ABB-Annual-31122010-Final by lanyuehua

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									Company No: 25046 T



AFFIN Bank Berhad
(Incorporated in Malaysia)

Reports and financial statements
for the financial year ended 31 December 2010
AFFIN Bank Berhad
(Incorporated in Malaysia)


Reports and financial statements
for the financial year ended 31 December 2010

Contents                                         Pages

Directors' report                                1 - 25

Statements Of Financial Position                   26

Income Statements                                  27

Statements of Comprehensive Income                 28

Statement of Changes in Equity                   29 - 30

Statements of Cash Flows                         31 - 34

Summary of significant accounting policies       35 - 61

Notes to the financial statements               62 - 168

Statement by Directors                            169

Statutory declaration                             169

Report of the auditors                          170 - 171

Basel II Pillar 3 disclosures                   172 - 213
                                Company No: 25046 T



                           AFFIN Bank Berhad
                             (Incorporated in Malaysia)


                          CORPORATE INFORMATION


                             BOARD OF DIRECTORS

             Jen Tan Sri Dato' Seri Ismail bin Haji Omar (Bersara) (Chairman)
      Dato' Zulkiflee Abbas bin Abdul Hamid (Managing Director/Chief Executive Officer)
Tan Sri Dato' Lodin bin Wok Kamaruddin (Reappointed as Director w.e.f. 4 October 2010)
                         Dr Raja Abdul Malek bin Raja Jallaludin
        Laksamana Madya Tan Sri Dato' Seri Ahmad Ramli bin Mohd Nor (Bersara)
                         Dato' Sri Abdul Aziz bin Abdul Rahman
                                Mr Aubrey Li Kwok-Sing
          Mr Brian Li Man-Bun (Alternate director to Mr Aubrey Li Kwok-Sing)
                                  Mr Stephen Charles Li
          Mr Eric Koh Thong Hau (Alternate director to Mr Stephen Charles Li)
                            En. Mohd Suffian bin Haji Haron




                        JOINT COMPANY SECRETARIES

                                 Nimma Safira Khalid
                                    Azizah Shukor

                              REGISTERED OFFICE

                               17th Floor, Menara Affin
                                80, Jalan Raja Chulan
                                 50200 Kuala Lumpur
                                       Malaysia


                                     AUDITORS

                       PricewaterhouseCoopers (No. AF : 1146)
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

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

     PRINCIPAL ACTIVITIES

     The principal activities of the Bank during the financial year are banking and related financial
     services. The principal activities of the subsidiaries are Islamic banking business, property
     management services, nominee and trustee services. Islamic banking business refers generally to the
     acceptance of deposits and granting of financing under the Shariah principles. There were no
     significant changes in the nature of these activities during the financial year.


     FINANCIAL RESULTS
                                                                            The Group         The Bank
                                                                              RM'000           RM'000

     Profit before taxation and zakat                                             521,904       474,794
     Taxation and zakat                                                          (140,667)     (128,089)
     Net profit for the financial year                                            381,237       346,705

     DIVIDENDS

     The dividends on ordinary shares paid or declared by the Bank since 31 December 2009 were as
     follows:

     In respect of the financial year ended 31 December 2009 as shown in the directors' report for that
     financial year:
                                                                                        RM'000
     Final gross dividend of 5.00 sen per share, less income tax of 25% paid
     on 25 March 2010                                                                     53,973

     In respect of the financial year ended 31 December 2010 :-

     Interim gross dividend of 5.28 sen per share, less income tax of 25% paid
     on 6 December 2010                                                                      57,000


     The Directors now recommend the payment of a final tax exempt dividend of 5 sen per share
     amounting to RM71,964,269 which is subject to the approval of members at the forthcoming
     Annual General Meeting of the Bank.




                                                     1
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     RESERVE AND PROVISIONS

     All material transfers to or from reserves or provisions during the financial year are shown in the
     financial statements and notes to the financial statements.


     BAD AND DOUBTFUL DEBTS AND FINANCING

     Before the financial statements of the Group and the Bank were made out, the Directors took
     reasonable steps to ascertain that proper action had been taken in relation to the writing off of bad
     debts and financing and the making of allowance for bad and doubtful debts and financing, and
     satisfied themselves that all known bad debts and financing had been written off and adequate
     allowances made for doubtful debts and financing.

     At the date of this report, the Directors are not aware of any circumstances which would render the
     amount written off for bad debts and financing, or the amount of the allowance for doubtful debts
     and financing, in the financial statements of the Group and the Bank inadequate to any substantial
     extent.


     CURRENT ASSETS

     Before the financial statements of the Group and the Bank were made out, the Directors took
     reasonable steps to ascertain that any current assets, other than debts and financing, which were
     unlikely to realise in the ordinary course of business, their values as shown in the accounting records
     of the Group and the Bank, have been written down to an amount which they might expected so to
     realise.

     At the date of this report, the Directors are not aware of any circumstances which would render the
     values attributed to the current assets in the financial statements of the Group and the Bank
     misleading.


     VALUATION METHODS

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




                                                      2
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     CONTINGENT AND OTHER LIABILITIES

     At the date of this report there does not exist:

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

     (b) any contingent liability in respect of the Group or the Bank that has arisen since the end of the
         financial year other than in the ordinary course of banking business or activities of the Group.


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



     CHANGE OF CIRCUMSTANCES

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


     ITEMS OF AN UNUSUAL NATURE

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

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




                                                        3
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     SIGNIFICANT EVENT DURING THE FINANCIAL YEAR

     There is no significant event during the financial year.


     SUBSEQUENT EVENTS

     There were no material events subsequent to the reporting date that require disclosure or adjustments
     to the financial statements.



     DIRECTORS

     The Directors of the Bank who have held office during the period since the date of the last report are:


     Jen Tan Sri Dato' Seri Ismail bin Haji Omar (Bersara)
     Chairman / Non-Independent Non-Executive

     Dato' Zulkiflee Abbas bin Abdul Hamid (Managing Director/Chief Executive Officer)
     Non-Independent Executive Director

     Tan Sri Dato' Lodin bin Wok Kamaruddin
     Non-Independent Non-Executive Director
     (Reappointed as Director w.e.f. 4 October 2010)

     Dr Raja Abdul Malek bin Raja Jallaludin
     Independent Non-Executive Director

     Laksamana Madya Tan Sri Dato' Seri Ahmad Ramli bin Mohd Nor (Bersara)
     Non-Independent Non-Executive Director

     Dato' Sri Abdul Aziz bin Abdul Rahman
     Independent Non-Executive Director

     Mr Aubrey Li Kwok-Sing
     Non-Independent Non-Executive Director




                                                       4
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     DIRECTORS (continued)

     Mr Brian Li Man-Bun
     Non-Independent Non-Executive Director (Alternate Director to Mr Aubrey Li Kwok-Sing)

     Mr Stephen Charles Li
     Non-Independent Non-Executive Director

     Mr Eric Koh Thong Hau
     Non-Independent Non-Executive Director (Alternate Director to Mr Stephen Charles Li)

     En. Mohd Suffian bin Haji Haron
     Independent Non-Executive Director




                                                   5
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     DIRECTORS' INTERESTS

     According to the register of Directors' shareholdings, the interest of Directors in office at the end of
     the financial year in shares, warrants and options of related companies are as follows:

                                                                         Ordinary shares of RM1 each
                                                   As at                                        As at
                                                1.1.2010          Bought         Sold      31.12.2010
     AFFIN Holdings Berhad
     Tan Sri Dato' Lodin bin Wok
                                           *                                                   *
      Kamaruddin                                808,714                  -                -         808,714
     Dato' Dr. Lee Chee Kuon                      7,000                  -                -           7,000
     Dato' Sri Abdul Hamidy bin
      Abdul Hafiz                               200,000                  -                -         200,000

     Boustead Heavy Industries
      Corporation Berhad
     Tan Sri Dato' Lodin bin Wok
      Kamaruddin                               2,000,000                 -                -        2,000,000

     Boustead Petroleum Sdn Berhad
     Tan Sri Dato' Lodin bin Wok
      Kamaruddin                               5,766,465         150,000 ^                -        5,916,465

     Al-Hadharah Boustead REIT
     Tan Sri Dato' Lodin bin Wok
      Kamaruddin                                200,000           50,000 ^^               -         250,000

     * Shares held in trust by nominee company
     ^ Acquisition of REIT on 21 April 2010
     ^^ Single tier dividend Redeemable Preference Shares for financial year ended 31 December 2010
        received on 24 December 2010




                                                       6
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     DIRECTORS' INTERESTS (continued)

                                                                       Number of warrants 2000/2010
                                                 As at                                        As at
                                              1.1.2010          Bought      Expired      31.12.2010
     AFFIN Holdings Berhad
     Tan Sri Dato' Lodin bin Wok
      Kamaruddin                                1,500                 -           1,500                 -


     Each warrant of the holding company ('AFFIN Warrants 2000/2005') entitles the registered holder to
     subscribe one new ordinary share of RM 1.00 each in AFFIN Holdings Berhad at any time from the
     date of issue of 8 July 2000 at the exercise price of RM 3.10 per share. The original exercise period
     of the AFFIN Warrants 2000/2005 was to expire on 7 July 2005. During the financial year 2005, the
     AFFIN Warrants 2000/2005 was extended for another five years and expired on 7 July 2010 ('AFFIN
     Warrants 2000/2010').

                                                         Ordinary shares of RM10 each; RM5 uncalled
                                                 As at                                        As at
                                              1.1.2010         Bought        Transfer    31.12.2010
     ABB Trustee Berhad ***
     Jen Tan Sri Dato' Seri Ismail bin
       Haji Omar (Bersara)                     20,000                 -                -          20,000
     Dr Raja Abdul Malek bin Raja
       Jallaludin                              20,000                 -                -          20,000
     Laksamana Madya Tan Sri Dato' Seri
       Ahmad Ramli bin Mohd Nor
       (Bersara)                               20,000                 -                -          20,000

     *** Shares held in trust for the Bank




                                                     7
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     DIRECTORS' INTERESTS (continued)

                                                                         Ordinary shares of 50 sen each
                                                  As at                                           As at
                                               1.1.2010           Bought           Sold      31.12.2010
     Boustead Holdings Berhad
     Tan Sri Dato' Lodin bin Wok
      Kamaruddin                            26,122,599                  -                -     26,122,599


                                                             Redeemable preference shares of RM1 each
                                                  As at                                          As at
                                               1.1.2010          Bought           Sold      31.12.2010
     Boustead Petroleum Sdn Berhad
     Tan Sri Dato' Lodin bin Wok
      Kamaruddin                                    50                  -                -              50



     Other than the above, the Directors in office at the end of the financial year did not have any other
     interest in shares, warrants and options over shares in the Bank or its related corporations during the
     financial year.




                                                      8
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     DIRECTORS' BENEFITS

     During and at the end of the financial year, no other arrangements subsisted to which the Bank or any
     of its subsidiaries is a party with the object or objects of enabling Directors of the Bank or any of its
     subsidiaries to acquire benefits by means of the acquisition of shares in, or debenture of, the Bank or
     any other body corporate, except for the share options granted to directors of the Bank by AFFIN
     Holdings Berhad, Boustead Holdings Berhad and Lembaga Tabung Angkatan Tentera.

     Since the end of the previous financial year, no Director of the Bank has received or become entitled
     to receive a benefit (other than the fees and other emoluments shown in the Note 31 to the financial
     statements) by reason of a contract made by the Bank or by a related corporation with the Director or
     with a firm of which he is a member or with a company in which he has a substantial financial interest
     except that certain Directors received remuneration as directors/executives of related corporations,
     share options granted to Directors of the Bank pursuant to the holding company's Employee Share
     Option Scheme and share options granted by the ultimate holding corporate body and Boustead
     Holdings Berhad.

     CORPORATE GOVERNANCE

     The Board of Directors is committed to ensure the highest standards of corporate governance
     throughout the organisation with the objectives of safeguarding the interests of all stakeholders and
     enhancing the shareholders' value and financial performance of the Bank. The Board considers that it
     has applied the Best Practices as set out in the Malaysian Code of Corporate Governance throughout
     the financial year. The Bank is also required to comply with BNM's Guidelines on Directorship in
     the banking institutions ('BNM/GP1').

     (i) Board of Directors Responsibility and Oversight

          The Board of Directors

          The direction and control of the Bank rest firmly with the Board as it effectively assumes the
          overall responsibility for corporate governance, strategic direction, formulation of policies and
          overseeing the investments and operations of the Bank. The Board exercises independent
          oversight on the management and bears the overall accountability for the performance of the
          Bank and compliance with the principle of good governance.

          There is a clear division of responsibility between the Chairman and the Managing
          Director/Chief Executive Officer to ensure that there is a balance of power and authority. The
          Board is responsible for reviewing and approving the longer-term strategic plans of the Bank as
          well as the business strategies. It is also responsible for identifying the principal risks and
          implementation of appropriate systems to manage those risks as well as reviewing the adequacy
          and integrity of the Bank's internal control systems, management information systems,
          including systems for compliance with applicable laws, regulations and guidelines.


                                                       9
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     CORPORATE GOVERNANCE (continued)

     (i) Board of Directors Responsibility and Oversight (continued)

         The Board of Directors (continued)

         Whilst, the Management Committee, headed by the Managing Director/Chief Executive Officer,
         is responsible for the implementation of the strategies and internal control as well as monitoring
         performance. The Committee is also a forum to deliberate issues pertaining to the Bank's
         business, strategic initiatives, risk management, manpower development, supporting technology
         platform and business processes.


         The Board Meetings

         The Board meets on a monthly basis, to review the Bank's financial and business performance,
         to oversee the conduct of the Bank's business as well as to ensure that adequate internal control
         systems are in place. The Board met 18 times during the financial year.


         Board Balance

         The Board of Directors comprises of Managing Director/Chief Executive Officer, eight Non-
         Executive Directors and two alternate Non-Executive Directors. There are three Independent
         Non-Executive Directors, five Non-Independent Non-Executive Directors and one Non-
         Independent Executive Director. The Board of Directors meetings are presided by a Non-
         Independent Non-Executive Chairman whose role is clearly separated from the role of the
         Managing Director/Chief Executive Officer.

         In 2010, the Bank continues to have a strong and experienced Board, befitting its aspiration to
         become a mid size Bank of prominence. It consists of representatives from the private sector
         with suitable qualifications and experience in relevant areas particularly in banking.




                                                     10
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     CORPORATE GOVERNANCE (continued)

     (i) Board of Directors Responsibility and Oversight (continued)

         The Board Balance (continued)

         The composition of the Board and the number of meetings attended by each director are as
         follows:
                                                                                  Total Meetings
         Directors                                                                      Attended

         Jen Tan Sri Dato' Seri Ismail bin Haji Omar (Bersara)                            18 / 18
         Chairman / Non-Independent Non-Executive Director

         Dato' Zulkiflee Abbas bin Abdul Hamid                                            18 / 18
         Managing Director/Chief Executive Officer
         Non-Independent Executive Director

         Tan Sri Dato' Lodin bin Wok Kamaruddin                                             2/3
         Non-Independent Non-Executive Director
         (Reappointment as Director w.e.f. 4 October 2010)

         Dr Raja Abdul Malek bin Raja Jallaludin                                          17 / 18
         Independent Non-Executive Director

         Laksamana Madya Tan Sri Dato' Seri Ahmad Ramli bin Mohd Nor (Bersara)            16 / 18
         Non-Independent Non-Executive Director

         Dato' Sri Abdul Aziz bin Abdul Rahman                                            18 / 18
         Independent Non-Executive Director

         Mr Aubrey Li Kwok-Sing                                                           11 / 18
         Non-Independent Non-Executive Director

         Mr Brian Li Man-Bun                                                               0 / 18
         Non-Independent Non-Executive Director
         (Alternate Director to Mr Aubrey Li Kwok-Sing)




                                                   11
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     CORPORATE GOVERNANCE (continued)

     (i) Board of Directors Responsibility and Oversight (continued)

         The Board Balance (continued)
                                                                       Total Meetings
         Directors                                                           Attended

         Mr Stephen Charles Li                                                  8 / 18
         Non-Independent Non-Executive Director

         Mr Eric Koh Thong Hau                                                10 / 18
         Non-Independent Non-Executive Director
         (Alternate Director to Mr Stephen Charles Li)

         En. Mohd Suffian bin Haji Haron                                      18 / 18
         Independent Non-Executive Director

         Tan Sri Mohamed Jawhar                                                  1/1
         Independent Non-Executive Director
         (Attended AFFIN Bank's Board Meeting by invitation)




                                                   12
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     CORPORATE GOVERNANCE (continued)

     (i) Board of Directors Responsibility and Oversight (continued)

         Board Committees

         Nomination Committee

         Nominating Committee was established to provide a formal and transparent procedure for the
         appointment of Directors and Managing Director/Chief Executive Officer. The committee also
         assesses the effectiveness of the Board as a whole, contribution of each Director, contribution of
         the Board's various committees and the performance of Managing Director/Chief Executive
         Officer and key senior management officers.

         During the financial year ended 31 December 2010, a total of 4 meetings were held. The
         Nominating Committee comprises the following members and the details of attendance of each
         member at the Nominating Committee meetings held during the financial year are as follows:


                                                                                           Total Meetings
         Members                                                                                 Attended

         En. Mohd Suffian bin Haji Haron                                                              4/4
         Chairman/Independent Non-Executive Director

         Dato' Zulkiflee Abbas bin Abdul Hamid                                                        4/4
         Member/Non-Independent Executive Director

         Laksamana Madya Tan Sri Dato' Seri Ahmad Ramli bin Mohd Nor (Bersara)                        4/4
         Member/Non-Independent Non-Executive Director

         Dato' Sri Abdul Aziz bin Abdul Rahman                                                        4/4
         Member/Independent Non-Executive Director

         Dr Raja Abdul Malek bin Raja Jallaludin                                                      4/4
         Member/Independent Non-Executive Director




                                                     13
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     CORPORATE GOVERNANCE (continued)

     (i) Board of Directors Responsibility and Oversight (continued)

         Board Committees (continued)

         Remuneration Committee

         Remuneration Committee was established to evaluate and recommend a framework of
         remuneration for Directors, the Chief Executive Officer and key senior management officers that
         is competitive and consistent with the Bank's culture, objectives and strategy.

         During the financial year ended 31 December 2010, a total of 7 meetings were held. The
         Remuneration Committee comprises the following members and the details of attendance of each
         member at the Remuneration Committee meetings held during the financial year are as follows:


                                                                                        Total Meetings
         Members                                                                              Attended

         Dr Raja Abdul Malek bin Raja Jallaludin                                                   7/7
         Chairman/Independent Non-Executive Director

         Laksamana Madya Tan Sri Dato' Seri Ahmad Ramli bin Mohd Nor (Bersara)                     6/7
         Member/Non-Independent Non-Executive Director

         En. Mohd Suffian bin Haji Haron                                                           7/7
         Member/Independent Non-Executive Director




                                                   14
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     CORPORATE GOVERNANCE (continued)

     (i) Board of Directors Responsibility and Oversight (continued)

         Board Committees (continued)

          Shariah Committee

          The Bank's business activities are subject to Shariah compliance and conformation by the
          Shariah Committee. The Shariah Committee is formed as legislated under Section 3(5)(b) of the
          Islamic Banking Act, 1983 and as per Guidelines on the Governance of Shariah Committee for
          the Islamic Financial Institutions ('BNM/GPS-i').

          The duties and responsibility of the Shariah Committee are as follow:
         •   To advise the Board on Shariah matters in order to ensure that the business operations of the
             Bank comply with the Shariah principles at all times;

         •   To endorse and validate relevant documentations of the Bank's products to ensure that the
             products comply with Shariah principles; and

         •    To advise the Bank on matters to be referred to the Shariah Advisory Council.


         The Shariah Committee was established in December 1995. During the year, a total of 8
         meetings were held. The Shariah Committee comprises the following members and the details of
         attendance of each member at the Shariah Committee meetings held are as follows:


                                                                                          Total Meetings
         Members                                                                                Attended

         Associate Professor Dr. Asyraf Wajdi bin Dato' Dusuki                                        8/8
         Chairman

         Associate Professor Dr. Said Bouheraoua                                                      8/8
         Member

         Associate Professor Dr. Md Khalil bin Ruslan                                                 6/8
         Member




                                                    15
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     CORPORATE GOVERNANCE (continued)

     (ii) Risk Management

         The Risk Management function, operating in an independent capacity, is part of the Bank's
         senior management structure which works closely as a team in managing risks to enhance
         stakeholders' value.

         The Risk Management function provides support to the Board Risk Management Committee
         ('BRMC'). Committees namely Board Loan Recovery Committee ('BLRC'), Management Loan
         Committee ('MLC'), Asset and Liability Management Committee ('ALCO') and Operational Risk
         Management Committee assist the BRMC in managing credit, liquidity and operational risk
         respectively.

         Responsibilities of these committees include:
         • risk identification
         • risk assessment and measurement
         • risk control and migration
         • risk monitoring

         Board Risk Management Committee ('BRMC')

         The main function of Board Risk Management Committee is to assist the Board in its
         supervisory role in the management of risk in the Bank. It has responsibility for approving and
         reviewing the credit risk strategy, credit risk framework and credit policies of the Bank.

         BRMC was established to provide oversight and management of all risks in the Bank. The
         Committee also ensures that the procedures and framework in relation to identifying, measuring,
         monitoring and controlling risk are operating effectively. The Bank's risk management
         framework is set out in Note 38 to the financial statements.


         The BRMC meeting for the Bank were jointly held with AFFIN Islamic Bank Berhad and during
         the financial year ended 31 December 2010, a total of 5 meetings were held. The BRMC
         comprises the following members and details of attendance of each member at the BRMC
         meetings held during the financial year are as follows:




                                                    16
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     CORPORATE GOVERNANCE (continued)

     (ii) Risk Management (continued)

                                                           Total Meetings
         Members                                                 Attended

         Dato' Sri Abdul Aziz bin Abdul Rahman                       5/5
         Chairman/Independent Non-Executive Director

         Dr Raja Abdul Malek bin Raja Jallaludin                     5/5
         Member/Independent Non-Executive Director

         En. Mohd Suffian bin Haji Haron                             5/5
         Member/Independent Non-Executive Director
         (Representative from AFFIN Islamic Bank Berhad)




                                                17
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     CORPORATE GOVERNANCE (continued)

     (ii) Risk Management (continued)

         Board Loan Review and Recovery Committee ('BLRC')

         Board Loan Review Committee critically reviews loans and other credit facilities with higher risk
         implications, after due process of checking, analysis, review and recommendation by the Credit
         Risk Management function, and if found necessary, exercise the power to veto loan applications
         that have been accepted by the Management Loan Committee. The Committee is also responsible
         to review on the non-performing loans presented by Management.


         During the financial year ended 31 December 2010, a total of 14 meetings were held. The
         BLRC comprises the following members and details of attendance of each member at the BLRC
         meetings held during the financial year are as follows:

                                                                                         Total Meetings
         Members                                                                               Attended

         Jen Tan Sri Dato' Seri Ismail bin Haji Omar (Bersara)                                    14 / 14
         Chairman / Non-Independent Non-Executive Director

         Laksamana Madya Tan Sri Dato' Seri Ahmad Ramli bin Mohd Nor (Bersara)                    13 / 14
         Member/Non-Independent Non-Executive Director

         En. Mohd Suffian bin Haji Haron                                                          14 / 14
         Member/Independent Non-Executive Director


         Management Loan Committee ('MLC')

         Management Loan Committee approves complex and larger loans and workout/recovery
         proposals beyond the delegated authority of the concerned individual senior management
         personnel of the Bank.




                                                    18
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     CORPORATE GOVERNANCE (continued)

     (ii) Risk Management (continued)

         Individual approvers

         For the delegated authority, a dual sign-off approval system is in place, independent of business
         imperatives.


         Asset and Liability Management Committee ('ALCO')

         Responsibilities of these committees include:
         •   Manage the asset liability of the Bank through coordination of the Bank's overall planning
             process including strategic planning, budgeting and asset liability management process;
         •   Direct the Bank's overall acquisition and allocation of Funds;
         •   Prudently manage the Bank's interest rate exposure;
         •   Determine the overall Balance Sheet strategy and ensuring policy compliance;
         •   Determined the type and scope of derivative activities, approve individual derivative
             transactions as well as control over the level of exposure in derivatives; and
         •   Review of market risks in Bank's trading portfolios.


         Operational Risk Management Committee

         Responsibilities of these committees include:
         •   To evaluate operational risks issues on escalating importance/strategic risk exposure;
         •   To review and recommend on broad operational risks management policies best practices
             for adoption by the Bank's operating units;
         •   To review the effectiveness of broad internal controls and making recommendation on
             changes if necessary;
         •   To review / approve recommendation on operational risk management groups section up to
             address specific issue;
         •   To take the lead in inculcating an operational risks awareness culture;
         •   To approve operational risk management methodologies/measurements tools; and
         •   To review and approve the strategic operational risk management initiatives/plans and to
             endorse for BRMC's approval if necessary.




                                                    19
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     CORPORATE GOVERNANCE (continued)

     (iii) Internal Audit and Internal Control Activities

         In accordance with Bank Negara Malaysia's GP10 guidelines, the Group Internal Audit Division
         ('GIA') conducts continuous reviews on auditable areas within the Bank. The continuous
         reviews by GIA are focused on areas of significant risks and effectiveness of internal control in
         accordance to the audit plan approved by the Audit and Examination Committee ('AEC'). The
         risk highlighted on the respective auditable areas as well as recommendation made by the GIA
         are addressed at AEC and Management meetings on bi-monthly basis. The AEC also conduct
         annual reviews on the adequacy of internal audit function, scope of work, resources and budget
         of GIA.

         At present, GIA consists of Operational Audit, IS Audit, Credit Review, Investigation and
         Compliance. Audit activities include these key components:

         •    Conduct audit on all auditable entities (Head Office, branches and subsidiaries) processes,
              services, products, system and provide an independent assessment to the Board of
              Directors, AEC and Management that appropriate control environment is maintained with
              clear authority and responsibility with sufficient staff and resources to carry out control
              responsibilities.

         •    Perform risk assessments to identify risk and evaluate actions taken to provide reasonable
              assurance that procedures and controls exist to contain those risks.

         •    Maintain strong control activities including documented processes and system
              incorporating adequate controls to produce accurate financial data and provide for the
              safeguarding of assets, and a documented review of reported results.

         •    Ensure effective information flows and communication, including:

              - Training and the dissemination of standards and requirements;
              - An information system to produce and convey complete, accurate and timely data
                  including financial data;
              - The upward communication of trends, developments and emerging issues.




                                                    20
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     CORPORATE GOVERNANCE (continued)

     (iii) Internal Audit and Internal Control Activities (continued)

         •       Monitor controls, including procedures to verify that controls are in place and functioning,
                 follow up on corrective action on control finding until its full resolution.

                 Based on GIA's review, identification and assessment of risk, testing and evaluation of
                 controls, GIA will provide an opinion on the effectiveness of internal controls maintained
                 by each entity.


         The AEC comprises members of the Bank's Board of Directors whose primary function is to
         assist the Board of Directors in its supervision over:


             • The reliability and integrity of accounting policies and financial reporting and disclosure
               practices,


             • The provision of advice to the Board with regards to the financial statements and business
               risks to enable the Board to fulfill its fiduciary duties and obligations, and


             •   The establishment and maintenance of processes to ensure that they:

                 - are in compliance with all applicable laws, regulations and company policies; and

                 - have adequately addressed the risk relating to internal controls and system,
                   management of inherent and business risks, and ensuring that the assets are properly
                   managed and safeguarded.

         The AEC is made up of at least three but not more than five members appointed by the Board
         of Directors from among its non-executive directors.




                                                        21
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     CORPORATE GOVERNANCE (continued)

     (iii) Internal Audit and Internal Control Activities (continued)

         The AEC meeting for the Bank were jointly held with AFFIN Islamic Bank Berhad and during
         the financial year ended 31 December 2010, a total of 9 meetings were held. The Audit and
         Examination Committee comprises the following members and details of attendance of each
         member at the Audit and Examination Committee meetings held during the financial year are
         as follows:

                                                                                       Total Meetings
         Members                                                                             Attended

         Dato' Sri Abdul Aziz bin Abdul Rahman                                                    9/9
         Chairman/Independent Non-Executive Director

         Dr Raja Abdul Malek bin Raja Jallaludin                                                  9/9
         Member/Independent Non-Executive Director

         Tan Sri Mohamed Jawhar                                                                   9/9
         Member/Independent Non-Executive Director
         (Representative from AFFIN Islamic Bank Berhad)


     (iv) Management Reports

         Before each Board meeting, Directors are provided with a complete set of board papers
         itemised in the agenda for Board's review/approval and/or notation.

         The Board monitors the Bank's performance by reviewing the monthly Management Report,
         which provides a comprehensive review and analysis of the Bank's operations and financial
         issues. In addition, the minutes of the Board Committees and Management Committees
         meetings and other issues are also tabled and considered by the Board.

         Procedures are in place for Directors to seek both independent professional advice at the
         Bank's expense and the advice and services of the Company Secretary in order to fulfil their
         duties and specific responsibilities.




                                                   22
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     BUSINESS PLAN AND STRATEGY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER
     2010 AND FUTURE OUTLOOK

      As global economy began to improve in 2010, the pre-emptive measures such as fiscal stimulus
      packages and easing of monetary policies introduced by the Government in 2009 helped push
      Malaysian economy toward speedier recovery.

      In 2010, AFFIN Bank was able to ride on Malaysia’s economic recovery in its lending activities
      without compromising the existing prudent risk management policies and practices.

      For 2010, the Bank posted a strong growth in operating profit by RM11.2 million (1.8%) as
      compared to the previous year. As indicators to sustainable business growth, our net loans &
      advances grew year-to-year by RM4.0 billion (18.1%) while asset quality continues to improved
      further as the Bank’s impaired loan ratio stood at 3.66%. The Bank was able to register Profit
      Before Tax growth of RM96.8 million (22.8%) as compared to the previous year.

      In 2010, the Bank was able to ensure sustainable business growth through:

       • Further develop the deposits business sector especially the retail segment

       • Improving customer touchpoints to ensure excellent & efficient customer service

       • Continuous improvement on risk management practices to be abreast with prevailing
         economic climate

       • Human capital development



     BUSINESS OUTLOOK FOR 2011

     Building on the momentum created in 2010, the Bank will continue to focus on "sustainable
     business growth" in both Business Banking as well as Consumer Banking segment.

     For Business Banking, the Bank will be leveraging on business opportunities arising from the 10th
     Malaysia Plan as well as the Economic Transformation Programs ('ETP') while Consumer Banking
     will be developing specific products and packages that suit a particular market segments.




                                                     23
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010


     RATING BY EXTERNAL AGENCIES

     The Bank has been rated by the following external rating agency:

          Name of rating agency:          RATING AGENCY MALAYSIA BERHAD
          Date of rating:                 26 July 2010
          Rating classifications:
          - Long term:                    A1
          - Short term:                   P1

      RAM has reaffirmed the Bank's long-term and short-term financial institution ratings, at A1 and P1,
      respectively, with a stable outlook.

      'A' rating is defined by RAM as being able to offer adequate safety for timely payment of interest
      and principal, and has adequate credit profile but possess one or more problem areas, giving rise to
      the possibility of future riskiness. Entities rated in this category have generally performed at
      industry average and are considered to be more vulnerable to changes in economic condition than
      those rated in the higher categories. The subscript 1 in this category indicates as higher end of its
      generic rating in the A category. A P1 rating is defined by RAM as obligations which are supported
      by superior ability with regards to timely payment of obligations.


     ZAKAT

     The Bank did not pay on behalf of its depositors or shareholder. The Bank only pays zakat on its
     business.


     HOLDING COMPANY AND ULTIMATE HOLDING CORPORATE BODY

     The holding company of the Bank is AFFIN Holdings Berhad, a public listed company incorporated
     in Malaysia and the ultimate holding corporate body is Lembaga Tabung Angkatan Tentera, a
     statutory body incorporated under the Tabung Angkatan Tentera Act, 1973.




                                                      24
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     DIRECTORS' REPORT
     for the financial year ended 31 December 2010

     AUDITORS

     The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.


     In accordance with resolution of the Board of Directors dated 28 February 2011.




     Jen Tan Sri Dato' Seri Ismail bin Haji Omar (Bersara)
     Chairman




     Dato' Zulkiflee Abbas bin Abdul Hamid
     Managing Director/Chief Executive Officer




                                                     25
Company No: 25046 T



       AFFIN Bank Berhad
       (Incorporated in Malaysia)

       STATEMENTS OF FINANCIAL POSITION as at 31 December 2010

                                                                              The Group                                    The Bank
                                                                          2010          2009                       2010                   2009
                                                          Note          RM'000       RM'000                      RM'000                 RM'000
       ASSETS
       Cash and short-term funds                            2         8,629,563            6,132,889           6,102,307           4,176,945
       Deposits and placements with banks and
        other financial institutions                        3           192,335             142,777             559,533             623,271
       Financial assets held-for-trading                    4           149,853             150,000             149,853             150,000
       Financial investments available-for-sale             5         5,766,053           5,627,371           4,428,260           4,239,770
       Financial investments held-to-maturity               6           431,159             481,474             431,159             480,899
       Loans, advances and financing                        7        25,974,847          21,989,304          22,419,251          19,108,595
       Other assets                                         8           246,202             415,290             233,619             384,271
       Derivative financial assets                          9            46,155              29,727              46,155              29,727
       Tax recoverable                                                   49,930                  31              46,072                   -
       Deferred tax assets                                 10             4,291              54,789                   -              54,390
       Statutory deposits with
        Bank Negara Malaysia                               11           245,130             219,600             245,130             219,600
       Investment in subsidiaries                          12                 -                   -             287,429             287,429
       Investment in jointly controlled entity             13               500                 500                   -                   -
       Amount due from subsidiaries                        14                 -                   -             185,271             231,285
       Amount due from jointly controlled entity                          2,745               1,057                   -                   -
       Property and equipment                              15           170,722             187,758             162,760             177,698
       Intangible assets                                   16           154,436             166,070             156,868             169,236
       TOTAL ASSETS                                                  42,063,921          35,598,637          35,453,667          30,333,116

       LIABILITIES
       Deposits from customers                             17        30,845,248          26,440,319          25,313,874          21,815,054
       Deposits and placements of banks and
        other financial institutions                       18         6,605,348            5,023,663           5,735,422           4,521,228
       Bills and acceptances payable                                    110,161               94,265             110,161              94,265
       Recourse obligation on loans
        sold to Cagamas Berhad                             19           286,370             297,216             286,370              297,216
       Other liabilities                                   20           521,276             431,745             464,622              404,055
       Derivative financial liabilities                    21            57,560              41,684              57,560               41,684
       Provision for taxation                                                22               2,726                   -                1,118
       Amount due to subsidiaries                          22                 -                   -              47,926               47,730
       Deferred tax liabilities                            10            24,932                   1              24,932                    -
       Subordinated term loan                              23           300,000             300,000             300,000              300,000
       TOTAL LIABILITIES                                             38,750,917          32,631,619          32,340,867           27,522,350

       EQUITY
       Share capital                                       24         1,439,285            1,439,285           1,439,285           1,439,285
       Reserves                                            25         1,873,719            1,527,733           1,673,515           1,371,481
       TOTAL EQUITY                                                   3,313,004            2,967,018           3,112,800           2,810,766

       TOTAL LIABILITIES AND EQUITY                                  42,063,921          35,598,637          35,453,667           30,333,116

       COMMITMENTS AND
        CONTINGENCIES                                      37        18,844,780          17,918,128          16,821,892           15,760,619



      The accounting policies on pages 35 to 61 and the notes on pages 62 to 168 form an integral part of these financial statements.



                                                                           26
Company No: 25046 T



       AFFIN Bank Berhad
       (Incorporated in Malaysia)

       INCOME STATEMENTS for the financial year ended 31 December 2010

                                                                               The Group                                     The Bank
                                                                           2010          2009                      2010                    2009
                                                           Note          RM'000       RM'000                     RM'000                  RM'000

       Interest income                                      26         1,511,835           1,341,088            1,523,568           1,348,136
       Interest expense                                     27          (760,848)           (605,111)           (760,881)            (605,336)
       Net interest income                                               750,987              735,977             762,687                742,800
       Islamic Banking income                               28           177,783              162,637                   -                      -
                                                                         928,770              898,614             762,687                742,800
       Other operating income                               29           227,351              221,928             226,904                230,284
       Net income                                                      1,156,121           1,120,542              989,591             973,084
       Other operating expense                              30          (530,911)           (506,487)            (440,145)           (429,032)
       Operating profit                                                  625,210              614,055             549,446                544,052
       Allowances for losses on loans,
        advances and financing                              32            (95,394)           (187,534)            (66,740)           (157,539)
       Impairment losses on securities                                     (7,912)             (1,374)             (7,912)             (1,374)
       Profit before taxation and zakat                                  521,904              425,147             474,794                385,139
       Taxation                                             34          (136,041)            (104,087)           (128,089)               (89,899)
       Zakat                                                              (4,626)              (3,308)                  -                      -
       Net profit after taxation and zakat                               381,237              317,752             346,705                295,240

       Attributable to:
       Equity holders of the Bank                                        381,237              317,752             346,705                295,240

       Earnings per share
       - basic/fully diluted (sen)                          35                26.5                22.1                24.1                  20.5




       The accounting policies on pages 35 to 61 and the notes on pages 62 to 168 form an integral part of these financial statements.



                                                                           27
Company No: 25046 T



       AFFIN Bank Berhad
       (Incorporated in Malaysia)

       STATEMENTS OF COMPREHENSIVE INCOME for the financial year ended 31 December 2010

                                                                               The Group                                     The Bank
                                                                           2010          2009                      2010                    2009
                                                                         RM'000       RM'000                     RM'000                  RM'000

       Profit after taxation and zakat                                   381,237              317,752             346,705                295,240

       Other comprehensive income:

       Income and expense recognised
        directly in equity                                                 16,474              46,149              11,334                 40,934
       Deferred tax on financial investments
        available-for-sale                                                 (4,115)            (11,105)              (2,834)              (10,234)

       Other comprehensive income for the
        financial year, net of tax                                         12,359              35,044                8,500                30,700

       Total comprehensive income for the
        financial year                                                   393,596              352,796             355,205                325,940

       Equity holders of the Group:
       - Total comprehensive income                                      393,596              352,796             355,205                325,940




       The accounting policies on pages 35 to 61 and the notes on pages 62 to 168 form an integral part of these financial statements.



                                                                           28
Company No: 25046 T



       AFFIN Bank Berhad
       (Incorporated in Malaysia)

       STATEMENT OF CHANGES IN EQUITY for the financial year ended 31 December 2010

                                                                 Non-distributable    Distributable

                                                                     Investment
                                            Share    Share Statutory fluctuation         Retained
                                           capital premium   reserve     reserve           profits      Total
       The Group                          RM'000 RM'000     RM'000      RM'000            RM'000       RM'000

       At 1 January 2010
       As previously reported            1,439,285   408,389   789,221     (1,880)        332,003     2,967,018
       Adoption of FRS 139 (Note 45)             -         -         -     43,770          19,593        63,363
                                         1,439,285   408,389   789,221     41,890         351,596     3,030,381

       Comprehensive income:
       Net profit for the financial
        financial year                           -         -         -           -        381,237      381,237

       Other comprehensive income:
       Income and expense
        recognised directly in equity            -         -         -     16,474                -      16,474
       Deferred tax on financial
        investments available-for-sale           -         -         -      (4,115)              -       (4,115)

       Total comprehensive income                -         -         -     12,359         381,237      393,596

       Dividend paid                             -         -         -           -       (110,973)    (110,973)
       Transfer to statutory reserve             -         -    99,689           -        (99,689)           -

       At 31 December 2010               1,439,285   408,389   888,910     54,249         522,171     3,313,004




       At 1 January 2009                 1,439,285   408,389   625,209     (36,924)       273,579     2,709,538

       Comprehensive income:
       Net profit for the financial
        financial year                           -         -         -           -        317,752      317,752

       Other comprehensive income:
       Income and expense
        recognised directly in equity            -         -         -     46,149                -      46,149
       Deferred tax on financial
        investments available-for-sale           -         -         -     (11,105)              -      (11,105)

       Total comprehensive income                -         -         -     35,044         317,752      352,796

       Dividend paid                             -         -         -           -        (95,316)      (95,316)
       Transfer to statutory reserve             -         -   164,012           -       (164,012)            -

       At 31 December 2009               1,439,285   408,389   789,221      (1,880)       332,003     2,967,018




                                                          29
Company No: 25046 T




       AFFIN Bank Berhad
       (Incorporated in Malaysia)

       STATEMENT OF CHANGES IN EQUITY for the financial year ended 31 December 2010 (continued)

                                                                                      Non-distributable         Distributable

                                                                               Investment
                                                      Share    Share Statutory fluctuation                          Retained
                                                     capital premium   reserve     reserve                            profits         Total
       The Bank                                     RM'000 RM'000     RM'000      RM'000                             RM'000          RM'000

       At 1 January 2010
       As previously reported                     1,439,285        408,389        720,824           (6,853)           249,121       2,810,766
       Adoption of FRS 139 (Note 45)                      -              -              -           44,148             13,654          57,802
                                                  1,439,285        408,389        720,824           37,295            262,775       2,868,568

       Comprehensive income:
       Net profit for the financial
        financial year                                       -              -              -               -          346,705            346,705

       Other comprehensive income:
       Income and expense
        recognised directly in equity                        -              -              -        11,334                    -           11,334
       Deferred tax on financial
        investments available-for-sale                       -              -              -         (2,834)                  -           (2,834)

       Total comprehensive income                            -              -              -          8,500           346,705            355,205

       Dividend paid                                         -              -            -                 -         (110,973)       (110,973)
       Transfer to statutory reserve                         -              -       86,676                 -          (86,676)              -

       At 31 December 2010                         1,439,285       408,389        807,500           45,795            411,831       3,112,800


       At 1 January 2009                           1,439,285       408,389        573,204          (37,553)           196,817       2,580,142

       Comprehensive income:
       Net profit for the financial
        financial year                                       -              -              -               -          295,240            295,240

       Other comprehensive income:
       Income and expense
        recognised directly in equity                        -              -              -        40,934                    -           40,934
       Deferred tax on financial
        investments available-for-sale                       -              -              -       (10,234)                   -          (10,234)

       Total comprehensive income                            -              -              -        30,700            295,240            325,940

       Dividend paid                                         -              -           -                  -          (95,316)           (95,316)
       Transfer to statutory reserve                         -              -     147,620                  -         (147,620)                 -

       At 31 December 2009                        1,439,285        408,389        720,824            (6,853)          249,121       2,810,766




       The accounting policies on pages 35 to 61 and the notes on pages 62 to 168 form an integral part of these financial statements.


                                                                           30
Company No: 25046 T



       AFFIN Bank Berhad
       (Incorporated in Malaysia)

       STATEMENTS OF CASH FLOWS for the financial year ended 31 December 2010

                                                                  The Group                   The Bank
                                                              2010          2009      2010            2009
                                                            RM'000       RM'000     RM'000          RM'000
       CASH FLOWS FROM OPERATING
        ACTIVITIES

       Profit before taxation and zakat                     521,904      425,147    474,794         385,139
       Adjustments for items not involving the movement
        of cash and cash equivalents:

       Interest income:
        - financial assets held-for-trading                     (311)       (950)       (311)          (950)
        - financial investments available-for-sale          (116,495)   (103,621)   (116,347)      (103,621)
        - financial investments held-to-maturity             (15,522)    (21,705)    (15,522)       (19,708)
       Dividend income:
        - financial investments available-for-sale                (8)       (150)         (8)          (150)
        - financial investments held-to-maturity              (2,901)     (5,704)     (2,901)        (5,704)
       Dividend income from subsidiaries                           -           -           -        (16,102)
       Amortisation of premium less accretion of discount
        - financial investments available-for-sale           (30,938)    (12,744)    (30,938)       (12,744)
        - financial investments held-to-maturity                (664)          -        (664)             -
       Gain on sale:
        - financial assets held-for-trading                   (1,217)     (1,646)     (1,217)        (1,646)
        - financial investments available-for-sale           (23,733)     (7,002)    (23,635)        (6,960)
        - financial investments held-to-maturity              (2,053)     (1,633)     (2,053)        (1,633)
       Unrealised (gain)/loss on revaluation
        - trading                                               (137)         69        (137)            69
        - derivatives                                         (6,303)    (11,716)     (6,303)       (11,716)
        - foreign exchange                                     9,549      10,072       9,549         10,072
       Allowance for impairment loss
        - financial investments available-for-sale            4,012        1,374      4,012           1,374
        - financial investments held-to-maturity              3,900            -      3,900               -
       Depreciation of property and equipment                20,071       21,862     19,297          21,092
       Property and equipment written-off                       514          455        513             421
       Foreclosed properties - dimunition in value            2,440        1,798      2,422           1,798
       Gain on sale of property and equipment                  (219)        (168)      (219)           (168)
       Gain on sale of leasehold properties                       -       (1,185)         -          (1,185)
       Amortisation of intangible assets                     16,474       20,502     15,658          19,999
       Lease rental - leasehold properties                        -          241          -             234
       Gain on sale of foreclosed properties                 (6,330)     (18,918)    (6,330)        (18,918)
       Net specific allowance for bad and doubtful
         debts and financing                                      -      275,593          -         252,137
       Charge of general allowance                                -       37,135          -          30,378
       Net individual impairment                            177,354            -    161,938               -
       Net collective impairment                             (3,044)           -    (16,409)              -
       Bad debt and financing written-off                    15,810       12,237     15,628          12,137
       Other provision                                       78,000            -     78,000               -
       Operating profit before changes
         in working capital                                 640,153      619,343    562,717         533,645




                                                              31
Company No: 25046 T



       AFFIN Bank Berhad
       (Incorporated in Malaysia)

       STATEMENTS OF CASH FLOWS for the financial year ended 31 December 2010 (continued)

                                                               The Group                   The Bank
                                                           2010          2009          2010         2009
                                                         RM'000       RM'000         RM'000       RM'000
       CASH FLOWS FROM OPERATING
        ACTIVITIES (continued)

       (Increase)/decrease in operating assets:

       Deposits and placements with banks and
         other financial institutions                    (49,558)      (32,561)       63,738      (168,495)
       Financial assets held-for-trading                   1,501        (9,579)        1,501        (9,579)
       Interest income from financial assets
        held-for-trading                                      311           950           311           950
       Foreign exchange transaction                       (48,511)        1,733       (48,921)        2,018
       Loans, advances and financing                   (4,148,877)   (2,798,014)   (3,450,614)   (2,343,274)
       Other assets                                       164,799        82,863       144,152        67,481
       Derivative financial instruments                      (552)       (1,526)         (552)       (1,526)
       Statutory deposits with Bank Negara
         Malaysia                                        (25,530)      545,000       (25,530)      438,600
       Amount due from subsidiaries                            -             -        46,210        46,144
       Amount due from jointly controlled entity          (1,688)         (307)            -             -

       Increase/(decrease) in operating liabilities:

       Deposits from customers                         4,404,929     1,212,530     3,498,821       835,486
       Deposits and placements of banks and
        other financial institutions                   1,581,685     1,202,776     1,214,194     1,599,187
       Bills and acceptances payable                      15,896       (41,978)       15,896       (41,978)
       Recourse obligation on loans sold to
        Cagamas Berhad                                   (10,846)      286,128       (10,846)      286,128
       Other liablilities                                 10,364       (52,045)      (17,466)      (42,469)
       Cash generated from operations                  2,534,076     1,015,313     1,993,611     1,202,318
       Tax paid                                         (138,418)     (141,313)     (118,028)     (132,200)
       Zakat paid                                         (3,493)       (2,314)            -           (91)
       Net cash generated from
        operating activities                           2,392,165       871,686     1,875,583     1,070,027




                                                           32
Company No: 25046 T



       AFFIN Bank Berhad
       (Incorporated in Malaysia)

       STATEMENTS OF CASH FLOWS for the financial year ended 31 December 2010 (continued)

                                                            The Group                 The Bank
                                                        2010          2009        2010         2009
                                                      RM'000       RM'000       RM'000       RM'000

       CASH FLOWS FROM INVESTING
        ACTIVITIES

       Interest received:
        - financial investments available-for-sale    116,495       103,621     116,347       103,621
        - financial investments held-to-maturity       15,522        21,705      15,522        19,708
       Dividend income:
        - financial investments available-for-sale           8          150            8          150
        - financial investments held-to-maturity         2,901        5,704        2,901        5,704
       Dividend income from subsidiaries                     -            -            -       16,102
       Redemption of financial investments
          held-to-maturity net of purchase             23,853        83,172      23,853        76,875
       Net sale/(purchase) of financial investments
        available-for-sale                             12,090     (1,374,836)    (43,027)   (1,065,790)
       Proceeds from disposal of
        - property and equipment                        2,480        22,701       2,480         7,701
        - prepaid lease rental                              -             -           -             -
        - foreclosed properties                        24,941        45,870      24,941        45,870
       Purchase of property and equipment              (9,608)      (14,552)     (9,482)      (12,938)
       Purchase of land held for sale                       -             -           -             -
       Purchase of intangible assets                   (1,043)         (786)     (1,043)         (948)
       Net cash generated/(used in) from
       investing activities                           187,639     (1,107,251)   132,500      (803,945)

       CASH FLOWS FROM FINANCING
         ACTIVITIES
       Investment in subsidiary                              -            -            -     (100,000)
       Repayment of subordinated term loan                   -     (500,000)           -     (500,000)
       Proceeds from issuance of subordinated
         term loan                                           -      300,000            -      300,000
       Payment of dividend                            (110,973)     (95,316)    (110,973)     (95,316)

       Net cash used in financing activities          (110,973)    (295,316)    (110,973)    (395,316)




                                                        33
Company No: 25046 T



       AFFIN Bank Berhad
       (Incorporated in Malaysia)

       STATEMENTS OF CASH FLOWS for the financial year ended 31 December 2010 (continued)

                                                                           The Group                                The Bank
                                                                          2010         2009                        2010        2009
                                                                        RM'000       RM'000                      RM'000      RM'000

       Net increase/(decrease) in cash and
        cash equivalents                                              2,468,831             (530,881)          1,897,110            (129,234)
       Amount vested from subsidiary                                          -                    -                   -                 843
       Net increase/(decrease) in foreign exchange                       27,843              (13,312)             28,252             (13,598)
       Cash and cash equivalents at beginning of
        the financial year                                            6,132,889            6,677,082           4,176,945           4,318,934
       Cash and cash equivalents at end of
        the financial year (Note 2)                                   8,629,563            6,132,889           6,102,307           4,176,945




      The accounting policies on pages 35 to 61 and the notes on pages 62 to 168 form an integral part of these financial statements.



                                                                           34
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     The following accounting policies have been used consistently in dealing with items which are
     considered material in relation to the financial statements. These policies have been consistently
     applied to all the financial years presented, unless otherwise stated.

     (A) BASIS OF PREPARATION

         The financial statements of the Group and the Bank have been prepared in accordance with
         Malaysian Accounting Standards Board ('MASB') Approved Accounting Standards in
         Malaysia for Entities Other Than Private Entities, Bank Negara Malaysia ('BNM') Guidelines
         and the provisions of the Companies Act, 1965. The financial statements incorporate those
         activities relating to Islamic banking business which have been undertaken by AFFIN Islamic
         Bank Berhad, a wholly owned subsidiary of the Bank. Islamic banking business refers
         generally to the acceptance of deposits and granting of financing under the Shariah principles.

         The financial statements of the Group and the Bank have been prepared under the historical
         cost convention, unless otherwise indicated in this summary of significant accounting
         policies.

         The preparation of financial statements in conformity with MASB Approved Accounting
         Standards in Malaysia for Entities Other Than Private Entities and BNM Guidelines requires
         the use of certain critical accounting estimates and assumptions that affect the reported
         amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
         of the financial statements, and the reported amounts of revenue and expenses during the
         reported period. It also requires Directors to exercise judgement in the process of applying the
         Bank's accounting policies. Although these estimates are based on the Directors' best
         knowledge of current events and actions, actual results may differ.

         The areas involving a higher degree of judgement or complexity, or areas where assumptions
         and estimates are significant to the financial statements are disclosed in Note 44.


         Standards, amendments to published standards and interpretations that are applicable
         to the Group and are effective

         The new accounting standards, amendments and improvements to published standards and
         interpretations that are effective for the Group and the Bank’s financial year beginning on or
         after 1 January 2010 are as follows:

         •    FRS 7 "Financial Instruments: Disclosures" and the related Amendments

         •    FRS 101 (revised) "Presentation of Financial Statements"




                                                     35
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (A) BASIS OF PREPARATION (continued)

         Standards, amendments to published standards and interpretations that are applicable
         to the Group and are effective (continued)

         •   FRS 123 "Borrowing Costs"

         •   FRS 139 "Financial Instruments: Recognition and Measurement" and the related
             Amendments

         •   Amendment to FRS 1 "First-time Adoption of Financial Reporting Standards" and FRS
             127 "Consolidated and Separate Financial Statements: Cost of an Investment in a
             Subsidiary, Jointly Controlled Entity or Associate"

         •   Amendment to FRS 2 "Share-based Payment: Vesting Conditions and Cancellations"

         •   Amendments to FRS 132 "Financial Instruments: Presentation" and FRS 101 (revised)
             "Presentation of Financial Statements" - Puttable financial instruments and obligations
             arising on liquidation

         •    IC Interpretation 9 "Reassessment of Embedded Derivatives" and the related
              Amendments

         •    IC Interpretation 10 "Interim Financial Reporting and Impairment"

         •   IC Interpretation 11 "FRS 2 Group and Treasury Share Transactions"

         •    IC Interpretation 13 "Customer Loyalty Programmes"

         •    Improvements to FRSs (2009)

         A summary of the impact of the new accounting standards, amendments and improvements to
         published standards and interpretations on the financial statements of the Group and Bank are
         set out in Note 45.




                                                   36
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (A) BASIS OF PREPARATION (continued)

         Standards, amendments to published standards and interpretations to existing
         standards that are applicable to the Group but not yet effective

         •   The revised FRS 3 "Business combinations" (effective prospectively from 1 July 2010)
             continues to apply the acquisition method to business combinations, with some
             significant changes. For example, all payments to purchase a business are to be recorded
             at fair value at the acquisition date, with contingent payments classified as debt
             subsequently re-measured through profit or loss. There is a choice on an acquisition-by-
             acquisition basis to measure the non-controlling interest in the acquiree either at fair
             value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.
             All acquisition-related costs should be expensed.

         •   The revised FRS 124 "Related party disclosures" (effective from 1 January 2012) removes
             the exemption to disclose transactions between government-related entities and the
             government, and all other government-related entities. The following new disclosures are
             now required for government related entities:

               -    The name of the government and the nature of their relationship;

               -    The nature and amount of each individually significant transactions; and

               -    The extent of any collectively significant transactions, qualitatively or
                    quantitatively.

         •   The revised FRS 127 "Consolidated and separate financial statements" (applies
             prospectively to transactions with non-controlling interests from 1 July 2010) requires the
             effects of all transactions with non-controlling interests to be recorded in equity if there is
             no change in control and these transactions will no longer result in goodwill or gains and
             losses. When this standard is effective, all earnings and losses of the subsidiary are
             attributed to the parent and the non-controlling interest, even if the attribution of losses to
             the non-controlling interest results in a debit balance in the shareholders’ equity. Profit or
             loss attribution to non-controlling interests for prior years is not restated. The standard also
             specifies the accounting when control is lost. Any remaining interest in the entity is re-
             measured to fair value, and a gain or loss is recognised in profit or loss.




                                                      37
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (A) BASIS OF PREPARATION (continued)

         Standards, amendments to published standards and interpretations to existing standards
         that are applicable to the Group but not yet effective (continued)

         •   Amendment to FRS 2 "Share-based payment: Group cash-settled share-based payment
             transactions" (effective from 1 January 2011) clarifies that an entity that receives goods or
             services in a share-based payment arrangement must account for those goods or services
             no matter which entity in the group settles the transaction, and no matter whether the
             transaction is settled in shares or cash. The amendments also incorporate guidance
             previously included in IC Interpretation 8 "Scope of FRS 2" and IC Interpretation 11
             "FRS 2 – group and treasury share transactions", which shall be withdrawn upon
             application of this amendment

         •   Amendments to FRS 7 "Financial instruments: Disclosures" and FRS 1 "First-time
             adoption of financial reporting standards" (effective from 1 January 2011) requires
             enhanced disclosures about fair value measurement and liquidity risk. In particular, the
             amendment requires disclosure of fair value measurements by level of a fair value
             measurement hierarchy.

             The Group has applied the transitional provision which exempts entities from disclosing
             the possible impact arising from the initial application of this amendment on the financial
             statements of the Group and Bank.

         •   Amendment to FRS 132 "Financial instruments: Presentation" on classification of rights
             issues (effective from 1 March 2010) addresses accounting for rights issues that are
             denominated in a currency other than the functional currency of the issuer. Provided
             certain conditions are met, such rights issues are now classified as equity instruments
             instead of as derivative liabilities, regardless of the currency in which the exercise price is
             denominated. Currently, these issues are accounted for as derivative liabilities.


         •   IC Interpretation 4 "Determining whether an arrangement contains a lease" (effective from
             1 January 2011) requires the Group to identify any arrangement that does not take the
             legal form of a lease, but conveys a right to use an asset in return for a payment or series
             of payments. This interpretation provides guidance for determining whether such
             arrangements are, or contain, leases. The assessment is based on the substance of the
             arrangement and requires assessment of whether the fulfillment of the arrangement is
             dependent on the use of a specific asset and the arrangement conveys a right to use the
             asset. If the arrangement contains a lease, the requirements of FRS 117 "Leases" should be
             applied to the lease element of the arrangement.




                                                     38
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (A) BASIS OF PREPARATION (continued)

         Standards, amendments to published standards and interpretations to existing standards
         that are applicable to the Group but not yet effective (continued)

         •   IC Interpretation 17 "Distribution of non-cash assets to owners" (effective from 1 July
             2010) provides guidance on accounting for arrangements whereby an entity distributes non
             cash assets to shareholders either as a distribution of reserves or as dividends. FRS 5 has
             also been amended to require that assets are classified as held for distribution only when
             they are available for distribution in their present condition and the distribution is highly
             probable.

         •   IC Interpretation 19 "Extinguishing financial liabilities with equity instruments” (effective
             from 1 July 2011) provides clarification when an entity renegotiates the terms of a
             financial liability with its creditor and the creditor agrees to accept the entity’s shares or
             other equity instruments to settle the financial liability fully or partially. A gain or loss,
             being the difference between the carrying value of the financial liability and the fair value
             of the equity instruments issued, shall be recognised in profit or loss. Entities are no
             longer permitted to reclassify the carrying value of the existing financial liability into
             equity with no gain or loss recognised in profit or loss.


             Improvements to FRSs:

         •   FRS 2 (effective from 1 July 2010) clarifies that contributions of a business on formation
             of a joint venture and common control transactions are outside the scope of FRS 2.


         •   FRS 3 (effective from 1 January 2011)

               - Clarifies that the choice of measuring non-controlling interests at fair value or at the
                 proportionate share of the acquiree’s net assets applies only to instruments that
                 represent present ownership interests and entitle their holders to a proportionate share
                 of the net assets in the event of liquidation. All other components of non-controlling
                 interest are measured at fair value unless another measurement basis is required by
                 FRS.




                                                     39
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (A) BASIS OF PREPARATION (continued)

         Standards, amendments to published standards and interpretations to existing standards
         that are applicable to the Group but not yet effective (continued)

         •   FRS 3 (effective from 1 January 2011) (continued)

               - Clarifies that the amendments to FRS 7, FRS 132 and FRS 139 that eliminate the
                 exemption for contingent consideration, do not apply to contingent consideration that
                 arose from business combinations whose acquisition dates precede the application of
                 FRS 3 (2010). Those contingent consideration arrangements are to be accounted for
                 in accordance with the guidance in FRS 3 (2005).

         •    FRS 5 "Non-current assets held for sale and discontinued operations" (effective from 1
              July 2010) clarifies that all of a subsidiary's assets and liabilities are classified as held for
              sale if a partial disposal sale plan results in loss of control. Relevant disclosure should be
              made for this subsidiary if the definition of a discontinued operation is met.


         •    FRS 101 "Presentation of financial statements" (effective from 1 January 2011) clarifies
              that an entity shall present an analysis of other comprehensive income for each
              component of equity, either in the statement of changes in equity or in the notes to the
              financial statements.

         •   FRS 138 "Intangible Assets" (effective from 1 July 2010) clarifies that a group of
             complementary intangible assets acquired in a business combination may be recognised as
             a single asset if each asset has similar useful lives.

         •   IC Interpretation 9 (effective from 1 July 2010) clarifies that this interpretation does not
             apply to embedded derivatives in contracts acquired in a business combination, businesses
             under common control or the formation of a joint venture.

         The Group will apply these standards when effective. The adoption of these standards and
         amendments will not have significant impact on the results of the Group and the Bank.




                                                       40
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (B) ECONOMIC ENTITIES IN THE GROUP

         The consolidated financial statements include the financial statements of the Bank,
         subsidiaries and a jointly controlled entity, made up to the end of the financial year.

         Subsidiaries

         Subsidiaries are all those corporations, partnerships, or other entities in which the Group has
         power to exercise control over the financial and operating policies so as to obtain benefits
         from their activities, generally accompanying a shareholding of more than one half of the
         voting rights. The existence and effect of potential voting rights that are currently exercisable
         or convertible are considered when assessing whether the Group controls another entity.

         Subsidiaries are fully consolidated from the date on which control is transferred to the Group
         and de-consolidated from the date that control ceases. The Group uses the purchase method
         of accounting to account for the acquisition of subsidiaries. The cost of an acquisition is
         measured as fair value of the assets given, equity instruments issued and liabilities incurred or
         assumed at the date of exchange, plus costs directly attributable to the acquisition.

         Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
         combination are measured initially at their fair values at the acquisition date, irrespective of
         the extent of any minority interest. The excess of the cost of acquisition over the fair value of
         the Group’s share of identifiable net assets acquired at the date of acquisition is reflected as
         goodwill (refer to accounting policy Note C on goodwill). If the cost of acquisition is less
         than the fair value of the net assets of the subsidiary acquired, the difference is recognised
         directly in the income statement.

         Intra-group transactions, balances and unrealised gains on transactions between group
         companies are eliminated. Unrealised losses are also eliminated but considered an
         impairment indicator of the asset transferred. Accounting policies of subsidiaries have been
         changed where necessary, to ensure consistency with the policies adopted by the Group.

         The gain or loss on disposal of a subsidiary is the difference between net disposal proceeds
         and the Group’s share of its net assets as of the date of disposal including the cumulative
         amount of any exchange differences that relate to the subsidiary is recognised in the
         consolidated income statement.




                                                     41
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (B) ECONOMIC ENTITIES IN THE GROUP (continued)

          Jointly controlled entity

         Jointly controlled entities are corporations, partnerships or other entities over which there is
         contractually agreed sharing of control by the Group with one or more parties where the
         strategic financial and operating decisions relating to the entities require unanimous consent
         of the parties sharing control.

         Investment in jointly controlled entities are accounted for in the consolidated financial
         statements using the equity method of accounting and are initially recognised at cost. The
         Group's investment in jointly controlled entities includes goodwill identified on acquisition,
         net of any accumulated impairment loss.

         The Group's share of the post-acquisition profits or losses of the jointly controlled entities are
         recognised in the income statement, and its share of the post-acquisition movements in
         reserves are recognised in reserves. The cummulative post-acquisition movements are
         adjusted against the carrying amount of the investment. When the Group's share of losses in a
         jointly controlled entities equals or exceeds its interest in the jointly controlled entity,
         including any other unsecured receivables, the Group's interest is reduced to nil and
         recognition of further losses is discontinued except to the extent that the Group has incurred
         legal or constructive obligations or made payments on behalf of the jointly controlled entity.

         Where neccessary, adjustments have been made to the financial statements of jointly
         controlled entities to ensure consistency of accounting policies with those of the Group.

         Dilution gains and losses in jointly controlled entities are recognised in the income statement.

         For incremental interest in a jointly controlled entity, the date of acquisition is purchase date
         at each stage and goodwill is calculated at each purchase date based on the fair value of assets
         and liabilities identified. There is no "step up to fair value" of net assets of previously
         acquired stake and the share of profits and equity movements for the previously acquired
         stake is recorded directly through equity.

         When the Group ceases to have control or joint control over an entity, the carrying amount of
         the investment at the date control, joint control or significant influence ceases become its cost
         on initial measurement as a financial asset in accordance with FRS 139. Any amounts
         previously recognised in other comprehensive income in respect of that entity are accounted
         for as if the Group had directly disposed of the related assets or liabilities.




                                                     42
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (B) ECONOMIC ENTITIES IN THE GROUP (continued)

         In the Bank's financial statements, the investment in subsidiaries and jointly controlled entity is
         stated at cost less impairment losses. At each reporting date, the Bank assesses whether there is
         any indication of impairment. If such indication exist, an analysis is performed to assess
         whether the carrying amount of the investment is fully recoverable. A write-down is made if
         the carrying amount exceeds the recoverable amount. Any subsequent increase in recoverable
         amount is recognised in the income statement (refer to accounting policy D for impairment of
         non-financial assets).


     (C) INTANGIBLE ASSET

         Goodwill

         Goodwill represents the excess of the cost of acquisition of subsidiaries, jointly controlled
         entities and associated company over the fair value of the Group’s share of the identifiable net
         assets at the date of acquisition.

         Goodwill on acquisition of subsidiaries are included in the statement of financial position as
         intangible assets. Goodwill is tested for impairment annually or more frequently if events or
         changes in circumstances indicated that the goodwill may be impaired. The amount retained in
         the consolidated financial statements is stated at cost less accumulated impairment losses.
         Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity
         include the carrying amount of goodwill relating to the entity sold.

         Goodwill is allocated to cash-generating units ('CGU') for the purpose of impairment testing.
         The allocation is made to those CGUs that are expected to benefit from the synergies of the
         business combination in which goodwill arose. The Group allocates its goodwill between the
         enterprise and consumer banking segment.

         Computer software

         Acquired computer software are capitalised on the basis of the cost incurred to acquire and
         bring to use the specific software. These costs are amortised over their estimated useful lives
         (five years). Computer software classified as intangible asset are stated at cost less
         accumulated amortisation and accumulated impairment losses, if any.

         Costs associated with developing or maintaining computer software programmes are
         recognised as an expense when incurred. Costs that are directly associated with identifiable
         and unique software products controlled by the Group, and that will probably generate
         economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct
         costs include software development employee costs and appropriate portion of relevant
         overhead.

                                                      43
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (D) IMPAIRMENT OF NON-FINANCIAL ASSETS

         Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation
         and are tested annually for impairment. Assets that are subject to amortisation are reviewed
         for impairment whenever events or changes in circumstances indicate that the carrying amount
         may not be recoverable.

         An impairment loss is recognised for the amount by which the assets's carrying amount
         exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value
         less costs to sell and value in use. For the purposes of assessing impairment, assets are
         grouped at the lowest levels for which there are separately identifiable cash flows (cash-
         generating units). Non-financial assets other than goodwill that suffered impairment are
         reviewed for possible reversal of the impairment at each reporting date.

         The impairment loss is charged to the income statement unless it reverses a previous
         revaluation in which case it is charged to the revaluation surplus. Any subsequent increase in
         recoverable amount is recognised in the income statement unless it reverses an impairment
         loss on a revalued asset in which case it is taken to revaluation surplus.


     (E) RECOGNITION OF INTEREST / FINANCING INCOME

        FRS 139 prescribes that financial assets classified as held-to-maturity and loans and
        receivables are measured at amortised cost using effective interest method. Whilst the Group
        and the Bank's financial investments held-to-maturity are already measured on this basis under
        the requirements of BNM's revised BNM/GP8 effective from 1 January 2005, interest income
        on its loans and receivables continued to be recognised based on contractual interest rates.
        Upon the full adoption of FRS 139 on 1 January 2010, interest income is recognised using
        effective interest rates ('EIR'), which is the rate that exactly discounts estimated future cash
        receipts through the expected life of the loan or, when appropriate, a shorter period to the net
        carrying amount of the loan.

        Prior to the adoption of FRS 139, interest accrued and recognised as income prior to the date
        that a loan is classified as non-performing is reversed out of income and set-off against the
        interest receivable account in the statement of financial position. Thereafter, interest on the
        non-performing loan is recognised as income on a cash basis. Upon adoption of FRS 139,
        once a loan has been written down as a result of an impairment loss, interest income is
        thereafter recognised using the rate of interest used to discount the future cash flows for the
        purpose of measuring impairment loss.

        .




                                                     44
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (E) RECOGNITION OF INTEREST / FINANCING INCOME (continued)

         Islamic financing income is recognised on an accrual basis in accordance with the Shariah
         principles and Guidelines on Financial Reporting for Licensed Islamic Banks ('BNM/GP8-i').
         Al-Ijarah Thumma Al-Bai' ('AITAB') financing income recognised using the effective
         income rates method over the lease terms, whilst Al-Bai' Bithaman Ajil ('BBA'), Al-
         Murabahah, Al-Istisna' and Bai'-Inah financing income is recognised on a monthly basis over
         the period of the financing contracts, based on an agreed profit at the inception of such
         contracts.

         Interest income from securities portfolio is recognised on an accrual basis using the effective
         interest method. The interest income includes coupons earned/accrued and
         accretion/amortisation of discount/premium on these securities.


     (F) RECOGNITION OF FEES, OTHER INCOME AND INTEREST EXPENSE

         Loan arrangement fees and commissions are recognised as income when all conditions
         precedent are fulfilled.

         Commitment fees and guarantee fees which are material are recognised as income based on
         time apportionment.

         Dividends from subsidiaries are recognised when the shareholders' right to receive payment is
         established.

         Dividends from securities portfolio are recognised when received.

         Fees and other profit from Islamic banking business are recognised on an accrual basis in
         accordance with the principles of Shariah.

         Interest expense and attributable profit payable on deposits and borrowings are recognised on
         an accrual basis.




                                                    45
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (G) FINANCIAL ASSETS

         The Group and the Bank have changed its accounting policy for recognition and
         measurement of financial assets upon adoption of FRS 139 "Financial Instruments:
         Recognition and Measurement" on 1 January 2010. The Group and the Bank have applied the
         new policy according to the transitional provision of FRS 139 by re-measuring all financial
         assets, as appropriate, and recording and adjustments to the previous carrying amounts to
         opening retained earnings. Refer to Note 45 for the impact of this change in accounting
         policy.

         In accordance with FRS 139, all financial assets which include derivative financial
         instruments have to be recognised in the statement of financial position and measured in
         accordance with their assigned category.


         The Group and the Bank allocates financial assets to the following FRS 139 categories:
         loans, advances and financing; financial assets at fair value through profit or loss, financial
         investments available-for-sale; and financial investments held-to-maturity. Management
         determines the classification of its financial instruments at initial recognition.


         Loans, advances and financing

         Loans, advances and financing are non-derivative financial assets with fixed or determinable
         payments that are not quoted in active market.

         Loans, advances and financing are initially recognised at fair value which is the cash
         consideration to originate or purchase the loan including any transaction costs and measured
         subsequently at amortised cost using the effective interest rate method, less impairment
         allowance.

         An uncollectible loan, advance and financing or portion of a loan, advance and financing
         classified as bad is written off after taking into consideration the realisable value of collateral,
         if any, when in the judgement of the management, there is no prospect of recovery.


         The adoption of FRS 139 has resulted in a change in accounting policy relating to the
         assessment for impairment of loans, advances and financing. The existing accounting
         policies relating to the assessment of impairment of other financial assets of the Group and
         the Bank are already largely in line with those of FRS 139. Prior to the adoption of FRS 139,
         allowances for impaired loans, advances and financing (previously referred to as non-
         performing loans) were computed in conformity with the BNM/GP3 - Guidelines on
         Classification of Non-Performing Loans and Provision for Substandard, Bad and Doubtful
         Debts.



                                                       46
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (G) FINANCIAL ASSETS (continued)

         Loans, advances and financing (continued)

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


         The criteria that the Group and the Bank use to determine that there is objective evidence of an
         impairment loss include among others:
         • past due contractual payments;
         • significant financial difficulties of borrower;
         • probability of bankruptcy or other financial re-organisation;
         • default of related borrower;

         The estimated period between a loss occurring and its identification for credit cards is six
         months and for all other loans are twelve months.

         The Group and the Bank first assess whether objective evidence of impairment exists
         individually for loans that are individually significant, and individually or collectively for
         loans that are not individually significant. If the Group and the Bank determine that no
         objective evidence of impairment exists for an individually assessed loan, whether significant
         or not, it includes the loan in a group of loans with similar credit risk characteristics and
         collectively assesses them for impairment. Loans that are individually assessed for
         impairment and for which an impairment loss is or continues to be recognised are not included
         in a collective assessment of impairment. Loans that are individually assessed for impairment
         and for which no impairment loss is required (over collateralised loans) are collectively
         assessed as a separate segment.

         The amount of the loss is measured as the difference between the loan’s carrying amount and
         the present value of estimated future cash flows (excluding future credit losses that have not
         been incurred) discounted at the loan’s original effective interest rate. The carrying amount of
         the loan is reduced through the use of an allowance account and the amount of the loss is
         recognised in the income statement. If a loan has a variable interest rate, the discount rate for
         measuring any impairment loss is the current effective interest rate determined under the
         contract.

         The calculation of the present value of the estimated future cash flows of a collateralised loan
         reflects the cash flows that may result from foreclosure less costs for obtaining and selling the
         collateral, whether or not foreclosure is probable.


                                                     47
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (G) FINANCIAL ASSETS (continued)

         Loans, advances and financing (continued)

         For the purposes of a collective evaluation of impairment, loans are grouped on the basis of
         similar credit risk characteristics. Those characteristics are relevant to the estimation of future
         cash flows for groups of such loans by being indicative of the borrowers’ ability to pay all
         amounts due according to the contractual terms of the loans being evaluated.


         Future cash flows in a group of loans that are collectively evaluated for impairment are
         estimated on the basis of the contractual cash flows of the loans in the Bank and historical loss
         experience for loans with credit risk characteristics similar to those in the Bank. Historical
         loss experience is adjusted on the basis of current observable data to reflect the effects of
         current conditions that did not affect the period on which the historical loss experience is
         based and to remove the effects of conditions in the historical period that do not currently
         exist.

         Estimates of changes in future cash flows for groups of loans should reflect and be
         directionally consistent with changes in related observable data from period to period (for
         example, changes in unemployment rates, property prices, payment status, or other factors
         indicative of changes in the probability of losses in the Group and the Bank and their
         magnitude). The methodology and assumptions used for estimating future cash flows are
         reviewed regularly by the Group and the Bank to reduce any differences between loss
         estimates and actual loss experience.

         The collective assessment is also subject to the transitional arrangement prescribed in BNM's
         guidelines on Classification and Impairment Provisions for Loans/Financing issued on 17
         December 2010.


         Financial assets at fair value through profit or loss

         This category comprises two sub-categories: financial assets classified as held-for-trading and
         financial assets designated by the Group and the Bank as at fair value through profit or loss
         upon initial recognition.




                                                      48
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (G) FINANCIAL ASSETS (continued)

         Financial assets at fair value through profit or loss (continued)

         A financial asset is classified as held-for-trading if it is acquired or incurred principally for
         the purpose of selling or repurchasing it in the near term or if it is part of a portfolio of
         identified financial instruments that are managed together and for which there is evidence of a
         recent actual pattern of short-term profit-taking. Derivatives are also categorised as held-for-
         trading unless they are designated and effective as hedging instruments. Derivatives are
         recognised in the statement of financial position as 'Derivative financial assets' when their fair
         values are positive. Financial assets held-for-trading consist of debt instruments, including
         money-market paper, traded corporate and bank loans, and equity instruments, as well as
         financial assets with embedded derivatives. They are recognised in the statement of financial
         position as 'Financial assets held-for-trading'.

         Financial instruments included in this category are recognised intially at fair value;
         transaction costs are taken directly to the income statement. Gains and lossess arising from
         changes in fair value are included directly in the income statement.

         The Group and the Bank may designate certain financial assets upon initial recognition as at
         fair value through profit or loss (fair value option). This designation cannot subsequently be
         changed. According to FRS 139, the fair value option is only applied when the following
         conditions are met:

         •      the application of the fair value option reduces or eliminates an accounting mismatch that
                would otherwise arise or

         •      the financial assets are part of a portfolio of financial instruments which is risk managed
                and reported to senior management on a fair value basis or

         •      the financial assets consists of debt host and an embedded derivatives that must be
                separated.

         Financial assets for which the fair value option is applied are recognised in the statement of
         financial position as 'Financial assets designated at fair value'. Fair value changes relating to
         financial assets designated at fair value through profit or loss are recognised in the income
         statement.


         The Group and the Bank may choose to reclassify a non-derivative financial assets held-for-
         trading out of this category where:

             • in rare circumstances, it is no longer held for the purpose of selling or repurchasing in the
               near term or


                                                       49
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (G) FINANCIAL ASSETS (continued)

         Financial assets at fair value through profit or loss (continued)

         •   it is no longer held for purpose of trading, it would have met the definition of a loan and
             receivable on initial classification and the Group and the Bank have the intention and
             ability to hold it for the foreseeable future or until maturity.


          Financial investments available-for-sale

         Financial investments available-for-sale are non-derivative financial assets that are either
         designated in this category or not classified as held-for-trading or held-to-maturity
         investments.

         Investments in equity instruments where there is no quoted market price in an active market
         and whose fair value cannot be reliably measured, will be stated at cost.

         Any gains or losses arising from the change in fair value adjustments are recognised directly
         in statement of comprehensive income except for impairment losses and foreign exchange
         gains or losses. When the financial asset is derecognised, the cumulative gains or loss
         previously recognised in statement of comprehensive income shall be transferred to the
         income statement.

         A financial investments available-for-sale that would have met the definition of loans and
         receivables may only be transferred from the available-for-sale classification where the Group
         and the Bank have the intention and the ability to hold the asset for the foreseeable future or
         until maturity.

         Impairment of financial investments available-for-sale is assessed when there is an objective
         evidence of impairment. Cumulative unrealised losses that had been recognised directly in
         equity shall be removed and recognised in income statement even though the securities have
         not been derecognised. Impairment loss in addition to the above unrealised losses is also
         recognised in the income statement. Subsequent reversal of impairment on debt instrument in
         the income statement is allowed when the decrease in impairment can be related objectively
         to an event occuring after the impairment was recognised.


         In the case of equity investments classified as available-for-sale, a significant or prolonged
         decline in the fair value of the security below its cost is objective evidence of impairement
         resulting in the recognition of an impairement loss. Impairment losses recognised in the
         income statement on equity instruments shall not be reversed.




                                                     50
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (G) FINANCIAL ASSETS (continued)

         Financial investments held-to-maturity

          Financial investments held-to-maturity are non-derivative financial assets with fixed or
          determinable payments and fixed maturity that the Group and the Bank have the positive
          intention and ability to hold to maturity.


         Financial investments held-to-maturity are measured at amortised cost using the effective
         interest method. Gains or losses are recognised in income statement when the securities are
         derecognised or impaired and through the amortisation process.

         If, as a result of a change in intention or ability, it is no longer appropriate to calssify a
         financial investment as held-to-maturity, the Group and the Bank shall reclassify the
         investment as available-for-sale and remeasured at fair value, and the difference between its
         carrying amount and fair value shall be recognised in other comprehensive income, except for
         impairment losses and foreign exchange gains and losses.


         Any sale or reclassification of a significant amount of financial investments held-to-maturity
         before maturity during the current financial year or last two preceding financial years will
         “taint” the entire category and result in the remaining financial investments held-to-maturity
         being reclassified to available-for-sale except for sales or reclassification that:


         •    are so close to maturity or call date that changes in the market rate of interest would not
              have significant effect on the financial asset's fair value;

         •    occur after the Group and the Bank have collected substantially all of the financial asset's
              original principal; or

         •    are attributable to an isolated event that is beyond the Group and the Bank's control are
              non-recurring and could not have been reasonably anticipated by the Group and the Bank.



         Impairment of financial investments held-to-maturity is assessed when there is an objective
         evidence of impairment. The impairment loss is measured as the difference between the
         financial investments' carrying amount and the present value of estimated future cash flows
         discounted at the financial investments' original effective interest rate. Subsequent reversal of
         impairment is allowed in the event of an objective decrease in impairment. Recognition of
         impairment losses and its reversal is made through the income statement.




                                                      51
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (G) FINANCIAL ASSETS (continued)

         Recognition

         The Group and the Bank use trade date accounting for regular way contracts when recording
         financial asset transactions. Financial assets that are transferred to a third party but do not
         qualify for derecognition are presented in the statement of financial position as 'Assets
         pledged as collateral', if the transferee has the right to sell or repledge them.


     (H) FINANCIAL LIABILITIES

         In accordance with FRS 139, all financial liabilities which include derivative financial
         instruments have to be recognised in the statement of financial position and measured in
         accordance with their assigned category.

         The Group and the Bank's holding in financial liabilities are in financial liabilities at fair
         value through profit or loss (including financial liabilities held for trading and those that
         designated at fair value) and financial liabilities at amortised cost. Financial liabilities are
         derecognised when extinguished.

         Financial liabilities at fair value through profit or loss

         This category comprises two sub-categories: financial liabilities classified as held-for-trading,
         and financial liabilities designated by the Group and the Bank as at fair value through profit or
         loss upon initial recognition.


         A financial liability is classified as held-for-trading if it is acquired or incurred principally for
         the purpose of selling or repurchasing it in the near term or if it is part of a portfolio of
         identified financial instruments that are managed together and for which there is evidence of a
         recent actual pattern of short-term profit-taking. Derivatives are also categorised as held-for-
         trading unless they are designated and effective as hedging instruments. Derivatives are
         recognised in the statement of financial position as 'Derivative financial liabilities' when their
         fair values are negative. Financial liabilities held-for-trading also include obligations to
         deliver financial assets borrowed by a short seller. Those financial instruments are recognised
         in the statement of financial position as 'Financial liabilities held-for-trading'.

         Gains and losses arising from changes in fair value of financial liabilities classified held-for-
         trading are included in the income statement.




                                                      52
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (H) FINANCIAL LIABILITIES (continued)

         Financial liabilities at fair value through profit or loss (continued)

         The Group and the Bank measure all financial liabilities at amortised cost using the effective
         interest method except for:

         •    derivatives that are liabilities, which shall be measured at fair value. For derivative
              liabilities that are linked to and settled by delivery of unquoted equity instruments whose
              fair value cannot be realiably measured, the derivatives shall be measured at cost;

         •   financial liabilities that arise when a transfer of a financial asset does not qualify for
             derecognition or when the continuing involvement approach applies;

         •   financial guarantee contracts;

         •   commitments to provide a loan at below-market interest rate; and

         •    financial liabilities that designated as hedged items and subject to hedge accounting
              requirements under the applicable FRS.


         Financial liabilities for which the fair value option is applied are recognised in the statement
         of financial position as 'Financial liabilities designated at fair value'. Fair value changes
         relating to financial liabilities designated at fair value through profit or loss are recognised in
         income statement.


         Other liabilities measured at amortised cost

         Financial liabilities that are not classified as at fair value through profit or loss fall into this
         category and are measured at amortised cost. All the financial liabilities of the Group and the
         Bank are measured at amortised cost.


         Derecognition

         Financial assets are derecognised when the contractual rights to receive the cash flows from
         these assets have ceased to exist or the assets have been transferred and substantially all the
         risks and rewards of ownership of the assets are also transferred (that is, if substantially all the
         risks and rewards have not been transferred, the Group and the Bank test control to ensure that
         continuing involvement on the basis of any retained powers of control does not prevent
         derecognition). Financial liabilites are derecognised when they have been redeemed or
         otherwise extinguished.




                                                      53
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (I) PROPERTY AND EQUIPMENT AND DEPRECIATION

         Property and equipment are stated at cost less accumulated depreciation and accumulated
         impairment losses. Cost includes expenditure that is directly attributable to the acquisition of
         the items.

         Subsequent costs are included in the asset's carrying amount or recognised as a separate asset,
         as appropriate, only when it is probable that future economic benefits associated with the item
         will flow to the Group and the cost of the item can be measured reliably. The carrying amount
         of the replaced part is derecognised. All other repairs and maintenance are charged to the
         income statement during the financial period in which they are incurred.


         Freehold land is not depreciated as it has an infinite life. Other property and equipment are
         depreciated on the straight line basis to write off the cost of the assets or their revalued
         amounts, to their residual values over their estimated useful lives, summarised as follows:

         Buildings                                50 years
         Leasehold buildings                      Over the remaining lease period
         Renovation and leasehold premises        5 years or the period of the lease whichever is
                                                  greater
         Office equipment and furniture           10 years
         Computer equipment and software          5 years
         Motor vehicles                           5 years

        Residual value and useful lives of assets are reviewed, and adjusted if appropriate, at each
        reporting date.

        At each reporting date, the Group assesses whether there is any indication of impairment. If
        such indications exist, an analysis is performed to assess whether the carrying amount of the
        asset is recoverable. A write down is made if the carrying amount exceeds the recoverable
        amount. Any subsequent increase in the recoverable amount is recognised in the income
        statement (refer to accounting policy D on impairment of non-financial assets).

        Gains and losses on disposal are determined by comparing proceeds with carrying amount and
        are recognised within other operating income in the income statement.


     (J) LAND HELD FOR SALE

         Land held for sale is stated at cost less accumulated impairment losses. Where an indication of
         impairment exists, an analysis is performed to assess whether the carrying amount of the land
         is fully recoverable. A write-down would be made if the carrying amount exceeded the
         recoverable amount. Any subsequent increase in recoverable amount would be recognised in
         the income statement.

                                                     54
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (K) LEASES

         Accounting by lessee

         Finance leases

         Leases of property and equipment where the Group assumes substantially all the benefits and
         risks of ownership are classified as finance leases. Finance leases are capitalised at the
         inception of the lease at the lower of the fair value of the leased property and the present
         value of the minimum lease payments.

         Each lease payment is allocated between the liability and finance charges so as to achieve a
         periodic constant rate on the finance balance outstanding. The corresponding rental
         obligations, net of finance charges, are included in borrowings. The interest element of the
         finance charge is charged to the income statement over the lease period so as to produce a
         constant periodic rate of interest on the remaining balance of the liability for each period.
         Property and equipment acquired under finance leases are depreciated over the shorter of the
         estimated useful life of the asset and the lease term.

         Initial direct costs incurred by the Group in negotiating and arranging finance leases are
         added to the carrying amount of the leased assets and recognised as an expense in income
         statement over the lease term on the same basis as the lease expense.


         Operating leases

         Leases of assets where a significant portion of the risks and rewards of ownership are retained
         by the lessor are classified as operating leases. Payments made under operating leases (net of
         any incentives received from the lessor) are charged to the income statement on the straight
         line basis over the lease period.

         Initial direct costs incurred by the Group in negotiating and arranging operating leases are
         recognised in income statement when incurred.


         Following the adoption of the improvement to FRS 117 "Leases", leasehold land in which the
         Group has substantially all the risks and rewards incidental to ownership has been reclassified
         retrospectively from operating lease to finance lease. Previously, leasehold land was classified
         as an operating lease unless title is expected to pass to the lessee at the end of the lease term.
         Refer to Note 45B for the impact of this change in accounting policy




                                                      55
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (K) LEASES (continued)

         Accounting by lessor

         Finance leases

         When assets are leased out under a finance lease, the present value of the lease payments is
         recognised as a receivable. The difference between the gross receivable and the present value
         of the receivable is recognised as unearned finance income. Lease income is recognised over
         the term of the lease using the net investment method so as to reflect a constant periodic rate
         of return.

         Operating leases

         When assets are leased out under an operating lease, the asset is included in the statement of
         financial position based on the nature of the asset. Lease income is recognised over the term
         of the lease on a straight-line basis.


     (L) FOREIGN CURRENCY TRANSLATIONS

         Functional and presentation currency

         Items included in the financial statements of each of the Group’s entities are measured using
         the currency of the primary economic environment in which the entity operates (‘the
         functional currency’). The consolidated financial statements are presented in Ringgit
         Malaysia, which is the Group and the Bank’s functional and presentation currency.


         Transactions and balances

         Foreign currency transactions are translated into the functional currency using the exchanges
         rate prevailing at the dates of the transactions. Foreign exchange gains and losses resulting
         from the settlement of such transactions and from the translation at year-end exchange rates of
         monetary assets and liabilities denominated in foreign currencies are recognised in the income
         statement, except when deferred in equity as qualifying cash flow hedges and qualifying net
         investment hedges.

         Changes in the fair value of monetary financial assets denominated in foreign currency
         classified as available-for-sale are analysed between translation differences resulting from
         changes in the amortised cost of the financial asset and other changes in the carrying amount
         of the financial asset. Translation differences related to changes in the amortised cost are
         recognised in income statement, and other changes in the carrying amount are recognised in
         other comprehensive income.


                                                    56
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (L) FOREIGN CURRENCY TRANSLATIONS (continued)

         Transactions and balances (continued)

         Translation differences on non-monetary financial assets and liabilities such as equities held
         at fair value through profit and loss, are reported as part of the fair value gain or loss.
         Translation differences on non-monetary financial assets such as equities classified as
         available-for-sale are included in the fair value reserve in other comprehensive income.



     (M) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING

         Derivatives are initially recognised at fair values on the date on which derivative contracts are
         entered into and are subsequently remeasured at their fair values. Fair values are obtained
         from quoted market prices in active markets, including recent market transactions, and
         valuation techniques, including discounted cash flow models and option pricing models, as
         appropriate. All derivatives are carried as assets when fair values are positive and as
         liabilities when fair values are negative.

         The best evidence of fair value of a derivative at initial recognition is the transaction price
         (i.e the fair value of the consideration given or received) unless fair value of the instrument is
         evidenced by comparison with other observable current market transactions in the same
         instrument (i.e without modification or repackaging) or based on a valuation technique whose
         variables include only data from observable markets. When such evidence exists, the Group
         and the Bank recognise profits immediately.

         The method of recognising the resulting fair value gain or loss depends on whether the
         derivative is designated as a hedging instrument, and if so, the nature of the item being
         hedged. The Group designates certain derivatives as either: (1) hedges of the fair value of
         recognised assets or liabilities or firm commitments (fair value hedge); or (2) hedges of
         highly probable future cash flows attributable to a recognised asset or liability, or a forecasted
         transaction (cash flow hedge). Hedge accounting is used for designated derivatives in this
         way provided certain criterias are met.


          The Group documents, at the inception of the transaction, the relationship between hedging
          instruments and hedged items, as well as its risk management objective and strategy for
          undertaking various hedge transactions. The Group also documents its assessment, both at
          hedge inception and an on-going basis, of whether the derivatives that are used in hedging
          transactions are highly effective in offsetting changes in fair values or cash flows of hedged
          items.




                                                     57
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (M) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING
         (continued)

         Fair value hedge

         Changes in the fair value of derivatives that are designated and qualify as fair value hedges are
         recorded in the income statement, together with any changes in the fair value of the hedged
         assets or liabilities that are attributable to the hedged risk.

         If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying
         amount of a hedged item for which the effective interest method is used, is amortised to
         income statement over the period to maturity. The adjustment to the carrying amount of a
         hedged equity security remains in retained earnings until the disposal of the equity security.


         Cash flow hedge

         The effective portion of changes in the fair value of derivatives that are designated and qualify
         as cash flow hedges are recognised in other comprehensive income. The gain and loss relating
         to the ineffective portion is recognised immediately in the income statement.

         Amounts accumulated in other comprehensive income are recycled to the income statement in
         the periods in which the hedged item will affect income statement (for example, when the
         forecast sale that is hedged take place).

         When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria
         for hedge accounting, any cumulative gain or loss existing at that time remains in other
         comprehensive income and is recognised when the forecast transaction is ultimately
         recognised in the income statement. When a forecast transaction is no longer expected to
         occur, the cummulative gain or loss that was reported in other comprehensive income is
         immediately transferred to 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.




                                                     58
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (M) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING
         (continued)

          Gains and losses on interest rate swaps, futures, forward and option contracts that qualify as
          hedges are deferred and amortised over the life of hedged assets or liabilities as adjustments
          to interest income or interest expense. Gains and losses on interest rate swaps, futures,
          forward and option contracts that do not qualify as hedges are recognised in the current
          financial year using the mark-to-market method and are included in the income statement.


     (N) INCOME TAX

         Current tax

         Current tax expense is determined according to the tax laws of each jurisdiction in which the
         Group operates and include all taxes based upon the taxable profits for the financial year.


         Deferred tax

         Deferred tax is recognised in full, using the liability method, on temporary differences arising
         between the amounts attributed to assets and liabilities for tax purposes and their carrying
         amounts in the financial statements. However, deferred tax is not accounted for if it arises
         from initial recognition of an asset or liability in a transaction other than a business
         combination that at the time of the transaction affects neither accounting nor taxable profit or
         loss.

         Deferred tax assets are recognised to the extent that it is probable that taxable profit will be
         available against which the deductible temporary differences or unused tax losses can be
         utilised.

         Deferred tax is determined using tax rates (and tax laws) that have been enacted or
         substantially enacted by the end of the reporting date and are expected to apply when the
         related deferred tax assets is realised or the deferred tax liability is settled.

         Deferred tax is recognised on temporary differences arising principally arising from
         depreciation of property and equipment, amortisation of intangible assets, foreign exchange
         and derivatives, provision for other liabilities and unused tax losses carried forward.

         Deferred tax related to fair value re-measurement of financial investments available-for-sale,
         which are charged or credited directly to other comprehensive income and is subsequently
         recognised in the income statement together with the deferred gain or loss.




                                                     59
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (O) ZAKAT

         Zakat represents business zakat payable by the Group to comply with the principles of Shariah
         and as approved by the Shariah Committee. The Bank's subsidiary, AFFIN Islamic Bank
         Berhad only pays zakat on its business and does not pay zakat on behalf of depositors or
         shareholders. Zakat provision is calculated based on 2.5% of the net asset method.


     (P) CASH AND CASH EQUIVALENTS

         Cash and cash equivalents consists of cash in hand, bank balances and deposits and
         placements maturing within one month which are held for the purpose of meeting short term
         commitments and are readily convertible to cash without significant risk of changes in value.


     (Q) FORECLOSED PROPERTIES

         Foreclosed properties are stated at the lower of cost and net realisable value.


     (R) CONTINGENT LIABILITIES AND CONTINGENT ASSETS


         The Group and the Bank does not recognise a contingent liability but discloses its existence in
         the financial statements. A contingent liability is possible obligation that arises from past
         events whose existence will be confirmed by the occurrence or non-occurrence of one or more
         uncertain future events beyond the control of the Group and the Bank or a present obligation
         that is not recognised because it is not probable that an outflow of resources will be required
         to settle the obligation. A contingent liability also arises in the extremely rare case where there
         is a liability that cannot be recognised because it cannot be measured reliably.

         A contingent asset is a possible asset that arises from past events whose existence will be
         confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond
         the control of the Group and the Bank. The Group and the Bank does not recognise contingent
         assets but discloses its existence where inflows of economic benefits are probable, but not
         virtually certain.



     (S ) BILLS AND ACCEPTANCES PAYABLE

         Bills and acceptances payable represent the Bank's own bills and acceptances rediscounted and
         outstanding in the market.




                                                      60
Company No: 25046 T


     AFFIN Bank Berhad
     (Incorporated in Malaysia)

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     for the financial year ended 31 December 2010

     (T) OTHER PROVISIONS

         Provisions are recognised by the Group and the Bank when all of the following conditions
         have been met:

         •   the Group and the Bank has a present legal or constructive obligation as a result of past
             events;

         •   it is probable that an outflow of resources to settle the obligation will be required; and

         •   a reliable estimate of the amount of obligation can be made.


     (U) EMPLOYEE BENEFITS

          Short term employee benefits

          Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are
          accrued in the period in which the associated services are rendered by employees of the
          Group.

          Defined contribution plan

          The defined contribution plan is a pension plan under which the Group pays fixed
          contributions to the National Pension Scheme, the Employees' Provident Fund ('EPF') and
          will have no legal or constructive obligations to pay further contributions if the fund does not
          hold sufficient assets to pay all employee benefits relating to employee service in the current
          and prior periods.

          The Group's contribution to defined contribution plans are charged to the income statement in
          the period to which they relate. Once the contributions have been paid, the Group has no
          further payment obligations.

          Termination benefits

          Termination benefits are payable whenever an employee's employment is terminated before
          the normal retirement date or whenever an employee accepts voluntary redundancy in
          exchange for these benefits. The Group recognises termination benefits when it is
          demonstrably committed to either terminate the employment of current employees according
          to a detailed formal plan without any possibility of withdrawal or to provide termination
          benefits as a result of an offer made to encourage voluntary redundancy.




                                                      61
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      1   GENERAL INFORMATION

          The Bank is principally engaged in all aspects of banking and related financial services. The principal
          activities of the Bank's subsidiaries are Islamic banking business, property management services,
          nominee and trustee services. There have been no significant changes in these principal activities
          during the financial year.

          The number of employees in the Group and the Bank as at 31 December 2010 was 3,113 (2009:
          3,065) and 2,933 (2009: 2,900) employees respectively.

          The holding company of the Bank is AFFIN Holdings Berhad, a public listed company incorporated
          in Malaysia and the ultimate holding corporate body is Lembaga Tabung Angkatan Tentera, a
          statutory body incorporated under the Tabung Angkatan Tentera Act, 1973.

          The Bank is a limited liability company, incorporated and domiciled in Malaysia.




      2   CASH AND SHORT-TERM FUNDS

                                                              The Group                      The Bank
                                                           2010        2009               2010        2009
                                                         RM'000      RM'000             RM'000     RM'000

          Cash and bank balances with banks
           and other financial institutions               172,530        138,525         169,157        134,582
          Money at call and deposit placements
           maturing within one month                    8,457,033      5,994,364       5,933,150      4,042,363
                                                        8,629,563      6,132,889       6,102,307      4,176,945


      3   DEPOSITS AND PLACEMENTS WITH BANKS AND OTHER FINANCIAL INSTITUTIONS

                                                              The Group                       The Bank
                                                           2010        2009               2010        2009
                                                         RM'000      RM'000             RM'000      RM'000

          Licensed banks                                   15,681              -         382,879        480,494
          Licensed investment banks                       176,654        142,777         176,654        142,777
                                                          192,335        142,777         559,533        623,271




                                                        62
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      4   FINANCIAL ASSETS HELD-FOR-TRADING

                                                        The Group                  The Bank
                                                     2010        2009           2010        2009
                                                   RM'000      RM'000         RM'000     RM'000
          At fair value
          Bank Negara Malaysia Monetary Notes       99,853             -       99,853            -
          Negotiable Instruments of Deposit         50,000       150,000       50,000      150,000
                                                   149,853       150,000      149,853      150,000


      5   FINANCIAL INVESTMENTS AVAILABLE-FOR-SALE

                                                        The Group                  The Bank
                                                     2010        2009           2010        2009
                                                   RM'000      RM'000         RM'000     RM'000
          At fair value
          Malaysian Government treasury bills      166,566        151,098     137,730        93,392
          Malaysian Government securities          756,181      1,632,607     756,181     1,632,607
          Malaysian Government investment
           issues                                 1,398,095      877,623      668,411      235,469
          BNM Sukuk                                  31,712            -            -            -
          Bank Negara Malaysia Monetary Notes     1,006,592      638,548      849,557      408,072
          Negotiable Instruments of Deposit and
           Islamic Debt Certificates               140,057       460,002      140,057      460,002
          Bankers' acceptances and Islamic
            accepted bills                          556,994        36,580      556,994            -
          Khazanah bonds                             13,250        24,961            -            -
                                                  4,069,447     3,821,419    3,108,930    2,829,542
          Quoted securities:
          Shares in Malaysia                           51,375     65,059       40,920       54,617
          Private debt securities in Malaysia           2,167      2,253        2,167        2,253

          Unquoted securities:
          Shares in Malaysia                           93,173           -      93,101             -
          Private debt securities
          - in Malaysia                           1,253,121     1,495,913      890,568    1,131,828
          - outside Malaysia                        336,775       312,425      325,834      284,483
                                                  5,806,058     5,697,069    4,461,520    4,302,723
          Allowance for impairment of
           securities                               (40,005)      (69,698)     (33,260)     (62,953)
                                                  5,766,053     5,627,371    4,428,260    4,239,770




                                                  63
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      6   FINANCIAL INVESTMENTS HELD-TO-MATURITY

                                                      The Group                The Bank
                                                   2010        2009        2010        2009
                                                 RM'000      RM'000      RM'000      RM'000
          At amortised cost
          Quoted securities:
          Private debt securities in Malaysia        38,123    38,123     38,123     38,123

          Unquoted securities:
          Private debt securities in Malaysia    480,788      478,915    480,620    478,747

          At cost
          Unquoted shares in Malaysia                  -       54,393          -     53,818
                                                 518,911      571,431    518,743    570,688
          Allowance for impairment of
           securities                            (87,752)     (89,957)   (87,584)   (89,789)
                                                 431,159      481,474    431,159    480,899




                                                64
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      7     LOANS, ADVANCES AND FINANCING

                                                             The Group                   The Bank
      (i)   By type                                       2010        2009            2010        2009
                                                        RM'000      RM'000          RM'000     RM'000

            Overdrafts                                1,971,364     1,936,567      1,747,438     1,718,354
            Term loans/financing
            - Housing loans/financing                 3,885,327     3,248,631      2,831,771     2,415,866
            - Hire purchase receivables               7,835,986     6,592,317      6,774,821     5,729,092
            - Syndicated financing                    1,371,964     1,099,161      1,254,969       920,137
            - Other term loans/financing              7,784,898     6,363,775      6,850,106     5,811,261
            Bills receivables                            39,077        39,727         37,688        31,856
            Trust receipts                              266,050       316,033        222,092       239,571
            Claims on customers under
              acceptances credits                       659,074       603,804        601,137      508,763
            Staff loans/financing (of which
              RM Nil to Directors)                      151,146       151,565        143,110       143,702
            Credit/charge cards                         101,682        96,468        101,682        96,468
            Revolving credits                         2,476,644     2,148,317      2,334,181     2,029,715
            Factoring                                     3,185         3,532          3,185         3,532
            Gross loans, advances and financing      26,546,397    22,599,897     22,902,180    19,648,317
            Less:
            Allowance for bad and doubtful
               debts and financing
            - General                                          -     (335,067)             -      (291,000)
            - Specific                                         -     (275,526)             -      (248,722)
            Allowance for impairment
            - Individual                               (175,849)             -      (139,709)            -
            - Collective                               (395,701)             -      (343,220)            -
            Total net loans, advances and
              financing                              25,974,847    21,989,304     22,419,251    19,108,595

            -   Included in term loans are housing loans sold to Cagamas Berhad with recourse amounting to
                RM286,370,000 (2009: RM297,216,000).

            -   Included in Group's other term loan/financing as at reporting date is RM13.5 million (2009:
                RM13.5 million) of term financing disbursed by AFFIN Islamic Bank Bhd to jointly controlled
                entity, AFFIN-i Goodyear Sdn Bhd.




                                                      65
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      7    LOANS, ADVANCES AND FINANCING (continued)

                                                       The Group                  The Bank
      (ii) By maturity structure                    2010        2009          2010        2009
                                                  RM'000      RM'000        RM'000      RM'000

           Maturing within one year              6,552,073    6,032,892    5,989,754    5,432,079
           One year to three years               2,748,818    2,624,066    2,581,046    2,410,452
           Three years to five years             4,411,920    3,450,201    3,906,606    3,214,452
           Over five years                      12,833,586   10,492,738   10,424,774    8,591,334
                                                26,546,397   22,599,897   22,902,180   19,648,317


                                                       The Group                  The Bank
      (iii) By type of customer                     2010        2009          2010        2009
                                                  RM'000      RM'000        RM'000      RM'000

           Domestic non-bank financial
             institutions
           - Stockbroking companies                    270            -          270            -
           - Others                              2,146,330    1,519,286    1,724,629    1,333,982
           Domestic business enterprises
           - Small and medium enterprises        6,789,502    6,182,392    6,311,415    5,670,572
           - Others                              5,785,703    4,628,530    5,265,662    4,245,440
           Government and statutory bodies          75,394       93,267       75,394       84,326
           Individuals                          11,473,630    9,909,813    9,369,378    8,191,403
           Other domestic entities                  45,584       20,117       43,749       19,297
           Foreign entities                        229,984      246,492      111,683      103,297
                                                26,546,397   22,599,897   22,902,180   19,648,317


                                                       The Group                  The Bank
      (iv) By interest/profit rate                  2010        2009          2010        2009
            sensitivity                           RM'000      RM'000        RM'000      RM'000

           Fixed rate
           - Housing loans/financing               286,138      357,071      183,375      163,641
           - Hire purchase receivables           7,834,034    6,589,445    6,773,029    5,726,220
           - Other fixed rate loans/financing    3,934,311    3,779,761    3,400,299    3,208,943
           Variable rate
           - BLR plus                           10,210,602    8,969,682    8,596,943    7,776,326
           - Cost plus                           4,281,312    2,903,938    3,948,534    2,773,187
                                                26,546,397   22,599,897   22,902,180   19,648,317




                                                66
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      7   LOANS, ADVANCES AND FINANCING (continued)

                                                        The Group                  The Bank
      (v) By sector                                  2010        2009          2010        2009
                                                   RM'000      RM'000        RM'000      RM'000

          Primary agriculture                       482,204      528,113      385,200      410,454
          Mining and quarrying                      373,899      254,864      373,664      254,665
          Manufacturing                           1,790,610    1,681,203    1,660,682    1,570,652
          Electricity, gas and water supply         194,137      155,944      193,273      155,671
          Construction                            2,367,389    2,412,212    2,027,689    1,929,928
          Real estate                             2,328,423    1,444,968    2,283,744    1,403,443
          Wholesale and retail trade, and
           restaurants and hotels                 1,213,751    1,166,009    1,164,859    1,090,258
          Transport, storage and communication      921,590      925,398      915,146      898,675
          Finance, insurance and business
           services                               4,396,591    3,298,676    3,809,129    3,016,548
          Education, health and others              855,655      698,097      584,559      622,075
          Household                              11,579,272   10,004,551    9,461,991    8,271,706
          Others                                     42,876       29,862       42,244       24,242
                                                 26,546,397   22,599,897   22,902,180   19,648,317


                                                        The Group                  The Bank
      (vi) By purpose                                2010        2009          2010        2009
                                                   RM'000      RM'000        RM'000      RM'000

          Purchase of securities                    268,145      171,054      254,706      150,042
          Purchase of transport vehicles          7,869,187    6,619,191    6,807,263    5,751,834
          Purchase of landed property of
            which:
          - Residential                           3,982,258    3,473,593    2,913,043    2,579,015
          - Non-residential                       2,637,636    1,605,207    2,211,785    1,430,102
          Fixed assets other than land and
            building                                339,184      274,654      329,088      270,145
          Personal use                              721,877      746,550      689,560      721,970
          Credit card                               101,682       96,468      101,682       96,468
          Consumer durable                            1,067        1,365        1,033        1,324
          Construction                              772,577      652,128      648,490      518,311
          Merger and acquisition                      4,867       14,598        4,867       14,598
          Working capital                         9,635,096    8,519,822    8,739,309    7,729,265
          Others                                    212,821      425,267      201,354      385,243
                                                 26,546,397   22,599,897   22,902,180   19,648,317




                                                 67
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      7    LOANS, ADVANCES AND FINANCING (continued)

                                                       The Group                    The Bank
      (vii) By geographical distribution            2010        2009            2010        2009
                                                  RM'000      RM'000          RM'000      RM'000

           Perlis                                   27,648        17,882        25,762        16,255
           Kedah                                   902,980       954,969       691,342       743,340
           Pulau Pinang                          1,271,331     1,110,256     1,176,306     1,027,779
           Perak                                   853,633       726,315       689,294       597,903
           Selangor                              7,602,382     6,552,003     6,423,997     5,582,084
           Wilayah Persekutuan                   8,720,586     7,060,962     7,876,473     6,425,087
           Negeri Sembilan                         721,564       635,459       660,393       585,102
           Melaka                                  663,856       575,803       623,077       550,692
           Johor                                 2,027,324     1,849,159     1,889,371     1,711,981
           Pahang                                  623,000       416,548       368,284       313,620
           Terengganu                              567,382       521,026       277,903       293,468
           Kelantan                                256,176       232,161        58,335        48,822
           Sarawak                                 732,788       572,920       707,464       555,644
           Sabah                                 1,173,362     1,048,697     1,137,077       999,578
           Labuan                                  277,901       177,666       277,889       177,651
           Abroad                                  124,484       148,071        19,213        19,311
                                                26,546,397    22,599,897    22,902,180    19,648,317


      (viii) Movements of impaired loans

                                                     The Group                   The Bank
                                                    2010        2009            2010        2009
                                                  RM'000      RM'000          RM'000      RM'000

           At beginning of the financial year      774,886     1,086,173       714,430     1,035,778
           Adoption of FRS 139                     264,897             -       194,513             -
                                                 1,039,783     1,086,173       908,943     1,035,778
           Acquisition from subsidiary                   -             -             -           296
           Classified as impaired                  689,486       780,474       596,797       697,126
           Reclassified as non-impaired           (313,791)     (379,573)     (271,704)     (336,133)
           Amount recovered                       (221,338)     (254,944)     (198,624)     (238,824)
           Amount written-off                     (223,017)     (457,244)     (216,890)     (443,813)
           At end of the financial year            971,123       774,886       818,522       714,430




                                                68
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      7   LOANS, ADVANCES AND FINANCING (continued)

      (ix) Movements in allowance for impairment

                                                           The Group    The Bank
                                                                2010        2010
                                                            RM'000       RM'000

          Individual impairment

          At beginning of the financial year                       -           -
          Adoption of FRS 139                                175,953     152,725
                                                             175,953     152,725
          Provision for loan impairment                      198,023     172,716
          Amount recovered                                   (20,669)    (10,778)
          Amount written-off                                (170,906)   (169,730)
          Unwind of discount of allowance                     (6,552)     (5,224)
          At end of the financial year                       175,849     139,709


          Collective impairment

          At beginning of the financial year                       -           -
          Adoption of FRS 139                                449,893     405,968
                                                             449,893     405,968
          Provision for loan impairment/(recovered)           (3,044)    (16,409)
          Amount written-off                                 (51,148)    (46,339)
          At end of the financial year                       395,701     343,220




                                                      69
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      7   LOANS, ADVANCES AND FINANCING (continued)

      (x) Movements in allowance for bad and doubtful debts and financing

                                                           The Group                The Bank
                                                        2010        2009        2010        2009
                                                      RM'000      RM'000      RM'000      RM'000

          General allowance

          At beginning of the financial year           335,067    297,932      291,000    260,443
          Acquisition from subsidiary                        -          -            -        179
          Adoption of FRS 139                         (335,067)         -     (291,000)
          Allowance made during the financial year           -     37,182            -     30,378
          Amount written-back                                -        (47)           -          -
          At end of the financial year                       -    335,067            -    291,000

          As % of gross loans, advances and
           financing less specific allowance                 -       1.50%           -       1.50%


          Specific allowance

          At beginning of the financial year           275,526    448,783      248,722    431,746
          Acquisition from subsidiary                        -          -            -        257
          Adoption of FRS 139                         (275,526)         -     (248,722)         -
          Allowance made during the financial
           year                                              -    322,570            -    297,631
          Transferred to allowance from impairment
           of securities                                     -       9,843           -       9,843
          Transferred to debt conversion                     -      (1,626)          -      (1,626)
          Amount recovered                                   -     (46,977)          -     (45,494)
          Amount written-off                                 -    (457,067)          -    (443,635)
          At end of the financial year                       -     275,526           -     248,722




                                                     70
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      7   LOANS, ADVANCES AND FINANCING (continued)

      (xi) Impaired loans by economic sectors

                                                        The Group               The Bank
                                                     2010        2009       2010        2009
                                                   RM'000      RM'000     RM'000      RM'000

          Primary agriculture                       11,937        5,443    11,874      5,345
          Mining and quarrying                          50          985         -        985
          Manufacturing                             99,831       81,803    78,707     57,120
          Electricity, gas and water supply          2,360        2,154     2,066      2,125
          Construction                             252,660      140,963   175,208    140,798
          Real estate                                8,263       28,820     8,263     28,820
          Wholesale and retail trade, and
           restaurants and hotels                      48,103    21,538    45,555     19,695
          Transport, storage and communication          4,633     3,768     4,633      3,768
          Finance, insurance and business
           services                                 15,108       15,498    14,469     14,911
          Education, health and others               8,301        9,021     8,301      9,021
          Household                                519,877      460,095   469,446    427,044
          Others                                         -        4,798         -      4,798
                                                   971,123      774,886   818,522    714,430


      (xii) Impaired loans by economic purposes

                                                        The Group               The Bank
                                                     2010        2009       2010        2009
                                                   RM'000      RM'000     RM'000      RM'000

          Purchase of securities                        2,741     3,614     2,741      3,614
          Purchase of transport vehicles               81,586    86,447    73,743     80,252
          Purchase of landed property of
            which:
          - Residential                            407,763      341,928   365,321    314,856
          - Non-residential                         44,744       51,691    44,119     48,411
          Fixed assets other than land and
            building                                 3,633        4,639     3,185      4,191
          Personal use                              16,373       18,946    16,170     18,927
          Credit card                                  636          865       636        865
          Consumer durable                              34           33        34         33
          Construction                             197,713       33,127   136,000     33,127
          Working capital                          215,683      224,587   176,360    203,383
          Others                                       217        9,009       213      6,771
                                                   971,123      774,886   818,522    714,430



                                                  71
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      7    LOANS, ADVANCES AND FINANCING (continued)

      (xiii) Impaired loans by geographical distribution

                                                                The Group             The Bank
                                                             2010        2009     2010        2009
                                                           RM'000      RM'000   RM'000      RM'000

           Perlis                                              840        563       840        563
           Kedah                                            40,612     27,157    39,228     26,525
           Pulau Pinang                                     30,120     30,702    27,892     27,896
           Perak                                            16,202     15,372    14,559     14,414
           Selangor                                        426,852    310,686   382,454    274,721
           Wilayah Persekutuan                             185,642    178,535   173,975    169,880
           Negeri Sembilan                                  37,483     36,656    35,466     34,871
           Melaka                                           15,854     17,717    15,356     17,594
           Johor                                            88,097    113,682    85,252    110,807
           Pahang                                           17,013     11,596    13,368      9,019
           Terengganu                                        8,009      4,462     6,529      3,589
           Kelantan                                          6,171      5,147     3,011      2,329
           Sarawak                                           6,614      7,075     6,387      6,814
           Sabah                                            14,387     15,497    14,160     15,369
           Labuan                                               45         39        45         39
           Abroad                                           77,182          -         -          -
                                                           971,123    774,886   818,522    714,430




                                                       72
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      8   OTHER ASSETS

                                                           The Group                 The Bank
                                                        2010        2009          2010        2009
                                                      RM'000      RM'000        RM'000     RM'000

          Other debtors, deposits and
           prepayments                                 27,273         22,285     26,606     21,707
          Clearing accounts                             4,160        153,097      4,077    129,236
          Accrued interest/income receivable           60,301         57,437     49,593     51,273
          Prepaid lease rental (a)                          -              -          -          -
          Foreclosed properties (b)                   160,648        180,329    160,253    179,916
          Others                                       (6,180)         2,142     (6,910)     2,139
                                                      246,202        415,290    233,619    384,271

          (a)   Prepaid lease rental

          Cost
          At beginning of the financial year
          As previously reported                          19,164      20,167     17,274     18,277
          Reclassified to property and
           equipment (Note 15)                            (19,164)   (20,167)   (17,274)    (18,277)
          As restated/At end of the financial year              -          -          -           -

          Less: Accumulated amortisation
          At beginning of the financial year
          As previously reported                           2,984       2,820      2,774      2,617
          Reclassified to property and
           equipment (Note 15)                             (2,984)    (2,820)    (2,774)     (2,617)
          As restated/At end of the financial year              -          -          -           -

          Net book value at end of
           financial year                                       -          -          -           -




                                                     73
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      8   OTHER ASSETS (continued)

                                                       The Group                  The Bank
                                                    2010        2009           2010        2009
                                                  RM'000      RM'000         RM'000     RM'000

          (b)   Foreclosed properties

          At beginning of the financial year       180,329      187,422      179,916      187,009
          Amount arising during the financial
           year                                      1,370       21,657        1,370       21,657
          Disposal during the financial year       (18,611)     (26,952)     (18,611)     (26,952)
                                                   163,088      182,127      162,675      181,714
          Foreclosed properties - dimunition
           in value                                 (2,440)      (1,798)      (2,422)      (1,798)
          At end of the financial year             160,648      180,329      160,253      179,916


      9   DERIVATIVE FINANCIAL ASSETS

                                                The Group and The Bank     The Group and The Bank
                                                         2010                       2009
                                                 Contract/                  Contract/
                                                  notional                   notional
                                                   amount        Assets       amount        Assets
                                                  RM'000       RM'000        RM'000        RM'000
          At fair value
          Foreign exchange derivatives:
           Currency forwards                       240,549        2,381      338,607        4,134
           Currency swaps                        1,347,158       34,031    1,037,690       17,530

          Interest rate derivatives:
           Interest rate swap                      576,120        9,743      375,635        8,063
                                                 2,163,827       46,155    1,751,932       29,727




                                                 74
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      10   DEFERRED TAX ASSETS / (LIABILITIES)

           Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current
           tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority.
           The following amounts determined after appropriate offsetting, are shown in the statement of financial
           position:

                                                                 The Group                        The Bank
                                                              2010        2009                2010        2009
                                                            RM'000      RM'000              RM'000      RM'000

           Deferred tax assets:
           - to be recovered after more than 12 month           5,221         47,681                -         47,171
           - to be recovered within 12 months                    (930)         7,108                -          7,219
                                                                4,291         54,789                -         54,390
           Deferred tax liabilities
           - to be recovered after more than 12 month           (2,876)             -         (2,876)               -
           - to be recovered within 12 months                  (22,056)            (1)       (22,056)               -
                                                               (24,932)            (1)       (24,932)               -

           At beginning of the financial year                   54,788        62,415          54,390          62,803
           Adoption of FRS 139                                 (21,123)            -         (19,269)              -
                                                                33,665        62,415          35,121          62,803
           (Charged)/credited to income
             statement (Note 34)                               (50,191)        3,478         (57,219)          1,821
           - property and equipment                                913         2,335             844           2,374
           - intangible assets                                   2,908         1,638           3,092           1,499
           - general allowance on bad and
              doubtful debts                                   (83,767)        9,284         (72,750)          7,639
           - collective allowances (transitional
              provision) for bad and doubtful
              financing                                         6,785              -             267               -
           - revaluation gain/(losses) on forex                13,507          1,262          11,879          (1,700)
           - revaluation gain/(losses) on derivatives           2,929        (10,233)          2,929         (10,233)
           - others                                             6,534           (808)         (3,480)          2,242

           Charged to equity                                    (4,115)      (11,105)         (2,834)        (10,234)
           At end of the financial year                        (20,641)       54,788         (24,932)         54,390




                                                          75
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      10   DEFERRED TAX ASSETS / (LIABILITIES) (continued)

           The movements in deferred tax assets and liabilities during the financial year are as follows:

                                                                The Group                        The Bank
                                                             2010        2009                2010        2009
                                                           RM'000      RM'000              RM'000      RM'000

           Subject to income tax
           Deferred tax assets (before
            offsetting)
           General allowance on bad and
              doubtful debts                                         -       83,767                -        72,750
           Collective allowances (transitional
              provision) for bad and doubtful
              financing                                         6,785              -            267               -
           Investment fluctuation reserve for financial
             investments available-for-sale                          -        2,285               -           2,284
           Others                                                   12           12              12           8,045
                                                                 6,797       86,064             279          83,079
           Offsetting                                           (2,506)     (31,275)           (279)        (28,689)
           Deferred tax assets (after
            offsetting)                                         4,291        54,789                -        54,390

           Deferred tax liabilities (before
            offsetting)
           Property and equipment                               (5,340)      (6,255)         (5,059)         (5,903)
           Intangible assets                                    (5,252)      (8,160)         (4,886)         (7,978)
           Revaluation gain on forex                                 -      (13,507)              -         (11,879)
           Revaluation gain on derivatives                           -       (2,929)              -          (2,929)
           Investment fluctuation reserve for financial
             investments available-for-sale                    (16,846)        (425)        (15,266)              -
                                                               (27,438)     (31,276)        (25,211)        (28,689)
           Offsetting                                            2,506       31,275             279          28,689
           Deferred tax liabilities (after
            offsetting)                                        (24,932)           (1)       (24,932)              -




                                                          76
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      10   DEFERRED TAX ASSETS / (LIABILITIES) (continued)

           The amount of unused tax losses for which no deferred tax asset is recognised in the statement of
           financial position are as follows:


                                                             The Group                      The Bank
                                                          2010        2009              2010        2009
                                                        RM'000      RM'000            RM'000      RM'000

           Tax losses                                    105,260       105,507                -             -


      11   STATUTORY DEPOSIT WITH BANK NEGARA MALAYSIA

           A non-interest bearing statutory deposit is maintained with Bank Negara Malaysia in compliance with
           requirements of Section 26(2)(c) of the Central Bank of Malaysia Act 2009, the amounts of which is
           determined at a set percentages of total eligible liabilities.

           The appointment of AFFIN Islamic Bank Berhad ('AIBB') as an Islamic principal dealer from 1 July
           2009 to 31 December 2012 by Bank Negara Malaysia has in turn accorded AIBB to maintain the 1%
           Statutory Reserve Requirement ('SRR') balances in the form of Malaysian Government securities
           and/or Government Investment issues holdings instead of cash. As at reporting date, RM40,000,000
           (2009: RM30,000,000) of Malaysian Government securities and/or Government Investment issues
           have been maintained by AIBB to comply with the SRR.



      12   INVESTMENT IN SUBSIDIARIES

                                                                                            The Bank
                                                                                        2010        2009
                                                                                      RM'000      RM'000

           Unquoted shares, at cost                                                   319,557        319,557
           Less: Allowance for impairment losses                                      (32,128)       (32,128)
                                                                                      287,429        287,429




                                                       77
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      12   INVESTMENT IN SUBSIDIARIES (continued)

           The subsidiaries of the Bank, all of which are incorporated in Malaysia, are as follows:


                                                                                      Percentage of equity held
           Name                                       Principal Activities               2010          2009
                                                                                          %              %

           AFFIN Islamic Bank Bhd                     Islamic banking business            100           100
           PAB Properties Sdn Bhd                     Property management                 100           100
                                                       services
           ABB Nominee (Tempatan) Sdn Bhd             Share nominee services              100           100
           ABB Nominee (Asing) Sdn Bhd                Share nominee services              100           100
           ABB Trustee Berhad *                       Trustee management                  100           100
                                                       services
           AFFIN Factors Sdn Bhd                      Dormant                             100           100
           AFFIN Futures Sdn Bhd                      Dormant                             100           100
           PAB Property Management Services           Dormant                             100           100
            Sdn Bhd
           PAB Property Development Sdn Bhd           Dormant                             100           100
           ABB Venture Capital Sdn Bhd                Dormant                             100           100
           ABB IT & Services Sdn Bhd                  Dormant                             100           100
           BSNCB Nominees (Tempatan) Sdn              Dormant                             100           100
            Bhd
           BSNC Nominees (Tempatan) Sdn               Dormant                             100           100
            Bhd
           ABB Asset Management (M) Bhd               Dormant                             100           100
           AFFIN Recoveries Bhd                       Dormant                             100           100
           BSN Merchant Nominees                      Dormant                             100           100
            (Tempatan) Sdn Bhd
           BSN Merchant Nominees                      Dormant                             100           100
            (Asing) Sdn Bhd
           AFFIN-ACF Nominees (Tempatan)              Dormant                             100           100
            Sdn Bhd

           *    80% held by Directors of the Bank, in trust for the Bank.




                                                        78
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      13   INVESTMENT IN JOINTLY CONTROLLED ENTITY
                                                                                                The Group
                                                                                             2010       2009
                                                                                           RM'000     RM'000

           Unquoted shares at cost                                                              500            500
           Group's share of post acquisition retained losses                                      -              -
                                                                                                500            500

           The Group did not account for the share of post acquisition retained losses as it is immaterial and has no
           commenced the development of land.

           The summarised financial information of jointly controlled entity are as follows:

           Revenue                                                                               2               1
           Loss after tax                                                                     (792)             (3)
           Total assets                                                                     20,816          16,813
           Total liabilities                                                                20,621          15,820

           The jointly controlled entity was incorporated on 1 April 2008 and the details are as follows:

                                                                       Issued and                Percentage of
                                                                          paid up                 equity held
           Name                        Principal activites            share capital            2010          2009
                                                                          RM'000                  %            %
           AFFIN-i Goodyear
            Sdn Bhd                    Land development project               1,000              50             50

           On 1 April 2008, AFFIN Islamic Bank Berhad and Jurus Positif Sdn Bhd, a subsidiary of Mutiara
           Goodyear Development Berhad, entered into a joint venture agreement under the Shariah principles
           ('Musharakah Agreement') to develop a land into a housing scheme at Bukit Gambir, Penang.

           The agreement also includes an arrangement where Jurus Positif Sdn Bhd may acquire the Bank's
           shares upon the completion of the project at a mutually agreed price, unless if both shareholders
           decide to continue the joint venture for subsequent projects.

           Major strategic operation and financial decisions relating to the activities of AFFIN-i Goodyear Sdn
           Bhd requires unanimous consent by both joint venture parties. The Group's interest in AFFIN-i
           Goodyear Sdn Bhd has been treated as investment in jointly controlled entity, which has been
           accounted for in the consolidated financial statements using the equity method of accounting.




                                                         79
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      14   AMOUNT DUE FROM SUBSIDIARIES

                                                                                          The Bank
                                                                                      2010        2009
                                                                                    RM'000      RM'000

           Advances to a subsidiary                                                 183,541       229,364
           Other receivables                                                          1,730         1,921
                                                                                    185,271       231,285

           The advances of RM183,541,000 (2009: RM229,364,000) to subsidiary is unsecured, bear interest at
           2.62% per annum (2009: 2.14%) and have no fixed terms of repayment.




                                                     80
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

15 PROPERTY AND EQUIPMENT

                                                                                     Buildings        Buildings                     Office   Computer
                                                         <---Leasehold land-->              on                on                equipment    equipment                Capital
                                              Freehold    50 years       Less than    freehold         leasehold                      and           and    Motor      work-in
    The Group                                     land    or more         50 years        land              land   Renovation    furniture     software   vehicles   progress     Total
    2010                                       RM'000     RM'000          RM'000       RM'000           RM'000       RM'000       RM'000        RM'000    RM'000     RM'000     RM'000

    Cost
    At 1 January 2010
    As previously reported                     25,087          -                -      33,480           89,549        94,572       50,262       63,359      3,458      2,251    362,018
    Reclassified from other assets (Note 8)         -     13,470            5,694           -                -             -            -            -          -          -     19,164
    As restated                                25,087     13,470            5,694      33,480           89,549        94,572       50,262       63,359      3,458      2,251    381,182
    Additions                                       -          -                -           -                -         1,653        1,358        2,601        437      3,559      9,608
    Disposals                                    (800)      (608)            (314)       (269)            (480)         (154)         (47)           -       (317)         -     (2,989)
    Write-off                                       -          -                -           -                -           (52)      (1,648)        (554)       (14)         -     (2,268)
    Reclassification                                -          -                -           -                -            53           87          (36)         -       (104)         -
    Transfer to intangible assets (Note 16)         -          -                -           -                -             -            -            -          -     (4,089)    (4,089)
    At 31 December 2010                        24,287     12,862            5,380      33,211           89,069        96,072       50,012       65,370      3,564      1,617    381,444

    Accumulated depreciation and impairment
     losses
    At 1 January 2010
    As previously reported                          -          -                -      12,810           18,078        77,346       32,390       47,036      2,780          -    190,440
    Reclassified from other assets (Note 8)         -      1,757            1,227           -                -             -            -            -          -          -      2,984
    As restated                                     -      1,757            1,227      12,810           18,078        77,346       32,390       47,036      2,780          -    193,424
    Charge for the financial year                   -        111              122         552            1,789         6,011        3,078        8,091        317          -     20,071
    Disposal                                        -        (57)             (17)        (89)             (74)         (137)         (37)           -       (317)         -       (728)
    Write-off                                       -          -                -           -                -           (36)      (1,511)        (484)       (14)         -     (2,045)
    Reclassification                                -          -                -           -                -             -            5           (5)         -          -          -
    At 31 December 2010                             -      1,811            1,332      13,273           19,793        83,184       33,925       54,638      2,766          -    210,722

    Net book value as at 31 December 2010      24,287     11,051            4,048      19,938           69,276        12,888       16,087       10,732       798       1,617    170,722




                                                                                                 81
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

15 PROPERTY AND EQUIPMENT (continued)

                                                                                       Buildings         Buildings                    Office    Computer
                                                          <---Leasehold land-->                on               on                equipment     equipment                Capital
                                              Freehold     50 years        Less than    freehold         leasehold                       and           and     Motor     work-in
    The Group                                      land     or more         50 years         land             land   Renovation     furniture     software   vehicles   progress     Total
    2009                                       RM'000      RM'000           RM'000       RM'000            RM'000      RM'000        RM'000        RM'000    RM'000     RM'000     RM'000

    Cost
    At 1 January 2009
    As previously reported                     28,630           -                -       35,616            90,095       91,703      48,665        65,230      3,947       5,116    369,002
    Reclassified from other assets (Note 8)         -      14,039            6,128            -                 -            -           -             -          -           -     20,167
    As restated                                28,630      14,039            6,128       35,616            90,095       91,703      48,665        65,230      3,947       5,116    389,169
    Additions                                       -           -                -            -                 -        4,806       3,639         2,425         12       3,670     14,552
    Disposals                                  (3,543)       (569)            (434)      (2,136)             (546)         (93)        (59)            -       (458)          -     (7,838)
    Write-off                                       -           -                -            -                 -       (2,286)     (2,115)       (4,545)       (43)          -     (8,989)
    Reclassification                                -           -                -            -                 -          442         132           249          -        (823)         -
    Transfer to intangible assets (Note 16)         -           -                -            -                 -            -           -             -          -      (5,712)    (5,712)
    At 31 December 2009                        25,087      13,470            5,694       33,480            89,549       94,572      50,262        63,359      3,458       2,251    381,182

    Accumulated depreciation and impairment
     losses
    At 1 January 2009
    As previously reported                           -          -                -       13,383            16,343       73,766      30,306        42,219      2,508           -    178,525
    Reclassified from other assets (Note 8)          -      1,662            1,158            -                 -            -           -             -          -           -      2,820
    As restated                                      -      1,662            1,158       13,383            16,343       73,766      30,306        42,219      2,508           -    181,345
    Charge for the financial year                    -        117              124          556             1,799        5,784       4,015         9,317        391           -     22,103
    Disposal                                         -        (22)             (55)      (1,129)              (64)         (92)        (52)            -        (76)          -     (1,490)
    Write-off                                        -          -                -            -                 -       (2,112)     (1,879)       (4,500)       (43)          -     (8,534)
    At 31 December 2009                              -      1,757            1,227       12,810            18,078       77,346      32,390        47,036      2,780           -    193,424

    Net book value as at 31 December 2009      25,087      11,713            4,467       20,670            71,471       17,226      17,872        16,323        678      2,251     187,758




                                                                                                    82
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

15 PROPERTY AND EQUIPMENT (continued)

                                                                                           Buildings        Buildings                     Office   Computer
                                                               <---Leasehold land-->              on                on                equipment    equipment                Capital
                                                 Freehold       50 years       Less than    freehold         leasehold                      and           and    Motor      work-in
    The Bank                                         land       or more         50 years        land              land   Renovation    furniture     software   vehicles   progress     Total
    2010                                          RM'000        RM'000          RM'000       RM'000           RM'000       RM'000       RM'000        RM'000    RM'000     RM'000     RM'000

    Cost
    At 1 January 2010
    As previously reported                           22,090          -                -      31,844           88,641        92,153       49,103       60,782      2,995        701    348,309
    Reclassified from other assets (Note 8)               -     11,580            5,694           -                -             -            -            -          -          -     17,274
    As restated                                      22,090     11,580            5,694      31,844           88,641        92,153       49,103       60,782      2,995        701    365,583
    Additions                                             -          -                -           -                -         1,647        1,338        2,501        437      3,559      9,482
    Disposals                                          (800)      (608)            (314)       (269)            (480)         (154)         (47)           -       (317)         -     (2,989)
    Write-off                                             -          -                -           -                -           (52)      (1,648)        (550)       (14)         -     (2,264)
    Reclassification                                      -          -                -           -                -            54           87          (36)         -       (105)         -
    Transfer to intangible assets (Note 16)               -          -                -           -                -             -            -            -          -     (2,538)    (2,538)
    Transfer to subsidiary                                -          -                -           -                -             -           (3)        (102)         -          -       (105)
    At 31 December 2010                              21,290     10,972            5,380      31,575           88,161        93,648       48,830       62,595      3,101      1,617    367,169

    Accumulated depreciation and impairment losses
    At 1 January 2010
    As previously reported                                -          -                -      11,954           17,612        75,760       32,023       45,156      2,606          -    185,111
    Reclassified from other assets (Note 8)               -      1,547            1,227           -                -             -            -            -          -          -      2,774
    As restated                                           -      1,547            1,227      11,954           17,612        75,760       32,023       45,156      2,606          -    187,885
    Charge for the financial year                         -        103              122         519            1,771         5,741        2,978        7,837        226          -     19,297
    Disposal                                              -        (57)             (17)        (89)             (74)         (137)         (37)           -       (317)         -       (728)
    Write-off                                             -          -                -           -                -           (36)      (1,511)        (482)       (14)         -     (2,043)
    Reclassification                                      -          -                -           -                -             -            -            -          -          -          -
    Transfer to subsidiary                                -          -                -           -                -             -            4           (6)         -          -         (2)
    At 31 December 2010                                   -      1,593            1,332      12,384           19,309        81,328       33,457       52,505      2,501          -    204,409

    Net book value as at 31 December 2010            21,290      9,379            4,048      19,191           68,852        12,320       15,373       10,090       600       1,617    162,760




                                                                                                       83
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

15 PROPERTY AND EQUIPMENT (continued)

                                                                                              Buildings         Buildings                    Office    Computer
                                                                 <---Leasehold land-->                on               on                equipment     equipment                Capital
                                                     Freehold     50 years        Less than    freehold         leasehold                       and           and     Motor     work-in
    The Bank                                              land     or more         50 years         land             land   Renovation     furniture     software   vehicles   progress     Total
    2009                                              RM'000      RM'000           RM'000       RM'000            RM'000      RM'000        RM'000        RM'000    RM'000     RM'000     RM'000

    Cost
    At 1 January 2009
    As previously reported                            25,633           -                -       33,980            89,187       89,260      47,520        62,447      3,441       5,116    356,584
    Reclassified from other assets (Note 8)                -      12,149            6,128            -                 -            -           -             -          -           -     18,277
    As restated                                       25,633      12,149            6,128       33,980            89,187       89,260      47,520        62,447      3,441       5,116    374,861
    Additions                                                                                        -                 -        4,788       3,621         2,397         12       2,120     12,938
    Disposals                                         (3,543)       (569)            (434)      (2,136)             (546)         (92)        (59)            -       (458)          -     (7,837)
    Write-off                                              -         -                               -                 -       (2,245)     (2,087)       (4,311)         -           -     (8,643)
    Reclassification                                       -         -                               -                 -          442         132           249          -        (823)         -
    Transfer to intangible assets (Note 16)                -         -                               -                 -            -           -             -          -      (5,712)    (5,712)
    Transfer to subsidiary                                 -         -                               -                 -            -         (24)            -          -           -        (24)
    At 31 December 2009                               22,090      11,580            5,694       31,844            88,641       92,153      49,103        60,782      2,995         701    365,583

    Accumulated depreciation and impairment losses
    At 1 January 2009
    As previously reported                                  -          -                -       12,560            15,895       72,444      30,043        40,350      2,383           -    173,675
    Reclassified from other assets (Note 8)                 -      1,459            1,158            -                 -            -           -             -          -           -      2,617
    As restated                                             -      1,459            1,158       12,560            15,895       72,444      30,043        40,350      2,383           -    176,292
    Charge for the financial year                           -        110              124          523             1,781        5,509       3,907         9,073        299           -     21,326
    Disposal                                                -        (22)             (55)      (1,129)              (64)         (92)        (52)            -        (76)          -     (1,490)
    Write-off                                               -          -                -            -                 -       (2,101)     (1,854)       (4,267)         -           -     (8,222)
    Transfer to subsidiary                                  -          -                -            -                 -            -         (21)            -          -           -        (21)
    At 31 December 2009                                     -      1,547            1,227       11,954            17,612       75,760      32,023        45,156      2,606           -    187,885

    Net book value as at 31 December 2009             22,090      10,033            4,467       19,890            71,029       16,393      17,080        15,626        389        701     177,698




                                                                                                           84
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      16   INTANGIBLE ASSETS

                                                                   Computer
                                                        Goodwill    Software     Total
           The Group                                     RM'000     RM'000     RM'000

           Cost
           At 1 January 2010                             133,430    104,501    237,931
           Additions                                           -      1,043      1,043
           Write-off                                           -       (618)      (618)
           Reclassification from property and
            equipment (Note 15)                                -      4,089      4,089
           At 31 December 2010                           133,430    109,015    242,445

           Less: Accumulated amortisation
           At 1 January 2010                                   -    (71,861)   (71,861)
           Amortised during the financial year                 -    (16,474)   (16,474)
           Write-off                                           -        326        326
           At 31 December 2010                                 -    (88,009)   (88,009)

           Net book value as at 31 December 2010         133,430     21,006    154,436

           Cost
           At 1 January 2009                             133,430     98,003    231,433
           Additions                                           -        786        786
           Reclassification from property and
            equipment (Note 15)                                -      5,712      5,712
           At 31 December 2009                           133,430    104,501    237,931

           Less: Accumulated amortisation
           At 1 January 2009                                   -    (51,359)   (51,359)
           Amortised during the financial year                 -    (20,502)   (20,502)
           At 31 December 2009                                 -    (71,861)   (71,861)

           Net book value as at 31 December 2009         133,430     32,640    166,070




                                                   85
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      16   INTANGIBLE ASSETS (continued)

                                                                   Computer
                                                        Goodwill    Software     Total
           The Bank                                      RM'000     RM'000     RM'000

           Cost
           At 1 January 2010                             137,323    101,973    239,296
           Additions                                           -      1,043      1,043
           Write-off                                           -       (618)      (618)
           Reclassification from property and
            equipment (Note 15)                                -      2,539      2,539
           At 31 December 2010                           137,323    104,937    242,260

           Less: Accumulated amortisation
           At 1 January 2010                                   -    (70,060)   (70,060)
           Amortised during the financial year                 -    (15,658)   (15,658)
           Write-off                                           -        326        326
           At 31 December 2010                                 -    (85,392)   (85,392)

           Net book value as at 31 December 2010         137,323     19,545    156,868

           Cost
           At 1 January 2009                             137,323     95,313    232,636
           Additions                                           -        948        948
           Reclassification from property and
            equipment (Note 15)                                -      5,712      5,712
           At 31 December 2009                           137,323    101,973    239,296

           Less: Accumulated amortisation
           At 1 January 2009                                   -    (50,061)   (50,061)
           Amortised during the financial year                 -    (19,999)   (19,999)
           At 31 December 2009                                 -    (70,060)   (70,060)

           Net book value as at 31 December 2009         137,323     31,913    169,236




                                                   86
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      16   INTANGIBLE ASSETS (continued)

           Goodwill

           The carrying amount of the Bank's goodwill have been allocated to the following business segments,
           which represents the Bank's cash-generating units ('CGUs'):

                                                                                          2010            2009
                                                                                        RM'000          RM'000

           Enterprise banking                                                            123,591        123,591
           Consumer banking                                                               13,732         13,732
                                                                                         137,323        137,323

           Goodwill is allocated to the Bank's CGU which are expected to benefits from the synergies of the
           acquisitions. For annual impairment testing purposes, the recoverable amount of the CGUs are
           determined based on value-in-use calculations using the cash flow projections based on the 2010
           financial budgets approved by the Directors, covering a period of 5 years. The cash flow beyond the
           fifth year are projected based on the assumption that the Year 5 operating cash flow will be generated
           by the respective CGUs at a growth rate of 5% (2009: 5%) to infinity.

           The cash flow projections are derived based on a number of key factors including past performance
           and management’s expectations of the market developments. The discount rates used are based on the
           pre-tax weighted average cost of capital plus an appropriate risk premium where applicable
           ('WACC'), at the date of assessment of the CGUs.

                                                            2010          2010              2009          2009
                                                        Enterprise    Consumer          Enterprise    Consumer
                                                          banking      banking            banking      banking
                                                               %            %                  %            %

           Pre-tax discount rate                             14.29          14.21          10.89          10.83

           No impairment charge was required for goodwill arising from all the business segments.
           Management views that any reasonable possible change to the assumptions applied is not likely to
           cause the recoverable amount of all the business segments to be lower than its carrying amount.




                                                        87
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      17   DEPOSITS FROM CUSTOMERS

                                                       The Group                 The Bank
           (i)    By type of deposit                2010        2009          2010        2009
                                                  RM'000      RM'000        RM'000     RM'000

                  Demand deposits                5,063,155    4,399,413    3,565,188    3,208,959
                  Savings deposits               1,400,535    1,030,103    1,142,332      824,129
                  Fixed deposits                19,913,674   15,883,534   16,780,143   13,670,901
                  Special investment deposits      641,673      706,577            -            -
                  Money market deposits            706,697      401,391      706,697      401,391
                  Negotiable instruments of
                  deposit ('NID')                3,119,514    4,019,301    3,119,514    3,709,674
                                                30,845,248   26,440,319   25,313,874   21,815,054


                                                       The Group                 The Bank
           (ii)   Maturity structure of fixed       2010        2009          2010        2009
                   deposit and NID                RM'000      RM'000        RM'000     RM'000

                  Due within six months         19,879,571   17,303,056   17,139,965   14,974,939
                  Six months to one year         3,106,639    2,500,457    2,716,939    2,311,196
                  One year to three years           24,026       74,881       20,738       70,847
                  Three years to five years         22,952       24,441       22,015       23,593
                                                23,033,188   19,902,835   19,899,657   17,380,575


                                                       The Group                 The Bank
           (iii) By type of customer                2010        2009          2010        2009
                                                  RM'000      RM'000        RM'000     RM'000

                  Government and statutory
                   bodies                        4,749,240    3,630,291    2,954,953    2,057,628
                  Business enterprise            9,744,742    9,286,822    8,158,218    7,881,652
                  Individuals                    5,003,875    3,969,168    4,568,915    3,607,557
                  Others                        11,347,391    9,554,038    9,631,788    8,268,217
                                                30,845,248   26,440,319   25,313,874   21,815,054




                                                88
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      18   DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS

                                                               The Group                       The Bank
                                                            2010         2009               2010        2009
                                                          RM'000      RM'000              RM'000     RM'000

           Licensed banks                                5,012,341       3,403,799      4,296,841       3,238,564
           Licensed investment banks                       226,253         695,015        226,253         592,250
           Bank Negara Malaysia                            308,350               -        308,350               -
           Other financial institutions                  1,058,404         924,849        903,978         690,414
                                                         6,605,348       5,023,663      5,735,422       4,521,228

           Maturity structure of deposits
           Due within six months                         6,537,162       5,019,439      5,667,236       4,517,004
           Six months to one year                           68,186           4,224         68,186           4,224
                                                         6,605,348       5,023,663      5,735,422       4,521,228


      19   RECOURSE OBLIGATION ON LOANS SOLD TO CAGAMAS BERHAD

           In the normal course of banking operations, the Bank sells loans to Cagamas Berhad with recourse at
           values equivalent to the unpaid principal balances of loans and advances due from the borrowers.

           The Bank is liable in respect of housing loans and hire purchase portfolio sold directly and indirectly
           to Cagamas Berhad, under the condition that the Bank undertakes to administer these loans on behalf
           of Cagamas Berhad and to buy back any loans which are regarded as defective based on an agreed
           prudential criteria. Such financing transactions and the obligations to buy back the loans are reflected
           as a liability on the statement of financial position.




                                                         89
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      20   OTHER LIABILITIES

                                                              The Group                      The Bank
                                                            2010        2009              2010        2009
                                                          RM'000     RM'000             RM'000     RM'000
           Bank Negara Malaysia and Credit
            Guarantee Corporation Funding
            programmes                                     43,002         71,768          43,002        71,768
           Margin and collateral deposits                  65,191         57,325          62,552        55,447
           Accrued interest payable                       167,391        123,487         147,627       113,562
           Sundry creditors                               188,983        169,985         172,182       154,416
           Clearing accounts                               44,616              -          27,706             -
           Defined contribution plan (Note a)              11,968          9,055          11,448         8,757
           Accrued employee benefits (Note b)                 125            125             105           105
                                                          521,276        431,745         464,622       404,055

           (a)   The Group and the Bank contributes to the Employee Provident Fund ('EPF'), the national
                 defined contribution plan. Once the contributions have been paid, the Group and the Bank has no
                 further payment obligations.

           (b)   This refers to the accruals for short-term employee benefits for leave entitlement. Under
                 employment contract, employees earn their leave entitlement which they are entitled to carry
                 forward and will lapse if not utilised in the following accounting period. Accruals are made for
                 the estimated liability for unutilised annual leave.


      21   DERIVATIVE FINANCIAL LIABILITIES

                                                       The Group and the Bank         The Group and the Bank
                                                                2010                           2009
                                                        Contract/                      Contract/
                                                         notional                       notional
                                                         amount      Liabilities         amount     Liabilities
                                                         RM'000        RM'000           RM'000        RM'000
           At fair value
           Foreign exchange derivatives:
            Currency forwards                             487,922         19,025         365,393          7,040
            Currency swaps                                340,846         21,087         473,155          7,698

           Interest rate derivatives:
            Interest rate swap                            919,193         17,448       1,039,363        26,946
                                                        1,747,961         57,560       1,877,911        41,684




                                                        90
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      22   AMOUNT DUE TO SUBSIDIARIES

           The amount due to subsidiaries is unsecured, interest-free and have no fixed terms of repayment.


      23   SUBORDINATED TERM LOAN

           On 10 March 2009, the Bank prepaid its 10 years subordinated term loan of RM500 million with
           Employee Provident Fund ('EPF'). On the same day a new 10 year subordinated loan amounting to
           RM300 million was taken with the Bank's Holding Company.

           The subordinated loan was constituted by Trust Deed dated 6 March 2009 and were issued on 10
           March 2009.

           The subordinated loan has a prepayment option on the first prepayment date or any interest payment
           date subsequent to the first prepayment date, giving the Bank the right, subject to Bank Negara
           Malaysia ('BNM') approval, to prepay the loan in whole or in part.

           Interest on subordinated loan payable semi annually.

           The nominal value and interest rate of the subordinated loan payable semi-annually are as follows:


           Value        :    RM300 million

           Interest rate :   Cost of Fund ('COF') plus 0.75% per annum for period of thirty six months from
                             the        issue date, COF plus 1.75% per annum for the next twenty four months
                             and thereafter COF plus 2.00% for the next 5 years.


           COF refers to rate determined by the lender on an interest determination date falling within the
           interest duration.




                                                        91
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      24   SHARE CAPITAL

                                                          Number of ordinary
                                                          shares of RM1 each          The Group and The Bank
                                                             2010          2009            2010         2009
                                                              '000          '000        RM'000       RM'000

           Authorised
           At beginning/end of the financial year        2,000,000      2,000,000       2,000,000      2,000,000

           Issued and fully paid
           At beginning/end of the financial year        1,439,285      1,439,285       1,439,285      1,439,285


      25   RESERVES

                                                               The Group                        The Bank
                                                            2010        2009                2010         2009
                                                          RM'000      RM'000              RM'000      RM'000

           Distributable
           - Retained profits                              522,171        332,003         411,831        249,121

           Non-distributable
           - Share premium                                 408,389        408,389         408,389        408,389
           - Investment fluctuation reserve                 54,249         (1,880)         45,795         (6,853)
           - Statutory reserve                             888,910        789,221         807,500        720,824
                                                         1,873,719      1,527,733       1,673,515      1,371,481

           Statutory reserve
           At beginning of the financial year              789,221        625,209         720,824        573,204
           Transfer from retained profits                   99,689        164,012          86,676        147,620
           At end of the financial year                    888,910        789,221         807,500        720,824

           (a)   The statutory reserves of the Group and the Bank are maintained in compliance with the
                 provisions of the Banking and Financial Institutions Act, 1989 and are not distributable as cash
                 dividends.

           (b)   Investment fluctuation reserves represent the unrealised gains or losses arising from the change
                 in fair value of investments classified as available-for-sale securities. The gains or losses are
                 transferred in the income statement upon disposal or when the securities become impaired.




                                                         92
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      26   INTEREST INCOME

                                                             The Group                The Bank
                                                          2010        2009         2010        2009
                                                        RM'000      RM'000       RM'000     RM'000

           Loans, advances and financing               1,190,417    1,071,593   1,190,417   1,071,593
           Money at call and deposit placements
             with financial institutions                108,787       77,082     117,260      83,714
           Financial assets/investments
           - Held-for-trading                                311          950         311         950
           - Available-for-sale                          116,495      103,621     116,347     103,621
           - Held-to-maturity                             15,522       21,705      15,522      19,708
           Interest rate derivatives                      48,701       53,393      48,701      53,393
           Others                                              -            -       3,408       2,413
                                                       1,480,233    1,328,344   1,491,966   1,335,392
           Amortisation of premium less
            accretion of discount                         31,602       12,744      31,602      12,744
                                                       1,511,835    1,341,088   1,523,568   1,348,136

           of which:
           Interest income earned on impaired loans,
            advances and financing                          (382)           -       (382)           -


      27   INTEREST EXPENSE

                                                             The Group                The Bank
                                                          2010        2009         2010        2009
                                                        RM'000      RM'000       RM'000     RM'000

           Deposits and placements of banks
            and other financial institutions            110,572       66,595     110,579      66,797
           Deposits from customers                      552,448      447,550     552,474     447,573
           Subordinated term loan                        10,633       13,036      10,633      13,036
           Loan sold to Cagamas Berhad                   14,559        6,477      14,559       6,477
           Interest rate derivatives                     66,152       70,354      66,152      70,354
           Others                                         6,484        1,099       6,484       1,099
                                                        760,848      605,111     760,881     605,336




                                                       93
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      28   ISLAMIC BANKING INCOME

                                                                            The Group
                                                                         2010        2009
                                                                       RM'000     RM'000

           Income derived from investment
            of depositors' funds and others                            287,402     242,605
           Income derived from investment
            of shareholders' funds                                       18,052     14,283
           Total distributable income                                   305,454    256,888
           Income attributable to depositors                           (127,671)   (94,251)
                                                                        177,783    162,637


      29   OTHER OPERATING INCOME

                                                     The Group               The Bank
                                                  2010        2009       2010         2009
                                                RM'000      RM'000     RM'000      RM'000

           Fee income
           Commission                               12,421   12,894     12,421      12,894
           Service charges and fees                 47,815   47,135     47,815      47,135
           Guarantee fees                           27,392   32,998     27,392      32,998
                                                    87,628   93,027     87,628      93,027

           Income from financial instruments
           Gain arising on financial assets
             held-for-trading:
           - net gain on disposal                    1,217    1,646       1,217      1,646
           - unrealised gains/(losses)                 137      (69)        137        (69)
                                                     1,354    1,577       1,354      1,577

           Gains on derivatives:
           - realised                                1,089      951       1,089        951
           - unrealised                              6,303   11,716       6,303     11,716
                                                     7,392   12,667       7,392     12,667




                                               94
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      29   OTHER OPERATING INCOME (continued)

                                                             The Group               The Bank
                                                          2010        2009        2010        2009
                                                        RM'000      RM'000      RM'000     RM'000

           Income from financial instruments
           (continued)

           Gain arising on financial investments
             available-for-sale:
           - net gain on disposal                           23,733     7,002     23,635      6,960
           - gross dividend income                               8       150          8        150
                                                            23,741     7,152     23,643      7,110

           Gain arising on financial investments
             held-to-maturity:
           - net gain on redemption                          2,053     1,633      2,053      1,633
           - gross dividend income                           2,901     5,704      2,901      5,704
                                                             4,954     7,337      4,954      7,337

           Other income
           Foreign exchange gains/(losses):
           - realised                                    82,790       71,810     82,790     71,810
           - unrealised                                  (9,549)     (10,072)    (9,549)   (10,072)
           Rental income                                  1,834        1,490      1,780      1,441
           Gain on sale of property and equipment           219        1,353        219      1,353
           Gain on disposal of foreclosed properties      6,330       18,918      6,330     18,918
           Dividend from subsidiaries                         -            -          -     16,102
           Other non-operating income                    20,658       16,669     20,363      9,014
                                                        102,282      100,168    101,933    108,566

                                                        227,351      221,928    226,904    230,284




                                                       95
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      30   OTHER OPERATING EXPENSES

                                                           The Group             The Bank
                                                        2010        2009     2010        2009
                                                      RM'000      RM'000   RM'000      RM'000

           Personnel costs (a)                        295,053    251,671   240,585    208,655
           Establishment costs (b)                    167,973    170,400   143,342    147,957
           Marketing expenses (c)                      11,553     34,637     9,633     29,844
           Administrative and general expenses (d)     56,332     49,779    46,585     42,576
                                                      530,911    506,487   440,145    429,032


           (a) Personnel costs

                                                           The Group             The Bank
                                                        2010        2009     2010        2009
                                                      RM'000      RM'000   RM'000      RM'000

           Wages, salaries and bonus                  228,427    196,676   186,516    163,605
           Defined contribution plan ('EPF')           35,770     30,810    29,223     25,560
           Other personnel costs                       30,856     24,185    24,846     19,490
                                                      295,053    251,671   240,585    208,655


           (b) Establishment costs

                                                           The Group             The Bank
                                                        2010        2009     2010        2009
                                                      RM'000      RM'000   RM'000      RM'000

           Rental of premises                          18,985     18,450    15,980     15,766
           Equipment rental                               741        599       718        567
           Repair and maintenance                      24,849     23,917    21,061     20,708
           Depreciation                                20,071     22,103    19,297     21,326
           Amortisation of intangible assets           16,474     20,502    15,658     19,999
           IT Consultancy fee                          54,659     51,292    47,348     45,071
           Dataline rental                              5,014      4,214     4,313      3,708
           Security services                            9,228      8,991     7,679      7,588
           Electricity, water and sewerage              8,118      7,943     6,858      6,848
           Other establishment costs                    9,834     12,389     4,430      6,376
                                                      167,973    170,400   143,342    147,957




                                                     96
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      30   OTHER OPERATING EXPENSES (continued)

           (c) Marketing expenses

                                                           The Group              The Bank
                                                        2010        2009      2010        2009
                                                      RM'000      RM'000    RM'000      RM'000

           Dealers' handling charges                           -   25,271         -     22,085
           Business promotion and advertisement            4,701    3,454     4,330      3,145
           Entertainment                                   2,048    1,347     1,819      1,150
           Travelling and accommodation                    3,511    3,259     2,490      2,452
           Other marketing expenses                        1,293    1,306       994      1,012
                                                          11,553   34,637     9,633     29,844


           (d) Administration and general expenses

                                                           The Group              The Bank
                                                        2010        2009      2010        2009
                                                      RM'000      RM'000    RM'000      RM'000

           Telecommunication expenses                      4,665    5,119     3,965      4,381
           Auditors' remuneration                          2,180    1,162     1,859        890
           Professional fees                              21,958   20,734    16,739     17,233
           Property and equipment written off                514      455       513        421
           Mail and courier charges                        4,456    3,942     3,798      3,411
           Stationery and consumables                      6,897    6,673     5,360      5,451
           Other administration and general
            expenses                                      15,662   11,694    14,351     10,789
                                                          56,332   49,779    46,585     42,576




                                                     97
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      30   OTHER OPERATING EXPENSES (continued)

           The above expenditure includes the following statutory disclosure:

                                                               The Group                       The Bank
                                                            2010        2009               2010        2009
                                                          RM'000      RM'000             RM'000      RM'000

           Directors' remuneration (Note 31)                  6,079         7,504           5,477      7,099
           Rental of premises                                18,985        18,450          15,980     15,766
           Equipment rental                                     741           599             718        567
           Auditors' remuneration
           - statutory audit fees                               707           672             569        535
           - under/(over) provision prior year                   12           (11)              -          -
           - audit related fees                                 264           125             168         81
           - non audit fees                                   1,197           376           1,122        274
           Depreciation of property and equipment            20,071        21,862          19,297     21,092
           Amortisation of intangible assets                 16,474        20,502          15,658     19,999
           Property and equipment written off                   514           455             513        421


      31   DIRECTORS' REMUNERATION

           The Directors of the Bank who have held office during the financial year are as follows:

           Executive Director

           Dato' Zulkiflee Abbas bin Abdul Hamid

           Non-Executive Directors

           Jen Tan Sri Dato' Seri Ismail bin Haji Omar (Bersara)
           Tan Sri Dato' Lodin bin Wok Kamaruddin (Reappointed as Director w.e.f. 4 October 2010)
           Dr. Raja Abdul Malek bin Raja Jallaludin
           Laksamana Madya Tan Sri Dato' Seri Ahmad Ramli bin Mohd Nor (Bersara)
           Dato' Sri Abdul Aziz bin Abdul Rahman
           Mr Aubrey Li Kwok-Sing
           Mr Brian Li Man-Bun (Alternate director to Mr Aubrey Li Kwok-Sing )
           Mr Stephen Charles Li
           Mr Eric Koh Thong Hau (Alternate director to Mr Stephen Charles Li )
           En. Mohd Suffian bin Haji Haron




                                                        98
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      31   DIRECTORS' REMUNERATION (continued)

           The aggregate amount of remuneration for the Directors of the Bank for the financial years were as
           follows:

                                                               The Group                       The Bank
                                                            2010        2009               2010        2009
                                                          RM'000      RM'000             RM'000      RM'000

           Executive Directors
           Salaries                                           1,260         1,542           1,260          1,542
           Bonuses                                            2,236         3,457           2,236          3,457
           Defined contribution plan ('EPF')                    569           828             569            828
           Other employee benefits                               62            71              62             71
           Benefits-in-kind                                      98           304              98            304

           Non-Executive Directors
           Fees                                               1,828         1,274           1,226            869
           Benefits-in-kind                                      26            28              26             28
           Directors' remuneration (Note 30)                  6,079         7,504           5,477          7,099

           Shariah Committee                                    188           156               -              -
                                                              6,267         7,660           5,477          7,099

           The remuneration attributable to the Managing Director/Chief Executive Officer of the Bank,
           including benefits-in-kind during the financial year amounted to RM4,225,000 (2009: RM6,202,000).




                                                         99
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      31   DIRECTORS' REMUNERATION (continued)

           A summary of the total remuneration of the Directors, distinguishing between Executive and Non-
           Executive Directors.

                                                                                  Directors'       * Other   Benefits-
           The Bank                                      Salaries     Bonuses          Fees    emoluments     in-kind     Total
           2010                                          RM'000       RM'000       RM'000          RM'000     RM'000     RM'000

           Executive Directors
           Dato' Zulkiflee Abbas bin Abdul Hamid          1,260           2,236           -           631         98      4,225
           Total                                          1,260           2,236           -           631         98      4,225

           Non-executive Directors
           Jen Tan Sri Dato' Seri Ismail bin Haji Omar
            (Bersara)                                          -              -        169             96         26       291
           Tan Sri Dato' Lodin bin Wok Kamaruddin              -              -         22              -          -        22
           Dr. Raja Abdul Malek bin Raja Jallaludin            -              -        202              -          -       202
           Laksamana Madya Tan Sri Dato' Seri
            Ahmad Ramli bin Mohd Nor (Bersara)                 -              -        163              -           -      163
           Dato' Sri Abdul Aziz bin Abdul Rahman               -              -        192              -           -      192
           Mr Aubrey Li Kwok-Sing                              -              -         91              -           -       91
           Mr Brian Li Man-Bun (Alternate director
            to Mr Aubrey Li Kwok-Sing )                        -              -          -              -           -        -
           Mr Stephen Charles Li                               -              -         88              -           -       88
           Mr Eric Koh Thong Hau (Alternate director
            to Mr Stephen Charles Li )                         -              -         10              -          -         10
           En. Mohd Suffian bin Haji Haron                     -              -        193              -          -        193
           Total                                               -              -      1,130             96         26      1,252

           Grand total                                    1,260           2,236      1,130            727        124      5,477




                                                                    100
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      31   DIRECTORS' REMUNERATION (continued)

           A summary of the total remuneration of the Directors, distinguishing between Executive and Non-
           Executive Directors (continued).

                                                                                       Directors'       * Other   Benefits-
           The Bank                                        Salaries       Bonuses           Fees    emoluments      in-kind     Total
           2009                                            RM'000         RM'000        RM'000          RM'000     RM'000     RM'000

           Executive Directors
           Dato' Zulkiflee Abbas bin Abdul Hamid              810                 90           -           197         78      1,175
           Dato' Sri Abdul Hamidy bin Abdul Hafiz             732              3,368           -           702        225      5,027
           Total                                            1,542              3,458           -           899        303      6,202

           Non-executive Directors
           Jen Tan Sri Dato' Seri Ismail bin Haji Omar
            (Bersara)                                            -                 -        129             96         28        253
           Dr. Raja Abdul Malek bin Raja Jallaludin              -                 -        116              -          -        116
           Laksamana Madya Tan Sri Dato' Seri
            Ahmad Ramli bin Mohd Nor (Bersara)                   -                 -        107              -           -       107
           Dato' Sri Abdul Aziz bin Abdul Rahman                 -                 -        112              -           -       112
           Mr Aubrey Li Kwok-Sing                                -                 -         79              -           -        79
           Mr Brian Li Man-Bun (Alternate director
            to Mr Aubrey Li Kwok-Sing )                          -                 -          -              -           -         -
           Mr Stephen Charles Li                                 -                 -         71              -           -        71
           Mr Eric Koh Thong Hau (Alternate director
            to Mr Stephen Charles Li )                           -                 -         15              -           -        15
           En. Mohd Suffian bin Haji Haron                       -                 -         38              -           -        38
           Datuk Razman Md. Hashim bin Che Din
            Md. Hashim (Retired as Director
            w.e.f 21 May 2009 )                                  -                 -         49              -           -        49
           Dato' Dr Lee Chee Kuon (Retired as
            Director w.e.f 21 May 2009 )                         -                 -         57              -          -         57
                                                                 -                 -        773             96         28        897

           Grand total                                      1,542              3,458        773            995        331      7,099

           * Executive Directors' Other emoluments include allowance and EPF




                                                                      101
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      32   ALLOWANCES FOR LOSSES ON LOANS, ADVANCES AND FINANCING

                                                                The Group                       The Bank
                                                             2010        2009               2010        2009
                                                           RM'000      RM'000             RM'000      RM'000

           Allowance for bad and doubtful debts
             on loans and financing:
           Specific allowance
           - made in the financial year                             -      322,570                -       297,631
           - written-back                                           -      (46,977)               -       (45,494)
           General allowance
           - made in the financial year                             -       37,182                -        30,378
           - written-back                                           -          (47)               -             -
           Individual impairment
           - made in the financial year                    198,023                -        172,716                -
           - written-back                                  (20,669)               -        (10,778)               -
           Collective impairment
           - made/(written-back)                               (3,044)            -        (16,409)               -
           Bad debts and financing
           - Recovered                                    (172,726)       (137,431)       (172,417)      (137,113)
           - Written-off                                    15,810          12,237          15,628         12,137
           Litigation losses arising from loans *           78,000               -          78,000              -
                                                            95,394         187,534          66,740        157,539

           * Litigation losses arising from loans made during the financial year is in relation to litigation claims
           against the Bank as stated in Note 43(a) and (b).




                                                         102
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      33   SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES

           Related parties that have transactions and their relationship with the Bank are as follows:

           Related parties                                             Relationship

           Lembaga Tabung Angkatan Tentera ('LTAT')                    Ultimate holding corporate body

           AFFIN Holdings Berhad ('AHB')                               Holding company

           Subsidiaries and associates of LTAT                         Subsidiary and associate companies of the
                                                                       ultimate holding corporate body

           Subsidiaries and associates of AHB as disclosed in its      Subsidiary and associate companies of the
           financial statements                                        holding company

           Subsidiaries of AFFIN Bank Berhad as disclosed in
           Note 12                                                     Subsidiaries

           Joint controlled entity as disclosed in Note 13             Joint controlled entity of subsidiary

           Voting shares in body corporate not less than 15% of
           votes                                                       Other related companies

           Key management personnel                                    The key management personnel of the Bank
                                                                       consist of:
                                                                       - Chief Executive Officer
                                                                       - Members of Senior Management team
                                                                         and the company secretary

           Related parties of key management personnel (deemed as - Close family members and dependents of
           related to the Bank)                                     key management personnel
                                                                       - Entities that are controlled, jointly
                                                                         controlled or significantly influenced by,
                                                                         or for which significant voting power in
                                                                         such entity resides with, directly or
                                                                         indirectly by key management personnel or
                                                                         its close family members


           Key management personnel includes the directors of the company in office during the year and their
           remuneration for the financial year are disclosed in Note 33(b).




                                                         103
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

33   SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (continued)

     (a) Related parties balances
                                                                                                                            Companies in which certain
                                                            Ultimate holding            Holding            Other related         Directors have
                                                             corporate body             company             companies          substantial interest
                                                          2010        2009       2010        2009       2010         2009         2010              2009
        Group                                           RM'000      RM'000     RM'000      RM'000     RM'000       RM'000       RM'000            RM'000

        Income
        Interest on private debt securities                  -             -        -             -    3,149        3,386             -               -
        Interest on advances                                 -             -        -             -   17,633       13,410             1               4
        Interest on deposits and placements with
          banks and other financial institutions             -             -        -             -      808        2,360             -               -
        Other income                                         -             -        -             -    5,813        4,153             -               -
                                                             -             -        -             -   27,403       23,309             1               4

        Expenditure
        Interest on fixed deposits                       4,421        2,331     5,269        4,801     4,766        7,019             -               -
        Interest on Negotiable Instruments of Deposit        -            -         -            -     1,432        3,165             -               -
        Interest on deposits and placements of banks
         and other financial institutions                    -            -         -            -        15           18             -               -
        Interest on special investment account             135          135         -            -       671          729             -               5
        Interest on money market deposits                  326        2,778       109           17     1,891        1,610             -               4
        Interest on repurchase agreements                    1            -         -            -         -            -             -               -
        Brokerage fees                                       -            -         -            -       526          467             -               -
        Rental                                             613          613         -            -    11,449       11,203             -               -
        Others                                               -            -    10,633        7,447     2,715        1,748             -               -
                                                         5,496        5,857    16,011       12,265    23,465       25,959             -               9




                                                                                  104
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

33   SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (continued)

     (a) Related parties balances (continued)
                                                                                                                                Companies in which certain
                                                              Ultimate holding             Holding             Other related         Directors have
                                                               corporate body              company              companies          substantial interest
                                                           2010         2009       2010         2009       2010          2009         2010              2009
        Group                                            RM'000       RM'000     RM'000       RM'000     RM'000        RM'000       RM'000            RM'000

        Amount due from
        Private debt securities                                -             -         -             -    66,107      415,281             -              -
        Advances                                               -             -         -             -   519,617      458,358             -            104
        Deposits and placement with banks and other
          financial institutions                              -             -      3,600        3,600    190,490      142,777             -              -
        Interest receivable on private debt securities        -             -          -           28      1,096        1,306             -              -
        Intercompany balances                                 -             -          -            -      2,745        1,058             -              -
        Security deposits                                    98           200         74            -      2,983        3,180             -              -
                                                             98           200      3,674        3,628    783,038    1,021,960             -            104

        Amount due to
        Demand and fixed deposits                        527,776      197,314    300,029      242,487    333,962      351,435             6              30
        Negotiable Instruments of Deposit                      -            -          -            -          -      150,000             -               -
        Deposits and placement of banks and other
          financial institutions                               -          -      300,000      300,000      4,157            -             -              -
        Special investment account                             -          -            -            -     17,394       44,515             -            453
        Money market deposits                                  -          -            -          315    153,008       40,337             -            138
        Interest payable                                     439          154      1,035          242      1,807        1,621             -              -
        Other payables                                         -          -           76          544         97           86             -              -
                                                         528,215      197,468    601,140      543,588    510,425      587,994             6            621




                                                                                     105
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)


NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

33   SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (continued)

     (a) Related parties balances (continued)
                                                                                                                                                      Companies which certain
                                                             Ultimate holding             Holding                                    Other related        Directors have
                                                              corporate body             company                 Subsidiaries         companies         substantial interest
                                                           2010       2009        2010           2009     2010         2009       2010        2009         2010            2009
         Bank                                            RM'000     RM'000      RM'000         RM'000   RM'000       RM'000     RM'000      RM'000      RM'000          RM'000

         Income
         Interest on special investment account               -           -          -              -    7,031         4,487         -            -            -             -
         Interest on private debt securities                  -           -          -              -        -             -     3,149        3,386            -             -
         Interest on advances                                 -           -          -              -        -             -    16,823       12,891            1             4
         Interest on deposits and placements with
           banks and other financial institutions             -           -          -              -    1,404         2,145       808        2,360            -             -
         Other income                                         -           -          -              -   63,031        51,712     5,750        4,154            -             -
                                                              -           -          -              -   71,466        58,344    26,530       22,791            1             4

         Expenditure
         Interest on short term advances                      -           -          -              -       7             34        15           17            -             -
         Interest on fixed deposits                       4,324       2,331      5,269          4,801      23             22     4,649        6,744            -             -
         Interest on Negotiable Instruments of Deposit        -           -          -              -       -              -     1,432        3,165            -             -
         Interest on money market deposits                  326       2,778        109             17       -            333     1,891        1,610            -             4
         Brokerage fees                                       -           -          -              -       -              -       497          445            -             -
         Rental                                             613         613          -              -     352            384    11,449       11,203            -             -
         Others                                               -           -     10,633          7,447      94              -     2,410        1,602            -             -
                                                          5,263       5,722     16,011         12,265     476            773    22,343       24,786            -             4




                                                                                         106
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

33   SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (continued)

     (a) Related parties balances (continued)
                                                                                                                                                                       Companies which certain
                                                                   Ultimate holding               Holding                                          Other related           Directors have
                                                                   corporate body                 company                  Subsidiaries             companies            substantial interest
                                                                2010         2009        2010             2009     2010          2009         2010           2009           2010            2009
         Bank                                                 RM'000       RM'000      RM'000           RM'000   RM'000        RM'000       RM'000         RM'000        RM'000          RM'000

         Amount due from
         Special investment account                                  -           -            -              -   330,197       176,000            -             -                 -             -
         Private debt securities                                     -           -            -              -         -             -       66,106       415,281                 -             -
         Advances                                                    -           -            -              -         -             -      506,113       444,878                 -           104
         Deposits and placements with banks and
          other financial institutions                              -           -        3,600           3,600   144,964       457,270      190,490       142,777                 -             -
         Interest receivable                                        -           -            -              28     5,202         3,390        1,096         1,306                 -             -
         Intercompany balances                                      -           -            -               -   184,738       231,286            -             -                 -             -
         Security deposits                                         98         200           74               -         -             -        2,981         2,878                 -             -
                                                                   98         200        3,674           3,628   665,101       867,946      766,786     1,007,120                 -           104

         Amount due to
         Demand and fixed deposits                           526,710      196,725      300,029      242,487        1,606         2,061      314,925       333,237                5              30
         Negotiable Instruments of Deposit                         -            -            -            -            -             -            -       150,000                -               -
         Deposits and placement of banks and other
           financial institutions                                  -            -      300,000      300,000            -       102,765        4,157              -               -              -
         Money market deposits                                     -            -            -          315            -             -      153,008        40,337                -            138
         Interest payable                                        439          154        1,035          242            -             3        1,776         1,524                -              -
         Intercompany balances                                     -            -            -            -       47,954        47,731            -           -                  -              -
         Other payables                                            -            -           74          544            -             -           91             83               -              -
                                                             527,149      196,879      601,138      543,588       49,560       152,560      473,957       525,181                5            168

          The significant related party transactions and balances described above were carried out on terms and conditions obtainable on transactions with unrelated parties except for amount due
          from subsidiaries of RM136.8 million (2009: amount due from subsidiaries of RM183.6 million). Amount due from/(to) subsidiaries are unsecured, interest free and have no fixed
          terms of repayment.




                                                                                                  107
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      33   SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (continued)

           (b)   Key management personnel compensation

                 The remuneration of key management personnel of the Group and the Bank during the year are as
                 follows:

                                                                The Group                       The Bank
                                                             2010        2009               2010        2009
                                                           RM'000      RM'000             RM'000      RM'000

                 Short-term employment benefits
                 Salaries                                      6,618         6,474           5,706     5,694
                 Bonuses                                       8,695         9,257           7,683     8,472
                 Defined contribution plan ('EPF')             2,594         2,699           2,265     2,427
                 Other employee benefits                       1,038         1,039             890       893
                 Benefits-in-kind                                445           550             383       463
                                                              19,390        20,019          16,927    17,949

                 Included in the above table are Directors' remuneration as disclosed in Note 31.




                                                        108
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      34   TAXATION

                                                             The Group                      The Bank
                                                          2010        2009              2010        2009
                                                        RM'000      RM'000            RM'000      RM'000
           The taxation charge arising in
            Malaysia for the financial year
            Current tax                                   66,627        107,748         56,599         92,183
            Under/(over) provision in prior year          19,223           (183)        14,271           (508)
            Deferred tax (Note 10)                        50,191         (3,478)        57,219         (1,776)
           Tax expense for the year                      136,041        104,087        128,089         89,899


                                                               The Group                      The Bank
                                                            2010        2009              2010        2009
                                                              %           %                 %           %

           Statutory tax rate in Malaysia                   25.00         25.00          25.00          25.00
           Tax effect in respect of:
           Non allowable expenses                            1.94          0.99            2.10          0.29
           Non taxable income                               (0.17)         0.18           (0.18)        (0.44)
           Utilisation of previously
             unrecognised tax losses                        (0.01)         (0.12)             -             -
           Effect of different tax rate                     (0.51)         (1.10)         (0.56)        (1.22)
           Tax savings arising from income exempt
             from tax for International Currency
             Business Unit (ICBU)                            0.54         (0.29)             -              -
           Under/(over) accrual in prior years               3.68         (0.04)          3.01          (0.13)
           Others                                           (4.40)        (0.14)         (2.39)         (0.16)
           Average effective tax rate                       26.07         24.48          26.98          23.34

           Tax savings of the Group during the financial year due to the recognition of previously unrecognised
           tax losses amounted to RM62,000 (2009: RM516,000).




                                                      109
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      35   EARNINGS PER SHARE

           The basic and fully diluted earnings per ordinary share for the Group and the Bank have been
           calculated based on the net profit attributable to equity holders of the Group and the Bank of
           RM381,237,000 (2009: RM317,752,000) and RM346,705,000 (2009: RM295,240,000) respectively.
           The weighted average number of shares in issue during the financial year of 1,439,285,000 (2009:
           1,439,285,000) is used for the computation.


      36   DIVIDEND PER SHARE

           Dividends declared or proposed for the financial year are as follows:

                                                       The Group and The Bank             The Group and The Bank
                                                                 2010                               2009
                                                            Gross    Amount of                Gross     Amount of
                                                          dividend    dividend              dividend     dividend
                                                         per share    net of tax            per share    net of tax
                                                               sen     RM'000                     sen     RM'000

           Ordinary shares
           Interim dividend paid                               5.28         57,000              6.83        73,727
           Proposed final dividend                             5.00         71,964              5.00        53,973
           Dividends in respect of the financial
            year                                              10.28       128,964              11.83       127,700



           At the forthcoming Annual General Meeting, a final tax exempt dividend in respect of the current
           financial year of 5 sen per share amounting to RM71,964,000 will be proposed for shareholder's
           approval. These financial statements do not reflect this final dividend which will be accounted for in
           the shareholder's equity as an appropriation of retained profits in the financial year ending 31
           December 2010 when approved by the shareholder.

           Dividends recognised as distribution to ordinary equity holders of the Bank:

                                                       The Group and The Bank             The Group and The Bank
                                                                 2010                               2009
                                                            Gross    Amount of                Gross     Amount of
                                                          dividend    dividend              dividend     dividend
                                                         per share    net of tax            per share    net of tax
                                                               sen     RM'000                     sen     RM'000
           Ordinary shares
           Interim dividend                                    5.28        57,000               6.83        73,727
           Final dividend                                      5.00        53,973               2.00        21,589
                                                              10.28       110,973               8.83        95,316




                                                        110
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      37    COMMITMENTS AND CONTINGENCIES

            In the normal course of business, the Group and the Bank make various commitments and incurs
            certain contingent liabilities with legal recourse to their customers. No material losses are anticipated
            as a result of these transactions.

            The commitments and contingencies consist of:

                                                              The Group                                            The Group
                                                                2010                                                 2009
                                                          Positive                                             Positive
                                                         fair value      Credit       Risk-                   fair value       Credit        Risk-
                                            Principal of derivative   equivalent   weighted      Principal of derivative   equivalent     weighted
                                             amount       contracts    amount *    amount *       amount       contracts    amount *      amount *
                                             RM'000        RM'000       RM'000      RM'000        RM'000        RM'000       RM'000        RM'000

           Direct credit substitutes         408,608             -     408,608      299,520      495,326              -        495,326    470,810
           Transaction-related
             contingent items               2,387,456            -    1,193,728    1,022,073    2,648,189             -    1,324,094     1,106,247
           Short-term self-liquidating
             trade-related contingencies    1,232,752            -     246,551      140,554     1,401,193             -        280,239    120,271
           Irrevocable commitments
             to extend credit:             10,310,068            -             -           -    9,188,099             -              -           -
           - maturity less than one year    6,062,519            -             -           -    5,231,059             -              -           -
           - maturity more than one year    4,247,549            -             -           -    3,957,040             -              -           -
           Foreign exchange related
             contracts:                     2,416,479      36,412         70,499     28,169     2,214,845       21,663          56,193     24,692
           - less than one year             2,215,359      25,842         50,821     19,952     2,111,158       18,440          45,883     20,345
           - one year to less than
               five years                    201,120       10,570         19,678      8,217      103,687         3,223          10,310      4,347

           Interest rate related
             contracts:                     1,495,313        9,743        71,106     16,781     1,414,998        8,064          57,854     14,749
           - less than one year                93,784            -            14          3       385,000            -             910        184
           - one year to less than
               five years                     956,256        2,664       32,602        7,936      589,721        3,981        18,380         6,655
           - more than five years             445,273        7,079       38,490        8,842      440,277        4,083        38,564         7,910
           Unutilised credit card lines       594,104            -      118,821       89,026      555,478            -       111,096        83,248
                                           18,844,780       46,155    2,109,313    1,596,123   17,918,128       29,727     2,324,802     1,820,017




                                                                          111
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      37   COMMITMENTS AND CONTINGENCIES (continued)

                                                              The Bank                                              The Bank
                                                                2010                                                  2009
                                                          Positive                                              Positive
                                                         fair value      Credit        Risk-                   fair value       Credit       Risk-
                                            Principal of derivative   equivalent    weighted      Principal of derivative   equivalent    weighted
                                             amount       contracts    amount *     amount *       amount       contracts    amount *     amount *
                                             RM'000        RM'000       RM'000       RM'000        RM'000        RM'000       RM'000       RM'000

           Direct credit substitutes         382,080             -       382,080     280,656      444,676              -       444,676    437,598
           Transaction-related
             contingent items               2,189,031            -    1,094,516      928,260     2,480,918             -    1,240,459    1,022,917
           Short-term self-liquidating
             trade-related contingencies     546,276             -       109,255     109,027      324,530              -        64,906     63,881
           Irrevocable commitments
             to extend credit:              9,198,609            -              -           -    8,325,174             -             -           -
           - maturity less than one year    5,360,954            -              -           -    4,651,975             -             -           -
           - maturity more than one year    3,837,655            -              -           -    3,673,199             -             -           -
           Foreign exchange related
             contracts:                     2,416,479       36,412        70,499      28,169     2,214,845       21,663         56,193     24,692
           - less than one year             2,215,359       25,842        50,821      19,952     2,111,158       18,440         45,883     20,345
           - one year to less than
               five years                    201,120        10,570        19,678       8,217      103,687         3,223         10,310      4,347
           Interest rate related
             contracts:                     1,495,313        9,743        71,106      16,781     1,414,998        8,064         57,854     14,749
           - less than one year                93,784            -            14           3       385,000            -            910        184
           - one year to less than
               five years                     956,256       2,664        32,602         7,936      589,721        3,981        18,380        6,655
           - more than five years             445,273       7,079        38,490         8,842      440,277        4,083        38,564        7,910
           Unutilised credit card lines       594,104           -       118,821        89,026      555,478            -       111,096       83,248
                                           16,821,892      46,155     1,846,277     1,451,919   15,760,619       29,727     1,975,184    1,647,085



           *      The credit equivalent amount and risk-weighted amount is arrived at using the credit conversion
                  factors as per Bank Negara Malaysia's revised Risk Weighted Capital Adequacy Framework
                  ("RWCAF") and Capital Adequacy for Islamic Banks ("CAFIB") guidelines.




                                                                          112
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      37   COMMITMENTS AND CONTINGENCIES (continued)

           FINANCIAL DERIVATIVES

           Financial derivatives are financial instruments whose characteristics are derived from the underlying
           assets, or from interest and exchange rates or indices. These include forwards, swaps, futures and
           options. The following outlines the nature and terms of the most common types of derivatives used by
           the Bank:

           Exchange rate contracts

           Forward foreign exchange contracts are agreements to buy or sell fixed amounts of currency at
           agreed rates of exchange on a specified future date.

           Cross currency swaps are agreements to exchange, and on termination of the swap, re-exchange
           principal amounts denominated in different currencies. Cross currency swaps may involve the
           exchange of interest payments in one specified currency for interest payments in another specified
           currency for a specified period.

           Currency futures are typically exchange-traded agreements to buy or sell standard amounts of a
           specified currency at an agreed exchange rate on a standard future date.

           Currency options give the buyer on payment of a premium, the right, but not the obligation, to buy or
           sell specified amounts of currency at agreed rates of exchange on or before a specified future date.

           Interest rate contracts

           Interest rate swaps involve the exchange of interest obligations with counterparties for a specified
           period without exchanging the underlying (or notional principal).

           Interest rate caps and floors give the buyer the ability to fix the maximum or minimum rate of
           interest. There is no facility to deposit of draw down funds; instead the writer pays to the buyer the
           amount by which the market rate exceeds or is less than the cap rate or the floor rate respectively. A
           combination of an interest rate cap and floor is known as an interest rate collar.

           Forward rate agreements give the buyer the ability to determine the underlying rate of interest for a
           specified period commencing on a specified future date (the settlement date). There is no exchange of
           principal and settlement is effected on the settlement date. The settlement amount is calculated by
           reference to the difference between the contracted rate and the market rate prevailing on the
           settlement date.




                                                       113
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      37   COMMITMENTS AND CONTINGENCIES (continued)

           Swaptions give the buyer the right, but not the obligation, to enter an interest rate swap as either the
           payer or receiver of the fixed side of the swap.

           The table below analyses the contractual or underlying principal amounts of derivative financial
           instruments held or issued. In addition, they also set out the corresponding gross positive credit
           equivalent of the derivative financial instruments.

                                                        The Group and The Bank           The Group and The Bank
                                                                 2010                             2009
                                                                         Credit                            Credit
                                                          Principal equivalent             Principal   equivalent
                                                            amount     amount                amount      amount
                                                           RM'000       RM'000              RM'000        RM'000

           Foreign exchange contracts
           Forward contracts                                728,471          15,115         704,000         12,554
           Swaps                                          1,688,004          55,384       1,510,845         43,639

           Interest rate contracts
           Swaps                                          1,495,313          71,106       1,414,998         57,854



           Foreign exchange related contracts and interest rate related contracts are subject to market risk and
           credit risk.



      38   FINANCIAL RISK MANAGEMENT

           (i)   Credit Risk

                 Credit risk is the potential financial loss resulting from the failure of the customer or
                 counterparty to settle the financial and contractual obligations to the Bank. Credit risk emanates
                 mainly from loans, advances and financing, loan commitments arising from such lending
                 activities, as well as through financial transactions with counterparties including interbank
                 money market activities, derivative instruments used for hedging and debt securities.

                 The management of credit in the Bank is governed by a set of credit policies approved by the
                 Board of Directors. Approval authorities are delegated to Senior Management and Group
                 Management Loan Committee ('GMLC') to implement the credit policies and ensure sound
                 credit granting standards.




                                                         114
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (i)   Credit Risk (continued)

                 An independent Group Risk Management ('GRM') function with a direct reporting line to
                 Board Risk Management Committee ('BRMC') is in place to ensure adherence to risk standards
                 and discipline. Portfolio management risk reports are submitted regularly to BRMC.

                 Lending guidelines and credit strategies are formulated and incorporated in the Annual Credit
                 Plan. New businesses are governed by the risk acceptance criteria and customer qualifying
                 criteria/fitness standards prescribed in the Credit Plan. The Credit Plan is reviewed at least
                 annually and approved by the BRMC.


                 Credit Risk measurement

                 Loans, advances and financing


                 Credit evaluation is the process of analyzing the creditworthiness of the prospective customer
                 against the Bank’s underwriting criteria and the ability of the Bank to make a return
                 commensurate to the level of risk undertaken. A critical element in the evaluation process is
                 the assignment of a credit risk grade to the counterparty. This assists in the risk assessment
                 and decision making process. The Bank has developed internal rating models to support the
                 assessment and quantification of credit risk.


                 For consumer mass market products, statistically developed application scorecards are used by
                 the Business to assess the risks associated with the credit application. The scorecards are used
                 as a decision support tool at loan origination.


                 Over-the-Counter ('OTC') Derivatives

                 The OTC Derivatives credit exposure is computed using the Current Exposure Method. Under
                 the Current Exposure method, computation of credit equivalent exposure for interest rate and
                 exchange rate related contracts is derived from the summation of the two elements; the
                 replacement costs (obtained by marking-to-market) of all contracts and the potential future
                 exposure of outstanding contracts (Add On charges depending on the specific remaining tenor
                 to maturity).




                                                        115
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (i)   Credit Risk (continued)

                 Risk limit control and mitigation policies

                 The Bank employs various policies and practices to control and mitigate credit risk.

                 Lending limits

                 The Bank establishes internal limits and related lending guidelines to manage large exposures
                 and avoid undue concentration of credit risk in its credit portfolio. The limits include single
                 customer groupings, connected parties, and geographical and industry segments. These risks
                 are monitored regularly and the limits reviewed annually or sooner depending on changing
                 market and economic conditions.

                 The credit risk exposure for derivative and loan books is managed as part of the overall lending
                 limits with customers together with potential exposure from market movements.


                 Collateral

                 Credits are established against borrower’s capacity to repay rather than rely solely on security.
                 However, collateral may be taken to mitigate credit risk. The main collateral types accepted
                 and given value by the Bank are:

                 - Mortgage over residential properties;
                 - Charges over commercial real estate or vehicles financed;
                 - Charges over business assets such as business premises, inventory and accounts receivable; and
                 - Charges over financial instruments such as marketable equities.


                 Financing covenants (for credit related commitments and loans books)

                 The primary purpose of these instruments is to ensure that funds are available to a customer
                 when required. Guarantees and standby letters of credit carry the same credit risk as loans.
                 Documentary and commercial letters of credit are collaterised by the underlying shipments of
                 goods to which they relate and therefore carry less risk than a direct loan.




                                                        116
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (i)   Credit Risk (continued)

                 Risk limit control and mitigation policies (continued)

                 Financing covenants (for credit related commitments and loans books)(continued)

                 Commitment to extend credit represents unutilized portion of approved credit in the form of
                 loans, guarantees or letters of credit. In terms of credit risk, the Bank is potentially exposed to
                 loss in an amount equal to the total unutilized commitments. However, the potential amount of
                 loss is less than the total unutilized commitments, as most commitments to extend credit are
                 contingent upon customers maintaining specific minimum credit standards.

                 The Bank monitors the term to maturity of credit commitments because longer-term
                 commitments generally have a greater degree of credit risk than short-term commitments.


                 Credit Risk monitoring

                 Retail credits are actively monitored and managed on a portfolio basis by product type. A new
                 collection management system has been implemented with a dedicated team in place to
                 promptly identify, monitor and manage delinquent accounts at early stages of delinquency.

                 Corporate credits and large individual accounts are reviewed by the Business Units at least
                 once a year against updated information. This is to ensure that the credit grades remain
                 appropriate and detect any signs of weaknesses or deterioration in the credit quality. Remedial
                 action is taken where evidence of deterioration exists.

                 Early Alert Process is in place as part of a means to pro-actively identify, report and manage
                 deteriorating credit quality. Watchlist accounts are closely reviewed and monitored with
                 corrective measures initiated to prevent them from turning non-performing. As a rule,
                 Watchlist accounts are either worked up or worked out within a period of twelve months.


                 Credit Risk culture

                 The Bank recognizes that learning is a continuous journey and is committed to enhance the
                 knowledge and required skills set of its staff. It places strong emphasis in creating and
                 enhancing risk awareness in the organization.

                 For effective and efficient staff learning, the Bank has implemented an E–Learning Program
                 with an online Learning Management System ('LMS'). The LMS provides staff with a
                 progressive self-learning alternative at own pace.




                                                         117
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (i)   Credit Risk (continued)

                 Credit Risk culture (continued)

                 Group Risk Management commenced an Internal Credit Certification ('ICC') Programme for
                 both Business Banking and Consumer Credit in July 2009 and August 2009 respectively. In
                 October 2010, the Bank introduced ICC-Market Risk with the Diagnostic Assessment
                 conducted through the LMS.

                 The aim of the ICCs is to assist the core credit related group of personnel in the Bank achieve a
                 minimum level of knowledge and analytical skills required to make sound corporate and
                 commercial loans to customers. It is envisaged that the core credit related group of personnel
                 would all be certified within 2 to 3 years.


                 Maximum exposure to credit risk

                 The following table presents the Group and the Bank’s maximum exposure to credit risk of on-
                 balance sheet and off-balance sheet financial instruments, without taking into account of any
                 collateral held or other credit enhancements. For on-balance sheet assets, the exposure to credit
                 risk equals their carrying amount. For contingent liabilities, the maximum exposure to credit risk
                 is the maximum amount that the Group and the Bank would have to pay if the obligations of the
                 instruments issued are called upon. For credit commitments, the maximum exposure to credit
                 risk is the full amount of the undrawn credit facilities granted to customers.


                                                                                        The Group   The Bank
                                                                                             2010       2010
                                                                                           Maximum exposure
                                                                                         RM'000      RM'000
                 Credit risk exposures of on-balance sheet assets:
                 Cash and short-term funds (exclude cash in hand)                        8,523,985     5,996,729
                 Deposits and placements with banks and other financial institutions       192,335       559,533
                 Financial assets held-for-trading                                         149,853       149,853
                 Financial investments available-for-sale (exclude equity securities)    5,659,343     4,325,332
                 Financial investments held-to-maturity                                    431,159       431,159
                 Loans, advances and financing                                          26,370,548    22,762,471
                 Other assets                                                               68,348        56,421
                 Derivative financial assets                                                46,155        46,155
                                                                                        41,441,726    34,327,653




                                                        118
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (i)   Credit Risk (continued)

                 Maximum exposure to credit risk (continued)

                                                                                       The Group   The Bank
                                                                                            2010       2010
                                                                                          Maximum exposure
                                                                                        RM'000      RM'000

                 Credit risk exposure of off-balance sheet items:
                 Financial guarantees                                                   1,602,338      1,476,596
                 Loan commitments and other credit related commitments                    506,976        369,681
                                                                                        2,109,314      1,846,277

                 Total maximum credit risk exposure                                    43,551,040     36,173,930


                 Cash and short-tem funds
                 Substantially all balances are held with BNM. There is limited credit risk in relation to balances
                 at BNM.

                 Other assets
                 There is limited credit risk in relation to items in the course of collection through the clearing
                 system from other banks.

                 Off-balance sheet
                 The Group and the Bank apply fundamentally the same risk management policies for off-balance
                 sheet risks as it does for its on-balance sheet risks. In the case of commitments to lend,
                 customers and counterparties will be subject to the same credit management policies as for
                 loans, advances and financing. Collateral may be sought depending on the strength of the
                 counterparty and the nature of the transaction.




                                                        119
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

38 FINANCIAL RISK MANAGEMENT (continued)

   (i)   Credit Risk (continued)

         Credit risk concentrations

         Credit risk is the risk of financial loss from the failure of customers to meet their obligations. Exposure to credit risk is managed through portfolio management. The credit portfolio's risk
         profiles and exposures are reviewed and monitored regularly to ensure that an acceptable level of risk diversification is maintained. Exposure to credit risk is also managed in part by
         obtaining collateral security and corporate and personal guarantees.

         The credit risk concentrations of the Group and the Bank, by industry concentration, are set out in the following tables:


                                                                    Deposits and
                                                                     placements Financial
                                                                     with banks     assets   Financial   Financial                                                                 On
                                                       Cash and        and other     held- Investments Investments        Loans,                         Derivative           balance Commitments
                                                      short-term        financial     for-   available-    held-to- advances and                  Other   financial             sheet          and
         The Group                                         funds     institutions trading      for-sale   maturity     financing                  assets     assets              total contingencies
         2010                                           RM'000           RM'000 RM'000        RM'000      RM'000         RM'000                  RM'000    RM'000             RM'000        RM'000

         Agriculture                                            -              -            -             -              -         476,425             -              -       476,425          31,535
         Mining and quarrying                                   -              -            -             -              -         373,899             -              -       373,899           1,053
         Manufacturing                                          -              -            -        20,268        156,498       1,743,308         1,279              -     1,921,353         207,361
         Electricity, gas and water                             -              -            -        92,741              -         192,953           993              -       286,687              57
         Construction                                           -              -            -             -        207,108       2,274,981             -              -     2,482,089         652,610
         Real estate                                            -              -            -             -              -       2,323,155             -              -     2,323,155         185,829
         Transport, storage and communication                   -              -            -        29,921              -         921,590           301              -       951,812          26,231
         Balance carried forward                                -              -            -       142,930        363,606       8,306,311         2,573              -     8,815,420       1,104,676




                                                                                                  120
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

38 FINANCIAL RISK MANAGEMENT (continued)

   (i)   Credit Risk (continued)

         Credit risk concentrations (continued)

                                                                 Deposits and
                                                                  placements Financial
                                                                  with banks     assets   Financial   Financial                                                      On
                                                    Cash and        and other     held- Investments Investments        Loans,                   Derivative      balance Commitments
                                                   short-term        financial     for-   available-    held-to- advances and            Other   financial        sheet          and
         The Group                                      funds     institutions trading      for-sale   maturity     financing            assets     assets         total contingencies
         2010                                        RM'000           RM'000 RM'000        RM'000      RM'000         RM'000            RM'000    RM'000        RM'000        RM'000

         Balance brought
          forward                                            -             -           -       142,930       363,606      8,306,311      2,573          -     8,815,420     1,104,676

         Finance, insurance and business
          services                                   247,088        192,335     149,853      2,157,267         27,000     4,346,670     25,815     46,155     7,192,183      241,832
         Government and government
          agencies                                  8,276,897              -           -     3,359,146         16,186       75,394      31,357          -    11,758,980      135,825
         Wholesale and retail trade, restaurants
          and hotels                                        -             -           -              -        24,037      1,198,629          -          -     1,222,666       140,172
         Others                                             -             -           -              -           330     12,443,544      8,603          -    12,452,477       486,808
         Total assets                               8,523,985       192,335     149,853      5,659,343       431,159     26,370,548 *   68,348     46,155    41,441,726     2,109,313

         * Not inclusive of collective allowance amounting to RM396 million.

         Risk concentrations for commitments and contingencies are based on the credit equivalent balances in Note 37.




                                                                                             121
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

38 FINANCIAL RISK MANAGEMENT (continued)

   (i)   Credit Risk (continued)

         Credit risk concentrations (continued)

                                                                 Deposits and
                                                                  placements     Financial
                                                                  with banks         assets     Financial      Financial                                             On
                                                     Cash and       and other         held-   Investments    Investments       Loans,            Derivative      balance Commitments
                                                    short-term       financial         for-     available-       held-to- advances and    Other   financial        sheet           and
         The Group                                       funds    institutions     trading        for-sale      maturity     financing    assets     assets         total contingencies
         2009                                         RM'000          RM'000      RM'000         RM'000         RM'000         RM'000    RM'000    RM'000        RM'000        RM'000

         Agriculture                                        -               -            -         4,977             -        526,897       22           -       531,896        3,580
         Mining and quarrying                               -               -            -             -             -        254,488        -           -       254,488       19,107
         Manufacturing                                      -               -            -        49,922       150,113      1,659,506      474           -     1,860,015      205,868
         Electricity, gas and water                         -               -            -        35,804             -        154,709      415           -       190,928          563
         Construction                                       -               -            -        28,713       213,689      2,317,296      323           -     2,560,021      709,607
         Real estate                                        -               -            -             -             -      1,444,967        -           -     1,444,967       95,128
         Transport, storage and communication               -               -            -             -             -        924,177        -           -       924,177       35,268
         Finance, insurance and business
          services                                   409,900        142,777      150,000      2,159,402         37,000      3,295,521    28,642     29,727     6,252,969      388,271
         Government and government
          agencies                                 5,623,891                -            -    3,299,875         27,124        93,261     26,801          -     9,070,952       15,719
         Wholesale and retail trade, restaurants
          and hotels                                       -              -            -         30,083         27,937     1,161,088       164           -     1,219,272       84,394
         Others                                            -              -            -              -            330    10,492,461   166,505           -    10,659,296      767,297
         Total assets                              6,033,791        142,777      150,000      5,608,776        456,193    22,324,371 * 223,346 *    29,727    34,968,981    2,324,802

         * Not inclusive of general allowance amounting to RM298 million.

                                                                                                                 37.
         Risk concentrations for commitments and contingencies are based on the credit equivalent balances in Note




                                                                                              122
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

38 FINANCIAL RISK MANAGEMENT (continued)

   (i)   Credit Risk (continued)

         Credit risk concentrations (continued)

                                                                 Deposits and
                                                                  placements Financial
                                                                  with banks     assets   Financial   Financial                                                      On
                                                    Cash and        and other     held- Investments Investments        Loans,                   Derivative      balance Commitments
                                                   short-term        financial     for-   available-    held-to- advances and            Other   financial        sheet          and
         The Bank                                       funds     institutions trading      for-sale   maturity     financing            assets     assets         total contingencies
         2010                                        RM'000           RM'000 RM'000        RM'000      RM'000         RM'000            RM'000    RM'000        RM'000        RM'000

         Agriculture                                         -             -           -             -             -        379,421          -          -       379,421        6,267
         Mining and quarrying                                -             -           -             -             -        373,664          -          -       373,664        1,032
         Manufacturing                                       -             -           -        20,268       156,498      1,620,577      1,279          -     1,798,622      203,874
         Electricity, gas and water                          -             -           -        92,741             -        192,089        993          -       285,823           57
         Construction                                        -             -           -             -       207,108      1,962,667          -          -     2,169,775      590,495
         Real estate                                         -             -           -             -             -      2,278,476          -          -     2,278,476      185,829
         Transport, storage and communication                -             -           -         4,991             -        915,146         71          -       920,208       26,231
         Finance, insurance and business
          services                                   321,761        559,533     149,853      1,795,453         27,000     3,759,208     27,315     46,155     6,686,278      209,594
         Government and government
          agencies                                  5,674,968              -           -     2,411,879         16,186       75,394      19,379          -     8,197,806         3,859
         Wholesale and retail trade, restaurants
          and hotels                                        -             -           -              -        24,037      1,150,259          -          -     1,174,296       136,037
         Others                                             -             -           -              -           330     10,055,570      7,384          -    10,063,284       483,002
         Total assets                               5,996,729       559,533     149,853      4,325,332       431,159     22,762,471 *   56,421 *   46,155    34,327,653     1,846,277

         * Not inclusive of collective allowance amounting to RM343 million.

         Risk concentrations for commitments and contingencies are based on the credit equivalent balances in Note 37.




                                                                                             123
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

38 FINANCIAL RISK MANAGEMENT (continued)

   (i)   Credit Risk (continued)

         Credit risk concentrations (continued)

                                                                 Deposits and
                                                                  placements     Financial
                                                                  with banks         assets     Financial      Financial                                             On
                                                     Cash and       and other         held-   Investments    Investments       Loans,            Derivative      balance Commitments
                                                    short-term       financial         for-     available-       held-to- advances and    Other   financial        sheet           and
         The Bank                                        funds    institutions     trading        for-sale      maturity     financing    assets     assets         total contingencies
         2009                                         RM'000          RM'000      RM'000         RM'000         RM'000         RM'000    RM'000    RM'000        RM'000        RM'000

         Agriculture                                        -               -            -             -             -        409,266        -           -       409,266          681
         Mining and quarrying                               -               -            -             -             -        254,289        -           -       254,289       19,086
         Manufacturing                                      -               -            -        15,150       150,113      1,556,029      124           -     1,721,416      204,140
         Electricity, gas and water                         -               -            -        35,804             -        154,437      415           -       190,656          563
         Construction                                       -               -            -        18,569       213,689      1,848,036        -           -     2,080,294      641,304
         Real estate                                        -               -            -             -             -      1,403,442        -           -     1,403,442       95,128
         Transport, storage and communication               -               -            -             -             -        897,454        -           -       897,454       34,522
         Finance, insurance and business
          services                                   407,040        623,271      150,000      1,785,812         37,000      3,013,968    29,601     29,727     6,076,419      346,631
         Government and government
          agencies                                 3,670,807                -            -    2,369,539         27,124        84,320     20,536          -     6,172,326           22
         Wholesale and retail trade, restaurants
          and hotels                                       -              -            -              -         27,937     1,085,920         -           -     1,113,857       74,009
         Others                                            -              -            -              -            330     8,692,435   142,351           -     8,835,116      560,098
         Total assets                              4,077,847        623,271      150,000      4,224,874        456,193    19,399,596 * 193,027 *    29,727    29,154,535    1,976,184

         * Not inclusive of general allowance amounting to RM260 million.

                                                                                                                 37.
         Risk concentrations for commitments and contingencies are based on the credit equivalent balances in Note




                                                                                              124
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (i)   Credit Risk (continued)

                 Collaterals

                 The main types of collateral obtained by the Group and the Bank are as follows:
                 - for personal housing loans, mortgages over residential properties;
                 - for commercial property loans, charges over the properties being financed;
                 - for hire purchase, charges over the vehicles or plant and machineries financed; and
                 - for other loans, charges over business assets such as premises, inventories, trade receivables or
                    deposits.

                 Total loan, advances and financing - credit quality

                 All loans, advances and financing are categorised into “neither past due nor impaired”, “past
                 due but not impaired” and “impaired”. Past due loans refer to loans that are overdue by one day
                 or more. Impaired loans are loans with months-in-arrears more than 90 days or with impairment
                 allowances.

                 Distribution of loans, advances and financing by credit quality
                                                                                         The Group       The Bank
                                                                                               2010           2010
                                                                                           RM'000         RM'000
                 Neither past due nor impaired (a)                                       22,362,063     19,340,931
                 Past due but not impaired (b)                                            3,213,211      2,742,727
                 Impaired (c)                                                               971,123        818,522
                 Gross financing, advances and other loans                               26,546,397     22,902,180
                 less: Allowance for impairment
                      -Individual                                                          (175,849)      (139,709)
                      -Collective                                                          (395,701)      (343,220)
                 Net financing, advances and other loans                                 25,974,847     22,419,251

                 Past due but not impaired includes accounts within grace period amounting to RM1.2 billion
                 (The Group) and RM1.1 billion (The Bank).

                 (a) Loans neither past due nor impaired

                      Analysis of loans, advances and financing that are neither past due nor impaired analysed
                      based on the Group and the Bank’s internal credit grading system is as follows:

                                                                                         The Group        The Bank
                                                                                              2010            2010
                                                                                          RM'000           RM'000
                      Quality classification
                      Satisfactory                                                       18,598,272     15,964,665
                      Special mention                                                     3,763,791      3,376,266
                                                                                         22,362,063     19,340,931

                                                         125
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (i)   Credit risk (continued)

                      Quality classification definitions


                      Satisfactory: Exposures demonstrate a strong capacity to meet financial commitments, with
                      negligible or low probability of default and/or levels of expected loss.

                      Special mention: Exposures require varying degrees of special attention and default risk is
                      of greater concern.



                 (b) Loans past due but not impaired

                      Certain financing, advances and other loans are past due but not impaired as the collateral
                      values of these loans are in excess of the principal and profit outstanding. Allowances for
                      these loans may have been set aside on a portfolio basis. The Bank’s financing, advances
                      and other loans which are past due but not impaired are as follows:

                                                                                         The Group       The Bank
                                                                                              2010           2010
                                                                                          RM'000          RM'000

                      Past due up to 30 days                                             1,730,084       1,542,944
                      Past due 30-60 days                                                  996,340         849,976
                      Past due 60-90 days                                                  486,787         349,807
                                                                                         3,213,211       2,742,727

                      The Group and the Bank do not disclose the fair value of collateral held as security on assets
                      past due but not impaired as it is not practicable to do so.




                 (c) Loans impaired

                                                                                         The Group       The Bank
                                                                                              2010           2010
                      Analysis of individually impaired assets                            RM'000          RM'000

                      Gross amount                                                         971,123         818,522

                      Individually impaired loans                                          439,997         329,510

                      Fair value of collateral                                           1,250,955       1,178,242



                                                           126
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (i)   Credit risk (continued)

                 Collateral and other credit enhancements obtained

                 During the year, the Bank obtained assets by taking possession of collateral held as security or
                 calling upon other credit enhancements as follows:

                                                                                      The Group     The Bank
                                                                                           2010         2010
                                                                                       RM'000        RM'000
                                                                                          Carrying amount
                 Nature of assets:
                 Vacant industrial land                                                    1,370          1,370

                 Foreclosed properties are sold as soon as practicable, with the proceeds used to reduce the
                 outstanding indebtedness. The carrying amount of foreclosed properties held by the Group and
                 the Bank as at reporting date has been classified as Other assets as disclosed in Note 8.


                 Renegotiated financial assets

                 Restructuring activities include extended payment arrangements, approved external management
                 plans, modification and deferral of payments. Restructuring policies and practices are based on
                 indicators or criteria that, in the judgement of management indicate that payment will most
                 likely continue. These policies are kept under continous review. Restructuring is most
                 commonly applied to term loans - in particular, customer finance loans.




                                                                                      The Group       The Bank
                                                                                           2010           2010
                                                                                       RM'000          RM'000

                 Renegotiated loans, advances and financing
                 Continuing to be impaired after restructuring                            14,869         14,412
                 Non-impaired after restructuring-would otherwise have been
                  impaired                                                               487,387       420,954
                                                                                         502,256       435,366




                                                       127
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (i)   Credit risk (continued)

                 Private debt securities, treasury bills and derivatives

                 Private debt securities, treasury bills and other eligible bills included in financial assets held-for-
                 trading and financial investments available-for-sale are measured on a fair value basis. The fair
                 value will reflect the credit risk of the issuer.

                 Most listed and some unlisted securities are rated by external rating agencies. The Group and the
                 Bank mainly uses external credit ratings provided by RAM, MARC, Standard & Poors' or
                 Moody's.

                 The table below presents an analysis of debt securities, treasury bills and other eligible bills by
                 rating agency :
                 The Group                                     AAA       AA- to AA+   A- to A+ Lower than A-    Unrated       Total
                 2010                                        RM'000         RM'000    RM'000        RM'000      RM'000       RM'000

                 Financial assets held-for-trading                 -             -          -             -      149,853     149,853
                 Financial investments available-for-sale    712,749       233,762    455,613       133,094    4,230,835   5,766,053
                 Financial investments held-to-maturity            -             -          -        27,000      404,159     431,159
                 Total                                       712,749       233,762    455,613       160,094    4,784,847   6,347,065


                  The Bank                                      AAA      AA- to AA+   A- to A+ Lower than A-    Unrated       Total
                  2010                                        RM'000        RM'000    RM'000        RM'000      RM'000       RM'000

                  Financial assets held-for-trading                -              -         -             -      149,853     149,853
                  Financial investments available-for-sale   393,841        220,031   455,613        92,240    3,266,535   4,428,260
                  Financial investments held-to-maturity           -              -         -        27,000      404,159     431,159
                  Total                                      393,841        220,031   455,613       119,240    3,820,547   5,009,272




                                                                   128
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (i)    Credit risk (continued)

                  Private debt securities, treasury bills and derivatives (continued)

                  Included in the above, there are impaired financial investments available-for-sale with a carrying
                  value for the Group and the Bank of RM40,005 (2009: RM69,698) and RM33,260 (2009:
                  RM62,953) respectively and financial investments held-to-maturity for the Group and the Bank
                  of RM87,752 (2009: RM89,957) and RM87,584 (RM89,789) respectively.

                  Collateral is not generally obtained directly from the issuers of debt securities. Certain debt
                  securities may be collateralised by specifically identified assets that would be obtainable in the
                  event of default.


           (ii)   Market risk

                  Market risk is defined as the risk of losses to the Bank’s portfolio positions arising from
                  movements in market prices. The Bank’s market risk management objective is to ensure that
                  market risk is appropriately identified, measured, controlled, managed and reported.

                  The Bank’s exposure to market risk stems primarily from interest rate risk and foreign exchange
                  rate risk. Interest rate risk arises mainly from differences in timing between the maturities or
                  repricing of assets, liabilities and derivatives. The Bank is also exposed to basis risk when there
                  is a mismatch between the change in price of a hedge and the change in price of the assets it
                  hedges. Foreign exchange rate risk arises from unhedged positions of customers' requirements
                  and proprietary positions.

                  Market risk is primarily controlled through the imposition of Cut-loss, Value-at-Risk (VaR) and
                  Net Open Position Limits which are approved by both the Asset Liability Management
                  Committee ('ALCO') and Board Risk Management Committee ('BRMC') in accordance with the
                  Bank's risk appetite. These limits are set and reviewed regularly according to a number of
                  factors, including liquidity and the Bank's business strategy. In addition, the Bank conducts
                  periodic stress test of its respective portfolios to ascertain the market risk under abnormal
                  market conditions. For the asset liability mismatch position in the statement of financial
                  position, the risk is measured using Net Interest Income simulations based on projected interest
                  rate scenarios managed through limits set over time buckets together with an Overall Risk
                  Tolerance Limit.

                  The Bank's Management, ALCO and BRMC are regularly kept informed of its risk profile and
                  positions.




                                                          129
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (ii)   Market risk (continued)

                  Value at risk ('VaR')

                  Value-at-Risk ('VaR') is used to compute the maximum potential loss amount over a specified
                  holding period of a trading portfolio. It measures the risk of losses arising from potential adverse
                  movements in interest rates and foreign exchange rates that could affect values of financial
                  instruments.

                  The Variance-Covariance Parametric methodology is adopted to compute the potential loss
                  amount. This is a statistically defined, probability-based approach that uses volatilities and
                  correlations to quantify price risks. Under this methodology, a matrix of historical volatilities
                  and correlations is computed from the past 100 business days’ market data. VaR is then
                  computed by applying these volatilities and correlations to the outstanding trading portfolio
                  valued at current price levels.

                  The table below sets out a summary of the Bank’s VaR profile by financial instrument types for
                  the trading portfolio:
                                                                      Average
                  The Group                               Balance for the year       Minimum       Maximum
                  2010                                    RM'000       RM'000          RM'000         RM'000

                  Instruments
                  FX swap                                        201             241             134            437
                  Government securities                            -               1               -             11
                  Private debt securities                          -               1               -             18


                                                                           Average
                  The Bank                                  Balance     for the year      Minimum        Maximum
                  2010                                      RM'000          RM'000         RM'000         RM'000

                  Instruments
                  FX swap                                        201             241             134            437
                  Government securities                            -               1               -             11
                  Private debt securities                          -               1               -             18




                                                          130
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (ii)   Market risk (continued)

                  Other Risk Measures

                  •   Mark-to-market

                       Mark-to-Market valuation tracks the current market value of the outstanding financial
                       instruments.


                  •   Stress testing

                      Stress tests are conducted to attempt to quantify market risk arising from low probability,
                      abnormal market movements. The stress test measure the change in value arising from
                      range of extreme movements in the interest rates and foreign exchange rates based on past
                      experience and simulated stress scenarios.


                  •   Sensitivity/Dollar Duration

                      Sensitivity/Dollar Duration is an additional measure of interest rate risk that is computed on
                      a daily basis. It measures the change in value of a portfolio resulting from a 0.01% increase
                      in interest rates. This measure identifies the Bank’s interest rate exposures that are most
                      vulnerable to interest rate changes and it facilitates the implementation of hedging
                      strategies.

                  Net interest income sensitivity

                  The table below shows the pre-tax net interest income sensitivity for the non-trading financial
                  assets and financial liabilities held at 31 December 2010. The sensitivity has been measured
                  using the Repricing Gap Simulation methodology based on parallel shifts in the interest rate.

                                                                                             +100            -100
                  The Group                                                            basis point    basis point
                  2010                                                                 RM million     RM million

                  Impact on net interest income                                              (25.7)          25.7
                  As percentage of net interest income                                       -2.8%           2.8%

                                                                                             +100            -100
                  The Bank                                                             basis point    basis point
                  2010                                                                 RM million     RM million

                  Impact on net interest income                                              (21.2)          21.2
                  As percentage of net interest income                                       -2.8%           2.8%

                                                         131
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (ii)   Market risk (continued)

                  Foreign exchange risk sensitivity analysis

                                                                        Open position
                                                                                            Ringgit    Impact of
                                                                                          Malaysia    1% fall in
                                                                US           Ringgit     equivalent           US
                                                            Dollar         Malaysia     amount for         Dollar
                                                        equivalent        equivalent    1 % fall in     exchange
                  The Group                                amount           amount       US Dollar           rate
                  2010                                        '000              '000           '000         '000

                  US Dollar                                   (4,453)       (13,730)       (13,592)         (137)
                  Others                                      (1,290)        (3,977)        (3,936)          (39)

                                                                        Open position
                                                                                            Ringgit    Impact of
                                                                                          Malaysia    1% fall in
                                                                US           Ringgit     equivalent           US
                                                            Dollar         Malaysia     amount for         Dollar
                                                        equivalent        equivalent    1 % fall in     exchange
                  The Bank                                 amount           amount       US Dollar           rate
                  2010                                        '000              '000           '000         '000

                  US Dollar                                   (5,944)       (18,329)       (18,145)         (183)
                  Others                                        (984)        (3,034)        (3,003)          (30)



                  The impact on the outstanding foreign exchange position as at 31 December 2010 for a one
                  percent change in USD exchange rate from 3.0835 to 3.0527 was a decrease of about
                  RM176,000 (The Group) and RM213,000 (The Bank).


                  Foreign exchange risk

                  The Bank takes on exposure to the effects of fluctuations in the prevailing foreign currency
                  exchange rates on its financial position and cash flows. The Board sets limits on the level of
                  exposure by currency and in aggragate for both overnight and intra-day positions, which are
                  monitored daily. The table summarises the Bank's exposure to foreign currency exchange rate
                  risk at 31 December 2010. Included in the table are the Bank's financial instruments at carrying
                  amounts, categorised by currency.




                                                        132
Company No: 25046 T




   Affin Bank Berhad
   (Incorporated in Malaysia)

   NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

   38 FINANCIAL RISK MANAGEMENT (continued)

       (ii) Market risk (continued)

           Foreign exchange risk (continued)

                                                                United                      Great
                                                                 States      Australian    Britain
           The Group                                    Euro     Dollar          Dollar    Pound      Others     Total
           2010                                       RM'000    RM'000         RM'000     RM'000     RM'000     RM'000

           Assets
           Cash and short-term funds                   3,205    163,867          2,049      2,058     36,513    207,692
           Deposits and placements with banks
            and other financial institutions               -     147,057        15,680         -      29,597     192,334
           Financial investments available-for-sale        -     191,793        39,548    46,067      59,367     336,775
           Loan, advances and financing                  271     748,162             -       113       1,503     750,049
           Other assets                                    -       4,174           376       846       1,986       7,382
           Total financial assets                      3,476   1,255,053        57,653    49,084     128,966   1,494,232




                                                                       133
Company No: 25046 T




   Affin Bank Berhad
   (Incorporated in Malaysia)

   NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

   38 FINANCIAL RISK MANAGEMENT (continued)

       (ii) Market risk (continued)

       (b) Foreign exchange risk (continued)

                                                                   United                      Great
                                                                    States      Australian    Britain
           The Group                                     Euro       Dollar          Dollar    Pound      Others     Total
           2010                                        RM'000      RM'000         RM'000     RM'000     RM'000     RM'000

           Liabilities
           Deposits from customers                       7,660     208,366          9,941      8,487     29,784    264,238
           Deposits and placements of banks
            and other financial institutions                 -     505,694          4,157         -           -    509,851
           Other liabilities                                 -      12,436            173     3,411         431     16,451
           Total financial liabilities                   7,660     726,496         14,271    11,898      30,215    790,540

           Net on-balance sheet financial position      (4,184)     528,557        43,382    37,186      98,751     703,692
           Off balance sheet credit commitments      1,093,230    2,051,238        25,235    65,866     396,827   3,632,396




                                                                          134
Company No: 25046 T




   Affin Bank Berhad
   (Incorporated in Malaysia)

   NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

   38 FINANCIAL RISK MANAGEMENT (continued)

       (ii) Market risk (continued)

           Foreign exchange risk (continued)

                                                                United                      Great
                                                                 States      Australian    Britain
           The Bank                                     Euro     Dollar          Dollar    Pound      Others     Total
           2010                                       RM'000    RM'000         RM'000     RM'000     RM'000     RM'000

           Assets
           Cash and short-term funds                   2,988    239,581          1,765      1,899     36,132    282,365
           Deposits and placements with banks
            and other financial institutions               -     184,059        15,680         -      29,597     229,336
           Financial investments available-for-sale        -     180,852        39,548    46,067      59,367     325,834
           Loan, advances and financing                  271     590,207             -       113       1,503     592,094
           Other assets                                    -       4,014           376       846       1,986       7,222
           Total financial assets                      3,259   1,198,713        57,369    48,925     128,585   1,436,851




                                                                       135
Company No: 25046 T




   Affin Bank Berhad
   (Incorporated in Malaysia)

   NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

   38 FINANCIAL RISK MANAGEMENT (continued)

       (ii) Market risk (continued)

           Foreign exchange risk (continued)

                                                                   United                      Great
                                                                    States      Australian    Britain
           The Bank                                      Euro       Dollar          Dollar    Pound      Others     Total
           2010                                        RM'000      RM'000         RM'000     RM'000     RM'000     RM'000

           Liabilities
           Deposits from customers                       7,564     208,306          9,941      8,484     29,784    264,079
           Deposits and placements of banks
            and other financial institutions                 -     505,694          4,157         -           -    509,851
           Other liabilities                                 -      12,412            173     3,411         431     16,427
           Total financial liabilities                   7,564     726,412         14,271    11,895      30,215    790,357

           Net on-balance sheet financial position      (4,305)     472,301        43,098    37,030      98,370     646,494
           Off balance sheet credit commitments      1,093,230    2,051,238        25,235    65,866     396,827   3,632,396




                                                                          136
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (ii)   Market risk (continued)

                  Interest/profit rate risk

                  Sensitivity to interest rates arises from mismatches in the interest rate characteristics of the
                  assets and their corresponding liability funding. One of the major causes of these mismatches is
                  timing differences in the repricing of the assets and liabilities. These mismatches are actively
                  managed as part of the overall interest rate risk management process which is conducted in
                  accordance with Group policy guidelines.

                  The following table represents the Group’s and the Bank’s assets and liabilities at carrying
                  amounts, categorised by the earlier of contractual repricing or maturity dates as at 31 December
                  2010.




                                                         137
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

38 FINANCIAL RISK MANAGEMENT (continued)

    (ii) Market risk (continued)

        Interest/profit rate risk (continued)
                                                                                     Non-trading book
                                                                                                                                  Non-
                                                                                                                              interest /                              Effective
                                                          Up to 1         > 1-3       >3-12           >1-5        Over 5         profit    Trading                     interest
        The Group                                          month        months       months          years         years      sensitive       book        Total            rate
        2010                                              RM'000        RM'000       RM'000         RM'000       RM'000        RM'000      RM'000        RM'000              %

        Assets
        Cash and short-term funds                      8,457,033               -            -              -            -      172,530            -    8,629,563          2.76
        Deposits and placements with banks
          and other financial institutions                29,597       132,468        30,270              -            -             -           -       192,335          2.62
        Financial assets held-for-trading                      -             -             -              -            -             -     149,853       149,853          2.81
        Financial investments available-for-sale         395,268       930,603       670,773      3,260,546      402,154       106,709           -     5,766,053          3.67
        Financial investment held-to-maturity             24,037       207,108             -        113,955            -        86,059           -       431,159          4.95
        Loans, advances and financing
        - non-impaired                                12,062,771     1,031,672     2,466,714      7,527,074    2,487,043      (395,701) *     -       25,179,573          4.94
        - impaired                                             -             -             -              -            -       795,274 #      -          795,274
        Others (1)                                             -             -             -              -            -       873,956        -          873,956
        Derivative financial assets                            -             -             -              -            -        36,412    9,743           46,155
        Total assets                                  20,968,706     2,301,851     3,167,757     10,901,575    2,889,197     1,675,239 159,596        42,063,921



         * The negative balance represents collective allowance for loans, advances and financing.
        # Net of individual allowance.
        (1) Others include property and equipment, intangible assets, statutory deposits with Bank Negara Malaysia, tax recoverable, deferred tax assets, subsidiaries,
            other assets, investment in jointly controlled entity and amount due from jointly controlled entity.




                                                                                           138
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

38 FINANCIAL RISK MANAGEMENT (continued)

    (ii) Market risk (continued)

        Interest/profit rate risk (continued)
                                                                                       Non-trading book
                                                                                                                                     Non-
                                                                                                                                 interest /                          Effective
                                                            Up to 1        > 1-3        >3-12           >1-5         Over 5         profit    Trading                 interest
        The Group                                            month       months        months          years          years      sensitive       book       Total         rate
        2010                                                RM'000       RM'000        RM'000         RM'000        RM'000        RM'000      RM'000       RM'000           %

        Liabilities
        Deposits from customers                          15,530,756    7,871,842     5,203,862         46,979              -    2,191,809           -   30,845,248       2.99
        Deposits and placements of banks
         and other financial institutions                 3,099,548    3,437,614              -        68,186              -            -           -    6,605,348       2.86
        Bills and acceptances payable                             -            -              -             -              -      110,161           -      110,161
        Recourse obligation on loans sold
         to Cagamas Berhad                                        -            -             -        286,370              -            -           -      286,370       5.00
        Subordinated term loan                              300,000            -             -              -              -            -           -      300,000       3.52
        Other liabilities (2)                                     -            -             -              -              -      546,230           -      546,230
        Derivative financial liabilities                          -            -             -              -              -       40,112      17,448       57,560
        Total liabilities                                18,930,304   11,309,456     5,203,862        401,535              -    2,888,312      17,448   38,750,917
        Shareholders' funds                                       -            -             -              -              -    3,313,004           -    3,313,004
        Total liabilities and shareholders'
         funds                                           18,930,304   11,309,456     5,203,862        401,535              -    6,201,316      17,448   42,063,921

        On-balance sheet interest sensitivity gap         2,038,402   (9,007,605) (2,036,105)      10,500,040 2,889,197 (4,526,077)           142,148
        Off-balance sheet interest sensitivity gap (3)      299,637      455,305      (5,193)        (704,458)  (45,291)         -                  -
        Total interest sensitivity gap                    2,338,039   (8,552,300) (2,041,298)       9,795,582 2,843,906 (4,526,077)           142,148

        (2) Other liabilities include provision for taxation, deferred tax liabilities and other liabilities.
        (3) The off-balance sheet gap represents the net notional amounts of all interest rate sensitive derivative financial instruments.




                                                                                             139
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

38 FINANCIAL RISK MANAGEMENT (continued)

    (ii) Market risk (continued)

        Interest/profit rate risk (continued)
                                                                                      Non-trading book
                                                                                                                                   Non-
                                                                                                                               interest /                                Effective
                                                          Up to 1        > 1-3        >3-12           >1-5        Over 5          profit    Trading                       interest
        The Group                                          month        months       months           years        years       sensitive       book        Total              rate
        2009                                              RM'000        RM'000       RM'000         RM'000       RM'000         RM'000      RM'000       RM'000                 %

        Assets
        Cash and short-term funds                      5,994,363              -             -              -            -      138,526            -    6,132,889            1.96
        Deposits and placements with banks
          and other financial institutions                 8,563        72,259        61,955             -             -             -            -      142,777            1.27
        Financial assets held-for-trading                      -             -             -             -             -             -      150,000      150,000            2.18
        Financial investments available-for-sale         877,180       489,648     1,564,182     1,968,840       690,446        37,075            -    5,627,371            3.41
        Financial investment held-to-maturity            236,035             -        26,530        43,186             -       175,723            -      481,474            4.73
        Loans, advances and financing
        - performing                                  11,322,040     2,461,621     2,219,502     4,242,502     1,566,346      (335,067) *     -       21,476,944            4.71
        - non-performing                                       -             -             -             -             -       512,360 #      -          512,360
        Others (1)                                             -             -             -             -             -     1,045,095        -        1,045,095
        Derivative financial assets                            -             -             -             -             -        21,664    8,063           29,727
        Total assets                                  18,438,181     3,023,528     3,872,169     6,254,528     2,256,792     1,595,376 158,063        35,598,637


        * The negative balance represents collective allowance for loans, advances and financing
        # Net of individual allowance.
        (1) Others include property and equipment, intangible assets, statutory deposits with Bank Negara Malaysia, tax recoverable, deferred tax assets, subsidiaries
            and other assets.




                                                                                          140
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

38 FINANCIAL RISK MANAGEMENT (continued)

    (ii) Market risk (continued)

        Interest/profit rate risk (continued)
                                                                                        Non-trading book
                                                                                                                                      Non-
                                                                                                                                  interest /                          Effective
                                                            Up to 1        > 1-3        >3-12            >1-5        Over 5          profit    Trading                 interest
        The Group                                            month        months       months            years        years       sensitive       book        Total        rate
        2009                                                RM'000        RM'000       RM'000          RM'000       RM'000         RM'000      RM'000       RM'000           %

        Liabilities
        Deposits from customers                           9,342,816    7,344,504     5,579,671         99,327              -    4,074,001            -   26,440,319      2.28
        Deposits and placements of banks
         and other financial institutions                 2,025,979    2,575,982       421,702               -             -            -            -    5,023,663      2.09
        Bills and acceptances payable                             -            -             -               -             -       94,265            -       94,265
        Recourse obligation on loans sold
         to Cagamas Berhad                                        -            -             -        297,216              -            -            -      297,216      5.00
        Subordinated term loan                              300,000            -             -              -              -            -            -      300,000      2.90
        Other liabilities (2)                                     -            -             -              -              -      434,472            -      434,472
        Derivative financial liabilities                          -            -             -              -              -       14,738       26,946       41,684
        Total liabilities                                11,668,795    9,920,486     6,001,373        396,543              -    4,617,476       26,946   32,631,619
        Shareholders' funds                                       -            -             -              -              -    2,967,018            -    2,967,018
        Total liabilities and shareholders'
         funds                                           11,668,795    9,920,486     6,001,373        396,543              -    7,584,494       26,946   35,598,637

        On-balance sheet interest sensitivity gap         6,769,386   (6,896,958) (2,129,204)       5,857,985 2,256,792 (5,989,118)            131,117
        Off-balance sheet interest sensitivity gap (3)      529,078      199,536    (339,724)        (293,106)  (95,784)         -                   -
        Total interest sensitivity gap                    7,298,464   (6,697,422) (2,468,928)       5,564,879 2,161,008 (5,989,118)            131,117

        (2) Other liabilities include provision for taxation, deferred tax liabilities and other liabilities.
        (3) The off-balance sheet gap represents the net notional amounts of all interest rate sensitive derivative financial instruments.




                                                                                             141
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

38 FINANCIAL RISK MANAGEMENT (continued)

    (ii) Market risk (continued)

        Interest/profit rate risk (continued)
                                                                                     Non-trading book
                                                                                                                                  Non-
                                                                                                                              interest /                              Effective
                                                          Up to 1         > 1-3       >3-12           >1-5        Over 5         profit    Trading                     interest
        The Bank                                           month        months       months          years         years      sensitive       book        Total            rate
        2010                                              RM'000        RM'000       RM'000         RM'000       RM'000        RM'000      RM'000        RM'000              %

        Assets
        Cash and short-term funds                      5,933,150               -            -              -            -      169,157            -    6,102,307          2.70
        Deposits and placements with banks
          and other financial institutions                29,597       462,664        67,272              -            -             -           -       559,533          2.76
        Financial assets held-for-trading                      -             -             -              -            -             -     149,853       149,853          2.81
        Financial investments available-for-sale         333,650       734,627       660,868      2,246,981      349,206       102,928           -     4,428,260          3.74
        Financial investment held-to-maturity             24,037       207,108             -        113,955            -        86,059           -       431,159          4.95
        Loans, advances and financing
        - non-impaired                                10,293,638       914,913     2,136,368      6,715,183    2,023,556      (343,220) *     -       21,740,438          4.95
        - impaired                                             -             -             -              -            -       678,813 #      -          678,813
        Others (1)                                             -             -             -              -            -     1,131,878        -        1,131,878
        Derivative financial assets                            -             -             -              -            -        36,412    9,743           46,155
        Amount due from subsidiaries                     183,541             -             -              -            -         1,730        -          185,271          2.62
        Total assets                                  16,797,613     2,319,312     2,864,508      9,076,119    2,372,762     1,863,757 159,596        35,453,667


        * The negative balance represents collective allowance for loans, advances and financing.
        # Net of individual allowance.
        (1) Others include property and equipment, intangible assets, statutory deposits with Bank Negara Malaysia, tax recoverable, deferred tax assets, subsidiaries,
            other assets, investment in jointly controlled entity and amount due from jointly controlled entity.




                                                                                           142
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

38 FINANCIAL RISK MANAGEMENT (continued)

    (ii) Market risk (continued)

        Interest/profit rate risk (continued)
                                                                                       Non-trading book
                                                                                                                                     Non-
                                                                                                                                 interest /                          Effective
                                                            Up to 1        > 1-3        >3-12           >1-5         Over 5         profit    Trading                 interest
        The Bank                                             month       months        months          years          years      sensitive       book       Total         rate
        2010                                                RM'000       RM'000        RM'000         RM'000        RM'000        RM'000      RM'000       RM'000           %

        Liabilities
        Deposits from customers                          12,147,517    6,553,954     4,376,920         42,754              -    2,192,729           -   25,313,874       3.02
        Deposits and placements of banks
         and other financial institutions                 2,479,622    3,187,614        68,186               -             -            -           -    5,735,422       2.86
        Bills and acceptances payable                             -            -             -               -             -      110,161           -      110,161
        Recourse obligation on loans sold
         to Cagamas Berhad                                        -            -             -        286,370              -            -           -      286,370       5.00
        Subordinated term loan                              300,000            -             -              -              -            -           -      300,000       3.52
        Other liabilities (2)                                     -            -             -              -              -      489,554           -      489,554
        Derivative financial liabilities                          -            -             -              -              -       57,560           -       57,560
        Amount due to subsidiaries                                -            -             -              -              -       47,926           -       47,926
        Total liabilities                                14,927,139    9,741,568     4,445,106        329,124              -    2,897,930           -   32,340,867
        Shareholders' funds                                       -            -             -              -              -    3,112,800           -    3,112,800
        Total liabilities and shareholders'
         funds                                           14,927,139    9,741,568     4,445,106        329,124              -    6,010,730           -   35,453,667

        On-balance sheet interest sensitivity gap         1,870,474   (7,422,256) (1,580,598)       8,746,995 2,372,762 (4,146,973)           159,596
        Off-balance sheet interest sensitivity gap (3)      299,637      455,305      (5,193)        (704,458)  (45,291)         -                  -
        Total interest sensitivity gap                    2,170,111   (6,966,951) (1,585,791)       8,042,537 2,327,471 (4,146,973)           159,596

        (2) Other liabilities include other liabilities.
        (3) The off-balance sheet gap represents the net notional amounts of all interest rate sensitive derivative financial instruments.




                                                                                             143
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

38 FINANCIAL RISK MANAGEMENT (continued)

    (ii) Market risk (continued)

        Interest/profit rate risk (continued)
                                                                                      Non-trading book
                                                                                                                                   Non-
                                                                                                                               interest /                                 Effective
                                                          Up to 1        > 1-3         >3-12          >1-5         Over 5         profit    Trading                        interest
        The Bank                                           month        months        months          years         years      sensitive       book         Total              rate
        2009                                              RM'000        RM'000        RM'000        RM'000        RM'000        RM'000      RM'000        RM'000                 %

        Assets
        Cash and short-term funds                      4,042,363               -            -              -            -      134,582            -    4,176,945             1.92
        Deposits and placements with banks
          and other financial institutions                 8,563       526,136        88,572              -            -             -            -      623,271             1.93
        Financial assets held-for-trading                      -             -             -              -            -             -      150,000      150,000             2.18
        Financial investments available-for-sale         621,336       333,128     1,300,742      1,329,715      621,471        33,378            -    4,239,770             3.50
        Financial investment held-to-maturity            236,035             -        26,530         43,186            -       175,148            -      480,899             4.73
        Loans, advances and financing
        - performing                                  10,202,241     2,255,261     1,903,848      3,489,151    1,083,386      (291,000) *     -       18,642,887             4.71
        - non-performing                                       -             -             -              -            -       465,708 #      -          465,708
        Others (1)                                             -             -             -              -            -     1,292,624        -        1,292,624
        Derivative financial assets                            -             -             -              -            -        21,664    8,063           29,727
        Amount due from subsidiaries                     229,364             -             -              -            -         1,921        -          231,285             2.14
        Total assets                                  15,339,902     3,114,525     3,319,692      4,862,052    1,704,857     1,834,025 158,063        30,333,116


        * The negative balance represents general allowance for loans, advances and financing in accordance with the Group's accounting policy on allowance
            for bad and doubtful debts and financing.
        # Net of specific allowance.
        (1) Others include property and equipment, intangible assets, statutory deposits with Bank Negara Malaysia, deferred tax assets, subsidiaries and other assets.




                                                                                           144
Company No: 25046 T




AFFIN Bank Berhad
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

38 FINANCIAL RISK MANAGEMENT (continued)

    (ii) Market risk (continued)

        Interest/profit rate risk (continued)
                                                                                        Non-trading book
                                                                                                                                      Non-
                                                                                                                                  interest /                          Effective
                                                           Up to 1         > 1-3        >3-12            >1-5        Over 5          profit    Trading                 interest
        The Bank                                            month         months       months            years        years       sensitive       book        Total        rate
        2009                                               RM'000         RM'000       RM'000          RM'000       RM'000         RM'000      RM'000       RM'000           %

        Liabilities
        Deposits from customers                          7,566,291     6,301,396     4,969,368         94,445              -    2,883,554            -   21,815,054      2.23
        Deposits and placements of banks
         and other financial institutions                1,703,983     2,395,542       421,703               -             -            -            -    4,521,228      2.09
        Bills and acceptances payable                            -             -             -               -             -       94,265            -       94,265
        Recourse obligation on loans sold
         to Cagamas Berhad                                       -             -             -        297,216              -            -            -      297,216      5.00
        Subordinated term loan                             300,000             -             -              -              -            -            -      300,000      2.90
        Other liabilities (2)                                    -             -             -              -              -      405,173            -      405,173
        Derivative financial liabilities                         -             -             -              -              -       14,738       26,946       41,684
        Amount due to subsidiaries                               -             -             -              -              -       47,730            -       47,730
        Total liabilities                                9,570,274     8,696,938     5,391,071        391,661              -    3,445,460       26,946   27,522,350
        Shareholders' funds                                      -             -             -              -              -    2,810,766            -    2,810,766
        Total liabilities and shareholders'
         funds                                           9,570,274     8,696,938     5,391,071        391,661              -    6,256,226       26,946   30,333,116

        On-balance sheet interest sensitivity gap        5,769,628    (5,582,413) (2,071,379)       4,470,391 1,704,857 (4,422,201)            131,117
        Off-balance sheet interest sensitivity gap (3)     529,078       199,536    (339,724)        (293,106)  (95,784)         -                   -
        Total interest sensitivity gap                   6,298,706    (5,382,877) (2,411,103)       4,177,285 1,609,073 (4,422,201)            131,117

        (2) Other liabilities include provision for taxation and other liabilities.
        (3) The off-balance sheet gap represents the net notional amounts of all interest rate sensitive derivative financial instruments.




                                                                                             145
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (iii) Liquidity Risk

                Liquidity risk is the risk of loss due to failure to access funds at reasonable cost to fund the
                Bank's operations and meet its liabilities when they fall due. Liquidity risk arises from the
                Bank's funding activities and the management of its assets.

                To measure and manage net funding requirements, the Bank adopts BNM's New Liquidity
                Framework ('NLF'). The NLF ascertains the liquidity condition based on the contractual and
                behavioral cash-flow of assets, liabilities and off-balance sheet commitments, taking into
                consideration the realisable cash value of the eligible liquefiable assets.

                The Bank employs liquidity risk indicators as an early alert of any structural change for liquidity
                risk management. The risk is measured monthly using internal and external qualitative and
                quantitative liquidity risk indicators. The Bank also conducts liquidity stress tests to gauge the
                Bank’s resilience in the event of a funding crisis. In addition, the Bank has in place the
                Contingency Funding Plan to deal with liquidity crisis and emergencies.

                The BRMC is responsible for the Bank's liquidity policy although the strategic management of
                liquidity has been delegated to the ALCO. The BRMC is however, informed regularly of the
                liquidity situation in the Bank.


                Liquidity risk disclosure table which is based on contractual undiscounted cash flow:

                                                          Up to 1             > 1-3      >3-12      >1-5     Over 5
                The Group                                  month            months      months     years      years       Total
                2010                                      RM'000            RM'000      RM'000    RM'000    RM'000       RM'000

                Deposits from customers                17,722,567         7,871,842   5,203,861    46,978         -   30,845,248
                Deposits and placements of banks
                 and other financial institutions       3,099,548         3,437,614     68,186          -         -    6,605,348
                Bills and acceptances payable             110,161                 -          -          -         -      110,161
                Recourse obligation on loans sold to
                 Cagamas Berhad                             1,441          1,312          8,491   275,126         -      286,370
                Other liabilities                          68,860        114,327        524,760   113,683    55,250      876,880
                Subordinate term loan                           -              -              -         -   300,000      300,000
                                                       21,002,577     11,425,095      5,805,298   435,787   355,250   39,024,007




                                                                    146
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (iii) Liquidity Risk (continued)

                Liquidity risk disclosure table which is based on contractual undiscounted cash flow
                (continued):

                                                          Up to 1             > 1-3       >3-12       >1-5       Over 5
                The Bank                                   month            months       months      years        years        Total
                2010                                      RM'000            RM'000       RM'000     RM'000      RM'000        RM'000

                Deposits from customers                14,340,248         6,553,953    4,376,920     42,753           -    25,313,874
                Deposits and placements of banks
                 and other financial institutions       2,479,621         3,187,614      68,187           -           -     5,735,422
                Bills and acceptances payable             110,161                 -           -           -           -       110,161
                Recourse obligation on loans sold to
                 Cagamas Berhad                             1,441             1,312        8,491    275,126           -       286,370
                Other liabilities                          60,248            94,583      461,233    113,198      55,250       784,512
                Amount due to holding company              47,926                 -            -          -           -        47,926
                Subordinate term loan                           -                 -            -          -     300,000       300,000
                                                       17,039,645         9,837,462    4,914,831    431,077     355,250    32,578,265




                Derivative financial liabilities

                Derivative financial liabilities based on contractual undiscounted cash flow:

                                                          Up to 1             > 1-3       >3-12        >1-5      Over 5
                The Group/ The Bank                        month            months       months       years       years        Total
                2010                                      RM'000            RM'000       RM'000      RM'000     RM'000        RM'000

                Derivatives settled on net basis
                Interest rate derivatives                  (1,098)           (1,353)      (9,658)    (33,596)   (12,799)      (58,504)

                Derivatives settled on gross basis
                Foreign exchange derivatives:
                Outflow                                  (278,479)         (207,640)    (229,901)   (115,560)         -      (831,580)
                Inflow                                    278,466           205,907      229,397     115,560          -       829,330
                                                              (13)           (1,733)        (504)          -          -        (2,250)




                                                                    147
Company No: 25046 T




    Affin Bank Berhad
    (Incorporated in Malaysia)

    NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

    38 FINANCIAL RISK MANAGEMENT (continued)

        (iii) Liquidity Risk (continued)

            Liquidity risk for assets and liabilities based on remaining contractual maturities:

             The maturities of on-balance sheet assets and liabilities as well as other off-balance sheet assets and liabilities, commitments and counter-
             guarantees are important factors in assessing the liquidity of the Group. The table below provides analysis of assets and liabilities into
             relevant maturity tenures based on remaining contractual maturities:-

             Maturities of assets and liabilities of the Group and the Bank by remaining contractual maturities profile are as follows:

                                                              Up to 3         > 3-6         > 6-12          > 1-3         > 3-5        Over 5
            The Group                                         months        months         months          years         years          years       Total
            2010                                              RM'000        RM'000         RM'000         RM'000        RM'000        RM'000       RM'000

            Assets
            Cash and short-term funds                       8,629,563              -               -             -             -            -    8,629,563
            Deposits and placements with banks
             and other financial institutions                 112,440        14,590        15,680               -       49,625              -      192,335
            Financial assets held-for-trading                 149,853             -             -               -            -              -      149,853
            Financial investments available-for-sale        1,339,407       579,919       184,027       2,168,054    1,092,492        402,154    5,766,053
            Financial investments held-to-maturity            110,096             -             -         113,955            -        207,108      431,159
            Loan, advances and financing                    3,174,354       668,789       780,775       3,085,018    4,366,931     13,898,980   25,974,847
            Other assets                                       58,806         9,675        10,930           5,127            -        161,664      246,202
            Derivative financial assets                        22,129         3,604           109          10,692        2,542          7,079       46,155
            Amount due from jointly controlled entity           2,745             -             -               -            -              -        2,745
            Other non-financial assets (1)                    245,130             -        49,930               -            -        329,949      625,009
                                                           13,844,523     1,276,577     1,041,451       5,382,846    5,511,590     15,006,934   42,063,921




                                                                                             148
Company No: 25046 T




    Affin Bank Berhad
    (Incorporated in Malaysia)

    NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

    38 FINANCIAL RISK MANAGEMENT (continued)

        (iii) Liquidity Risk (continued)

            Liquidity risk for assets and liabilities based on remaining contractual maturities (continued):

                                                              Up to 3         > 3-6        > 6-12           > 1-3        > 3-5         Over 5
            The Group                                         months        months        months           years        years           years         Total
            2010                                              RM'000        RM'000        RM'000          RM'000       RM'000         RM'000         RM'000

            Liabilities
            Deposits from customers                       25,594,409      2,013,432     3,190,429          24,027       22,951               -   30,845,248
            Deposits and placements of banks
             and other financial institutions               6,537,162              -       68,186                -            -              -     6,605,348
            Bills and acceptances payable                     110,161              -            -                -            -              -       110,161
            Recourse obligation on loans sold to
             Cagamas Berhad                                         -             -             -               -      286,370              -       286,370
            Subordinated term loan                                  -             -             -               -            -        300,000       300,000
            Other liabilities                                 487,425        14,144        19,412             295            -              -       521,276
            Derivative financial liabilities                   12,207        12,666           602          17,828        7,336          6,921        57,560
            Provision for taxation                                  -             -            22               -            -              -            22
            Deferred tax liabilities                                -             -             -               -            -         24,932        24,932
                                                           32,741,364     2,040,242     3,278,651          42,150      316,657        331,853    38,750,917

            On balance sheet gap                          (18,896,841)     (763,665) (2,237,200)       5,340,696 5,194,933        14,675,081      3,313,004
            Off balance sheet credit commitments                    -             - 13,700,237                 -         -                 -     13,700,237
            Derivatives                                       385,598       218,885     (23,126)         (30,000)        -                 -        551,357
            Net maturity mismatch                         (18,511,243)     (544,780) 11,439,911        5,310,696 5,194,933        14,675,081     17,564,598

            (1) Other non-financial assets include tax recoverable, statutory deposits with BNM, deferred tax assets, investment in jointly controlled entity,
                property and equipment and intangible assets.




                                                                                            149
Company No: 25046 T




    Affin Bank Berhad
    (Incorporated in Malaysia)

    NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

    38 FINANCIAL RISK MANAGEMENT (continued)

        (iii) Liquidity Risk (continued)

            Liquidity risk for assets and liabilities based on remaining contractual maturities (continued):

                                                           Up to 3        > 3-6        > 6-12         > 1-3        > 3-5       Over 5
            The Bank                                       months       months        months         years        years         years       Total
            2010                                           RM'000       RM'000        RM'000        RM'000       RM'000       RM'000       RM'000

            Assets
            Cash and short-term funds                    6,102,307             -              -            -           -            -    6,102,307
            Deposits and placements with banks
             and other financial institutions              442,636       42,341       15,680              -       58,876            -      559,533
            Financial assets held-for-trading              149,853            -            -              -            -            -      149,853
            Financial investments available-for-sale     1,078,104      579,919      174,050      1,496,103      750,878      349,206    4,428,260
            Financial investments held-to-maturity         110,096            -            -        113,955            -      207,108      431,159
            Loan, advances and financing                 2,950,236      526,876      748,576      2,922,556    3,873,320   11,397,687   22,419,251
            Other assets                                    48,443        8,108       10,830          4,983            -      161,255      233,619
            Derivative financial assets                     22,129        3,604          109         10,692        2,542        7,079       46,155
            Amount due from subsidiaries                   185,271            -            -              -            -            -      185,271
            Other non-financial assets (1)                 245,130            -       46,072              -            -      607,057      898,259
                                                        11,334,205    1,160,848      995,317      4,548,289    4,685,616   12,729,392   35,453,667




                                                                                        150
Company No: 25046 T




    Affin Bank Berhad
    (Incorporated in Malaysia)

    NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2010

    38 FINANCIAL RISK MANAGEMENT (continued)

        (iii) Liquidity Risk (continued)

            Liquidity risk for assets and liabilities based on remaining contractual maturities (continued):

                                                             Up to 3        > 3-6        > 6-12          > 1-3         > 3-5        Over 5
            The Bank                                         months       months        months          years         years          years        Total
            2010                                             RM'000       RM'000        RM'000         RM'000        RM'000        RM'000        RM'000

            Liabilities
            Deposits from customers                      20,894,201     1,584,038     2,792,882         20,739       22,014               -   25,313,874
            Deposits and placements of banks
             and other financial institutions              5,667,236             -       68,186               -            -              -    5,735,422
            Bills and acceptances payable                    110,161             -            -               -            -              -      110,161
            Recourse obligation on loans sold to
             Cagamas Berhad                                       -             -             -              -      286,370             -        286,370
            Subordinated term loan                                -             -             -              -            -       300,000        300,000
            Other liabilities                               435,580        11,655        17,117            270            -             -        464,622
            Derivative financial liabilities                 12,207        12,666           602         17,828        7,336         6,921         57,560
            Amount due to subsidiaries                       47,926             -             -              -            -             -         47,926
            Deferred tax liabilities                              -             -             -              -            -        24,932         24,932
                                                         27,167,311     1,608,359     2,878,787         38,837      315,720       331,853     32,340,867

            On balance sheet gap                        (15,833,106)     (447,511) (1,883,470)       4,509,452 4,369,896       12,397,539      3,112,800
            Off balance sheet credit commitments                  -             - 12,245,520                 -         -                -     12,245,520
            Derivatives                                     385,598       218,885     (23,126)         (30,000)        -                -        551,357
            Net maturity mismatch                       (15,447,508)     (228,626) 10,338,924        4,479,452 4,369,896       12,397,539     15,909,677

            (1) Other non-financial assets include tax recoverable, statutory deposits with BNM, investment in subsidiairies, property and equipment
                and intangible assets.




                                                                                          151
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (iv) Operational Risk Management

               Operational risk is the risk of loss due to action on or by people, processes, infrastructure or
               technology or similar events which have an operational impact, including fraudulent activities.

               The Bank manages such risk through a control based environment in which policies and
               procedures are formulated after taking into account individual unit's business activities, the
               environment and market in which it is operating and any regulatory requirement in force. Risk is
               identified through the use of assessment tools and measured using threshold/limits mapped
               against risk matrix. Monitoring and control procedures include the use of key control standards,
               independent tracking of risk, back-up procedures and contingency plans, including disaster
               recovery and business continuity plans. This is supported by periodic reviews undertaken by
               Group Internal Audit to ensure adequacy and effectiveness of the Group Operational Risk
               Management process.

               The Bank gathers and reports operational risk loss and 'near miss' events to Group Operational
               Risk Management Committee and Board Risk Management Committee. Appropriate remedial
               actions are reviewed and implemented to minimize the recurrence of such events.

               Group Risk Management commenced an internal operational risk (including anti-money
               laundering/counter financing of terrorism and business continuity management) Certification
               Program in November 2009.

               Since October 2010, this certification programme is being conducted vide an e-learning portal.
               Operational Risk coordinators will first go through an on-line self learning exercise before
               attempting on-line assessments to measure their skills and knowledge level. This will enable
               Group Risk Management to prescribe appropriate training and development activities for the
               coordinators. It is a requirement that all Operational Risk coordinators and staff engaged in
               operational risk work are all duly certified.




                                                      152
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (v)   Fair value of financial instruments

                 Financial instruments comprise financial assets, financial liabilities and also off balance sheet
                 financial instruments. The fair value of a financial instrument is the amount at which the
                 instruments could be exchanged or settled between knowledgeable and willing parties in an
                 arm’s length transaction. The information presented herein represents estimates of fair values as
                 at reporting date.
                 Quoted market prices, when available, are used as the measure of fair values. For financial
                 instruments, without quoted market prices, fair values are estimated using net present value or
                 other valuation techniques. These techniques involve a certain degree of uncertainty depending
                 on the assumptions used and judgements made regarding risk characteristics of various financial
                 instruments, discount rates, estimates of future cash flows, future expected loss experience and
                 other factors. Changes in these assumptions could materially affect these estimates and the
                 resulting fair value.

                 Fair value information for non-financial assets and liabilities are excluded as they do not fall
                 within the scope of FRS 132 which requires fair values to be disclosed. This includes property
                 and equipment, statutory deposits with Bank Negara Malaysia, investment in subsidiaries, other
                 assets, tax recoverable, deferred tax and intangible assets.

                 The fair values of the financial assets and financial liabilities of the Group and the Bank
                 approximated to their respective carrying value as at reporting date, except for the following:


                                                               The Group                      The Bank
                                                                  2010                          2010
                                                          Carrying        Fair          Carrying        Fair
                                                             value       value             value       value
                                                          RM'000       RM'000           RM'000       RM'000
                 Financial assets
                 Financial investments held-to-maturit    431,159         646,941        431,159        646,941
                 Loans, advances and financing         25,974,847      26,270,051     22,419,251     22,690,852
                                                       26,406,006      26,916,992     22,850,410     23,337,793

                 Financial liabilities
                 Deposits from customers               30,845,248      30,834,587     25,313,874     25,306,320
                 Recourse obligation on loans
                  sold to Cagamas Berhad                  286,370         303,270        286,370        303,270
                                                       31,131,618      31,137,857     25,600,244     25,609,590




                                                        153
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (v)   Fair value of financial instruments (continued)

                                                                    The Group                       The Bank
                                                                       2009                           2009
                                                              Carrying         Fair          Carrying         Fair
                                                                 value        value             value        value
                                                              RM'000        RM'000           RM'000        RM'000
                 Financial assets
                 Financial investments held-to-maturit    481,474             502,532       480,899           501,957
                 Loans, advances and financing         21,989,304          22,313,398    19,108,595        19,320,106
                                                       22,470,778          22,815,930    19,589,494        19,822,063

                 Financial liabilities
                 Deposits from customers                    26,440,319     26,431,631    21,815,054        21,804,882
                 Recourse obligation on loans
                  sold to Cagamas Berhad                       297,216        313,077       297,216           313,077
                                                            26,737,535     26,744,708    22,112,270        22,117,959


                 The fair values of derivative financial instruments at the reporting date are as follows:


                                                  The Group and the Bank                The Group and the Bank
                                                          2010                                  2009
                                              Underlying                            Underlying
                                                notional     Asset Liability          notional     Asset Liability
                                                RM'000 RM'000 RM'000                  RM'000    RM'000      RM'000

                 Foreign exchange contracts
                 - forward contracts              728,471          2,381   19,025     704,000      4,134       7,040
                 - swaps                        1,688,004         34,031   21,087   1,510,845     17,530       7,698

                 Interest rate contracts
                 - swaps                        1,495,313          9,743   17,448   1,414,998      8,063      26,946




                                                            154
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (v)   Fair value of financial instruments (continued)

                 The derivative financial instruments become favourable (assets) or unfavourable (liabilities) as a
                 result of fluctuation in market interest rates or foreign exchange rates relative to their terms. The
                 extent to which instruments are favourable or unfavourable and the aggregate fair values of
                 derivative financial assets and liabilities can fluctuate significantly from time to time.

                 The fair value estimates were determined by application of the methodologies and assumptions
                 described below.

                 Short-term funds and placements with banks and other financial institutions

                 For short-term funds and placements with banks and other financial institutions with maturity of
                 less than six months, the carrying amount is a reasonable estimate of fair value.

                 For amounts with maturities of six months or more, fair values have been estimated by reference
                 to current rates at which similar deposits and placements would be made to banks with similar
                 credit ratings and maturities.

                 Financial assets held-for-trading, financial investments available-for-sale and held-to-
                 maturity

                 The fair values of financial assets held-for-trading, financial investments available-for-sale and
                 financial investments held-to-maturity are reasonable estimates based on quoted market prices.
                 In the absence of such quoted prices, the fair values are based on the expected cash flows of the
                 instruments discounted by indicative market yields for the similar instruments as at reporting
                 date or the audited net tangible asset of the invested company.

                 Loans, advances and financing

                 Loans, advances and financing of the Group comprise of floating rate loans and fixed rate loans.
                 For performing floating rate loans, the carrying amount is a reasonable estimate of their fair
                 values.

                 The fair values of performing fixed rate loans are arrived at using the discounted cash flows
                 based on the prevailing market rates of loans and advances with similar credit ratings and
                 maturities.

                 The fair values of impaired loans and advances, whether fixed or floating are represented by their
                 carrying values, net of individual and collective allowances, being the reasonable estimate of
                 recoverable amount.




                                                          155
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      38   FINANCIAL RISK MANAGEMENT (continued)

           (v)   Fair value of financial instruments (continued)

                 Other assets and liabilities

                 The carrying value less any estimated allowance for financial assets and liabilities included in
                 other assets and other liabilities are assumed to approximate their fair values as these items are
                 not materially sensitive to the shift in market interest rates.

                 Deposits from customers, banks and other financial institutions, bills and acceptances
                 payable

                 The carrying values of deposits and liabilities with maturities of six months or less are assumed
                 to be reasonable estimates of their fair values. Where the remaining maturities of deposits and
                 liabilities are above six months, their estimated fair values are arrived at using the discounted
                 cash flows based on prevailing market rates currently offered for similar remaining maturities.

                 The estimated fair value of deposits with no stated maturity, which include non-interest bearing
                 deposits, approximates carrying amount which represents the amount repayable on demand.

                 Recourse obligation on loans sold to Cagamas Berhad

                 For floating rate loans sold to Cagamas Berhad, the carrying value is generally a reasonable
                 estimate of their fair values.

                  The fair values of fixed rate loans sold to Cagamas Berhad are arrived at using the discounted
                 cash flow methodology at prevailing market rates of similarly profiled loans.

                 Subordinated term loan

                 For fixed rate borrowings, the estimate of fair value is based on discounted cash flow model
                 using prevailing lending rates for borrowings with similar risks and remaining term to maturity.

                 For floating rate borrowings, the carrying value is generally a reasonable estimate of their fair
                 values.

                 Derivative financial instruments

                 The fair value of exchange rate and interest rate contracts is the estimated amount the Group
                 would receive or pay to terminate the contracts at the reporting date.




                                                        156
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      39   LEASE COMMITMENTS

           The Bank has lease comitments in respect of rented premises and hired equipment, all of which are
           classified as operating leases. A summary of the non-cancellable long-term commitments, net of sub-
           leases are as follows:

                                                                                   The Group and The Bank
                                                                                        2010         2009
                                                                                     RM'000       RM'000

           Within one year                                                              19,771        18,776
           One year to five years                                                       79,084        75,104


      40   CAPITAL AND OPERATING COMMITMENTS

           Capital commitments

           Capital expenditure approved by the Directors but not provided for in the financial statements
           amounted to approximately:

                                                                                   The Group and The Bank
                                                                                        2010         2009
                                                                                     RM'000       RM'000

           Authorised and contracted for                                                 4,163         3,188
           Authorised but not contracted for                                                 -             -
                                                                                         4,163         3,188
           Analysed as follows:
            Property and equipment                                                       4,163         3,188


           Operating commitments

           Operating expenditure approved by the Directors but not provided for in the financial statements
           amounted to approximately:

                                                                                   The Group and The Bank
                                                                                        2010         2009
                                                                                     RM'000       RM'000

           Authorised and contracted for                                               320,852       375,383




                                                      157
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      41    CAPITAL MANAGEMENT

            The Group and the Bank's objectives when managing capital, are:

            •    To comply with the capital requirements set by the regulators of the banking markets where the
                 entities within the Group and the Bank operates;

            •    To safeguard the Group and the Bank's ability to continue as a going concern so that it can
                 continue to provide returns for shareholders and benefits for other stakeholders; and

            •    To maintain a strong capital base to support the development of its business.


           The Group and the Bank maintain a ratio of total regulatory capital to its risk-weighted assets above a
           minimum level agreed with the management which takes into account the risk profile of the Group and
           the Bank.

           The table in Note 42 below summarises the composition of regulatory capital and the ratios of the
           Group and the Bank for the year ended 31 December 2010.


      42    CAPITAL ADEQUACY

            The capital adequacy ratios are as follows:

                                                                   The Group #                        The Bank
                                                            Basel II     Basel II          Basel II        Basel II
                                                              2010         2009              2010            2009
                                                           RM'000        RM'000           RM'000           RM'000

            Tier I capital
            Paid-up share capital                         1,439,285      1,439,285       1,439,285       1,439,285
            Share premium                                   408,389        408,389         408,389         408,389
            Retained profits                                499,179        317,517         411,831         249,121
            Statutory reserve                               888,910        789,221         807,500         720,824
                                                          3,235,763      2,954,412       3,067,005       2,817,619
            Less:
             Goodwill                                      (137,323)      (137,323)       (137,323)       (137,323)
             Deferred tax assets *                                -        (60,961)              -         (52,105)
            Total Tier I capital                          3,098,440      2,756,128       2,929,682       2,628,191




                                                          158
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      42   CAPITAL ADEQUACY (continued)

                                                                  The Group #                       The Bank
                                                           Basel II     Basel II         Basel II        Basel II
                                                             2010         2009             2010            2009
                                                          RM'000        RM'000          RM'000           RM'000

           Tier II capital
           Subordinated term loan                         300,000        300,000         300,000         300,000
           General allowance for bad and
            doubtful debts and financing                        -        335,067               -         291,000
           Collective impairment @                        153,538              -         111,304               -
           Total Tier II capital                          453,538        635,067         411,304         591,000
           Less:
            Investment in capital instruments
              of other banking institutions               (39,858)      (217,056)        (39,858)       (200,898)
            Investment in subsidiaries                    (27,429)       (27,429)       (287,429)       (287,429)
           Capital base                                 3,484,691      3,146,710       3,013,699       2,730,864

           Core capital ratio                              11.51%          11.42%         12.35%          12.35%
           Risk-weighted capital ratio                     12.94%          13.04%         12.71%          12.83%
           Core capital ratio (net of
            proposed dividends) ^                          11.24%          11.19%         12.05%          12.09%
           Risk-weighted capital ratio (net
            of proposed dividends) ^                       12.67%          12.81%         12.40%          12.58%

           Risk-weighted assets for
            credit risk                                24,768,236     22,071,130      21,849,466      19,478,147
           Risk-weighted assets for
            market risk                                      96,572        92,319         91,973          84,589
           Risk-weighted assets for
            operational risk                            2,062,578      1,976,470       1,776,655       1,721,636
           Total risk-weighted assets                  26,927,386     24,139,919      23,718,094      21,284,372


           * Deferred tax assets exclude deferred tax arising from investment fluctuation reserves.

           #   The Group comprises the Bank and the Bank's subsidiary, AFFIN Islamic Bank Berhad.

           @ Qualifying collective impairment is restricted to allowances on unimpaired portion of the loans,
             advances and financing.

           ^   Net proposed dividends of RM71,964,000 (2009: RM53,973,000).

           Pursuant to Bank Negara Malaysia’s circular, ‘Recognition of Deferred Tax Asset ('DTA') and
           Treatment of DTA for RWCR Purposes’ dated 8 August 2003, deferred tax income/(expenses) is
           excluded from the calculation of Tier I capital and DTA is excluded from the calculation of risk-
           weighted assets.

                                                       159
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      43   LITIGATIONS AGAINST THE BANK

           (a)   As part of a merger of banking businesses, by an Agreement dated 30 August 2000 ('the
                 Acquisition Agreement') between AFFIN Holdings Berhad ('AHB') , AFFIN Bank Berhad
                 ('ABB'), BSN Commercial Bank (Malaysia) Berhad ('BSNC') and Bank Simpanan Nasional
                 Berhad ('BSN'), it was agreed that all banking assets and liabilities of BSNC would be sold to
                 ABB in consideration of a purchase price of RM338,560,000 to be paid partly in cash and partly
                 in shares ('the Purchase Price'). Pursuant to clause 2.1.5 of the Acquisition Agreement, BSNC
                 and BSN undertook to ABB that debts other than those reflected as bad or doubtful debts in the
                 audited financial statements of BSNC will be recoverable in the ordinary course of business. For
                 the debts not recoverable, BSNC undertook to pay ABB within 30 days from the date of receipt
                 of the Bank’s letter of demand, the amounts claimed subject to a limit of 30% of the Purchase
                 Price amounting to RM101,568,000.

                 Subsequent to the merger, an audit was conducted and it was found that there had been
                 significant under-provisioning of bad and doubtful debts by BSNC. AHB, ABB and BSN agreed
                 that the purchase price payable to BSNC would be reduced to compensate for this under-
                 provisioning ('the Settlement Agreement'). In return, it was agreed that ABB would assign the
                 bad and doubtful debts to BSNC under clause 2.1.5 of the Acquisition Agreement, subject to
                 approval being given to both parties by regulatory authorities for the reassignment. However,
                 the accounts to be reassigned to BSNC were not identified then.

                 Dispute arose when ABB subsequently did not agree with BSNC on the assignment of 106 non-
                 performing accounts with gross amount of RM988,000,000 or net amount of RM578,000,000
                 which have been identified unilaterally by BSNC. In 2005, BSNC issued an Originating
                 Summons against AHB and ABB seeking an order for ABB to reassign the 106 accounts to
                 BSNC.

                 On 30 November 2009, the Court has fixed the matter for further case management where filing
                 of documents, statement of agreed/non-agreed facts and statements of issues will be tried
                 accordingly. On 20 August 2010 where the matter came up for case management before the
                 Judge, both counsels briefed the Judge on the facts of this case. The Judge suggested for both
                 parties to come to a settlement, in the event that there is still room for negotiation.

                 On 8 September 2010, the Plaintiff's solicitors requested for an adjournment at the trial. The
                 Judge vacated the trial dates and set the matter down for case management on 8 October 2010
                 whcich was further postponed to 10 December 2010. On 10 December 2010 the matter was fixed
                 for trial on 4, 5 , 6 ,7 and 8 April 2011.




                                                       160
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      43   LITIGATIONS AGAINST THE BANK (continued)

           (b) There was a legal suit between Malayan Banking Berhad's ('MBB') predecessor-in-title,
               PhileoAllied Bank (Malaysia) Berhad and AFFIN Bank Berhad's ('ABB') predecessor-in-title,
               BSN Commercial Bank (Malaysia) Berhad with regards to who has prior charge over the shares
               of Kuo Shinn Sdn Bhd (the 'Shares').

               The suit was initiated by PhileoAllied Bank (Malaysia) Berhad vide an Originating Summons
               dated 28 January 2000 against BSN Commercial Bank (Malaysia) Berhad for inter alia the return
               of the Shares or its equivalent value if the Shares had been sold by BSN Commercial Bank
               (Malaysia) Berhad.

               Subsequently, the High Court allowed MBB's claim on 25 November 2002 wherein the High
               Court ordered for the return of the Shares within 7 days from the date of the Order or in the event
               the Shares had been sold, the sale proceeds of the Shares to be paid to MBB ('25 November 2002
               Order'). ABB had filed an appeal to the Court of Appeal against the 25 November 2002 Order
               which was dismissed on 27 November 2008. Further thereto, ABB had applied for leave to
               appeal to the Federal Court but the leave application was dismissed with costs by the Federal
               Court on 8 July 2009.

               Following the decision of the Federal Court, ABB had delivered the share certificates to MBB in
               August 2009. However, MBB refused to accept the share certificates, with the view that the
               shares had been disposed. MBB then proceeded to enforce the 25 November 2002 Order vide an
               application for a monetary judgement in the Kuala Lumpur High Court.

               On 31 May 2010, the High Court allowed MBB's application for monetary judgement wherein
               the High Court ordered ABB to pay the sum of RM30 million together with 8% interest thereon
               from 2 December 2002 until the date of payment and payment to be made within 14 days of the
               Order dated 31 May 2010 (the 'Judgement Sum')('31 May 2010 Order').

               Pursuant thereto, ABB had applied for a stay of execution of the 31 May 2010 Order pending
               appeal to the Court of Appeal. The stay of execution was dismissed by the Kuala Lumpur High
               Court on 18 June 2010 and ABB was ordered to pay the Judgement Sum within 21 days from 18
               June 2010. Thereafter, ABB filed an application for stay of execution of the 31 May 2010 Order
               to the Court of Appeal which was subsequently dismissed on 5 July 2010 with costs in the sum of
               RM2,000 to be paid to MBB.

               The Court of Appeal had fixed the hearing of ABB's appeal on 25 August 2010 and parties were
               required to file in their respective written submission on or before 11 August 2010. On 8 October
               2010, the appeal was however dismissed.

               On 8 November 2010 the Bank filed the Notice for Motion together with the Affidavit pertaining
               to the application for leave to appeal to the Federal Court against decision of the Court of
               Appeal. The Federal Court however dismissed ABB's application for leave to appeal on 22
               February 2011.




                                                       161
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      43   LITIGATIONS AGAINST THE BANK (continued)

           (c)   Other than above, there are various legal suits against the Bank in respect of claims and counter
                 claims of approximately RM86.3 million (2008: RM103.8 million). Based on legal advice, the
                 Directors are of the opinion that no provision for damages need to be made in the financial
                 statements, as the probability of adverse adjudication against the Bank is remote.




      44   CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS


           The Group and the Bank makes estimates and assumptions concerning the future. The resulting
           accounting estimates will, by definition, seldom equal the related actual results. To enhance the
           information content of the estimates, certain variables that are anticipated to have material impact to
           the Group’s and the Bank’s results and financial position are tested for sensitivity to changes in the
           underlying parameters. The estimates and assumptions that have a significant risk of causing a
           material adjustment to the carrying amount of assets and liabilities within the next financial year are
           discussed below.


           Allowance for losses on loans, advances and financing

           The accounting estimates and judgments related to the impairment of loans and provision for off-
           balance sheet positions is a critical accounting estimate for because the underlying assumptions used
           for both the individually and collectively assessed impairment can change from period to period and
           may significantly affect the Group and the Bank’s results of operations.

           In assessing assets for impairment, management judgment is required. The determination of the
           impairment allowance required for loans which are deemed to be individually significant often
           requires the use of considerable management judgment concerning such matters as local economic
           conditions, the financial performance of the counterparty and the value of any collateral held, for
           which there may not be a readily accessible market. The actual amount of the future cash flows and
           their timing may differ from the estimates used by management and consequently may cause actual
           losses to differ from the reported allowances.




                                                        162
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      44   CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

           Allowance for losses on loans, advances and financing (continued)

           The impairment allowance for portfolios of smaller-balance homogenous loans, such as those to
           individuals and small business customers of the private and retail business, and for those loans which
           are individually significant but for which no objective evidence of impairment exists, is determined on
           a collective basis. The collective impairment allowance is calculated on a portfolio basis using
           statistical models which incorporate numerous estimates and judgments, and therefore is subject to
           estimation uncertainty. The Group and the Bank perform a regular review of the models and
           underlying data and assumptions as far as possible to reflect the current economic circumstances.
           The probability of default, loss given defaults, and loss identification period, amongst other things,
           are all taken into account during this review.


           Estimated impairment of goodwill

           The Group performs an impairment review on an annual basis to ensure that the carrying value of the
           goodwill does not exceed its recoverable amounts from cash generating units to which the goodwill is
           allocated. The recoverable amount represents the present value of the estimated future cash flows
           expected to arise from continuing operations. Therefore, in arriving at the recoverable amount,
           management exercise judgement in estimating the future cash flows, growth rate and discount rate.




                                                        163
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      45   CHANGES IN ACCOUNTING POLICIES

           During the financial year, the Group and the Bank have changed the following accounting policies
           upon adoption of new accounting standards, amendments and improvements to published standards
           and interpretations:

           • Financial assets – Note G
           • Leasehold land – Note K

           The following Notes (i) to (ii) disclose the impacts of such changes on the financial statements of the
           Group and Bank.


           Impact on adoption of FRS 139

           i)   Impact on the Group and the Bank's statement of financial position

                                                                           Balance as at 1 January 2010
                                                                     As previously                         As
                                                                          reported      FRS 139      Adjusted
                The Group                                                 RM'000         RM'000       RM'000

                Assets
                Financial investments available-for-sale                5,627,371          83,639      5,711,010
                Financial investments held-to-maturity                    481,474         (25,279)       456,195
                Loans, advances and financing                          21,989,304          27,090     22,016,394
                Other assets                                              461,197         (30,691)       430,506
                Derivative financial assets                                     -          29,727         29,727
                Deferred tax assets                                        54,789         (21,123)        33,666
                                                                       28,614,135          63,363     28,677,498

                Liabilities
                Other liabilities                                         473,429         (41,684)       431,745
                Derivative financial liabilities                                -          41,684         41,684
                                                                          473,429               -        473,429

                Equity
                Reserves - investment fluctuation reserve                  (1,880)         43,770         41,890
                Reserves - retained profits                               332,003          19,593        351,596
                                                                          330,123          63,363        393,486




                                                        164
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      45   CHANGES IN ACCOUNTING POLICIES (continued)

           Impact on adoption of FRS 139 (continued)

           i)   Impact on the Group and the Bank's statement of financial position (continued)

                                                                          Balance as at 1 January 2010
                                                                    As previously                         As
                                                                         reported      FRS 139      Adjusted
                The Bank                                                 RM'000         RM'000       RM'000

                Assets
                Financial investments available-for-sale              4,239,770          83,568     4,323,338
                Financial investments held-to-maturity                  480,899         (24,704)      456,195
                Loans, advances and financing                        19,108,595          21,502    19,130,097
                Other assets                                            428,498         (33,022)      395,476
                Derivative financial assets                                   -          29,727        29,727
                Deferred tax assets                                      54,390         (19,269)       35,121
                                                                     24,312,152          57,802    24,369,954

                Liabilities
                Other liabilities                                       473,429         (41,684)     431,745
                Derivative financial liabilities                              -          41,684       41,684
                                                                        473,429               -      473,429

                Equity
                Reserves - investment fluctuation reserve                (6,853)         44,148       37,295
                Reserves - retained profits                             249,121          13,654      262,775
                                                                        242,268          57,802      300,070

           The Group and the Bank did not disclose the effect of the adoption of FRS 139 on the current period
           because it is impracticable.




                                                       165
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      45   CHANGES IN ACCOUNTING POLICIES (continued)

           Impact on adoption of FRS 117

           i)   Impact on the Group and the Bank's statement of financial position

                                                                         Balance as at 31 December 2008
                                                                    As previously                        As
                                                                         reported      FRS 117      restated
                The Group                                                RM'000         RM'000       RM'000

                Other assets                                            531,026       (17,347)     513,679
                Property and equipment                                  187,758        17,347      205,105


                                                                         Balance as at 31 December 2009
                                                                    As previously                        As
                                                                         reported      FRS 117      restated
                                                                         RM'000         RM'000       RM'000

                Other assets                                            431,470       (16,180)     415,290
                Property and equipment                                  171,578        16,180      187,758


                                                                         Balance as at 31 December 2008
                                                                    As previously                        As
                                                                         reported      FRS 117      restated
                The Bank                                                 RM'000         RM'000       RM'000

                Other assets                                            482,934       (15,660)     467,274
                Property and equipment                                  182,909        15,660      198,569


                                                                         Balance as at 31 December 2009
                                                                    As previously                        As
                                                                         reported      FRS 117      restated
                                                                         RM'000         RM'000       RM'000

                Other assets                                            398,771       (14,500)     384,271
                Property and equipment                                  163,198        14,500      177,698




                                                      166
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      45   CHANGES IN ACCOUNTING POLICIES (continued)

           Impact on adoption of FRS 117

           ii)   Impact on the Group and the Bank's income statement/statement of comprehensive income

                                                                         For the financial year ended
                                                                              31 December 2008
                                                                  As previously                          As
                                                                       reported      FRS 117        restated
                 The Group                                             RM'000         RM'000         RM'000

                 Establishment cost
                 Depreciation                                           22,514           465        22,979
                 Lease rental - leasehold properties                       465          (465)            -


                                                                         For the financial year ended
                                                                              31 December 2009
                                                                  As previously                          As
                                                                       reported      FRS 117        restated
                                                                       RM'000         RM'000         RM'000

                 Establishment cost
                 Depreciation                                           21,862           241        22,103
                 Lease rental - leasehold properties                       241          (241)            -


                                                                         For the financial year ended
                                                                              31 December 2008
                                                                  As previously                          As
                                                                       reported      FRS 117        restated
                 The Bank                                              RM'000         RM'000         RM'000

                 Establishment cost
                 Depreciation                                           21,829           457        22,286
                 Lease rental - leasehold properties                       457          (457)            -


                                                                         For the financial year ended
                                                                              31 December 2009
                                                                  As previously                          As
                                                                       reported      FRS 117        restated
                                                                       RM'000         RM'000         RM'000

                 Establishment cost
                 Depreciation                                           21,092           234        21,326
                 Lease rental - leasehold properties                       234          (234)            -

                                                       167
Company No: 25046 T


      AFFIN Bank Berhad
      (Incorporated in Malaysia)

      NOTES TO THE FINANCIAL STATEMENTS
      for the financial year ended 31 December 2010

      46   CREDIT EXPOSURES ARISING FROM TRANSACTIONS WITH CONNECTED
           PARTIES

           The following credit exposures are based on Bank Negara Malaysia's revised Guidelines on Credit
           Transaction and Exposures with Connected Parties, which are effective 1 January 2008.

           (i)   The aggregate value of outstanding credit exposures with connected parties
                 (RM'000)                                                                            2,677,539
           (ii) The percentage of outstanding credit exposures to connected parties as a
                 proportion of total credit exposures                                                       7%
           (iii) The percentage of outstanding credit exposures with connected parties which
                 is non-performing or in default                                                           Nil


      47   APPROVAL OF FINANCIAL STATEMENTS

           The financial statements have been approved for issue in accordance with a resolution of the Board of
           Directors on 28 February 2011.




                                                       168
Company No: 25046 T

     AFFIN BANK BERHAD
     (Incorporated in Malaysia)

     STATEMENT BY DIRECTORS
     PURSUANT TO SECTION 169 (15) OF THE COMPANIES ACT, 1965

     We, JEN TAN SRI DATO' SERI ISMAIL BIN HAJI OMAR (BERSARA) and DATO' ZULKIFLEE
     ABBAS BIN ABDUL HAMID, two of the Directors of AFFIN BANK BERHAD, state that, in the opinion
     of the Directors, the accompanying financial statements set out on pages 26 to 168 are drawn up so as to give
     a true and fair view of the state of affairs of the Group and the Bank as at 31 December 2010 and of the
     results and cash flows of the Group and the Bank for the financial year ended on the date in accordance with
     the provisions of the Companies Act, 1965, MASB Approved Accounting Standards for Entities Other Than
     Private Entities and Bank Negara Malaysia Guidelines.

     In accordance with a resolution of the Board of Directors dated 28 February 2011.




     JEN TAN SRI DATO' SERI ISMAIL BIN HAJI OMAR (BERSARA)
     Chairman




     DATO' ZULKIFLEE ABBAS BIN ABDUL HAMID
     Managing Director/Chief Executive Officer


     STATUTORY DECLARATION
     PURSUANT TO SECTION 169 (16) OF THE COMPANIES ACT, 1965

     I, EE KOK SIN, the officer of AFFIN BANK BERHAD primarily responsible for the financial management
     of the Group and the Bank, do solemnly and sincerely declare that, in my opinion, the accompanying
     financial statements set out on pages 26 to 168, are correct and I make this solemn declaration
     conscientiously believing the same to be true, by virtue of the provisions of the Statutory Declarations Act,
     1960.




     EE KOK SIN
     Subscribed and solemnly declared by the abovenamed EE KOK SIN at Kuala Lumpur in Malaysia on 28
     February 2011, before me.




     Commissioner for Oaths

                                                         169
Company No: 25046 T



       INDEPENDENT AUDITORS' REPORT
       TO THE MEMBER OF AFFIN BANK BERHAD
       (Incorporated in Malaysia)


       REPORT ON THE FINANCIAL STATEMENTS

       We have audited the financial statements of AFFIN Bank Berhad, which comprise the statements of
       financial position as at 31 December 2010 of the Group and the Bank, and the statements of income,
       comprehensive income, changes in equity and cash flows of the Group and the Bank for the year then
       ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages
       26 to 168.

       Directors’ Responsibility for the Financial Statements

       The directors of the Bank are responsible for the preparation and fair presentation of these financial
       statements in accordance with MASB Approved Accounting Standards in Malaysia for Entities Other
       than Private Entities, Bank Negara Malaysia Guidelines and the Companies Act, 1965. This
       responsibility includes: designing, implementing and maintaining internal control relevant to the
       preparation and fair presentation of financial statements that are free from material misstatement, whether
       due to fraud or error; selecting and applying appropriate accounting policies; and making accounting
       estimates that are reasonable in the circumstances.

       Auditors’ Responsibility

       Our responsibility is to express an opinion on these financial statements based on our audit. We
       conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards
       require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
       assurance whether the financial statements are free from material misstatement.

       An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
       the financial statements. The procedures selected depend on our judgement, including the assessment of
       risks of material misstatement of the financial statements, whether due to fraud or error. In making those
       risk assessments, we consider internal control relevant to the Bank’s preparation and fair presentation of
       the financial statements in order to design audit procedures that are appropriate in the circumstances, but
       not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control. An audit
       also includes evaluating the appropriateness of accounting policies used and the reasonableness of
       accounting estimates made by the directors, as well as evaluating the overall presentation of the financial
       statements.

       We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
       our audit opinion.




                                                         170
Company No: 25046 T


       INDEPENDENT AUDITORS' REPORT
       TO THE MEMBER OF AFFIN BANK BERHAD
       (Incorporated in Malaysia)


       REPORT ON THE FINANCIAL STATEMENTS (continued)

       Opinion

       In our opinion, the financial statements have been properly drawn up in accordance with MASB
       Approved Accounting Standards in Malaysia for Entities Other than Private Entities, Bank Negara
       Malaysia Guidelines and the Companies Act, 1965 so as to give a true and fair view of the financial
       position of the Group and the Bank as of 31 December 2010 and of their financial performance and cash
       flows for the year then ended.

       REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

       In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the
       following:

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

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

       c) Our audit reports on the financial statements of the subsidiaries did not contain any qualification or
          any adverse comment made under Section 174(3) of the Act.



       OTHER MATTERS

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




       PRICEWATERHOUSECOOPERS                               MOHAMMAD FAIZ BIN MOHAMMAD AZMI
       (No. AF : 1146)                                      (No. 2025/03/12 (J))
       Chartered Accountants                                Chartered Accountant


       Kuala Lumpur, Malaysia
       28 February 2011




                                                         171
Company No: 25046 T



AFFIN Bank Berhad
(Incorporated in Malaysia)




BASEL II
PILLAR 3 DISCLOSURES
        st
As at 31 December 2010
Company No: 25046 T



       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures

          Table of Contents

       1. Introduction
          1.1 Background
          1.2 Scope of Application

       2. Risk Governance Structure
          2.1 Overview
          2.2 Board Committees
          2.3 Management Committees
          2.4 Group Risk Management Function
          2.5 Internal Audit and Internal Control Activities

       3. Capital
          3.1 Capital Structure
          3.2 Capital Adequacy

       4. Risk Management Objectives and Policies

       5. Credit Risk
          5.1 Credit risk management objectives and policies
          5.2 Application of Standardised Approach for credit risk
          5.3 Credit risk measurement
          5.4 Risk limit control and mitigation policies
          5.5 Credit risk monitoring
          5.6 Impairment provisioning
          5.7 Credit risk culture

       6. Market Risk
          6.1 Market risk management objectives and policies
          6.2 Application of Standardised Approach for credit risk
          6.3 Market risk measurement, control and monitoring
          6.4 Value-at-Risk ('VaR')
          6.5 Foreign Exchange Risk
          6.6 Market risk culture

       7. Liquidity Risk
          7.1 Liquidity risk management objectives and policies
          7.2 Liquidity risk measurement, control and monitoring

       8. Operational Risk
          8.1 Operational risk management objectives and policies
          8.2 Application of Basic indicator approach for operational risk
          8.3 Operational risk measurement, control and monitoring
          8.4 Operational risk culture

       9. Shariah Compliance




                                                               172
Company No: 25046 T



       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      1    Introduction

      1.1 Background

           AFFINBANK ('ABB') adopted Basel II in January 2008 in line with the directive from Bank Negara Malaysia
           ('BNM'). The Basel II framework is structured around three fundamental Pillars.

           -    Pillar 1 defines the minimum capital requirement to ensure that financial institutions hold sufficient capital to
                cover their exposure to credit, market and operational risks.

           -    Pillar 2 requires financial institutions to have a process for assessing their overall capital adequacy in relation
                to their risk profile and a strategy for maintaining their capital levels.


           -    Pillar 3 requires financial institutions to establish and implement an appropriate disclosure policy that
                promotes transparency regarding their risk management practices and capital adequacy positions.

           ABB elected to adopt the following approaches under Pillar 1 requirements:

           -   Standardised Approach for Credit Risk
           -   Basic Indicator Approach for Operational Risk
           -   Standardised Approach for Market Risk

      1.2 Scope of Application

          This document contains the disclosure requirements under Pillar 3 for ABB for the year ended 31 December 2010.
          The disclosures are made in line with the Pillar 3 disclosure requirements under the Basel II framework as laid out
          by BNM.

          The disclosures should be read in conjunction with ABB’s 2010 Annual Report for the year ended 31 December
          2010.

          The Group’s capital requirements are generally based on the principles of consolidation adopted in the preparation
          of its financial statements. The Group’s consolidated entities comprises the Bank and the Bank’s subsidiary, AFFIN

      2    Risk governance structure

      2.1 Overview

          The Board of Directors of ABB is ultimately responsible for the overall performance of ABB. The Board’s
          responsibilities remain within the framework of BNM Guidelines. The Board also exercises great care to ensure
          that high ethical standards are upheld, and that the interests of stakeholders are not compromised. These include
          responsibility for determining ABB’s general policies and strategies for the short, medium and long term, approving
          business plans, including targets and budgets, and approving major strategic decisions.




                                                                 173
Company No: 25046 T



       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      2    Risk Governance Structure (continued)

      2.1 Overview (continued)

           The Board has overall responsibility for maintaining the proper management and protection of ABB’s interests by
           ensuring effective implementation of the risk management policy and process, as well as adherence to a sound
           system of internal control, and by seeking regular assurance on their effectiveness. The Board also recognises that
           risks cannot be eliminated completely. As such, the inherent system of internal control is designed to provide a
           reasonable though not absolute assurance against the risk of material errors, fraud or losses occurring. The system
           of internal controls encompasses controls relating to financial, operational, risk management and compliance with
           applicable laws, regulations, policies and guidelines.

           The terms of reference of the Board Committees as disclosed in the Annual Report provide an outline of its role and
           functions. In carrying out its functions, the Board has delegated specific responsibilities to other Board
           Committees, which operated under approved terms of reference, to assist the Board in discharging their duties. The
           Chairmen of the various Committees report on the outcome of their Committee meetings to the Board and any
           further deliberation is made at Board level, if required. These reports and deliberations are incorporated into the
           Minutes of the Board meetings. The Board meets on a monthly basis.
           .
           The Board of ABB has a balance composition with a strong independent element. It consists of representatives from
           the private sector with suitable qualifications fulfilling the fit and proper criteria as required by BNM/GP1, a
           mixture of different skills, competencies, experience and personalities.


      2.2 Board Committees

          Board Remuneration Committee ('BRC')

          The BRC is responsible for providing a formal and transparent procedure for developing the remuneration policy for
          Directors, Managing Director/Chief Executive Officer and key senior management officers and ensuring that
          compensation is competitive and consistent with ABB’s culture, objectives and strategy.

          The Committee obtains advice from experts in compensation and benefits, both internally and externally.

          Board Nominating Committee ('BNC')

          The BNC is responsible for providing a formal and transparent procedure for the appointment of Directors and
          Managing Director/Chief Executive Officer, assessing the effectiveness of individual Directors, the Board as a
          whole and the performance of the Managing Director/Chief Executive Officer and key senior management
          personnel.

          Board Risk Management Committee ('BRMC')

          The BRMC is responsible for overseeing management’s activities in managing credit, market, liquidity, operational,
          legal and other risks and to ensure that the risk management process is in place and functioning.




                                                               174
Company No: 25046 T



       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      2    Risk Governance Structure (continued)

      2.2 Board Committees (continued)

           Board Risk Management Committee ('BRMC')(continued)

           It has responsibility for reviewing and approving all risk management policies and risk management methodologies.
           BRMC also reviews guidelines and portfolio management reports including risk exposure information.

           The Committee also ensures that the procedures and framework in relation to identifying, measuring, monitoring and
           controlling risk are operating effectively.

           Board Loan Review and Recovery Committee ('BLRRC')

           The BLRRC is responsible in providing critical review of loans and other credit facilities with higher risk
           implications, after due process of checking, analysis, review and recommendation by the Credit Risk Management
           function, and if found necessary, exercise the power to veto loan applications that have been approved by the Group
           Management Loan Committee. BLRRC also reviews the non performing loan reports presented by the Management.

           Audit and Examination Committee ('AEC')

           The AEC is responsible for providing oversight on reviewing the adequacy and integrity of the internal control
           systems and oversees the work of the internal and external auditors.

           Reliance is placed on the results of independent audits performed primarily by internal auditors, the outcome of
           statutory audits on financial statements conducted by external auditors and on representations by Management based
           on their control self-assessment of all areas of their responsibility.

           Minutes of Audit & Examination Committee meetings, which provide a summary of the proceedings, are circulated
           to Board members for notation and discussion. ABB has an established Group Internal Audit Division (GIA) which
           reports functionally to the Audit Committee and administratively to the Managing Director/Chief Executive Officer.

           Shariah Committee

           ABB's business activities are subject to Shariah compliance and conformation by the Shariah Committee. The
           Shariah Committee is formed as legislated under Section 3(5)(b) of the Islamic Banking Act, 1983 and as per
           Guidelines on the Governance of Shariah Committee for the Islamic Financial Institutions ('BNM/GPS-i').

           The duties and responsibility of the Shariah Committee are as follows:


           (i)   To advise the Board on Shariah matters in order to ensure that the business operations of ABB comply with
                 the Shariah principles at all times;

           (ii) To endorse and validate relevant documentations of ABB's products to ensure that the product comply with
                Shariah principles; and




                                                               175
Company No: 25046 T



       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      2    Risk Governance Structure (continued)

      2.2 Board Committees (continued)

           Shariah Committee

           (iii) To advice ABB on matters to be referred to the Shariah Advisory Council.

      2.3 Management Committees

          Management Committee ('MCM')

          MCM comprising the senior management team chaired by the MD/CEO, assists the Board in managing the day-to-
          day operations and ensure its effectiveness. MCM formulates tactical plans and business strategies, monitors ABB’s
          overall performance, and ensures that the activities are in accordance with corporate objectives, strategies, policies
          and annual business plan and budget.

          Group Management Loan Committee ('GMLC')

          GMLC is established within senior management chaired by the MD/CEO to approve complex and larger loans and
          workout/recovery proposals beyond the delegated authority of the concerned individual senior management
          personnel of ABB.

          Asset and Liability Management Committee ('ALCO')

          ALCO is established within senior management to manage market and liquidity risks. Its responsibilities include:-


           (i)   Manage the asset liability of ABB through coordination of the overall planning process including strategic
                 planning, budgeting and asset liability management process;

           (ii) Direct ABB's overall acquisition and allocation of Funds;

           (iii) Prudently manage ABB's interest rate exposure;

           (iv) Determine the overall Balance Sheet strategy and ensuring policy compliance;

           (v) Prudently manage ABB's interest rate exposure;

           (vi) Determined the type and scope of derivative activities, approve individual derivative transactions as well as
                control over the level of exposure in derivatives; and

           (vii) Review of market risks in ABB's trading portfolios.




                                                                176
Company No: 25046 T



       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      2    Risk Governance Structure (continued)

      2.3 Management Committees (continued)

           Group Operational Risk Management Committee ('GORMC')

           GORMC is established within senior management to manage operational risks. Its responsibilities include:

           (i)   To evaluate operational risks issues on escalating importance/strategic risk exposure;

           (ii) To review and recommend on broad operational risks management policies best practices for adoption by
                ABB's operating units;

           (iii) To review the effectiveness of broad internal controls and making recommendation on changes if necessary;

           (iv) To review/approve recommendation on operational risk management groups section up to address specific
                issue;

           (v) To take the lead in inculcating an operational risks awareness culture;

           (vi) To approve operational risk management methodologies/measurements tools; and

           (vii) To review and approve the strategic operational risk management initiatives/plans and to endorse for BRMC's
                 approval if necessary.


           Early Alert Committee ('EAC')

           EAC is established within senior management chaired by the MD/CEO to monitor credit quality through monthly
           review of the Early Alert, Watchlist and Exit Accounts and review the actions taken to address the emerging risks
           and issues in these accounts.


      2.4 Group Risk Management Function


           An integrated risk management framework is in place. The Group Risk Management ('GRM') function, headed by
           Group Chief Risk Officer ('GCRO') and operating in an independent capacity, is part of ABB's senior management
           structure which works closely as a team in managing risks to enhance stakeholders' value.

           GRM reports to BRMC. Committees namely BLRRC, GMLC, ALCO and GORMC assist BRMC in managing
           credit, liquidity and operational risk. The responsibilities of these Committees include risk identification, risk
           assessment and measurement, risk control and mitigation; and risk monitoring.




                                                                 177
Company No: 25046 T



       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      2    Risk Governance Structure (continued)

      2.5 Internal Audit and Internal Control Activities

          In accordance with BNM's GP10 guidelines, GIA conducts continuous reviews on auditable areas within ABB.
          The continuous reviews by GIA are focused on areas of significant risks and effectiveness of internal control in
          accordance to the audit plan approved by the AEC.

          Based on GIA's review, identification and assessment of risk, testing and evaluation of controls, GIA will provide
          an opinion on the effectiveness of internal controls maintained by each entity. The risks highlighted on the
          respective auditable areas as well as recommendation made by the GIA are addressed at AEC and Management
          meetings on bi-monthly basis. The AEC also conduct annual reviews on the adequacy of internal audit function,
          scope of work, resources and budget of GIA.


      3    Capital

      3.1 Capital structure

          The following table sets forth details on the capital resources and capital adequacy ratios for the Group as at 31
          December 2010. The Group’s Core capital ratio ('CCR') and Risk-weighted capital ratio ('RWCR') as at 31
          December 2010 were above the BNM minimum requirements of 4.0% and 8.0%.


                                                                                             The Group              The Bank
                                                                                                  2010                  2010
                                                                                               RM'000                RM'000
           Tier I capital
           Paid-up share capital                                                             1,439,285             1,439,285
           Share premium                                                                       408,389               408,389
           Retained profits                                                                    499,179               411,831
           Statutory reserve                                                                   888,910               807,500
                                                                                             3,235,763             3,067,005
           Less:
            Goodwill                                                                          (137,323)             (137,323)
            Deferred tax assets                                                                    -                     -
           Total Tier I capital                                                              3,098,440             2,929,682




                                                              178
Company No: 25046 T



       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      3    Capital (continued)

      3.1 Capital structure (continued)

                                                                                            The Group              The Bank
                                                                                                 2010                  2010
                                                                                              RM'000                RM'000

           Tier II capital
           Subordinated term loan                                                             300,000               300,000
           Collective impairment                                                              153,538               111,304
           Total Tier II capital                                                              453,538               411,304
           Less:
            Investment in capital instruments
              of other banking institutions                                                   (39,858)              (39,858)
            Investment in subsidiaries                                                        (27,429)             (287,429)
           Capital base                                                                     3,484,691             3,013,699

           Core capital ratio                                                                  11.51%                12.35%
           Risk-weighted capital ratio                                                         12.94%                12.71%
           Core capital ratio (net of
            proposed dividends)                                                                11.24%                12.05%
           Risk-weighted capital ratio (net
            of proposed dividends)                                                             12.67%                12.40%

           Risk-weighted assets for:
            credit risk                                                                    24,768,236            21,849,466
            market risk                                                                        96,572                91,973
            operational risk                                                                2,062,578             1,776,655
           Total risk-weighted assets                                                      26,927,386            23,718,094


      3.2 Capital adequacy

          The Group's has in place an internal limit for its CCR and RWCR, which is guided by the need to maintain a
          prudent relationship between available capital and the risks of its underlying businesses. The capital management
          process is monitored by managements through periodic reviews.

          Refer to Appendix I.




                                                             179
Company No: 25046 T



       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      4    Risk Management Objectives and Policies

          ABB is principally engaged in all aspects of banking and related financial services. The principal activities of
          ABB's subsidiaries are Islamic banking business, property management services, nominee and trustee services.
          There have been no significant changes in these principal activities during the financial year.

          ABB’s business activities involve the analysis, measurement, acceptance, and management of risks but it operates
          within well defined risk acceptance criteria covering customer segments, industries and products. ABB does not
          enter into risk it cannot administer, book, monitor or value, or deal with persons of questionable integrity.

          ABB’s risk management policies are established to identify all the key risks, assess and measure these risks, control
          and mitigate these risks, and manage and monitor the risk positions.

          ABB regularly reviews its risk management policies and systems to reflect changes in markets, products and best
          practice in risk management processes. ABB’s aim is to achieve an appropriate balance between risk and return
          and minimize any potential adverse effects.

          The key business risks to which ABB is exposed are credit risk, liquidity risk, market risk and operational risk.



      5    Credit Risk

      5.1 Credit risk management objectives and policies

          Credit risk is the potential financial loss resulting from the failure of the customer or counterparty to settle the
          financial and contractual obligations to ABB. Credit risk emanates mainly from loans and advances, loan
          commitments arising from such lending activities, as well as through financial transactions with counterparties
          including interbank money market activities, derivative instruments used for hedging and debt securities.

          The management of credit in ABB is governed by a set of credit policies approved by the Board of Directors.
          Approval authorities are delegated to Senior Management and GMLC to implement the credit policies and ensure
          sound credit granting standards.

          An independent GRM function with a direct reporting line to BRMC is in place to ensure adherence to risk
          standards and discipline.

          Lending guidelines and credit strategies are formulated and incorporated in the Annual Credit Plan. New
          businesses are governed by the risk acceptance criteria and customer qualifying criteria/fitness standards prescribed
          in the Credit Plan. The Credit Plan is reviewed as least annually and approved by the BRMC.




                                                                180
Company No: 25046 T



       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      5    Credit Risk (continued)

      5.2 Application of Standardised Approach for credit risk

           ABB uses the following ECAIs to determine the risk weights for the rated credit exposures:-

           • RAM Rating Services Berhad
           • Malaysian Rating Corporation Berhad
           • Standard &Poor’s Rating Services
           • Moody’s Investors Service
           • Fitch Ratings

           The external ratings of the ECAIs are used to determine the risk weights of the following types of exposure:
           sovereigns, banks, public sector entities and corporates.

           The mapping of the rating categories of different ECAIs to the risk weights is in accordance with the guidelines
           provided by BNM. In cases where there is no issuer or issue rating, the exposures are treated as unrated and
           accorded a risk weight appropriate for unrated exposure in the respective category.

           The external ratings are updated in the core banking system, and extracted and matched by the risk system
           according to the above rules to determine the appropriate risk weights.

           Refer to Appendix II and Appendices III (i) to III (ii).


      5.3 Credit Risk Measurement

           Loans, advances and financing

           Credit evaluation is the process of analyzing the creditworthiness of the prospective customer against ABB’s
           underwriting criteria and the ability of ABB to make a return commensurate to the level of risk undertaken. A
           critical element in the evaluation process is the assignment of a credit risk grade to the counterparty. This assists in
           the risk assessment and decision making process. ABB has developed internal rating models to support the
           assessment and quantification of credit risk.

           For consumer mass market products, statistically developed application scorecards are used by the Business to
           assess the risks associated with the credit application. The scorecards are used as a decision support tool at loan
           origination.

           Over-the-Counter ('OTC') Derivatives

           The OTC Derivatives credit exposure is computed using the Current Exposure Method. Under the Current
           Exposure method, computation of credit equivalent exposure for interest rate and exchange rate related contracts is
           derived from the summation of the two elements; the replacement costs (obtained by marking-to-market) of all
           contracts and the potential future exposure of outstanding contracts (Add On charges depending on the specific
           remaining tenor to maturity).




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       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      5    Credit Risk (continued)

      5.4 Risk limit control and mitigation policies

           ABB employs various policies and practices to control and mitigate credit risk.

           Lending limits

           ABB establishes internal limits and related lending guidelines to manage large exposures and avoid undue
           concentration of credit risk in its credit portfolio. The limits include single customer groupings, connected parties,
           and geographical and industry segments. These risks are monitored regularly and the limits reviewed annually or
           sooner depending on changing market and economic conditions.

           The credit risk exposure for derivative and loan books is managed as part of the overall lending limits with
           customers together with potential exposure from market movements.

           Collateral

           Credits are established against borrower’s capacity to repay rather than rely solely on security. However, collateral
           may be taken to mitigate credit risk. The main collateral types accepted and given value by ABB are:
           • For personal housing loans, mortgages over residential properties;
           • For commercial property loans, charges over the properties being financed;
           • For hire purchase, charges over the vehicles or plant and machineries financed;
           • For other loans, charges over business assets such as premises, inventories, trade receivables or deposits.

           In order to be recognised as security, all items pledged must have value and ABB must have physical control
           and/or legal title thereto, together with the necessary documentation to enable ABB to realise the asset without the
           co-operation of the asset owner. Other items, such as personal or corporate guarantees, may be taken for comfort
           but will not be treated as security for approval purposes. Valuations are updated on a regular basis.

           Prior to acceptance of any item as security, verification must be done to ensure that the security exists and an
           accurate and up-to-date valuation can be placed upon it. A pre-facility disbursement site visit must be undertaken
           in respect of landed security of significant value. Where third parties are used to undertake a valuation they must
           be taken from a list of approved valuers.

           All assets which provide security to ABB must be adequately insured with an insurer from the list of approved
           insurers.

           The security documentation process is centralized in an independent Security Documentation Section at Head
           Office. ABB adopts standardized Letter of Offer and Legal Documents. Variations/ amendments require the
           approval from the relevant approving authority in the Bank.

           Master Netting Arrangements

           The Bank presently does not have any master netting arrangement with its business counterparties.




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       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      5    Credit Risk (continued)

      5.4 Risk limit control and mitigation policies (continued)

           Financial covenants (for credit related commitments and loan books)

           The primary purpose of these instruments is to ensure that funds are available to a customer when required.
           Guarantees and standby letters of credit carry the same credit risk as loans. Documentary and commercial letters of
           credit are collaterised by the underlying shipments of goods to which they relate and therefore carry less risk than a
           direct loan.

           Commitment to extend credit represents unutilized portion of approved credit in the form of loans, guarantees or
           letters of credit. In terms of credit risk, ABB is potentially exposed to loss in an amount equal to the total
           unutilized commitments. However, the potential amount of loss is less than the total unutilized commitments, as
           most commitments to extend credit are contingent upon customers maintaining specific minimum credit standards.

           ABB monitors the term to maturity of credit commitments because longer-term commitments generally have a
           greater degree of credit risk than short-term commitments.

           Refer to Appendix IV (a) to (b).

      5.5 Credit risk monitoring

           Retail credits are actively monitored and managed on a portfolio basis by product type. A new collection
           management system has been implemented with a dedicated team in place to promptly identify, monitor and
           manage delinquent accounts at early stages of delinquency.

           Corporate credits and large individual accounts are reviewed by the Business Units at least once a year against
           updated information. This is to ensure that the credit grades remain appropriate and detect any signs of
           weaknesses or deterioration in the credit quality. Remedial action is taken where evidence of deterioration exists.

           Early Alert Process is in place as part of a means to pro-actively identify, report and manage deteriorating credit
           quality. Watchlist accounts are closely reviewed and monitored with corrective measures initiated to prevent them
           from turning non-performing. As a rule, Watchlist accounts are either worked up or worked out within a period of
           twelve months.

           Portfolio management risk reports are submitted regularly to EAC and BRMC.

      5.6 Impairment provisioning

           Individual impairment provisioning

           Significant loans, with or without past due status, are subject to individual assessment for impairment when an
           evidence of impairment surfaces or at the very least once annually during the annual review process.




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       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      5    Credit Risk (continued)

      5.6 Impairment provisioning (continued)

          Individual impairment provisioning (continued)

          If impaired, the amount of loss is measured as the difference between the asset‘s carrying value and the present
          value of estimated future cash flows discounted at the financial assets original effective interest rate. The level of
          impairment allowance on significant loans is reviewed regularly, at least quarterly or more often when
          circumstances require.

          Significant loans that are deemed not impaired after individual assessment are included in a group of loans with
          similar characteristics and collectively assessed for impairment.

          Collective impairment provisioning

          All loans are grouped in respective business segments according to similar credit risk characteristics and is
          generally based on industry, asset or collateral type, credit grade and past due status grouped based on business
          segments.

          Portfolio provisioning is determined for each segment based on its respective loss probabilities and other
          information relevant to estimation of the future cash flows of each segment.

          Collective provisioning is applicable to all loans not covered under individual assessment as well as significant
          loans that are deemed not impaired after individual assessment.

           Total loan, advances and financing - credit quality

           All loans, advances and financing are categorised into “neither past due nor impaired”, “past due but not impaired”
           and “impaired”. Past due loans refer to loans that are overdue by one day or more. Impaired loans are loans with
           months-in-arrears more than 90 days or with impaired allowances.




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       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      5    Credit Risk (continued)

      5.6 Impairment provisioning (continued)

           Analysed by economic sector
                                                        The Group    The Bank
                                                             2010        2010
           Past due loans                                 RM'000      RM'000

           Primary agriculture                            25,065      25,000
           Mining and quarrying                            1,034       1,034
           Manufacturing                                  55,979      53,530
           Electricity, gas and water supply               1,701       1,580
           Construction                                  195,354     132,596
           Real estate                                   183,208     181,164
           Wholesale and retail trade, and
            restaurants and hotels                        69,846      63,909
           Transport, storage and communication           58,578      57,658
           Finance, insurance and business
            services                                      271,344     222,654
           Education, health and others                   130,868     130,467
           Household                                    2,220,092   1,872,993
           Others                                             142         142
                                                        3,213,211   2,742,727

                                                        The Group    The Bank
                                                             2010        2010
           Individual impairment                          RM'000      RM'000

           Primary agriculture                             5,778       5,778
           Mining and quarrying
           Manufacturing                                  47,302      40,105
           Electricity, gas and water supply               1,184       1,184
           Construction                                   92,408      65,022
           Real estate                                     1,900       1,900
           Wholesale and retail trade, and
            restaurants and hotels                        15,122      14,600
           Finance, insurance and business
            services                                       3,368       3,368
           Education, health and others                    8,786       7,752
                                                         175,848     139,709




                                                  185
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       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      5    Credit Risk (continued)

      5.6 Impairment provisioning (continued)

           Analysed by economic sector (continued)

                                                           The Group   The Bank
                                                                2010       2010
           Individual impairment charged                     RM'000     RM'000

           Primary agriculture                                6,039      6,039
           Mining and quarrying                               1,046      1,046
           Manufacturing                                     45,226     43,262
           Electricity, gas and water supply                  1,191      1,191
           Construction                                      98,539     75,814
           Real estate                                        2,075      2,075
           Wholesale and retail trade, and
            restaurants and hotels                           15,588     15,066
           Transport, storage and communication               6,599      6,599
           Finance, insurance and business
            services                                          3,789      3,789
           Education, health and others                      17,931     17,835
                                                            198,023    172,716

                                                           The Group   The Bank
                                                                2010       2010
           Individual impairment written-off                 RM'000     RM'000

           Mining and quarrying                               1,046      1,046
           Manufacturing                                      2,677      1,502
           Construction                                      71,454     71,454
           Real estate                                        7,157      7,157
           Wholesale and retail trade, and
            restaurants and hotels                            5,271      5,271
           Transport, storage and communication               6,549      6,549
           Finance, insurance and business
            services                                         63,076     63,076
           Education, health and others                      13,675     13,675
                                                            170,905    169,730




                                                     186
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       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      5    Credit Risk (continued)

      5.6 Impairment provisioning (continued)

           Analysed by economic sector (continued)
                                                           The Group    The Bank
                                                                2010        2010
           Collective impairment                             RM'000      RM'000

           Primary agriculture                                2,877       2,642
           Mining and quarrying                               1,350       1,337
           Manufacturing                                     28,455      27,135
           Electricity, gas and water supply                    716         678
           Construction                                      18,408      16,102
           Real estate                                        8,258       8,035
           Wholesale and retail trade, and
            restaurants and hotels                           12,352      11,932
           Transport, storage and communication               5,406       5,380
           Finance, insurance and business
            services                                         15,591      13,891
           Education, health and others                       6,658       5,517
           Household                                        268,318     249,333
           Others                                            27,312       1,238
                                                            395,701     343,220

           Analysed by geographical area
                                                           The Group    The Bank
                                                                2010        2010
           Past due loans                                    RM'000      RM'000

           Perlis                                              1,613       1,271
           Kedah                                             150,752      89,000
           Pulau Pinang                                      126,917     118,361
           Perak                                             145,745     108,697
           Selangor                                          909,378     795,447
           Wilayah Persekutuan                               654,069     578,597
           Negeri Sembilan                                   123,082     111,816
           Melaka                                            134,772     131,112
           Johor                                             320,955     299,750
           Pahang                                             98,030      71,358
           Terengganu                                         65,665      14,879
           Kelantan                                           56,413       7,026
           Sarawak                                           148,198     144,516
           Sabah                                             277,149     270,436
           Labuan                                                269         257
           Abroad                                                204         204
                                                           3,213,211   2,742,727




                                                     187
Company No: 25046 T



       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      5    Credit Risk (continued)

      5.6 Impairment provisioning (continued)

           Analysed by geographical area (continued)
                                                             The Group   The Bank
                                                                  2010       2010
           Individual impairment                               RM'000     RM'000

           Kedah                                                6,394      6,394
           Pulau Pinang                                           646        640
           Perak                                                2,084      2,084
           Selangor                                            68,011     60,293
           Wilayah Persekutuan                                 55,911     54,881
           Negeri Sembilan                                      2,127      2,127
           Melaka                                                 777        777
           Johor                                                2,778      2,778
           Pahang                                               5,968      5,968
           Terengganu                                           2,613      2,613
           Kelantan                                             1,154      1,154
           Abroad                                              27,386          -
                                                              175,849    139,709

                                                             The Group   The Bank
                                                                  2010       2010
           Collective impairment                               RM'000     RM'000

           Perlis                                                 312        303
           Kedah                                               11,156      9,581
           Pulau Pinang                                        12,111     11,227
           Perak                                               13,267     12,138
           Selangor                                           128,479     91,650
           Wilayah Persekutuan                                154,491    150,545
           Negeri Sembilan                                      8,937      8,103
           Melaka                                               9,198      8,889
           Johor                                               26,892     25,460
           Pahang                                               6,658      5,266
           Terengganu                                           4,105      2,767
           Kelantan                                             3,129        734
           Sarawak                                              6,079      5,930
           Sabah                                                9,895      9,635
           Labuan                                                 992        992
                                                              395,701    343,220




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Company No: 25046 T



       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      5    Credit Risk (continued)

      5.7 Credit risk culture

          ABB recognizes that learning is a continuous journey and is committed to enhance the knowledge and required
          skills set of its staff. It places strong emphasis in creating and enhancing risk awareness in the organization.

          For effective and efficient staff learning, ABB has implemented an E–Learning Program with an online Learning
          Management System ('LMS'). The LMS provides staff with a progressive self-learning alternative at own pace.

          GRM commenced an Internal Credit Certification ('ICC') Programme for both Business Banking and Consumer
          Credit in July 2009 and August 2009 respectively.

          The aim of the ICCs is to assist the core credit related group of personnel in ABB achieve a minimum level of
          knowledge and analytical skills required to make sound corporate and commercial loans to customers. It is
          envisaged that the core credit related group of personnel would all be certified within 2 to 3 years.


      6    Market Risk

      6.1 Market risk management objectives and policies

          Market risk is defined as the risk of losses to ABB’s portfolio positions arising from movements in market prices.
          ABB’s market risk management objective is to ensure that market risk is appropriately identified, measured,
          controlled, managed and reported.

          ABB’s exposure to market risk stems primarily from interest rate risk and foreign exchange rate risk. Interest rate
          risk arises mainly from differences in timing between the maturities or repricing of assets, liabilities and derivatives.
          ABB is also exposed to basis risk when there is a mismatch between the change in price of a hedge and the change
          in price of the assets it hedges. Foreign exchange rate risk arises from unhedged positions of customers'
          requirements and proprietary positions.


      6.2 Application of Standardised Approach for market risk

          ABB adopts the Standardised Approach for the purpose of calculating the capital requirement for market risk.

          Refer to Appendix I.




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       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      6    Market Risk (continued)

      6.3 Market risk measurement, control and monitoring

          Market risk is primarily controlled through the imposition of Cut-loss, Value-at-Risk ('VaR') and Net Open Position
          Limits which are approved by both ALCO and BRMC in accordance with ABB’s risk appetite. These limits are set
          and reviewed regularly according to a number of factors, including liquidity and ABB’s business strategy. In
          addition, ABB conducts periodic stress test of its respective portfolios to ascertain the market risk under abnormal
          market conditions. For the asset liability mismatch position in the statement of financial position, the risk is
          measured using Net Interest Income simulations based on projected interest rate scenarios managed through limits
          set over time buckets together with an Overall Risk Tolerance Limit.

          The Bank's Management, ALCO and BRMC are regularly kept informed of its risk profile and positions.


      6.4 Value-at-Risk ('VaR')

          Value-at-Risk ('VaR') is used to compute the maximum potential loss amount over a specified holding period of a
          Trading portfolio. It measures the risk of losses arising from potential adverse movements in interest rates and
          foreign exchange rates that could affect values of financial instruments.

          The Variance-Covariance Parametric methodology is adopted to compute the potential loss amount. This is a
          statistically defined, probability-based approach that uses volatilities and correlations to quantify price risks. Under
          this methodology, a matrix of historical volatilities and correlations is computed from the past 100 business days’
          market data. VaR is then computed by applying these volatilities and correlations to the outstanding Trading
          portfolio valued at current price levels.

           Other risk measures include the following:

           (i) Mark-to-Market valuation tracks the current market value of the outstanding financial instruments.

           (ii) Stress tests are conducted to attempt to quantify market risk arising from low probability, abnormal market
                movements. The stress test measure the change in value arising from range of extreme movements in the
                interest rates and foreign exchange rates based on past experience and simulated stress scenarios.

           (iii) Sensitivity/Dollar Duration is an additional measure of interest rate risk that is computed on a daily basis. It
                 measures the change in value of a portfolio resulting from a 0.01% increase in interest rates. This measure
                 identifies ABB interest rate exposures that are most vulnerable to interest rate changes and it facilitates the
                 implementation of hedging strategies.




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       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      6    Market Risk (continued)

      6.5 Foreign Exchange Risk

           ABB takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its
           financial position and cash flows. The Board sets limits on the level of exposure by currency and in aggregate for
           both overnight and intra-day positions, which are monitored daily.


      6.6 Market risk culture

           In October 2010, ABB introduced ICC-Market Risk with the Diagnostic Assessment conducted through the LMS.


      7    Liquidity Risk

      7.1 Liquidity risk management objectives and policies

           Liquidity risk is the risk of loss due to failure to access funds at reasonable cost to fund ABB's operations and meet
           its liabilities when they fall due. Liquidity risk arises from ABB's funding activities and the management of its
           assets.

      7.2 Liquidity risk measurement, control and monitoring

           To measure and manage net funding requirements, ABB adopts BNM's New Liquidity Framework ('NLF'). The
           NLF ascertains the liquidity condition based on the contractual and behavioral cash-flow of assets, liabilities and
           off-balance sheet commitments, taking into consideration the realisable cash value of the eligible liquefiable assets.


           ABB employs liquidity risk indicators as an early alert of any structural change for liquidity risk management. The
           risk is measured monthly using internal and external qualitative and quantitative liquidity risk indicators. ABB also
           conducts liquidity stress tests to gauge ABB’s resilience in the event of a funding crisis. In addition, ABB has in
           place the Contingency Funding Plan to deal with liquidity crisis and emergencies.

           BRMC is responsible for ABB's liquidity policy although the strategic management of liquidity has been delegated
           to ALCO. BRMC is however, informed regularly of the liquidity situation.




                                                                191
Company No: 25046 T



       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      8    Operational Risk

      8.1 Operational risk management objectives and policies

           Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or
           from external events. Such risks may result in omissions, errors and breakdowns that can potentially lead to
           financial loss or other indirect losses to ABB.

           ABB manages operational risk through a control based environment in which policies and procedures are
           formulated after taking into account individual unit's business activities, the environment and market in which it is
           operating and any regulatory requirement in force.


      8.2 Application of Basic Indicator Approach for operational risk

           ABB adopts the Basic Indicator Approach for the purpose of calculating the capital requirement for operational
           risk. The capital requirement is calculated by taking 15% of ABB’s average annual gross income over the previous
           three years.


      8.3 Operational risk measurement, control and monitoring

           Risk is identified through the use of assessment tools and measured using threshold/limits mapped against risk
           matrix. Monitoring and control procedures include the use of key control standards, independent tracking of risk,
           back-up procedures and contingency plans, including disaster recovery and business continuity plans. This is
           supported by periodic reviews undertaken by GIA to ensure adequacy and effectiveness of the Group Operational
           Risk Management process.

           ABB gathers and reports operational risk loss and 'near miss' events to GORMC and BRMC. Appropriate
           remedial actions are reviewed and implemented to minimize the recurrence of such events.


      8.4 Operational risk culture

           An Operational Risk Management certification programme is being conducted vide an e-learning portal.
           Respective Businesses’ Operational Risk coordinators will first go through an on-line self-learning exercise before
           attempting on-line assessments to measure their skills and knowledge level. This will enable GRM to prescribe
           appropriate training and development activities for the coordinators. It is a requirement that all Operational Risk
           coordinators and staff engaged in operational risk work are all duly certified.




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       AFFIN Bank Berhad
      (Incorporated in Malaysia)

      BASEL II Pillar 3 Disclosures (continued)

      9    Shariah Compliance

           Shariah Compliance and Review ('SCR') officer of the Bank conducts regular Shariah compliance and review to
           ensure that documentation, procedures and execution of transactions are in accordance with the Shariah standards
           issued by AFFIN Group Shariah Committee ('AGSC') and Shariah Advisory Council ('SAC') of BNM. The results
           of the review are reported to the AGSC. Cases of non-Shariah compliance are thoroughly investigated to establish
           causes of their occurrence and to ensure introduction of adequate controls to avoid their recurrence in the future.

           The AGSC consists of three Shariah Committee members (Chairman and two members). The AGSC meets
           periodically or as and when there is a need to hold a meeting. The members received a fixed sum of money as
           attendance fee for every meeting they attend, in addition to a fixed amount paid monthly to each member as
           remuneration, irrespective of the number of meetings held during the year or the financial results of the Bank.




                                                               193
Company No: 25046 T                                                                                                                                                                                                           Appendix I


AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures

 The Group and the Bank have adopted Basel II - Risk Weighted Assets computation under the BNM's Risk-Weighted Capital Adequacy Framework with effect from 1 January 2008. The Group and the Bank have adopted the Standardised
 Approach for credit risk and market risk, and Basic Indicator Approach for operation risk computation.

 The following information concerning the Group and the Bank's risk exposures are disclosed as accompanying information to the annual report, and does not form part of the audited accounts.


Disclosure on Capital Adequacy under the Standardised Approach (RM'000)
Group
2010



                                                                                                                     Gross                  Net                                  Total Risk         Total Risk Weighted Minimum Capital
                                                                                                                 Exposures/EAD        Exposures/EAD         Risk Weighted      Weighted Assets      Assets after Effects Requirements at
         Exposure Class                                                                                           before CRM            after CRM              Assets         Absorbed by PSIA            of PSIA              8%
       1 CREDIT RISK
         On Balance Sheet Exposures
         Corporates                                                                                                    14,018,930           13,151,465          11,707,401                      -          11,707,401           936,592
         Regulatory Retail                                                                                              9,990,439            9,878,644           7,408,826                      -           7,408,826           592,706
         Other Assets                                                                                                   1,007,575            1,007,575             355,022                      -             355,022            28,402
         Sovereigns/Central Banks                                                                                      11,727,290           11,727,290              10,941                      -              10,941               875
         Public Sector Entities                                                                                            51,159               45,199               9,040                      -               9,040               723
         Banks, Development Financial Institutions & MDBs                                                               1,970,016            1,970,016             540,152                      -             540,152            43,212
         Insurance Companies, Securities Firms & Fund Managers                                                             95,362               95,362              95,362                      -              95,362             7,629
         Residential Real Estate (RRE) Financing                                                                        1,980,809            1,978,940             778,567                      -             778,567            62,285
         Total Higher Risk Assets                                                                                         389,024              388,597             582,895                      -             582,895            46,632
         Defaulted Exposures                                                                                            1,275,168            1,255,513           1,683,907                      -           1,683,907           134,713
         Total for On-Balance Sheet Exposures                                                                          42,505,772           41,498,601          23,172,113                      -          23,172,113         1,853,769
         Off Balance Sheet Exposures
         Off Balance sheet Exposures other than OTC derivatives or credit derivatives                                    2,077,478           2,043,484            1,552,189                     -           1,552,189           124,175
         Defaulted Exposures                                                                                                31,835              29,289               43,934                     -              43,934             3,515
         Total for Off-Balance Sheet Exposures                                                                           2,109,313           2,072,773            1,596,123                     -           1,596,123           127,690

          Total for On and Off-Balance Sheet Exposures                                                                 44,615,085           43,571,374          24,768,236                      -          24,768,236         1,981,459

       2 MARKET RISK                                                                         Long Position        Short Position
         Interest Rate Risk                                                                       2,609,530             2,473,385              136,145               69,361                     -                   -             5,549
         Foreign Currency Risk                                                                        8,899                22,612              (13,713)              27,211                     -                   -             2,177
       3 OPERATIONAL RISK
         Operational Risk                                                                                                                                         2,062,578                                                     165,006

          Total RWA and Capital Requirements                                                                                                                    26,927,386                      -          24,768,236         2,154,191

          PSIA "Profit Sharing Investment Account"
          OTC "Over The Counter"




                                                                                                                   194
Company No: 25046 T                                                                                                                                                                                           Appendix I


AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

Disclosure on Capital Adequacy under the Standardised Approach (RM'000)
Group
2009



                                                                                                            Gross                 Net                               Total Risk      Total Risk Weighted Minimum Capital
                                                                                                        Exposures/EAD       Exposures/EAD       Risk Weighted     Weighted Assets   Assets after Effects Requirements at
        Exposure Class                                                                                   before CRM           after CRM            Assets        Absorbed by PSIA         of PSIA              8%
      1 CREDIT RISK
        On Balance Sheet Exposures
        Corporates                                                                                           11,940,769         11,284,642           9,784,011                  -           9,784,011           782,721
        Regulatory Retail                                                                                     8,418,717          8,302,885           6,226,940                  -           6,226,940           498,155
        Other Assets                                                                                            829,957            829,957             329,297                  -             329,297            26,344
        Sovereigns/Central Banks                                                                              8,985,402          8,985,402              13,964                  -              13,964             1,117
        Public Sector Entities                                                                                   55,050             50,843              10,168                  -              10,168               813
        Banks, Development Financial Institutions & MDBs                                                      2,158,145          2,158,145             602,721                  -             602,721            48,218
        Insurance Companies, Securities Firms & Fund Managers                                                    95,092             94,445              94,445                  -              94,445             7,556
        Residential Real Estate (RRE) Financing                                                               1,787,181          1,787,181             708,939                  -             708,939            56,715
        Total Higher Risk Assets                                                                                523,648            523,648             785,471                  -             785,471            62,838
        Equity Exposure                                                                                          42,918             42,918              42,918                  -              42,918             3,433
        Defaulted Exposures                                                                                   1,248,429          1,230,075           1,652,239                  -           1,652,239           132,179
        Total for On-Balance Sheet Exposures                                                                 36,085,308         35,290,141          20,251,113                  -          20,251,113         1,620,089
        Off Balance Sheet Exposures
        Off Balance sheet Exposures other than OTC derivatives or credit derivatives                            2,289,459        2,261,016           1,771,072                  -           1,771,072           141,686
        Defaulted Exposures                                                                                        35,343           32,630              48,945                  -              48,945             3,916
        Total for Off-Balance Sheet Exposures                                                                   2,324,802        2,293,646           1,820,017                  -           1,820,017           145,602

         Total for On and Off-Balance Sheet Exposures                                                        38,410,110         37,583,787          22,071,130                  -          22,071,130         1,765,691

      2 MARKET RISK                                                                    Long Position     Short Position
        Interest Rate Risk                                                                  2,219,276         (2,094,522)                   -           66,516                  -                   -             5,321
        Foreign Currency Risk                                                                  11,055            (18,073)                   -           25,803                  -                   -             2,064
      3 OPERATIONAL RISK
        Operational Risk                                                                                                                             1,976,470                                                  158,118

         Total RWA and Capital Requirements                                                                                                         24,139,919                  -          22,071,130         1,931,194

         PSIA "Profit Sharing Investment Account"
         OTC "Over The Counter"




                                                                                                          195
Company No: 25046 T                                                                                                                                                                                          Appendix I


AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

Disclosure on Capital Adequacy under the Standardised Approach (RM'000) (continued)
Bank
2010



                                                                                                            Gross                 Net                              Total Risk      Total Risk Weighted Minimum Capital
                                                                                                        Exposures/EAD       Exposures/EAD     Risk Weighted      Weighted Assets   Assets after Effects Requirements at
        Exposure Class                                                                                   before CRM           after CRM          Assets         Absorbed by PSIA         of PSIA              8%
      1 CREDIT RISK
        On Balance Sheet Exposures
        Corporates                                                                                           12,540,053         11,749,181        10,626,610                   -          10,626,610           850,129
        Regulatory Retail                                                                                     8,055,493          7,951,324         5,963,336                   -           5,963,336           477,067
        Other Assets                                                                                          1,286,037          1,286,037           525,486                   -             525,486            42,038
        Sovereigns/Central Banks                                                                              8,186,533          8,186,533                  -                  -                    -                 -
        Public Sector Entities                                                                                   51,159             45,199             9,040                   -               9,040               723
        Banks, Development Financial Institutions & MDBs                                                      1,914,175          1,914,175           528,984                   -             528,984            42,319
        Insurance Companies, Securities Firms & Fund Managers                                                       306                306               306                   -                 306                24
        Residential Real Estate (RRE) Financing                                                               1,859,507          1,857,981           726,720                   -             726,720            58,138
        Total Higher Risk Assets                                                                                346,361            345,933           518,901                   -             518,901            41,512
        Defaulted Exposures                                                                                   1,128,386          1,108,751         1,498,164                   -           1,498,164           119,853
        Total for On-Balance Sheet Exposures                                                                 35,368,010         34,445,420        20,397,547                   -          20,397,547         1,631,803
        Off Balance Sheet Exposures
        Off Balance sheet Exposures other than OTC derivatives or credit derivatives                            1,814,442        1,780,448         1,407,985                   -           1,407,985           112,639
        Defaulted Exposures                                                                                        31,835           29,289            43,934                   -              43,934             3,515
        Total for Off-Balance Sheet Exposures                                                                   1,846,277        1,809,737         1,451,919                   -           1,451,919           116,154

         Total for On and Off-Balance Sheet Exposures                                                        37,214,287         36,255,157        21,849,466                   -          21,849,466         1,747,957

      2 MARKET RISK                                                                    Long Position     Short Position
        Interest Rate Risk                                                                  2,609,530          2,473,385           136,145            69,361                   -                    -            5,549
        Foreign Currency Risk                                                                   4,300             22,612           (18,312)           22,612                   -                    -            1,809
      3 OPERATIONAL RISK
        Operational Risk                                                                                                                           1,776,655                                                   142,132

         Total RWA and Capital Requirements                                                                                                       23,718,094                   -          21,849,466         1,897,447

         PSIA "Profit Sharing Investment Account"
         OTC "Over The Counter"




                                                                                                          196
Company No: 25046 T                                                                                                                                                                                           Appendix I


AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

Disclosure on Capital Adequacy under the Standardised Approach (RM'000) (continued)
Bank
2009



                                                                                                            Gross                 Net                               Total Risk      Total Risk Weighted Minimum Capital
                                                                                                        Exposures/EAD       Exposures/EAD       Risk Weighted     Weighted Assets   Assets after Effects Requirements at
        Exposure Class                                                                                   before CRM           after CRM            Assets        Absorbed by PSIA         of PSIA              8%
      1 CREDIT RISK
        On Balance Sheet Exposures
        Corporates                                                                                           10,632,554         10,024,632           8,842,285                  -           8,842,285           707,383
        Regulatory Retail                                                                                     6,870,382          6,758,972           5,069,005                  -           5,069,005           405,520
        Other Assets                                                                                          1,188,466          1,188,466             530,773                  -             530,773            42,462
        Sovereigns/Central Banks                                                                              6,057,135          6,057,135               1,925                  -               1,925               154
        Public Sector Entities                                                                                   55,050             50,843              10,169                  -              10,169               813
        Banks, Development Financial Institutions & MDBs                                                      1,866,036          1,866,036             544,299                  -             544,299            43,544
        Insurance Companies, Securities Firms & Fund Managers                                                        45                 45                  45                  -                  45                 4
        Residential Real Estate (RRE) Financing                                                               1,661,387          1,661,387             654,555                  -             654,555            52,364
        Total Higher Risk Assets                                                                                395,719            395,719             593,578                  -             593,578            47,487
        Equity Exposure                                                                                          42,918             42,918              42,918                  -              42,918             3,433
        Defaulted Exposures                                                                                   1,165,717          1,147,394           1,541,510                  -           1,541,510           123,321
        Total for On-Balance Sheet Exposures                                                                 29,935,409         29,193,547          17,831,062                  -          17,831,062         1,426,485
        Off Balance Sheet Exposures
        Off Balance sheet Exposures other than OTC derivatives or credit derivatives                            1,939,841        1,911,398           1,598,140                  -           1,598,140           127,851
        Defaulted Exposures                                                                                        35,343           32,630              48,945                  -              48,945             3,916
        Total for Off-Balance Sheet Exposures                                                                   1,975,184        1,944,028           1,647,085                  -           1,647,085           131,767

         Total for On and Off-Balance Sheet Exposures                                                        31,910,593         31,137,575          19,478,147                  -          19,478,147         1,558,252

      2 MARKET RISK                                                                    Long Position     Short Position
        Interest Rate Risk                                                                  2,219,276         (2,094,522)                   -           66,516                  -                   -             5,321
        Foreign Currency Risk                                                                   3,325            (18,073)                   -           18,073                  -                   -             1,446
      3 OPERATIONAL RISK
        Operational Risk                                                                                                                             1,721,636                                                  137,731

         Total RWA and Capital Requirements                                                                                                         21,284,372                  -          19,478,147         1,702,750

         PSIA "Profit Sharing Investment Account"
         OTC "Over The Counter"




                                                                                                          197
Company No: 25046 T                                                                                                                                                                                                               Appendix I


AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

Disclosure on Capital Adequacy under the Standardised Approach (RM'000) (continued)

 Market risk is defined as the risk of losses in on and off-balance sheet positions arising from movements in market prices. The Bank’s Capital-at-Risk ('CaR') is defined as the amount of the Bank’s capital that is exposed to the risk of
 unexpected losses arising particularly from movements in interest and foreign exchange rates. A CaR Limit is set as a management trigger to ensure that the Bank’s exposure to such movements do not compromise the Bank’s capital
 adequacy. The Bank is currently adopting BNM’s Standardised Approach for the computation of market risk capital charges. The market risk capital charges addresses among others, capital requirement for market risk which includes the
 interest rate risk pertaining to the Bank’s exposure in the trading book as well as foreign exchange risk in the trading and banking books.

 The computation of market risk capital charge covers the following outstanding financial instruments:

 a) Foreign Exchange
 b) Interest Rate Swap ('IRS')
 c) Cross Currency Swap ('CCS')
 d) Fixed Income instruments (i.e. Private Debt and Government Securities)




                                                                                                                    198
    Company No: 25046 T                                                                                                                                                                                                           Appendix II




AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

Disclosure on Credit Risk: Disclosures on Risk Weights under the Standardised Approach (RM'000)
Group
2010

                                                                                    Exposures after Netting and Credit Risk Mitigation

                                                                 Insurance
                                                                                                                                                                                                                Total Exposure
                                                                Companies,                                                                                  Specialised                                                             Total Risk
                      Sovereigns &               Banks, MDBs                                   Regulatory   Residential       Higher Risk                                                                       after Netting &
       Risk Weights                   PSEs                       Securities   Corporates                                                    Other Assets     Financing        Securitisation       Equity                           Weighted
                      Central Banks               and FDIs                                      Retail      Mortgages           Assets                                                                            Credit Risk
                                                               Firms & Fund                                                                                /Investment                                                               Assets
                                                                                                                                                                                                                   Mitigation
                                                                 Managers



           0%          11,719,253          -              -              -             -               -             -                -         601,396                   -                    -            -     12,320,649                 -
          10%                   -          -              -              -             -               -             -                -               -                   -                    -            -              -                 -
          20%             131,982     45,209      1,751,344              -     1,104,217             875             -                -          65,973                   -                    -            -      3,099,600           619,920
          35%                   -          -              -              -             -               -     1,406,021                -               -                   -                    -            -      1,406,021           492,107
          50%                   -          -        573,341              -     1,330,074             238       572,920                -               -                   -                    -            -      2,476,573         1,238,286
          75%                   -          -              -              -             -       9,997,337             -                -               -                   -                    -            -      9,997,337         7,498,003
          90%                   -          -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         100%              10,941          -         39,824        105,464    12,189,309           8,703       247,982           34,559         336,960                   -                    -            -     12,973,742        12,973,742
         110%                   -          -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         125%                   -          -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         135%                   -          -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         150%                   -          -              -              -       326,319         543,654         1,018          423,216           3,245                   -                    -            -      1,297,452         1,946,178
         270%                   -          -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         350%                   -          -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         400%                   -          -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         625%                   -          -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         938%                   -          -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         1250%                  -          -              -              -             -               -             -                -               -                   -                    -            -              -                 -

      Average Risk
        Weight                                                                                                                                                                                 -                             -                   -
       Deduction
      from Capital
          Base                    -          -       39,858               -                -            -                 -            -               -                  -                    -            -                -

     PSE "Public Sector Entities"
     MDB "Multilateral Development Banks"
     FDI "Financial Development Institutions"




                                                                                                                 199
    Company No: 25046 T                                                                                                                                                                                                           Appendix II




AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

Disclosure on Credit Risk: Disclosures on Risk Weights under the Standardised Approach (RM'000) (continued)
Group
2009

                                                                                    Exposures after Netting and Credit Risk Mitigation

                                                                 Insurance
                                                                                                                                                                                                                Total Exposure
                                                                Companies,                                                                                  Specialised                                                             Total Risk
                      Sovereigns &               Banks, MDBs                                   Regulatory   Residential       Higher Risk                                                                       after Netting &
       Risk Weights                   PSEs                       Securities   Corporates                                                    Other Assets     Financing        Securitisation       Equity                           Weighted
                      Central Banks               and FDIs                                      Retail      Mortgages           Assets                                                                            Credit Risk
                                                               Firms & Fund                                                                                /Investment                                                               Assets
                                                                                                                                                                                                                   Mitigation
                                                                 Managers



           0%            8,963,738         -              -              -             -               -             -                -         470,934                   -                    -         -         9,434,672                 -
          10%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
          20%              208,304    50,853      1,922,669              -     1,218,925             720             -                -          38,131                   -                    -         -         3,439,602           687,920
          35%                    -         -              -              -             -               -     1,231,008                -               -                   -                    -         -         1,231,008           430,853
          50%                    -         -        605,047              -     1,104,369          23,071       579,981                -               -                   -                    -         -         2,312,468         1,156,234
          75%                    -         -              -              -             -       8,413,463             -                -               -                   -                    -         -         8,413,463         6,310,097
          90%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         100%               12,039         -        172,894        103,608    10,404,079          42,655       188,143                -         319,334                   -                    -    42,918        11,285,670        11,285,670
         110%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         125%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         135%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         150%                    -         -              -              -       570,664         365,113             -          529,569           1,558                   -                    -         -         1,466,904         2,200,356
         270%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         350%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         400%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         625%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         938%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         1250%                   -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -

      Average Risk
        Weight                                                                                                                                                                                 -                             -                   -
       Deduction
      from Capital
          Base                    -          -      217,056               -                -            -                 -            -               -                  -                    -            -                -

     PSE "Public Sector Entities"
     MDB "Multilateral Development Banks"
     FDI "Financial Development Institutions"




                                                                                                                 200
    Company No: 25046 T                                                                                                                                                                                                           Appendix II




AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

Disclosure on Credit Risk: Disclosures on Risk Weights under the Standardised Approach (RM'000) (continued)
Bank
2010

                                                                                    Exposures after Netting and Credit Risk Mitigation

                                                                 Insurance
                                                                                                                                                                                                                Total Exposure
                                                                Companies,                                                                                  Specialised                                                             Total Risk
                      Sovereigns &               Banks, MDBs                                   Regulatory   Residential       Higher Risk                                                                       after Netting &
       Risk Weights                   PSEs                       Securities   Corporates                                                    Other Assets     Financing        Securitisation       Equity                           Weighted
                      Central Banks               and FDIs                                      Retail      Mortgages           Assets                                                                            Credit Risk
                                                               Firms & Fund                                                                                /Investment                                                               Assets
                                                                                                                                                                                                                   Mitigation
                                                                 Managers



           0%            8,189,437         -              -              -             -               -             -                -         562,902                   -                    -            -      8,752,339                 -
          10%                    -         -              -              -             -               -             -                -               -                   -                    -            -              -                 -
          20%                   15    45,209      1,683,645              -       760,650             875             -                -         247,060                   -                    -            -      2,737,454           547,491
          35%                    -         -              -              -             -               -     1,348,467                -               -                   -                    -            -      1,348,467           471,963
          50%                    -         -        573,341              -     1,229,250             238       509,514                -               -                   -                    -            -      2,312,343         1,156,172
          75%                    -         -              -              -             -       8,070,017             -                -               -                   -                    -            -      8,070,017         6,052,513
          90%                    -         -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         100%                    -         -         39,824         10,408    11,098,278           3,875       232,490                -         476,074                   -                    -            -     11,860,949        11,860,949
         110%                    -         -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         125%                    -         -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         135%                    -         -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         150%                    -         -              -              -       326,319         482,009         1,018          364,240               -                   -                    -            -      1,173,586         1,760,378
         270%                    -         -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         350%                    -         -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         400%                    -         -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         625%                    -         -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         938%                    -         -              -              -             -               -             -                -               -                   -                    -            -              -                 -
         1250%                   -         -              -              -             -               -             -                -               -                   -                    -            -              -                 -

      Average Risk
        Weight                                                                                                                                                                                 -                             -                   -
       Deduction
      from Capital
          Base                    -          -       39,858               -                -            -                 -            -               -                  -                    -            -                -

     PSE "Public Sector Entities"
     MDB "Multilateral Development Banks"
     FDI "Financial Development Institutions"




                                                                                                                 201
    Company No: 25046 T                                                                                                                                                                                                           Appendix II




AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

Disclosure on Credit Risk: Disclosures on Risk Weights under the Standardised Approach (RM'000) (continued)
Bank
2009

                                                                                    Exposures after Netting and Credit Risk Mitigation

                                                                 Insurance
                                                                                                                                                                                                                Total Exposure
                                                                Companies,                                                                                  Specialised                                                             Total Risk
                      Sovereigns &               Banks, MDBs                                   Regulatory   Residential       Higher Risk                                                                       after Netting &
       Risk Weights                   PSEs                       Securities   Corporates                                                    Other Assets     Financing        Securitisation       Equity                           Weighted
                      Central Banks               and FDIs                                      Retail      Mortgages           Assets                                                                            Credit Risk
                                                               Firms & Fund                                                                                /Investment                                                               Assets
                                                                                                                                                                                                                   Mitigation
                                                                 Managers



           0%            6,047,510         -              -              -             -               -             -                -         445,988                   -                    -         -         6,493,498                 -
          10%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
          20%                9,625    50,853      1,630,560              -       837,851             720             -                -         264,632                   -                    -         -         2,794,241           558,848
          35%                    -         -              -              -             -               -     1,174,260                -               -                   -                    -         -         1,174,260           410,991
          50%                    -         -        605,047              -     1,037,479          21,804       510,464                -               -                   -                    -         -         2,174,794         1,087,397
          75%                    -         -              -              -             -       6,869,550             -                -               -                   -                    -         -         6,869,550         5,152,162
          90%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         100%                    -         -        172,894          9,208     9,436,542          38,726       178,064                -         477,846                   -                    -    42,918        10,356,198        10,356,198
         110%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         125%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         135%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         150%                    -         -              -              -       554,673         319,049             -          401,312               -                   -                    -         -         1,275,034         1,912,551
         270%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         350%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         400%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         625%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         938%                    -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -
         1250%                   -         -              -              -             -               -             -                -               -                   -                    -         -                 -                 -

      Average Risk
        Weight                                                                                                                                                                                 -                             -                   -
       Deduction
      from Capital
          Base                    -          -      200,898               -                -            -                 -            -               -                  -                    -            -                -

     PSE "Public Sector Entities"
     MDB "Multilateral Development Banks"
     FDI "Financial Development Institutions"




                                                                                                                 202
Company No: 25046 T                                                                                                                                                                             Appendix III




AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

(i)   Disclosures on Rated Exposures according to Ratings by ECAIs (RM'000)
      Group
      2010

                                                                                                                   Ratings of Corporate by Approved ECAIs
                                                                                Moodys           Aaa to Aa3             A1 to A3            Baa1 to Ba3         B1 to C          Unrated
                                                                                 S&P            AAA to AA-              A+ to A-           BBB+ to BB-          B+ to D          Unrated
          Exposure Class                                                         Fitch          AAA to AA-              A+ to A-           BBB+ to BB-          B+ to D          Unrated
                                                                                 RAM            AAA to AA3              A to A3            BBB1 to BB3          B to D           Unrated
                                                                                MARC            AAA to AA-              A+ to A-           BBB+ to BB-          B+ to D          Unrated
                                                                          Rating & Investment
                                                                                  Inc           AAA to AA-             A+ to A-          BBB+ to BB-            B+ to D          Unrated
          On and Off-Balance-Sheet Exposures

          Credit Exposures (using Corporate Risk Weights)
          Public Sector Entities (applicable for entities risk weighted
           based on their external ratings as corporates)                                                    -                     -                    -                    -         51,184
          Insurance Cos, Securities Firms & Fund Managers                                                    -                     -                    -                    -        105,466
          Corporates                                                                                   433,081             1,155,313                3,570                    -     14,184,902
          Total                                                                                        433,081             1,155,313                3,570                    -     14,341,552


                                                                                                Short term Ratings of Banking Institutions and Corporate by Approved ECAIs
                                                                                Moodys             P-1                   P-2                    P-3                Others        Unrated
                                                                                 S&P               A-1                   A-2                    A-3                Others        Unrated
          Exposure Class                                                         Fitch           F1+, F1                 F2                     F3                 B to D        Unrated
                                                                                 RAM               P-1                   P-2                    P-3                 NP           Unrated
                                                                                MARC             MARC-1                MARC-2                MARC-3-             MARC-4          Unrated
                                                                          Rating & Investment
                                                                                  Inc            a-1+, a-1                a-2                 a-3                 b, c           Unrated
          On and Off-Balance-Sheet Exposures
          Banks, MDBs and FDIs                                                                                 -                   -                    -                    -              -

          Rated Credit Exposures (using Corporate Risk Weights)
          Public Sector Entities (applicable for entities risk weighted
           based on their external ratings as corporates)                                                      -                   -                    -                    -              -
          Insurance Cos, Securities Firms & Fund Managers                                                      -                   -                    -                    -              -
          Corporates                                                                                           -                   -                    -                    -              -
          Total                                                                                                -                   -                    -                    -              -




                                                                                                             203
Company No: 25046 T                                                                                                                                                                             Appendix III




AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

(i)   Disclosures on Rated Exposures according to Ratings by ECAIs (RM'000) (continued)
      Bank
      2010

                                                                                                                   Ratings of Corporate by Approved ECAIs
                                                                                Moodys           Aaa to Aa3             A1 to A3            Baa1 to Ba3         B1 to C          Unrated
                                                                                 S&P            AAA to AA-              A+ to A-           BBB+ to BB-          B+ to D          Unrated
          Exposure Class                                                         Fitch          AAA to AA-              A+ to A-           BBB+ to BB-          B+ to D          Unrated
                                                                                 RAM            AAA to AA3              A to A3            BBB1 to BB3          B to D           Unrated
                                                                                MARC            AAA to AA-              A+ to A-           BBB+ to BB-          B+ to D          Unrated
                                                                          Rating & Investment
                                                                                  Inc           AAA to AA-             A+ to A-          BBB+ to BB-            B+ to D          Unrated
          On and Off-Balance-Sheet Exposures

          Credit Exposures (using Corporate Risk Weights)
          Public Sector Entities (applicable for entities risk weighted
           based on their external ratings as corporates)                                                    -                     -                    -                    -         51,184
          Insurance Cos, Securities Firms & Fund Managers                                                    -                     -                    -                    -         10,410
          Corporates                                                                                   427,064             1,054,489                3,570                    -     12,744,599
          Total                                                                                        427,064             1,054,489                3,570                    -     12,806,193


                                                                                                Short term Ratings of Banking Institutions and Corporate by Approved ECAIs
                                                                                Moodys             P-1                   P-2                    P-3                Others        Unrated
                                                                                 S&P               A-1                   A-2                    A-3                Others        Unrated
          Exposure Class                                                         Fitch           F1+, F1                 F2                     F3                 B to D        Unrated
                                                                                 RAM               P-1                   P-2                    P-3                 NP           Unrated
                                                                                MARC             MARC-1                MARC-2                MARC-3-             MARC-4          Unrated
                                                                          Rating & Investment
                                                                                  Inc            a-1+, a-1                a-2                 a-3                 b, c           Unrated
          On and Off-Balance-Sheet Exposures
          Banks, MDBs and FDIs                                                                                 -                   -                    -                    -              -

          Rated Credit Exposures (using Corporate Risk Weights)
          Public Sector Entities (applicable for entities risk weighted
           based on their external ratings as corporates)                                                      -                   -                    -                    -              -
          Insurance Cos, Securities Firms & Fund Managers                                                      -                   -                    -                    -              -
          Corporates                                                                                           -                   -                    -                    -              -
          Total                                                                                                -                   -                    -                    -              -




                                                                                                             204
Company No: 25046 T                                                                                                                                                                                    Appendix III




AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

(ii) Disclosures on Rated Exposures according to Ratings by ECAIs (RM'000) (continued)
     Group
     2010

                                                                                                               Ratings of Sovereigns and Central Banks by Approved ECAIs
                                                                             Moodys          Aaa to Aa3            A1 to A3            Baa1 to Baa3         Ba1 to B3          Caa1 to C         Unrated
                                                                              S&P            AAA to AA-            A+ to A-           BBB+ to BBB-          BB+ to B-          CCC+ to D         Unrated
         Exposure Class                                                       Fitch          AAA to AA-            A+ to A-           BBB+ to BBB-          BB+ to B-          CCC+ to D         Unrated
                                                                       Rating & Investment
                                                                               Inc           AAA to AA-           A+ to A-          BBB+ to BBB-           BB+ to B-           CCC+ to C         Unrated
         On and Off-Balance-Sheet Exposures
         Sovereigns and Central Banks                                                                      -         11,851,234                    -              10,941                     -              -

         Total                                                                                             -         11,851,234                    -              10,941                     -              -


                                                                                                                  Ratings of Banking Institutions by Approved ECAIs
                                                                             Moodys           Aaa to Aa3          A1 to A3           Baa1 to Baa3           Ba1 to B3          Caa1 to C         Unrated
                                                                              S&P            AAA to AA-           A+ to A-          BBB+ to BBB-            BB+ to B-          CCC+ to D         Unrated
         Exposure Class                                                       Fitch          AAA to AA-           A+ to A-          BBB+ to BBB-            BB+ to B-          CCC+ to D         Unrated
                                                                              RAM            AAA to AA3-          A1 to A3         BBB1+ to BBB3           BB1 to B3            C1+ to D         Unrated
                                                                             MARC            AAA to AA-           A+ to A-          BBB+ to BBB-            BB+ to B-           C+ to D          Unrated
                                                                       Rating & Investment
                                                                               Inc           AAA to AA-           A+ to A-          BBB+ to BBB-           BB+ to B-           CCC+ to C         Unrated
         On and Off-Balance-Sheet Exposures
         Banks, MDBs and FDIs                                                                      911,685               62,276             116,038                        -               157      1,274,354

         Total                                                                                     911,685               62,276             116,038                        -               157      1,274,354




                                                                                                      205
Company No: 25046 T                                                                                                                                                                                    Appendix III




AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

(ii) Disclosures on Rated Exposures according to Ratings by ECAIs (RM'000) (continued)
     Bank
     2010

                                                                                                               Ratings of Sovereigns and Central Banks by Approved ECAIs
                                                                             Moodys          Aaa to Aa3            A1 to A3            Baa1 to Baa3         Ba1 to B3          Caa1 to C         Unrated
                                                                              S&P            AAA to AA-            A+ to A-           BBB+ to BBB-          BB+ to B-          CCC+ to D         Unrated
         Exposure Class                                                       Fitch          AAA to AA-            A+ to A-           BBB+ to BBB-          BB+ to B-          CCC+ to D         Unrated
                                                                       Rating & Investment
                                                                               Inc           AAA to AA-           A+ to A-          BBB+ to BBB-           BB+ to B-           CCC+ to C         Unrated
         On and Off-Balance-Sheet Exposures
         Sovereigns and Central Banks                                                                      -          8,189,452                    -                       -                 -              -

         Total                                                                                             -          8,189,452                    -                       -                 -              -


                                                                                                                  Ratings of Banking Institutions by Approved ECAIs
                                                                             Moodys           Aaa to Aa3          A1 to A3           Baa1 to Baa3           Ba1 to B3          Caa1 to C         Unrated
                                                                              S&P            AAA to AA-           A+ to A-          BBB+ to BBB-            BB+ to B-          CCC+ to D         Unrated
         Exposure Class                                                       Fitch          AAA to AA-           A+ to A-          BBB+ to BBB-            BB+ to B-          CCC+ to D         Unrated
                                                                              RAM            AAA to AA3-          A1 to A3         BBB1+ to BBB3           BB1 to B3            C1+ to D         Unrated
                                                                             MARC            AAA to AA-           A+ to A-          BBB+ to BBB-            BB+ to B-           C+ to D          Unrated
                                                                       Rating & Investment
                                                                               Inc           AAA to AA-           A+ to A-          BBB+ to BBB-           BB+ to B-           CCC+ to C         Unrated
         On and Off-Balance-Sheet Exposures
         Banks, MDBs and FDIs                                                                      899,824               62,276             116,038                        -               157      1,218,515

         Total                                                                                     899,824               62,276             116,038                        -               157      1,218,515




                                                                                                      206
Company No: 25046 T                                                                                                                                  Appendix IV


AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

a)   Disclosures on Credit Risk Mitigation (RM'000)
     Group
     2010

                                                                                          Exposures       Exposures       Exposures        Exposures
                                                                                           before         Covered by      Covered by       Covered by
     Exposure Class                                                                         CRM           Guarantees        Eligible          Other
                                                                                                           /Credit         Financial         Eligible
                                                                                                          Derivatives      Collateral       Collateral
     Credit Risk
     On-Balance Sheet Exposures
     Sovereigns/Central Banks                                                                11,727,290               -                -                 -
     Public Sector Entities                                                                      51,159               -            5,975                 -
     Banks, Development Financial Institutions & MDBs                                         1,970,016               -                -                 -
     Insurance Cos, Securities Firms & Fund Managers                                             95,362               -                2                 -
     Corporates                                                                              14,018,930         242,210          901,322                 -
     Regulatory Retail                                                                        9,990,439             518          111,915                 -
     Residential Mortgages                                                                    1,980,809               -            1,869                 -
     Higher Risk Assets                                                                         389,024               -              427                 -
     Other Assets                                                                             1,007,575               -                -                 -
     Defaulted Exposures                                                                      1,275,168             357           22,202                 -
     Total for On-Balance Sheet Exposures                                                    42,505,772         243,085        1,043,712                 -

     Off-Balance Sheet Exposures
     Off-Balance sheet exposures other than OTC derivatives or credit derivatives             2,077,478               -                -                 -
     Defaulted Exposures                                                                         31,835               -                -                 -
     Total for Off-Balance Sheet Exposures                                                    2,109,313               -                -                 -
     Total On and Off-Balance Sheet Exposures                                                44,615,085         243,085        1,043,712                 -




                                                                                    207
Company No: 25046 T                                                                                                                                  Appendix IV


AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

a)   Disclosures on Credit Risk Mitigation (RM'000) (continued)
     Bank
     2010

                                                                                          Exposures       Exposures       Exposures        Exposures
                                                                                           before         Covered by      Covered by       Covered by
     Exposure Class                                                                         CRM           Guarantees        Eligible          Other
                                                                                                           /Credit         Financial         Eligible
                                                                                                          Derivatives      Collateral       Collateral
     Credit Risk
     On-Balance Sheet Exposures
     Sovereigns/Central Banks                                                                 8,186,533               -                -                 -
     Public Sector Entities                                                                      51,159               -            5,975                 -
     Banks, Development Financial Institutions & MDBs                                         1,914,175               -                -                 -
     Insurance Cos, Securities Firms & Fund Managers                                                306               -                2                 -
     Corporates                                                                              12,540,053         242,210          824,732                 -
     Regulatory Retail                                                                        8,055,493             518          104,288                 -
     Residential Mortgages                                                                    1,859,507               -            1,526                 -
     Higher Risk Assets                                                                         346,361               -              427                 -
     Other Assets                                                                             1,286,037               -                -                 -
     Defaulted Exposures                                                                      1,128,386             357           22,181                 -
     Total for On-Balance Sheet Exposures                                                    35,368,010         243,085          959,131                 -

     Off-Balance Sheet Exposures
     Off-Balance sheet exposures other than OTC derivatives or credit derivatives             1,814,442               -                -                 -
     Defaulted Exposures                                                                         31,835               -                -                 -
     Total for Off-Balance Sheet Exposures                                                    1,846,277               -                -                 -
     Total On and Off-Balance Sheet Exposures                                                37,214,287         243,085          959,131                 -




                                                                                    208
Company No: 25046 T                                                                                                                                                                             Appendix IV


AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

b)   Disclosure on Off-Balance Sheet and Counterparty Credit Risk (RM'000)

     Counterparty Credit Risk is the risk that the counterparty to a transaction could default before the final settlement of the transaction's cashflows. An economic loss could occur if the
     transactions with the counterparty has a positive economic value for the Bank at the time of default.

     In contrast to the exposure to credit risk through a loan, where the exposure to credit risk is unilateral and only the lending bank faces the risk of loss, Counterparty Credit Risk creates a
     bilateral risk of loss where the market value for many types of transactions can be positive or negative to either counterparty.
     In respect of Off-balance sheet items, the credit risk inherent in each off-balance sheet instrument is translated into an on-balance sheet exposure equivalent (credit equivalent) by multiplying
     the nominal principal amount with a credit conversion factor ('CCF') as prescribed by the Standardised Approach under the Risk Weighted Capital Adequacy Framework. The resulting amount
     is then weighted against the risk weight of the counterparty. In addition, counterparty risk weights for over-the-counter ('OTC') derivative transactions will be determined based on the external
     rating of the counterparty and will not be subject to any specific ceiling.

     Group
     2010


                                                                                                                                  Positive Fair Value
                                                                                                                                                          Credit Equivalent       Risk Weighted
                                                                                                            Principal Amount        of Derivative
                                                                                                                                                              Amount                 Amount
                                                                                                                                       Contracts
     Description
     Direct Credit Substitutes                                                                                         408,608                                       408,608               299,520
     Transaction related contingent Items                                                                            2,387,456                                     1,193,728             1,022,073
     Short Term Self Liquidating trade related contingencies                                                         1,232,752                                       246,551               140,554
     Foreign exchange related contracts
       One year or less                                                                                              2,215,359                25,842                  50,821                 19,952
       Over one year to five years                                                                                     201,120                10,570                  19,678                  8,217
     Interest/Profit rate related contracts
       One year or less                                                                                                 93,784                      -                     14                      3
       Over one year to five years                                                                                     956,256                  2,664                 32,602                  7,936
       Over five years                                                                                                 445,273                  7,079                 38,490                  8,842

     Other commitments, such as formal standby facilities and credit lines, with an original maturity of
     over one year                                                                                                   4,247,549                                                -                    -

     Other commitments, such as formal standby facilities and credit lines, with an original maturity of
     up to one year                                                                                                  6,062,519                                                -                    -
     Unutilised credit card lines                                                                                      594,104                                       118,821                 89,026
     Total                                                                                                          18,844,780                46,155               2,109,313             1,596,123




                                                                                                    209
Company No: 25046 T                                                                                                                                                                    Appendix IV


AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

b)   Disclosure on Off Balance Sheet and Counterparty Credit Risk (RM'000)
     Group
     2009


                                                                                                                              Positive Fair Value
                                                                                                                                                    Credit Equivalent       Risk Weighted
                                                                                                           Principal Amount     of Derivative
                                                                                                                                                        Amount                 Amount
                                                                                                                                   Contracts
     Description
     Direct Credit Substitutes                                                                                      495,326                                   495,326               470,810
     Transaction related contingent Items                                                                         2,648,189                                 1,324,094             1,106,247
     Short Term Self Liquidating trade related contingencies                                                      1,401,193                                   280,239               120,271
     Foreign exchange related contracts
       One year or less                                                                                           2,111,158              18,440                45,883               20,345
       Over one year to five years                                                                                  103,687               3,223                10,310                4,347
     Interest/Profit rate related contracts
       One year or less                                                                                             385,000                    -                  910                  184
       Over one year to five years                                                                                  589,721                3,981               18,380                6,655
       Over five years                                                                                              440,277                4,083               38,564                7,910
     Other commitments, such as formal standby facilities and credit lines, with an original maturity of
     over one year                                                                                                3,957,040                                             -                   -
     Other commitments, such as formal standby facilities and credit lines, with an original maturity of
     up to one year                                                                                               5,231,059                                             -                   -
     Unutilised credit card lines                                                                                   555,478                                   111,096               83,248
     Total                                                                                                       17,918,128              29,727             2,324,802             1,820,017




                                                                                                   210
Company No: 25046 T                                                                                                                                                                    Appendix IV


AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

b)   Disclosure on Off Balance Sheet and Counterparty Credit Risk (RM'000) (continued)
     Bank
     2010


                                                                                                                              Positive Fair Value
                                                                                                                                                    Credit Equivalent       Risk Weighted
                                                                                                           Principal Amount     of Derivative
                                                                                                                                                        Amount                 Amount
                                                                                                                                   Contracts
     Description
     Direct Credit Substitutes                                                                                      382,080                                   382,080              280,656
     Transaction related contingent Items                                                                         2,189,031                                 1,094,516              928,260
     Short Term Self Liquidating trade related contingencies                                                        546,276                                   109,255              109,027
     Foreign exchange related contracts
       One year or less                                                                                           2,215,359              25,842                50,821               19,952
       Over one year to five years                                                                                  201,120              10,570                19,678                8,217
     Interest/Profit rate related contracts
       One year or less                                                                                              93,784                    -                   14                    3
       Over one year to five years                                                                                  956,256                2,664               32,602                7,936
       Over five years                                                                                              445,273                7,079               38,490                8,842
     Other commitments, such as formal standby facilities and credit lines, with an original maturity of
     over one year                                                                                                3,837,655                                             -                   -
     Other commitments, such as formal standby facilities and credit lines, with an original maturity of
     up to one year                                                                                               5,360,954                                             -                   -
     Unutilised credit card lines                                                                                   594,104                                   118,821               89,026
     Total                                                                                                       16,821,892              46,155             1,846,277             1,451,919




                                                                                                   211
Company No: 25046 T                                                                                                                                                                    Appendix IV


AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

b)   Disclosure on Off Balance Sheet and Counterparty Credit Risk (RM'000) (continued)
     Bank
     2009


                                                                                                                              Positive Fair Value
                                                                                                                                                    Credit Equivalent       Risk Weighted
                                                                                                           Principal Amount     of Derivative
                                                                                                                                                        Amount                 Amount
                                                                                                                                   Contracts
     Description
     Direct Credit Substitutes                                                                                      444,676                                   444,676               437,598
     Transaction related contingent Items                                                                         2,480,918                                 1,240,459             1,022,917
     Short Term Self Liquidating trade related contingencies                                                        324,530                                    64,906                63,881
     Foreign exchange related contracts
       One year or less                                                                                           2,111,158              18,440                45,883               20,345
       Over one year to five years                                                                                  103,687               3,223                10,310                4,347
     Interest/Profit rate related contracts
       One year or less                                                                                             385,000                    -                  910                  184
       Over one year to five years                                                                                  589,721                3,981               18,380                6,655
       Over five years                                                                                              440,277                4,083               38,564                7,910
     Other commitments, such as formal standby facilities and credit lines, with an original maturity of
     over one year                                                                                                3,673,199                                             -                   -
     Other commitments, such as formal standby facilities and credit lines, with an original maturity of
     up to one year                                                                                               4,651,975                                             -                   -
     Unutilised credit card lines                                                                                   555,478                                   111,096               83,248
     Total                                                                                                       15,760,619              29,727             1,975,184             1,647,085




                                                                                                   212
Company No: 25046 T                                                                                                                                                                               Appendix IV


AFFIN Bank Berhad
(Incorporated in Malaysia)

BASEL II Pillar 3 Disclosures (continued)

c)   Disclosures on Market Risk - Interest Rate Risk/Rate of Return Risk in the Banking Book (RM million)

     Interest rate risk is the current and prospective impact to the Bank's financial condition due to adverse changes in the interest rates to which the balance sheet is exposed. The objective is to
     manage interest rate risk to achieve stable and sustainable net interest income in the long term which impact can be viewed from the perspectives of (1) earnings in the next 12 months, and (2)
     economic value.

     (1) Next 12 months' Earnings - Interest rate risk from the earnings perspective is the impact based on changes to the net interest income over the next 12 months. This risk is measured monthly
     through sensitivity analysis including the application of an instantaneous 100 basis point parallel shock in interest rates across the yield curve. The prospective change to the net interest income
     is measured using an Asset Liability Management simulation model which incorporates the assessment of both existing and new business.

     (2) Economic Value - Measuring the change in the economic value of equity is an assessment of the long term impact to the earnings potential. This is assessed through the application of
     relevant duration factors to capture the net economic value impact over the long term or total life of all balance sheet assets and liabilities to adverse changes in interest rates.

     The above calculations do not take into account loan prepayments and places non-maturity deposits in the overnight bucket.


     2010

                                                                                                                              Group                                           Bank
     Type of Currency                                                                                                   Impact on Positions                            Impact on Positions
                                                                                                                  (100 basis points) Parallel Shift              (100 basis points) Parallel Shift
                                                                                                             Increase/(Decline) Increase/(Decline)          Increase/(Decline)      Increase/(Decline)
                                                                                                                 in Earnings       in Economic Value            in Earnings        in Economic Value
     Ringgit Malaysia                                                                                                       20.3                  311.4                     15.6                  328.1
     US Dollar                                                                                                               4.1                     7.4                     4.2                    7.2
     Great Britain Pound                                                                                                     0.4                     1.1                     0.4                    1.1
     Australian Dollar                                                                                                       0.4                     0.8                     0.4                    0.8
     Singapore Dollar                                                                                                        0.3                     2.2                     0.3                    2.2
     Japanese Yen                                                                                                            0.3                     0.8                     0.3                    0.8
     Others (*)                                                                                                             (0.1)                   (0.0)                   (0.1)                  (0.0)

     Total                                                                                                                   25.7                 323.7                     21.2                 340.1

     * Others comprise of NZD, EUR, HKD and AED currencies where the amount of each currency is relatively small.




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