the MTN is or shall become unlawful, unenforceable, voidable or void, (e) it is aware that the MTN can only be transferred or otherwise disposed of in accordance with the relevant selling restrictions and all applicable laws, (f) it has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of subscribing for or purchasing the MTN and is able and prepared to bear the economic and financial risks of investing in or holding the MTN, (g) it is subscribing for, purchasing or accepting the MTN for its own account, and (h) it, at the point of issuance of the MTN, falls within one or more of the categories of persons to whom an offer or invitation to subscribe for or purchase the MTN would constitute an excluded issue, excluded offer or excluded invitation pursuant to Schedule 6 or section 229(1)(b) or Schedule 7 or section 230(1)(b) and Schedule 9 or section 257(3) of the CMSA (subject to any law, order, regulation or official directive of BNM, the SC and/or any other regulatory authority from time to time) and after the point of issuance of the MTN, falls within one or more of the categories of persons to whom an offer or invitation to subscribe for or purchase the MTN would constitute an excluded offer or excluded invitation pursuant to Schedule 6 or section 229(1)(b) and Schedule 9 or section 257(3) of the CMSA (subject to any law, order, regulation or official directive of BNM, the SC and/or any other regulatory authority from time to time). Each recipient is solely responsible for seeking all appropriate expert advice as to the laws of all jurisdictions to which it is subject.

Neither the delivery of this Information Memorandum nor the offering, sale or delivery of any MTN shall in any circumstance imply that the information contained herein concerning the Issuer is correct at any time subsequent to the date hereof or that any other information supplied in connection with the MTN is correct as of any time subsequent to the date indicated in the document containing the same. The Lead Arranger expressly does not undertake to advise any investor in the MTN of any information coming to their attention. The recipient of this Information Memorandum or the potential investors should review, inter alia, the most recently published documents incorporated by reference into this Information Memorandum when deciding whether or not to purchase any MTN. This Information Memorandum includes certain historical information and reports thereon derived from sources believed to be reliable and other publicly available information. Such information and reports have been included solely for illustrative purposes. No


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representation or warranty is made as to the accuracy of any information and report thereon derived from such and other third party sources. This Information Memorandum includes “forward looking statements”. These statements include, among other things, disclosure of AmBank‟s business strategy and expectation concerning its position in the Malaysian economy, future operations, liquidity, financial position and settlement of indebtedness. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may affect actual outcomes, many of which are outside the control of AmBank. All these statements are based on assumptions made by AmBank that, although believed to be reasonable, are subject to risks and uncertainties that may cause actual events and the future results of AmBank to be materially different from that expected or indicated by such statements and no assurance is given that any of such statements will be realised. Therefore, the contingencies and inherent uncertainties underlying such information should be carefully considered by investors and the inclusion of a forward looking statement in this Information Memorandum is not a representation or warranty by AmBank or any other person that the plans and objectives of AmBank will be achieved. Further, such parties are not under any obligation to update or revise such forward-looking statements to reflect any change in expectations or circumstances. Any differences in the expectations of AmBank and its actual performance may result in AmBank‟s financial and operating performance and plans being materially different from those anticipated. This Information Memorandum will be lodged with the SC. Such lodgement shall not be taken to indicate that the SC recommends the MTN, or that it assumes responsibility for the correctness of any statement, opinion or report contained in this Information Memorandum.

EACH ISSUE OF PRIVATE DEBT SECURITIES WILL CARRY DIFFERENT RISKS.

INVESTORS MUST RELY ON THEIR OWN EVALUATION TO ASSESS THE MERITS AND

RISKS OF AN INVESTMENT IN ANY ISSUE OF PRIVATE DEBT SECURITIES,

INCLUDING THE MTN. IT IS RECOMMENDED THAT PROSPECTIVE INVESTORS

CONSULT THEIR OWN LEGAL, FINANCIAL AND OTHER ADVISERS BEFORE

PURCHASING OR ACQUIRING THE MTN.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]


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TABLE OF CONTENTS

GLOSSARY OF DEFINITIONS AND ABBREVIATIONS……………………………………………….....vi

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

1.1 History and Background ............................................................................................ 1

1.2 Description of the Issue ............................................................................................. 1

1.3 Rationale of the Issue................................................................................................. 2

1.4 Utilisation of Proceeds ............................................................................................... 3

1.5 Rating ........................................................................................................................... 3

1.6 Approvals Required .................................................................................................... 3

1.7 Conflict of Interest and Appropriate Mitigating Measures ..................................... 4

2 SUMMARY OF THE TERMS AND CONDITIONS OF THE MTN PROGRAMME ................... 5

3 INVESTMENT CONSIDERATIONS ........................................................................................ 17

3.1 Considerations relating to the Issuer and its business ........................................ 17

3.1.1 Business Risk ............................................................................................................. 17

3.1.2 Market Volatility........................................................................................................... 18

3.1.3 Political and Economic Factors ................................................................................... 19

3.1.4 Regulatory Constraints ............................................................................................... 19

3.1.5 Competition ................................................................................................................. 19

3.1.6 Employee Misconduct ................................................................................................. 20

3.1.7 Dependence on key Personnel ................................................................................... 20

3.1.8 Influence by Shareholder ............................................................................................ 21

3.1.9 Introduction of a new substantial shareholder in the AHB may lead to a change in the business strategies of the Issuer ................................................................................ 21

3.1.10 Insurance Cover ......................................................................................................... 21

3.1.11 Accounting Policy ....................................................................................................... 22

3.1.12 Information technology (“IT”) Risk .............................................................................. 23

3.2 Considerations relating to the MTN ........................................................................ 24

3.2.1 Issuer’s Ability to meet its Obligations under the MTN ............................................... 24

3.2.2 Rating of the MTN is no guarantee of AmBank’s paying ability .................................. 24

3.2.3 Liquidity of the MTN .................................................................................................... 24

3.2.4 Investors claims to the Interest & Principal payments are subordinated .................... 25


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4 DESCRIPTION OF THE ISSUER............................................................................................ 25

4.1 History and Background .......................................................................................... 25

4.2 Business Overview ................................................................................................... 26

4.3 Recent Developments .............................................................................................. 26

4.4 Corporate Information .............................................................................................. 30

4.4.1 Principal Place of Business ........................................................................................ 30

4.4.2 Share Capital and Changes in Share Capital ............................................................. 30

4.4.3 Substantial Shareholders ............................................................................................ 32

4.5 Information on Directors and Senior Management ............................................... 33

4.5.1 Board of Directors ....................................................................................................... 33

4.5.2 Directors’ Profiles ........................................................................................................ 33

4.5.3 Profile of Key Management......................................................................................... 37

4.6 Risk Management ..................................................................................................... 39

4.7 Accolades and Awards ............................................................................................. 41

5 FINANCIAL AND OTHER MATERIAL INFORMATION ......................................................... 42

5.1 Historical Financial Highlights ................................................................................ 42

5.2 Commentaries on past performance ...................................................................... 43

5.3 Material commitments and contingent liabilities as at 30 September

2007 and capital commitments as at 31 March 2007 ............................................. 45

5.4 Other Material Information ....................................................................................... 46

5.4.1 Material Contracts ....................................................................................................... 46

5.4.2 Material Litigation ........................................................................................................ 47

APPENDIX A Interim Financial Statements for the financial half-year from 1 April 2007 to 30 September 2007

APPENDIX B RAM Rating Report


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GLOSSARY OF DEFINITIONS AND ABBREVIATIONS

The following definitions (in addition to the definitions contained in the body herein) shall apply throughout this Information Memorandum except where the context otherwise requires:

Act : The Companies Act, 1965 or any statutory modification, amendment or re-enactment thereof for the time being in force

AHB : AMMB Holdings Berhad (223035-V)

AHB Group : AHB, its subsidiary and associated companies

AIGB : AmInvestment Group Berhad (657000-X)

AmBank or Issuer : AmBank (M) Berhad (8515-D)

AmBank Group : AmBank and its subsidiary companies

AMFB : AMFB Holdings Berhad (5493-X)

AmInvestment Bank : AmInvestment Bank Berhad (23742-V)

ANZ : Australia and New Zealand Banking Group Limited (005 357 522)

ANZ Funds : ANZ Funds Pty Ltd (004 594 343)

BAFIA : The Banking and Financial Institutions Act 1989, or any statutory modification, amendment or re-enactment thereof for the time being in force

BNM : Bank Negara Malaysia

Board : Board of Directors of AmBank

Bursa Securities : Bursa Malaysia Securities Berhad (635998-W)

CMSA : The Capital Markets and Services Act, 2007 or any statutory modification, amendment or re-enactment thereof for the time being in force

Depository and Paying

Agency Agreement

: The Depository and Paying Agency Agreement entered or to be entered into between the Issuer, the Trustee, BNM and AmInvestment Bank (as lead arranger) in connection with the MTN

EB : The RM575,000,000 nominal value of 10-year unsecured


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subordinated exchangeable bonds issued by AmBank on 18 May 2007 pursuant to the trust deed dated 15 May 2007 between AmBank, AHB and BHLB Trustee Berhad, which are exchangeable into new Ordinary Shares at an exchange price of RM3.05 (or such adjusted exchange price pursuant to the terms of the trust deed) and which, if not earlier exchanged, shall mature on 18 May 2017

EPS : Earnings per share

Facility Agency

Agreement

The facility agency agreement entered or to be entered into between the Issuer, the Facility Agent and the Trustee

Facility Agent AmInvestment Bank

FYE : Financial Year Ended

Issue : The issue of, offer for subscription or purchase of, or invitation to subscribe for or purchase the MTN

Lead Arranger : AmInvestment Bank

Listing Requirements : The Listing Requirements of Bursa Securities

MI : Minority interest

MTN : The up to RM2.0 billion nominal value of medium term notes under the MTN Programme to be issued by AmBank

MTN Programme : The programme under which AmBank may issue tranches of MTN from time to time during its tenor.

NTA : Net tangible assets

PAT : Profit after taxation

PBT : Profit before taxation

PDS : Private debt securities

Principal Adviser : AmInvestment Bank

Proposed Business

Transfer

: The transfer of AmInvestment Bank‟s fund-based business to AmBank (with respect to its non-Islamic banking business) and to AmIslamic Bank (with respect to its Islamic banking business)

RAM : RAM Rating Services Berhad (763588-T)


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RM and sen : Ringgit and sen respectively

SC : Securities Commission

SMEs : Small and medium enterprises

Share(s) : Ordinary share(s) of RM1.00 each

Transaction Document : Each of the following documents:- (i) the Trust Deed; (ii) the Programme Agreement; (iii) the Facility Agency Agreement; (iv) the Depository and Paying Agency Agreement; and references to Transaction Documents shall include references to any one or more of them

Trust Deed : The Trust Deed entered or to be entered into between the Issuer and the Trustee constituting the MTN

Trustee : Pacific Trustees Berhad (317001-A)


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1 EXECUTIVE SUMMARY

The following summary is qualified in its entirety by the more detailed information, the financial statements and notes thereto appearing elsewhere in this Information Memorandum. Investors should read the full text of the Information Memorandum before deciding to invest in the MTN.

1.1 History and Background

AmBank was incorporated on 25 March 1969 as a public limited company under the Companies Act, 1965 under the name of Malaysia Borneo Finance Corporation (M) Berhad (“MBFC”).

MBFC was listed on the Main Board of Bursa Malaysia Securities Berhad (“Bursa

Securities”) on 8 June 1983 and changed its name to MBf Finance Berhad (“MBf

Finance”) on 19 December 1985.

Pursuant to a restructuring scheme, MBf Finance became a wholly-owned subsidiary of MBf Capital Berhad, with MBf Capital Berhad assuming the listing status of MBf Finance. MBf Capital Berhad was listed on the Main Board of Bursa Securities in place of MBf Finance effective from 15 January 1993 and consequently, MBf Finance was delisted. MBf Finance changed its name to AmFinance Berhad on 3 April 2002 and assumed its present name on 1 June 2005. AmBank and its subsidiary companies (“AmBank Group”) provide banking and financial services which include loans, advances and financing, deposit services, credit cards, remittance services, foreign exchange and (through its wholly-owned subsidiary, AmIslamic Bank Berhad) Islamic banking services.

As at 12 December 2007, the authorised share capital of AmBank was RM3,886,250,002 comprising 1,386,250,002 ordinary shares of RM1.00 each and 2,500,000,000 6% irredeemable non-cumulative convertible preference shares of

RM1.00 each (“IPS”) of which 610,363,762 ordinary shares of RM1.00 each and 150,000,000 IPS respectively are issued and fully paid-up.

1.2 Description of the Issue

The MTN Programme is structured to be recognized as Tier 2 capital under the capital adequacy framework for financial institutions subject to compliance with the Risk Weighted Capital Adequacy Framework issued by BNM.

The MTN will constitute unsecured obligations of AmBank, subordinated in right and priority of payment, to the extent and in the manner provided in the terms of the MTN, to all deposit liabilities and other secured and unsecured liabilities of AmBank and preference shares issued by AmBank except those liabilities which by their terms rank pari-passu in right and priority of payment with or are subordinated to the MTN. The MTN will, in the event of a distribution of assets in the winding-up or liquidation of AmBank, rank senior to the ordinary share capital of AmBank and other instruments subordinated to the MTN in the manner provided in the terms of such other instruments.

The MTN Programme has a tenor of 20 years from the date of the first issuance under the MTN Programme. The MTN shall be issued for maturities of between 10 to


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20 years as the Issuer may select at the point of issuance provided that no MTN shall mature after the expiration of the MTN Programme.

The MTN will bear a coupon at a rate to be determined upon the completion of the bookrunning exercise and/or private placement to identified investors at the time of each issue under the MTN Programme. The coupon rate of the MTN shall be stepped up by 0.5% per annum at the beginning of the 5

th year, and every

anniversary thereafter, preceding the maturity of the MTN.

The coupon for the MTN is payable semi-annually in arrears, with the last coupon payment to be made on the maturity date or Call Date (as defined below), as the case may be. Unless previously redeemed or purchased and cancelled, the Issuer will have a call

option (the “Call Option”) to redeem the MTN at par, and in whole but not in part, at the beginning of the 5

th year, and every anniversary thereafter, preceding the maturity

of the MTN (“Call Date”) at 100% of the nominal value of the outstanding MTN together with accrued interest by giving the Trustee not less than thirty (30) days prior written notice. The exercise of the Call Option by the Issuer in respect of any particular tranche of MTN will not affect the other outstanding tranche(s) of MTN under the MTN Programme. Such exercise of the Call Option is subject to the prior approval of BNM.

1.3 Rationale of the Issue

AmBank has currently a combination of approximately RM1.695 billion of Tier 2 capital comprising an array of Tier 2 qualifying debt instruments, namely:-

No Original

Issuer

Format Investor/(s) Issuance

Size

First

Optional

Redemption

Date

1 AmBank subordinated bonds

capital markets

RM200m 29 Apr 2008

2 AmBank subordinated loan

Quanto Assets Berhad

(repackaged for capital markets)

RM460m 29 Sep 2008

3 AmBank exchangeable subordinated

bonds

ANZ Funds Pty Ltd

RM575m 18 May 2017

4 AmInvestment Bank*

subordinated bonds

capital markets

RM460m 29 Sep 2008

Note:- * To be transferred to AmBank pursuant to the Proposed Business Transfer.


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AmBank intends to take the opportunity to streamline its Tier 2 capital issuance under one single format and instrument type via the issuance of MTN. As there are still outstanding Tier 2 capital issuances of AmBank in the market with various first optional redemption dates, AmBank intends to undertake the streamlining of its Tier 2 capital issuance via the MTN Programme. In addition to refinancing the above-mentioned current outstanding Tier 2 issuances, the MTN Programme will also cater for the future issuances of Tier 2 capital instruments to further increase the capital base of AmBank at the appropriate time and to take advantage of liquidity in the capital market. The MTN Programme also enables AmBank to raise funds in a more cost effective manner in the long run.

1.4 Utilisation of Proceeds

Proceeds raised from the MTN Programme shall be utilised for the following purposes:

PROPOSED UTILIZATION ISSUE AMOUNT

Refinancing existing Tier 2 subordinated bonds/loans

Up to RM1,120 million

Working capital/funding

Up to RM878.7 million

Initial expenses

Up to RM1.3 million

Total Up to RM2,000 million

1.5 Rating

As at the date of this Information Memorandum, RAM has assigned a long-term

rating of A2 for the MTN. Please see Appendix B of this IM for a copy of the rating rationale by RAM.

1.6 Approvals Required

The MTN Programme has been approved by the SC vide its letter dated 14 January 2008. The SC has also, in the same approval letter waived the inclusion of certain provisions of the SC‟s Guidelines on the Minimum Contents Requirements for Trust Deeds in the Trust Deed.

BNM has vide its letter dated 19 December 2007 approved the implementation of the MTN Programme and MTN issued thereunder to be eligible as Tier 2 capital under the capital adequacy framework for financial institutions subject to compliance with BNM's guidelines on “Risk-Weighted Capital Adequacy Framework (General Requirements and Capital Components)”.


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1.7 Conflict of Interest and Appropriate Mitigating Measures

Principal Adviser

AmInvestment Bank is a wholly-owned subsidiary of AIGB, which in turn is a wholly-owned subsidiary of AHB. AmBank is a wholly-owned subsidiary of AMFB, which in turn is a wholly-owned subsidiary of AHB. As such, AHB, AmInvestment Bank, AMFB and AmBank are deemed to be related corporations.

Notwithstanding the aforementioned, AmInvestment Bank, in its role as Principal Adviser to AmBank in respect of the MTN Programme, has considered the factors involved and believes that objectivity and independence in carrying out its role has been/will be maintained at all times for the following reasons:-

a) AmInvestment Bank is a licensed investment bank and its appointment as the

Principal Adviser to AmBank in respect of the MTN Programme is in the ordinary course of its business.

b) The conduct of AmInvestment Bank is regulated strictly by the BAFIA and

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

c) Save for the professional fees charged in relation to its appointed roles as the

Principal Adviser, Lead Arranger and Facility Agent for the MTN Programme, AmInvestment Bank will not be deriving any other monetary benefit from the proposals outside of its aforesaid capacities.

d) Save for loans extended to subsidiaries of AHB (including AmBank) and inter-bank transactions between AmInvestment Bank and AmBank which are established on terms and conditions that are no less different than those with independent third parties and which are entered into in AmInvestment Bank‟s ordinary course of business, there are no other financial facilities granted by AmInvestment Bank to AHB or its subsidiary companies.

The Board of Directors of AmBank has confirmed that it has been made fully informed and are aware of the aforesaid potential conflict of interest situations and, having considered the above situations, intends to proceed with the MTN Programme and is agreeable to AmInvestment Bank acting in its capacity as, inter alia, the Principal Adviser, the Lead Arranger and the Facility Agent in relation to the MTN Programme.

Other Advisers Messrs Shook Lin & Bok, being the legal adviser to the Principal Adviser/Lead Arranger and legal due diligence solicitors for the MTN Programme, have confirmed that they do not have any interest in the MTN Programme other than their capacity as the legal adviser and legal due diligence solicitors.


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2 SUMMARY OF THE TERMS AND CONDITIONS OF THE MTN PROGRAMME

1. BACKGROUND INFORMATION

(a) Issuer (i) Name : AmBank (M) Berhad (“AmBank”). (ii) Address : 22

nd Floor, Bangunan AmBank Group

55, Jalan Raja Chulan 50200 Kuala Lumpur.

(iii) Business Registration No. : 8515-D. (iv) Date/Place of Incorporation : 25 March 1969 / Malaysia. (v) Date of Listing (in case of a

Public Listed Company) : Not listed on any exchange.

(vi) Status

- Resident/Non-Resident controlled company - Bumiputera/Non-Bumiputera controlled company

: :

Resident controlled company. Non-Bumiputera controlled company.

(vii) Principal Activities : AmBank is a licensed bank and finance company

under BAFIA and it provides banking and financial services which include loans, advances and financing, deposit services, credit cards, remittance services, foreign exchange and (through its wholly-owned subsidiary, AmIslamic Bank Berhad) Islamic banking services.

(viii) Board of Directors : The board of directors consists of:

Name Nationality /

Designation

Tan Sri Dato‟ Azman

Hashim (”TSDAH”)

Malaysian / Chairman, Non-Independent Non-Executive Director

Tun Mohammed Hanif bin Omar

Malaysian / Independent Non-Executive Director

Tan Sri Datuk Clifford Francis Herbert


Dato‟ Gan Nyap Liou@ Gan Nyap Liow


Tan Kheng Soon Malaysian / Independent Non-Executive Director

Cheah Tek Kuang Malaysian/

Chief Executive Officer

Anthony John Healy Australian/ Non-Independent Non-Executive Director


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(ix) Structure of Shareholdings

and names of Shareholders or, in the case of a Public Company, names of all Substantial Shareholders

: AmBank is a wholly-owned subsidiary of AMFB Holdings Berhad (“AMFB”) which in turn is a wholly-owned subsidiary of AMMB Holdings Berhad. The substantial shareholders of AmBank as at 12 December 2007 are as follows:-

Name No. of AmBank shares/% Direct Indirect

AMFB 610,363,762^

/100% -

AHB - 610,363,762 *^

/100% TSDAH - 610,363,762 *^

/100% AmcorpGroup Berhad

- 610,363,762 *^ /100%

Clear Goal Sdn Bhd

- 610,363,762 *^ /100%

Employees Provident Fund Board

- 610,363,762 * /100%

Notes: * Deemed interested by virtue of his/its interests in AMFB via his/its substantial interests in AHB. ^ Excluding 150,000,000 6% irredeemable non-cumulative convertible preference shares of RM1.00 each.

(x) Authorised and Paid-Up

Capital :

Authorised share capital as at 12 December 2007

: RM3,886,250,002 comprising :- (a) 1,386,250,002 ordinary shares of RM1.00

each (“Ordinary Shares”); and (b) 2,500,000,000 6% irredeemable non-

cumulative convertible preference shares of

RM1.00 each (“IPS”).

Paid-up capital as at 12 December 2007

: 610,363,762 Ordinary Shares. 150,000,000 IPS.


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2. PRINCIPAL TERMS AND CONDITIONS

(a) Name of parties involved in the proposed transaction, (where applicable)

(i) Principal Adviser(s)/Lead Arranger(s)

: AmInvestment Bank Berhad (Company No. 23742-V)

(“AmInvestment Bank”).

(ii) Arranger(s) : Not applicable. (iii) Valuers : Not applicable. (iv) Solicitors : Messrs Shook Lin & Bok.

(v) Financial Adviser : Not applicable. (vi) Technical Adviser : Not applicable. (vii) Guarantor : Not applicable. (viii) Trustee : Pacific Trustees Berhad (Company No. 317001-A). (ix) Facility Agent : AmInvestment Bank. (x) Primary Subscriber(s)

and amount subscribed (where applicable)

: The Primary Subscribers (if any) will be determined prior to each issuance of the MTN.

(xi) Underwriter(s) and

amount underwritten : Not applicable.

(xii) Central Depository : Bank Negara Malaysia (“BNM”). (xiii) Paying Agent : BNM (xiv) Reporting Accountant : Not applicable. (xv) Others (please specify) Lead Manager : AmInvestment Bank and/or such other parties as may be

appointed by the Issuer.

(b) Facility Description : Up to RM2.0 billion nominal value Medium Term Notes

(“MTN”) Programme (“MTN Programme”). The MTN Programme will be recognised as Tier 2 capital in accordance with the Risk Weighted Capital Adequacy Framework issued by BNM.

(c) Issue Size (RM) : Up to RM2.0 billion in nominal value. The total outstanding MTN shall not at any one time exceed the nominal amount of RM2.0 billion.

(d) Issue Price (RM) : The MTN shall be issued at a discount or par or premium to the nominal value at the Issuer‟s option and agreed to by the Lead Manager for each issue of MTN.


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(e) Tenor of the Facility/Issue

: Up to 20 years (“Programme Tenor”) from the date of the first issuance. The first issuance of MTN under the MTN Programme shall not be later than twelve (12) months from the date of the SC‟s approval.

Maturity of MTN The MTN shall have maturities ranging from ten (10) to twenty (20) years which will be determined at the point of

each issuance (“Maturity Date”) and callable by the Issuer at the beginning of the 5

th year, and every anniversary

thereafter, preceding the maturity of the MTN (“Call Date”). None of the MTN shall have a maturity date extending beyond the expiry date of the Programme Tenor.

(f) Interest/Coupon (%) : The MTN shall bear a coupon at a rate to be determined prior to each issuance.

The coupon rate of the MTN shall be stepped up by 0.5% per annum at the beginning of the 5

th year, and every

anniversary thereafter, preceding the Maturity Date of the MTN.

(g) Interest/Coupon Payment

Frequency

: Payable semi-annually in arrears, with the last coupon payment to be made on the Maturity Date or the Call Date as the case may be.

(h) Interest/Coupon Payment

Basis

: Actual/365 days.

(i) Yield to Maturity (“YTM”) (%) : The yield-to-maturity of the MTN will be determined prior to

each issuance. The Securities Commission (“SC”) will be notified immediately thereafter.

(j) Security/Collateral (if any) : Nil.

(k) Details on Utilisation of

Proceeds

: Proceeds raised from the MTN Programme shall be utilised to refinance existing Tier 2 subordinated bonds/loans and to meet working capital and funding requirements as below:

P ISSUE AMOUNT

Refinancing the existing Tier 2 subordinated bonds/loans

Up to RM1,120 million

Working capital/funding Up to RM878.7 million

Initial expenses Up to RM1.3 million

Total Up to RM2,000 million

(l) Sinking Fund (if any) : Not applicable.

(m) Rating

Credit Rating assigned (Please

specify if this is an indicative

rating)

: A2.

Name of Rating Agency : RAM Rating Services Berhad (“RAM”).


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(n) Form and Denomination : The MTN will be represented by global certificates to be deposited with BNM as the Central Depository and exchangeable for definitive certificates only in certain limited circumstances. The MTN shall be issued in accordance with the rules on Fully Automated System for Issuing/Tendering

(“FAST”) and the Real Time Electronic Transfer of Funds

and Securities (“RENTAS”) system issued by BNM and/or any other relevant guidelines issued by the relevant authorities and traded under the Scripless Securities

Trading System (“SSTS”) operated by BNM. The MTN shall be in denominations of RM100,000.00 each and shall be issued in bearer form.

(o) Mode of Issue

: The MTN shall be issued via private placement (by way of book-building, bought deal and/or direct placement to identified investors) without prospectus.

(p) Selling Restriction : (a) At the point of issuance The MTN may not be offered or sold, directly or indirectly, nor may any document or other material in connection therewith be distributed, in Malaysia other than to persons, whether as principal or agent, falling within:

Schedule 6 or Section 229(1)(b);

Schedule 7 or Section 230(1)(b); and

Schedule 9 or Section 257(3),

of the Capital Markets and Services Act 2007 (“CMSA”), as amended from time to time, subject to any law, order, regulation or official directive of BNM, SC and/or any other regulatory authority from time to time. (b) After issuance The MTN may not be offered or sold, directly or indirectly, nor may any document or other material in connection therewith be distributed in Malaysia other than to persons, whether as principal or agent, falling within:

Schedule 6 or Section 229(1)(b); and

Schedule 9 or Section 257(3),

of the CMSA, as amended from time to time, subject to any law, order, regulation or official directive of BNM, SC and/or any other regulatory authority from time to time.

(q) Listing Status : The MTN will not be listed on Bursa Malaysia Securities Berhad or on any other stock exchange.


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(r) Minimum Level of

Subscription (RM or %)

: The minimum level of subscription for each issue shall be 10%. In the event that any issue, offer or invitation is undersubscribed and does not meet the minimum level of subscription, the same shall be aborted and where applicable, any consideration received for the purpose of subscription shall be immediately returned to the respective subscribers.

(s) Other regulatory approvals

required in relation to the

issue, offer or invitation and

whether or not obtained

(please specify)

: BNM‟s approval for the implementation of the MTN Programme. BNM‟s approval was obtained via its letter dated 19 December 2007.

(t) Conditions Precedent : Conditions precedent usual and customary for an issuance of this nature which shall include but are not limited to the following:- (a) Delivery of the Issuer‟s Memorandum and Articles of

Association, board resolution and other constitutional documents of the Issuer required by the Lead Arranger;

(b) A signed copy of each of the Transaction Documents

which have been duly executed and stamped (or, as the case may be, endorsed as exempted from stamp duty) where relevant;

(c) The written approval from the SC and BNM in respect

of the MTN and a written confirmation from the solicitors acting for the Lead Arranger (“Solicitors”) addressed to the Trustee and the Lead Arranger that the approval is unconditional or, if they are conditional, that the conditions have been fulfilled to the extent that they have to be fulfilled prior to the issuance of the MTN;

(d) A search on the Issuer at the Companies Commission

of Malaysia that does not reveal any circumstances which would or might prejudice the validity or enforceability of the MTN;

(e) Evidence that the MTN have been accorded a minimum

rating of A2 by RAM; (f) An acceptable legal opinion from the Solicitors

addressed to the Lead Arranger and Trustee advising on the validity, legality and enforceability of the MTN and the Transaction Documents; and

(g) Such other conditions as may be advised by the

Solicitors for an issuance of this nature.


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(u) Representations and

Warranties

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

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

(b) that the Issuer has the power and capacity to execute,

deliver and perform the terms of the Transaction Documents and the Issuer has taken all necessary corporate and other actions to authorise the execution, delivery and performance of the Transaction Documents;

(c) that no Event of Default has occurred; (d) that to the best of the knowledge of the directors of the

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

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

knowledge, is threatened, which if adversely determined would have a material adverse effect on the ability of the Issuer to comply with its obligations under the Transaction Documents;

(f) the written information provided to the Lead Arranger

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

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

(financial or otherwise) of the Issuer or its subsidiaries since the date of its last audited financial statements which might have a material adverse effect on the ability of the Issuer to comply with its obligations under the Transaction Documents;

(h) that the audited financial statements and unaudited

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


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position of the Issuer and its subsidiaries taken as a whole, which is material in the context of the issue of the MTN since the date of such financial statements; and

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

documents in the execution of the Transaction Documents.

(v) Events of default : (i) Non-Payment of Interest and/or Principal of the MTN The Issuer defaults in payment of any principal or interest under the MTN on the due date and the Issuer does not remedy such default within a period of 14 days after the Issuer became aware or having been notified by the Trustee of the default; (ii) Winding-Up An order is made for the winding-up of the Issuer and such order is not stayed or set aside within thirty (30) days of such order being made or, where so stayed, such stay lapses, or an effective resolution is passed for the winding-up of the Issuer except where such order is made or such resolution is passed for the purpose of a reconstruction or amalgamation the terms of which have been approved by the MTN holders by way of special resolution. Upon the occurrence of item (i) above, subject to the terms of the Trust Deed, the Trustee may or shall (if directed to do so by a special resolution of the MTN holders) institute proceedings to enforce the payment obligations of the Issuer under the MTN and may institute proceedings for the winding-up of the Issuer, provided that neither the Trustee nor any of the MTN holders shall have the right to accelerate payment of the entire outstanding nominal amount of the MTN in the case of default under item (i) above. Upon the occurrence of item (ii) above, subject to the terms of the Trust Deed, the Trustee may or shall (if directed to do so by a special resolution of the MTN holders) declare (by giving written notice to the Issuer) that the entire outstanding nominal amount of the MTN together with all other sums payable under the MTN shall immediately become due and payable.

(w) Principal terms and

conditions for warrants

(where applicable)

: Not applicable.

(x) Other principal terms and

conditions for the issue

: Other principal terms and conditions for the issue shall include but are not limited to the following:-


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(y) (i) Call Option

: Unless previously redeemed or purchased and cancelled, the Issuer will have a call option (the “Call Option”) to redeem the MTN at par, and in whole but not in part, at a Call Date at 100% of the nominal value of the outstanding MTN together with accrued interest by giving the Trustee not less than thirty (30) days prior written notice. The exercise of the Call Option by the Issuer in respect of any particular tranche of MTN will not affect the other outstanding tranche(s) of MTN under the MTN Programme. Such exercise of the Call Option is subject to the prior approval of BNM.



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(ii) Covenants : Positive and negative covenants as agreed between the parties including but not limited to the following:- a) The Issuer shall provide to the Trustee any information

relating to the Issuer‟s affairs to the extent permitted by law which the Trustee may require from time to time in order to discharge its duties and obligations as Trustee under the trust deed;

b) The Issuer shall comply at all times with any and all

requirements and conditions, notices, circulars and/or guidelines as may be issued and/or imposed by the SC and/or BNM, from time to time and the applicable provisions of the CMSA;

c) The Issuer will exercise reasonable diligence in carrying

out its business in a proper and efficient manner and in particular, it will ensure, amongst others, that all necessary approvals or relevant licences are obtained;

d) The Issuer will, save and except for transactions lawfully

entered into by the Issuer in the ordinary course of its banking and/or financial services business with its or its related corporation‟s directors, substantial shareholders or persons connected with any of them (“Interested Persons”), not enter into a transaction, whether directly or indirectly with interested persons (including a director, substantial shareholder or persons connected with them) unless:-

i) such transaction shall be on terms that are no less

favourable to the Issuer than those which could have been obtained in a comparable transaction from persons who are not Interested Persons; and

ii) with respect to transactions involving an aggregate

payment or value equal to or greater than 25% of the Issuer‟s total shareholders‟ funds as reflected in the latest audited financial statements, the Issuer shall obtain certification from an independent adviser that the transaction is carried out on fair and reasonable terms; provided

that the Issuer certifies to the trustee that the transaction complies with paragraph (i), that the Issuer has received the certification referred to in paragraph (ii) (where applicable) and that the transaction has been approved by the majority of the board of directors or shareholders in a general meeting as the case may require; e) The Issuer will maintain a paying agent in Malaysia; f) The Issuer will procure that the paying agent shall notify

the Trustee in the event that the paying agent does not receive payment from the Issuer on the due dates as required under the trust deed and the terms and conditions of the MTN;


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g) The Issuer will keep proper books and accounts at all

times; h) The Issuer will immediately notify the trustee in the event

that the Issuer becomes aware:

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

ii) of any circumstance that has occurred that would

materially prejudice the Issuer;

iii) of any substantial change in the nature of the business of the Issuer;

iv) of any change in withholding tax position or taxing

jurisdiction of the Issuer;

v) of any change in the utilisation of proceeds from the MTN where the information memorandum or any agreement entered into in connection with the MTN sets out a specific purpose for which proceeds are to be utilized; and

vi) of any other matter that may materially prejudice the

interests of the MTN holders. i) The Issuer shall provide to the Trustee the annual audited

accounts of the Issuer within 180 days after the end of its financial year end and any other accounts, report, notice, statement or circular issued to shareholders.

j) The Issuer will provide not later than 180 days after the

end of its financial year to the Trustee, a certificate that the Issuer has complied with its obligations under the trust deed and the terms and conditions of the MTN and that there did not exist or had not existed, from the date the MTN was issued or the date of the previous certificate, as the case may be, any event of default and if such is not the case, to specify the same.

(iii) Final Redemption

: Unless previously redeemed or purchased and cancelled, the MTN will be redeemed by the Issuer at 100% of their nominal value on their respective maturity dates.

(v) Restrictive Covenants : None.



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a. (vi) Status

: The MTN will constitute direct, unconditional and unsecured obligations of the Issuer and shall at all times rank pari passu, without discrimination, preference or priority amongst themselves and pari passu with all other present and future unsecured and subordinated obligations of the Issuer but subordinated in right and priority of payment, to the extent and in the manner provided in the terms of the MTN, to all deposit liabilities and other secured and unsecured liabilities of the Issuer and preference shares issued by the Issuer except those liabilities which by their terms rank pari-passu in right of and priority of payment with or subordinated to the MTN. The MTN will, in the event of a distribution of assets in the winding-up or liquidation of the Issuer, rank senior to the Ordinary Share capital of AmBank and other instruments subordinated to the MTN in the manner provided in the terms of such other instruments.

(vii) Adverse Market

Condition

: At any time prior to the issuance of the MTN, the Lead Arranger reserves the right to withdraw/terminate the arrangement of the MTN if there occurs any material change in the national or international financial, political or economic conditions, including but not limited to material changes in the international/ domestic money, capital or syndicated loan markets, the business activities or financial position of the Issuer which in the opinion of the Lead Arranger, will materially affect the offering and distribution of the MTN.

(vii) Governing Law and

Jurisdiction

: The laws of Malaysia and the non-exclusive jurisdiction of the courts of Malaysia.

(viii) Withholding tax and

duties

: All payments of principal and interest by the Issuer shall be made after deducting or withholding any amounts for, or on account of, any present or future taxes or duties of whatever nature imposed by Malaysia or any political subdivision or taxing authority thereof or therein. The Issuer will not pay any additional amounts in respect of any such deduction or withholding for payments of principal and interest for or on account of any such taxes or duties.

(x) Repurchase and

cancellation

:

The Issuer may at any time purchase the MTN at any price in the open market or by private treaty but these repurchased MTN shall not be counted for the purposes of voting (but shall be included for the purposes of calculating the required quorum at meetings of MTN holders) and any of the MTN purchased by the Issuer shall be cancelled and shall not be resold or reissued.

(xi) Transaction Documents : Transaction Documents shall refer to:- (a) Programme Agreement; (b) Trust Deed; (c) Depository and Paying Agency Agreement; (d) Facility Agency Agreement; and (e) Any other legal documentation as may be advised by

the legal counsel for the Lead Arranger.


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3 INVESTMENT CONSIDERATIONS

The purchase of the MTN may involve substantial risks and is suitable only for sophisticated investors who have the knowledge and experience in financial and business matters necessary to enable them to evaluate the risks and the merits of an investment in the MTN. The following is a summary of certain aspects of the MTN Programme about which prospective holders of the MTN should be aware, but it is not intended to be complete or exhaustive. Prospective investors should undertake their own investigations and analysis on the Issuer, its business and the risks associated with the MTN Programme and should consider carefully, in the light of their own financial circumstances and investment objectives, the investment considerations set forth below along with all other information set forth in this Information Memorandum before making an investment decision.

The information contained in this Information Memorandum includes forward looking statements which imply risks and uncertainties. AmBank’s actual results could differ materially from those anticipated in these forward looking statements and/or otherwise projected as a result of certain factors, including but not limited to those set forth in this section.

3.1 Considerations relating to the Issuer and its business

Before investing in the MTN, prospective investors should pay particular attention to the fact that the Issuer, and its activities, is governed by the legal, regulatory and business environment in Malaysia.

In the event of any of the following investment considerations materialising, the

Issuer‟s business, business condition and/or results of operations could be materially and adversely affected.

3.1.1 Business Risk

As a commercial banking institution covering activities including retail,

commercial and corporate banking and treasury products and services, the Issuer is subject to business risks which are inherent in the financial services industry. Generally, these business risks can be broadly divided into:-

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

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

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

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

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

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


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(e) Legal and regulatory risk, which is the risk of breaches of applicable laws and regulatory requirements, breaches of obligations of fidelity, unenforceability of counterparty obligations, and inappropriate documentation of contractual obligations.

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

To counter the business risks it face, the Issuer has put in place a risk management system to manage uncertainties such that deviations from the Issuer‟s intended objectives are kept within acceptable levels. The risk management system thus serves to identify, capture and analyse the risks assumed by the Issuer at an early stage, continuously measuring and monitoring the risks and to set limits, policies and procedures to control them to ensure sustainable risk-taking and sufficient return.

However, the risk management framework, as a whole may not always be fully effective as there may be risks that have not been anticipated or identified and certain risks may be significantly greater than indicated by historical data. Further, the data relied upon to formulate the risk management framework may not be accurate, complete, up-to-date or properly evaluated. The process to manage operational, legal and regulatory risks would require proper recording and verifying a large number of transactions and events. Such process may not be fully effective in all cases.

A description of the Issuer‟s risk management structure is set out in section 4 of this Information Memorandum.

3.1.2 Market Volatility

The businesses of the Issuer are highly susceptible to the conditions of the financial markets as well as economic conditions both in Malaysia and globally. Unfavourable financial or economic conditions (which may include, inter alia, adverse movement in interest rates, foreign exchange rates and equity prices) would adversely affect the operations of the Issuer.


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In the event of significant fluctuations in the treasury and capital markets, the Issuer‟s business would be adversely affected and the Issuer‟s revenue could decline under such circumstances. Accordingly, the Issuer has implemented a risk management framework to, inter alia, identify potential risk areas early to mitigate any adverse effects from market volatility.

3.1.3 Political and Economic Factors

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

3.1.4 Regulatory Constraints

The Issuer‟s core business, as a commercial bank, is subject to regulatory purview and measures imposed by the relevant regulatory agencies e.g. banking activities are regulated under the BAFIA. Such regulatory measures include restrictions on operations, e.g. BNM imposes a maximum permissible credit exposure to a single customer group and maximum sectorial credit exposure in respect of certain lending activities, and measures requiring maintenance of reserves and minimum capital adequacy requirement, e.g. a commercial bank is presently required to maintain a minimum capital adequacy ratio of 8%.

The regulatory measures presently imposed, and as may be introduced from time to time, by the regulatory agencies could affect the Issuer‟s business activities. For example, a change by BNM in credit policies would require the Issuer to scale down its operations in a particular business area. Further, any change in the rules relating to minimum capital adequacy requirement, e.g. increase in minimum capital adequacy ratio or a change in the computation and or composition of regulatory capital, could adversely affect the operations of the Issuer if the Issuer‟s internally generated capital (i.e. retained earnings) is insufficient to meet the increased capital funds requirement. Under such circumstances, the Issuer would need to raise fresh capital which may involve a cash call on the shareholders for such additional capital requirement.

3.1.5 Competition

Whilst the number of domestic banking institutions have been reduced over time through consolidation, the Malaysian banking industry operates in a very competitive environment fostered by BNM‟s policies, inter alia, foreign


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licensed Islamic banks and domestic Islamic banks which are now allowed to offer/perform products and services that are similar to those of the Issuer. Although these policies are designed, in part, to encourage development of financial institutions in Malaysia and to strengthen domestic financial institutions in preparation for increased foreign competition, any increased competition could have an adverse effect on the Issuer‟s operations in the form of reduced margins, smaller market share and reduced income generally.

Although the Issuer would plan for expansion and growth in future business volume, the Issuer‟s future growth would inevitably be subject to competition from other service providers and also customer preference. As such, there can be no assurance that the Issuer will be able to maintain or increase its present market share in the future.

Notwithstanding the aforesaid, the Issuer has acquired a strong franchise value, and with the recent entry of a strategic shareholder at AHB, which is still growing, and together with the broad experience of the management, it is believed that this will enable the Issuer to maintain its competitive edge.

3.1.6 Employee Misconduct

As with any business enterprise, the Issuer is susceptible to the risks associated with acts of misconduct by its employees including directors. Acts of misconduct by employees may take various forms and could include misappropriation of the Issuer‟s assets or the assets of its clients, concealment and or wilful misstatement of its liabilities, unauthorised transactions and or commitment of its resources, and breach of client confidentiality.

Acts of misconduct by employees would not only result in financial loss to the Issuer but also tarnish its image, which would bring about a loss of its stature in the market. Furthermore, acts of misconduct may also cover breaches of laws, regulations and guidelines, which, in extreme cases, could result in suspension and or revocation of its banking and finance licences under the BAFIA.

Whilst the risks of misconduct by employees, including directors, cannot be entirely eliminated, the Issuer has in place internal control systems to check such misconduct and to take appropriate action.

3.1.7 Dependence on key Personnel

The Issuer‟s performance is largely dependent on the skills and efforts of its employees, especially the directors and senior management staff. The Issuer‟s continued ability to compete effectively in its businesses would thus depend on its ability to attract new employees as well as retain its existing employees. The Issuer devotes considerable resources to recruiting, training and compensating its employees. Nonetheless, any employee of the Issuer may still choose to leave the Issuer at any time to pursue other opportunities.


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3.1.8 Influence by Shareholder

As at 12 December 2007, Tan Sri Dato‟ Azman Hashim, the Chairman of AmBank, is deemed interested in 19.37% of the current issued and paid-up share capital of AHB by virtue of his controlling interest in AmcorpGroup Berhad (“Amcorp”). Amcorp holds an equity stake of 19.37% in AHB as at 12 December 2007. AHB, in turn, is deemed to have a 100% effective shareholding in AmBank. Pursuant thereto, TSDAH could, directly and indirectly (through AHB), influence the outcome of various matters including the election of the directors of AmBank and the approval of other business transactions involving the Issuer. However, in line with the regulatory provisions including those contained in the Listing Requirements, TSDAH would be prohibited from voting on related party transactions involving AHB and/or its subsidiaries in which TSDAH is interested, which would therefore be decided by the minority shareholders of AHB and where required, an independent adviser will be appointed to advise the minority shareholders.

3.1.9 Introduction of a new substantial shareholder in the AHB may lead to a change in the business strategies of the Issuer

On 18 May 2007, ANZ had purchased 300 million ordinary shares in AHB from AmCorpGroup Berhad, providing ANZ with a shareholding of 13.61% in AHB as at 12 December 2007. ANZ also subscribed for:-

(a) 163.9 million convertible preference shares of AHB at an issue price of RM3.05 per share which converts into 163.9 million new ordinary shares in AHB; and

(b) RM575.0 million exchangeable bonds issued by AmBank which are exchangeable into 188.5 million new ordinary shares in AHB at RM3.05 per share.

As a substantial shareholder, ANZ may take an active involvement at both the board and management levels of AHB. As such, the current business policies and strategies implemented by the Issuer may be affected in future by the introduction of ANZ as a new substantial shareholder of AHB.

3.1.10 Insurance Cover

The Issuer has in place insurance coverage in respect of the assets used in its operations. However, there is no assurance that such insurance coverage would adequately cover the replacement costs of those assets or any consequential costs arising from any loss, depreciation, obsolescence or otherwise of such assets.


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3.1.11 Accounting Policy

AmBank has adopted the revised BNM/GP8 in its accounting policies of the securities portfolio of the Issuer, which have been applied retrospectively as follows:

(a) Securities held-for-trading

Securities are classified as held-for-trading if they are acquired principally for the purpose of benefiting from actual or expected short-term price movement or to lock in arbitrage profits. The securities held-for-trading are stated at fair value and any gain or loss arising from a change in their fair values or the derecognition of securities held-for-trading are recognised in the income statements.

(b) Securities available-for-sale

Securities available-for-sale are financial assets that are not classified as held-for-trading or held-to-maturity. The securities available-for-sale are measured at fair value or at amortised cost (less impairment losses) if the fair value cannot be reliably measured. Any gain or loss arising from a change in fair value are recognised directly in equity through the statement of changes in equity, until the financial asset is sold, collected, disposed of or impaired, at which time the cumulative gain or loss previously recognised in equity will be transferred to the income statements.

(c) Securities held-to-maturity

Securities held-to-maturity are financial assets with fixed or determinable payments and fixed maturity that the Group have the positive intent and ability to hold to maturity. Unquoted shares in organisations set up for socio-economic purposes and equity instruments received as a result of loan restructuring or loan conversion which do not have a quoted market price in an active market and whose fair value cannot be reliably measured are also classified as securities held-to-maturity.

The securities held-to-maturity are measured at accreted/amortised cost based on effective yield method. Amortisation of premium, accretion of discount and impairment as well as gain or loss arising from the derecognition of securities held-to-maturity are recognised in the income statement.

Any sale or reclassification of a significant amount of securities held-to-maturity not close to their maturity would result in the reclassification of all securities held-to-maturity to securities available-for-sale, and prevent the Group from classifying the similar class of securities as securities held-to-maturity for the current and following two financial years.

(b) Derivative financial instruments and hedge accounting

Derivative financial instruments are measured at fair value and are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Any gain or loss arising from the change in the fair value of the derivative instrument is recognised in the income statements unless they are


23

part of a hedging relationship which qualifies for hedge accounting where the gain or loss is recognised as follows: Fair value hedge Where a derivative financial instrument hedges the changes in fair value of a recognised asset or liability, any gain or loss on the hedging instruments is recognised in the income statement. The hedged item is also stated at fair value in respect of the risk being hedged, with any gain or loss being recognised in the income statement.

Cash flow hedge Gains and losses on the hedging instruments, to the extent that the hedge is effective, are deferred in the separate component of equity. The ineffective part of any gain or loss is recognised in the income statement. The deferred gains and losses are then released to the income statement in the periods when the hedged item affects the income statement. Derivatives that do not qualify for hedge accounting Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement.

3.1.12 Information technology (“IT”) Risk

The Issuer is susceptible to IT risk as large portions of its operational systems are computerised. However, the Issuer has taken reasonable steps to reduce these risks, which include:-

(i) Adoption of an “Information System Operational Risk Scorecard” which is used to monitor and manage the critical information system operational risk;

(ii) Adoption of an IT governance model which include regular reviews by senior management;

(iii) Formulation of an Information and Communication Technology plan which is reviewed annually which ensures continuous upgrading of the critical IT application systems;

(iv) Formulation and adoption of disaster recovery procedures and facilities for critical application areas which are tested on a regular basis; and

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


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3.2 Considerations relating to the MTN

3.2.1 Issuer’s Ability to meet its Obligations under the MTN

Investors should note that the expected interest that is payable on the MTN on an interest payment date is payable out of the proceeds generated from business operations and assets of the Issuer. Investors should also note that payment of interest is dependent on the maintenance of the Issuer‟s revenue operations at the expected levels.

3.2.2 Rating of the MTN is no guarantee of AmBank’s paying ability

It is a condition of the first issuance of the MTN that the MTN be assigned, on

issue, a minimum rating of A2 by RAM and RAM has accorded a rating of A2

on the MTN. Based on RAM‟s current long-term rating criteria for issues of corporate debt securities, an “A” rating indicates that the MTN Programme is judged to be of adequate safety for timely payment of interest and principal but is more susceptible to changes in circumstances and economic conditions than debts in higher-rated categories, while the subscript “2” indicates that the MTN Programme possesses a mid-ranking of its generic rating category (Source: RAM‟s website). However, the rating is not a recommendation by RAM to subscribe for, purchase, sell or hold such security and there can be no assurance that such a rating will not be revised on a periodic review basis by RAM during the tenure of the MTN. Further, such a rating is not a guarantee of repayment or a guarantee that there will be no default by AmBank under the MTN. There is no assurance by or specific obligation on the part of the Issuer to maintain or procure the maintenance of any rating of the MTN. Any subsequent reduction or withdrawal of the rating initially assigned to the MTN for any reason whatsoever will not constitute an event of default.

3.2.3 Liquidity of the MTN

The MTN comprise a new issue of securities for which there is currently no established secondary market. There can therefore be no assurance that a secondary market will develop or, that if a secondary market does develop, as to the liquidity of that market for the MTN or the price at which holders of the MTN may be able to sell their MTN or that it will continue for the entire tenure of the MTN. In addition, the MTN could trade in the secondary market at prices that may be higher or lower than the initial offering price depending on many factors, including prevailing capital market forces and required rate of return on investments, the Issuer's results of operations, and the market for similar securities. Investors should also note that the MTN will not be listed on Bursa Securities, but will be traded under RENTAS and there are selling restrictions governing

the MTN as described under “Selling Restrictions” under the terms and conditions of the MTN as described herein.


25

Accordingly, the purchase or subscription of the MTN is suitable only for investors who can bear the risks associated with a lack of liquidity in the MTN apart from the financial and other risks associated with an investment in the MTN.

3.2.4 Investors claims to the Interest & Principal payments are subordinated

In line with its eligibility as Tier 2 capital of AmBank, the MTN and the rights of holders thereunder are generally subordinated to those of all other creditors of AmBank. In particular, MTN issued under the MTN Programme constitute direct, unconditional and unsecured obligations of the Issuer that ranks pari-passu amongst themselves and pari-passu with all other present and future unsecured and subordinated obligations of the Issuer but subordinated in right and priority of payment, to all deposit liabilities and other secured and unsecured liabilities of the Issuer except those liabilities which by their terms rank pari-passu in right of and priority of payment with or subordinated to the MTN. In the winding-up or liquidation of the Issuer, MTN rank senior to the ordinary share capital of AmBank and other instruments subordinated to the MTN in the manner provided in the terms of such other instruments. In the event that the Issuer defaults in payment of any principal or interest under the MTN and such default is not remedied within 14 days, the Trustee may or shall institute proceedings to enforce the payment obligations of the Issuer and may institute proceedings for the winding-up of the Issuer, provided that neither the Trustee nor any of the MTN holders shall have the right to accelerate payment of the entire outstanding nominal amount of the MTN in the case of default. In the case that an order is made for the winding-up of the Issuer and such order is not stayed or set aside within thirty (30) days of such order being made, except where such order is made or such resolution is passed for the purpose of a reconstruction or amalgamation the terms of which have been approved by the MTN holders by way of special resolution, the Trustee may or shall declare that the entire outstanding nominal amount of the MTN together with all other sums payable under the MTN shall immediately become due and payable.

4 DESCRIPTION OF THE ISSUER

4.1 History and Background

AmBank was incorporated on 25 March 1969 as a public limited company under the Companies Act, 1965 under the name of Malaysia Borneo Finance Corporation (M) Berhad (“MBFC”).

MBFC was listed on the Main Board of Bursa Malaysia Securities Berhad (“Bursa

Securities”) on 8 June 1983 and changed its name to MBf Finance Berhad (“MBf

Finance”) on 19 December 1985.


26

Pursuant to a restructuring scheme, MBf Finance became a wholly-owned subsidiary of MBf Capital Berhad, with MBf Capital Berhad assuming the listing status of MBf Finance. MBf Capital Berhad was listed on the Main Board of Bursa Securities in place of MBf Finance effective from 15 January 1993 and consequently, MBf Finance was delisted. MBf Finance changed its name to AmFinance Berhad on 3 April 2002 and assumed its present name on 1 June 2005. AmBank and its subsidiary companies (“AmBank Group”) provide banking and financial services which include loans, advances and financing, deposit services, credit cards, remittance services, foreign exchange and (through its wholly-owned subsidiary, AmIslamic Bank Berhad) Islamic banking services.

As at 12 December 2007, the authorised share capital of AmBank was RM3,886,250,002 comprising 1,386,250,002 ordinary shares of RM1.00 each and 2,500,000,000 6% irredeemable non-cumulative convertible preference shares of

RM1.00 each (“IPS”) of which 610,363,762 ordinary shares of RM1.00 each and 150,000,000 IPS respectively are issued and fully paid-up.

4.2 Business Overview

Based on the published financial results of domestic banks in Malaysia as at 30 September 2007, AmBank was the sixth largest domestic bank in Malaysia in terms of total assets of RM61.97 billion and currently with a distribution network of approximately 176 branches, 270 Automated Teller Machines (ATMs) and 56 self-service Electronic Banking Centres (EBCs) in Malaysia. AmBank is engaged in a wide range of retail and business banking activities. AmBank is a market leader in the retail banking sector and has the third largest retail assets by value in Malaysia (based on the published financial results of domestic banks in Malaysia) as at 30 September 2007. AmBank‟s principal retail banking activities are the provision of consumer loans (such as vehicle hire purchase, mortgages and personal financing) and credit cards. Currently, the focus of AmBank‟s business banking activity is commercial lending and trade finance, in particular, for the mid-sized corporations and SMEs in Malaysia. The focus of AmBank's corporate and institutional banking business is providing treasury and lending services to its large corporate and institutional clients. The AHB Group was the fifth largest financial services group in Malaysia in terms of total assets of RM77.71 billion (based on the published financial results of both domestic and foreign financial services groups in Malaysia) as at 30 September 2007. The AHB Group‟s business operations include investment banking, commercial banking, retail banking, Islamic banking, insurance and other related financial services. AHB controls 100.0% of the share capital of AmBank through its wholly-owned subsidiary, AMFB Holdings Berhad.

4.3 Recent Developments

The following recent developments are expected to have a significant impact on AmBank‟s operations in future.

(a) Privatization of AIGB and Group Internal Reorganization

On 26 September 2007, AHB received the approval of its shareholders to undertake the privatization of AIGB, and to partially fund this privatization through a rights issue.


27

The shareholders of AIGB voted at a Court Convened Meeting of AIGB shareholders to accept an offer of RM3.70 per cancelled share from AHB for the cancellation of the 49% shareholding interest in AIGB that was not already owned by AHB. The proposed rights issue will enable AHB to raise a total of RM975.5 million. AHB has already secured the remaining RM1.4 billion that will be required to effect the privatization through bank borrowings. The primary reasons for the privatization include increased competition from new and existing players, a more challenging operating environment, as well as recent regulatory changes to lending guidelines. These factors, in the aggregate, limit AIGB's ability to underwrite large deals due to its smaller capital base, as compared to the other investment banks, which have already consolidated their business activities with the commercial banks. Consistent with global trends in the financial services industry, where many of the global banks have adopted the universal banking model in order to offer capital market services to the mid-sized corporates and retail customers, the privatization of AIGB will enable the AHB Group to capitalise on its streamlined and enhanced group structure. The privatization will also enable the AHB Group to grow at a sustainable rate, achieve a more efficient utilisation of capital, increase its market competitiveness and further consolidate its position as a key player in the financial services industry. Upon the completion of the privatization exercise on 15 January 2008, the AHB

Group will also implement an internal group reorganization (the “Reorganization”). The primary purpose of the Reorganization will be to permit the AHB Group to realign its operating subsidiaries along its four principal business lines, namely: its banking group, its asset management group, its capital markets group and its insurance group. The Reorganization will also involve:

(a) the Proposed Business Transfer; and,

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

subsidiary, AmInternational (L) Ltd (“AMIL”), to AmBank (“Proposed AMIL

Transfer”). The Proposed Business Transfer will be implemented: (a) via a vesting order to be obtained under section 50 of the Banking and Financial Institutions Act, 1989 (the

“BAFIA”); (b) after approval by BNM and the Minister of Finance under section 49 of the BAFIA; and (c) the Foreign Investment Committee and fulfilment of other conditions precedent. The approvals of BNM and the Minister of Finance have been obtained. The Proposed Business Transfer will involve the transfer of AmInvestment Bank‟s fund-based business to AmBank at book value. The Proposed Business Transfer is expected to complete by the second quarter of 2008. Specifically, it is contemplated that AmBank will acquire the fund-based assets of AmInvestment Bank, which primarily include assets from AmInvestment Bank's treasury and lending operations, including: (i) deposit placements; (ii) money market securities; (iii) quoted securities; (iv) corporate bonds; (v) loan portfolio ; (vi) statutory deposits with the BNM; and (vii) amounts receivable related to treasury and lending operations. The risk-weighted value (based on the Basel II framework) of the assets, commitments and contingencies transferred would be approximately RM12.54 billion as at 30 September 2007. Pursuant to the Proposed Business Transfer, AmBank will assume the funding resources of AmInvestment Bank, including: (i) deposits from customers; (ii) deposits


28

from banks and other financial institutions; and (iii) subordinated debt capital. AmBank will also acquire or assume all commitments and contingencies relating to the treasury and lending operations of AmInvestment Bank, including: (i) interest rated related contracts; (ii) foreign exchange related contracts; (iii) commitments to extend credit; and (iv) guarantees given on behalf of customers. AmBank will also assume all litigation related to the fund-based business activity transferred where AmInvestment Bank is engaged as plaintiff or defendant. Pursuant to the Proposed AMIL Transfer, AmBank will acquire AmInvestment Bank‟s 100% shareholding in AMIL, a licensed Labuan offshore bank, as follows: (i) AmBank will acquire the entire issued and paid-up capital of 10,000,000 ordinary shares of US$1.00 each in AMIL; and, (ii) the consideration for the AMIL Transfer will be the USD equivalent of RM33,020,000, based on the carrying value of AmInvestment Bank‟s investment in AMIL. The consideration will be satisfied by AmBank in cash.

The implementation of the Proposed AMIL Transfer requires the approvals of BNM and the Labuan Offshore Financial Services Authority, which approvals have been obtained. (b) Partnership with the ANZ

On 26 April 2007, AHB obtained the approval of its shareholders at an extraordinary general meeting for its proposed strategic partnership with the ANZ by way of ANZ's equity participation in the AHB Group. ANZ's equity participation entailed:

i) the issuance of 163.9 million convertible preference shares to ANZ at an issue price of RM3.05 per share which converts into 163.9 million new ordinary shares in AHB; and

ii) the issuance of RM575.0 million exchangeable bonds by AmBank to ANZ which are exchangeable into 188.5 million new ordinary shares in AHB at RM3.05 per share.

ANZ has also purchased 300 million ordinary shares in AHB from AmCorpGroup Berhad, previously the largest shareholder of AHB, thus providing ANZ with a shareholding of 13.61% in AHB as at 12 December 2007.

ANZ‟s equity investment allows it to take an active involvement at both the board and management levels of AHB through key senior management appointments to the AHB Group. Such appointments include appointments to the positions of Deputy Group Managing Director, Chief Financial Officer and Chief Risk Officer. ANZ has also appointed three directors to the Board of Directors of AHB, and one director to the Boards of the major companies of the AHB Group, as well as representation on the management committees.

ANZ is an international banking and financial services group that is ranked amongst the top 50 banks in the world. ANZ has over 6,000,000 customers worldwide and a presence across 30 countries, with its primary operations in Australia, New Zealand, and Asia Pacific. Primary listings of ANZ securities are on the Australian Securities Exchange and New Zealand Exchange, with additional listings of ADRs on various other exchanges including the New York Stock Exchange. ANZ has a market capitalization of approximately US$45 billion.


29

ANZ considers retail and SME banking, product innovation and risk management techniques as its key strengths. ANZ was voted as Money Magazine's Bank of the Year 2007 and Personal Investor Magazine's Bank of the Year from 2000 to 2004. ANZ has a strong presence in home loans, credit cards, savings and deposits markets in Australia and New Zealand. ANZ has established partnerships with the following financial institutions in Asia: Metrobank Card Corporation (Philippines), Panin Bank (Indonesia), Sacombank (Vietnam), ANZ Royal (Cambodia), Tianjin City Commercial Bank (China) and the Shanghai Rural Commercial Bank (China). ANZ also has an established corporate and structured finance business in Asia and has been ranked as a leading merger and acquisition adviser in Singapore by Bloomberg for each of the last five years.

AmBank believes that the AHB Group's partnership with ANZ will create further market growth opportunities, given ANZ's exposure to international products, banking systems as well as cross border capabilities in Asia. By leveraging on ANZ's capabilities in risk management, retail banking and SME banking, product innovation, branding, IT infrastructure, training and development of personnel, AmBank aims to entrench its position as a premier financial institution providing innovative products and services to its customers.

ANZ's equity participation also provided AHB with a capital infusion of RM1.075 billion to further strengthen its balance sheet and capital position. Of the RM1.075 billion, a total of RM1.025 billion was provided to AmBank in return for a combination of preference shares, irredeemable convertible loan stocks and exchangeable bonds.



30

4.4 Corporate Information

4.4.1 Principal Place of Business

The registered office of AmBank is located at 22

nd Floor, Bangunan AmBank

Group, 55 Jalan Raja Chulan, 50200 Kuala Lumpur while its principal place of business of the Retail and Business Banking Divisions are located at Menara AmBank, Jalan Yap Kwan Seng, 50450 Kuala Lumpur and Menara Dion, Jalan Sultan Ismail, 50250 Kuala Lumpur respectively.

4.4.2 Share Capital and Changes in Share Capital

Share Capital

The authorised and issued and fully paid-up share capital of AmBank as at 12 December 2007 are as follows:-

Type No. of shares

Par value

(RM)

Total

(RM)

Authorised 3,886,250,002 1.00 3,886,250,002

- Ordinary shares 1,386,250,002 1.00 1,386,250,002

- 6% irredeemable non-cumulative

convertible preference shares

2,500,000,000 1.00 2,500,000,000

Issued and fully paid-up 760,363,762 1.00 760,363,762

- Ordinary shares 610,363,762 1.00 610,363,762

-6% irredeemable non-cumulative

convertible preference shares

150,000,000 1.00 150,000,000

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

Ordinary Shares

Date of

Allotment

No. of shares

of RM1.00

each allotted

Par value

Type of issuance

Cumulative

share capital

(RM) (RM) 25.03.1969 2 1.00 Subscribers‟ shares 2 11.06.1969 999,998 1.00 Cash 1,000,000 24.09.1969 200,000 1.00 Cash 1,200,000 11.11.1969 100,000 1.00 Cash 1,300,000 03.01.1970 100,000 1.00 Cash 1,400,000 31.03.1970 100,000 1.00 Cash 1,500,000 25.03.1971 500,000 1.00 Cash 2,000,000 23.06.1971 400,000 1.00 Cash 2,400,000 28.09.1971 220,000 1.00 Cash 2,620,000 29.12.1971 30,000 1.00 Cash 2,650,000 28.01.1972 250,000 1.00 Cash 2,900,000 13.03.1972 50,000 1.00 Cash 2,950,000 17.03.1972 50,000 1.00 Cash 3,000,000 10.04.1972 50,000 1.00 Cash 3,050,000 16.06.1972 50,000 1.00 Cash 3,100,000 02.11.1972 400,000 1.00 Cash 3,500,000


31

Date of

Allotment

No. of shares

of RM1.00

each allotted

Par value

Type of issuance

Cumulative

share capital

(RM) (RM)

27.02.1973 500,000 1.00 Cash 4,000,000 18.03.1974 540,000 1.00 Cash 4,540,000 29.03.1974 460,000 1.00 Cash 5,000,000 04.11.1974 1,000,000 1.00 Cash 6,000,000 23.02.1976 5,325,000 1.00 Rights issue of 3 for 2 at

RM1.00 per share 11,325,000

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

15,000,000

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

17,300,000

02.11.1981 6,920,000 1.00 Rights issue of 2 for 5 at RM1.00 per share

24,220,000

14.03.1983 67,816,000 0.50* Bonus issue of 7 for 5 at RM0.50 per share

58,128,000

09.05.1983 1,744,000 0.50* Cash 59,000,000 18.06.1984 29,500,000 0.50* Rights issue of 1 for 4 at

RM1.30 per share 73,750,000

21.08.1989 73,750,000 0.50* Rights issue of 1 for 2 at RM0.50 per share

110,625,000


165,937,500


221,250,000


331,875,000

16.12.1992 663,750,000 0.50* Shares allotted to MBf Capital Berhad pursuant to a scheme of arrangement

331,875,000**


663,750,000

23.06.1997 700,000,000 0.50* Cash 1,013,750,000 29.07.1999 724,000,000 0.50* Cash 1,375,750,000 29.07.1999 2,476,000,000^^ 0.50* Allotment of Preference

Shares 2,613,750,000

12.06.2002 (5,227,499,996) 0.50* Capital reduction 2^ 12.06.2002 0 1.00 Consolidation 2^ 18.07.2002 528,402,118 1.00 # 528,402,120 31.05.2005 64,825,308 1.00 @ 593,227,428 29.06.2005 17,136,334 1.00 @ 610,363,762

Notes:-

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

** The shares were cancelled on 16 December 1992 pursuant to a scheme of arrangement under Section 176 of the Companies Act, 1965 between MBf Finance Berhad (“MBf Finance”) and its shareholders sanctioned by the High Court of Malaya on 17 September 1992 under Originating Petition No. D6-26-27-92 and re-allotted to MBf Capital Berhad on the same date. Pursuant to the said scheme, every one (1) ordinary share of RM0.50 each in MBf Finance was exchanged for one (1) new ordinary share of RM1.00 each in MBf Capital Berhad.

^ Pursuant to an order by the High Court dated 22 April 2002 for capital reduction and consolidation in accordance with Section 64(2) of the Companies Act 1965.

# Settlement for part of the consideration due in respect of the transfer of business from AMFB pursuant to the vesting order of the High Court of Malaya under Section 50 of the Banking and Financial Institution Act 1989.

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


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@ 81,961,642 new ordinary shares of RM1 each allotted to AMFB pursuant to the acquisition of all issued shares in AmIslamic Bank Berhad

6% Irredeemable Non-cumulative Convertible Preference Shares

Date of

Allotment

No. of convertible

preference shares

of RM1.00 each

allotted

Type of issuance

Cumulative

share capital

(RM)

(RM) 18.05.2007 150,000,000 Cash 150,000,000

4.4.3 Substantial Shareholders

Based on the Registrar of Substantial Shareholders, the substantial shareholders of AmBank as at 12 December 2007 and its shareholdings in AmBank are as follows:-

Nationality/

Country of

Incorporation

No. of Shares

Substantial

Shareholders

Direct

interest

% Indirect

interest

%

AMFB

Malaysia 610,363,762^ 100 - -

AHB

Malaysia - - 610,363,762*^ 100

TSDAH Malaysian - - 610,363,762*^ 100 AmcorpGroup Berhad

Malaysia - - 610,363,762*^ 100

Clear Goal Sdn Bhd

Malaysia - - 610,363,762*^ 100

Employees Provident Fund Board

Malaysia - - 610,363,762*^ 100

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

in AHB ^ Excluding 150,000,000 6% irredeemable non-cumulative convertible preference

shares of RM1.00 each


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4.5 Information on Directors and Senior Management

4.5.1 Board of Directors

The members of the Board of Directors of AmBank as at 12 December 2007 are as follows:

Name/

Designation*

Address

Date of

appointment

Nationality NRIC/

Passport

Number

TSDAH (Chairman, Non-Independent Non-

Executive Director)

No. 2 Jalan Teberau Satu Ukay Heights 68000 Ampang Selangor

20.12.2001 Malaysian 390717-10-5069

Tun Mohammed Hanif bin

Omar (Independent Non-Executive Director)

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

20.12.2001 Malaysian 390116-08-5111

Tan Sri Datuk Clifford

Francis Herbert (Independent Non-Executive

Director)

No. 59 Jalan Setiakasih Satu Bukit Damansara 50490 Kuala Lumpur

01.10.2005 Malaysian 411004-10-5405

Dato’ Gan Nyap Liou @

Gan Nyap Liow (Independent Non-Executive

Director))

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

15.06.2006 Malaysian 541219-04-5409

Tan Kheng Soon (Independent Non-Executive

Director)

No. 16 Jalan Taman Seputeh 6 58000 Kuala Lumpur

01.10.2005 Malaysian 390210-07-5083

Cheah Tek Kuang (Chief Executive Officer)

No. 1 Jalan Setiabakti 10 Bukit Damansara 50490 Kuala Lumpur

20.12.2001 Malaysian 470528-07-5067

Anthony John Healy (Non-Independent Non-Executive Director)

No. 5 Persiaran Perseketuan Bukit Seri Perseketuan 50480 Kuala Lumpur

01.10.2007 Australian M2562595

4.5.2 Directors’ Profiles

Y. Bhg. Tan Sri Dato’ Azman Hashim

Tan Sri Dato’ Azman Hashim, a Malaysian, aged 69 was appointed a Director of AmBank on 20 December 2001. Tan Sri Dato‟ Azman has been the Chairman of AHB, the holding company of AmBank, since 1991. He is the Non-Executive Chairman of AHB. Currently, he serves as a member of AHB‟s Nomination Committee.

He sits as Chairman of the board of several subsidiaries of AHB, namely AIGB, AMFB, AmInvestment Bank, AmIslamic Bank Berhad, AmProperty Trust Management Berhad and AmAssurance Berhad.


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

Tan Sri Dato‟ Azman is the Chairman of AmcorpGroup Berhad, and Executive Chairman of RCE Capital Berhad, Malaysian South-South Corporation Berhad, and MCM Technologies Berhad. He serves as a member on the board of Pembangunan MasMelayu Berhad. Tan Sri Dato‟ Azman is also involved in several charitable organisations as Chairman of AmGroup Foundation and Perdana Leadership Foundation, Yayasan Perpaduan Nasional and the Malaysian Liver Foundation.

Tan Sri Dato‟ Azman is the Chairman of the Malaysian Investment Banking Association, the National Productivity Corporation, East-Asia Business Council and recently, Chairman Emeritus of the Pacific Basin Economic Council International and Co-Chairman of Malaysia-Singapore Roundtable. He is the President of the Malaysia South-South Association, Malaysia-Japan Economic Association, Malaysian Prison FRIENDS Club and Non-Aligned Movement‟s Business Council. He is a Member of the APEC Business Advisory Council, The Trilateral Commission (Asia-Pacific Group), the Malaysian-British and Malaysia-China Business Councils, and the United Nations Economic and Social Commission for Asia and the Pacific Business Advisory Council. He is also the Leader of the ASEAN-Japanese Business Meeting (Malaysia Committee, Keizai Doyukai) and is on the board of Advisors of AIM Centre for Corporate Social Responsibility.

Tan Sri Dato‟ Azman is also the Pro-Chancellor, Open University of Malaysia and a Member, Governing Body of the Asian Productivity Organisation. In addition, he is also a member of the Executive Committee of the Malaysian Crime Prevention Foundation and International Advisory Panel, Bank Negara Malaysia International Centre for Education in Islamic Finance.

Y. A. Bhg. Tun Mohammed Hanif bin Omar

Tun Mohammed Hanif bin Omar, a Malaysian, aged 69, was appointed to the board of AmBank on 20 December 2001. He also sits on the Board of Directors of AHB and other subsidiaries of AHB, namely AMFB, AmIslamic Bank Berhad and AmInvestment Bank Berhad.

Tun Hanif was the Inspector General of the Malaysian Police Force for 20 years until his retirement in January 1994. Tun Mohammed Hanif is also currently the Chairman of General Corporation Berhad, Deputy Chairman of Genting Berhad and Resorts World Bhd. He has been the President of the Malaysian Institute of Management since 2001.


35

Tun Hanif received his BA from the then University of Malaya, Singapore in 1959, his LLB (Hons) from Buckingham University, United Kingdom in 1986 and his Certificate of Legal Practice (Hons) from the Legal Qualifying Board in 1987.

Y. Bhg. Tan Sri Datuk Clifford Francis Herbert

Tan Sri Datuk Clifford Francis Herbert, a Malaysian, aged 67, was appointed to the board of AmBank on 1 October 2005. He is also a board member of AHB and a member of AHB‟s Nomination Committee.

Tan Sri Datuk Clifford joined the Malaysian civil service in 1964 as Assistant Secretary in the Public Services Department. From 1968 to 1975, he was the Assistant Secretary in the Development Administration Unit, Prime Minister‟s Department. Tan Sri Datuk Clifford served in the Ministry of Finance from 1975 to 1997, culminating as Secretary General to the Treasury. He was the former Chairman of Percetakan Nasional Malaysia Berhad and had been a board member of numerous statutory bodies and government-related public companies.

Tan Sri Datuk Clifford is currently a board member of Resorts World Bhd, AIGB, AmInvestment Bank and AmIslamic Bank Berhad. Additionally, Tan Sri Datuk Clifford is also involved in several charitable organisations.

Tan Sri Datuk Clifford holds a Masters of Public Administration from University of Pittsburgh, USA, and a Bachelor of Arts (Honours) from the University of Malaya.

Y. Bhg. Dato’ Gan Nyap Liou @ Gan Nyap Liow

Dato’ Gan Nyap Liou @ Gan Nyap Liow, a Malaysian, aged 54, was appointed to the board of AmBank on 15 June 2006. He is also a board member of AIGB and AmIslamic Bank Berhad.

Dato‟ Gan was with Accenture, a global management and technology consulting firm for 26 years until his retirement in December 2004. He was a partner for 16 years and had held many global leadership roles including Managing Partner for Malaysia, ASEAN, Asia and Corporate Development, Asia Pacific. Dato‟ Gan is currently the Chairman of REDtone International Berhad and Cuscapi Berhad (formerly known as Datascan Berhad). He is also a Director of Tien Wah Press Holdings Berhad and AMDB Berhad and is currently a Director of Tanjong Public Limited Company, MIMOS Berhad and Badan Pengawas Pemegang Saham Minoriti Berhad (Minority Shareholders Watchdog Group).

Dato‟ Gan was also the Chairman of the Association of Computer Industry Malaysia and the Vice President of the Association of Asian Oceania Computer Industry Organization, and was a member of the Ministry of Science and Technology Think Tank, Copyright Tribunal and the Labuan International Financial Exchange Committee.

Dato‟ Gan is a Chartered Accountant, a Fellow of the Association of Chartered Certified Accountants and a Certified Management Consultant.


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Mr. Tan Kheng Soon

Mr. Tan Kheng Soon, a Malaysian, aged 69, was appointed to the board of AmBank on 1 October 2005. He began his career in the financial industry with his attachment to BNM from 1959 to 1986. He served in various departments including economics, foreign exchange, exchange control and investment, until he was promoted to Manager of the Exchange Control Department, and was later seconded to Cagamas Berhad as its first General Manager in 1986. In 1989, he joined Malaysian French Bank Berhad (now known as Alliance Bank Berhad) as Senior Vice-President and retired from office in October 1996. He was a Director of AmBank Berhad (now known as AmIslamic Bank Berhad) from 1999 untill 2005.

Mr. Cheah Tek Kuang

Mr. Cheah Tek Kuang, a Malaysian, aged 61, was appointed to the board of AmBank on 20 December 2001. Mr. Cheah is currently the Group Managing Director of AHB and Chief Executive Officer of AmBank. He is also a member of the Group Information Technology Committee.

He joined AmInvestment Bank Berhad in 1978 and served in various senior positions. In 1994, he was promoted to Managing Director, and he became the Group Managing Director of AmInvestment Bank from January 2002 to December 2004 before assuming the office of Group Managing Director in AHB. He remains as a Non-Independent Non-Executive Director of AmInvestment Bank.

His directorships in other public companies include Bursa Malaysia Berhad, AlGB, AmIslamic Bank Berhad, AmAssurance Berhad and Cagamas Berhad. He was recently appointed as an Investment Panel Member of the Employees‟ Provident Fund Board and an Investment Panel Member of the Kumpulan Wang Persaraan. He also currently serves as a Council Member of the Association of Banks in Malaysia and is an Alternate Chairman of the Malaysian Investment Banking Association.

He has a Bachelor of Economics (Honours) degree from the University of Malaya and is a Fellow of the Institute of Bankers Malaysia.

Mr. Anthony John Healy

Mr. Anthony John Healy, an Australian, aged 41, was appointed to the board of AmBank on 1 October 2007. Currently, he serves as the Deputy Group Managing Director of AHB. He also sits on the board of AmInvestment Bank, AIGB, AmIslamic Bank Berhad and AmInvestment Management Sdn Bhd.

He is a graduate of the University of Melbourne with a Bachelor of Science, Post Graduate Diploma in Economics and Post Graduate Diploma in Finance, and had been with the Australia and New Zealand Banking Group Limited since 1991.


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4.5.3 Profile of Key Management

Mr. Cheah Tek Kuang Please refer to item 4.5.2.

Mohamed Azmi Mahmood En. Mohamed Azmi Mahmood, a Malaysian, aged 53, the Managing Director of Retail Banking of AmBank (M) Berhad.

He first joined Arab-Malaysian Finance Berhad (now known as AMFB Holdings Berhad) in 1981 as an accountant and over the years, he rose to become Senior General Manager. In 1989, he was seconded by Bank Negara Malaysia to First Malaysia Finance Berhad as its Chief Executive Officer in a rescue scheme of the company. In January 1991, Mohamed Azmi rejoined Arab-Malaysian Finance Berhad and was promoted to Managing Director on 1 August 1994. He assumed the office of Managing Director of AmFinance Berhad (now AmBank (M) Berhad) with effect from 15 June 2002 after the completion of the acquisition of MBf Finance Berhad by Arab-Malaysian Finance Berhad. He has more than 20 years of experience in the banking industry. He is also a Director of AmAssurance Berhad, AmIslamic Bank Berhad, Malaysian Electronic Payment System (1997) Sdn Bhd (MEPS), MEPS Currency Management Sdn Bhd, Akademi IBBM Sdn Bhd, Financial Information Services Sdn Bhd and FIS Data Link Sdn Bhd. He is also a Member of the Council and Committee of the Institute of Bankers Malaysia as well as a Fellow of the institute, a Council Member and Honorary Treasurer of the Association of Finance Companies of Malaysia and a Council Member and Honorary Secretary of the Association of Hire Purchase Companies of Malaysia.

Dato’ James Lim Cheng Poh Dato‟ James Lim Cheng Poh, a Malaysian, aged 59, joined AmBank Berhad as its Managing Director/CEO, on 15 June 2004. After the merger of the business operations of AmBank Berhad and AmFinance Berhad, whereby AmFinance Berhad became AmBank (M) Berhad on 1 June 2005, he was appointed as Managing Director, Business Banking of AmBank (M) Berhad. He graduated from Camborne School of Mines (England) in Mining Engineering and holds a Masters Degree in Science (Engineering) from Queen‟s University in Canada as well as a Masters Degree in Business Administration from Harvard University, USA. Prior to joining AmBank Berhad, he served in the Hong Leong Group for more than 20 years. He joined the Hong Leong Group in 1983 and held various senior positions and served in various capacities including insurance, properties and finance in the Hong Leong Group. In 1994, he was appointed as the Senior Group Managing Director of Hong Leong Bank Berhad, a position he held until 16 October 2003. Under his leadership, he has


38

developed Hong Leong Bank into one of the fastest growing banks in the country.

Mahdi Morad

Encik Mahdi Morad, aged 52, is currently the Exetuve Director, Retail Banking of AmBank (M) Berhad. He joined Arab-Malaysian Finance Berhad (now known as AMFB Holdings Berhad) in 1989. Prior to this, he held various positions in Asia Commercial Finance Berhad and Sime Darby Plantations Berhad.

Encik Mahdi Morad has a Bachelor of Science degree in Agricultural Business from Iowa State University, USA and a Masters degree in Business Administration from University of Missouri, USA. He also serves as a director on the boards of various subsidiaries of the Bank, namely AMBB Capital (L) Ltd, MBf Information Services Sdn Bhd, MBf Trustees Bhd, Bougainvillea Development Sdn Bhd, AmProperty Holdings Sdn Bhd and AmCredit & Leasing Sdn Bhd. He is also the Chairman of Arab-Malaysian Credit Berhad.

Ashok Ramamurthy

Mr. Ashok Ramamurthy, aged 46, is currently the Chief Financial Officer of AHB. Ashok is responsible for leading the Group Finance function which will include implementing comprehensive financial reporting systems across the Group‟s businesses. Ashok has over 15 years finance experience within ANZ, across multiple geographies including New Zealand, Australia and India. He has been successful in developing and executing transformational strategy and leading large Finance functions.

Andrew Kerr

Mr. Andrew Kerr, aged 49, is currently the Chief Risk Officer of AHB. Andrew is responsible for the development and leadership of the AHB Group‟s risk function ensuring the financial and reputational integrity of the AHB Group through an effective risk management framework. Andrew has over 25 years experience with a number of major international financial institutions predominately in the area of Corporate Finance and Risk Management. Andrew spent 4 years at ANZ from 1999 to 2003 in senior Risk roles in institutional banking. Andrew‟s most recent experience was with another Australian financial institution as General Manager, Group Portfolio Management & Policy. He also spent over 5 years in Hong Kong with Bank of America in various positions and he brings considerable Asian experience to this role. Andrew has been very successful in instilling a strong credit culture at the organizational and business unit.

Sim How Chuah

Mr Sim How Chuah, aged 54, is currently a Senior General Manager, Business Banking of AmBank (M) Berhad. He joined Arab-Malaysian Finance Berhad (now known as AMFB Holdings Berhad) in 1984 and was subsequently transferred to the Bank in 1994. Prior to joining Arab-Malaysian


39

Finance Berhad, he was with BDO Binder from 1974 to 1984 where he was initially with the audit arm and his last position was a Director and Manager of the company secretarial unit. He has more than 20 years of experience in the banking industry. He also serves as a director on the board of AMBB Capital (L) Ltd., a subsidiary of AmBank (M) Berhad

Ahmad Zaini Othman En. Ahmad Zaini Othman, aged 50, joined the AmBank Group through the commercial banking arm in 1996. He was the Programme Principal in the Programme Management Office of the AmBank Group, which was responsible for setting up the Islamic banking arm of the AmBank Group. He is currently the Chief Executive Officer of AmIslamic Bank Berhad.

He holds a Master‟s Degree in Business Administration (Finance) from the St.

Louis University in the United States of America and a Bachelor of Science (Finance) Degree from the Southern Illinois University in the United States of America. He also studied in England for his Higher National Diploma in Accounting.

He has more than 20 years of banking and corporate experience. Presently,

he is a member of the Bank Negara Malaysia (BNM) Islamic Law Review Committee and BNM Arbitration Committee. He has been a council member of the Association of Islamic Banking Institutions Malaysia (AIBIM) since 2004. He is also a member of the Structured Business Committee of AIBIM.

4.6 Risk Management

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

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

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

A uniform risk language for quantifiable risks that permits comparability and

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


40

Better awareness, grading and development of risk indicators on non-quantifiable risks for making decisions. Data collection will be initiated in the near term to quantify such risks and ultimately integrate them into a value-based decision making process.

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

permissible risk-taking activity will be assessed against the capital at risk.

Risk taking activities must be able to generate sufficient profits to cover expected losses that can arise from their inherent risks in the long-run. A risk costing methodology and allocation system has been developed to impute risks as a cost to a particular business line, product or customer.

A balance must be achieved between revenue expectations and risks involved

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

The AHB Group‟s main risk management organizational structure (as illustrated below) is made up of the following components:- Board of Directors Risk Management Committee of Directors Executive Risk Management Committees Risk Management Department Risk management structure

Board of Directors

Risk Management Committee of Directors

Executive Risk Management Committees

Credit, Capital & Strategic

Risk

Operational & Legal Risk

Market & Funding Risk

Risk Management Department


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4.7 Accolades and Awards

Accolades and awards received by AmBank in the year 2007 include the following:-

Award/ Recognition Awarded by

Excellence in Automobile Lending Award for Asia Pacific

The Asian Banker

Five Contact Centre Awards

Gold Award under Prestigious Category Most Significant Achievement

Sliver Award under Corporate Category Best Direct Marketing Program Special Excellence Award

Bronze Award under Customer Services Award Best In-House Service Contact Centre Best In-House Sales Contact Centre

Customer Relationship Management & Contact Centre Association Malaysia

Best Domestic Provider of FX Services Asiamoney



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5 FINANCIAL AND OTHER MATERIAL INFORMATION

5.1 Historical Financial Highlights

A summary of the consolidated financial statements of the AmBank Group based on the audited financial statements for the past three (3) FYEs 31 March 2005 to 2007 after incorporating the prior year‟s adjustments as well as the unaudited financial statements for the six (6) months financial period ended 30 September 2007 are as follows:-

FYE 31 March

2005 (Restated

consolidated)

2006 (Restated

consolidated)

2007 (Restated

consolidated)

6-months

financial period

ended 30

September 2007

(Unaudited) RM million RM million RM million RM million

Paid-up share capital 610.4 610.4 610.4 610.4

Shareholders‟ funds 3,289.5 3,532.4 3,093.4 3,433.9

NTA 3,256.1 3,495.5 3,039.0 3,370.0

NTA per share (RM) 5.33 5.73 4.98 5.52

Operating revenue 2,766.9 3,139.1 3,904.0 2,184.2

PBT / (Loss before taxation) 206.3 393.5 (523.4) 293.3

PATMI / (Loss after taxation and minority interests)

108.7 271.3 (442.2) 147.2

Gross EPS (RM) 1 0.34 0.64 (0.86) 0.90

Net Earnings / (Loss per share)

(RM)1

0.18 0.44 (0.72) 0.46

Pre-tax profit margin (%) 2 N/A N/A N/A N/A

Current ratio (times) 2 N/A N/A N/A N/A

Total borrowings 3 1,340.0 2,067.7 1,744.2 2,596.5

Gearing ratio (times) 0.4 0.6 0.6 0.8

Notes:- The summary restated consolidated financial statements of AmBank Group for the FYE 31 March 2005 was derived from: (i) the audited consolidated financial statements of AmBank for the FYE 31 March 2005 after

adjusting for the adoption of BNM’s revised guidelines on Financial Reporting for Licensed Institutions (BNM/GP8) in respect of the treatment of securities and derivative financial instruments, BNM’s Circular on handling fees dated 16 October 2006 and the adoption of new and revised FRSs that are applicable to AmBank Group with effect from April 2006.

(ii) the audited financial statements of AmIslamic Bank Berhad (“AmIslamic Bank”) for the FYE 31

March 2005 after adjusting for the adoption of BNM’s revised guidelines on Financial Reporting for Licensed Institutions (BNM/GP8) in respect of the treatment of securities and the adoption of new and revised FRSs that are applicable to AmIslamic Bank with effect from April 2006; and

(iii) the consolidation of (i) and (ii) above in accordance with the merger accounting method under

Malaysian GAAP (which deemed AmBank and AmIslamic Bank to be operating as a single entity from the earliest financial period presented herein).

The summary restated consolidated financial statements of AmBank Group for the FYE 31 March 2006 was derived from: (iv) the audited consolidated financial statements of AmBank Group for the FYE 31 March 2006 after

adjusting for the adoption of BNM’s revised guidelines on Financial Reporting for Licensed


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Institutions (BNM/GP8) in respect of the treatment of securities and derivative financial instruments, BNM’s Circular on handling fees dated 16 October 2006 and the adoption of new and revised FRSs that are applicable to AmBank Group with effect from April 2006.

The summary restated consolidated financial statements of AmBank Group for the FYE 31 March 2007 was derived from: (v) the audited consolidated financial statements of AmBank Group for the FYE 31 March 2007 after

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

The summary consolidated financial statements of AmBank Group for the period ended 30 September 2007, had been subjected to a Limited Review by the external auditors, Ernst & Young. 1 Annualised 2 There is no classification of current assets, current liabilities or pre-tax profit margin in the financial

statements of AmBank. 3 Comprising subordinated term loans, subordinated bonds, exchangeable bonds, hybrid securities,

Irredeemable Convertible Unsecured Loan Stocks (liability portion) and Irredeemable Non-Cumulative Convertible Preference shares.

5.2 Commentaries on past performance

FYE 31 March 2005 The AmBank Group registered strong loan growth of 10% during the year, which was mainly attributed to financing for purchase of transport vehicles and purchase of residential properties. The AmBank Group registered a PBT of RM206.3 million despite the adoption of a more conservative provisioning policy for corporate non-performing loans of seven (7) years and beyond, whereby zero value has been assigned for property collaterals although realizable values based on independent values are available. Additionally, in March 2005 the AmBank Group adopted the three (3) month non-performing loans classification basis where loans are classified as non-performing when repayment is in arrears for more than three (3) months instead of six (6) months previously.

FYE 31 March 2006 The merger of the commercial banking business with the AmBank Group‟s finance company business in June 2005, and the resultant conversion of AmBank Group‟s finance company branches into full-fledged commercial banking branches has provided AmBank Group with a solid platform to grow its loans exposure to the small and medium-sized enterprises and develope the group‟s trade financing and cash management businesses. The merger has also boosted AmBank‟s reach and scale to extend its leadership market positions in the retail banking sector.

The AmBank Group registered strong loan growth of 16% and a PBT of RM 393.5 million, an increase of 90% over the previous year.


44

On 27 January 2006, AMBB Capital (L) Ltd, a wholly owned subsidiary of AmBank issued USD200 million Innovative Hybrid Tier 1 Capital comprising 2,000 preference

shares of USD100,000 each (“Hybrid Securities”) to non-resident investors. The Hybrid Securities were priced at par on a semi-annual coupon of 6.77% pa for the first ten (10) years and have the benefit of a subordinated guarantee by AmBank.

The Hybrid Securities improved AmBank‟s capital adequacy ratios and provide the flexibility to fund the growth of its business operations.

FYE 31 March 2007

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

During the year, the AmBank Group adopted a more stringent basis for charging specific allowances on non-performing loans. Accordingly, only 50% of the realizable value is assigned to the properties held as collateral for non-performing loans which are in arrears for more than five (5) years but less than seven (7) years, no value is assigned to the realizable value of the properties held as collateral for non-performing loans which are in arrears for more than seven (7) years. Further, a specific allowance of 20% is provided on non-performing loans which are more than three (3) months but less than six (6) months in arrears. This change in the method of provisioning has resulted in an additional specific allowance charge for the year of RM515.5 million. The AmBank Group also set aside impairment loss of RM213.8 million on debt converted securities and incurred unrealized loss of RM107.7 million upon marking to market the derivative financial instruments as required under BNM‟s revised guidelines. The AmBank Group reported a pre-tax loss of RM523.4 million for the year due to higher loss allowances as a result of adopting a more prudent provisioning policy on loans, advances and financing and debt converted instruments. However the decrease was partially set-off by improvement in operating revenue. In December 2006, AmBank prepaid the RM680 million subordinated term loan facility to Astute Assets Berhad. In the same month, its wholly owned subsidiary,

AmIslamic Bank issued RM400 million Subordinated Sukuk Musyarakah (“Sukuk

Musyarakah”) for purposes of increasing AmIslamic Bank‟s capital funds. The Sukuk Musyarakah is for a period of ten (10) years and carries a profit rate of 4.8% per annum for the first five (5) years and shall be stepped up by 0.5% per annum every subsequent year to maturity date.

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

September 2007 The AmBank Group registered a pre-tax profit of RM293.3 million, a 67% increase from the pre-tax profit of RM175.2 million in the corresponding period last year.


45

The improvement is attributable to the increase in investment income, fees and commission and net interest income set-off against higher operating expenses. On 18 May 2007, AmBank issued

RM575 million Exchangeable Bonds (“EB”) to ANZ Funds Pty Ltd. The EBs bear a rate 5% per annum for the first five (5) years and 5.5% per annum for the next five (5) years and will mature on the tenth (10

th) anniversary from the date of issue. The

EBs are exchangeable into 188,524,590 new ordinary shares in the ultimate holding company, AMMB Holdings Berhad at an exchange rate of RM3.05 per share.

RM300 million Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) to the holding company, AMFB. The ICULS bears interest at 6% per annum and will mature on 2017. The ICULS shall be convertible to new shares in AmBank all credited as fully paid on the basis of one (1) new share for every RM5.00 nominal amount of ICULS tendered.

RM150 million Irredeemable Non-Cumulative Convertible Preference Shares

(“IPS”) to the holding company, AMFB. The IPS are perpetual securities and do not have a fixed maturity date and dividend rate will be 6% per annum. The IPS are convertible into new ordinary shares of AmBank on the basis of one (1) new ordinary share for every one (1) IPS held.

BNM has approved the IPS as Tier 1 capital and both the EBs and ICULS as Tier 2 capital of AmBank under the capital adequacy framework.

5.3 Material commitments and contingent liabilities as at 30 September 2007 and

capital commitments as at 31 March 2007

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

The commitments and contingencies outstanding of the AmBank Group as at 30 September 2007 are as follows:-

Principal Credit Equivalent

Amount Amount (1)

(RM’000) (RM’000)

Derivative Financial Instruments

Interest rate related contracts: Interest rate swaps :

Related companies 9,151,819 58,953 Others 911,800 129,642

Foreign exchange related contracts:

Forward exchange contracts 1,359,394 20,370

11,423,013 208,965

Commitments

Irrevocable commitments to extend credit maturing :


46

within one year 12,391,188 - more than one year 1,048,866 524,433

Forward purchase commitments 49,981 49,981

13,490,035 574,414

Contingent Liabilities

Direct credit substitutes 995,029 995,029 Short-term self liquidating trade-related contingencies

338,639 67,728

Obligations under underwriting agreements 1,070,000 535,000 Islamic financing sold to Cagamas Berhad with

recourse 2,161,823 2,161,823

Unpaid portion of partly paid shares 250 250 Certain transaction-related contingent items 457,157 228,579 Others 70,324 -

5,093,222 3,988,409

30,006,270 4,771,788

Note:-

(1) The credit equivalent amount is arrived at using the credit conversion factor as per

BNM guidelines.

As at 31 March 2007, AmBank Group has the following capital commitments:

2007 2006

(RM’000) (RM’000)

Authorised and contracted for :

Purchase of computer equipment and software 24,700 32,886 Leasehold improvements 4,448 6,949

29,148 39,835

Authorised but not contracted for:

Purchase of computer equipment and software 20,201 14,127

49,349 53,962

5.4 Other Material Information

5.4.1 Material Contracts

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

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


47

(b) Exchangeable Bond Trust Deed dated 15 May 2007 between AmBank, AHB and BHLB Trustee Berhad in relation to the issue of the EBs.

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

between AmBank, BHLB Trustee Berhad, BNM and AmInvestment Bank in relation to the issue of the EBs.

5.4.2 Material Litigation

As at 31 October 2007, other than litigation, claims and arbitration arising from the ordinary course of business of which (i) the financial impact thereof has already been accounted for in the latest audited accounts and/or (ii) the Board is of the view that there would not be any material and adverse impact on the financial position of AmBank and its subsidiary companies, AmBank and its subsidiary companies are not engaged in any material litigation, claims and arbitration either as plaintiff or defendant and the Board does not have any knowledge of any proceedings pending or threatened against AmBank and/or its subsidiary companies or of any facts likely to give rise to any proceedings which may materially and adversely affect the financial position or business of AmBank and its subsidiary companies.



APPENDIX A

INTERIM FINANCIAL STATEMENTS FOR THE FINANCIAL

HALF-YEAR FROM 1 APRIL 2007 TO 30 SEPTEMBER 2007


APPENDIX B

RAM RATING REPORT

THE ISSUER

AmBank (M) Berhad 22


55 Jalan Raja Chulan 50200 Kuala Lumpur

Malaysia

PRINCIPAL ADVISER, LEAD ARRANGER & FACILITY AGENT

AmInvestment Bank 22



Malaysia

TRUSTEE

Pacific Trustees Berhad Unit A-9-8, 9

th Floor, Megan Avenue I

No. 189, Jalan Tun Razak Off Persiaran Hampshire

50400 Kuala Lumpur Malaysia

LEGAL COUNSEL

Shook Lin & Bok 20

th Floor, Bangunan AmBank Group


Malaysia