Cimb Financial Statement

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068 Directors’ Report 075 Statement by Directors 075 Statutory Declaration 076 Independent Auditors’ Report 078 Balance Sheets 080 Income Statements 081 Statement of Changes in Equity 085 Cash Flow Statements 088 Summary of Significant Accounting Policies 106 Notes to the Financial Statements Financial Statements

Transcript of Cimb Financial Statement

Page 1: Cimb Financial Statement

068 Directors’ Report

075 Statement by Directors

075 Statutory Declaration

076 Independent Auditors’ Report

078 Balance Sheets

080 Income Statements

081 Statement of Changes in Equity

085 Cash Flow Statements

088 Summary of Significant Accounting Policies

106 Notes to the Financial Statements

Financial Statements

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Annual Report 2008068

CIMB Bank Berhad(13491-P)

The Directors have pleasure in submitting their Report and the Audited Financial Statements of the Group and of CIMB Bank Berhad (“CIMB Bank” or “the Bank”) for the financial year ended 31 December 2008.

PrinciPal activitiesThe principal activities of the Bank during the financial year are commercial banking and the provision of related financial services, including Islamic banking. The principal activities of the significant subsidiaries as set out in Note 11 to the Financial Statements, consist of Islamic banking, offshore banking, debt factoring, trustees and nominee services, and property ownership and management. There was no significant change in the nature of these activities during the financial year.

Financial results

the Group the Bank rM’000 rM’000

Net profit after taxation and zakat - Equity holders of the Bank 1,572,746 1,678,036 - Minority interests 1,952 -

1,574,698 1,678,036

DiviDenDsThe dividends on ordinary shares and redeemable preference shares paid or declared by the Bank since 31 December 2007 were as follows:

rM’000

In respect of the financial year ended 31 December 2007: Final gross dividend of 13.63 sen per redeemable preference share, less 26% income tax, paid on 7 May 2008 300,000

In respect of the financial year ended 31 December 2008: Special interim gross dividend of 9.09 sen per redeemable preference share,less 26% income tax, paid on 7 May 2008 200,000 Interim gross dividend of 2.00 sen per ordinary share, less 26% income tax, paid on 25 August 2008 44,000 Tax exempt interim dividend of 2.22 sen per ordinary share, paid on 25 August 2008 66,000

610,000

The Directors now propose a second interim gross dividend of approximately 6.72 sen per share, less 25% income tax on 2,974,009,486 Redeemable Preference Shares of RM0.01 each, amounting to RM150,000,000. The second interim dividend was approved by the Board of Directors in a resolution dated 23 January 2009.

reserves, Provisions anD allowancesThere were no material transfers to or from reserves or provisions or allowances during the financial year other than those disclosed in the Financial Statements and Notes to the Financial Statements.

Directors’ ReportFor the financial year ended 31 December 2008

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CIMB Bank Berhad(13491-P)

BaD anD DouBtFul DeBts, anD FinancinGBefore the Financial Statements of the Group and of 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 doubtful debts and financing, and satisfied themselves that all known bad debts and financing had been written off and that adequate allowance had been made for doubtful debts and financing.

At the date of this Report, the Directors are not aware of any circumstances which would render the amounts 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 assetsBefore the Financial Statements of the Group and of the Bank were made out, the Directors took reasonable steps to ascertain that any current assets, other than debts, 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 had been written down to an amount which they might be expected so to realise.

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

valuation MethoDsAt the date of this Report, the Directors are not aware of any circumstances which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and the Bank misleading or inappropriate. continGent anD other liaBilitiesAt 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 liability of any other person; or

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

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

chanGe oF circuMstancesAt 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 of the Bank, that would render any amount stated in the Financial Statements misleading.

iteMs oF an unusual natureIn opinion of the Directors:

(a) the results of the Group’s and the Bank’s operations for the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature other than those disclosed in Notes 4, 50 and 56 to the Financial Statements; and

(b) except as disclosed in Note 51 to the Financial Statements, 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 to affect substantially the results of the operations of the Group or the Bank for the financial year in which this Report is made.

Directors’ ReportFor the financial year ended 31 December 2008

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Annual Report 2008070

CIMB Bank Berhad(13491-P)

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

Directors Tan Sri Dato’ Seri Haidar bin Mohamed Nor Dato’Sri Mohamed Nazir bin Abdul Razak Tan Sri G.K. Rama Iyer Dato’ Dr. Mohamad Zawawi bin Ismail Datuk Dr. Syed Muhamad bin Syed Abdul Kadir Dato’ Zainal Abidin bin Putih Dato’ Mohd Shukri bin Hussin Dato’ Seri Yeap Leong Huat Tunku Dato’ Ahmad Burhanuddin Dr. Gan Wee Beng

In accordance with Article 97 of the Bank’s Articles of Association, Dato’ Dr. Mohamad Zawawi Ismail, Dato’ Zainal Abidin Putih and Dato’ Mohd Shukri Hussin retire from the Board at the forthcoming Annual General Meeting and being eligible, offer themselves for re-election.

Tan Sri G.K. Rama Iyer who is above the age of seventy (70) years, retires from the Board at the Annual General Meeting pursuant to Section 129 of the Companies Act, 1965. Under Section 129(6) of the Companies Act, 1965 it is proposed to pass a resolution to re-elect him as a Director of the Bank to hold office until the next Annual General Meeting of the Bank.

Directors’ interests in shares anD share oPtionsAccording to the Register of Directors’ Shareholdings maintained by the Bank in accordance with Section 134 of the Companies Act, 1965, the interests of the Directors who held office at the end of the financial year in the shares of the Bank or its subsidiaries during the financial year are as follows:

no. of ordinary shares of rM1 each as at as at 1 January acquired Disposed 31 December

subsidiary company BhlB trustee Berhad Dato’ Seri Yeap Leong Huat* 70,000 - (70,000) -

Note: Includes shareholding of spouse, details of which are as follows:

no. of ordinary shares of rM1 each as at transferred as at 1 January from spouse acquired Disposed 31 December

*Datin Seri P’ng Gek Ling 70,000 - - (70,000) -

Directors’ ReportFor the financial year ended 31 December 2008

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According to the Register of Directors’ Shareholdings, the beneficial interests of the Directors who held office at the end of the financial year in the shares and share options of the ultimate holding company during the financial year are as follows:

no. of ordinary shares of rM1 each as at as at 1 January acquired Disposed 31 December

ultimate holding company Bumiputra-commerce holdings Berhad (“BchB”)

Tan Sri G.K. Rama Iyer** 25,812 - - 25,812 Dato’ Dr. Mohamad Zawawi bin Ismail 4,000 - - 4,000 Dato’ Sri Mohamed Nazir bin Abdul Razak^ 28,053,261 350,000 (450,000) 27,953,261 Dato’ Mohd Shukri bin Hussin 300,112 - - 300,112 Tunku Dato’ Ahmad Burhanuddin 190,000 - (8,000) 182,000 Dato’ Zainal Abidin bin Putih# 15,000 40,000 - 55,000

centurion investments sdn Bhd indirect interest Dato’ Seri Yeap Leong Huat* 200,000 24,000 - 224,000

Note: Includes shareholding of spouse/child, details of which are as follows:

no. of ordinary shares of rM1 each as at transferred as at 1 January from spouse acquired Disposed 31 December

**Puan Sri Vijayalakshmi a/p Krishnaswamy 18,812 - - - 18,812 **Ganapathy Srihari a/l Rama Iyer 6,000 - - - 6,000 ^Datin Sri Azlina binti Abdul Aziz 4,450,000 - - (450,000) 4,000,000 #Datin Jasmine binti Abdullah Heng 10,000 - - - 10,000 #Mohamad Ari Zulkarnain bin Zainal Abidin 5,000 - - - 5,000 *Daryl Yeap Liew Sym - - 24,000 - 24,000

None of the other Directors in office at the end of the financial year had any interest in the shares and share options of the Bank, the holding company, the ultimate holding company and the Bank’s related companies.

Directors’ ReportFor the financial year ended 31 December 2008

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Annual Report 2008072

CIMB Bank Berhad(13491-P)

Directors’ BeneFitsSince the end of the previous financial year, no Director of the Bank has received or become entitled to receive any benefit (other than the benefit included in the aggregate amount of emoluments received or due and receivable by Directors shown in Note 43 to the Financial Statements or the fixed salary as a full time employee of the Bank) by reason of a contract made by the Bank or a related corporation with the Director or with a firm of which the Director is a member or with a company in which the Director has a substantial financial interest.

Neither at the end of the financial year, nor at any time during the financial year, did there subsist any other arrangements to which the Bank is a party with the object or objects of enabling Directors of the Bank to acquire benefits by means of the acquisition of shares in, or debentures of, the Bank or any other body corporate other than share options of the ultimate holding company.

2008 Business Plan anD strateGyThe financial year ended 31 December 2008 was a challenging year both locally and globally. During the year, the Bank continued on its transformation journey by putting in place our strategic priorities to drive higher productivity and efficiency which would brace the Bank for the challenges of an increasingly competitive environment. The Bank continued to drive the current growth direction and strengthen itself as a domestic core player and internationalise the CIMB franchise as a regional financial services group. In terms of regional capacity building, the Bank made 2 significant acquisitions in 2008. The first was the acquisition of a 19.99% stake in the Bank of Yingkou, giving the Bank a toehold into mainland China and access to its north eastern growth corridor. The second acquisition was of a 42.13% stake in BankThai Public Company Limited (“BankThai”), completing our universal banking footprint in Thailand.

outlook For 2009Uncertainty and volatility in global credit markets will continue to place upward pressure on funding costs. While the domestic economy remains resilient, credit growth is expected to moderate to slightly below the average of the past decade as the slowing in the economy impacts both consumers and businesses. The Bank will focus on growing its market share in consumer and commercial banking businesses by offering innovative financial products and services to meet our customers’ needs. We will also continue to invest in our branches network and alternative sales channels to expand reach and also improve on our quality of service. There will be further upgrading of our systems to enhance our analytical capabilities and to create a positive experience for our customers across all touch points. The underlying performance of our business and our strategic focus however provide the foundation for us to manage through these uncertain times and deliver acceptable returns for shareholders over the longer term. In this environment, the Bank recognises the need to be prudent and the importance of maintaining a strong capital base and high levels of liquidity. We expect a difficult operating environment as the impact of the global financial crisis and economic slowdown is felt in the regional and domestic markets. We nevertheless expect the Bank to continue to be a key earnings driver while we defend our strong share of regional capital market activities. A significant portion of our resources will be spent on the transformation of BankThai, as well as capturing synergies from our regional universal banking platform.

Directors’ ReportFor the financial year ended 31 December 2008

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CIMB Bank Berhad(13491-P)

ratinGs By external ratinG aGenciesDetails of the ratings of the Bank and its debt securities are as follows:

rating agency rating classification Definition

Malaysian Rating Long Term Rating : AA+ Indicates very strong capacity to meet its Corporation Berhad Short Term Rating : MARC-1 financial commitments and ability to withstandDate accorded: Outlook : Stable adversity. The institution also possesses a December 2008 good track record and has no readily apparent weaknesses.

Moody’s Investors Long Term Rating: A3 Indicates good credit quality. However, elements Services Ltd Long Term Subordinated may be present that suggest a susceptibilityDate accorded: Debt : Baa1 to impairment over the long term. December 2008 Short Term Rating : P-1 Outlook : Stable

Fitch Ratings Ltd Long Term Ratings: BBB+ Indicates currently low expectation of credit risk.Date accorded: Long Term Subordinated Capacity for timely payment of financial April 2008 Debt : BBB commitment is adequate. However, adverse Short Term Rating : F2 changes in circumstances and in economic Outlook : Positive conditions are more likely to impair this capacity.

Standard & Poor’s Long Term Rating: BBB+ Indicates adequate capacity to meet its financial Rating Agency Short Term Rating : A-2 commitments. However, adverse economicDate accorded: Outlook : Stable conditions or changing circumstances areSeptember 2008 more likely to lead to a weakened capacity of the obligor to meet its financial commitments.

shariah coMMitteeAll the Islamic banking businesses of the CIMB Group come under the purview of the CIMB Islamic Shariah Committee, which resides at CIMB Islamic Bank Berhad (“CIMB Islamic”).

As per BNM/GPS1 (Guideline on the Governance of Shariah Committee for Islamic Financial Institutions), the Shariah Committee advises the Group on the operations of its Islamic banking business to ensure that the Group is not involved in any elements/activities which are not approved under Shariah. In advising on such matters, the Shariah Committee also considers the views of the Shariah Council/Committees of relevant authorities like Bank Negara Malaysia and the Securities Commission on issues relating to the activities and operations of Islamic banking and financing.

Composition of the Shariah Committee:

1. Sheikh Professor Dr. Mohammad Hashim Kamali (Chairman)2. Sheikh Nedham Muhammad Seleh Yaqooby 3. Sheikh Dr. Haji Mohd Nai’m bin Haji Mokhtar 4. Sheikh Associate Professor Dr. Shafaai Bin Musa5. Sheikh Dr. Haji Zainudin bin Jaffar 6. Sheikh Dr. Yousef Abdullah AlShubaily (appointed on 28 October 2008)

Directors’ ReportFor the financial year ended 31 December 2008

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Annual Report 2008074

CIMB Bank Berhad(13491-P)

Zakat oBliGationsCIMB Islamic is obliged to pay business zakat to comply with the principles of Shariah. CIMB Islamic does not pay zakat on behalf of the shareholders or depositors.

siGniFicant events DurinG the Financial yearSignificant events during the financial year are disclosed in Note 50 to the Financial Statements.

suBsequent events aFter the Financial yearSignificant subsequent events after the financial year are disclosed in Note 51 to the Financial Statements. ultiMate holDinG coMPanyThe Directors regard Bumiputra-Commerce Holdings Berhad, a quoted company incorporated in Malaysia, as the Bank’s ultimate holding company.

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

Signed on behalf of the Board of Directors in accordance with their resolution.

tan sri Dato’ seri haidar bin Mohamed norDirector

tunku Dato’ ahmad Burhanuddin Director

Kuala Lumpur7 April 2009

Directors’ ReportFor the financial year ended 31 December 2008

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075Annual Report 2008

CIMB Bank Berhad(13491-P)

We, Tan Sri Dato’ Seri Haidar bin Mohamed Nor and Tunku Dato’ Ahmad Burhanuddin, being two of the Directors of CIMB Bank Berhad, hereby state that, in the opinion of the Directors, the Financial Statements set out on pages 078 to 262 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Bank as at 31 December 2008 and of the results and cash flows of the Group and of the Bank for the financial year ended on that date, in accordance with the provisions of the Companies Act, 1965, the MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities and Bank Negara Malaysia Guidelines.

Signed on behalf of the Board of Directors in accordance with their resolution.

tan sri Dato’ seri haidar bin Mohamed nor Director

tunku Dato’ ahmad Burhanuddin Director

Kuala Lumpur7 April 2009

I, Kim Kenny, being the officer primarily responsible for the financial management of CIMB Bank Berhad, do solemnly and sincerely declare the Financial Statements set out on pages 078 to 262 are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

kim kenny

Subscribed and solemnly declared by the abovenamed Kim Kenny at Kuala Lumpur before me, on 7 April 2009.

Commissioner for Oaths

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

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

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Annual Report 2008076

CIMB Bank Berhad(13491-P)

Independent Auditors’ ReportTo the members of CIMB Bank BerhadCompany No: 13491-P (Incorporated in Malaysia)

rePort on the Financial stateMentsWe have audited the Financial Statements of CIMB Bank Berhad, which comprise the balance sheets as at 31 December 2008 of the Group and of the Bank, and the income statements, statements of changes in equity and cash flow statements of the Group and of the Bank for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 078 to 262.

Directors’ resPonsiBility For the Financial stateMentsThe Directors of the Bank are responsible for the preparation and fair presentation of these Financial Statements in accordance with the Companies Act, 1965, the MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities and the Bank Negara Malaysia Guidelines. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of Financial Statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

auDitors’ resPonsiBilityOur responsibility is to express an opinion on these Financial Statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the Financial Statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Financial Statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the Financial Statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Bank’s preparation and fair presentation of the Financial Statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the Financial Statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

oPinionIn our opinion, the Financial Statements have been properly drawn up in accordance with the Companies Act, 1965, the MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities and the Bank Negara Malaysia Guidelines so as to give a true and fair view of the financial position of the Group and of the Bank as of 31 December 2008 and of their financial performance and cash flows for the year then ended.

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CIMB Bank Berhad(13491-P)

rePort on other leGal anD reGulatory requireMentsIn accordance with the requirements of the Companies Act, 1965, in Malaysia, we also report the following:

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

(b) We have considered the accounts and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 11 to the Financial Statements.

(c) We are satisfied that the accounts 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.

(d) The audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

other MattersThis report is made solely to the members 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 sridharan nair(No. AF: 1146) (No. 2656/05/10 (J))Chartered Accountants Chartered Accountant

Kuala Lumpur7 April 2009

Independent Auditors’ ReportTo the members of CIMB Bank Berhad

Company No: 13491-P (Incorporated in Malaysia)

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Annual Report 2008078

CIMB Bank Berhad(13491-P)

Balance SheetsAs at 31 December 2008

the Group the Bank

note 2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

assets Cash and short-term funds 2 21,966,362 27,774,626 14,308,346 23,115,966 Securities purchased under resale agreements 2,967,770 4,308,971 2,967,770 4,308,971 Deposits and placements with banks and other financial institutions 3 2,139,459 5,120,678 4,967,910 5,339,365 Securities held for trading 4 9,564,281 14,233,869 6,517,399 10,814,173 Available-for-sale securities 5 7,360,190 6,699,411 6,503,390 5,832,506 Held-to-maturity securities 6 11,625,970 3,473,316 8,685,401 3,366,167 Derivative financial instruments 25 5,335,535 1,710,930 5,126,006 1,636,344 Loans, advances and financing 7 95,687,146 80,617,533 84,922,177 73,011,777 Other assets 8 2,095,571 1,404,250 1,933,236 1,202,351 Deferred taxation 9 304,537 408,971 263,993 370,523 Tax recoverable 248,055 6,750 226,786 - Statutory deposits with central banks 10 2,723,540 3,038,272 2,453,934 2,933,983 Investment in subsidiaries 11 - - 2,245,919 2,321,488 Investment in jointly controlled entity 12 127,701 124,448 124,448 124,448 Investment in associate 13 587,280 791 595,814 - Amount due from holding company and ultimate holding company 14 278,350 276,778 246,872 248,715 Amount due from subsidiaries 15 - - 197,618 467,432 Amount due from related companies 16 90,926 100,368 90,819 87,949 Deferred consideration 17 - - - 46,314 Goodwill 18 3,695,075 3,695,075 3,559,075 3,559,075 Intangible assets 19 412,288 465,625 400,857 456,062 Prepaid lease payments 20 29,618 32,437 25,197 27,967 Property, plant and equipment 21 728,713 658,950 564,047 473,643 Investment properties 22 100,175 97,421 100,175 97,421

168,068,542 154,249,470 147,027,189 139,842,640 Non-current assets/disposal groups held for sale 57 82,452 762,094 42,712 115,886

total assets 168,150,994 155,011,564 147,069,901 139,958,526

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CIMB Bank Berhad(13491-P)

Balance SheetsAs at 31 December 2008

the Group the Bank

note 2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

liabilities Deposits from customers 23 127,625,741 112,189,637 107,105,025 99,307,364 Deposits and placements of banks and other financial institutions 24 8,614,530 12,694,895 10,569,514 13,785,163 Obligations on securities sold under repurchase agreements - 605,780 - 1,000 Derivative financial instruments 25 4,849,035 1,610,036 4,820,357 1,610,595 Bills and acceptances payable 3,091,173 4,463,113 3,085,915 4,462,145 Amount due to Cagamas Berhad 993,818 2,004,707 993,818 2,004,707 Amount due to subsidiaries 15 - - 178,140 357,760 Amount due to related companies 16 15,432 1,977 9,398 - Other liabilities 26 2,751,252 2,969,203 2,400,962 2,790,533 Provision for taxation and zakat 5,698 104,294 - 89,316 Redeemable asset-backed bonds 27 - 31,772 - - Irredeemable Convertible Unsecured Loan Stocks 28 667,000 667,000 667,000 667,000 Other borrowings 29 1,039,350 992,100 - - Subordinated obligations 30 4,573,212 2,004,856 5,386,548 2,685,889 Redeemable preference shares 31(a), (b) 813,336 1,981,033 - 1,300,000

155,039,577 142,320,403 135,216,677 129,061,472 Liabilities directly associated with non-current assets/disposal groups classified as held for sale 57 29,499 556,090 - -

total liabilities 155,069,076 142,876,493 135,216,677 129,061,472

equity capital and reserves attributable to equity holders of the Bank Ordinary share capital 32 2,974,009 2,974,009 2,974,009 2,974,009 Reserves 34 9,859,290 8,931,335 8,649,475 7,723,045

12,833,299 11,905,344 11,623,484 10,697,054 Perpetual preference shares 33 200,000 200,000 200,000 200,000 Redeemable preference shares 31(c) 29,740 - 29,740 - Minority interests 18,879 29,727 - -

total equity 13,081,918 12,135,071 11,853,224 10,897,054

total equity and liabilities 168,150,994 155,011,564 147,069,901 139,958,526

commitments and contingencies 25 307,223,451 278,186,549 295,630,457 273,710,057 credit equivalent 25 16,621,342 15,908,617 14,936,213 14,559,520

net assets per ordinary share (rM) * 4.39 4.07 3.99 3.66

* Net assets per ordinary share is calculated by dividing the total equity less minority interests, by the number of ordinary share capital in issue.

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CIMB Bank Berhad(13491-P)

Income StatementsFor the financial year ended 31 December 2008

the Group the Bank

note 2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000 Interest income 36 7,341,222 7,196,426 6,935,440 6,658,411 Interest expense 37 (3,625,092) (3,592,428) (3,448,667) (3,292,100)

Net interest income 3,716,130 3,603,998 3,486,773 3,366,311 Income from Islamic banking operations 59 340,390 252,949 1,575 16,312 Non-interest income 38 1,375,773 2,189,294 1,827,037 2,151,592

Net income 5,432,293 6,046,241 5,315,385 5,534,215 Overheads 39 (2,697,439) (2,857,900) (2,552,656) (2,741,446)

Profit before allowances 2,734,854 3,188,341 2,762,729 2,792,769 Allowances for losses on loans, advances and financing 40 (602,714) (914,336) (569,733) (888,867)Write-back of/(allowance for) losses on other receivables 469 (13,796) 23 (15,866)Write-back of/(allowance for) impairment losses 41 46,481 70,312 (8,323) (120,097)

Profit after allowances 2,179,090 2,330,521 2,184,696 1,767,939 Share of results of jointly controlled entity 12 3,253 3,410 - - Share of results of associate 13 (40,565) 567 - -

Profit before taxation and zakat 2,141,778 2,334,498 2,184,696 1,767,939 Taxation and zakat 44 (567,080) (601,953) (506,660) (589,452)

net profit after taxation and zakat 1,574,698 1,732,545 1,678,036 1,178,487

attributable to: Equity holders of the Bank 1,572,746 1,729,605 1,678,036 1,178,487 Minority interests 1,952 2,940 - -

1,574,698 1,732,545 1,678,036 1,178,487

earnings per share attributable to ordinary equity holders of the Bank - basic/fully diluted (sen) 45 43.20 47.50 46.09 32.37

Dividend: - per ordinary share of 2.00 sen (2007: 20.27 sen) less 26% (2007: 27%) tax 46 1.48 14.80 1.48 14.80

- per ordinary share of 2.22 sen tax exempt (2007: nil) 46 2.22 - 2.22 -

- per redeemable preference share of 22.72 sen (2007: nil) less 26% (2007: nil) tax 46 16.81 - 16.81 -

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Statements of Changes in EquityFor the financial year ended 31 December 2008

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tyth

e G

roup

n

ote

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

At 1

Jan

uary

200

8

2,97

4,00

9 -

4,15

7,07

4 2,

547,

114

1,05

5 (1

39,2

30)

98,6

44

(1,0

85,9

28)

735,

457

- 2,

617,

149

11,9

05,3

44

200,

000

29,7

27 1

2,13

5,07

1

Net

cha

nge

in

avai

labl

e-fo

r-sal

e

secu

ritie

s, n

et o

f tax

34

-

- -

- -

- 30

6 -

- -

- 30

6 -

- 30

6C

urre

ncy

trans

latio

n

diffe

renc

e 34

-

- -

- -

85,5

27

- -

- -

- 85

,527

-

(178

) 85

,349

Inco

me

and

expe

nse

re

cogn

ised

dire

ctly

in

equ

ity

-

- -

- -

85,5

27

306

- -

- -

85,8

33

- (1

78)

85,6

55N

et p

rofit

for t

he

finan

cial

yea

r

- -

- -

- -

- -

- -

1,57

2,74

6 1,

572,

746

- 1,

952

1,57

4,69

8

Tota

l rec

ogni

sed

in

com

e an

d

expe

nse

for t

he

finan

cial

yea

r

- -

- -

- 85

,527

30

6 -

- -

1,57

2,74

6 1,

658,

579

- 1,

774

1,66

0,35

3Tr

ansf

er to

st

atut

ory

rese

rves

34

-

- -

610,

260

- -

- -

- -

(610

,260

) -

- -

-Fi

nal d

ivide

nds

for t

he

finan

cial

yea

r end

ed

31

Dec

embe

r 200

7 46

-

- -

- -

- -

- -

- (3

00,0

00)

(300

,000

) -

- (3

00,0

00)

Inte

rim a

nd s

peci

al

di

viden

ds fo

r the

fin

anci

al y

ear e

nded

31

Dec

embe

r 200

8 46

-

- -

- -

- -

- -

- (3

10,0

00)

(310

,000

) -

- (3

10,0

00)

Cap

italis

ed to

re

deem

able

pr

efer

ence

sha

res

31(c

) -

29,7

40

- -

- -

- -

- -

(29,

740)

-

- -

-N

et in

vest

men

t

hedg

e in

ove

rsea

s

oper

atio

ns a

nd

subs

idia

ries

34

- -

- -

- -

- -

- (1

22,3

36)

- (1

22,3

36)

- -

(122

,336

)Ac

quisi

tion

of a

ssoc

iate

- -

- -

- -

32,1

67

- -

- -

32,1

67

- -

32,1

67Di

spos

al o

f sub

sidia

ry

-

- -

- -

(715

) -

- -

- -

(715

) -

(12,

622)

(1

3,33

7)

At 3

1 De

cem

ber 2

008

2,

974,

009

29,7

40

4,15

7,07

4 3,

157,

374

1,05

5 (5

4,41

8)

131,

117

(1,0

85,9

28)

735,

457

(122

,336

) 2,

939,

895

12,8

63,0

39

200,

000

18,8

79 1

3,08

1,91

8

Page 16: Cimb Financial Statement

Annual Report 2008082

CIMB Bank Berhad(13491-P)

Statements of Changes in EquityFor the financial year ended 31 December 2008

at

trib

utab

le to

equ

ity h

olde

rs o

f the

Ban

k

r

eval

uatio

n

rese

rve

-

Mal

aysi

a o

ther

ex

chan

ge

avai

labl

e-

Perp

etua

l

sh

are

shar

e st

atut

ory

stat

utor

y flu

ctua

tion

for-

sale

M

erge

r c

apita

l r

etai

ned

pr

efer

ence

M

inor

ity

tota

l

ca

pita

l pr

emiu

m

rese

rve

rese

rve

rese

rve

secu

ritie

s de

ficit

rese

rve

profi

ts

tota

l sh

ares

in

tere

sts

equi

tyth

e G

roup

n

ote

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

At 1

Jan

uary

200

7

2,97

4,00

9 4,

157,

074

2,21

7,87

4 60

1 (9

,138

) 71

,624

(1

,085

,928

) 73

5,45

7 1,

657,

205

10,7

18,7

78

200,

000

26,1

48

10,9

44,9

26N

et c

hang

e in

ava

ilabl

e-fo

r-sal

e

secu

ritie

s, n

et o

f tax

34

-

- -

- -

27,0

20

- -

- 27

,020

-

- 27

,020

Cur

renc

y tra

nsla

tion

diffe

renc

e 34

-

- -

- (1

30,0

92)

- -

- -

(130

,092

) -

639

(129

,453

)In

com

e an

d ex

pens

e re

cogn

ised

di

rect

ly in

equ

ity

-

- -

- (1

30,0

92)

27,0

20

- -

- (1

03,0

72)

- 63

9 (1

02,4

33)

Net

pro

fit fo

r the

fina

ncia

l yea

r

- -

- -

- -

- -

1,72

9,60

5 1,

729,

605

- 2,

940

1,73

2,54

5

Tota

l rec

ogni

sed

inco

me

and

ex

pens

e fo

r the

fina

ncia

l yea

r

- -

- -

(130

,092

) 27

,020

-

- 1,

729,

605

1,62

6,53

3 -

3,57

9 1,

630,

112

Tran

sfer

to s

tatu

tory

rese

rves

34

-

- 32

9,24

0 45

4 -

- -

- (3

29,6

94)

- -

- -

Fina

l divi

dend

s fo

r the

fin

anci

al y

ear e

nded

31 D

ecem

ber 2

006

46

- -

- -

- -

- -

(189

,965

) (1

89,9

65)

- -

(189

,965

)Sp

ecia

l inte

rim d

ivide

nd fo

r

the

finan

cial

yea

r end

ed

31 D

ecem

ber 2

007

46

- -

- -

- -

- -

(250

,002

) (2

50,0

02)

- -

(250

,002

)

At 3

1 De

cem

ber 2

007

2,

974,

009

4,15

7,07

4 2,

547,

114

1,05

5 (1

39,2

30)

98,6

44

(1,0

85,9

28)

735,

457

2,61

7,14

9 11

,905

,344

20

0,00

0 29

,727

12

,135

,071

Page 17: Cimb Financial Statement

083Annual Report 2008

CIMB Bank Berhad(13491-P)

Statements of Changes in EquityFor the financial year ended 31 December 2008

n

on-d

istr

ibut

able

D

istr

ibut

able

r

eval

uatio

n

rese

rve

-

red

eem

able

ex

chan

ge

avai

labl

e-

Pe

rpet

ual

shar

e pr

efer

ence

sh

are

stat

utor

y flu

ctua

tion

for-

sale

M

erge

r c

apita

l h

edgi

ng

ret

aine

d p

refe

renc

e to

tal

capi

tal

shar

es

prem

ium

re

serv

e re

serv

e se

curit

ies

defic

it re

serv

e re

serv

e pr

ofits

to

tal

shar

es

equi

tyth

e B

ank

not

e r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

At 1

Jan

uary

200

8

2,97

4,00

9 -

4,15

7,07

4 2,

601,

434

(32,

769)

55

,458

(1

,047

,872

) 74

6,85

2 -

1,24

2,86

8 10

,697

,054

20

0,00

0 10

,897

,054

Net

cha

nge

in a

vaila

ble-

for-s

ale

se

curit

ies,

net

of t

ax

34

- -

- -

- 26

,174

-

- -

- 26

,174

-

26,1

74C

urre

ncy

trans

latio

n di

ffere

nce

34

- -

- -

(15,

704)

-

- -

- -

(15,

704)

-

(15,

704)

Inco

me

and

expe

nse

reco

gnise

d

dire

ctly

in e

quity

- -

- -

(15,

704)

26

,174

-

- -

- 10

,470

-

10,4

70N

et p

rofit

for t

he fi

nanc

ial y

ear

-

- -

- -

- -

- -

1,67

8,03

6 1,

678,

036

- 1,

678,

036

Tota

l rec

ogni

sed

inco

me

and

ex

pens

e fo

r the

fina

ncia

l yea

r

- -

- -

(15,

704)

26

,174

-

- -

1,67

8,03

6 1,

688,

506

- 1,

688,

506

Tran

sfer

to s

tatu

tory

rese

rve

34

- -

- 57

2,57

5 -

- -

- -

(572

,575

) -

- -

Fina

l divi

dend

s fo

r the

fina

ncia

l

year

end

ed 3

1 De

cem

ber 2

007

46

- -

- -

- -

- -

- (3

00,0

00)

(300

,000

) -

(300

,000

)In

terim

and

spe

cial

divi

dend

s fo

r

the

finan

cial

yea

r end

ed

31 D

ecem

ber 2

008

46

- -

- -

- -

- -

- (3

10,0

00)

(310

,000

) -

(310

,000

)C

apita

lised

to re

deem

able

pr

efer

ence

sha

res

31(c

) -

29,7

40

- -

- -

- -

- (2

9,74

0)

- -

-Ar

ising

from

net

inve

stm

ent h

edge

in

ove

rsea

s op

erat

ions

and

su

bsid

iarie

s 34

-

- -

- -

- -

- (1

22,3

36)

- (1

22,3

36)

- (1

22,3

36)

At 3

1 De

cem

ber 2

008

2,

974,

009

29,7

40

4,15

7,07

4 3,

174,

009

(48,

473)

81

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(1

,047

,872

) 74

6,85

2 (1

22,3

36)

1,70

8,58

9 11

,653

,224

20

0,00

0 11

,853

,224

Page 18: Cimb Financial Statement

Annual Report 2008084

CIMB Bank Berhad(13491-P)

Statements of Changes in EquityFor the financial year ended 31 December 2008

n

on-d

istr

ibut

able

D

istr

ibut

able

rev

alua

tion

rese

rve

-

exch

ange

av

aila

ble-

Pe

rpet

ual

shar

e sh

are

stat

utor

y flu

ctua

tion

for-

sale

M

erge

r c

apita

l r

etai

ned

pr

efer

ence

to

tal

capi

tal

prem

ium

re

serv

e re

serv

e se

curit

ies

defic

it re

serv

e pr

ofits

to

tal

shar

es

equi

tyth

e B

ank

not

e r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

At 1

Jan

uary

200

7

2,97

4,00

9 4,

157,

074

2,30

6,81

2 (1

1,55

0)

66,9

83

(1,0

47,8

72)

853,

341

798,

970

10,0

97,7

67

200,

000

10,2

97,7

67

N

et c

hang

e in

ava

ilabl

e-fo

r-sal

e se

curit

ies,

net o

f tax

34

-

- -

- (1

1,52

5)

- -

- (1

1,52

5)

- (1

1,52

5)C

urre

ncy

trans

latio

n di

ffere

nce

34

- -

- (2

1,21

9)

- -

- -

(21,

219)

-

(21,

219)

Inco

me

and

expe

nse

reco

gnise

d di

rect

ly

in e

quity

- -

- (2

1,21

9)

(11,

525)

-

- -

(32,

744)

-

(32,

744)

Net

pro

fit fo

r the

fina

ncia

l yea

r

- -

- -

-

1,

178,

487

1,1

78,4

87

- 1,

178,

487

Tota

l rec

ogni

sed

inco

me

and

expe

nse

for

th

e fin

anci

al y

ear

-

- -

(21,

219)

(1

1,52

5)

- -

1,17

8,48

7 1,

145,

743

- 1,

145,

743

Tran

sfer

to s

tatu

tory

rese

rve

34

- -

294,

622

- -

- -

(294

,622

) -

- -

Tran

sact

ion

with

sha

reho

lder

s

- -

- -

- -

(106

,489

) -

(106

,489

) -

(106

,489

)Fi

nal d

ivide

nds

for t

he fi

nanc

ial y

ear

en

ded

31 D

ecem

ber

2006

46

-

- -

- -

- -

(189

,965

) (1

89,9

65)

- (1

89,9

65)

Spec

ial in

terim

divi

dend

for t

he fi

nanc

ial

ye

ar e

nded

31

Dece

mbe

r 200

7 46

-

- -

- -

- -

(250

,002

) (2

50,0

02)

- (2

50,0

02)

At 3

1 De

cem

ber 2

007

2,

974,

009

4,15

7,07

4 2,

601,

434

(32,

769)

55

,458

(1

,047

,872

) 74

6,85

2 1,

242,

868

10,6

97,0

54

200,

000

10,8

97,0

54

Page 19: Cimb Financial Statement

085Annual Report 2008

CIMB Bank Berhad(13491-P)

Cash Flow StatementsFor the financial year ended 31 December 2008

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000 cash flows from operating activities Profit before taxation 2,141,778 2,334,498 2,184,696 1,767,939 Depreciation of property, plant and equipment 134,500 121,922 116,860 101,044 Amortisation of intangible assets 111,371 95,741 104,346 92,622 Amortisation of prepaid lease payment 1,057 1,710 998 1,517 Gain on disposal of property, plant and equipment (9,157) (2,907) (7,596) (2,355)Fair value loss/(gain) on investment properties 2,141 (56,158) 2,141 (56,158)Property, plant and equipment written off 364 11,956 258 11,813 Gain from disposal of available-for-sale securities (108,326) (66,465) (103,283) (54,011)Gain from disposal of held-to-maturity securities (4,089) (566) (4,089) - Gain/(loss) from hedging derivatives 5,891 (16,650) 5,891 (16,650)Unrealised loss from revaluation of securities held for trading 166,791 123,171 80,659 53,257 Unrealised gain from revaluation of derivative financial instruments (112,452) (328,219) (129,712) (353,728)Unrealised gain on foreign exchange (184,132) (105,982) (231,312) (132,177)Write back of impairment losses on securities (46,481) (73,312) (49,855) (76,490)Write back of impairment losses on intangible assets - (12,000) - (12,000)Interest income on available-for-sale securities (221,779) (234,597) (219,603) (222,843)Interest income on held-to-maturity securities (184,132) (18,524) (231,312) (17,623)Interest expense on subordinated obligations 171,425 146,418 215,565 188,518 Interest expense on redeemable preference shares 87,015 96,721 42,875 54,621Accretion of discount less amortisation of premium (133,081) (186,618) (141,766) (186,127)Allowances for bad and doubtful debts and financing 959,410 1,208,587 913,734 1,174,082 Allowance for/(write back of) impairment loss in subsidiaries - - 21,178 (1,413)(Write back of)/allowance for losses on other receivables (469) 13,796 (23) 15,866 Write back of impairment losses on investment in jointly controlled entity - - - (3,410)Loss/(gain) from disposal of subsidiaries 2,669 (216,753) (23,693) 159 Gain on disposal of associate (2,904) - - - Dividend income (51,234) (71,002) (124,413) (383,429)Goodwill impairment - 3,000 37,000 198,000 Share of profit of jointly controlled entity (3,253) (3,410) - - Share of loss/(profit) of associates 40,565 (567) - - Transfer (from)/to profit equalisation reserve (2,200) 235 - 1,075

2,755,508 2,764,025 2,525,434 2,142,099

Page 20: Cimb Financial Statement

Annual Report 2008086

CIMB Bank Berhad(13491-P)

Cash Flow StatementsFor the financial year ended 31 December 2008

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

(increase)/decrease in operating assets Assets held under resale agreements 1,341,201 (1,606,575) 1,341,201 (1,606,575)Deposits and placements with banks and other financial institutions 2,971,856 (2,320,405) 371,455 (1,532,661)Securities held for trading 4,536,619 (1,146,743) 4,249,937 (22,664)Loans, advances and financing (16,033,205) (5,172,992) (12,828,316) (2,453,871)Amount due from holding company and ultimate holding company 262 (23,120) 16,411 (23,911)Amount due from subsidiaries - - 269,814 (200,919)Amount due from related companies 9,442 (39,021) (17,457) (49,045)Other assets (182,426) (115,023) (359,118) (71,840)Statutory deposits with central banks 314,732 (727,196) 480,049 (713,805) increase/(decrease) in operating liabilities Deposits from customers 15,436,105 22,984,166 7,797,661 16,649,161 Deposits and placements of banks and other financial institutions (4,080,365) 5,098,480 (3,215,649) 5,277,618 Securities sold under repurchase agreements (605,780) (5,543,391) (1,000) (6,005,676)Derivative financial instruments (401,381) (18,909) (278,416) 76,755 Bills and acceptances payable (1,371,940) 202,364 (1,376,229) 200,013 Amount due to Cagamas Berhad (1,010,889) (1,661,117) (1,010,889) (1,661,117)Amount due to holding company and ultimate holding company - (7,200) - - Amount due to subsidiaries - - (130,328) 309,061 Amount due to related companies 13,518 (30,189) 9,398 (31,470)Other liabilities (96,415) 1,250,726 (219,063) 867,297

Cash flows generated from operations 3,596,842 13,887,880 (2,375,105) 11,148,450 Taxation paid (728,241) (285,485) (691,532) (244,433)

net cash generated from/(used in) operating activities 2,868,601 13,602,395 (3,066,637) 10,904,017

Page 21: Cimb Financial Statement

087Annual Report 2008

CIMB Bank Berhad(13491-P)

Cash Flow StatementsFor the financial year ended 31 December 2008

the Group the Bank

note 2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

cash flows from/(used in) investing activities Proceeds from disposal of subsidiaries 59,101 431,725 59,101 - Proceeds from disposal of associate 3,499 - - - Dividend income 40,701 51,831 113,380 303,469 Investment in subsidiaries - - - (1,047,693)Investment in associate (595,814) - (595,814) - Cash and short term funds reclassified to assets held for sale - (78,341) - - Interest income received from available-for-sale securities 213,737 245,259 211,561 233,505 Interest income received from held-to-maturity securities 137,493 15,787 113,003 14,886 Net (purchase of)/proceeds from disposal of available-for-sale securities (438,099) (219,662) (425,981) 137,844 Net purchase/reclassitication of held-to-maturity securities (8,108,803) (1,480,385) (5,264,700) (1,676,904)Proceeds from disposal of property, plant and equipment 17,564 31,688 13,217 30,374 Purchase of property, plant and equipment (223,201) (239,451) (217,077) (218,137)Proceeds from disposal of Islamic banking operations - - - 388,089 Addition in prepaid lease payments - (542) - - Proceeds from disposal of intangible assets - 28,311 - 28,311 Proceeds from disposal of prepaid lease payment 1,871 2,394 1,871 11 Purchase of intangible assets (51,531) (76,267) (49,122) (69,888)

net cash used in investing activities (8,943,482) (1,287,653) (6,040,561) (1,876,133)

cash flows from/(used in) financing activitiesDividends paid (610,000) (439,967) (610,000) (439,967)Interest expense paid on subordinated notes (145,948) (135,098) (189,746) (177,682)Interest expense paid on redeemable preference shares (86,673) (97,205) (42,875) (54,621)Repayment of floating rate certificates of deposits - (211,800) - - Repayment of redeemable asset backed bonds (31,772) (112,705) - - Proceeds from issuance of subordinated obligations 3,500,000 - 3,500,000 - Repayment of other borrowings - (561,433) - - Repayment of redeemable preference shares (1,300,000) - (1,300,000) - Repayment of subordinated notes (1,058,400) (300,000) (1,058,400) (300,000)

net cash generated from/(used in) financing activities 267,207 (1,858,208) 298,979 (972,270)

net change in cash and cash equivalents (5,807,674) 10,456,534 (8,808,219) 8,055,614 effects of exchange rate differences (590) (128,619) 599 (48,573)cash and cash equivalents at beginning of financial year 27,774,626 17,446,711 23,115,966 15,108,925

cash and cash equivalents at end of financial year 2 21,966,362 27,774,626 14,308,346 23,115,966

Cash Flow StatementsFor the financial year ended 31 December 2008

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Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

The following accounting policies have been used consistently in dealing with items that are considered material in relation to the Financial Statements.

a Basis oF PreParation The Financial Statements of the Group and the Bank are prepared under the historical cost convention, modified by the

revaluation of available-for-sale securities, securities held for trading, all derivative contracts, investment properties and non-current assets/disposal groups held for sale.

The Financial Statements of the Group and the Bank have been prepared in accordance with the Financial Reporting Standards, MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities, Bank Negara Malaysia (“BNM”) Guidelines, Shariah requirements and the provisions of the Companies Act, 1965.

The Financial Statements incorporate those activities relating to Islamic banking which have been undertaken by the Bank and its wholly-owned subsidiaries, CIMB Islamic Bank Berhad (“CIMB Islamic”) and CIMB Bank (L) Limited. Islamic banking refers generally to the acceptance of deposits, granting of financing and dealing in Islamic Securities under the Shariah principles.

BNM has granted indulgence to the Group and the Bank and other local banks in Malaysia from complying with the requirements on the impairment of loans under the revised ‘Guideline on Financial Reporting for Licensed Institutions’ (“BNM/GP8”). Paragraph 4, Appendix A of the revised BNM/GP8 requires the impaired loans to be measured at their estimated recoverable amount. This requirement is principally similar to the requirement under FRS 139 - Financial Instruments: Recognition and Measurement. During the financial year, BNM issued a revised circular on BNM/GP3 which requires impaired credit facilities to be measured at their recoverable amount. This requirement supersedes paragraph 4, Appendix A of the revised BNM/GP8. In view of the deferment of the implementation of FRS 139 in Malaysia, the Group and the Bank and other local banks in Malaysia will be deemed to be in compliance with the requirement on the impairment of loans under the revised BNM/GP8 if the allowance for non-performing loans, advances and financing is computed based on BNM’s guidelines on the ‘Classification of Non-Performing Loans and Provision for Substandard, Bad and Doubtful Debts’ (“BNM/GP3”) requirements.

The preparation of Financial Statements in conformity with the provisions of the Companies Act, 1965, Financial Reporting

Standards and Bank Negara Malaysia 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 income and expenses during the reported period. It also requires the Directors to exercise their judgement in the process of applying the Group’s and the Bank’s accounting policies. Although these estimates and judgement are based on the Directors’ best knowledge of current events and actions, actual results may differ from those estimates.

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 52.

(a) standards, amendments to published standards and interpretations that are applicable to the Group and Bank and are effective

The new accounting standards, amendments to published standards and interpretations to existing standards that are effective for the Group and the Bank for the financial year ended 31 December 2008 are as follows:

• Amendment to FRS 121 - The Effect of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operations

• IC Interpretation 8 - Scope of FRS 2 - Share based Payment

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a Basis oF PreParation (continueD) (a) standards, amendments to published standards and interpretations that are applicable to the Group and Bank

and are effective (continued) All changes in accounting policies have been made in accordance with the transitional provisions in the respective standards,

amendments to published standards and interpretations. All standards, amendments and interpretations adopted by the Group and the Bank require retrospective application except for IC Interpretation 8 which requires retrospective application subject to the transition/provision of FRS 2. FRS 2 requires retrospective application for all equity instruments granted after 31 December 2004 and not vested at 1 January 2006.

The adoption of the new accounting standards, amendments to published standards and interpretations did not have a material impact on the Financial Statements of the Group and Bank.

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

The new standards and IC Interpretations that are applicable to the Group but which the Group and the Bank have not early adopted, are as follows:

• FRS 8 Operating Segments (effective for accounting periods beginning on or after 1 July 2009). This new standard requires a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes. The Group and the Bank will apply this standard when effective.

• IC Interpretation 9 Reassessment of Embedded Derivatives (effective for accounting periods beginning on or after 1 January 2010). IC Interpretation 9 requires an entity to assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent reassessment is disallowed unless there is a change in the terms of contract that significantly modifies the cash flows that otherwise would be required under the contract, in which case reassessment is required. The Group and the Bank will apply this standard when effective.

• IC Interpretation 10 Interim Financial Reporting and Impairment (effective for accounting periods beginning on or after 1 January 2010). IC Interpretation 10 prohibits the impairment losses recognised in an interim period on goodwill and investments in equity instruments and in financial assets carried at cost to be reversed at a subsequent balance sheet date. The Group and the Bank will apply this standard when effective.

• The following standards will be effective for annual periods beginning on or after 1 January 2010. The Group will apply these standards from financial periods beginning on 1 January 2010. The Group has applied transitional provisions in the respective standards which exempts entities from disclosing the possible impact arising from the initial application of the standard in the financial statements of the Group and the Bank.

(i) FRS 139 Financial Instruments: Recognition and Measurement. This new standard establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. Hedge accounting is permitted only under strict circumstances. However, with effect from 1 January 2005, the revised BNM/GP8 has adopted certain FRS 139 principles in recognising and measuring financial assets, financial liabilities, derivative financial instruments and hedge accounting. The relevant accounting policies are set out in Notes G, M and U to the Financial Statements.

(ii) FRS 7 Financial Instruments: Disclosures

Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

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a Basis oF PreParation (continueD)(b) standards, amendments to published standards and interpretations to existing standards that are applicable

to the Group but not yet effective (continued) The adoption of the above new standards and IC Interpretations is expected not to have a material impact on the Group’s

and the Bank’s Financial Statements for the financial year ending 31 December 2009.

B econoMic entities in the GrouP(a) subsidiaries The Bank treats as subsidiaries, those corporations, partnerships or other entities (including special purpose entities) in

which the Bank has the 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 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 Bank controls another entity.

Investment in subsidiaries is stated at cost less accumulated impairment losses. Where there is an indication of impairment, the carrying amount of the investment is assessed. A write down is made if the carrying amount exceeds its recoverable amount.

External costs directly attributable to an acquisition, other than the costs of issuing shares and other capital instruments, are included as part of the cost of acquisition.

The consolidated Financial Statements include the Financial Statements of the Bank and all its subsidiaries made up to the end of the financial year.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group and de-consolidated from the date that control ceases. Subsidiaries are consolidated using the purchase method of accounting, except for business combinations involving entities or businesses under common control with agreement dates on or after 1 January 2006, which are accounted for using the pooling-of-interests method.

Under the purchase method of accounting, the results of subsidiaries acquired or disposed of during the year are included from the date of acquisition up to the date of disposal. The cost of an acquisition is measured as the 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 the identifiable assets, liabilities and contingent liabilities acquired at the date of acquisition is reflected as goodwill. If the cost of acquisition is less than the fair value of the assets, liabilities and contingent liabilities of the subsidiary acquired, the difference is recognised directly in the income statement.

Minority interest represents that portion of the profit or loss and net assets of a subsidiary attributable to equity interests

that are not owned, directly or indirectly through subsidiaries, by the parent. It is measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets and liabilities at the acquisition date and the minorities’ share of changes in the subsidiaries’ equity since that date.

Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

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B econoMic entities in the GrouP (continueD) (a) subsidiaries (continued)

The Directors note that business combinations involving entities or businesses under common control are outside the scope of FRS 3 - Business Combinations and that there is no guidance elsewhere in FRS covering such transactions. FRS contain specific guidance to be followed where a transaction falls outside the scope of FRS. This guidance is included in paragraphs 10 to 12 of FRS 108 - Accounting Policies, Changes in Accounting Estimates and Errors. This requires, inter alia, that where FRS does not include guidance for a particular issue, the Directors may also consider the most recent pronouncements of other standard-setting bodies that use a similar conceptual framework to develop accounting standards. In this regard, it is noted that the United States Financial Accounting Standards Board (“FASB”) has issued an accounting standard covering business combinations (“FAS 141”) that is similar in a number of respects to FRS 3.

In contrast to FRS 3, FAS 141 does include, as an Appendix, limited accounting guidance for transactions under common control which, as with FRS 3, are outside the scope of that accounting standard. The guidance contained in FAS 141 indicates that a form of accounting that is similar to pooling-of-interests method may be used when accounting for transactions under common control.

Having considered the requirements of FRS 108 and the guidance included within FAS 141, the Directors consider appropriate to use a form of accounting which is similar to pooling-of-interests when dealing with business combinations involving entities or businesses under common control.

Under the pooling-of-interests method of accounting, the results of entities or businesses under common control are presented as if the merger had been effected throughout the current and previous years. The assets and liabilities combined are accounted for based on the carrying amounts from the perspective of the common control shareholder at the date of transfer. On consolidation, the cost of the merger is cancelled with the values of the shares received. Any resulting credit difference is classified as equity and regarded as a non-distributable reserve. Any resulting debit difference is adjusted against any suitable reserve. Any share premium, capital redemption reserve and any other reserves which are attributable to share capital of the merged enterprises, to the extent that they have not been reduced by a debit difference, are reclassified and presented as movement in other capital reserve.

All material transactions and balances between group companies are eliminated and the consolidated Financial Statements

reflect external transactions only. Where necessary, the accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Group.

Where more than one exchange transaction is involved, any adjustment to the fair values of the subsidiary’s identifiable assets, liabilities and contingent liabilities relating to previously held interests of the Group is accounted for as a revaluation.

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, and is recognised in the consolidated income statement.

(b) investment in jointly controlled entity The Group treats as a jointly controlled entity, 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.

Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

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B econoMic entities in the GrouP (continueD) (b) investment in jointly controlled entity (continued)

Investment in a jointly controlled entity is stated at cost less accumulated impairment losses. Where there is an indication of impairment, the carrying amount of the investment is assessed. A write down is made if the carrying amount exceeds its recoverable amount.

The Group’s interest in jointly controlled entities is accounted for in the consolidated Financial Statements by the equity method of accounting.

Equity accounting involves recognising the Group’s share of the post acquisition results of the joint venture in the income statement and its share of post acquisition movements within reserves in reserves. The cumulative post acquisition movements are adjusted against the cost of the investment and include goodwill on acquisition, net of accumulated impairment loss (if any).

(c) investment in associates The Group treats as associates, corporations, partnerships or other entities in which the Group exercises significant

influence, but which it does not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of the associates but not the power to exercise control over those policies. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss.

Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

c recoGnition oF ProFit incoMe anD interest incoMe Interest income on financial assets is recognised on an accrual basis. Interest earned on hire purchase, leasing and

block discounting agreements is spread over the terms of the loans, using the “Sum-of-Digit” method so as to produce a constant periodic rate of interest. Accretion of discount and amortisation of premium for securities are recognised on an effective yield basis.

Where an account is classified as non-performing, interest accrued and recognised as income prior to the date the loans are classified as non-performing are reversed out of income and set off against the accrued interest receivable amount in the balance sheet. Subsequently, the interest earned on non-performing loans is recognised as income on a cash basis instead of being accrued and suspended at the same time as prescribed previously. Customers’ accounts are classified as non-performing where repayments are in arrears for 3 months or more from the first day of default for loans and overdrafts, and after 3 months from maturity date for trade bills, bankers’ acceptances and trust receipts.

Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

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c recoGnition oF ProFit incoMe anD interest incoMe (continueD) The Bank’s policy on recognition of interest income on loans and advances is in conformity with BNM/GP3 and the revised

BNM/GP8.

Income from Islamic banking business is recognised on an accrual basis in accordance with the principles of Shariah.

D recoGnition oF Fees anD other incoMe Loans, advances and financing arrangement fees and commissions are recognised as income when all conditions precedent

are fulfilled.

Commitment fees, guarantee fees, portfolio management fees and income from asset management and securities services which are material are recognised as income based on a time apportionment method.

Brokerage fees are recognised as income based on inception of such transactions.

Dividends are recognised when the right to receive payment is established.

e allowances For BaD anD DouBtFul DeBts anD FinancinG Specific allowances are made for doubtful debts and financing which have been individually reviewed and specifically identified

as bad or doubtful.

A general allowance based on a percentage of the loans portfolio is also made to cover possible losses which are not specifically identified.

An uncollectible loan or portion of a loan 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 Bank’s allowance for non-performing debts and financing is in conformity with the minimum requirements of BNM/GP3.

F sale anD rePurchase aGreeMents Securities purchased under resale agreements are securities which the Group and the Bank had purchased with a commitment

to re-sell at future dates. The commitment to re-sell the securities is reflected as an asset on the balance sheet.

Conversely, obligations on securities sold under repurchase agreements are securities which the Group and the Bank had sold from their portfolio, with a commitment to repurchase at future dates. Such financing transactions and the obligation to repurchase the securities are reflected as a liability on the balance sheet.

The difference between sale and repurchase price as well as purchase and resale price is treated as interest and accrued over the life of the resale/repurchase agreement using the effective yield method.

G securities The Group and the Bank classify their securities portfolio into the following categories: securities held for trading, available-for-

sale securities and held-to-maturity securities. Management determines the classification of securities at initial recognition.

(a) securities held for trading This category comprises securities held for trading and those designated at fair value through profit or loss at inception.

Securities are classified into this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges.

Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

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G securities (continueD)(a) securities held for trading (continued) Pursuant to the amendments to the Revised BNM/GP8 guidelines, the Bank and its banking subsidiaries are now permitted

by BNM for the period from 1 July 2008 to 31 December 2009 to reclassify non-derivatives held for trading securities into held-to-maturity securities or available-for-sale securities. In the 4th quarter of 2008, the Bank and its banking subsidiaries reclassified a portion of their securities in the held for trading category to held-to-maturity category based on current market prices at the relevant dates of the reclassification. Further details of the reclassification are set out in Note 4 to these Financial Statements.

Reclassifications are made at the fair value at the date of the reclassification. The fair values of the securities becomes the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before the reclassification date are subsequently made. The effective interest rates for the securities reclassified to held-to-maturity category is determined at the reclassification date. Further changes in estimates of future cash flows are recognised as an adjustment to the effective interest rates.

(b) available-for-sale securities Available-for-sale securities are those intended to be held for an indefinite period of time, which may be sold in response

to needs for liquidity or changes in interest rates, exchange rates or equity prices.

(c) held-to-maturity securities Held-to-maturity securities are non-derivative instruments with fixed or determinable payments and fixed maturities that

the Group’s and the Bank’s management has the positive intent and ability to hold to maturity. If the Group or the Bank sell other than an insignificant amount of held-to-maturity securities, the entire category will be tainted and reclassified as available-for-sale securities.

Securities are initially recognised at fair value plus transaction costs for all securities not carried at fair value through profit or loss and securities not held for trading. Securities are derecognised when the rights to receive cash flows from the securities have expired or where the Group or the Company have transferred substantially all risks and rewards of ownership.

Securities held for trading and available-for-sale securities are subsequently carried at fair value, except for investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured in which case the investments are stated at cost. Gains and losses arising from changes in the fair value of the securities held for trading category are included in the income statement in the period which they arise. Gains and losses arising from changes in fair value of available-for-sale securities are recognised directly in equity, until the securities are derecognised or impaired at which time the cumulative gains or loss previously recognised in equity are recognised in the income statement.

Held-to-maturity securities are subsequently measured at amortised cost using the effective interest method. Gains or losses arising from the de-recognition or impairment of the securities are recognised in the income statement.

Interest from securities held for trading, available-for-sale securities and held-to-maturity securities is calculated using the effective interest method and is recognised in the income statement. Dividends from available-for-sale equity instruments are recognised in the income statement when the entity’s right to receive payment is established.

The fair values of quoted securities are based on quoted prices in active markets. If the market for an instrument is not active and for unquoted securities, the Group and the Bank establish fair value by using valuation techniques. These include the use of recent arm’s length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants.

Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

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h ProPerty, Plant anD equiPMent Property, plant 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 Bank and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance costs 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, plant and equipment are depreciated on a straight line basis to write off the cost of the assets to their residual values over their estimated useful lives, summarised as follows:

Building on freehold land 40 years Building on leasehold land 40 years or over the balance period of the lease, whichever is shorter Office equipment, furniture and fixtures: - office equipment 5 years - furniture and fixtures 10 years Computer equipment: - servers and hardware 3 years - ATM machine 5 years Computer equipment under lease 3 years or over the period of the lease, whichever is shorter Motor vehicles 5 years Renovations to rented premises 5 years or over the period of the tenancy, whichever is shorter Depreciation on assets under construction commences when the assets are ready for their intended use.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

Property, plant and equipment are reviewed for impairment at each balance sheet date and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down to its recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amounts and are included in non-interest income.

i intanGiBle assets(a) Goodwill Goodwill arises on business combinations when the cost of acquisition exceeds the fair value of the Bank’s share of the

identifiable assets, liabilities and contingent liabilities acquired. 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. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Impairment testing is performed annually by comparing the present value of the CGU’s projected cash flows against the carrying amount of its net assets which include the allocated goodwill. The allocation is made to those CGUs or groups of CGUs that are expected to benefit from the synergies of the business combination in which the goodwill arose. The Group and the Bank allocate goodwill to each business unit (Note 18).

Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

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i intanGiBle assets (continueD)(a) Goodwill (continued) Goodwill on acquisitions of associates and jointly controlled entities respectively are included in investments in associates

and jointly controlled entities. Such goodwill is tested for impairment as part of the overall balance.

Under the current applicable approved accounting standards for business combinations, FRS 3 - Business Combinations which apply to the accounting for business combinations for which the agreement date is on or after 1 January 2006, the provisions of the standard are applied prospectively and no retrospective changes in respect of accounting for business combinations prior to 1 January 2006 have been made. Under FRS 3, previously recognised negative goodwill (if any) has been derecognised with a corresponding adjustment to the opening balances of retained earnings.

(b) other intangible assets Other intangible assets include credit card customer relationships, core deposits and computer software. Other intangible

assets are initially recognised when they are separable or arise from contractual or other legal rights, the cost can be measured reliably and, in the case of intangible assets not acquired in a business combination, where it is probable that future economic benefits attributable to the assets will flow from their use. The value of intangible assets which are acquired in a business combination is generally determined using income approach methodologies. Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software.

Intangible assets that have an indefinite useful life, or are not yet ready for use, are tested for impairment annually. This impairment test may be performed at any time during the year, provided it is performed at the same time every year. An intangible asset recognised during the current period is tested before the end of the current year.

Intangible assets that have a finite useful life are stated at cost less accumulated amortisation and accumulated impairment losses, and are amortised over their estimated useful lives.

Intangible assets are amortised over their finite useful lives as follows:

Credit card customer relationships 12 years Core deposits 8 years Computer software: - core and front-end systems 5 years - others 3 years

J assets PurchaseD unDer lease(a) Finance lease Assets purchased under lease which in substance transfers the risks and benefits of ownership of the assets to the

Group or the Bank are capitalised under property, plant and equipment. The assets and the corresponding lease obligations are recorded at the lower of the present value of the minimum lease payments or the fair value of the leased assets at the beginning of the lease term. Such leased assets are subject to depreciation on the same basis as other property, plant and equipment.

Leases which do not meet such criteria are classified as operating lease and the related rentals are charged to income statement as incurred.

Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

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J assets PurchaseD unDer lease (continueD)(b) operating lease Leasehold land Leasehold land that normally has an indefinite economic life and title is not expected to pass to the lessee by the end of the

lease term is treated as an operating lease. The payment made on entering into or acquiring a leasehold land is accounted as prepaid lease payments that are amortised over the lease term in accordance with the pattern of benefits provided.

Others Leases of assets under which all the risks and benefits of ownership are retained by the lessor are classified as operating

leases. Payments made under operating leases are charged to the income statement on a straight line basis over the period of the lease.

When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.

k assets solD unDer lease(a) Finance lease When assets are sold under a finance lease, the present value of the lease payments is recognised as a debtor. The

difference between the gross debtor and the present value of the debtor is recognised as unearned finance income. Lease income is recognised over the term of the lease using the net investment method, which reflects a constant periodic rate of return.

(b) operating lease Assets leased out under operating leases are included in property, plant and equipment in the balance sheet. They are

depreciated over their expected useful lives on a basis consistent with similar property, plant and equipment. Rental income is recognised on a straight line basis over the lease term.

l Bills anD accePtances PayaBle Bills and acceptances payable represent the Group’s or the Bank’s own bills and acceptances rediscounted and outstanding

in the market.

M Derivative Financial instruMents anD heDGe accountinG Derivatives are initially recognised at fair value on the date on which a derivative contract is 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 value is positive and as liabilities when fair value is negative. Changes in the fair value of any derivatives that do not qualify for hedge accounting are recognised immediately in the income statement.

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 the 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.

Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

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CIMB Bank Berhad(13491-P)

M Derivative Financial instruMents anD heDGe accountinG (continueD) 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 and the Bank designate 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) or (3) hedges of a net investment in a foreign operation (net investment hedge). Hedge accounting is used for derivatives designated in this way provided certain criteria are met.

At the inception of the transaction, the Group and the Bank document the relationship between hedging instruments and hedged items, as well as their risk management objective and strategy for undertaking various hedge transactions. The Group and the Bank also document their assessment, both at hedge inception and on an ongoing 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.

(a) 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 the 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.

(b) 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 equity. The gain and loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are recycled to the income statement in the periods in which the hedged item will affect the income statement.

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 in equity at that time remains in equity 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 cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

(c) net investment hedge Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the

hedging instrument relating to the effective portion of the hedge is recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

Gains and losses accumulated in the equity are included in the income statement when the foreign operation is partially disposed or sold.

(d) 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.

Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

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n BorrowinGs Borrowings are initially recognised based on the proceeds received, net of transaction costs incurred. In subsequent periods,

borrowings are stated at amortised cost using the effective yield method; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings.

Preference shares, which are mandatorily redeemable on a specific date, are classified as liabilities. The dividends on these preference shares are recognised in the income statement as interest expense.

o hire Purchase receivaBles securitisation ProGraMMe The Group through its Hire Purchase Receivables Securitisation Programme, sells undivided shares of hire purchase receivables

to a special purpose vehicle (“SPV”). The SPV will in turn issue bonds to raise funds for the purchase of assets.

The Group receives fee income for various services provided to the SPV. These fees are determined on an arms length basis and are recognised on an accrual basis. Deferred consideration/balance of hire purchase receivables obtained under this programme are held at cost and an allowance is made for any impairment loss based on the position of the SPV and its underlying assets.

P currency translations(a) 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’s and the Bank’s functional and presentation currency.

(b) Foreign currency transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates 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 securities denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in the carrying amount are recognised in equity.

Translation differences on non-monetary financial assets and liabilities, such as equity instruments held at fair value through profit or 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 available-for-sale reserve in equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

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P currency translations (continueD)(c) Group companies The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that

have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet;• income and expenses for each income statement are translated at average exchange rates (unless this average is

not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

• all resulting exchange differences are recognised as a separate component of equity.

q incoMe anD DeFerreD taxes Current tax expense is determined according to the tax laws of each jurisdiction in which the Group operates and includes all

taxes based upon the taxable profits.

Deferred income tax is recognised in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements. However, deferred income 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 future taxable profits will be available against which the temporary differences can be utilised.

Deferred income tax is recognised on temporary differences arising on investments in subsidiaries, associates and joint ventures except where the timing of the reversal of the temporary difference can be controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

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

Deferred income tax is determined using tax rates (and tax laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

r share caPital(a) classification Ordinary shares and non-redeemable preference shares with discretionary dividends are classified as equity. Other shares

are classified as equity and/or liability according to the economic substance of the particular instrument. Distributions to holders of a financial instrument classified as an equity instrument are charged directly to equity.

(b) share issue costs Incremental external costs directly attributable to the issue of new shares or options are shown in equity as a deduction,

net of tax, from the proceeds.

(c) Dividends Dividends on ordinary shares are recognised as a liability when the shareholders’ right to receive the dividend is established.

Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

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s eMPloyee BeneFits(a) short term employee benefits The Group and the Bank recognise a liability and an expense for bonuses. The Group and the Bank recognise a provision

where contractually obliged or where there is a past practice that has created a constructive obligation.

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 and Bank.

(b) Post employment benefits The Group and the Bank have various post-employment benefit schemes. These benefit plans are either defined

contribution or defined benefit plans.

Defined contribution plans A defined contribution plan is a pension plan under which the Group and the Bank pay fixed contributions into a separate

entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior periods.

The Group’s and Bank’s contributions 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 and the Bank have no further payment obligations. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

Defined benefit plans A defined benefit plan is a pension plan that defines an amount of pension benefit to be provided, usually as a function of

one or more factors such as age, years of services or compensation.

The liability in respect of a defined benefit plan is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains/losses and past service cost.

The Group and the Bank determine the present value of the defined benefit obligation and the fair value of any plan assets with sufficient regularity such that the amounts recognised in the Financial Statements do not differ materially from the amounts that would be determined at the balance sheet date.

The defined benefit obligation, calculated using the projected unit credit method, is determined by independent actuaries, considering the estimated future cash outflows using market yields at balance sheet date of government securities which have currency and terms to maturity that approximate the terms of the related liability.

Plan assets in excess of the defined obligation are subject to the asset limitation specified in FRS 119 - Employee Benefits.

Actuarial gains and losses arise from experience adjustments and changes in actuarial assumptions. The amount of net actuarial gains and losses recognised in the income statement is determined by the corridor method in accordance with FRS 119 and is charged or credited to income over the average remaining service lives of the related employees participating in the defined benefit plan.

Past-service costs are recognised immediately in income, unless the changes to the plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a straight-line basis over the vesting period.

Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

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s eMPloyee BeneFits (continueD)(c) other long term employee benefits The cost of long term employee benefits (for example, long term service leave) is accrued to match the rendering of the

services by the employees concerned using an accounting methodology similar to that for defined benefit plans.

(d) 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 and the Bank recognise termination benefits when they are demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the balance sheet date are discounted to their present value.

(e) share-based compensation benefits The equity compensation benefits of the Group comprise the following:

(i) Share options granted by the ultimate holding company under the Modified Executive Employee Share Option Scheme (“EESOS”).

As allowed in the transition provisions of FRS 2 - Share-based Payment, the Group and the Bank have elected not to apply FRS 2 to these equity instruments which were granted:

(a) before 31 December 2004(b) after 31 December 2004 but had vested before 1 January 2006

(ii) Management Equity Scheme (‘MES’).

FRS 2 only applies to transactions involving a transfer of equity instruments between shareholders and option holders, hence entitlements based on ordinary shares of the ultimate company granted under the Management Equity Scheme (‘MES’) is out of the scope of FRS 2.

t iMPairMent oF assets Assets that have an indefinite useful life 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 carrying amount of the asset 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 purpose 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. Impairment losses on goodwill are not reversed. In respect of other assets, 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.

Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

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u iMPairMent oF securities PortFolio The Group and the Bank assess at each balance sheet date whether there is objective evidence that the securities are

impaired. A security or a group of securities is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the securities (a “loss event”) and that loss event has an impact on the estimated future cash flows of the securities that can be reliably estimated.

(a) securities carried at amortised cost If there is an objective evidence that an impairment loss on held-to-maturity instruments held at amortised cost has been

incurred, the amount of loss is measured as the difference between the securities’ carrying amount and the present value of estimated future cash flows discounted at the securities’ original effective interest rate. The carrying amount of the securities is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in the income statement.

(b) securities carried at fair value In the case of equity instruments classified as available-for-sale securities, a significant or prolonged decline in the fair

value of the security below its cost is considered in determining whether the securities are impaired. If there is an objective evidence that an impairment loss on available-for-sale securities has been incurred, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on the securities previously recognised in income statement - is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. If, in a subsequent period, the fair value of a debt instrument classified as available for sale securities increases and the increase can be related objectively to an event occurring after the impairment was recognised in the income statement, the impairment loss is reversed through the income statement.

v ForecloseD ProPerties Foreclosed properties are stated at the lower of cost and net realisable value. When an indication of impairment exists, the

carrying amount of the asset is assessed and written-down to its recoverable amount.

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

(i) the Group and the Bank have a present legal or constructive obligation as a result of past events:(ii) it is probable that an outflow of resources to settle the obligation will be required; and(iii) a reliable estimate of the amount of obligation can be made.

Where the Group and the Bank expect a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

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w Provisions (continueD) Provisions are measured at the present values of the expenditures expected to be required to settle the obligation using a pre-

tax rate that reflects current market assessments of the time value of money and risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

x Dealers’ hanDlinG charGes Handling charges paid to hire purchase dealers are expensed off to the income statement.

y Zakat This represents business zakat. It is a contribution amount payable by CIMB Islamic Bank berhad (“CIMB Islamic”)to comply with

the principles of Shariah. Zakat provision is calculated based on ‘Adjusted Growth’ method, at 2.5% for individual Bumiputra shareholders of Bumiputra-Commerce Holdings Berhad, the Bank’s ultimate holding company.

Z cash anD cash equivalents Cash and cash equivalents comprise cash in hand, bank balances and deposit placements maturing less than one month. aa coMPounD Financial instruMents Compound financial instruments contain both a liability and equity element. The Group’s and the Bank’s compound financial

instruments comprise Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) which were issued in 2001. Pursuant to the transition provisions of FRS 132 - Financial Instruments: Disclosure and Presentation, the classification of compound instruments into equity and liability components need to be applied only to financial instruments that are issued during reporting periods beginning on or after 1 January 2003. Accordingly, the ICULS continue to be classified according to their legal form i.e. as liability instruments.

On issue of a financial instrument that contains both a liability and an equity component, the fair value of the liability portion is determined using a market interest rate for an equivalent financial instrument; this amount is carried as liability on the amortised cost basis until extinguished on conversion or maturity of the instrument. The remainder of the proceeds is allocated to the conversion option which is recognised and included in shareholders’ equity; the value of the conversion option is not changed in subsequent periods.

aB seGMent rePortinG Segment reporting is presented for enhanced assessment of the Group’s risks and returns. A business segment is a group

of assets and operations engaged in providing products or services that are subject to risk and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those components.

Segment revenue, expense, assets and liabilities are those amounts resulting from the operating activities of a segment that are directly attributable to the segment and the relevant portion that can be allocated on a reasonable basis to the segment. Segment revenue, expense, assets and segment liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between group enterprises within a single segment.

Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

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ac non-current assets/DisPosal GrouPs helD For sale Non-current assets/disposal groups are classified as assets held for sale and stated at the lower of carrying amount and

fair value less costs to sell if their carrying amount is recovered principally through a sale transaction rather than through continuing use.

aD investMent ProPerties Investment properties, comprising principally land and office buildings, are held for long term rental yields or for capital

appreciation or both, and are not occupied by the Group, and the Bank.

Investment properties are stated at fair value, representing the open-market value determined annually by external valuers. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If this information is not available, the Group and the Bank use alternative valuation methods such as recent prices on less active markets or discounted cash flow projections. Changes in fair values are recorded in the income statement as part of other income.

On disposal of an investment property, or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal, it shall be derecognised (eliminated from the balance sheet). The difference between the net disposal proceeds and the carrying amount is recognised in profit or loss in the period of the retirement or disposal.

Summary of Significant Accounting PoliciesFor the financial year ended 31 December 2008

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

1 General inForMation The Bank is principally engaged in all aspects of commercial banking and in the provision of related financial services, including

Islamic banking. The principal activities of the significant subsidiaries as set out in Note 11 to the Financial Statements, consist of Islamic banking, offshore banking, debt factoring, trustees and nominee services, and property ownership and management. There was no significant change in the nature of these activities during the financial year.

The holding company of the Bank is CIMB Group Sdn Bhd and the Directors regard the ultimate holding company as Bumiputra-Commerce Holdings Berhad (“BCHB”), a quoted company, both of which are incorporated in Malaysia.

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

The address of the Bank’s registered office is 5th Floor, Bangunan CIMB, Jalan Semantan, Damansara Heights, 50490 Kuala Lumpur, Malaysia.

The Bank’s principal place of business is at No. 6, Jalan Tun Perak, 50050 Kuala Lumpur, Malaysia.

2 cash anD short-terM FunDs the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Cash and balances with banks and other financial institutions 2,830,307 1,790,222 2,629,900 1,807,150 Money at call and deposit placements maturing within one month 19,136,055 25,984,404 11,678,446 21,308,816

21,966,362 27,774,626 14,308,346 23,115,966

Included in the Bank’s and Group’s cash and short-term funds are RM236,891 (2007: RM236,891) of money at call and deposit placements relating to a jointly controlled entity, Proton Commerce Sdn Bhd (“PCSB”).

Included in the Group’s cash and short term funds are the following monies held in trust in relation to the Group’s stockbroking business:

the Group

2008 2007 rM’000 rM’000

Client’s trust balances - 25,472 Dealers’ representatives’ balances - 9,345

- 34,817

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

3 DePosits anD PlaceMents with Banks anD other Financial institutions the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Licensed banks 1,599,159 3,285,341 4,627,910 4,420,128 Licensed investment banks 50,000 473,096 50,000 473,096 Bank Negara Malaysia 210,300 1,296,100 210,000 380,000 Other financial institutions 280,000 66,141 80,000 66,141

2,139,459 5,120,678 4,967,910 5,339,365

Included in the Bank’s deposits and placements with banks and other financial institutions are exposures to Restricted Profit Sharing Investment Accounts (“RPSIA”), as part of an arrangement with CIMB Islamic. The RPSIA is a contract based on the Mudharabah principle between the Bank and CIMB Islamic to finance a specific business venture where the Bank solely provides capital and the business ventures are managed solely by the entrepreneur. The profit of the business venture is shared between both parties based on a pre-agreed ratio and management fees.

As at 31 December 2008, the RPSIA placements amounted to RM3,020 million (2007: RM374 million) for a tenure between 1 to 3 months at profit rates from 3.56% to 3.93% per annum (2007: 3.56% to 3.93% per annum).

4 securities helD For traDinG the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Money market instruments unquoted Malaysian Government Securities 1,342,488 416,150 1,324,809 290,653 Cagamas bonds 205,323 279,354 205,323 279,354 Khazanah bonds 9,791 96,918 - 24,329 Malaysian Government treasury bills 38,262 119,294 38,262 89,552 Other Government securities - 630,359 - - Bank Negara Malaysia bills 552,598 97,736 552,598 97,736 Bank Negara Malaysia negotiable notes 46,892 409,900 46,892 191,735 Bankers’ acceptances and Islamic accepted bills 1,174,286 800,764 595,865 595,636 Negotiable instruments of deposit 3,529,709 1,149,588 1,285,891 1,130,007 Credit-linked notes 172,884 353,247 159,942 331,530 Commercial papers 332,605 45,099 312,939 20,793 Government Investment Issue 81,376 56,075 66,727 56,075

7,486,214 4,454,484 4,589,248 3,107,400

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

4 securities helD For traDinG (continueD) the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

quoted securities In Malaysia Shares 137,527 724,530 134,758 712,956 Warrants 5 35 - - Loan stocks 1,272 5,838 - 3,719

138,804 730,403 134,758 716,675 Outside Malaysia Shares 326 43,041 - -

unquoted securities In Malaysia Shares 5,001 - 5,001 - Private and Islamic debt securities 1,416,966 6,704,160 1,401,255 6,683,741

1,421,967 6,704,160 1,406,256 6,683,741 Outside Malaysia Private and Islamic debt securities 516,970 2,301,781 387,137 306,357

9,564,281 14,233,869 6,517,399 10,814,173

Securities held for trading of RMNil (2007: RM995,000) have been pledged to third parties in relation to securities sold under repurchase agreements.

In the 4th quarter of 2008, the Bank and its banking subsidiaries reclassified a portion of their securities in held for trading category to the held-to-maturity category based on current market prices at the relevant dates of the reclassification. The reclassification has been accounted for in accordance with the BNM circular on ‘Reclassification of Securities under Specific Circumstances’ dated 17 October 2008, which is effective from 1 July 2008 until 31 December 2009.

The fair value of the securities reclassified from held for trading category to held-to-maturity category, as of the respective dates

of reclassification are RM5,955,065,000 and RM4,396,670,000 for the Group and the Bank, respectively.

Included in the non-interest income (Note 38) is the net gains/(losses) arising from the change in fair value recognised in the income statement in respect of the reclassified securities:

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Net fair value (loss)/gain (110,605) (30,228) 12,449 (198)

As of date of reclassification, the effective interest rates on the reclassified held for trading securities, based on the new cost is an average of 6.63% per annum and 6.52% per annum for the Group and the Bank respectively, with expected recoverable cash flows of approximately RM6,110,905,000 and RM4,430,456,000 for the Group and the Bank respectively, including any coupons receivable on the securities.

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

5 availaBle-For-sale securities the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Money market instruments unquoted Malaysian Government Securities 109,729 177,504 99,710 53,221 Khazanah bonds 58,376 193,238 9,791 127,456 Government Investment Issue 187,714 15,195 66,477 15,195 Commercial papers 134,040 29,707 134,040 29,707 Malaysian Government treasury bills - 87,906 - 87,906 Other Government treasury bills - 50,003 - - Bank Negara Malaysia bills - 23,322 - 13,375 Cagamas bonds 296,925 397,330 248,011 362,910 Bank Negara negotiable notes - 125,393 - 125,393 786,784 1,099,598 558,029 815,163

quoted securities In Malaysia Unit trusts 703,889 702,318 703,889 702,318 Shares - 6,669 - 5,500 703,889 708,987 703,889 707,818

Outside Malaysia Shares - 7,627 - 7,627 Private debt securities 115,216 - 115,216 - 115,216 7,627 115,216 7,627

unquoted securities In Malaysia Private debt securities 5,401,347 4,689,956 5,001,921 4,288,143 Shares 378,104 381,032 378,989 380,457 Loan stocks 30,715 18,183 30,715 18,183 5,810,166 5,089,171 5,411,625 4,686,783 Outside Malaysia Shares 9,606 22,244 633 121 Private equity funds 83,953 68,384 - - Unit trust funds 136,578 59,318 - - Private debt securities - 29,866 - - 230,137 179,812 633 121

7,646,192 7,085,195 6,789,392 6,217,512

allowance for impairment losses: Private debt securities (279,343) (367,672) (279,343) (367,672) Quoted shares - (7,076) - (6,298) Unquoted shares (6,659) (11,036) (6,659) (11,036) (286,002) (385,784) (286,002) (385,006)

7,360,190 6,699,411 6,503,390 5,832,506

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CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

6 helD-to-Maturity securities the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Money market instruments unquoted Malaysian Government Securities 149,967 - 149,967 - Cagamas bonds 294,817 290,000 294,817 290,000 Bank Negara Malaysia negotiable notes - 98,057 - 98,057 444,784 388,057 444,784 388,057 unquoted securities In Malaysia Shares 462 270 192 - Loans stocks 32,478 32,478 - - Danaharta Urus Sdn Bhd bonds 929,639 1,151,932 929,639 1,151,932 Private debt securities 7,738,316 1,737,931 6,538,110 1,635,072 8,700,895 2,922,611 7,467,941 2,787,004 Outside Malaysia Private debt securities 2,324,723 - 570,525 -

Accretion of discount net of amortisation of premium 231,116 187,611 231,116 191,106 Less: Allowance for impairment losses (75,548) (24,963) (28,965) -

11,625,970 3,473,316 8,685,401 3,366,167

Private debt securities amounting to RM954 million are funded by a RPSIA depositor, as part of an arrangement with CIMB Islamic.

Included in the held-to-maturity securities are securities transferred from the held for trading category during the last quarter of the year, with the following carrying value and fair value as at 31 December 2008 (2007: no such reclassification permitted):

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Carrying value 5,973,951 - 4,393,006 - Fair value 5,946,391 - 4,456,902 -

Page 45: Cimb Financial Statement

111Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

7 loans, aDvances anD FinancinG(i) By type

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000 Overdrafts 7,238,366 6,496,719 7,002,421 6,371,371 Term loans/financing - Housing loan/financing 25,110,340 19,135,860 23,078,689 18,371,408 - Syndicated term loan 6,670,195 7,700,986 2,543,434 2,537,520 - Other term loans/financing 35,010,869 24,882,855 30,970,022 24,273,417 - Factoring receivables 48,737 62,019 - - - Lease receivables 73,227 104,231 - - - Hire purchase receivables 13,663,402 14,332,824 11,484,488 12,628,301 Bills receivable 153,420 251,143 153,420 251,111 Trust receipts 795,516 963,531 771,629 957,979 Claim on customers under acceptance credit 5,650,525 5,937,119 5,493,816 5,847,316 Staff loans 442,311 445,450 441,375 444,047 Credit card receivables 2,663,733 2,241,590 2,660,753 2,241,590 Revolving credit 7,619,761 5,987,416 6,429,039 5,354,865 Share margin financing 172,954 281,000 172,954 281,000

105,313,356 88,822,743 91,202,040 79,559,925 Less: Unearned interest (4,717,873) (2,951,290) (1,870,394) (2,120,929)

100,595,483 85,871,453 89,331,646 77,438,996 Less: Islamic financing sold to Cagamas (294,946) (575,918) - -

Gross loans, advances and financing 100,300,537 85,295,535 89,331,646 77,438,996 Fair value changes arising from fair value hedges 177,618 - 177,618 -

100,478,155 85,295,535 89,509,264 77,438,996 Less: Specific allowance (3,184,511) (3,300,748) (3,140,552) (3,194,131)

97,293,644 81,994,787 86,368,712 74,244,865 Less: General allowance (1,606,498) (1,377,254) (1,446,535) (1,233,088)

Total net loans, advances and financing 95,687,146 80,617,533 84,922,177 73,011,777

(a) Included in the Bank’s loans, advances and financing balances are RM2,061,944,000 (2007: RM2,064,458,000)

of net loans relating to that of a jointly controlled entity, PCSB. The revenue and risks of these accounts are shared equally between the Bank and the joint venture partner, Proton Edar Sdn Bhd, pursuant to the terms of a Joint Venture Agreement.

(b) Included in other term loans is RM3,021,205,464 (2007: RMNil) provided on normal commercial terms which is exempted from general allowance by Bank Negara Malaysia.

Page 46: Cimb Financial Statement

Annual Report 2008112

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

7 loans, aDvances anD FinancinG (continueD)(i) By type (continued)

(c) During the financial year, the Bank has undertaken fair value hedge on the interest rate risk of the RM2 billion loans using interest rate swaps. the Group and the Bank

2008 2007 rM’000 rM’000

Gross loan hedged 2,000,000 - Fair value changes arising from fair value hedges 177,618 -

2,177,618 -

The fair values of interest rate swaps as at 31 December 2008 were RM202,404,724 (2007: RMNil).

(d) As part of an arrangement with CIMB Islamic in relation to the RPSIA, the Bank records as deposits and placements with banks and other financial institutions, its exposure in the arrangement (See Note 3), whereas CIMB Islamic records its exposure as loans, advances and financing. The RPSIA arrangement exposes the Bank to the risks and rewards on the financing and accordingly, the Bank account for all the general allowance and specific allowances for bad and doubtful financing arising from the RPSIA financing.

As at 31 December 2008, the gross exposure and general allowance relating to RPSIA financing are RM1,893 million (2007: RMNil) and RM32 million (2007: RMNil) respectively.

(e) The maturity structure of loans, advances and financing is as follows: the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Maturing within one year 21,501,907 22,347,359 16,123,350 18,961,683 One year to less than three years 24,235,265 19,741,431 22,628,789 17,409,204 Three years to less than five years 11,080,136 8,672,601 10,167,614 7,528,457 Five years and more 43,778,175 35,110,062 40,411,893 33,539,652

100,595,483 85,871,453 89,331,646 77,438,996 Less: Islamic financing sold to Cagamas (294,946) (575,918) - -

100,300,537 85,295,535 89,331,646 77,438,996

Page 47: Cimb Financial Statement

113Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

7 loans, aDvances anD FinancinG (continueD)(ii) By type of customer

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Domestic banking institutions 149,356 160,452 - - Domestic non-bank financial institutions - stockbroking companies - 996 - 996 - others 2,994,551 1,582,797 2,991,427 1,575,593 Domestic business enterprises - small medium enterprises 12,576,067 13,219,535 11,947,385 12,901,005 - others 25,108,259 20,743,607 22,371,585 19,900,323 Government and statutory bodies 3,098,571 69,614 3,086,979 65,190 Individuals 47,590,813 41,146,748 44,660,572 39,389,781 Other domestic entities 3,375,151 4,021,814 74,614 71,668 Foreign entities 5,702,715 4,925,890 4,199,084 3,534,440

100,595,483 85,871,453 89,331,646 77,438,996 Less: Islamic financing sold to Cagamas (294,946) (575,918) - -

Gross loans, advances and financing 100,300,537 85,295,535 89,331,646 77,438,996

(iii) By interest rate sensitivity

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Fixed rate - Housing loans 5,048,818 3,857,299 4,704,226 3,500,520 - Hire-purchase receivables 11,421,719 11,995,147 9,605,869 10,497,861 - Other fixed rate loans 24,370,875 15,830,952 22,841,668 14,979,184 Variable rate - BLR plus 41,327,282 38,156,423 40,913,189 38,128,948 - Cost-plus 10,056,076 12,117,063 7,402,107 6,252,386 - Other variable rates 8,370,713 3,914,569 3,864,587 4,080,097

100,595,483 85,871,453 89,331,646 77,438,996 Less: Islamic financing sold to Cagamas (294,946) (575,918) - -

Gross loans, advances and financing 100,300,537 85,295,535 89,331,646 77,438,996

Page 48: Cimb Financial Statement

Annual Report 2008114

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

7 loans, aDvances anD FinancinG (continueD)(iv) By economic purpose

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Personal use 2,953,083 2,623,310 2,433,123 2,587,916 Credit card 2,663,733 2,241,590 2,660,753 2,241,590 Purchase of consumer durables 19,111 21,761 17,486 21,595 Construction 2,759,028 2,832,228 2,417,509 2,520,897 Residential property (housing) 24,657,226 19,229,741 23,876,489 18,843,132 Non-residential property 8,593,380 6,066,970 7,904,813 5,859,258 Purchase of fixed assets other than land and building 797,611 732,076 347,299 429,338 Merger and acquisition 1,563,682 604,907 1,500,984 - Purchase of securities 11,828,362 8,325,970 8,734,648 6,131,283 Purchase of transport vehicles 11,415,972 12,093,134 9,735,385 10,799,163 Working capital 27,194,826 27,821,070 24,375,948 25,315,308 Other purpose 6,149,469 3,278,696 5,327,209 2,689,516

100,595,483 85,871,453 89,331,646 77,438,996 Less: Islamic financing sold to Cagamas (294,946) (575,918) - -

100,300,537 85,295,535 89,331,646 77,438,996

(v) non-performing loans, advances and financing by economic purpose:

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Personal use 246,826 251,857 224,972 239,902 Credit card 70,400 57,668 70,400 57,668 Purchase of consumer durables 950 1,005 950 1,005 Construction 329,641 442,512 309,509 423,295 Residential property (housing) 1,585,234 1,759,557 1,529,613 1,698,746 Non-residential property 438,087 558,248 422,317 520,240 Purchased of fixed assets other than land and building 66,745 40,165 14,830 14,718 Purchase of securities 69,980 119,446 45,119 93,749 Purchase of transport vehicles 354,539 587,988 314,476 474,102 Working capital 2,193,798 2,833,053 2,095,621 2,745,816 Other purpose 117,578 102,212 116,001 101,202

5,473,778 6,753,711 5,143,808 6,370,443

Page 49: Cimb Financial Statement

115Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

7 loans, aDvances anD FinancinG (continueD)(vi) Movements in non-performing loans, advances and financing are as follows:

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

At 1 January 6,753,711 8,030,592 6,370,443 7,876,789 Classified as non-performing during the financial year 3,349,374 3,855,504 3,124,107 3,688,528 Disposal of Islamic banking operations to CIMB Islamic - - - (270,475)Loans/financing converted to securities - (1,849) - - Reclassified as performing during the financial year (2,532,285) (2,669,815) (2,395,585) (2,587,199)Amount written back in respect of recoveries (1,051,314) (1,340,813) (1,016,722) (1,305,651)Amount written off (660,640) (1,109,825) (604,045) (1,031,935)Sale of non-performing loans (385,389) - (380,698) - Amount transferred from subsidiaries - - 46,704 - Reclassified to non-current assets held for sale - (9,101) - - Exchange fluctuation 321 (982) (396) 386

At 31 December 5,473,778 6,753,711 5,143,808 6,370,443

Net non-performing loans, advances and financing^ 2,488,054 3,452,963 2,201,984 3,176,312

Ratio of net non-performing loans, advances and financing to total loans, advances and financing (including Islamic financing sold to Cagamas) less specific allowance^ 2.55% 4.18% 2.55% 4.28%

^ Excludes specific allowances on performing loans amounting to RM198,787,000 (2007: RMNil) for the Group and RM198,728,000 (2007: RMNil) for the Bank.

Page 50: Cimb Financial Statement

Annual Report 2008116

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

7 loans, aDvances anD FinancinG (continueD)(vii) Movements in the allowance for bad and doubtful debts and financing are as follows:

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

specific allowance At 1 January 3,300,748 3,240,620 3,194,131 3,144,799 Allowance made during the financial year 1,508,387 1,999,713 1,364,169 1,918,625 Allowance made and charged to deferred assets 878 5,062 878 5,062 Amount written back in respect of recoveries (718,893) (816,349) (608,735) (726,203)Amount written back from NPL sale (61,099) - (60,416) - Amount written off (648,042) (1,109,824) (591,362) (1,031,935)Sale of non-performing loans (194,711) - (189,943) - Amount transferred in respect of loans converted to securities - (1,849) - - Disposal of Islamic banking operations to CIMB Islamic - - - (104,654)Write back in relation to jointly controlled entity (4,329) (9,132) (4,329) (9,132)Amount transferred from I-Prestige Sdn Bhd - - 35,589 - Reclassified to non-current assets held for sale - (1,090) - - Exchange fluctuation 1,572 (6,403) 570 (2,431)

At 31 December 3,184,511 3,300,748 3,140,552 3,194,131

General allowance At 1 January 1,377,254 1,361,692 1,233,088 1,283,046 Net allowance made/(write back) during the financial year 229,830 24,461 217,803 (18,546)Write back in relation to jointly controlled entity - (658) - (658)Disposal of Islamic banking operations to CIMB Islamic - - - (28,617)Reclassified to non-current assets held for sale - (464) - - Exchange fluctuation (586) (7,777) (4,356) (2,137)

At 31 December 1,606,498 1,377,254 1,446,535 1,233,088

(General allowance excluding allowance on RPSIA financing as % of gross loans, advances and financing including Islamic financing sold to Cagamas, less loans exempted from general allowance by BNM and specific allowance) 1.70% 1.67% 1.70% 1.66%

Page 51: Cimb Financial Statement

117Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

8 other assets the Group the Bank

note 2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Interest receivable 176,628 259,308 178,047 215,958 Deferred assets (a) 216,292 226,311 216,292 226,311 Foreclosed properties (b) 27,495 29,351 27,495 29,351 Option financing 301,995 293,676 301,995 293,676 Credit Support Annex for derivative transactions 464,823 155,557 464,823 155,557 Amounts receivable from non-performing loans sale 165,871 - 165,871 - Other debtors, deposits and prepayments 742,467 440,047 578,713 281,498

2,095,571 1,404,250 1,933,236 1,202,351

(a) Deferred assets comprise mainly the carrying value of the excess of liabilities over assets of Common Forge Berhad taken over by SBB Berhad (formerly known as Southern Bank Berhad) in 2000 and will be reduced progressively by a scheme of arrangement which has been agreed by Bank Negara Malaysia. Movements in deferred assets during the financial year are as follows:

the Group and the Bank

2008 2007 rM’000 rM’000

At 1 January 226,311 247,474 Amortisation for the financial year (10,897) (26,225)Specific allowance made 878 5,062

At 31 December 216,292 226,311

Page 52: Cimb Financial Statement

Annual Report 2008118

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

8 other assets (continueD) (b) Movements in foreclosed properties during the financial year are as follows:

the Group and the Bank

2008 2007 rM’000 rM’000

At 1 January 29,351 66,219 Impairment during the financial year - (7,194)Disposed during the financial year (496) (4,604)Reclassified to non-currrent assets held for sale (Note 57(v)) (1,360) (25,070)

At 31 December 27,495 29,351

9 DeFerreD taxation 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, have been offset and shown in the balance sheet:

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Deferred tax assets 459,250 572,260 263,993 370,523 Deferred tax liabilities (154,713) (163,289) - -

304,537 408,971 263,993 370,523

Page 53: Cimb Financial Statement

119Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

9 D

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Page 54: Cimb Financial Statement

Annual Report 2008120

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

9 D

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xa

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Page 55: Cimb Financial Statement

121Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

10 statutory DePosits with central Banks the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Statutory deposits with - Bank Negara Malaysia 2,612,580 2,998,094 2,342,974 2,893,805- Other central banks 110,960 40,178 110,960 40,178

2,723,540 3,038,272 2,453,934 2,933,983

The non-interest bearing statutory deposits maintained with Bank Negara Malaysia are in compliance with Section 37(1)(c) of the Central Bank of Malaysia Act, 1958 (revised 1994), the amounts of which are determined at set percentages of total eligible liabilities. The non-interest bearing statutory deposits of foreign branches are maintained with respective central banks in compliance with the applicable legislation.

11 investMent in suBsiDiaries the Bank

note 2008 2007 rM’000 rM’000

Unquoted shares, at cost - ordinary and preference shares (a) 2,547,517 2,597,136 - fair value changes arising from net investment hedge (b) (41,100) (36,000)

2,506,417 2,561,136 Less: Allowance for impairment loss (260,498) (239,648)

2,245,919 2,321,488

(a) Ordinary shares(i) On 1 January 2008, CIMB Bank Berhad disposed 20% of its direct and 20% of its indirect equity interest in CIMB

Trustee Berhad to CIMB Berhad and CIMB Holdings Sdn Bhd.

(ii) On 18 March 2008, BHL Venture Bhd, a wholly-owned subsidiary of the Bank undertook a capital reduction exercise to distribute RM300,860,905 to the Bank via the cancellation of 178,545,000 ordinary shares of RM1.00 each amounting to RM178,545,000 and the cancellation of its entire share premium account amounting to RM122,315,905.

(iii) On 1 April 2008, the Bank disposed its 60% equity interest in South East Asian Bank Ltd to British American Investment Co (Mauritius) Ltd.

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CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

11 investMent in suBsiDiaries (continueD)(b) The Bank had undertaken a fair value hedge on the foreign exchange risk of CIMB (L) Limited with a USD100 million

subordinated debt. The foreign exchange changes are reflected in the Bank’s cost of investment in CIMB (L) Limited. On 31 August 2008, the fair value hedge was discontinued pursuant to the transfer of assets and liabilities of CIMB (L) Limited to CIMB Bank (L) Limited. As such, the Bank had undertaken a net investment hedge on the foreign exchange risk of CIMB Bank (L) Limited using the following subordinated loans, subordinated notes and loans:

Fair value as at Fair value as at 31.12.08 31.12.07

USD200 million subordinated loans RM692,900,000 - USD200 million subordinated notes RM786,501,000 - USD200 million loans RM692,900,000 -

(c) The subsidiaries of the Bank are as follows: Percentage of equity held Directly by through the Bank subsidiary company

name Principal activities 2008 2007 2008 2007 % % % %

BOC Nominees Sdn Bhd * Dormant 100 100 - - BOC Nominees (Tempatan) Sdn Bhd * Dormant 100 100 - - BOC Nominees (Asing) Sdn Bhd * Dormant 100 100 - - CIMB Group Nominees Sdn Bhd Nominee services 100 100 - - CIMB Group Nominees (Tempatan) Sdn Bhd Nominee services 100 100 - - CIMB Group Nominees (Asing) Sdn Bhd Nominee services 100 100 - - Bumiputra-Commerce Corporate Services Nominee services - - 100 100 Limited (Incorporated in the Federal Territory of Labuan) BC Management Services Ltd Nominee services - - 100 100 (Incorporated in the Federal Territory of Labuan) Bumiputra-Commerce Finance Berhad Dormant 100 100 - - I-Prestige Sdn Bhd Special purpose vehicle 100 100 - - CIMB Trustee Berhad Trustee services 20 20 40 80 CIMB Trust Limited (Incorporated in the Trustee services 100 100 - - Federal Territory of Labuan)BBMB Unit Trust Management Berhad * Dormant 100 100 - - CIMB FactorLease Berhad Leasing, hire purchase 100 100 - - financing, debt factoring, loan management and property management CIMB Bank (L) Limited (Incorporated in Offshore banking 100 100 - - the Federal Territory of Labuan) CIMB (L) Limited (Incorporated in the Offshore banking 100 100 - - Federal Territory of Labuan) Semerak Services Sdn Bhd Service company 100 100 - -

Page 57: Cimb Financial Statement

123Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

11 investMent in suBsiDiaries (continueD)(c) The subsidiaries of the Bank are as follows: (Continued) Percentage of equity held Directly by through the Bank subsidiary company

name Principal activities 2008 2007 2008 2007 % % % %

BBMB Securities (Holdings) Sdn Bhd * Investment holding 100 100 - - company iCIMB (M) Sdn Bhd Provision of management 100 100 - - services and outsourcing South East Asian Bank Ltd (Incorporated in Commercial banking and Republic of Mauritius) related financial services - 60 - -Bumiputra-Commerce Factoring Berhad * Dormant 100 100 - - Bumiputra-Commerce Properties Sdn Bhd * Dormant 100 100 - - BBMB Futures Sdn Bhd * Dormant - - 100 100 BBMB Finance (Hong Kong) Limited Dormant 100 100 - - (Incorporated in Hong Kong) BBMB Finance Nominee (Hong Kong) Dormant - - - 100 Limited (Incorporated in Hong Kong) ^ Bumiputra Nominee Ltd (Incorporated Dormant - 100 - - in the United Kingdom) ^ CIMB Islamic Bank Berhad Islamic banking 100 100 - - Halyconia Asia Fund Limited (Incorporated Open ended investment - - 100 100 in British Virgin Islands) fund CIMB Private Equity General Partner Limited Fund management - - 100 100 CIMB Mezzanine General Partner Limited Fund management - - 100 100 CIMB Islamic Funds DCC Limited Fund company - - 100 100 S.B. Venture Capital Corporation Sdn Bhd Investment holding and 100 100 - - provision of management services Southern Nominees (Tempatan) Sdn Bhd Nominee services 100 100 - - Southern Nominees (Asing) Sdn Bhd Nominee services 100 100 - - SBB Capital Markets Sdn Bhd * Investment holding 100 100 - - SBB Securities Sdn Bhd Stock and share broking - - - 100 RC Nominees (Tempatan) Sdn Bhd^ Nominee services - - - 100 RC Nominees (Asing) Sdn Bhd^ Nominee services - - - 100 SBB Sec Research Sdn Bhd^ Providing research and - - - 100 management services Mohaiyani Sdn Bhd Investment holding - - 100 100 Mohaiyani Nominees Sdn Bhd * Dormant - - 100 100 Mohaiyani Nominees (Tempatan) Sdn Bhd * Dormant - - 100 100 Mohaiyani Nominees (Asing) Sdn Bhd * Dormant - - - 100 BHLB Trustee Berhad Trustee services - - 73 73 S.B. Properties Sdn Bhd Property ownership and 100 100 - - management

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CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

11 investMent in suBsiDiaries (continueD)(c) The subsidiaries of the Bank are as follows: (Continued) Percentage of equity held Directly by through the Bank subsidiary company

name Principal activities 2008 2007 2008 2007 % % % %

Elite Constant Development Sdn Bhd Construction of building - - 100 100 BHLB Properties Sdn Bhd Property ownership and 100 100 - - management Southern Investment Bank Berhad Merchant banking business 80 80 - - Perdana Nominees (Tempatan) Sdn Bhd Nominee services - - 80 80 Perdana Nominees (Asing) Sdn Bhd * Nominee services - - 80 80 Perdana Mutual Fund Berhad * Dormant - - 80 80 BHL Venture Berhad * Investment holding 100 100 - - BHLB Asset Management Sdn Bhd * Investment holding - - 100 100 SBB Unit Trust Management Berhad * Dormant - - 100 100 SFB Auto Berhad Dormant 100 100 - - SFB Nominees (Tempatan) Sdn Bhd * Nominee services 100 100 - - SFB Nominees (Asing) Sdn Bhd ^ Nominee services - 100 - - SFB Development Sdn Bhd Property investment 100 100 - - Seal Line Trading Sdn Bhd Property investment - - 100 100 CIMB Bank Nominees (S) Sdn Bhd α Nominee services 100 100 - - SBB Capital Corporation Special purpose vehicle 100 100 - -Cempaka Nominees (Tempatan) Sdn Bhd ^ Dormant - 100 - - Perdana Visi Hartanah Sdn Bhd Property investment 100 100 - - Common Forge Berhad Dormant 100 100 - - SBB Nominees (Tempatan) Sdn Bhd Nominee services 100 100 - - SBB Nominees (Asing) Sdn Bhd Nominee services 100 100 - - SBB Futures Sdn Bhd * Investment holding 100 100 - - Premier Fidelity Berhad Dormant 100 100 - - Southern Finance Company Berhad ^ Dormant - 100 Auto ABS One Berhad ∞ Special Purpose Vehicle - - - - Commerce Returns Berhad ∞ Special Purpose Vehicle - - - -

* Company will be liquidated in 2009^ Company has been voluntarily liquidated during the financial yearα Audited by a member firm of PricewaterhouseCoopers International Limited which is a separate and independent

legal entity from PricewaterhouseCoopers Malaysia∞ In accordance with IC 112 - Consolidation: Special Purpose Entities, Auto ABS One Berhad (“Auto ABS”) and

Commerce Returns Berhad are consolidated in the Group as the substance of the relationship between the Group and the two special purpose entities indicates that both are controlled by the Group

All the subsidiaries, unless otherwise stated, are incorporated in Malaysia

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125Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

12 investMent in Jointly controlleD entity the Group

2008 2007 rM’000 rM’000

Share of net assets of joint venture 127,701 124,448

the Bank

2008 2007 rM’000 rM’000

Unquoted shares, at cost 125,000 125,000 Less: Allowance for impairment loss (552) (552)

124,448 124,448

The joint venture, which is incorporated in Malaysia, is as follows: Percentage of equity held

2008 2007name of company Principal activities % %

Proton Commerce Sdn Bhd Financing of vehicles 50 50 On 22 October 2003, Bumiputra-Commerce Finance Berhad (“BCF”) entered into a joint venture agreement with Proton

Edar Sdn Bhd (“PESB”) for the purposes of building and operating a competitive vehicle financing business in Malaysia for vehicles distributed by PESB. Subsequently, a jointly controlled entity was incorporated under the name of Proton Commerce Sdn Bhd (“PCSB”) which is 50%:50% owned by BCF and PESB respectively. PCSB is primarily responsible for developing, managing and marketing hire purchase loans for vehicles sold to the customers of PESB. Pursuant to the joint venture, BCF issued RM200 million Perpetual Preference Shares (“PPS”) which were fully subscribed by PCSB. Pursuant to the vesting of the finance company business and the related assets and liabilities of BCF to the Bank and the subsequent capital reduction exercise undertaken by BCF in 2006, the BCF PPS were cancelled, and the Bank issued RM200 million PPS to PCSB.

Under the joint venture, the assets and liabilities of PCSB are recorded and accounted for by the Bank in a Special Project Account (“SPA”) for and on behalf of PCSB. The respective balances in this SPA as at balance sheet date are consolidated and reported as the assets and liabilities of the Bank.

All income and expenses arising from PCSB’s activities are recorded in the books of PCSB. At the Group, the 50% share of profit and loss from the operations of PCSB is shown as a line item in the income statement. For the 12 months period ended 2008, PCSB recorded a profit after taxation of RM6,506,098 (2007: profit after taxation of RM6,820,000) and the Group’s share of this profit is RM3,253,049 (2007: profit of RM3,410,000).

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CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

12 investMent in Jointly controlleD entity (continueD) The assets and liabilities in the SPA as at 31 December are as follows:

2008 2007 rM’000 rM’000

assets Cash and short-term funds 237 237 Loans and advances 2,061,944 2,064,458 Other assets 4,423 4,647 Held-to-maturity securities 90,000 90,000

total assets 2,156,604 2,159,342

liabilities and equity Deposits and placements of banks and other financial institutions 1,030,504 741,833 Amount due to Cagamas Berhad 68,158 291,884 Other liabilities 452,539 442,579 Amount due to related company (Nota 26) 405,403 483,046

total liabilities 1,956,604 1,959,342

Perpetual preference shares 200,000 200,000

200,000 200,000

total liabilities and equity 2,156,604 2,159,342

commitments and contingencies 30,840 17,360

The Group’s share of income and expenses of the joint venture is as follows:

2008 2007 rM’000 rM’000

Income 57,224 27,100 Expenses (53,175) (23,314)

Profit before taxation 4,049 3,786 Taxation (796) (376)

Net profit for the financial year 3,253 3,410

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127Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

12 investMent in Jointly controlleD entity (continueD) The Group’s share of the assets and liabilities of the joint venture other than those that are held in trust by the Bank is as follows:

2008 2007 rM’000 rM’000

Non-current assets 301,371 339,062 Current assets 59,368 69,537 Current liabilities (35,283) (35,796)Long term liabilities (197,755) (248,355)

Net assets 127,701 124,448

13 investMent in associate

the Group

2008 2007 rM’000 rM’000

At 1 January 791 242 Acquisition of associate (note 56(a)(i)) 595,814 - Disposal of associate (note 56(b)(iv)) (595) - Dividend from associate (500) - Share of (loss)/profit (40,565) 567 Revaluation reserve - available-for-sale securities 32,167 - Exchange fluctuation 168 (18)

587,280 791

the Bank

2008 2007 rM’000 rM’000

Quoted shares outside Malaysia, at cost 595,814 -

Investment in associate as at 31 December 2008 includes premium on acquisition of RM379,003,000 (2007: RMNil), which is the provisional amount that relates to the acquisition of 42.13% equity interest in BankThai Public Company Limited (‘BankThai’) during the financial year.

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CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

13 investMent in associate (continueD) The Group’s share of income and expenses of the associates is as follows:

2008 2007 rM’000 rM’000

Interest income 73,922 - Interest expense (38,628) -

Net interest income 35,294 - Non-interest income 13,497 1,167

Net income 48,791 1,167 Overheads (45,572) (595)Allowances for losses on loans and advances (24,911) - Allowance for impairment losses (19,044) -

(Loss)/profit before taxation (40,736) 572 Taxation 140 (5)

(Loss)/profit after taxation (40,596) 567 Minority interest 31 -

(40,565) 567

The Group’s share of the assets and liabilities of the associates is as follows:

2008 2007 rM’000 rM’000

Total assets 8,763,864 1,118 Total liabilities (8,587,754) (327)

Net assets 176,110 791 Revalution reserve - available-for-sale securities 32,167 -

208,277 791

Commitments and contingencies 9,149,942 -

Details of the associate held by CIMB Bank (L) Limited are as follows:

Percentage of equity held

2008 2007name of company Principal activities % %

Navis-CIMB General Partner Ltd. Fund management - 25 CIMB Bank (L) Limited has disposed its entire equity interest in Navis-CIMB General Partner Ltd. in September 2008.

Page 63: Cimb Financial Statement

129Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

13 investMent in associate (continueD) Details of the associate held by the Bank are as follows:

Percentage of equity held

2008 2007name of company Principal activities % %

BankThai Public Company Limited Banking 42 - As set out in Note 51(a) of these financial statements, on 13 January 2009, BankThai Public Company Limited became a

92.04% owned subsidiary.

14 aMount Due FroM holDinG coMPany anD ultiMate holDinG coMPany the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Amount due from: - holding company 18,033 17,018 14,568 17,018 - ultimate holding company 260,317 259,760 232,304 231,697

278,350 276,778 246,872 248,715

The amounts due from holding company and ultimate holding company are unsecured, interest free and recallable on demand.

15 aMount Due FroM/(to) suBsiDiaries the Bank

2008 2007 rM’000 rM’000

Amount due from subsidiaries 197,618 467,432

Amount due to subsidiaries (178,140) (357,760)

The amounts due from/(to) subsidiaries are unsecured, interest free and recallable on demand. 16 aMount Due FroM/(to) relateD coMPanies

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Amount due from related companies 90,926 100,368 90,819 87,949

Amount due to related companies (15,432) (1,977) (9,398) -

The amounts from/(to) related companies are unsecured, interest free and recallable on demand.

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CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

17 DeFerreD consiDeration The deferred consideration (“consideration”) equals the total initial purchase price for the hire purchase receivables sold by BCF

to a special purpose vehicle, Auto ABS One Berhad, less cash paid to BCF. The consideration bears an average interest rate of 8% per annum. The consideration is receivable after all indebtedness of Auto ABS One Berhad to Malaysian Trustee Berhad and the holders of the redeemable asset-backed bonds arising under the transaction of documents and other obligations having priority over the consideration have been satisfied in full.

On 28 February 2008, the redeemable asset-backed bonds were redeemed and all other obligations were repaid in full. The consideration became receivable and was fully settled.

18 GooDwill the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

cost At 1 January 3,695,075 3,966,649 3,559,075 3,965,075 Disposal of interest in subsidiaries - (195,000) - - Disposal of Islamic banking operations to CIMB Islamic - - - (136,000)Reclassified to non-current assets held for sale (Note 57(iv)) - (76,574) - (75,000)Written off due to disposal of indirect subsidiary - - - (195,000)

At 31 December 3,695,075 3,695,075 3,559,075 3,559,075

impairment At 1 January - - - - Impairment charge - (3,000) - (198,000)Reclassified to non-current assets held for sale (Note 57(iv)) - 3,000 - 3,000 Written off due to disposal of indirect subsidiary - - - 195,000

At 31 December - - - -

net book value at 31 December 3,695,075 3,695,075 3,559,075 3,559,075

allocation of goodwill to cash-generating units Goodwill has been allocated to the following cash-generating units (“CGUs”). These CGUs do not carry any intangible assets

with indefinite useful lives.

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131Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

18 GooDwill (continueD) A segment-level summary of the goodwill allocation is presented below:

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Retail Banking 1,101,075 1,101,075 1,101,075 1,101,075Business Banking 911,000 911,000 911,000 911,000Corporate Banking 419,000 419,000 419,000 419,000Islamic Banking 136,000 136,000 - -Direct Banking Group 587,000 587,000 587,000 587,000Treasury 537,000 537,000 537,000 537,000Others 4,000 4,000 4,000 4,000

Goodwill 3,695,075 3,695,075 3,559,075 3,559,075Goodwill classified as non-current assets held for sale (Note 57(iv)) 35,000 73,574 35,000 72,000

3,730,075 3,768,649 3,594,075 3,631,075

impairment test for goodwill Value-in-use The recoverable amount of CGUs which are not classified as held for sale is determined based on value-in-use calculations.

These calculations use pre-tax cash flow projections based on the 2009 financial budgets approved by Board of Directors, projected for 5 years based on the average to year historical Gross Domestic Product (“GDP”) growth of the country covering a five year period, revised for current economic conditions. Cash flows beyond the five-year period are extrapolated using estimated growth rate of 5.00% (2007: 5.42%). The cash flow projections are derived based on a number of key factors including the past performance and management’s expectation of market developments. The discount rate used in determining the recoverable amount of the CGUs is 9.80% (2007: 8.43%). The discount rate is pre-tax and reflects the specific risks relating to the CGUs.

Management believes that no reasonably possible change in any of the key assumptions would cause the carrying value of any CGU to exceed its recoverable amount.

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CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

18 GooDwill (continueD) impairment test for goodwill (continued)

Fair value less costs to sell For the CGU which are associated with the proposed disposals as disclosed in Note 57, the recoverable amount is determined

based on the estimated disposal price less any costs to sell. The disposal price is determined based on the net tangible assets of the affected business as at 31 December 2008, plus a premium of RM20 million which has been agreed by both the Bank and the acquirer of the business.

impairment charge The impairment charge of RM195 million in the Bank in the previous financial year arises from the disposal of CIMB Wealth

Advisors Berhad and SBB Asset Management Sdn Bhd as disclosed in Note 56(c)(i) and has been written off. The “Others” CGU was affected by the impairment charge write-off.

19 intanGiBle assets

credit card customer core computer relationships deposits software total the Group note rM’000 rM’000 rM’000 rM’000

2008 cost or valuation At 1 January 153,091 263,612 275,708 692,411 Additions - - 51,531 51,531 Disposals/write-off - - (14) (14)Reclassified from property, plant and equipment 21 - - 8,289 8,289 Reclassified from non-current assets held for sale 57(i) - - 301 301 Exchange fluctuation - - 4 4

At 31 December 153,091 263,612 335,819 752,522

amortisation At 1 January 19,134 49,428 158,224 226,786 Amortisation during the financial year 12,758 32,951 65,662 111,371 Disposals/write-off - - (14) (14)Reclassified from property, plant and equipment 21 - - 1,886 1,886 Reclassified from non-current assets held for sale 57(i) - - 202 202 Exchange fluctuation - - 3 3

At 31 December 31,892 82,379 225,963 340,234

net book value at 31 December 2008 121,199 181,233 109,856 412,288

Page 67: Cimb Financial Statement

133Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

19 intanGiBle assets (continueD)

credit card customer core computer relationships deposits software total the Group note rM’000 rM’000 rM’000 rM’000

2007 cost or valuation At 1 January 153,091 263,612 232,986 649,689 Additions - - 76,267 76,267 Disposals/write-off - - (38,825) (38,825)Reclassified from property, plant and equipment 21 - - 5,987 5,987 Reclassified to non-current assets held for sale 57(i) - - (707) (707)

At 31 December 153,091 263,612 275,708 692,411

amortisation At 1 January 6,833 17,125 130,126 154,084 Amortisation during the financial year 12,301 32,303 51,137 95,741 Disposals/write-off - - (10,514) (10,514)Reversal of impairment - - (12,000) (12,000)Reclassified to non-current assets held for sale 57(i) - - (525) (525)

At 31 December 19,134 49,428 158,224 226,786

net book value at 31 December 2007 133,957 214,184 117,484 465,625

credit card customer core computer relationships deposits software total the Bank rM’000 rM’000 rM’000 rM’000

2008 cost or valuation At 1 January 153,091 263,612 263,979 680,682 Additions - - 49,122 49,122 Transferred from CIMB Islamic - - 19 19

At 31 December 153,091 263,612 313,120 729,823

amortisation At 1 January 19,134 49,428 156,058 224,620 Amortisation during the financial year 12,758 32,951 58,637 104,346

At 31 December 31,892 82,379 214,695 328,966

net book value at 31 December 2008 121,199 181,233 98,425 400,857

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CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

19 intanGiBle assets (continueD)

credit card customer core computer relationships deposits software total the Bank rM’000 rM’000 rM’000 rM’000

2007 cost or valuation At 1 January 153,091 263,612 232,031 648,734 Additions - - 69,888 69,888 Disposals - - (37,940) (37,940)

At 31 December 153,091 263,612 263,979 680,682

amortisation At 1 January 6,833 17,125 129,669 153,627 Amortisation during the financial year 12,301 32,303 48,018 92,622 Disposals - - (9,629) (9,629)Reversal of impairment - - (12,000) (12,000)

At 31 December 19,134 49,428 156,058 224,620

net book value at 31 December 2007 133,957 214,184 107,921 456,062

The valuation of credit card customer relationships was determined through the sum of the discounted future excess earnings attributable to existing credit card customers over the remaining life span of the customer relationships. Income from existing credit card base was projected, adjusted for expected attrition and taking into account applicable costs to determine future excess earnings. The discount rate used in the valuation of credit card customer relationships was 11.7%, which is arrived at using the weighted average cost of capital adjusted for the risk premium after taking into consideration the average market cost of equity.

The valuation of core deposits was derived by discounting the anticipated future benefits in the form of net interest savings from core deposits. The discount rate used was 9.6%, which was derived from the average of the weighted average cost of capital and the cost of equity, reflecting the lower risk premium for core deposit intangibles compared with equity returns.

The remaining amortisation period of credit card customer relationships and core deposits range from 5 to 9 years, respectively.

Page 69: Cimb Financial Statement

135Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

20 PrePaiD lease PayMents

long term short term leasehold land leasehold land total the Group rM’000 rM’000 rM’000 2008 cost At 1 January 39,728 5,609 45,337 Disposals/write-off (3,427) - (3,427)Exchange fluctuation 17 213 230

At 31 December 36,318 5,822 42,140

amortisation At 1 January 9,591 3,309 12,900 Amortisation during the financial year 922 135 1,057 Disposals/write-off (1,556) - (1,556)Exchange fluctuation 6 115 121

At 31 December 8,963 3,559 12,522

net book value at 31 December 2008 27,355 2,263 29,618

long term short term leasehold land leasehold land total the Group note rM’000 rM’000 rM’000 2007 cost At 1 January 44,766 5,653 50,419 Additions 532 10 542 Disposals/write-off (2,410) - (2,410)Reclassified to property, plant and equipment 21 (1,960) - (1,960)Reclassified to non-current assets held for sale 57(ii)(v) (1,176) - (1,176)Exchange fluctuation (24) (54) (78)

At 31 December 39,728 5,609 45,337

amortisation At 1 January 8,341 3,188 11,529 Amortisation during the financial year 1,493 217 1,710 Disposals/write-off (16) - (16)Reclassified to property, plant and equipment 21 (40) - (40)Reclassified to non-current assets held for sale 57(ii)(v) (179) - (179)Exchange fluctuation (8) (96) (104)

At 31 December 9,591 3,309 12,900

net book value at 31 December 2007 30,137 2,300 32,437

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Annual Report 2008136

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

20 PrePaiD lease PayMents (continueD)

long term short term leasehold land leasehold land total the Bank rM’000 rM’000 rM’000 2008 cost At 1 January 35,285 4,684 39,969 Disposals/write-off (3,427) - (3,427)Exchange fluctuation - 213 213

At 31 December 31,858 4,897 36,755

amortisation At 1 January 9,064 2,938 12,002 Amortisation during the financial year 881 117 998 Disposals/write-off (1,556) - (1,556)Exchange fluctuation - 114 114

At 31 December 8,389 3,169 11,558

net book value at 31 December 2008 23,469 1,728 25,197

long term short term leasehold land leasehold land total the Bank note rM’000 rM’000 rM’000

2007cost At 1 January 38,433 4,738 43,171 Reclassified to property, plant and equipment 21 (2,745) - (2,745)Reclassified to non-current assets held for sale 57(v) (376) - (376)Disposals/write-off (27) - (27)Exchange fluctuation - (54) (54)

At 31 December 35,285 4,684 39,969

amortisation At 1 January 7,847 2,957 10,804 Reclassified to property, plant and equipment 21 (40) - (40)Reclassified to non-current assets held for sale 57(v) (167) - (167)Amortisation during the financial year 1,440 77 1,517 Disposals/write-off (16) - (16)Exchange fluctuation - (96) (96)

At 31 December 9,064 2,938 12,002

net book value at 31 December 2007 26,221 1,746 27,967

Page 71: Cimb Financial Statement

137Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

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106,

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115

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4

550

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99,9

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-

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108

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,015

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31

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8,41

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1,62

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9

Page 72: Cimb Financial Statement

Annual Report 2008138

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

21

Pr

oP

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ty,

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-

75,

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9,7

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he fi

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539)

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-

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1,5

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57(i)

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77,

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31 D

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104

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Page 73: Cimb Financial Statement

139Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

21

Pr

oP

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Pla

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108

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18

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0

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Addi

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102

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Dis

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Page 74: Cimb Financial Statement

Annual Report 2008140

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

21

Pr

oP

er

ty,

Pla

nt

an

D e

qu

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333

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Cha

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40

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19

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Page 75: Cimb Financial Statement

141Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

21

Pr

oP

er

ty,

Pla

nt

an

D e

qu

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60,

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Page 76: Cimb Financial Statement

Annual Report 2008142

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

21

Pr

oP

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ty,

Pla

nt

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Page 77: Cimb Financial Statement

143Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

21

Pr

oP

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ty,

Pla

nt

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Page 78: Cimb Financial Statement

Annual Report 2008144

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

22 investMent ProPerties

Buildings on Buildings on short term long term leasehold land leasehold land total

the Group and the Bank rM’000 rM’000 rM’000

2008 At 1 January 44,519 52,902 97,421 Fair value adjustments (2,141) - (2,141)Exchange fluctuation 2,321 2,574 4,895

At 31 December 44,699 55,476 100,175

Buildings on Buildings on short term long term leasehold land leasehold land total

the Group and the Bank rM’000 rM’000 rM’000

2007 At 1 January - - - Reclassified from property, plant and equipment 8,709 33,169 41,878 Fair value adjustments 36,384 19,774 56,158 Exchange fluctuation (574) (41) (615)

At 31 December 44,519 52,902 97,421

The investment properties are valued annually at fair value based on market values determined by independent qualified

valuers. The following amounts have been reflected in the income statement:

2008 2007 rM’000 rM’000

Rental income 3,287 3,024 Operating expenses arising from investment properties that generated the rental income (426) (357)

Page 79: Cimb Financial Statement

145Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

23 DePosits FroM custoMers(a) By type of deposit

the Group the Bank

2008 2007 2008 2007 note rM’000 rM’000 rM’000 rM’000

Demand deposits 26,043,404 23,456,477 23,743,569 23,115,848 Saving deposits 9,264,470 8,074,683 8,869,939 7,909,063 Fixed deposits 57,958,370 55,591,312 47,726,542 44,268,212 Negotiable instruments of deposit (i) 8,879,114 6,749,330 7,764,816 6,547,504 Others 25,480,383 18,317,835 19,000,159 17,466,737

127,625,741 112,189,637 107,105,025 99,307,364

(i) During the financial year, the Bank has undertaken a fair value hedge on the interest rate risk of the negotiable instruments of deposit amounting to RM1,104,900,000 (2007: RM930,000,000) using interest rate swaps. the Group and the Bank

2008 2007 rM’000 rM’000

Negotiable instruments of deposit 1,104,900 930,000 Fair value changes arising from fair value hedges 13,420 4,765

1,118,320 934,765

The fair values of interest rate swaps as at 31 December 2008 were RM44,861,369 (2007: RM17,892,000).

The maturity structure of fixed deposits and negotiable instruments of deposit is as follows: the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Due within six months 53,514,938 43,686,681 43,478,322 32,658,882 Six months to less than one year 7,832,019 13,152,147 7,629,884 12,870,828 One year to less than three years 4,032,323 1,910,653 3,579,308 1,888,112 Three years to less than five years 1,458,204 3,590,734 803,844 3,397,889 Five years and above - 427 - 5

66,837,484 62,340,642 55,491,358 50,815,716

Page 80: Cimb Financial Statement

Annual Report 2008146

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

23 DePosits FroM custoMers (continueD)(b) By type of customer

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Government and statutory bodies 10,209,884 10,145,047 6,930,030 8,487,213 Business enterprises 62,985,795 58,259,868 48,239,319 48,957,825 Individuals 32,389,188 28,347,752 30,243,479 27,201,480 Others 22,040,874 15,436,970 21,692,197 14,660,846

127,625,741 112,189,637 107,105,025 99,307,364

24 DePosits anD PlaceMents oF Banks anD other Financial institutions

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Licensed banks 4,564,048 8,367,617 7,034,224 9,606,700 Licensed finance companies 14,140 18,235 14,140 18,235 Licensed investment banks 2,342,569 1,332,565 2,142,269 1,183,750 Bank Negara Malaysia 365,000 1,952,360 365,000 1,952,360 Other financial institutions 1,328,773 1,024,118 1,013,881 1,024,118

8,614,530 12,694,895 10,569,514 13,785,163

25 Derivative Financial instruMents, coMMitMents anD continGencies

(i) Derivative financial instruments The following tables summarise the contractual the underlying principal amounts of derivative financial instruments held at

fair value through the income statement. The principal or contractual amounts of these instruments reflect the volume of transactions outstanding at balance sheet date, and do not represent amounts at risk.

Trading derivative financial instruments are revalued on a gross position basis and the unrealised gains or losses are reflected in “Derivative financial instruments” Assets and Liabilities respectively.

Page 81: Cimb Financial Statement

147Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

25 Derivative Financial instruMents, coMMitMents anD continGencies (continueD)(i) Derivative financial instruments (continued)

the Group the Bank Fair values Fair values

Derivatives at fair value through income statement Principal assets liabilities Principal assets liabilities at 31 December 2008 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 Foreign exchange derivatives Currency forward 8,292,585 113,488 (79,987) 7,640,459 113,382 (79,987) Currency swaps 16,222,368 229,311 (245,874) 16,202,368 229,311 (242,394) Currency option 1,881,221 56,429 (50,018) 1,881,221 56,429 (50,018) Cross currency interest rate swaps 12,786,403 388,497 (396,895) 12,859,158 388,497 (406,933)

39,182,577 787,725 (772,774) 38,583,206 787,619 (779,332) Interest rate derivatives Interest rate swaps 156,927,418 3,045,560 (2,622,839) 154,185,276 2,878,665 (2,630,138) Interest rate futures 28,174,595 82,820 (45,444) 28,174,595 82,820 (45,444) Interest rate options 3,630,000 14,954 (13,512) 3,630,000 14,954 (13,512)

188,732,013 3,143,334 (2,681,795) 185,989,871 2,976,439 (2,689,094) Equity related derivatives Equity options 15,383,947 194,711 (201,303) 11,637,270 152,183 (158,768) Commodity options 971,404 986,367 (982,056) 971,404 986,367 (982,056) Equity futures 13,009 1 (420) 13,009 1 (420)

16,368,360 1,181,079 (1,183,779) 12,621,683 1,138,551 (1,141,244) Credit related contract Credit default swaps 580,817 4,207 (6,117) 580,817 4,207 (6,117) Held for hedging purpose Interest rate swaps 4,736,722 219,190 (204,570) 4,736,722 219,190 (204,570)

Total derivatives assets/ (liabilities) 249,600,489 5,335,535 (4,849,035) 242,512,299 5,126,006 (4,820,357)

Page 82: Cimb Financial Statement

Annual Report 2008148

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

25 Derivative Financial instruMents, coMMitMents anD continGencies (continueD)(i) Derivative financial instruments (continued)

the Group the Bank Fair values Fair values

Derivatives at fair value through income statement Principal assets liabilities Principal assets liabilities at 31 December 2007 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 Foreign exchange derivatives Currency forward 6,325,570 30,279 (69,435) 6,320,977 30,279 (69,435) Currency swaps 14,986,084 198,904 (134,109) 14,878,257 198,904 (134,109) Currency option 622,471 4,346 (2,777) 622,471 4,346 (2,777) Cross currency interest rate swaps 7,652,297 245,414 (207,998) 7,652,297 245,414 (207,998)

29,586,422 478,943 (414,319) 29,474,002 478,943 (414,319) Interest rate derivatives Interest rate swaps 127,001,694 1,060,102 (792,697) 126,086,954 985,516 (794,511) Interest rate futures 29,816,022 23,897 (12,900) 29,816,022 23,897 (12,900) Interest rate options 5,980,000 8,826 (13,055) 5,980,000 8,826 (13,055)

162,797,716 1,092,825 (818,652) 161,882,976 1,018,239 (820,466) Equity related derivatives Equity options 22,991,005 89,998 (235,246) 22,991,005 89,998 (235,247) Commodity options 179,525 213 - 179,525 213 - Equity futures 44,032 - (1,256) - - -

23,214,562 90,211 (236,502) 23,170,530 90,211 (235,247) Credit related contract Credit default swaps 100,000 121 (78) 100,000 121 (78) Held for hedging purpose Interest rate swaps 2,252,800 48,830 (30,849) 2,252,800 48,830 (30,849) Cross currency interest rate swap 760,000 - (109,636) 760,000 - (109,636)

3,012,800 48,830 (140,485) 3,012,800 48,830 (140,485)

Total derivatives assets/ (liabilities) 218,711,500 1,710,930 (1,610,036) 217,640,308 1,636,344 (1,610,595)

(ii) commitments and contingencies In the normal course of business, the Group and the Bank enter into various commitments and incur certain contingent

liabilities with legal recourse to their customers. No material losses are anticipated as a result of these transactions and hence, they are not provided for in the Financial Statements.

These commitments and contingencies are not secured over the assets of the Group and the Bank, except for certain securities held for trading being pledged as credit support assets for certain over-the-counter derivative contracts.

Page 83: Cimb Financial Statement

149Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

25 Derivative Financial instruMents, coMMitMents anD continGencies (continueD)(ii) commitments and contingencies (continued) The commitments and contingencies constitute the following:

2008 2007 credit risk credit risk equivalent weighted equivalent weighted Principal amount* amount Principal amount* amount the Group rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 Credit-related Direct credit substitutes 1,840,720 1,809,540 1,231,300 1,797,765 1,797,765 1,554,395 Transaction-related contingent items 4,379,188 2,189,594 1,710,147 4,549,710 2,274,856 1,921,981 Short-term self-liquidating trade-related contingencies 3,700,924 737,396 511,436 3,217,282 643,455 383,464 Islamic Financing sold directly and indirectly to Cagamas with recourse 294,946 294,946 294,946 575,918 575,918 575,918 Obligations under underwriting agreement 65,000 32,500 32,500 85,000 42,500 42,500 Irrevocable commitments to extend credit : - maturity not exceeding one year 35,316,004 - - 36,531,623 - - - maturity exceeding one year 8,751,965 4,375,983 3,721,781 10,056,536 5,028,178 4,396,414 Forward asset purchase 104,052 14 10 5,000 24 12 Miscellaneous commitments and contingencies 4,722,384 320,398 65,012 2,756,215 3,677 2,192

Total credit-related commitments and contingencies 59,175,183 9,760,371 7,567,132 59,575,049 10,366,373 8,876,876

Page 84: Cimb Financial Statement

Annual Report 2008150

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

25 Derivative Financial instruMents, coMMitMents anD continGencies (continueD)(ii) commitments and contingencies (continued) The commitments and contingencies constitute the following: (Continued)

2008 2007 credit risk credit risk equivalent weighted equivalent weighted Principal amount* amount Principal amount* amount the Group rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 Treasury-related Foreign exchange related contracts : - less than one year 35,372,264 308,096 111,756 21,790,607 615,310 149,065 - one year to less than 5 years 1,769,837 867,286 211,566 5,345,876 663,791 163,264 - five years and above 2,040,476 733,002 283,815 3,209,939 562,478 242,587

39,182,577 1,908,384 607,137 30,346,422 1,841,579 554,916 Interest rate related contracts : - less than one year 114,353,287 13,008 2,623 94,113,253 136,220 27,227 - one year to less than 5 years 71,481,378 2,162,265 499,791 63,194,850 2,355,940 479,983 - five years and above 7,634,070 2,059,072 442,869 7,742,413 1,208,505 260,744

193,468,735 4,234,345 945,283 165,050,516 3,700,665 767,954 Equity related contracts - less than one year 5,602,078 116,973 25,687 23,170,530 - - - one year to less than 5 years 9,737,250 596,904 177,659 - - - - five years and above 57,628 4,365 873 44,032 - -

15,396,956 718,242 204,219 23,214,562 - -

Total treasury-related commitments and contingencies 248,048,268 6,860,971 1,756,639 218,611,500 5,542,244 1,322,870

307,223,451 16,621,342 9,323,771 278,186,549 15,908,617 10,199,746

Included in the Group’s commitments and contingencies above is RM30,840,000 (2007: RM17,360,000) of irrevocable

commitments to extend credit with maturity less than one year relating to a jointly controlled entity, PCSB.

The Bank has given a continuing guarantee to Bank Negara Malaysia to meet the liabilities and financial obligations and requirements of its subsidiaries, CIMB Bank (L) Limited and CIMB (L) Limited, arising from its offshore banking business in the Federal Territory of Labuan.

Page 85: Cimb Financial Statement

151Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

25 Derivative Financial instruMents, coMMitMents anD continGencies (continueD)(ii) commitments and contingencies (continued)

2008 2007 credit risk credit risk equivalent weighted equivalent weighted Principal amount* amount Principal amount* amount the Bank rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 Credit-related Direct credit substitutes 1,538,499 1,538,499 960,259 1,560,930 1,560,930 1,317,559 Transaction-related contingent items 3,827,518 1,913,759 1,511,102 4,282,001 2,141,001 1,801,280 Short-term self-liquidating trade-related contingencies 3,388,686 677,737 478,249 2,903,157 580,631 320,640 Obligations under underwriting agreement 15,000 7,500 7,500 35,000 17,500 17,500 Irrevocable commitments to extend credit : - maturity not exceeding one year 32,082,352 - - 34,484,080 - - - maturity exceeding one year 7,491,232 3,745,616 3,307,623 9,446,665 4,723,332 4,098,816 Forward assets purchase 99,052 14 10 5,000 24 12 Miscellaneous commitments and contingencies 6,228,040# 567,869 312,482 3,452,916# 1,863 378

Total credit-related commitments and contingencies 54,670,379 8,450,994 6,577,225 56,169,749 9,025,281 7,556,185

Page 86: Cimb Financial Statement

Annual Report 2008152

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

25 Derivative Financial instruMents, coMMitMents anD continGencies (continueD)(ii) commitments and contingencies (continued)

2008 2007 credit risk credit risk equivalent weighted equivalent weighted Principal amount* amount Principal amount* amount the Bank rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 Treasury-related Foreign exchange related contracts : - less than one year 34,720,138 295,712 108,225 21,678,187 613,228 148,615 - one year to less than 5 years 1,842,592 873,708 212,851 5,345,876 663,791 163,264 - five years and above 2,020,476 729,052 282,290 3,209,939 562,478 242,587

38,583,206 1,898,472 603,366 30,234,002 1,839,497 554,466 Interest rate related contracts : - less than one year 114,398,325 13,016 2,625 94,113,253 136,220 27,227 - one year to less than 5 years 68,562,547 2,040,193 475,377 62,033,739 2,336,822 476,159 - five years and above 7,765,721 2,062,033 443,461 7,988,784 1,221,700 263,383

190,726,593 4,115,242 921,463 164,135,776 3,694,742 766,769 Equity related contracts - less than one year 3,425,246 78,016 17,896 23,170,530 - - - one year to less than 5 years 8,196,303 390,608 136,400 - - - - five years and above 28,730 2,881 576 - - -

11,650,279 471,505 154,872 23,170,530 - -

Total treasury-related commitments and contingencies 240,960,078 6,485,219 1,679,701 217,540,308 5,534,239 1,321,235

295,630,457 14,936,213 8,256,926 273,710,057 14,559,520 8,877,420

* The credit equivalent amount is arrived at using the credit conversion factors as per Bank Negara Malaysia guidelines. Effective 1 October 2008, the following approaches have been adopted for the computation of the credit equivalent and risk-weighted assets:- adoption of bilateral netting as provided under the Standardised Approach Framework which involves the

weighting of net claims rather than gross claims with the same counterparties arising out of the full range of forwards, swaps, options and similar derivative contracts.

- irrevocable commitments to extend credit (undrawn loans) have been revised to include only those undrawn loans whereby all conditions precedent have been met.

# Included in miscellaneous commitment and contingencies is a commitment by the Bank to place an additional RM1,507 million (2007: RM719 million) with CIMB Islamic in relation to the RPSIA arrangement (See Note 3).

The Bank has confirmed that it will provide continuing financial support to certain of its wholly-owned subsidiaries to meet their liabilities and financial obligations as and when they fall due and to carry on their businesses without significant restriction on their operations.

Page 87: Cimb Financial Statement

153Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

26 other liaBilities the Group the Bank

note 2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Interest payable 544,351 575,613 557,552 514,089 Due to brokers and clients - 891 - - Profit equalisation reserve (a) - 2,200 - - Accrued employee benefits (b) 9,822 8,709 9,822 8,663 Post employment benefit obligations (c) 55,324 71,180 55,189 71,174 Sundry creditors 474,492 186,811 172,172 136,400 Expenditure payable 369,379 657,741 358,761 646,092 Amount due to special purpose vehicle of jointly controlled entity (Note 12) 405,403 483,046 405,403 483,046 Provision for legal claims 186,750 267,230 186,750 267,230 Others 705,731 715,782 655,313 663,839

2,751,252 2,969,203 2,400,962 2,790,533

(a) Profit equalisation reserve the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

At 1 January 2,200 1,965 - 242 Provided during the financial year - 1,076 - 1,075 Written back during the financial year (2,200) (841) - - Disposal of Islamic banking operations to CIMB Islamic - - - (1,317)

At 31 December - 2,200 - -

(b) accrued employee benefits This refers to the accruals for short term employee benefits for leave entitlement. Under their employment contract,

employees can 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 estimate of liability for unutilised annual leave.

(c) Post employment benefit obligations

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Defined contribution plan – EPF (i) 9,393 10,544 9,258 10,538 Defined benefit plans (ii) 45,931 60,636 45,931 60,636

55,324 71,180 55,189 71,174

Page 88: Cimb Financial Statement

Annual Report 2008154

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

26 other liaBilities (continueD)(c) Post employment benefit obligations (continued)

(i) Defined contribution plan of the Bank and the Group Group companies incorporated in Malaysia contribute to the Employees Provident Fund (“EPF”), the national

defined contribution plan. Once the contributions have been paid, the Bank and the Group have no further payment obligations.

(ii) Defined benefit plans of the Bank and the Group The Bank operates final salary defined benefit plans for employees, the assets of which are held in separate trustee

- administered funds. The latest actuarial valuation of the plan in the Bank was carried out as at 31 December 2008.

The amounts recognised in the balance sheet in respect of defined benefit plans are determined as follows: the Group and the Bank

2008 2007 rM’000 rM’000

Present value of funded obligations 170,709 142,191 Fair value of plan assets (83,622) (89,696)Unrecognised actuarial (loss)/gains (41,156) 8,141

Liability 45,931 60,636

The amount recognised in the income statement in respect of defined benefit plans is as follows:

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Current service cost 9,780 9,744 9,780 9,744 Interest cost 8,417 8,268 8,417 8,268 Expected return on plan assets (5,924) (4,542) (5,924) (4,542)Curtailment/settlement costs (11,330) - (11,330) -

Total included in personnel costs (Note 39) 943 13,470 943 13,470

The actual return on plan assets of the Group and the Bank were RM15,082,892 (2007: RM12,999,416) respectively.

Page 89: Cimb Financial Statement

155Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

26 other liaBilities (continueD)(c) Post employment benefit obligation (continued)

(ii) Defined benefit plans of the Bank and the Group (continued) Movement in the defined benefit obligation over the financial year are as follows:

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

At 1 January 142,191 136,444 142,191 134,584 Current service costs 9,780 9,744 9,780 9,744 Interest costs 8,416 8,268 8,416 8,268 Actuarial losses 31,827 2,650 31,827 2,650 Benefits paid (6,638) (5,485) (6,638) (5,485)Liabilities reclassified as non-current assets held for sale - (1,860) - - Past service costs-vested benefits - (7,570) - (7,570)Settlement (14,867) - (14,867) -

At 31 December 170,709 142,191 170,709 142,191

The movements in the fair value of plan assets for the financial year is as follows: the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

At 1 January 89,696 70,198 89,696 68,717 Expected return on plan assets 5,924 4,542 5,924 4,542 Actuarial (losses)/gains (21,007) 8,458 (21,007) 8,458 Employer contributions 12,498 11,596 12,498 11,596 Assets reclassified as non-current assets held for sale - (1,481) - - Benefits paid (3,489) (3,617) (3,489) (3,617)

At 31 December 83,622 89,696 83,622 89,696

To develop the expected long-term rate of return on assets assumption, the Bank considered the current level of expected returns on risk free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio.

Page 90: Cimb Financial Statement

Annual Report 2008156

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

26 other liaBilities (continueD)(c) Post employment benefit obligation (continued)

(ii) Defined benefit plans of the Bank and the Group (continued) The principal actuarial assumptions used in respect of the Group’s and the Bank’s defined benefit plans were as follows:

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

% % % %

Discount rates 6.60 6.00 6.60 6.00 Expected return on plan assets 5.45 6.25 5.45 6.25 Future salary increases 6.00^ 5.00 6.00^ 5.00

^ The Bank included a special 8.00% revision for employees in Grade 34, 35 and 36 who are entitled to salary revisions under the Association of Bank Officers in Malaysia and CIMB Executive Staff Union collective agreements for the year 2009 only.

Expected contribution to post employment benefits plan for the financial year ended 31 December 2009 is RM20,000,000 (2008: RM14,000,000) to both the Group and the Bank.

2008 2007 2006 2005 2004 rM’000 rM’000 rM’000 rM’000 rM’000

the Group as at 31 December Present value of defined benefit obligation 170,709 142,191 136,444 162,734 153,375 Fair value of plan assets (83,622) (89,696) (70,198) (105,352) (89,373)

Deficit 87,087 52,495 66,246 57,382 64,002

experience adjustments on plan liabilities 31,827 2,650 8,232 1,686 (2)experience adjustments on plan assets (21,007) (8,458) (774) - -

the Bank as at 31 December Present value of defined benefit obligation 170,709 142,191 134,584 143,554 135,737 Fair value of plan assets (83,622) (89,696) (68,717) (91,557) (88,597)

Deficit/(surplus) 87,087 52,495 65,867 51,997 47,140

experience adjustments on plan liabilities 31,827 2,650 8,036 1,623 N/A* experience adjustments on plan assets (21,007) (8,458) (771) 352 N/A*

* Information not available as actuarial valuation was not performed in 2004.

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

27 reDeeMaBle asset-BackeD BonDs the Group

2008 2007 rM’000 rM’000

Nominal value of bonds - 5.00% Redeemable asset-backed bonds 2003/2009 - 32,059

- 32,059 Less: Unaccreted discounts - (287)

- 31,772

Discount upon issuance - 712 Less: Accumulated accretion - (425)

Unaccreted discounts as at 31 December - 287

The Group’s Hire Purchase Receivables Securitisation Programme is funded through the issuance of bonds by a special purpose vehicle, Auto ABS One Berhad, and deferred consideration owing by I-Prestige Sdn Bhd to the Bank. The scheme and the issuance of Bonds are in compliance with the Securities Commission’s ‘Guidelines on the offering of Asset-Backed Debt Securities’.

The bonds were fully redeemed on 28 February 2008.

28 irreDeeMaBle convertiBle unsecureD loan stocks Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) with detachable coupons 2001/2011

the Group and the Bank

2008 2007 rM’000 rM’000

At 31 December 667,000 667,000

The main features of the 7.5% irredeemable convertible unsecured loan stocks (“ICULS”) 2001/2011 issued in 2001 are as

follows:

(i) Nominal value of the ICULS is RM667,000,000 in denominations or multiples of RM1,000 with detachable coupons.

(ii) The ICULS bear fixed interest at the rate of 7.5% per annum payable annually in arrears from the date of issue of the ICULS. The detachable coupons represent the interest of the ICULS and as such, bear no further interest.

(iii) The ICULS are not redeemable for cash except upon the occurrence and declaration of an event of default as provided in the trust deed. All outstanding ICULS will be mandatorily converted by the Bank into new ordinary shares of the Bank on the last day of the tenure of the ICULS.

(iv) The ICULS shall constitute unsecured and subordinated obligations of the Bank.

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

28 irreDeeMaBle convertiBle unsecureD loan stocks (continueD) (v) All new ordinary shares issued upon conversion of ICULS will rank pari passu in all respects with the existing ordinary

shares of the Bank save and except that they will not be entitled to any dividend, right, allotments and/or other distributions, the entitlement date of which is prior to the date of allotment of the new ordinary shares of the Bank.

29 other BorrowinGs the Group

2008 2007 rM’000 rM’000

Term loan- USD300 million 1,039,350 992,100

At 1 January 1,092,750 1,092,750 Exchange difference (53,400) (100,650)

1,039,350 992,100

In 2006, CIMB Bank (L) Limited secured a term loan facility amounting to USD300 million which will mature on 22 June

2011. It bears a floating interest rate of LIBOR+0.19% per annum. The term loan is secured by a corporate guarantee issued by the Bank.

30 suBorDinateD oBliGations the Group the Bank

note 2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Subordinated notes - USD300 million (a) - 1,024,264 - 1,024,264 Subordinated notes - USD200 million (b) 674,250 640,727 674,250 640,727 Subordinated loans - USD100 million (c) 363,486 339,865 363,486 339,865 Subordinated loans - USD200 million (d) - - 813,336 681,033 Subordinated bonds - RM1.5 billion (e) 1,535,476 - 1,535,476 - Subordinated bonds - RM1.0 billion (f) 1,000,000 - 1,000,000 - Subordinated bonds - RM1.0 billion (g) 1,000,000 - 1,000,000 -

4,573,212 2,004,856 5,386,548 2,685,889

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

30 suBorDinateD oBliGations (continueD)(a) The Bank had undertaken fair value hedge on the foreign exchange risk and interest rate risk of the USD300 million

subordinated notes using cross currency interest rate swaps and interest rate swaps. the Group and the Bank

2008 2007 rM’000 rM’000

Subordinated notes, at cost - 1,140,000 Fair value changes arising from fair value hedges - 32,164 Foreign exchange translations - (147,900)

- 1,024,264

The fair values of outstanding cross currency interest rate swaps and interest rate swaps at 31 December 2008 were RMNil (2007: RM106,801,000) and RMNil (2007: RM3,558,000), respectively. The fair value hedge has been discontinued as the subordinated notes have been fully redeemed during the financial year.

The main features of the USD300 million Subordinated Notes due 2013 Callable with Step-up in 2008 issued in 2003 (“The Notes”) are as follows:

(i) The Notes are in bearer form, serially numbered and in denominations of USD1,000, USD10,000 and USD100,000.

(ii) The Notes bear interest at the rate of 5.125% per annum from and including 16 October 2003 to, but excluding, 16 October 2008 and, thereafter, at a rate per annum equal to the US Treasury Rate plus 3.55%. Interest will be payable semi-annually in arrears on 16 April and 16 October, in each year, commencing 16 April 2004.

(iii) The Notes and Coupons constitute direct and unsecured obligations of the Issuer and are subordinated in the manner described in the Conditions of the Notes and, for the avoidance of doubt, rank pari passu with the Issuer’s 7.5% RM667 million ICULS with detachable coupons 2001/2011. The Notes and the Coupons rank and will rank pari passu without any preference among themselves.

(v) The principal of, and interest and any additional amounts payable on the Notes will be subordinated in right of payment upon occurrence of any Winding Up Proceeding to the prior payment in full of all deposit liabilities and all other liabilities of the Issuer, except in each case to those liabilities which by their terms rank equally in right of payment with or subordinated to the Notes.

(vi) The issuer may at its option, but subject to the prior written approval of Bank Negara Malaysia (“BNM”), redeem the Notes on 16 October 2008 at their principal amount plus accrued interest.

The Bank has fully redeemed the Notes on 16 October 2008 upon obtaining approval from BNM.

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

30 suBorDinateD oBliGations (continueD)(b) The USD200 million 10-year subordinated notes (“the USD200 million Notes”) were issued on 30 June 2004. The USD200

million Notes were issued at a price of 99.028% of the principal amount and are callable with step-up in 2009. The USD200 million Notes bear an interest rate of 6.125% per annum payable semi-annually in arrears for the first 5 years, after which interest rate will be reset at a rate per annum equal to the 5-year US Treasury Rate plus 3.925%.

The Bank may at its option, subject to the prior approval of BNM, redeem the USD200 million Notes in whole but not in part, on 30 June 2009 at their principal amount plus accrued interest.

The USD200 million Notes were listed on the Luxembourg Stock Exchange on 30 June 2004 and qualify as Tier-2 Capital for the purpose of the risk weighted capital ratio (‘RWCR’) computation.

(c) On 12 June 2006, the Bank obtained a USD100 million subordinated loan due on 2014 callable with step-up in 2009 from CIMB Investment Bank Berhad. The loan bears interest at the rate of 5% per annum from, and including 12 June 2006 to, but excluding 15 October 2008 and, thereafter, at a rate per annum equal to the US Treasury Rate plus 3.7%. The interest rate is payable semi-annually in arrears on 15 April and 15 October in each year, commencing on 12 June 2006. The USD100 million subordinated loan qualify as Tier-2 Capital for the purpose of the RWCR computation.

The Bank has undertaken fair value hedge on the foreign exchange risk and interest rate risk of the USD100 million subordinated loan using interest rate swaps and net investment hedge of CIMB Bank (L) Limited.

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Subordinated loans, at cost 367,850 367,850 367,850 367,850 Fair value changes arising from fair value hedges 17,806 12,947 17,806 12,947 Foreign exchange translations (22,170) (40,932) (22,170) (40,932)

363,486 339,865 363,486 339,865

The fair values of interest rate swaps at 31 December 2008 were (RM2,165,621) (2007: RM5,304,000).

(d) The USD200 million 6.62% subordinated loans of the Bank were obtained from SBB Capital Corporation (“SCC”) from the net proceeds that SCC raised through the issuance of SCC Preference Shares. The loans bear interest at a rate of 6.62% per annum payable semi-annually in arrears on 2 May and 2 November up to and including 2 November 2015. Thereafter, interest will be reset at a floating rate per annum equal to three-month LIBOR plus 2.53%, payable quarterly on 2 February, 2 May, 2 August and 2 November. The subordinated loans will mature on 2 November 2055. The USD200 million subordinated loans qualify as Tier-1 Capital for the purpose of the RWCR computation.

During the financial year, the Bank has undertaken fair value hedge on the interest rate risk of the USD200 million subordinated note using interest rate swaps.

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

30 suBorDinateD oBliGations (continueD) the Bank

2008 2007 rM’000 rM’000

Subordinated notes, at cost 728,250 728,250 Fair value changes arising from fair value hedges 129,846 25,853 Foreign exchange translations (44,760) (73,070)

813,336 681,033

The fair values of interest rate swaps as at 31 December 2008 were RM127,438,641 (2007: RM27,875,240).

(e) The RM1.5 billion 10-year subordinated bonds (“the RM1.5 billion Bonds”) were issued by the Bank on 28 March 2008. The Bonds were issued at par and are callable with step-up in 2013. The Bonds bear an interest rate of 4.9% per annum payable semi-annually in arrears for the first 5 years, after which interest rate will be reset to 5.9% per annum until maturity date.

The Bank may at its option, subject to the prior approval of BNM, redeem the RM1.5 billion Bonds in part or in whole, on 28 March 2013 at their principal amount.

The RM1.5 billion Bonds qualify as Tier-2 Capital for the purpose of the RWCR computation.

During the financial year, the Bank has undertaken fair value hedge on the interest rate risk amounting to RM600 million of the RM1.5 billion Bonds using interest rate swaps.

the Group and the Bank

2008 2007 rM’000 rM’000

Subordinated notes, at cost 600,000 - Fair value changes arising from fair value hedges 35,476 -

635,476 -

The fair value of interest rate swaps as at 31 December 2008 was RM46,890,284 (2007:RMNil)

(f) The RM1.0 billion subordinated bonds (“the RM1.0 billion Bonds”) were issued at par on 7 October 2008 under the Innovative Tier-1 Capital Securities Programme which was approved by the Securities Commission on 24 September 2008. The RM1.0 billion Bonds are due on 7 October 2038 callable with step-up on 7 October 2018. The bonds bear an interest rate of 6.7% per annum payable semi-annually in arrears for the first ten years, after which the interest rate will be reset at a rate per annum equal to the 3-month KLIBOR plus 2.98%.

The Bank may at its option, subject to the prior approval of BNM, redeem the RM1.0 billion subordinated bonds in whole but not in part, on 7 October 2018 or any interest payment date thereafter, at their principal amount plus accrued interest.

The RM1.0 billion Bonds qualify as Tier-1 Capital for the purpose of the RWCR computation.

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

30 suBorDinateD oBliGations (continueD)(g) The RM1.0 billion subordinated bonds (“the Bonds”) is part of the Non-Innovative Tier 1 Stapled Securities Issuance

Programme which was approved by the Securities Commission on 17 December 2008. Under the programme, the Bank is allowed to raise Non-Innovative Tier 1 Capital of up to RM4.0 billion in nominal value outstanding at any one time comprising:

(i) Non-Cumulative Perpetual Capital Securities issued by the Bank; and(ii) Subordinated Notes issued by Commerce Returns Berhad, a wholly-owned subsidiary of the Bank

The Bonds under the first issuance were issued at par on 26 December 2008 and are due on 26 December 2058, with optional redemption on 26 December 2018 or any distribution payment date thereafter. The Bonds bear an interest rate of 7.2% per annum payable semi-annually in arrears.

Subject to the prior approval of BNM, the Bank shall redeem the RM1.0 billion subordinated bonds in whole but not in part, on 26 December 2018 or any distribution payment date thereafter, at their principal amount plus accrued interest.

The Bonds qualify as Tier-1 Capital for the purpose of the RWCR computation.

31 reDeeMaBle PreFerence shares the Group and the Bank

(a) 2008 2007 rM’000 rM’000

authorised redeemable preference shares of rM0.10 each At 1 January 100 100 Cancelled during the financial year (100) -

At 31 December - 100

the Group and the Bank

2008 2007 rM’000 rM’000

issued and fully paid redeemable preference shares of rM0.10 each At 1 January 1,300,000 1,300,000 Redeemed during the financial year (1,300,000) -

Redeemable preference shares (liability) - 1,300,000

On 1 November 2006, the Bank issued 13,000 new Redeemable Preference Shares (“RPS”) of RM0.10 each to BCHB at a premium of RM99,999.90 per share for RM1,300,000,000 being part consideration for the transfer of the entire assets and liabilities of SBB Berhad (formerly known as Southern Bank Berhad) from BCHB to the Bank.

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163Annual Report 2008

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

31 reDeeMaBle PreFerence shares (continueD) In accordance with FRS 132 - Financial Instruments: Disclosure and Presentation, the RPS is recognised as a financial liability

in the Financial Statements. The main features of the RPS are as follows:

(i) The RPS will be entitled to an annual gross dividend rate of 3.60% per annum payable annually in arrears on the anniversary of the issue date.

(ii) The RPS will not be convertible into ordinary shares.

(iii) The RPS will rank superior to ordinary shares in the event of winding up/ liquidation of the Bank.

(iv) The RPS will be redeemable at the option of the Bank (but not the holder) at anytime from the issue date subject to approval by Bank Negara Malaysia.

The RPS qualify as Non-Innovative Tier-1 capital for RWCR calculation purposes.

During the financial year, the Bank has fully redeemed the Redeemable Preference Shares upon obtaining approval from BNM. the Group

(b) 2008 2007 rM’000 rM’000

authorisedredeemable preference shares of usD0.01 eachAt 1 January/31December 8 8

the Group

2008 2007 rM’000 rM’000

issued and fully paid redeemable preference shares of usD0.01 eachNon-cumulative guaranteed preference shares 813,336 681,033

the Group

2008 2007 rM’000 rM’000

Non-cumulative guaranteed preference shares, at cost 728,250 728,250 Fair value changes arising from fair value hedges 129,846 25,853 Foreign exchange translations (44,760) (73,070)

813,336 681,033

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

31 reDeeMaBle PreFerence shares (continueD) The USD200 million 6.62% Non-cumulative Guaranteed Preference Shares of USD0.01 each at a premium of USD999.99 per

share were issued on 2 November 2005 by SCC, a wholly owned subsidiary company of the Bank incorporated in Labuan. In accordance with FRS 132 - Financial Instruments: Disclosure and Presentation, the SCC Preference Shares are recognised as financial liability in the Financial Statements. The main features of the SCC Preference Shares are as follows:

(i) The SCC Preference Shares are entitled to dividends which are payable in arrears on 2 May and 2 November up to and including 2 November 2015 at a fixed rate of 6.62% per annum.

(ii) On 2 November 2015 (First Optional Redemption Date) and on each dividend date thereafter, SCC may at its option, subject to the prior approval of Bank Negara Malaysia, redeem the SCC Preference Shares in whole but not in part, at their principal amount plus accrued but unpaid dividends. If the SCC Preference Shares are not called on 2 November 2015, dividends will be reset at a floating rate per annum equal to three-month LIBOR plus 2.53%, payable quarterly on 2 February, 2 May, 2 August and 2 November.

(iii) The SCC Preference Shares will not be convertible into ordinary shares.

(iv) The SCC Preference Shares are guaranteed by the Bank on a subordinated basis. If the SCC Preference shares have not been redeemed in full on or prior to 2 November 2055, the Bank shall cause the substitution of the SCC Preference Shares with Preference Shares issued by the Bank (Substitute Preference Shares) and the SCC Preference Shares shall be mandatorily exchanged for such Substitute Preference Shares having economic terms which are in all material aspects equivalent to those of the SCC Preference Share.

The SCC Preference Shares were admitted to the Official List of the Singapore Exchange Securities Trading Limited and Labuan International Financial Exchange Inc on 4 November 2005 and 24 November 2005 respectively and qualify as Tier-1 Capital for the purpose of the RWCR computation, subject to the limit as prescribed in the ‘Guidelines on Innovative Tier 1 Capital Instruments’ issued by Bank Negara Malaysia on 24 December 2004.

(c) 2008 2007 rM’000 rM’000

authorised redeemable preference shares of rM0.01 each At 1 January - - Created during the financial year 50,000 -

At 31 December 50,000 -

the Group and the Bank

2008 2007 rM’000 rM’000

issued and fully paid redeemable preference shares of rM0.01 each Redeemable preference shares (equity) 29,740 -

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165Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

31 reDeeMaBle PreFerence shares (continueD) The Bank paid dividend of RM29.74 million on the RM1.3 billion RPS via bonus shares capitalised from retained profits. Arising

from this, on 30 January 2008, the Bank issued 2,974,009,486 RPS of nominal value RM0.01 each to the Bank’s minority shareholders and to BCHB at an issue price of RM1.00 each, which was approved by the shareholders via an Extraordinary General Meeting on the same date.

In accordance with FRS 132 - Financial Instruments: Disclosure and Presentation, the RPS is recognised as an equity in the Financial Statements. The main features of the RPS are as follows:

(i) The RPS will rank equal in all respects with each other and senior to ordinary shares.

(ii) The RPS will be fully paid-up upon issue and allotment.

(iii) The RPS will not carry any fixed dividend but ranks the most senior in terms of dividend distribution.

(iv) The RPS will not carry any voting rights.

(v) The RPS will only be redeemable, subject to BNM’s approval, at the option of the Bank.

(vi) The RPS will not be convertible.

(vii) The RPS will not be earmarked to any particular assets or banking activities.

(viii) The RPS will not represent any fixed charge on the earnings of the Bank.

32 orDinary share caPital the Group and the Bank

2008 2007 rM’000 rM’000

authorised ordinary shares of rM1.00 each: At 1 January/31 December 7,000,000 7,000,000

issued and fully paid ordinary shares of rM1.00 each: At 1 January/31 December 2,974,009 2,974,009

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CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

33 PerPetual PreFerence shares the Group and the Bank

2008 2007 rM’000 rM’000

authorisedPerpetual preference shares of rM1.00 each At 1 January/31 December 500,000 500,000

the Group and the Bank

2008 2007 rM’000 rM’000

issued and fully paidPerpetual preference shares of rM1.00 each At 1 January/31 December 200,000 200,000

The main features of the PPS are as follows:

(a) The PPS have no right to dividends.

(b) In the event of liquidation, dissolution or winding-up of the Bank, PCSB as holder of the PPS will be entitled to receive full repayment of the capital paid up on the PPS in priority to any payments to be made to the ordinary shareholders of the Bank.

(c) The PPS rank pari passu in all aspects among themselves.

(d) The Bank must not redeem or buy back any portion of the PPS and the PPS will be perpetual except for any capital reduction exercise permitted by the Companies Act, 1965 and as approved by Bank Negara Malaysia.

34 reserves(a) The statutory reserve is maintained in compliance with Section 36 of the Banking and Financial Institutions Act, 1989 and

is not distributable as cash dividends.

(b) Pursuant to the Finance Act, 2007 which was gazetted on 28 December 2007, dividends paid, credited or distributed to shareholders are not tax deductible by the Bank, but is exempted from tax in the hands of the shareholders (“single tier system”). During the year, the Bank has utilised the credit in the Section 108 balance to distribute dividend payments to its shareholders as allowed by the transitional provision under the Finance Act, 2007. As at 31 December 2008, the Bank has sufficient credit in the Section 108 balance to pay franked dividends and sufficient tax exempt account balances to pay tax exempt dividends out of its entire retained earnings.

(c) Currency translation differences have arisen from translation of net assets of Labuan offshore banking subsidiaries and the Bank’s foreign branches. These translation differences are shown under exchange fluctuation reserve.

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167Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

34 reserves (continueD)(d) Capital reserves, which are non-distributable, relate to the retained earnings of Bumiputra-Commerce Finance Berhad and

CIMB Investment Bank Berhad, and the four months profit of SBB Berhad (formerly known as Southern Bank Berhad) from 1 July 2006 to 31 October 2006 which were transferred to the Bank, arising from the business combinations under common control using the ‘pooling-of-interests’/merger accounting method in financial year 2006.

(e) Merger deficit, which is non-distributable, relates to the difference between the cost of the merger between the Bank and CIMB Investment Bank Berhad and SBB Berhad (formerly known as Southern Bank Berhad) in 2006 and the value of the net assets and reserves transferred to the Bank and the Group.

(f) Movement of the revaluation reserve of available-for-sale securities is as follows: the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

At 1 January 98,644 71,624 55,458 66,983 Net gain from change in fair value 116,701 85,957 137,550 36,500 Net loss transferred to net profit on disposal and impairment (108,326) (66,465) (103,283) (54,011)Deferred taxation (8,069) 7,528 (8,093) 5,986 Acquisition of associate 32,167 - - - Net change in available-for-sale securities 32,473 27,020 26,174 (11,525)

131,117 98,644 81,632 55,458

(g) Hedging reserve arise from net investment hedge activities undertaken by the Bank on overseas operations and foreign subsidiaries. The reserve are non-distributable and are reversed to the income statement when the foreign operations and subsidiaries are partially or fully disposed.

35 share PreMiuM the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Relating to - Ordinary shares 4,157,074 4,157,074 4,157,074 4,157,074- Redeemable preference shares (Note 31(a)) - 1,299,999 - 1,299,999

4,157,074 5,457,073 4,157,074 5,457,073

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

36 interest incoMe the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Loans and advances - interest income other than recoveries 5,142,021 4,974,163 4,810,704 4,616,295 - recoveries from non-performing loans and advances 376,522 449,437 375,561 440,831 - recoveries from NPL sale 5,541 - 5,541 - Money at call and deposit with financial institutions 833,859 903,492 878,937 893,304 Securities purchased under resale agreement 124,891 119,640 124,891 108,733 Securities held for trading 505,221 498,170 401,708 355,673 Available-for-sale securities 221,779 234,597 219,603 222,843 Held-to-maturity securities 189,912 18,524 165,422 17,623 Others 3,043 5,543 313 3,738

7,402,789 7,203,566 6,982,680 6,659,040 Net accretion of discount less amortisation of premium 133,081 210,252 141,766 209,761 Net interest suspended (194,648) (217,392) (189,006) (210,390)

7,341,222 7,196,426 6,935,440 6,658,411

37 interest exPense the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Deposits and placements of banks and other financial institutions 357,062 476,480 346,694 487,468 Deposits from other customers 2,663,475 2,407,040 2,506,151 2,107,759 Obligation on securities sold under repurchase agreements 9,269 107,176 1,379 98,430 Loans sold to Cagamas 60,376 111,861 60,376 111,861 Negotiable certificates of deposits 225,602 192,601 225,602 193,418 ICULS 50,025 50,025 50,025 50,025 Redeemable preference shares 87,015 96,721 42,875 54,621 Subordinated obligations 171,425 146,418 215,565 188,518 Others 843 4,106 - -

3,625,092 3,592,428 3,448,667 3,292,100

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

38 non-interest incoMe the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Fee and commission income Commissions 164,224 212,440 150,461 171,942 Fee on loans and advances 301,840 293,130 284,477 212,116 Service charges and fees 157,816 127,573 146,206 109,770 Guarantee fees 47,904 57,622 47,686 57,387 Other fee income 218,027 195,532 227,181 204,158 889,811 886,297 856,011 755,373 Gross dividend income from: Subsidiaries - - 74,985 316,452 Securities held for trading 29,500 52,520 29,458 48,571 Available-for-sale securities 21,676 18,406 19,970 18,406 Held-to-maturity securities 58 76 - - 51,234 71,002 124,413 383,429 net gain/(loss) arising from securities held for trading - realised (36,587) 514,215 6,120 436,290 - unrealised (166,791) (123,171) (80,659) (53,257) (203,378) 391,044 (74,539) 383,033 net (loss)/gain arising from hedging derivatives (5,891) 16,650 (5,891) 16,650 net gain/(loss) arising from derivative financial instrument - realised 59,980 (78,911) 49,757 (57,210) - unrealised 112,452 328,219 129,712 353,728 172,432 249,308 179,469 296,518

net gain from sale of available-for-sale securities 108,326 66,465 103,283 54,011 net gain from held-to-maturity securities 4,089 566 4,089 - other non-interest income Foreign exchange gain 274,875 137,346 292,827 132,178 Rental income 15,662 15,925 10,996 10,463 Gain on disposal of property, plant and equipment 6,393 3,317 5,076 2,765 Gain/(loss) on disposal of foreclosed properties 2,520 (410) 2,520 (410)Gain on disposal of leased assets 244 - - - (Loss)/gain on disposal of subsidiaries (2,669) 216,753 23,693 (159)Gain on disposal of associate 2,904 - - - (Loss)/gain on revaluation of investment properties (2,141) 56,158 (2,141) 56,158 Capital gain from capital repayment of subsidiary - - 248,700 - Others 61,362 78,873 58,531 61,583 359,150 507,962 640,202 262,578

1,375,773 2,189,294 1,827,037 2,151,592

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CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

39 overheaDs the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Personnel costs - Salaries, allowances and bonuses 872,925 1,049,292 783,348 963,572- Pension cost (defined contribution plan) 102,658 90,648 100,573 88,053- Pension cost (defined benefit plan) (Note 26(c)(ii)) 943 13,470 943 13,470- Termination benefits 405 - 405 - - Overtime 32,240 33,942 26,298 30,505- Staff incentives and other staff payments 160,995 112,177 130,545 110,901- Medical expenses 36,446 34,788 34,266 33,590- Others 69,967 75,695 52,578 47,930

establishment costs - Depreciation of property, plant and equipment 134,500 121,922 116,860 101,044- Amortisation of prepaid lease payments 1,057 1,710 998 1,517 - Rental 102,712 84,593 104,292 88,867- Insurance 16,862 21,629 15,257 19,391- Repairs and maintenance 129,088 100,881 125,374 82,842- Outsourced services 111,455 121,330 225,612 222,390- Premium security expenses 55,729 59,782 69,656 59,746- Utility expenses 31,247 25,823 27,707 24,217- Others 73,378 65,878 48,985 63,599

Marketing expenses - Sales commission 26,619 19,706 17,814 19,508- Advertisement 136,103 103,693 119,761 101,339- Legal fees 32,693 58,396 32,693 58,396- Others 11,742 8,466 6,380 3,863

administration and general expenses - Communication 39,268 71,161 36,766 69,285- Consultancy and professional fees 40,613 39,680 37,837 37,719- Legal expenses 52,923 42,823 51,766 41,886- Stationery 55,585 52,523 50,812 47,320- Merchant expenses 85,993 71,121 85,993 71,121- Amortisation of intangible assets 111,371 95,741 104,346 92,622- Postages 22,465 23,064 21,616 23,060- Administrative travelling and vehicle expenses 20,913 22,777 19,947 22,330- Incidental expenses on banking operations 84,133 91,864 77,344 90,775- Others 44,411 143,325 25,884 110,588

2,697,439 2,857,900 2,552,656 2,741,446

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

39 overheaDs (continueD) The above expenditure includes the following statutory disclosures:

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Directors’ remuneration (excluding benefits-in-kind) (Note 43) 3,700 5,126 3,282 4,751Hire of equipment 4,166 3,109 3,626 3,047Lease rental 4,476 7,413 4,390 7,413Auditors’ remuneration - statutory audit (PwC Malaysia) 1,794 1,707 1,380 1,230- statutory audit (other member firms of PwC International Limited) 362 409 362 342- others (PwC Malaysia) 2,558 2,034 2,413 1,905- others (other member firms of PwC International Limited) 1,481 330 1,481 327Property, plant and equipment written-off 364 11,956 258 11,813

* PricewaterhouseCoopers Malaysia and other member firms of PricewaterhouseCoopers International Limited are separate

and independent legal entities.

40 allowances For losses on loans, aDvances anD FinancinG During the financial year, the Group and the Bank have evaluated their portfolio of non-performing loans, advances and

financing that have been in default and that remained uncollected for more than 7 years and also those non-performing loans, advances and financing in default for more than 5 but less than 7 years. For loans, advances and financing in default for more than 7 years, no value is assigned as the realisable value of collateral. For loans, advances and financing which are in default for more than 5 but less than 7 years, 50% of the realisable value of assets held has been assigned as the value of collateral. The effect of this exercise resulted in specific allowances of RM186,537,987 made for the Group (2007: RM303,981,333) and RM172,843,102 (2007: RM295,972,088) made for the Bank during the financial year.

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

40 allowances For losses on loans, aDvances anD FinancinG (continueD) the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Allowance for bad and doubtful debts and financing(a) Specific allowance - made during the financial year 1,508,387 1,999,713 1,364,169 1,918,625 - written back (718,893) (816,349) (608,735) (726,203) - written back from NPL sale (61,099) - (60,416) -

(779,992) (816,349) (669,151) (726,203)(b) General allowance - made/(written back) during the financial year 229,830 24,461 217,803 (18,546) Bad debts on loans and financing- recovered (330,420) (294,251) (318,407) (285,215)- recovered from NPL sale (26,276) - (25,594) - - written off 1,185 762 913 206

602,714 914,336 569,733 888,867

41 write-Back oF / (allowance For) iMPairMent losses the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Securities held for trading - made during the financial year (10,000) - (10,000) -

Available-for-sale securities - made during the financial year (19,258) (36,120) (17,883) (36,120)- written back during the financial year 106,703 112,610 106,703 112,610

87,445 76,490 88,820 76,490 Held-to-maturity securities - made during the financial year (32,282) (3,178) (28,965) - - written back during the financial year 1,318 - - -

(30,964) (3,178) (28,965) - Goodwill - made during the financial year - (3,000) (37,000) (198,000)Subsidiaries - (made)/written back during the financial year - - (21,178) 1,413

46,481 70,312 (8,323) (120,097)

The goodwill impaired arose from SBB Securities which was disposed during the financial year. In 2007, the goodwill was

reclassified to non-current assets/disposal groups held for sale (Note 57).

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

42 siGniFicant relateD Party transactions anD Balances(a) The related parties of, and their relationship with the Bank, are as follows:

related parties relationship Bumiputra-Commerce Holdings Berhad Ultimate holding company CIMB Group Sdn Bhd Holding company Subsidiaries of the Bank as disclosed in Note 11 Subsidiaries CIMB Investment Bank Berhad Subsidiary of holding company SBB Berhad Subsidiary of ultimate holding company PT Bank CIMB Niaga Tbk (formerly known as PT Bank Niaga Tbk) and Group Subsidiary of holding company Proton Commerce Sdn Bhd Jointly controlled entity BankThai Public Company Limited Associate Commerce International Group Berhad and Group Subsidiary of holding company Commerce Asset Ventures Sdn Bhd and Group Subsidiary of holding company Commerce Asset Realty Sdn Bhd Subsidiary of ultimate holding company Commerce Asset Nominees Sdn Bhd Subsidiary of ultimate holding company Commerce Volantia Sdn Bhd Subsidiary of ultimate holding company Commerce MGI Sdn Bhd Subsidiary of ultimate holding company Commerce Capital (Labuan) Ltd Subsidiary of ultimate holding company Rangkaian Segar Sdn Bhd Associate of ultimate holding company Key management personnel See below

Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the Group and the Bank either directly or indirectly. The key management personnel of the Group and the Bank include all the Directors of the Bank and employees of the Bank who make certain critical decisions in relation to the strategic direction of the Bank.

(b) Related party transactions A number of banking transactions are entered into with related parties in the normal course of business. These include

loans, deposits, derivative transactions and other financial instruments. These transactions were carried out on commercial terms and at market rates.

other key Parent related management company subsidiaries companies personnel2008 rM’000 rM’000 rM’000 rM’000

income Interest on deposits and placements with financial institutions 82,716 85,498 37,955 - Interest on loans, advances and financing - 9,312 - 20 Others - 39,795 - - expenditure Interest on deposits from customers and securities sold under repurchase agreement 12,156 - - 611 Interest on deposits and placements of banks and other financial institutions - 76,987 51,811 - Interest on ICULS 48,760 - - - Others - 192,605 4 -

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

42 siGniFicant relateD Party transactions anD Balances (continueD)(b) Related party transactions (Continued)

other key Parent related management company subsidiaries companies personnel2007 rM’000 rM’000 rM’000 rM’000

income Interest on deposits and placements with financial institutions 74,226 41,172 28,541 - Interest on loans, advances and financing - 13,780 - 139 Others - 3,317 - 16 expenditure Interest on deposits from customers and securities sold under repurchase agreement 21,341 - - 3,043 Interest on deposits and placements of banks and other financial institutions 4,517 131,620 16,143 - Interest on ICULS 46,747 - - - Others - 143,405 16,787 -

Transactions with other related parties are aggregated because these transactions are similar in nature and no single

transaction with these parties is significant enough to warrant separate disclosure. (c) Related party balances

other key Parent related management company subsidiaries companies personnel2008 rM’000 rM’000 rM’000 rM’000

amounts due from Current accounts, deposits and placements with banks and other financial institutions - 3,586,578 1,423,385 - Loans, advances and financing 1,900,000 186,659 45,157 545 Others 239,061 111,849 1,158 -

amounts due to Deposits from customers and securities sold under repurchase agreement 301,477 141,743 77,057 31,923 Deposits and placements of banks and other financial institutions 99,700 2,932,102 2,079,400 - Subordinated obligations - - 345,680 - ICULS 667,000 - - - Others 16 25,732 5,250 66

commitment and contingencies Interest rate swap - 802,032 - -

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

42 siGniFicant relateD Party transactions anD Balances (continueD)(c) Related party balances (Continued)

other key Parent related management company subsidiaries companies personnel2007 rM’000 rM’000 rM’000 rM’000

amounts due from Current accounts, deposits and placements with banks and other financial institutions - 1,620,159 714,393 -Loans, advances and financing 65,000 295,472 71,899 2,537 Deferred consideration - 46,314 - -Others 231,697 26,056 988 - amounts due to Deposits from customers and securities sold under repurchase agreement 288,553 124,073 451,755 87,785 Deposits and placements of banks and other financial institutions 69,500 2,986,132 433,595 -Subordinated obligations - - 330,568 -ICULS 667,000 - - -Others - 297,323 4,809 - commitment and contingencies Interest rate swap - 836,671 - -

Other related party balances are unsecured, non-interest bearing and has no fixed repayment terms.

(d) Key management personnel Key management compensation

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Salaries and other short-term employee benefits 24,938 27,273 23,513 26,009

unit unit unit unit

Share options balance of ultimate holding company 21,802,126 20,885,000 21,552,398 20,805,000

Included in the above is the Executive Directors’ compensation which is disclosed in Note 43. The share options are granted on the same terms and condition as those offered to other employees of the Group and the Bank.

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

42 siGniFicant relateD Party transactions anD Balances (continueD)(d) Key management personnel (Continued) Key management compensation (Continued) There were no loans, advances and financing granted to the Directors of the Bank. Loans made to other key management

personnel of the Group and the Bank are on similar terms and conditions generally available to other employees within the Group. No specific allowances were required in 2008 and 2007 for loans, advances and financing made to the key management personnel.

(e) Management Equity Scheme (“MES”) The MES were granted to eligible senior management of the Bank as part of the performance linked compensation

scheme by a substantial shareholder of BCHB. The scheme was initially launched in 1 March 2004 at BCHB level and in November 2007, both the Nomination and Remuneration Committee of BCHB approved amendments to the terms which provides for the inclusion of the senior management of CIMB Group in the MES.

The eligibility for participation in the scheme shall be at the discretion of the Nomination and Remuneration Committee of BCHB. Entitlement of eligible members of senior management are non-assignable and non-transferable whereby the Nomination and Remuneration Committee of BCHB administers the scheme on behalf of the substantial shareholder. The options granted vest in proportions across various exercise periods.

In December 2008, the substantial shareholder of BCHB approved the extension of the MES from 28 February 2009 to 28 February 2012. The MES will continue to be in force until 28 February 2012, after which the voting rights of unexercised balances will remain with the substantial shareholder of BCHB.

All options have the same reference price which is at RM3.48 each. The weighted average remaining contractual life is 3.2 years.

the Group the Bank

2008 2007 2008 2007 ’000 ’000 ’000 ’000

Number of options: - Granted during the financial year (units) 800 1,180 650 1,100 - As at 31 December (units) 1,201 968 1,021 888

(f) Credit transactions and exposures with connected parties Credit exposures with connected parties as per BNM’s revised “Guidelines in Credit Transactions and Exposures with

Connected Parties” which became effective on 1 January 2008 are as follows: the Group the Bank

2008 2008 rM’000 rM’000

Outstanding credit exposures with connected parties 5,862,475 5,241,829 Percentage of outstanding credit exposures to connected parties as a proportion of total credit exposures 4.5% 4.7%Percentage of outstanding credit exposures with connected parties which is non-performing or in default 0.0% 0.0%

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

43 Directors’ reMuneration The Directors of the Bank in office during the financial year were as follows:

Non-Executive Directors

Tan Sri Dato’Seri Haidar bin Mohamed Nor Dato’ Sri Mohamed Nazir Abdul Razak Tan Sri G.K. Rama Iyer Dato’ Zainal Abidin bin Putih Dato’ Seri Yeap Leong Huat Dato’ Dr. Mohamad Zawawi bin Ismail Datuk Dr. Syed Muhamad bin Syed Abdul Kadir Dato’ Mohd Shukri bin Hussin

Executive Directors

Tunku Dato’ Ahmad Burhanuddin Dr. Gan Wee Beng

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Executive Directors - Salary and other remuneration 1,332 1,308 1,332 1,308 - Bonus 864 2,334 864 2,334 - Benefits-in-kind 75 97 75 97 Non-Executive Directors - Fees 309 304 192 202 - Other remuneration# 1,195 1,180 894 907 - Benefits-in-kind 73 47 44 47

3,848 5,270 3,401 4,895

# Includes RMNil (2007:RM62,000) paid to Dato’ Hamzah Bakar, who is a member of the Group Audit Committee, but is not a member of the Board of Directors of the Bank.

Consistent with the practice for certain key personnel, the bonus for 2008 will be paid in tranches, spread over 2009. In addition, the final tranche will only be paid out in the third quarter of 2009, after certain key financial performance indicators for the Group has been met. A similar condition is also imposed on the 2008 bonus of certain key personnel.

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

43 Directors’ reMuneration (continueD) The functions and responsibilities of the CEO are carried out on a Group basis.

The Directors of the Bank and their total remuneration during the financial year are analysed below: the Group the Bank

2008 2007 2008 2007 number of number of number of number of directors directors directors directors

Executive Directors RM50,000 and below - - - - RM50,001 – RM200,000 - - - - RM200,001 – RM250,000 - - - - RM250,001 – RM400,000 - - - - RM400,001 – RM450,000 - - - - RM450,001 – RM700,000 - - - - RM700,001 – RM750,000 1 - 1 - RM750,001 – RM1,500,000 - 1 - 1 RM1,500,001 – RM2,500,000 1 - 1 -

RM2,500,001 – RM2,900,000 - 1 - 1

Non-Executive Directors RM50,000 and below 2 2 2 2 RM50,001 – RM100,000 - 1 - 1 RM100,001 – RM150,000 1 2 2 2 RM150,001 – RM200,000 1 - 2 2 RM200,001 – RM250,000 2 2 1 1 RM250,001 – RM300,000 - - - - RM300,001 – RM350,000 1 1 1 1 RM350,001 – RM400,000 - - - -

RM400,001 – RM550,000 1 1 - -

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

44 taxation anD Zakat the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Taxation based on the profit for the financial year: - Malaysian income tax 618,931 674,219 549,934 668,932 - Foreign tax 7,412 12,085 7,412 11,957 Deferred taxation (Note 9) (51,114) (88,038) (47,784) (95,008)

(Over)/under accrual in prior years (8,383) 3,617 (2,902) 3,571

566,846 601,883 506,660 589,452 Zakat 234 70 - -

567,080 601,953 506,660 589,452

reconciliation between tax expense and the Malaysian tax rate Profit before taxation and zakat 2,141,778 2,334,498 2,184,696 1,767,939 Tax calculated at a rate of 26% (2007: 27%) 556,862 630,314 568,021 477,344 Tax effects: - different tax rates in Labuan (13,261) (53,985) - - - change in tax rates 12,457 15,826 11,664 15,000 - expenses not deductible for tax purposes 64,748 183,983 54,982 178,451 - income not subject to tax (45,577) (177,872) (125,105) (84,914)

- under/(over) accrual in prior years (8,383) 3,617 (2,902) 3,571

Tax expense 566,846 601,883 506,660 589,452

45 earninGs Per share

The basic and fully diluted earnings per ordinary share for the Group have been calculated based on the net profit attributable to ordinary equity holders of the Group of RM1,572,746,000 (2007: RM1,729,605,000). For the Bank, the basic and fully diluted earnings per ordinary share have been calculated based on the net profit attributable to ordinary equity holders of the Bank of RM1,678,036,000 (2007: RM1,178,487,000).

Potential ordinary shares that would be issued on conversion of the Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) are included in the weighted average number of ordinary shares used in the calculation of basic and fully diluted earnings per share from the date of issue of the ICULS.

Ordinary shares issued arising from business combinations under common control are included in the calculation of the weighted average number of shares from the date the business combination had been effected. The weighted average number of shares in issue during the year of 3,641,009,000 (2007: 3,641,009,000) is used for the computation.

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

46 DiviDenDs The gross and net dividend declared per share for each financial year are as follows:

2008 2007 amount of amount of

Gross net dividend Gross net dividend per share per share net of tax per share per share net of tax sen sen rM’000 sen sen rM’000 Dividends recognised as distributions to equity holders: Final dividend Per ordinary shares - - - 8.75 6.39 189,965 Per redeembale preference shares 13.63 10.09 300,000 - - - Interim special dividend Per ordinary shares 2.00 1.48 44,000 11.52 8.41 250,002 Per ordinary shares - tax exempt 2.22 2.22 66,000 - - - Per redeemable preference shares 9.09 6.72 200,000 - - -

26.94 20.51 610,000 20.27 14.80 439,967

The proposed dividend for redeemable preference shares in respect of the financial year ended 31 December 2007 was

approved by the Bank’s shareholders and paid in the current financial year. These are shown as a deduction from the retained profits in the statement of changes in equity.

The Directors have proposed a second interim gross dividend of approximately 6.72 sen per share less 25% income tax on 2,974,009,486 Redeemable Preference Shares of RM0.01 each, amounting to RM150,000,000. The second interim dividend was approved by the Board of Directors in a resolution dated 23 January 2009.

47 lease coMMitMents The Group and the Bank have lease commitments in respect of rented premises and equipment on hire, all of which are

classified as operating leases. A summary of the non-cancellable long-term commitments, net of sub-leases, is as follows: the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Within one year 83,215 83,914 81,438 70,864 One year to less than five years 41,512 62,268 38,995 57,786

Five years and above 1,152 1,195 1,152 1,195

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

48 caPital coMMitMents the Group and the Bank

2008 2007 rM’000 rM’000

Capital expenditure: - authorised and contracted for 24,269 47,421

- authorised but not contracted for 613,028 894,642

At 31 December 637,297 942,063

These capital commitments are for acquisition of property, plant and equipment of RM505,631,000 (2007: RM713,679,000)

and for computer software of RM131,666,000 (2007: RM228,384,000).

49 caPital aDequacy(a) The capital adequacy ratios of the Bank are as follows:

the Bank*

2008 2007 rM’000 rM’000

Tier I capital 11,662,347 9,705,107 Eligible Tier II capital 4,752,839 3,977,779

16,415,186 13,682,886 Less: Investment in subsidiaries and holding of other banking institutions’ capital (1,376,978) (861,187)

Capital base before proposed dividend 15,038,208 12,821,699 Less: Proposed dividend (150,000) (300,000)

Capital base after proposed dividend 14,888,208 12,521,699

Core capital ratio 10.89% 9.66% Risk-weighted capital ratio 14.04% 12.76% Core capital ratio (net of proposed dividend) 10.75% 9.36% Risk-weighted capital ratio (net of proposed dividend) 13.90% 12.46%

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

49 caPital aDequacy (continueD)(b) Components of Tier I and Tier II capitals are as follows:

the Bank*

2008 2007 rM’000 rM’000

tier i capital Paid-up share capital 2,974,009 2,974,009 Perpetual preference shares 200,000 1,500,000 Non-innovative Tier I capital 1,000,000 - Innovative Tier I capital 1,692,900 661,400 Other reserves 9,618,506 8,499,296 15,485,415 13,634,705 Less: Deferred tax assets (263,993) (370,523) Goodwill (3,559,075) (3,559,075)

Total Tier I capital 11,662,347 9,705,107 tier ii capital ICULS issued 667,000 667,000 Subordinated notes 2,539,350 1,984,200 Redeemable preference shares 29,740 - General allowance for bad and doubtful debts and financing 1,516,749 1,326,579 Total Eligible Tier II capital 4,752,839 3,977,779 Add/(less): (i) Investment in subsidiaries (717,021) (787,467) (ii) Investment in joint venture^ (51,564) (51,564) (iii) Investment in associate (595,814) - (iv) Holding of other banking institutions’ capital instruments (12,579) (22,156)

15,038,208 12,821,699

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

49 caPital aDequacy (continueD)(c) Breakdown of risk-weighted assets in the various categories of risk-weights:

the Bank the Bank

2008 2007 risk- risk- Principal weighted Principal weighted rM’000 rM’000 rM’000 rM’000 0% 23,692,884 - 25,076,564 - 10% 147,282 14,728 187,815 18,782 20% 22,637,137 4,527,427 25,856,246 5,171,249 50% 24,013,412 12,006,706 18,869,263 9,434,632 100%# 85,765,298 85,765,298 74,383,220 74,383,220

Total risk-weighted assets for credit risks 156,256,013 102,314,159 144,373,108 89,007,883 Risk-weighted assets for market risk 4,629,925 4,629,925 11,505,792 11,505,792 Risk-weighted assets for large exposure risk requirements 196,983 196,983 - -

Total risk-weighted assets 161,082,921 107,141,067 155,878,900 100,513,675

* Includes the operations of CIMB Bank (L) Limited and CIMB (L) Limited.^ In accordance with a circular by Bank Negara Malaysia (“BNM”) dated 25 April 2006, the Bank is required to deduct

50% of its investment in its jointly controlled entity, PCSB, from the capital base for purposes of computing the capital adequacy ratio.

# In accordance with BNM guidelines on the Recognition and Measurement of Profit Sharing Investment Account as Risk Absorbent (‘PSIA Guidelines’), the credit and market risks on the assets funded by the PSIA are included in the risk-weighted capital (‘RWCR’) calculation, where a 100% risk-weight is assigned.

The capital adequacy ratios have incorporated market risk pursuant to BNM’s guideline on Market Risk Capital Adequacy Framework which is effective from 1 April 2005.

50 siGniFicant events DurinG the Financial year(a) Disposal of ciMB trustee On 1 January 2008, CIMB Bank Berhad and CIMB Group Nominees (Tempatan) Sdn Bhd disposed 20% of their equity

interest respectively in CIMB Trustee Berhad to CIMB Berhad and CIMB Holdings Sdn Bhd.

See Note 56(b)(i) for the effects of the disposal on the Financial Statements of the Group.

(b) alliance with international currency exchange (“ice”) On 18 January 2008, the Bank signed a Participation Agreement with ICE Commercial Services Sdn Bhd and Lenlyn UK

Limited to manage the Bank’s retail foreign exchange business.

(c) issuance of 2,974,009,486 redeemable Preference shares (“rPs”) On 30 January 2008, the Bank issued 2,974,009,486 RPS of nominal value RM0.01 each to the Bank’s minority shareholders

and to BCHB at an issue price of RM1.00 each, which was approved by the shareholders via an Extraordinary General Meeting on the same date.

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

50 siGniFicant events DurinG the Financial year (continueD)(d) Disposal of south east asian Bank limited (“sea Bank”) On 1 April 2008, the Bank disposed its 60% equity interest in SEA Bank to British American Investment Co (Mauritius) Ltd.

for a cash consideration of RM40.0 million based on willing buyer-willing seller basis.

See Note 56 (b)(ii) for the effects of the disposal on the Financial Statements of the Group.

(e) Disposal of entire equity interest in navis-ciMB General Partner ltd (“navis-ciMB”) On 18 September 2008, CIMB (L) Limited, a wholly-owned subsidiary of the Bank, had disposed its entire 25% equity

interest in Navis-CIMB to Navis Capital Partners Ltd.

See Note 56(b)(iv) for the effects of the disposal on the Financial Statements of the Group.

(f) issuance of innovative tier-1 capital On 24 September 2008, the Securities Commission had approved issuance of up to RM1.0 billion Innovative Tier-1 Capital

Securities (“IT-1 Issue”). The IT-1 Issue was completed on 7 October 2008.

(g) Disposal by sBB capital Markets sdn Bhd (“scMsB”), a wholly-owned subsidiary of the Bank, of its 100% equity interest in sBB securities sdn Bhd (“sssB”) to hlG credit sdn Bhd (“hlGc”) (“sssB Disposal”)

SCMSB and the Bank had on 19 October 2007 entered into a conditional share sale agreement with HLGC and HLG Capital Berhad for the proposed disposal by SCMSB of its 100% equity interest in SSSB to HLGC for a total consideration to be determined at a later date. The transaction was completed on 22 October 2008 for a total cash consideration of RM75.2 million based on willing buyer-willing seller basis.

See Note 56 (b)(iii) for the effects of the disposal on the Financial Statements of the Group.

(h) sale of non-performing loans On 13 August 2008, the Bank entered into a conditional sale and purchase agreement to sell RM1.1 billion worth of non-

performing loans (“NPLs”) to Sinesinga Sdn Bhd, a special purpose vehicle created by Standard Merchant Bank (Asia) Limited, which is part of the Standard Bank Group of South Africa. Approval was obtained from Bank Negara Malaysia on 30 October 2008 which is conditional on change in the 51% ownership of Sinesinga Sdn Bhd within six months from completion date of the NPL sale. The transaction was completed on 1 November 2008. The Bank has recognised a gain of RM92.9 million from the sale of the NPLs of which RM87,375,000 is treated as a reduction of allowances for losses on loans, advances and financing and the balance of RM5,541,000 as interest recovered.

(i) acquisition of 42.13% equity stake in Bankthai Public company limited (“Bankthai”) On 20 June 2008, the Bank’s holding company, CIMB Group Sdn Bhd, entered into a Share Purchase Agreement (“SPA”)

with Financial Institutions Development Fund (“FIDF”) to purchase or to procure the Bank to purchase 2,811,862,559 fully paid ordinary shares of Baht 3.75 par value each in the share capital of BankThai, representing approximately 42.13% of the total issued shares in BankThai, from FIDF for a total cash consideration of approximately Baht 5,904.9 million (equivalent to approximately RM595.8 million) or a cash consideration of Baht 2.10 per BankThai share. The acquisition was completed on 5 November 2008.

See Note 56(a)(i) for the effects of the acquisition on the Financial Statements of the Group. Subsequently, on 13 January 2009, the Bank acquired a further 49.91% equity stake in BankThai as disclosed in Note 51(a).

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50 siGniFicant events DurinG the Financial year (continueD)(j) Proposed issuance of senior unsecured guaranteed bonds (“Bonds”) together with the issuance of 5 year

warrants (“warrants”) On 3 November 2008, CIMB Bank (L) Limited (“CIMB Bank (L)”) and Bumiputra-Commerce Holdings Berhad (“BCHB”)

entered into an agreement with TPG Malaysia Finance, L. P. for the proposed issuance by CIMB Bank (L) of up to USD150 million (the final amount to be mutually agreed between the parties subject to a floor of USD100 million) senior unsecured guaranteed bonds (“Bonds”) together with the issuance by BCHB of 5 year warrants (“Warrants”). The Bonds will be guaranteed by BCHB in the manner set out in the conditions applicable to the Bonds.

The issue date of the Bonds and Warrants shall be a business day to be decided by CIMB Bank (L) after the conditions precedent listed in agreement have been satisfied. The issuance of the Bonds and Warrants is subject to approvals being obtained from the relevant regulatory authorities.

(k) issuance of non-innovative tier 1 stapled securities issuance Programme (“the Programme”) On 17 December 2008, the Securities Commission approved the issuance of up to RM4.0 billion in nominal value

outstanding at any one time comprising:

(i) Non-Cumulative Perpetual Capital Securities issued by the Bank; and(ii) Subordinated Notes issued by Commerce Returns Berhad, a wholly-owned subsidiary of the Bank

The first issuance under the programme amounting to RM1.0 billion was completed on 26 December 2008.

51 suBsequent events aFter the Financial year(a) acquisition of additional 49.91% equity stake in Bankthai Public company limited (“Bankthai”) Subsequent to the completion of the acquisition of the 42.13% equity stake in BankThai, the Bank extended a tender

offer under the laws of Thailand to acquire all the remaining BankThai shares not already owned by the Bank (“Tender Offer”). The Tender Offer was completed on 13 January 2009 with a total of approximately 3.33 billion BankThai shares representing approximately 49.91% of the total issued and paid-up share capital of BankThai accepting the Tender Offer and consequently, the Bank’s total equity holding in BankThai is 92.04%, making it a subsidiary of the Bank.

(b) Disposal by the Bank of certain assets, liabilities and the asset/fund management business of southern investment Bank Berhad (“siBB”) to hlG credit sdn Bhd (“hlGc”), a 75% indirect subsidiary of hong leong Financial Group Berhad (“siBB Disposal”)

The SIBB Disposal has been approved by the Minister of Finance II on 20 May 2008 and the vesting of certain assets and liabilities to HLGC was completed on 31 January 2009.

(c) Proposed sale and leaseback of Menara Bumiputra-commerce On 3 December 2007, the Bank and its ultimate holding company, Bumiputra Commerce Holdings Berhad (“BCHB”)

entered into a Sale and Purchase Agreement (“SPA”) and Lease Agreement (“LA”) with Pelaburan Hartanah Bumiputra Berhad (“PHBB”) for the proposed sale and leaseback of Menara Bumiputra-Commerce.

Pursuant to the SPA and LA, BCHB shall dispose Menara Bumiputra-Commerce to PHBB for a total cash consideration of RM460 million. The Bank will then lease Menara Bumiputra-Commerce for an initial lease tenure of ten years with renewal options for two additional periods of five years each. The proposed sale and leaseback of Menara Bumiputra-Commerce was completed on 16 February 2009.

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52 critical accountinG estiMates anD JuDGeMents in aPPlyinG accountinG Policies The Group and the Bank make estimates and assumptions concerning the future. The resulting accounting estimates will, by

definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key 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 outlined below:

(a) Impairment of available-for-sale and held-to-maturity securities The Group and the Bank follow the guidance of the revised BNM/GP8 in determining when an investment is other than

temporarily impaired. This determination requires significant judgement. The Group and the Bank evaluate, among other factors, the duration and extent to which the fair value of the investment is less than cost; and the financial health and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financial cash flow.

(b) Allowance on loans, advances and financing The Group and the Bank make allowance for losses on loans, advances and financing based on assessment of

recoverability. Whilst management is guided by the relevant BNM guidelines, management makes judgement on the future and other key factors in respect of the recovery of loans, advances and financing. Among the factors considered are the Group’s aggregate exposure to the borrowers, the net realisable value of the underlying collateral value, the viability of the customer’s business model, the capacity to generate sufficient cash flow to service debt obligations and the aggregate amount and ranking of all other creditor claims.

(c) Goodwill impairment The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy stated

in Note I of the Summary of Significant Group Accounting Policies.

The first step of the impairment review process requires the identification of independent operating units, dividing the Group’s business into the various business segments. The goodwill is then allocated to these various business segments. The first element of this allocation is based on the areas of the business expected to benefit from the synergies derived from the acquisition. The second element reflects the allocation of the net assets acquired and the difference between the consideration paid for those net assets and their fair value. This allocation is reviewed following business reorganisation. The carrying value of the business segment, including the allocated goodwill, is compared to its fair value to determine whether any impairment exists. Detailed calculations may need to be carried out taking into consideration changes in market in which a business operates. In the absence of readily available market data, this calculation is usually based upon discounting expected pre-tax cash flows at the Group’s and the Bank’s cost of capital, which requires exercise of judgement.

Changes to the assumptions used by management, particularly the discount rate and the terminal growth rate, may significantly affect the results of the impairment.

(d) Intangible assets The Group’s and the Bank’s intangible assets that derive their value from contractual customer relationships and core

deposits or that can be separated and sold and have a finite useful life are amortised over their estimated useful life.

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52 critical accountinG estiMates anD JuDGeMents in aPPlyinG accountinG Policies (continueD)(d) Intangible assets (continued) Determining the estimated useful life of these intangible assets requires an analysis of circumstances and judgement

by the Bank’s management. At each balance sheet date, or more frequently when events or changes in circumstances dictate, intangible assets are assessed for indications of impairment. If indications are present, these assets are subject to an impairment review. The impairment review comprises a comparison of the carrying amount of the assets with its recoverable amount: the higher of the assets’ selling price and its value in use. Net selling price is calculated based by reference to the amount at which the asset could be disposed in a binding agreement in an arms length transaction evidenced by an active market or recent transactions for similar assets.

Value in use is calculated by discounting the expected future cash flows obtainable as a result of the assets’ continued use, including those resulting from its ultimate disposal, at a market-based discount rate on pre-tax basis.

53 seGMent rePortinG(i) Primary reporting – business segments Definition of segments For management purposes, the Group is organised into six major operating divisions. The divisions form the basis on

which the Group reports its primary segment information.

Treasury Treasury focuses on treasury activities and services which include foreign exchange, money market, derivatives and capital

market instruments trading. It also invests the Group’s proprietary capital.

Corporate and Investment Banking Corporate and Investment Banking comprise Investment Banking, Corporate Banking, International Banking and

Transactional Services, Equity Derivatives and Equity Investment and Trading.

Investment Banking advises on issuance of equity and equity-linked products management services. Corporate Banking provides a broad spectrum of financial and Ringgit lending services for domestic and multinational corporations as well as institutional and public sector clients. International Banking and Transactional Services oversees the activities of the Group’s overseas branches in London, Singapore and Hong Kong and provides conventional and customised financial packages in order to meet customers’ needs, with products including non-Ringgit corporate lending, nominee services and cash management services.

Equity Derivatives develops and issues new equity derivatives instruments such as structured warrants and over-the-counter options to provide investors with alternative investment avenues. Equity Investment and Trading is the Group’s proprietary equity trading unit.

Retail Banking Retail Banking focuses on innovative products and services to individual customers. It offers products such as credit

facilities (residential mortgages, personal loans, share financing, credit card and hire purchase), remittance services, deposit collection, private banking and retail equity services.

Business Banking Business Banking is responsible for offering products and services for customer segments comprising micro-enterprises,

small and medium-scale enterprises (“SME”s) and mid-sized corporations. Its products include credit facilities (loans, banker’s acceptances, revolving credit, leasing, factoring, hire purchase), remittance services and deposit collection.

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53 seGMent rePortinG (continueD)(i) Primary reporting – business segments (continued) Foreign Banking Operations Foreign Banking Operations comprise of BankThai Public Company Limited, which is involved in the provision of commercial

banking and related services.

Support and others Support services comprises all middle and back-office processes and cost centres and other subsidiaries whose results

are not material to the Group.

corporate and Foreign investment retail Business Banking support 2008 treasury Banking Banking Banking operations and others total Group rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 Net interest income - external (385,690) 1,285,829 2,310,050 497,495 - 8,446 3,716,130 - inter-segment 951,161 (612,957) (542,303) 242,187 - (38,088) -

565,471 672,872 1,767,747 739,682 - (29,642) 3,716,130 Islamic banking income 70,899 67,795 188,569 13,127 - - 340,390 Non-interest income 260,462 403,048 518,896 131,116 - 62,251 1,375,773

896,832 1,143,715 2,475,212 883,925 - 32,609 5,432,293 Overheads (199,174) (247,919) (1,653,920) (510,816) - (85,610) (2,697,439)

Profit/(loss) before allowances 697,658 895,796 821,292 373,109 - (53,001) 2,734,854 (Allowances for)/write-back of losses on loans, advances and financing - (210,889) (355,671) (38,749) - 2,595 (602,714) Write-back of losses on other receivables 3 - - - - 466 469 (Allowances for)/write-back of impairment losses (46,291) 92,830 - - - (58) 46,481

Segment results 651,370 777,737 465,621 334,360 - (49,998) 2,179,090 Share of results of jointly controlled entity - - 3,253 - - - 3,253 Share of results of associate - - - - (40,565) - (40,565) Taxation and zakat (567,080)

net profit after taxation and zakat 1,574,698

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53 seGMent rePortinG (continueD)(i) Primary reporting – business segments (continued)

corporate and Foreign investment retail Business Banking support 2008 treasury Banking Banking Banking operations and others total Group rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

Segment assets 64,453,411 38,086,188 48,067,980 13,337,556 587,280 1,822 164,534,237 Unallocated assets 3,616,757

total assets 168,150,994

Segment liabilities 84,713,596 15,040,942 32,896,776 18,480,949 - 1,480,340 152,612,603 Unallocated liabilities 2,456,473

total liabilities 155,069,076

other segment items Capital expenditure 3,515 2,522 16,023 5,616 - 247,056 274,732 Depreciation of property, plant and equipment 1,458 1,031 7,584 10,572 - 113,855 134,500 Amortisation of prepaid lease payments - - - - - 1,057 1,057 Amortisation of intangible assets 1,716 1,611 49,817 314 - 57,913 111,371 Accretion of discount less amortisation of premium 132,708 81 - - - 292 133,081 Investment in joint venture - - 127,701 - - - 127,701 Investment in associate - - - - 587,280 - 587,280

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53 seGMent rePortinG (continueD)(i) Primary reporting – business segments (continued)

corporate and investment retail Business support 2007 treasury Banking Banking Banking and others total Group rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

Net interest income - external 19,258 1,046,402 2,035,291 554,788 (51,741) 3,603,998 - inter-segment 576,873 (428,807) (314,581) 166,515 - -

596,131 617,595 1,720,710 721,303 (51,741) 3,603,998 Islamic banking income 104,503 27,501 118,609 2,336 - 252,949 Non-interest income 770,509 669,548 443,985 155,940 149,312 2,189,294

1,471,143 1,314,644 2,283,304 879,579 97,571 6,046,241 Overheads (251,113) (347,903) (1,603,263) (571,564) (84,057) (2,857,900)

Profit before allowances 1,220,030 966,741 680,041 308,015 13,514 3,188,341 (Allowances for)/write-back of losses on loans, advances and financing - (99,246) (693,515) (122,030) 455 (914,336) Allowance for losses on other receivables (124) (13,426) - - (246) (13,796) (Allowances for)/write-back of impairment losses (10,182) 86,672 - - (6,178) 70,312

Segment results 1,209,724 940,741 (13,474) 185,985 7,545 2,330,521 Share of results of jointly controlled entity - - 3,410 - - 3,410 Share of results of associate - 567 - - - 567 Taxation and zakat (601,953)

net profit after taxation and zakat 1,732,545

Segment assets 66,600,299 30,042,212 41,162,792 14,092,839 1,764 151,899,906 Unallocated assets 3,111,658

total assets 155,011,564

Segment liabilities 78,243,878 13,706,853 27,993,921 17,264,334 3,108,483 140,317,469 Unallocated liabilities 2,559,024

total liabilities 142,876,493

other segment items Capital expenditure 7,702 15,485 82,863 60,204 150,006 316,260 Depreciation of property, plant and equipment 2,366 7,172 39,378 29,713 43,293 121,922 Amortisation of prepaid lease payments - - - - 1,710 1,710 Amortisation of intangible assets 2,048 939 48,310 1,239 43,205 95,741 Accretion of discount less amortisation of premium 207,090 (318) - - 3,480 210,252 Investment in joint venture - - 124,448 - - 124,448 Investment in associate - 791 - - - 791

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53 seGMent rePortinG (continueD)(i) Primary reporting – business segments (continued) Basis of pricing for inter-segment transfers: Intersegmental charges are computed on the interest-bearing assets and liabilities of each business segment with rates

applied based on the interest yield curve according to the term structure of maturity.

(ii) Secondary reporting – geographic segments The Group operates in two main geographical areas:

- Malaysia, the home country of the Group, which includes all the areas of operations in the primary business segments.

- Overseas operations, which include branch and subsidiary operations in Singapore, United Kingdom and Hong Kong. The overseas operations are involved mainly in corporate lending and borrowing activities. With the exception of Malaysia, no other individual country contributed more than 10% of the net interest income and of total assets.

2008

net interest total total capital income assets liabilities expenditure rM’000 rM’000 rM’000 rM’000 The Group Malaysia 3,628,156 161,895,206 148,665,889 267,668 Overseas operations 87,974 6,255,788 6,403,187 7,064

3,716,130 168,150,994 155,069,076 274,732 2007

net interest total total capital income assets liabilities expenditure rM’000 rM’000 rM’000 rM’000

The Group Malaysia 3,495,622 146,474,521 135,034,330 307,521 Overseas operations 108,376 8,537,043 7,842,163 8,739

3,603,998 155,011,564 142,876,493 316,260

54 risk ManaGeMent anD use oF Financial instruMents(a) Financial risk management objectives and policies An effective risk management system is critical for the Bank to achieve continued profitability and sustainable growth in

shareholder’s value, more so in today’s globalised, yet inter-linked financial and economic environment.

Risk management is an integral part of the Bank’s activities and is an important feature in all its business, operations, delivery channels and decision-making processes. The extent to which the Bank is able to identify, assess, monitor, manage and report each of the various types of risk is critical to its safety, soundness and profitability. The Bank’s risk management function is independent of its operating units and reports to the Board on a regular basis. The Bank does not embark on new businesses, introduce new products, engage in new activities or enter into new markets, unless approved by the Group Risk Committee.

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54 risk ManaGeMent anD use oF Financial instruMents (continueD)(a) Financial risk management objectives and policies (continued) Generally, the objectives of the Bank’s risk management framework are to:

• Identify the various risk exposures and risk capital requirements;• Establish the policies and procedures to measure, monitor, manage and report these exposures, and to ensure that

they are within the Bank’s risk profile as approved by the Board of the Bank; and• Set out the appropriate responsibilities, internal controls, as well as supporting structures required in the risk

management process.

(b) enterprise risk Management and control Framework CIMB Group employs an Enterprise Wide Risk Management (“EWRM”) framework to manage its risk and opportunity

effectively. The EWRM framework involves an on-going process of identifying, evaluating, monitoring, managing and reporting significant risks affecting the Group, implemented through a number of committees established by the Board of Directors. The framework provides the Board and its management with a tool to anticipate and manage both the existing and potential risk, taking into consideration the changing risk profiles, as dictated by changes in business strategies and regulatory environment and functional activities throughout the year.

The Bank employs a Capital-at-Risk (“CaR”) framework as the common measure of risk across CIMB Group. The CaR framework provides the basis of allocating economic capital within CIMB, to cushion against unexpected losses. CaR can be aggregated, thus allowing measurement of the Bank’s total risk. It also provides a yardstick for evaluating risk-return relationship in different lines of business. The CaR framework also enables measurement of return of risk-adjusted-capital, to compare profitability across different businesses and for performance measurement in the Bank.

A group wide stress test is performed on a biannual basis to evaluate the financial impact on the Group in the event of projected adverse economic and financial situations. This process enables the Group to assess the sufficiency of its liquidity surplus and reserves, and whether it could continue to meet its minimum capital requirement under such scenario. Such group wide stress test allows management to gain a better understanding of how portfolios and investments are likely to react to changing economic conditions and how the Group can best prepare for and react to them. In addition, the Group performs ad-hoc stress tests on selected portfolio to evaluate its performance under a given stress scenario.

(c) risk Management organisation At the apex of the Bank management structure is the Board Risk Committee (“BRC”), which comprises exclusively of non-

executive Directors of the Bank. In line with best practices, the BRC determines the risk policy objectives for the Bank, and assumes ultimate responsibility for risk management. The BRC also decides the yearly allocation of risk capital to support all risks taken by the Bank.

The day-to-day responsibility for risk management and control is delegated to the Group Risk Committee (“GRC”). The GRC, comprises of senior management of the Group, undertakes the oversight function for capital allocation and overall risk limits, in line with the risk appetite determined by the Board of Directors. The GRC is supported by four specialised sub-committees, namely the Market and International Risk Committee, the Credit Risk Committee, the Liquidity Risk Committee and the Operational Risk Committee, each addressing one of the following:

• Market risk, arising from changes in market prices from exposure to interest rates, currency exchange rate, credit spreads, equity and commodities prices;

• Credit risk, arising from losses due to obligor, counterparty or issuer failing to perform its contractual obligations to the Group;

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54 risk ManaGeMent anD use oF Financial instruMents (continueD)(c) risk Management organisation (continued)

• Liquidity risk, arising from a bank’s inability to meet its present and future funding needs on a timely basis, from mismatches between the size of assets and liabilities or their maturities; and

• Operational risk, arising from internal processes which may result from inadequacies or failures in processes, controls or projects due to fraud, unauthorised activities, error, omission, inefficiency, systems failures or from external events.

The roles and responsibilities of the committees and sub-committees are set out in the chart below:

(d) Group risk Division (“GrD”) The primary oversight body is the Group Risk Division, comprising of Group Risk Management (“GRM”) and Group Credit

(“GC”), which are independent of business units and assist the Management and the various risk committees in monitoring and controlling the Group’s risk exposures.

The key responsibilities of GRD are to identify, analyse, monitor, review and report the principal risks to which the Bank is exposed. It also helps to create shareholder value through proper allocation of risk capital, development of risk-based pricing framework and facilitate development of new business and products.

• Reviewandrecommendriskpoliciesandstrategiesforapproval

• OverseeentireEWRMandprovidestrategicguidancetovariousriskcommittees

BOARD OF DIRECTORS

BOARD RISK COMMITTEE

• Reviewandadviseonriskpoliciesandstrategies

• Overseemanagementofrisk,capitalallocationandassetliabilitymanagement

processacrosstheGroup

GROUP RISK COMMITTEE

Market and International Risk Committee (“MIRC”)

• Overseeexposurestomarketrisks

• Evaluateandapproveproposalsforprimaryandsecondarymarketdealsfordebtandequityinstruments

Credit Risk Committee (“CRC”)

• Creditapprovalauthority

• AssignandreviewtheInter-bankLimits,SectorialExposures,GlobalCounterpartyCreditLimitsandGlobalCountryLimits

Liquidity Risk Committee (“LRC”)

• OverseetheGroup’soverallliquiditymanagement

• EnsureGroupisabletomeetitscashflowobligationsinatimelyandcosteffectivemanner

Operational Risk Committee (“ORC”)

• Overseeissuesrelatingtotheoperationalriskandinternalcontrolenvironment

• ReviewandevaluateallBusinessContinuityManagement(BCM)/DisasterRecovery(DR)activities

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54 risk ManaGeMent anD use oF Financial instruMents (continueD)(e) Group risk Management (“GrM”) GRM monitors risk-taking activities, initiates and proposes risk policies, risk measurement methodologies, risk limits

and risk capital allocation, performs independent review of loan assets quality and loan recovery plan, coordinates new products deployments and develops the risk-based product pricing framework for loan portfolios.

In propagating and ensuring compliance to the Market Risk framework, GRM reviews and analyses treasury trading strategy, positions and activities vis-à-vis changes in the financial market and performs mark-to-market as part of financial valuation. Further, GRM also conducts validation on the risk pricing parameters and models used.

GRM is also tasked with the co-ordination of the Group’s effort towards implementation of the Basel II framework in compliance with the International Convergence of Capital Measurement and Capital Standards prescribed by the Bank of International Settlements and as adopted by BNM. In this regard, GRM develops, implements and validates all internal rating and scoring models and closely monitors the usage of the rating and scoring systems to ensure relevance to current market conditions and integrity of the ratings.

On an annual basis, GRM proposes the global CaR limit to the GRC and BRC for approval. This limit is allocated by the GRC to the various businesses of the Group through the MIRC and the CRC. The appropriate market and credit allocations are given by the various business units to execute their business plans each year. GRC also ensures that the aggregate risk exposure does not exceed the global CaR limit approved by the BRC.

(f) Group credit (“Gc”) GC is authorised to approve applications for credit facilities of up to RM10 million extended to small and medium

enterprises. Otherwise, GC carries out independent assessments of all credit risk related proposals originating from the various business units such as loans and advances, fixed income, derivatives, sales and trading, prior to submission to the CRC, the EXCO or Board for approval. GC also reviews the Bank’s holdings of all fixed income assets and recommends the internal ratings for CRC’s approval. GC is also responsible for tracking and analysing loans which turn non-performing within 1 year of approval.

(g) key areas of risk Management1. credit risk Credit and counterparty risk is defined as the possibility of losses due to an obligor or market counterparty or issuer

of securities failing to perform its contractual obligations to the Bank.

Credit risk arises primarily from lending activities through loans as well as commitments to support clients’ obligations to third parties, i.e. guarantees. In sales and trading activities, credit risk arises from the possibility that counterparties will not be able or willing to fulfil their obligation on transactions on or before settlement date. In derivatives activities, credit risk arises when counterparties to derivative contracts, such as interest rate swaps, are not able to or willing to fulfil their obligation to pay the Bank the positive fair value or receivable resulting from the execution of contract terms. Credit risk may also arise where the downgrading of an entity’s rating causes the fair value of the Bank’s investment in that entity’s financial instruments to fall.

Credit risk remains the most significant risk to which the Bank is exposed. The purpose of credit risk management is to keep credit risk exposure to an acceptable level vis-à-vis the capital, and to ensure the returns commensurate with risk.

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54 risk ManaGeMent anD use oF Financial instruMents (continueD)(g) key areas of risk Management (continued)

1. credit risk (continued) All credit exposures are subject to an internal rating, based on a combination of quantitative and qualitative criteria.

Adherence to set credit limits is monitored daily by GRM, which combines all exposures for each counterparty, including off-balance sheet items and potential exposure. Compliance to the Group-wide credit policy limits the exposure to any one counterparty or group, industry sector and rating classification.

Credit exposures are evaluated by the CRC and are monitored against approved limits on a regular basis. Adherence to and compliance with single customer limit as well as assessing the quality of collateral are approaches adopted to address concentration risk to any large sector/industry, or to a particular counterparty group or individual.

The result of severe disruption of the US sub-prime mortgage market was felt across the global financial markets in 2008, and were reflected in wider credit spread, higher volatility, tighter liquidity and ultimately, the collapse of several large global investment banks. At the onset of the financial crisis, GC has conducted numerous reviews to scale down the Group’s exposure in several industries/sectors, countries and counterparties that are affected by the sub-prime and global financial crisis.

2. Market risk Market risk is defined as any fluctuation in the value of the portfolio resulting from changes in market prices, such as

interest rates, currency exchange rates, credit spreads, equity prices and commodities prices.

Market risk results from trading activities that can arise from customer-related businesses or from proprietary positions. The Group hedges the exposures to market risk by employing varied strategies, including the use of derivative instruments.

The Group adopts various measures in its risk management process to manage market risk. An accurate and timely valuation of position is critical to provide the Group with its current market exposure. GRM values the exposure using market price or a pricing model where appropriate.

The Group also adopts a value-at-risk (“VAR”) approach in the measurement of market risk. Backtesting is performed to validate and reassess the accuracy of the existing VAR model. VAR is a statistical measure of the potential losses that could occur as a result of movements in market rates and prices over a specified time horizon within a given confidence level. Backtesting involves the comparison of the daily model-generated VAR forecast against the actual or hypothetical profit or loss data over the corresponding period.

Stress testing is conducted to capture the potential market risk exposures from an unexpected market movement. In formulating stress scenario, consideration is given to various aspects of the market; for example identification of areas where unexpected losses can occur and areas where historical correlation may no longer hold true.

Policies and procedures governing risk-taking translates limits and management triggers which complements the global CaR limit. Limits constitute the key mechanism to control allowable risk taking, and are regularly reviewed in the face of changing business needs, market condition and regulatory changes.

Risk Middle Office (“RMO”) within GRM undertakes monitoring and oversight process at Group Treasury and Equity Market & Derivatives trading floor, which includes reviewing and analysing treasury trading strategy, positions and activities vis-à-vis changes in the financial market, monitoring limit usage, assessing limit adequacy and verifying transaction prices.

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

54 risk ManaGeMent anD use oF Financial instruMents (continueD)(g) key areas of risk Management (continued)

2. Market risk (continued) Exposures to several of the Group’s global investment banking counterparties were reduced and further mitigated,

hence containing losses due to the global financial crisis.

3. liquidity risk Liquidity risk is defined as the risk to earnings or shareholders funds from the Group’s inability to meet its present and

future (both anticipated and unanticipated) funding needs on a timely basis, arising from mismatches between the size or maturities of assets and liabilities.

The Group’s liquidity risk management policy is to maintain hiqh quality and well diversified portfolios of liquid assets and sources of funds. Management action triggers have been established to alert management to potential and emerging liquidity pressures. The Group’s early warning system and contingency funding plans are in place to alert and enable Management to act effectively and efficiently during a liquidity crisis and under adverse market conditions.

The Group’s liquidity risk management organisation and its strong liquidity position helped the Group manage through the credit and liquidity turmoil that affected global financial markets in 2008. The Liquidity Risk Committee meets at least once a month to discuss the liquidity risk and funding profile and is chaired by the Head of Group Risk Division. The Asset Liability Management function, which is responsible for the independent monitoring of the Bank’s liquidity risk profile, worked closely with Group Treasury in intensifying its surveillance on market conditions and performed frequent stress testing on liquidity positions. Liquidity positions are monitored on a daily basis and complied with regulatory requirements for liquidity risk. The Group maintained large buffers of liquidity throughout 2008. As result, contingency funding plans were not required to be executed as there was sufficient liquidity to ensure safe and sound operations from a strategic, structural and tactical perspective.

4. operational risk Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or from

external events.

The existing Operational Risk Management Framework, which is revised periodically to cater for changing business conditions, is designed objectively to monitor and control operational risk effectively leading to a sound and stable operational environment within the Group. All operational risks, both inherent and anticipated, are properly identified, captured, mitigated, monitored and reported in a systematic and consistent manner. The Operational Risk Committee (“ORC”) has oversight responsibility for all Group operational activities conducted on a day-to-day basis.

The adoption of the Control Risk Self Assessment (“CRSA”) and the Self Assessment Review Project (“ShARP”) are part of the Bank’s initiatives to ensure that operational risks within the processes in each business unit are properly identified, analysed and mitigated on a periodic basis. Relevant Key Risk Indicators (“KRI”) are in use to track changes that may highlight new risk concerns and potential areas of weaknesses in operational control.

Each new or varied product and changes to the process flow are subjected to a rigorous risk review through sign-offs from the relevant support units where all critical risks are being identified and assessed independently from the risk takers or product owners.

The Bank continued to stress the importance of adhering to internal controls and established procedures to deter fraud and to minimize losses due to staff negligence. In order to demonstrate the seriousness of such offences, strict disciplinary actions are instituted against staff concerned.

Page 131: Cimb Financial Statement

197Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

54 risk ManaGeMent anD use oF Financial instruMents (continueD)(g) key areas of risk Management (continued)

5. Basel ii implementation BNM has announced a two-phase approach for implementing the standards recommended by the Bank of

International Settlement set out in “International Convergence of Capital Measurement and Capital Standards: A Revised Framework” (“Basel II”) in Malaysia. In the first phase, banking institutions will be required to adopt the Standardised Approach for credit risk by the end of 2008. In the second phase, qualified banking institutions will be allowed to migrate directly to the Internal Rating-Based approach (“IRB Approach”) by January 2010.

BNM has approved the Group’s application for direct migration to the IRB Approach. The approach for credit risk will be Advance IRB for retail exposure and Foundation IRB for corporate exposure. Operational risk will be based on Basic Indicator Approach and working towards Standarised Approach in 2010. Regular meetings are held with BNM to ensure implementation initiatives are in line with their expectations.

A Basel II Steering Committee chaired by the Group CEO has been set up to oversee the implementation initiatives across the Group with assistance of various sub-committees. Significant progress has been achieved in various workstreams, primarily, in rating models calibration and risk datamart.

The Group employs an economic capital allocation framework, whereby capital is allocated to all business units. All major categories of risk are measured. This is in line with the Second Pillar of Basel II framework-Supervisory Review Process and also BNM’s Internal Capital Adequacy Assessment Process, which requires banks adopting the IRB Approach to develop a robust risk management framework (methodologies and process) to assess the adequacy of its internal economic capital in relation to the risk profile.

Ongoing efforts are in place to enhance the operational risk loss event reporting and data collection for the enlarged Group. Initiatives are being made to promote a web based application to ensure loss event incidents are being reported and captured on a timely basis and in an accurate manner. The integrated loss event database is crucial to prepare the Group to adopt a more advanced operational measurement model.

Page 132: Cimb Financial Statement

Annual Report 2008198

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

54

ris

k M

an

aG

eM

en

t a

nD

us

e o

F Fi

na

nc

ial

ins

tr

uM

en

ts

(co

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inu

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tere

st r

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risk

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e ta

bles

bel

ow s

umm

aris

e th

e G

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’s a

nd t

he B

ank’

s ex

posu

re t

o in

tere

st r

ate

risks

. In

clud

ed in

the

tab

les

are

the

Gro

up’s

and

the

Ban

k’s

asse

ts a

nd li

abilit

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at t

heir

full

carr

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am

ount

s, a

naly

sed

by t

he e

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r of

con

trac

tual

rep

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g or

mat

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dat

es.

As

inte

rest

rat

es a

nd y

ield

cu

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cha

nge

over

tim

e, t

he G

roup

and

the

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k m

ay b

e ex

pose

d to

loss

in e

arni

ngs

due

to t

he e

ffect

s of

inte

rest

rat

es o

n th

e st

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ure

of t

he

bala

nce

shee

ts.

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sitiv

ity t

o in

tere

st r

ates

aris

es fr

om m

ism

atch

es in

the

rep

ricin

g da

tes,

cas

h flo

ws

and

othe

r ch

arac

teris

tics

of t

he a

sset

s an

d th

eir

corr

espo

ndin

g lia

bilit

ies

fund

ing.

the

Gro

up

2008

n

on-t

radi

ng b

ook

u

p to

1

>1 –

3

>3 –

6

>6 –

12

>1 –

5

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r 5

non

-int

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t tr

adin

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mon

th

mon

ths

mon

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mon

ths

year

s ye

ars

sens

itive

bo

ok

tota

l

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

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r

M’0

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rM

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rM

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h an

d sh

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0,11

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-

1,8

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s pu

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ents

1

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nd p

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men

ts w

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anks

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d ot

her fi

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tions

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1

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for t

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utor

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l ban

ks

-

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-

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stm

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-

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-

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-

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Page 133: Cimb Financial Statement

199Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

54

ris

k M

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th

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1

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5

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Page 134: Cimb Financial Statement

Annual Report 2008200

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

54

ris

k M

an

aG

eM

en

t a

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Page 135: Cimb Financial Statement

201Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

54

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Page 136: Cimb Financial Statement

Annual Report 2008202

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

54

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Page 137: Cimb Financial Statement

203Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

54

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Page 138: Cimb Financial Statement

Annual Report 2008204

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

54

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Page 139: Cimb Financial Statement

205Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

54

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k M

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Page 140: Cimb Financial Statement

Annual Report 2008206

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

54 risk ManaGeMent anD use oF Financial instruMents (continueD)(h) interest rate risk (continued) The tables below summarises the effective average interest rates by major currencies for each class of financial asset and

financial liability: the Group the Bank

2008 2007 2008 2007 rM usD rM usD rM usD rM usD % % % % % % % %

Financial assets Cash and short-term funds 3.20 1.08 3.53 4.98 3.28 1.10 3.52 5.08 Securities purchased under resale agreement 2.83 - 3.53 - 2.83 - 3.53 - Deposits and placements with banks and other financial institutions 3.38 1.93 3.54 4.76 3.54 2.07 3.54 4.68 Securities held for trading 3.63 5.46 5.08 2.77 3.70 2.59 5.17 2.77 Available-for-sale securities 5.12 - 4.90 7.09 5.22 - 4.99 - Held-to-maturity securities 5.64 7.26 5.31 - 5.67 - 5.24 - Loans, advances and financing 5.72 3.92 6.53 6.22 5.71 - 6.53 - Other assets 5.93 - 5.51 - 5.93 - 5.51 - Financial liabilities Deposits from customers 3.22 0.56 3.41 4.83 3.36 0.62 3.42 4.22 Deposits and placements of banks and other financial institutions 3.20 1.43 3.20 6.14 2.89 1.54 3.19 5.01 Obligations on securities sold under repurchase agreements - - 3.45 - - - 3.45 - Bills and acceptances payable 3.72 - 3.67 - 3.73 - 3.67 - Amount due to Cagamas Berhad 4.74 - 3.83 - 4.74 - 3.83 - Redeemable asset-backed bonds - - 4.75 - - - - - ICULS 7.50 - 7.50 - 7.50 - 7.50 - Other borrowings - 2.19 - 4.94 - - - - Subordinated obligations 6.07 5.61 - 3.93 6.07 6.10 - 3.93 Redeemable preference shares - 6.62 3.60 6.62 - - 3.60 -

Page 141: Cimb Financial Statement

207Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

54

ris

k M

an

aG

eM

en

t a

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th

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shor

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Page 142: Cimb Financial Statement

Annual Report 2008208

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

54

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k M

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Page 143: Cimb Financial Statement

209Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

54

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Page 144: Cimb Financial Statement

Annual Report 2008210

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

54

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Page 145: Cimb Financial Statement

211Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

55 Fair value oF Financial instruMents Financial instruments comprise financial assets, financial liabilities and off-balance sheet financial instruments. Fair value is

the amount at which a financial asset could be exchanged or a financial liability settled, between knowledgeable and willing parties in an arm’s length transaction. The information presented herein represents the estimates of fair values as at the balance sheet date.

Where available, quoted and observable market prices are used as the measure of fair values. Where such quoted and observable market prices are not available, fair values are estimated based on a range of methodologies and assumptions regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Changes in the uncertainties and assumptions could materially affect these estimates and the resulting fair value estimates.

In addition, fair value information for non-financial assets and liabilities are excluded as they do not fall within the scope of FRS 132 - Financial Instruments: Disclosure and Presentation which requires the fair value information to be disclosed.

A range of methodologies and assumptions had been used in deriving the fair values of the Group’s and the Bank’s financial instruments at balance sheet date. The total fair value of each financial instrument approximates the total carrying value as at the balance sheet, except for the following:

the Group the Bank

2008 2008 carrying carrying amount Fair value amount Fair value rM’000 rM’000 rM’000 rM’000

Financial assets Deposit and placements with banks and other financial institutions 2,139,459 2,139,609 4,967,910 4,969,036Held-to-maturity securities 11,625,970 11,651,170 8,685,401 8,640,259Loans, advances and financing 95,687,146 93,872,845 84,922,177 82,306,562

Financial liabilities Deposits from customers 127,625,741 127,725,604 107,105,025 107,209,604Deposits and placements of banks and other financial institutions 8,614,530 8,608,757 10,569,514 10,564,134Amount due to Cagamas Berhad 993,818 994,910 993,818 994,910Other borrowings 1,039,350 1,039,350 - - Subordinated obligations 4,573,212 4,527,478 5,386,548 5,220,378

Page 146: Cimb Financial Statement

Annual Report 2008212

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

55 Fair value oF Financial instruMents (continueD) the Group the Bank

2007 2007 carrying carrying amount Fair value amount Fair value rM’000 rM’000 rM’000 rM’000

Financial assetsDeposit and placements with banks and other financial institutions 5,120,678 5,120,924 5,339,365 5,339,611Held-to-maturity securities 3,473,316 3,361,372 3,366,167 3,255,775Loans, advances and financing 80,617,533 79,934,908 73,011,777 72,230,064

Financial liabilitiesDeposits from customers 112,189,637 112,195,658 99,307,364 99,313,385Deposits and placements of banks and other financial institutions 12,694,895 12,736,651 13,785,163 13,826,919Amount due to Cagamas Berhad 2,004,707 2,008,653 2,004,707 2,008,653Other borrowings 992,100 992,100 - - Subordinated obligations 2,004,856 1,983,587 2,685,889 2,646,038

The carrying amount of the financial assets at the balance sheet date were not reduced to their estimated fair values as the

Directors are of the opinion that the amounts will be recoverable in full on the maturity date.

The fair values are based on the following methodologies and assumptions:

short term funds and placements with financial institutions For short term funds and placements with financial institutions with maturities of less than six months, the carrying value is

a reasonable estimate of fair value. For deposits and placements with maturities of six months and above, the estimated fair value is based on discounted cash flows using prevailing money market interest rates at which similar deposits and placements would be made with financial institutions of similar credit risk and remaining period to maturity.

securities held for trading, available-for-sale securities and held-to-maturity securities The estimated fair value is generally based on quoted and observable market prices. Where there is no ready market in certain

securities, the Group and the Bank establish fair value by using valuation techniques. These include the use of recent arm’s length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants.

loans, advances and financing For floating rate loans, the carrying value is generally a reasonable estimate of fair value.

For fixed rate loans with maturities of six months or more, the fair value is estimated by discounting the estimated future cash flows using the prevailing market rates of loans with similar credit risks and maturities.

The fair values of impaired floating and fixed rate loans are represented by their carrying value, net of specific allowance, being the expected recoverable amount.

Page 147: Cimb Financial Statement

213Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

55 Fair value oF Financial instruMents (continueD) amount due (to)/from subsidiaries and related companies The estimated fair values of the amount due from subsidiaries and related companies approximate the carrying values as the

balances are either recallable on demand or are based on the current rates for such similar loans.

amount due (to)/from holding company and ultimate holding company The estimated fair value of the amount due from holding company approximates the carrying value as the balances are

recallable on demand.

Deposits from customers For deposits from customers with maturities of less than six months, the carrying amounts are a reasonable estimate of their

fair value. For deposit with maturities of six months or more, fair values are estimated using discounted cash flows based on prevailing market rates for similar deposits from customers.

Deposits and placements of banks and other financial institutions The estimated fair values of deposits and placements of banks and other financial institutions with maturities of less than six

months approximate the carrying values. For deposits and placements with maturities of six months or more, the fair values are estimated based on discounted cash flows using prevailing money market interest rates for deposits and placements with similar remaining period to maturities.

obligations on securities sold under repurchase agreements The estimated fair values of obligations on securities sold under repurchase agreements with maturities of less than six months

approximate the carrying values. For obligations on securities sold under repurchase agreements with maturities of more than six months, the fair values are estimated based on discounted cash flows using prevailing money market interest rates with similar remaining period to maturity.

Bills and acceptances payable The estimated fair values of bills and acceptances payable with maturities of less than six months approximate the carrying

values. For bills and acceptances payable with maturities of six months or more, the fair values are estimated based on discounted cash flows using prevailing money market interest rates for bills and acceptance payable with similar remaining period to maturity.

amount due to cagamas Berhad The estimated fair values of the amount due to Cagamas Berhad with maturities of less than six months approximate the

carrying values. For amount due to Cagamas Berhad with maturities of six months or more, the fair values are estimated based on discounted cash flows using prevailing interest rates for loans sold to Cagamas Berhad with similar remaining period to maturity.

iculs The estimated fair value of ICULS approximates the carrying value as based on the Directors’ estimate, the effective interest

rate of the ICULS is a fair reflection of the current rates for such similar long term borrowings.

subordinated obligations The fair values for the quoted subordinated obligations are obtained from quoted market prices while the fair values for

unquoted subordinated obligations are estimated based on discounted cash flow models.

Page 148: Cimb Financial Statement

Annual Report 2008214

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

55 Fair value oF Financial instruMents (continueD) redeemable preference shares The estimated fair value of redeemable cumulative preference shares (“RCPS”) approximates the carrying value based on

Directors’ estimate as the effective interest rate of the RCPS is a fair reflection of the current rate for such similar instrument.

Derivative financial instruments The fair values of derivative financial instruments 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.

credit related commitment and contingencies The net fair value of these items was not calculated as estimated fair values are not readily ascertainable. These financial

instruments generally relate to credit risks and attract fees in line with market prices for similar arrangements. They are not presently sold nor traded. The fair value may be represented by the present value of fees expected to be received, less associated costs.

56 Business coMBinations(a) acquisitions during the financial year

(i) acquisition of Bankthai Public company limited On 5 November 2008, CIMB Bank Berhad had acquired approximately 42.127% of the total issued share capital of

BankThai Public Company Limited (“BankThai”). The share of net assets arising from the acquisition are as follows:

Fair value Provisional carrying value adjustments fair value rM’000 rM’000 rM’000

Cash and short term funds 411,306 411,306 Deposits and placements with bank and other financial institutions 4,272,528 4,272,528 Investments 4,488,772 4,488,772 Loans, advances and financing 8,149,980 (6,739) 8,143,241 Properties foreclosed 259,075 259,075 Property, plant and equipment 386,607 386,607 Intangible assets 50,221 50,221 Other assets 1,757,763 32,111 1,789,874 Deposits from customers (15,791,580) (15,791,580)Deposits and placements of bank and other financial institutions (661,791) (661,791)Bills and acceptances payable (18,087) (18,087)Borrowings (758,002) (758,002)Other liabilities (2,034,710) (22,795) (2,057,505)

Net assets 512,082 2,577 514,659 Share of net assets acquired 216,811 Premium on acquisition 379,003

Purchase consideration satisfied via cash 595,814

Page 149: Cimb Financial Statement

215Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

56 Business coMBinations (continueD)(a) acquisitions during the financial year (continued)

(i) acquisition of Bankthai Public company limited (continued) The premium on acquisition represents the value of synergies arising from the acquisition. The adjustments to other

assets, loans, advances and financing and other liabilities relate to valuation adjustments and are provisional, based on management’s best estimates. The fair value adjustments in respect of intangibles assets are in progress. As disclosed in Note 51(a), the Bank acquired a further 49.91% of the total issued and paid-up share capital of BankThai on 13 January 2009, thus making BankThai a subsidiary of the Bank. The fair value adjustments will be finalised in the 2009 financial statements.

The acquisition contributed to a share of loss of RM40,701,460 to the Group for the period from 5 November 2008 to 31 December 2008. If the acquisition had occurred on 1 January 2008, the associate would have contributed revenue (comprise net interest income and non-interest income) and net loss of RM299,670,532 and RM62,175,105 respectively, to the Group.

There were no acquisitions in the financial year ended 31 December 2007.

(b) Disposals during the financial year(i) Disposal of ciMB trustee Berhad On 1 January 2008, CIMB Bank Berhad disposed 20% of its direct and 20% of its indirect equity interest in CIMB Trustee

Berhad to CIMB Berhad and CIMB Holdings Sdn Bhd. The disposal was satisfied via intercompany balances.

The effects of the disposal on the financial position of the Group as at 31 December 2008 are as follows:

2008 rM’000 Fixed assets (112) Intangible assets (58) Statutory deposit (40) Deferred tax assets (69) Trade debtors (165) Sundry debtors (6) Amount due from a related company - Deposits and placements with a licensed trustee (571) Deposits and placements with a licensed institution (1,427) Cash and bank balances (435) Sundry creditors 506 Provision for taxation 75 Amount due to holding company 409 Amount due to related company 437

Identifiable net assets disposed (1,456) Net disposal proceeds 794

Loss on disposal before and after tax (662)

Page 150: Cimb Financial Statement

Annual Report 2008216

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

56 Business coMBinations (continueD)(b) Disposals during the financial year (continued)

(ii) Disposal of south east asian Bank limited (“sea Bank”) On 1 April 2008, CIMB Bank Berhad disposed its entire 60% equity interest in SEA Bank to British American

Investment Co (Mauritius) Ltd, for a total cash consideration of 339.0 million Mauritius Rupees (or approximately RM40.0 million).

The effects of the disposal on the financial position of the Group as at 31 December 2008 are as follows: 2008 rM’000 Cash and short-term funds (13,262) Deposits and placements with banks and other financial institutions (125,144) Securities and other investments (36,500) Derivative financial instruments (11) Loans, advances and financing (108,797) Other assets (4,232) Intangible assets (1,205) Property, plant and equipment (8,413) Deposit from customers 268,825 Deposits and placements of banks and other financial institutions 153 Deferred tax liabilities 434 Provision for taxation 214 Other liabilities 7,268

Identifiable net assets disposed (20,670) Less: Goodwill (1,574)

(22,244) Net disposal proceeds 40,002

Gain on disposal before and after tax 17,758

The net cash flow on disposal was determined as follows: Total proceeds from disposal - cash consideration 40,002 Expenses directly attributable to the disposal, paid in cash -

Net disposal proceeds 40,002 Cash and cash equivalents of subsidiaries disposed (13,262)

Net cash inflow on disposal 26,740

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217Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

56 Business coMBinations (continueD)(b) Disposals during the financial year (continued)

(iii) Disposal of sBB securities sdn Bhd (“sssB”) On 22 October 2008, SBB Capital Markets Sdn Bhd (“SCMSB”), a wholly owned subsidiary of the Bank, had disposed

its 100% equity interest in SSSB to HLG Credit Sdn Bhd (“HLGC”) for a cash consideration of RM75.2 million.

The effects of the disposal on the financial position of the Group as at 31 December 2008 are as follows:

2008 rM’000

Property, plant and equipment (2,288) Deferred tax assets (1,588) Cients and brokers balances (assets) (29,746) Other receivables, deposits and prepayments (1,085) Tax recoverable (4,936) Cash and bank balances (43,610) Clients and brokers balances (liabilities) 17,132 Other payables and accruals 8,179

Identifiable net assets disposed (57,942) Less : Goodwill (37,000)

(94,942) Net disposal proceeds 75,177

Loss on disposal before and after tax (19,765)

The net cash flow on disposal was determined as follows:

Total proceeds from disposal - cash consideration 75,177 Expenses directly attributable to the disposal , paid in cash -

Net disposal proceeds 75,177 Cash and cash equivalents of subsidiaries disposed (43,610)

Net cash inflow on disposal 31,567

(iv) Disposal of navis-ciMB General Partner ltd (“navis-ciMB”) On 18 September 2008, CIMB(L) Limited, a wholly owned subsidiary of the Bank had disposed its entire 25% equity

interest in Navis-CIMB to Navis Capital Partners Ltd.

The effects of the disposal on the financial position of the Group as at 31 December 2008 are as follows:

2008 rM’000 Non-current assets (229) Current assets (741) Current liabilities 375

Net assets (595) Net disposal proceeds 3,499

Gain on disposal before and after tax 2,904

Page 152: Cimb Financial Statement

Annual Report 2008218

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

56 Business coMBinations (continueD)(c) Disposals during the prior financial year

(i) Disposal of ciMB wealth advisors Berhad (“ciMB wa”) and sBB assets Management sdn Bhd (“sBBaM”) On 7 February 2007, the Group, through its wholly-owned subsidiaries, BHL Venture Berhad and BHLB Assets

Management Sdn Bhd, disposed of its 100% equity interest in CIMBWA and SBBAM respectively, to CIMB-Principal Asset Management Berhad, for a total cash consideration of RM481 million. The purchase consideration was based on willing buyer-willing seller basis, after taking into consideration the assets under management of CIMB WA and SBBAM as well as the agency distribution network of CIMB WA.

The effects of the disposal on the financial position of the Group as at 31 December 2007 are as follows:

2008 rM’000 Cash and short-term funds (49,275) Deposits and placements with banks and other financial institutions (21,059) Loans, advances and financing (3,409) Other assets (134,509) Deferred taxation (604) Property, plant and equipment (16,077) Other liabilities 154,108 Current tax liabilities 1,737

Identifiable net assets disposed (69,088) Less : Goodwill (195,000)

(264,088) Net disposal proceeds 481,000

Gain on disposal before and after taxation 216,912

The net cash flow on disposal was determined as follows:

Total proceeds from disposal - cash consideration 481,000 Expenses directly attributable to the disposal, paid in cash -

Net disposal proceeds 481,000 Cash and cash equivalents of subsidiaries disposed of (49,275)

Net cash inflow on disposal 431,725

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219Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

56 Business coMBinations (continueD)(c) Disposals during the prior financial year (continued)

(ii) vesting of the Bank’s entire islamic banking business to ciMB islamic Bank Berhad (“ciMB islamic”) On 24 November 2006, the Bank proposed to enter into a business transfer agreement with CIMB Islamic to transfer

its entire Islamic banking business, which is operating under Section 124 of the Banking and Financial Institutions Act 1989 (“Islamic banking business”), to CIMB Islamic after obtaining all relevant approvals. On 1 March 2007, pursuant to the order of the High Court of Malaya, which was obtained on 28 February 2007, the Bank’s entire Islamic banking business was vested to CIMB Islamic in accordance with the terms and conditions of the business transfer agreement entered into between the Bank and CIMB Islamic dated 6 February 2007. The effects of the disposal on the financial position of the Bank as at 31 December 2007 are as follows:

2008 rM’000 Cash and short-term funds (296) Deposits and placements with banks and other financial institutions (355,050) Securities held for trading (171,678) Available-for-sale securities (575) Held-to-maturity securities (179,535) Financing, advances and other loans (1,126,261) Other assets (386,944) Statutory deposits with Bank Negara Malaysia (50,478) Deferred tax asset (11,604) Deposits from customers 758,984 Deposits and placements with banks and other financial institutions 1,271,052

Identifiable net assets disposed (252,385) Add: Goodwill (136,000)

(388,385) Net disposal proceeds 388,385

-

The net cash flow on disposal was determined as follows: Total proceeds from disposal - cash consideration 388,385 Expenses directly attributable to the disposal, paid in cash -

Net disposal proceeds 388,385 Cash and cash equivalents of operations disposed of (296)

Net cash inflow on disposal 388,089

Page 154: Cimb Financial Statement

Annual Report 2008220

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

57 non-current assets/DisPosal GrouPs helD For sale the Group the Bank

note 2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

non-current assets held for sale: - disposal of certain assets of Southern Investment Bank Berhad (i) 39,740 55,328 - - - assets relating to disposal of 100% equity interest in SBB Securities Sdn Bhd (ii) - 114,159 - - - assets relating to disposal of 60% equity interest in South East Asian Bank Ltd (iii) - 491,234 - 16,087 - goodwill (iv) 35,000 73,574 35,000 72,000 - foreclosed properties (v) 7,592 25,070 7,592 25,070 - property plant and equipment (v) 120 2,520 120 2,520

- prepaid lease payments (v) - 209 - 209

Total non-current assets held for sale 82,452 762,094 42,712 115,886

liabilities directly associated with non- current assets classified as held for sale: - disposal of certain liabilities of Southern Investment Bank Berhad (i) 29,499 54,267 - - - liabilities relating to disposal of 100% equity interest in SBB Securities Sdn Bhd (ii) - 41,414 - - - liabilities relating to disposal of 60%

equity interest in South East Asian Bank Ltd (iii) - 460,409 - -

Total liabilities directly associated with non-current assets classified as held for sale 29,499 556,090 - -

(i) Disposal of certain assets, liabilities and asset/fund management business of southern investment Bank

Berhad (“siBB”) Certain assets and liabilities of SIBB have been presented as held for sale following the proposed sale to HLG Credit Sdn

Bhd (“HLGC”). The disposal was completed on 31 January 2009.

Page 155: Cimb Financial Statement

221Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

57 non-current assets/DisPosal GrouPs helD For sale (continueD)(i) Disposal of certain assets, liabilities and asset/fund management business of southern investment Bank

Berhad (“siBB”) (continued)The assets and liabilities identified for disposal as at 31 December 2008 are as follows:

the Group

2008 2007 rM’000 rM’000

assets Loans, advances and financing 39,636 55,076Intangible assets 83 182Property, plant and equipment 21 70

Non-current assets held for sale 39,740 55,328

liabilities Deposits from customers 3,507 12,448Deposits and placements of banks and other financial institutions 25,296 41,614Other liabilities 696 205

Liabilities directly associated with non-current assets classified as held for sale 29,499 54,267

(ii) Disposal of 100% equity interest in sBB securities sdn Bhd (“sBB securities”) The assets and liabilities of SBB Securities have been presented as held for sale as at 31 December 2007 following the

conditional share sale agreement entered with HLG Credit Sdn Bhd on 19 October 2007. The disposal was completed on 22 October 2008.

(iii) Disposal of 60% equity interest in south east asian Bank ltd (“sea Bank”) On 4 December 2007, the Bank agreed to dispose its 60% equity interest in SEA Bank to British American Investment Co

(Mauritius) Ltd. The disposal was completed on 1 April 2008.

(iv) Goodwill Arising from items (i) above, the goodwill arising from the acquisition of SIBB is classified as non-current assets held for

sale as at 31 December 2008. the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

SIBB 35,000 35,000 35,000 35,000SBB Securities - 37,000 - 37,000 SEA Bank - 1,574 - -

35,000 73,574 35,000 72,000

(v) Foreclosed properties, property, plant and equipment and prepaid lease payments Foreclosed properties, property, plant and equipment and prepaid lease payments of the Bank whereby deposits have

been received from buyers of the properties, and where a definitive buyer has been identified have been classified as held for sale. The disposals are expected to be completed in 2009.

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Annual Report 2008222

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

58 coMParatives(a) restatement of comparatives Certain comparatives were restated to conform with the current financial year’s presentation. There was no impact to the

financial performance and ratios in relation to the financial year ended 31 December 2007. The restatements are as follows:

as previously note reported reclassification as restated rM’000 rM’000 rM’000

Group Balance sheet Other assets (i) 1,433,265 (29,015) 1,404,250 Other liabilities (i) 2,998,218 (29,015) 2,969,203 Bank Balance sheet Cash and short term funds (ii) 23,490,309 (374,343) 23,115,966 Deposits and placements with banks and other financial institutions (ii) 4,965,022 374,343 5,339,365 Other assets (i) 1,231,366 (29,015) 1,202,351 Other liabilities (i) 2,819,548 (29,015) 2,790,533

Group Income statement Interest income (iii) 7,171,325 25,101 7,196,426 Non-interest income (iii) 2,214,395 (25,101) 2,189,294 Bank Income statement Interest income (iii) 6,633,310 25,101 6,658,411 Non-interest income (iii) 2,178,106 (26,514) 2,151,592 Write-back of/(allowance for) impairment losses (iii) (121,510) 1,413 (120,097)

(i) The reclassification amount shown is the net effect of the grossing and off-setting of certain account balances as

allowed under FRS 132, comprising clearing items of credit RM131,181,000 and Credit Support Annex for derivative transactions of debit RM102,166,000.

(ii) An amount of RM374,343,000, being the Bank’s RPSIA placed with CIMB Islamic, was classified under “Cash and short term funds” in 2007. As required by BNM, this amount has now been reclassified to deposits and placements with banks and other financial institutions.

(iii) The reclassification is in relation to the following:- option premium paid of RM25,101,000 which was previously classified as amortisation of premium but now treated

as realised loss from sale of derivatives. - write-back of impairment in subsidiaries of RM1,413,000 previously classified as other income, now classified as

write-back of impairment losses.

Page 157: Cimb Financial Statement

223Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG Balance sheets as at 31 December 2008

the Group the Bank

note 2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

assets Cash and short-term funds (a) 6,249,125 4,013,925 - - Deposits and placements with banks and other financial institutions (b) 711,989 1,149,900 377,574 - Securities held for trading (c) 2,882,056 618,872 - - Available-for-sale securities (d) 612,378 654,874 - - Held-to-maturity securities (e) 1,198,056 95,148 - - Derivative financial instruments (f) 267,369 97,790 2,349 - Financing, advances and other loans (g) 6,259,726 2,254,224 68,268 - Other assets (h) 99,244 71,717 2,002 - Deferred tax assets (i) 21,369 16,851 307 - Amount due from related company - 5,996 - - Amount due from holding company 100,622 - - - Statutory deposits with Bank Negara Malaysia (j) 269,224 101,144 - - Goodwill (k) 136,000 136,000 - - Intangible assets (l) 5,962 9,556 - -

Property, plant and equipment (m) 3,855 3,691 - -

total assets 18,816,975 9,229,688 450,500 -

liabilities Deposits from customers (n) 13,984,562 7,520,405 291,375 - Deposits and placements of banks and other financial institutions (o) 3,656,836 600,343 156,000 - Derivative financial instruments (f) 46,452 1,408 - - Bills and acceptances payable 5,258 968 - - Other liabilities (p) 304,493 60,855 3,600 - Amount due to holding company - 335,856 - - Amount due to related company 4,010 - - -

Provision for taxation and zakat (q) 3,076 5,958 - -

total liabilities 18,004,687 8,525,793 450,975 -

equity Ordinary share capital (r) 550,000 550,000 - - Perpetual preference shares (s) 70,000 70,000 - -

Reserves (t) 192,288 83,895 (475) -

total equity 812,288 703,895 (475) -

total equity and liabilities 18,816,975 9,229,688 450,500 -

commitment and contingencies (f) 11,402,365 4,146,681 293,695 -

Page 158: Cimb Financial Statement

Annual Report 2008224

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD) income statements for the financial year ended 31 December 2008

the Group the Bank

note 2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Income derived from investment of depositors’ funds and others (u) 630,902 322,824 18,922 16,842 Income derived from investment of shareholders’ funds (v) 121,592 151,651 - 13,024 Allowances for losses on financing, advances and other loans (w) (83,481) (65,833) (1,451) (14,191) Allowances for impairment of securities (164) - - - Transfer from/(to) profit equalisation reserve 26(a) 2,200 (235) - (1,075) Other expenses directly attributable to investment of the depositors’ and

shareholders’ funds (11,012) - (11,012) -

Total distributable income 660,037 408,407 6,459 14,600 Income attributable to depositors (x) (401,092) (221,526) (6,335) (13,554)

Total net income 258,945 186,881 124 1,046 Personnel expenses (y) (47,568) (27,509) (337) (264)

Other overheads and expenditures (z) (74,661) (44,679) (143) (2,442)

Profit/(loss) before taxation and zakat 136,716 114,693 (356) (1,660) Taxation (ab) (23,756) (28,162) 307 (1,885)

Zakat (234) (70) - -

Profit/(loss) after taxation and zakat 112,726 86,461 (49) (3,545)

Total net income 258,945 186,881 124 1,046 Add: Allowances for losses on financing, advances and other loans 83,481 65,833 1,451 14,191 Less: Transfer from/(to) profit equalisation reserve (2,200) 235 - 1,075

Less: Allowances for impairment of securities 164 - - -

Income from Islamic banking operations (per page 080) 340,390 252,949 1,575 16,312

Page 159: Cimb Financial Statement

225Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD) statements of changes in equity for the financial year ended 31 December 2008

revaluation reserve Perpetual exchange available share preference statutory fluctuation for-sale retained capital shares reserve reserves securities profit total rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 the Group At 1 January 2008 550,000 70,000 39,186 (999) 303 45,405 703,895 Net gain from change in fair value of available-for-sale securities net of deferred tax - - - - (2,022) - (2,022) Currency translation difference - - - (2,311) - - (2,311) Income and expenses recognised directly in equity - - - (2,311) (2,022) - (4,333) Net profit for the financial year - - - - - 112,726 112,726

Total recognised income and expenses for the financial year - - - (2,311) (2,022) 112,726 108,393 Transfer to statutory reserve - - 36,660 - - (36,660) -

At 31 December 2008 550,000 70,000 75,846 (3,310) (1,719) 121,471 812,288

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Annual Report 2008226

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD) statements of changes in equity for the financial year ended 31 December 2008 (continued)

revaluation reserve retained Perpetual islamic exchange available profit / share preference Banking statutory fluctuation for-sale (accumulated capital shares funds reserve reserves securities losses) total rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

the Group At 1 January 2007 150,000 70,000 250,000 7,008 - 2,768 (5,084) 474,692 Issue of shares during the financial year 400,000 - - - - - - 400,000 Net gain from change in fair value of available-for-sale securities net of deferred tax - - - - - (2,465) - (2,465) Currency translation difference - - - - (999) - - (999) Income and expenses recognised directly in equity - - - - (999) (2,465) - (3,464) Net profit for the financial year - - - - - - 86,461 86,461

Total recognised income and expenses for the financial year - - - - (999) (2,465) 86,461 82,997 Transaction with shareholders - - (250,000) (2,001) - - (1,793) (253,794) Transfer to statutory reserve - - - 34,179 - - (34,179) -

At 31 December 2007 550,000 70,000 - 39,186 (999) 303 45,405 703,895

Page 161: Cimb Financial Statement

227Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD) statements of changes in equity for the financial year ended 31 December 2008 (continued)

non- distributable Distributable exchange fluctuation accumulated reserves loss total rM’000 rM’000 rM’000 Bank At 1 January 2008 - - - Currency translation difference (426) - (426)

Net loss for the financial year - (49) (49)

At 31 December 2008 (426) (49) (475)

non- distributable Distributable Malaysia islamic statutory retained Banking funds reserve profits total rM’000 rM’000 rM’000 rM’000 Bank At 1 January 2007 250,000 2,001 5,338 257,339 Net loss for the financial year - - (3,545) (3,545)

Transaction with shareholders (250,000) (2,001) (1,793) (253,794)

At 31 December 2007 - - - -

Page 162: Cimb Financial Statement

Annual Report 2008228

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD) cash flow statements for the financial year ended 31 December 2008

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

cash flows from/(used in) operating activities Profit/(loss) before taxation and zakat 136,716 114,693 (356) (1,660) Adjustments for: Depreciation of property, plant and equipment 965 957 - - Amortisation of intangible assets 3,829 1,808 - - Property, plant and equipment written-off - 143 - - Net gain from disposal of available-for-sale securities (105) (143) - - Net loss/(gain) from sale of securities held for trading 100 (366) - 184 Unrealised gain on derivative financial instruments (127,914) (96,382) (2,349) - Unrealised foreign exchange gain - (195) - - Allowance for bad and doubtful debts and financing 90,803 69,195 1,451 14,191 Unrealised (gain)/loss from revaluation of securities held for trading (95) 443 - - Accretion of discount less amortisation of premium (31,964) (16,093) - (810) Profit income from available-for-sale securities (24,433) (17,674) - (70) Profit income from held-to-maturity securities (17,847) (6,289) - (932) Transfer (from)/to profit equalisation reserve (2,200) 235 - 1,075 Impairment loss for securities 164 - - -

Bad debt written off 47 - - -

28,066 50,332 (1,254) 11,978 (increase)/decrease in operating assets Deposits and placements with banks and other financial institutions 437,912 (1,036,900) (377,574) (335,050) Securities held for trading (2,263,189) (408,933) - (39,282) Financing, advances and other loans (4,096,352) (704,947) (69,719) 33,669 Other assets (27,527) 238,853 (2,002) 1,290 Amount due from holding company (100,603) 7,010 - - Amount due from related company 5,996 - - - Statutory deposits with Bank Negara Malaysia (168,080) (26,752) - 184 increase/(decrease) in operating liabilities Deposits from customers 6,464,157 5,092,857 291,375 (32,714) Deposits and placements of banks and other financial institutions 3,056,493 (1,065,657) 156,000 215,052 Derivative financial instruments 3,379 - - - Bills and acceptances payable 4,290 968 - - Amount due to holding company (338,166) 198,212 - - Amount due to related companies 4,010 133,987 - -

Other liabilities 245,836 14,748 3,174 (129,673)

Cash flows generated from/(used in) operations 3,256,222 2,493,778 - (274,546)Taxation and zakat paid (31,366) (25,577) - -

Cash flows generated from/(used in) operating activities 3,224,856 2,468,201 - (274,546)

Page 163: Cimb Financial Statement

229Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD) cash flow statements for the financial year ended 31 December 2008 (continued)

the Group the Bank

note 2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

cash flows from/(used in) investing activities Net proceeds from held-to-maturity securities (1,071,108) 100,217 - - Net purchase of available-for-sale securities 40,555 (447,790) - - Profit income from held-to-maturity securities 17,847 6,289 - 932 Profit income from available-for-sale securities 24,433 17,674 - 70 Purchase of property, plant and equipment (1,105) (3,175) - -

Purchase of intangible assets (278) (1,042) - -

Net cash (used in)/generated from investing activities (989,656) (327,827) - 1,002

cash flows from financing activities Issuance of share capital - 400,000 - -

Payment to holding company - (389,794) - (296)

Net cash generated from/(used in) financing activities - 10,206 - (296)

net increase/(decrease) in cash and cash equivalents 2,235,200 2,150,580 - (273,840) cash and cash equivalents at beginning of

financial year 4,013,925 1,863,345 - 273,840

cash and cash equivalents at end of financial year 6,249,125 4,013,925 - -

cash and cash equivalents comprise:

cash and short-term funds (a) 6,249,125 4,013,925 - -

Page 164: Cimb Financial Statement

Annual Report 2008230

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(a) cash and short-term funds

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Cash and balances with banks and other financial institutions 222,123 184,405 - - Money at call and deposit placements maturing within one month 6,027,002 3,829,520 - -

6,249,125 4,013,925 - -

(b) Deposits and placements with banks and other financial institutions the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Licensed banks 511,989 249,900 377,574 - Bank Negara Malaysia - 900,000 - - Other financial institutions 200,000 - - -

711,989 1,149,900 377,574 -

(c) securities held for trading the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Money market instruments unquoted Government Investment Issues 14,649 28,942 - - Khazanah bonds 9,791 72,589 - - Bank Negara Malaysia negotiable notes - 218,165 - - Malaysian Government Treasury Bills - 29,742 - - Negotiable instruments of deposits 2,243,818 19,581 - - Bankers’ acceptance and Islamic accepted bills 578,421 205,128 - - Islamic commercial papers 19,666 24,306 - - unquoted securities In Malaysia Islamic debt securities 15,711 20,419 - -

2,882,056 618,872 - -

During the financial year, the Bank had reclassified certain held for trading securities to held-to-maturity category. The reclassification has been accounted for in accordance with the BNM circular on ‘Reclassification of Securities under Specific Circumstances’ issued during the year, and is effective from 1 July 2008 until 31 December 2009.

Page 165: Cimb Financial Statement

231Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(c) securities held for trading (continued) The fair values of the securities reclassified from held for trading category to held-to-maturity category, as of the respective

dates of reclassification are RM38 million.

Included in the other operating income (Note u & v) is the net gains/(losses) arising from the change in fair value recognised in the income statement in respect of the reclassified securities:

2008 2007 rM’000 rM’000

Net fair value gain/(loss) 894 (78)

As of date of reclassification, the effective profit rates on the reclassified held for trading securities, based on the new cost is an average of 5.36% per annum with expected recoverable cash flows of approximately RM40 million in face value inclusive of coupon receivable on the securities.

(d) available-for-sale securities the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Money market instruments unquoted Government Investment Issues 121,237 114,185 - - Islamic Cagamas bonds 48,914 34,420 - - Khazanah bonds 48,585 65,782 - - unquoted securities in Malaysia Other Government securities - 50,003 - - Private debt securities 393,067 389,909 - - Placement with Islamic Banking and Finance Institute Malaysia 575 575 - -

612,378 654,874 - -

Page 166: Cimb Financial Statement

Annual Report 2008232

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(e) held-to-maturity securities

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

unquoted securities Islamic commercial papers 34,832 - - - Private debt securities 1,168,385 98,644 - -

1,203,217 98,644 - - Amortisation of premium less accretion of discounts (4,997) (3,496) - -

1,198,220 95,148 - - accumulated impairment losses Private debt securities (164) - - -

1,198,056 95,148 - -

Private debt securities amounting to RM954 million are funded by a Restricted Profit Sharing Investment Account (“RPSIA”)

depositor, as part of an arrangement with the Bank.

Included in the held-to-maturity securities are securities transferred from securities held for trading category during the financial year, with the following carrying value and fair value as at 31 December 2008 (2007: no such reclassification permitted):

2008 2007 rM’000 rM’000

Carrying value 37,430 -

Fair value 37,609 -

(f) Derivative financial instruments, commitments and contingencies(i) Derivative financial instruments

The following tables summarise the contractual or underlying principal amounts of derivative financial instruments held at fair value through income statement and hedging purposes. The principal or contractual amounts of these instruments reflect the volume of transactions outstanding at balance sheet date, and do not represent amounts at risk.

In the financial statements, trading derivative financial instruments are revalued on a gross position basis and the unrealised gains or losses are reflected in “Derivative financial instruments” Assets and Liabilities respectively.

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(f) Derivative financial instruments, commitments and contingencies (continued)

(i) Derivative financial instruments (continued)

2008 2007 Fair values Fair values

Principal assets liabilities Principal assets liabilities the Group rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

Foreign exchange derivative Currency forward 652,126 106 - 4,593 43 - Currency swaps 313,695 2,349 (3,480) 107,827 - (38) 965,821 2,455 (3,480) 112,420 43 (38) Profit rate derivatives Profit rate swaps 3,471,419 222,386 (437) 1,751,410 97,747 (1,370) equity derivatives Equity options 3,746,677 42,528 (42,535) - - -

total derivative assets/(liabilities) 8,183,917 267,369 (46,452) 1,863,830 97,790 (1,408)

2008 2007 Fair values Fair values

Principal assets liabilities Principal assets liabilities the Bank rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

Foreign exchange derivative Currency swaps 293,695 2,349 - - - -

total derivative assets 293,695 2,349 - - - -

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(f) Derivative financial instruments, commitments and contingencies (continued)

(ii) commitments and contingencies In the normal course of business, the Group and the Bank make various commitments and incur certain contingent

liabilities with legal recourse to their customers. No material losses are anticipated as a result of these transactions.

The commitments and contingencies constitute the following:

2008 2007 risk risk credit weighted credit weighted Principal equivalent* amount Principal equivalent* amount the Group rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

credit related Direct credit substitutes 35,057 35,057 35,057 38,247 38,247 38,247 Certain transaction-related contingent items 381,536 190,768 113,978 190,777 95,389 95,389 Short-term self-liquidating trade-related contingencies 147,568 29,514 3,042 269,577 53,915 53,915 Obligation under underwriting agreements 50,000 25,000 25,000 50,000 25,000 25,000 Islamic financing sold directly and indirectly to Cagamas with recourse 294,946 294,946 294,946 575,918 575,918 575,918 Irrevocable commitments to extend credit: - maturity not exceeding one year 1,716,834 - - 908,605 - - - maturity exceeding one year 586,343 293,172 76,963 247,913 123,956 116,708 Forward asset purchase 5,000 - - - - - Miscellaneous commitments and contingencies 1,164 1,164 1,164 1,814 1,814 1,814

Total credit-related commitments and contingencies 3,218,448 869,621 550,150 2,282,851 914,239 906,991

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(f) Derivative financial instruments, commitments and contingencies (continued)

(ii) commitments and contingencies (continued)

2008 2007 risk risk credit weighted credit weighted Principal equivalent* amount Principal equivalent* amount the Group rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

treasury related Foreign exchange related contracts: - less than one year 652,126 12,384 3,531 112,420 2,082 450 - five years and above 313,695 10,742 2,883 - - - Profit rate related contracts: - one year to less than five years 3,471,419 124,245 24,849 1,751,410 37,711 7,542 Equity related contracts: - less than one year 2,176,832 38,957 7,791 - - - - one year to less than five years 1,540,947 206,296 41,259 - - - - five years and above 28,898 1,484 297 - - -

Total treasury-related commitments and contingencies 8,183,917 394,108 80,610 1,863,830 39,793 7,992

11,402,365 1,263,729 630,760 4,146,681 954,032 914,983

2008 2007 risk risk credit weighted credit weighted Principal equivalent* amount Principal equivalent* amount the Bank rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

treasury related Foreign exchange related contracts: - five years and above 293,695 6,792 1,358 - - -

293,695 6,792 1,358 - - -

* The credit equivalent amount is arrived at using the credit conversion factors as per Bank Negara Malaysia guidelines. Effective 1 October 2008, the following approaches have been adopted for the computation of the credit equivalent and risk-weighted assets:- adoption of bilateral netting as provided under the Standardised Approach Framework which involves the

weighting of net claims rather than gross claims with the same counterparties arising out of the full range of forwards, swaps, options and similar derivative contracts.

- Irrevocable commitments to extend credit (undrawn loans) have been revised to include only those undrawn loans whereby all conditions precedent have been met.

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(g) Financing, advances and other loans

(i) By type: the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Cash line 235,945 125,348 - - Term financing - Housing financing 2,031,304 764,085 - - - Syndicated term financing 559,285 571,723 69,449 - - Hire purchase receivables 2,030,346 1,485,856 - - - Other term financing 4,096,445 620,327 - - Bills receivable - 32 - - Trust receipts 23,887 5,552 - - Claim on customers under acceptance credit 156,709 89,803 - - Staff financing 17 44 - - Revolving credits 422,299 117,160 - - Other financing 3,054 - - -

9,559,291 3,779,930 69,449 - Less: Unearned income (2,824,630) (806,002) - -

6,734,661 2,973,928 69,449 - Less: Financing sold to Cagamas (294,946) (575,918) - -

Gross financing, advances and other loans 6,439,715 2,398,010 69,449 - Less: Specific allowance (99,374) (94,904) - -

6,340,341 2,303,106 69,449 - Less: General allowance (80,615) (48,882) (1,181) -

Total net financing, advances and other loans 6,259,726 2,254,224 68,268 -

Included in financing, advances and other loans of the Group are exposures to Restricted Profit Sharing Investment

Accounts (“RPSIA”), as part of an arrangement between CIMB Islamic and CIMB Bank. CIMB Bank is exposed to risks and rewards on RPSIA financing and will account for all the general and specific allowances for bad and doubtful debts arising thereon. As at 31 December 2008, the gross exposures to RPSIA financing is RM1,893 million (2007: RMNil) and the general allowance relating to this RPSIA is RM32 million(2007: RMNil).

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237Annual Report 2008

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(g) Financing, advances and other loans (continued)

(ii) By contract: the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Bai-Bithaman Ajil (deferred payment sale) 3,530,591 1,252,765 - - Murabahah 488,572 22,706 69,449 - Al-Ijarah 2,080,452 1,633,900 - - Others 635,046 64,557 - -

6,734,661 2,973,928 69,449 - Less: Financing sold to Cagamas (294,946) (575,918) - -

6,439,715 2,398,010 69,449 -

(iii) By type of customer: the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Domestic non-bank financial institutions 1,454 1,597 - - Domestic business enterprises - small medium enterprises 579,945 253,504 - - - others 2,896,762 837,031 - - Government and statutory bodies 8,231 - - - Individuals 2,929,412 1,639,624 - - Other domestic entities 19,993 8,814 - - Foreign entities 298,864 233,358 69,449 -

6,734,661 2,973,928 69,449 - Less: Financing sold to Cagamas (294,946) (575,918) - -

6,439,715 2,398,010 69,449 -

(iv) By profit rate sensitivity: the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Fixed rate - House financing 343,427 355,183 - - - Hire-purchase receivables 1,639,046 1,224,507 - - - Other financing 1,437,004 837,070 - -

Variable rate - House financing 390,663 - - - - Others 2,924,521 557,168 69,449 -

6,734,661 2,973,928 69,449 - Less: Financing sold to Cagamas (294,946) (575,918) - -

6,439,715 2,398,010 69,449 -

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(g) Financing, advances and other loans (continued)

(v) By economic purposes: the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Personal use 519,960 35,394 - - Credit card 2,980 - - - Purchase of consumer durables 1,626 163 - - Residential property 779,572 385,012 - - Non residential property 661,912 174,444 - - Purchase of fixed assets other than land and building 167,293 11,241 - - Construction 33,700 5,622 - - Purchase of securities 1,417,806 214,276 - - Purchase of transport vehicles 1,643,861 1,224,506 - - Working capital 1,257,678 870,718 - - Other purpose 248,273 52,552 69,449 -

6,734,661 2,973,928 69,449 - Less: Financing sold to Cagamas (294,946) (575,918) - -

6,439,715 2,398,010 69,449 -

(vi) non-performing financing by economic purposes: the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Personal use 21,854 11,955 - - Residential property 55,621 60,811 - - Non residential property 15,770 38,008 - - Purchase of fixed assets other than land and building 1,620 - - - Purchase of securities 18,672 18,667 - - Purchase of transport vehicles 40,063 67,235 - - Working capital 46,291 53,822 - - Other purpose 1,577 1,009 - -

201,468 251,507 - -

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(g) Financing, advances and other loans (continued)

(vii) Movements in non-performing financing, advances and other loans are as follows: the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

At 1 January 251,507 255,036 - 255,032 Non-performing during the financial year 167,038 141,081 - 15,443 Reclassified to performing during the financial year (132,282) (70,209) - - Recoveries (30,441) (19,307) - - Amount written off (54,354) (55,094) - - Disposal of Islamic banking operations to CIMB Islamic - - - (270,475)

At 31 December 201,468 251,507 - - Less: Specific allowance (99,374) (94,904) - -

Net non-performing financing, advances and other loans 102,094 156,603 - -

Ratio of net non-performing financing, advances and other loans to total financing, advances and other loans (including financing sold to Cagamas) less specific allowance 1.54% 5.44% - -

(viii) Movements in allowance for bad and doubtful financing:

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

specific allowance At 1 January 94,904 90,800 - 90,800 Allowance made during the financial year 99,584 80,712 - 14,191 Amount written back in respect of recoveries (40,608) (19,106) - - Amount written off (54,506) (57,502) - - Disposal of Islamic banking operations to CIMB Islamic - - - (104,991)

At 31 December 99,374 94,904 - -

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(g) Financing, advances and other loans (continued)

(viii) Movements in allowance for bad and doubtful financing: (continued) the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

General allowance At 1 January 48,882 41,485 - 33,800 Net allowance made during the financial year 31,827 7,589 1,451 - Exchange fluctuation (94) (192) (270) - Disposal of Islamic banking operations to CIMB Islamic - - - (33,800)

At 31 December 80,615 48,882 1,181 -

As % of gross financing, advances and other loans (including financing sold to Cagamas, but excluding RPSIA financing) less specific allowance 1.70% 1.70% 1.70% -

(h) other assets

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Income receivable 23,438 26,582 170 - Deposits and prepayments 309 430 - - Sundry debtors 75,497 44,705 1,832 -

99,244 71,717 2,002 -

(i) Deferred taxation 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, are offset and shown in the balance sheet:

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Deferred tax assets 22,912 18,235 307 - Deferred tax liabilities (1,543) (1,384) - -

21,369 16,851 307 -

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241Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(i) Deferred taxation (continued) The movements in deferred tax assets and liabilities during the financial year comprise the following: General revaluation allowance reserves- unutilised for bad and accelerated available- other tax doubtful tax for-sale temporary losses financing depreciation securities differences total the Group note rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 Deferred tax assets/(liabilities) 2008 At 1 January 2008 - 10,061 (1,384) 549 7,625 16,851 Credited/(charged) to income statement (ab) - 7,576 (159) - (2,923) 4,494 Transferred from equity - - - 24 - 24

At 31 December 2008 - 17,637 (1,543) 573 4,702 21,369

Deferred tax assets/(liabilities) 2007 At 1 January 2007 2,298 9,231 (194) (1,024) 3,765 14,076 Credited/(charged) to income statement (ab) (2,298) 830 (1,190) - 3,860 1,202 Transferred from equity - - - 1,573 - 1,573

At 31 December 2007 - 10,061 (1,384) 549 7,625 16,851

General allowance for bad and other doubtful temporary financing differences totalthe Bank rM’000 rM’000 rM’000

Deferred tax assets/(liabilities) 2008 At 1 January/31 December 2008 307 - 307 2007 At 1 January 2007 9,126 2,967 12,093 Disposal of Islamic banking operations to CIMB Islamic (9,126) (2,967) (12,093)

At 31 December 2007 - - -

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(j) statutory deposits with Bank negara Malaysia The non-profit bearing statutory deposits are maintained with Bank Negara Malaysia in compliance with Section 37(1)(c)

of the Central Bank of Malaysia Act, 1958 (revised 1994), the amounts of which are determined at set percentages of total eligible liabilities.

(k) Goodwill Group

2008 2007 rM’000 rM’000

cost At 1 January 136,000 - Arising from acquisition of Islamic Banking operations of CIMB Bank - 136,000

at 31 December 136,000 136,000

Goodwill is wholly allocated to the retail banking cash-generating unit(‘CGU’). The CGU does not carry any intangible

assets with indefinite useful lives.

The recoverable amount of CGU which are not classified as held for sale is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on the 2009 financial budgets approved by Board of Directors, projected for 5 years based on the average to year historical Gross Domestic Product (“GDP”) growth of the country covering a five year period, revised for current economic conditions. Cash flows beyond the five-year period are extrapolated using an estimated growth rate of 5.00%. The cash flow projections are derived based on a number of key factors including the past performance and management’s expectation of market developments. The discount rate used in determining the recoverable amount of the CGUs is 9.80%. The discount rate is pre-tax and reflects the specific risks relating to the CGUs.

(l) intangible assets

Group

2008 2007 rM’000 rM’000

computer software cost At 1 January 11,626 4,597 Additions 278 1,042 Reclassified (to)/from property, plant and equipment (842) 5,987 Transfer of assets to holding company (19) -

At 31 December 11,043 11,626

amortisation At 1 January 2,070 262 Charge for the financial year 3,829 1,808 Reclassified (to)/from property, plant and equipment (818) -

At 31 December 5,081 2,070

net book value at 31 December 5,962 9,556

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243Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(m) Property, plant and equipment

renovations, office equipment, computer furniture equipment Motor and fittings and software vehicles total the Group rM’000 rM’000 rM’000 rM’000 2008 cost At 1 January 4,804 21 302 5,127 Additions 1,105 - - 1,105 Reclassified from intangible assets 842 - - 842

At 31 December 6,751 21 302 7,074

Depreciation At 1 January 1,328 5 103 1,436 Charge for the financial year 946 4 15 965 Reclassified from intangible assets 818 - - 818

At 31 December 3,092 9 118 3,219

net book value at 31 December 2008 3,659 12 184 3,855

2007 cost At 1 January 7,766 14 302 8,082 Additions 3,168 7 - 3,175 Write-off (143) - - (143) Reclassified to intangible assets (5,987) - - (5,987)

At 31 December 4,804 21 302 5,127

Depreciation At 1 January 412 2 65 479 Charge for the financial year 916 3 38 957

At 31 December 1,328 5 103 1,436

net book value at 31 December 2007 3,476 16 199 3,691

The above property, plant and equipment include renovations and computer equipment and software under construction

at cost of RM659,000 (2007: RM141,000).

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(n) Deposits from customers

(i) By type of deposits the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Non-Mudharabah Demand deposits 1,897,477 312,399 17 - Saving deposits 301,675 133,613 - - Fixed return investment account 1,840,535 1,159,860 291,358 - Negotiable instruments of deposit 242,975 201,826 - - Commodity Murabahah-i 379,480 - - - Others 303,680 620 - -

4,965,822 1,808,318 291,375 -

Mudharabah Demand deposits 398,731 126,719 - - Saving deposits 92,856 32,007 - - General investment deposits (inclusive of Special General investment deposits of RM5,254,880,000 (2007: RM3,869,386,000)) 6,780,540 4,682,656 - - Specific investment deposit 1,746,613 870,705 - -

9,018,740 5,712,087 - -

13,984,562 7,520,405 291,375 -

(ii) By type of customer

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Government and statutory bodies 3,279,854 1,657,849 - - Business enterprises 7,940,207 3,956,886 - - Individuals 2,125,845 1,129,078 784 - Others 638,656 776,592 290,591 -

13,984,562 7,520,405 291,375 -

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245Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(o) Deposits and placements of banks and other financial institutions

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Mudharabah Licensed Islamic banks 64,809 100,000 - - Licensed banks 3,074,907 500,343 154,072 - Licensed investment banks 200,300 - - - Other financial institutions 316,820 - 1,928 -

3,656,836 600,343 156,000 -

(p) other liabilities

the Group the Bank

2008 2007 2008 2007 note rM’000 rM’000 rM’000 rM’000

Income payable 38,412 24,545 3,600 - Profit equalisation reserve (i) - 2,200 - - Amount due to Head office 17,073 - - - Accruals and other payables 249,008 34,110 - -

304,493 60,855 3,600 -

(i) Profit equalisation reserve the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

At 1 January 2,200 1,965 - 242 Provided during the financial year - 28,879 - 1,075 Written-back during the financial year (2,200) (28,644) - - Disposal of Islamic banking operations to CIMB Islamic - - - (1,317)

- 2,200 - -

The shareholders’ portion of the profit equalisation reserve of the Group and the Bank is RMNil (2007: RM217,360) and RMNil (2007: RMNil) respectively.

(ii) Defined contribution plan The Bank contributes to the Employee Provident Fund (“EPF”), the national defined contribution plan. Once the

contribution has been paid, the Bank has no further payment obligations.

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(q) Provision for taxation and zakat

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Taxation 3,076 5,779 - - Zakat - 179 - -

3,076 5,958 - -

(r) ordinary share capital the Group

2008 2007 rM’000 rM’000

authorised ordinary shares of rM1.00 each: At 1 January/31 December 900,000 900,000

issued and fully paid ordinary shares of rM1.00 each: At 1 January 550,000 150,000 Issued during the financial year - 400,000

At 31 December 550,000 550,000

(s) Perpetual preference shares the Group

2008 2007 rM’000 rM’000

authorised Perpetual preference shares of rM1.00 each At 1 January/31 December 100,000 100,000

issued and fully paid Perpetual preference shares of rM1.00 each At 1 January/31 December 70,000 70,000

(t) reserves(a) The statutory reserve is maintained in compliance with Section 15 of the Islamic Banking Act, 1983 and is not

distributable as cash dividends.

(b) Revaluation reserve of available-for-sale securities comprises gains and losses arising from changes in the fair value of available-for-sale securities. The depositors’ portion of unrealised gains on available-for-sale securities of the Group at the end of the financial year is RM1,618,000 (2007: RM1,418,000).

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247Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(u) income derived from investment of depositors’ funds and others

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Income derived from investment of (i) General investment deposits 412,327 224,109 18,922 2,084 (ii) Specific investment deposits 83,948 24,947 - - (iii) Other deposits 134,627 73,768 - 14,758

630,902 322,824 18,922 16,842

(i) income derived from investment of general investment deposits

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Financing, advances and other loans 175,551 113,919 4,014 1,828 Securities held for trading 7,242 1,035 - 16 Available-for-sale securities 18,219 12,829 - 70 Held-to-maturity securities 4,640 3,926 - - Money at call and deposits with financial institutions 166,462 73,154 6,237 109 Others 9,168 - 6,322 -

381,282 204,863 16,573 2,023 Accretion of discount less amortisation of premium 23,381 11,118 - 57

404,663 215,981 16,573 2,080

Other operating income - Net (loss)/gain from sale of securities held for trading (37) 309 - (13) - Net gain from sale of available-for sale securities 78 105 - - - Net unrealised loss on revaluation of security held for trading (164) (277) - - - Net gain from derivative instruments 2,349 - 2,349 - - Net gain from foreign exchange transactions 1,761 126 - -

3,987 263 2,349 (13) Fee and commission income 3,677 6,792 - - Sundry income - 1,073 - 17

412,327 224,109 18,922 2,084

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(u) income derived from investment of depositors’ funds and others (continued)

(ii) income derived from specific investment deposits the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Financing, advances and other loans 21,309 1,696 - - Money at call and deposit with financial institutions 51,004 23,251 - - Held-to-maturity securities 11,635 - - -

83,948 24,947 - -

(iii) income derived from investment of other deposits

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Financing, advances and other loans 79,611 43,966 - 12,958 Securities held for trading 1,883 591 - 111 Available-for-sale securities 4,543 3,126 - - Held-to-maturity securities 1,146 1,397 - 495 Money at call and deposits with financial institutions 39,251 19,387 - 771

126,434 68,467 - 14,335 Accretion of discount less amortisation of premium 6,476 3,125 - 400

132,910 71,592 - 14,735 Other operating income - Net (loss)/gain from sale of securities held for trading (8) 15 - (91) - Net gain from sale of available-for-sale securities 20 22 - - - Net unrealised gain/(loss) on revaluation of securities held for trading 227 (51) - - - Net gain from foreign exchange transactions 488 54 - -

727 40 - (91) Fee and commission income 990 1,753 - 49 Sundry income - 383 - 65

134,627 73,768 - 14,758

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249Annual Report 2008

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Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(v) income derived from investment of shareholders’ funds

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Financing, advances and other loans 17,083 26,525 - 11,434 Securities held for trading 658 178 - 98 Available-for-sale securities 1,671 1,719 - - Held-to-maturity securities 426 966 - 437 Money at call and deposits with financial institutions 14,633 10,727 - 681 Others 150 - - -

34,621 40,115 - 12,650 Accretion of discount less amortisation of premium 2,107 1,850 - 353

36,728 41,965 - 13,003

Other operating income - Net (loss)/gain from sale of securities held for trading (55) 42 - (80) - Net gain from sale of available-for sale securities 7 16 - - - Net gain/(loss) from derivative financial instruments - Realised loss (69,389) (50,696) - - - Unrealised gain 125,565 96,382 - - - Unrealised gain/(loss) on revaluation of securities held for trading 32 (115) - - - Net gain from foreign exchange transactions 154 15 - -

56,314 45,644 - (80)

Fee and commission income 28,428 63,825 - 43 Sundry income 122 217 - 58

121,592 151,651 - 13,024

Page 184: Cimb Financial Statement

Annual Report 2008250

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(w) allowances for losses on financing, advances and other loans

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Allowance for bad and doubtful debts and financing: (i) Specific allowance - made during the financial year 99,584 80,712 - 14,191 - written back the financial year (40,608) (19,106) - - (ii) General allowance - made during the financial year 31,827 7,589 1,451 - Bad debts on financing: - recovered (7,369) (3,362) - - - written off 47 - - -

83,481 65,833 1,451 14,191

(x) income attributable to depositors

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Deposits from customers - Mudharabah 242,733 187,950 - 13,554 - Non-Mudharabah 94,386 13,548 - - Deposits and placements of banks and other financial institutions - Mudharabah 46,040 16,182 - - - Non-Mudharabah 17,933 3,846 6,335 -

401,092 221,526 6,335 13,554

(y) Personnel expenses

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Wages and salaries 7,366 6,221 - 264 Allowances and bonuses 6,263 4,135 288 - Personnel expenses charged by CIMB Bank Berhad 28,822 15,592 - - Other staff related costs 5,117 1,561 49 -

47,568 27,509 337 264

Included in the personnel costs are fees paid to the Shariah Committee’s members amounting to RM361,000 (2007: RM361,000).

Page 185: Cimb Financial Statement

251Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(z) other overheads and expenditures

the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

establishment Rental 1,768 1,196 - - Depreciation of property, plant and equipment 965 957 - - Repairs and maintenance 271 2,366 - - Overheads charged by CIMB Bank Berhad 17,675 6,494 - - EDP expenses 3,230 8,196 - - Insurance 268 266 - - Others 2,771 1,691 - - Promotion Advertisement and publicity 13,573 2,282 - 10 Handling fees 8,333 1,427 - - Promotion costs charged by CIMB Bank Berhad 2,751 1,688 - 279 Others 4,509 666 - - General expenses Auditor’s remuneration - statutory audit 104 90 - - Amortisation of intangible assets 3,829 1,808 - - General expenses charged by CIMB Bank Berhad 848 8,768 - - Legal and professional fees 788 486 - 13 Communication 1,005 90 - - Incidental expenses on banking operations 5,565 2,297 - - Brokerage fees and commissions 3,648 894 - - Others 2,760 3,017 143 2,140

74,661 44,679 143 2,442

Page 186: Cimb Financial Statement

Annual Report 2008252

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(aa) significant related party transactions and balances The related parties of, and their relationship with the Group and Bank, are disclosed in Note 42.

other key Parent related management company companies personnel 2008 rM’000 rM’000 rM’000 income Profit income on deposits and placements with banks and other financial institution 2,498 3,304 - expenditure Profit expense on deposits and placements of banks and other financial institution 45,952 9,127 - Profit expense on deposits and placements of customers 43,363 11,863 36 Security services - 177 -

amounts due from Current accounts, deposits and placements with banks and other financial institutions 207,870 2,500 - Others 552 - - amounts due to Deposits from customers - 27,533 1,826 Deposits and placements of banks and other financial institutions 3,381,584 265,192 - Profit expense on deposits from customers - 10 7 Profit expense on deposits and placements of banks and other financial institution 4,040 929 - Outsourced back-office processing 8,091 - -

Page 187: Cimb Financial Statement

253Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(aa) significant related party transactions and balances (continued)

other key Parent related management company companies personnel 2007 rM’000 rM’000 rM’000 income Profit income on deposits and placements with banks and other financial institution - 674 - expenditure Profit expense on deposits and placements of banks and other financial institution 9,888 214 - Profit expense on deposits and placements of customers - - 28 Outsourced back-office processing 28,828 2,922 - Security services - 139 -

amounts due from Current accounts, deposits and placements with banks and other financial institutions 146,227 4,900 - Others 16,246 5,996 - amounts due to Deposits from customers 374,343 - 2,045 Deposits and placements of banks and other financial institutions - 126,000 - Profit expense on deposits from customers 805 - - Profit expense on deposits and placements of banks and other financial institutions - 44 - Outsourced back-office processing 9,360 - -

Transactions with other related parties are aggregated because these transactions are similar in nature and no single transaction with these parties is significant enough to warrant separate disclosure.

Key management compensation and credit transaction and exposures with connected parties are disclosed in Note 42.

(ab) taxation the Group the Bank

2008 2007 2008 2007 rM’000 rM’000 rM’000 rM’000

Taxation based on the profit for the financial year: - Malaysian income tax 28,250 29,364 - 1,885 Deferred taxation (Note i) (4,494) (1,202) (307) -

23,756 28,162 (307) 1,885

Page 188: Cimb Financial Statement

Annual Report 2008254

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59

th

e o

Pe

ra

tio

ns

oF

isla

Mic

Ba

nk

inG

(co

nt

inu

eD

)(a

c) P

rofi

t ra

te r

isk

Th

e ta

bles

bel

ow s

umm

aris

e th

e G

roup

’s a

nd t

he B

ank’

s ex

posu

re t

o ra

te o

f re

turn

ris

k. In

clud

ed in

the

tab

les

are

the

Gro

up’s

and

the

Ban

k’s

asse

ts a

nd li

abilit

ies

at t

heir

full

carr

ying

am

ount

s, c

ateg

oris

ed b

y th

e ea

rlier

of c

ontr

actu

al r

epric

ing

or m

atur

ity d

ates

. A

s m

arke

t ra

tes

and

yiel

d cu

rves

cha

nge

over

tim

e, t

he G

roup

and

the

Ban

k m

ay b

e ex

pose

d to

loss

in e

arni

ngs

due

to t

he e

ffect

s of

mar

ket

rate

s on

the

str

uctu

re o

f the

ba

lanc

e sh

eets

. S

ensi

tivity

to

mar

ket

rate

s ar

ises

from

mis

mat

ches

in t

he r

epric

ing

date

s, c

ash

flow

s an

d ot

her

char

acte

ristic

s of

the

ass

ets

and

thei

r co

rres

pond

ing

liabi

litie

s fu

ndin

g.

the

Gro

up

non

-tra

ding

boo

k

up

to 1

>1

– 3

>3

– 6

>6

– 1

2 >1

– 5

o

ver

5 n

on-p

rofit

tr

adin

g

mon

th

mon

ths

mon

ths

mon

ths

year

s ye

ars

sens

itive

bo

ok

tota

l20

08

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

r

M’0

00

rM

’000

ass

ets

Cas

h an

d sh

ort-

term

fund

s 6

,027

,002

-

-

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-

-

2

22,1

23

-

6,2

49,1

25

Dep

osits

and

pla

cem

ents

w

ith b

anks

and

oth

er

finan

cial

inst

itutio

ns

116

,700

3

00,2

89

245

,000

5

0,00

0

-

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-

-

711

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S

ecur

ities

hel

d fo

r tr

adin

g -

-

-

-

-

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2,

882,

056

2,

882,

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ilabl

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r-sa

le s

ecur

ities

5

,000

-

2

5,05

5

54,

380

3

06,8

32

220

,536

5

75

-

612

,378

H

eld-

to-m

atur

ity s

ecur

ities

8

92,8

84

69,

664

8

,708

1

7,41

6

106

,390

1

02,9

94

-

-

1,1

98,0

56

Der

ivat

ive

finan

cial

in

stru

men

ts

-

-

-

-

-

-

-

26

7,36

9

267

,369

Fi

nanc

ing,

adv

ance

s an

d

othe

r lo

ans

-

Per

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1,8

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910

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9

8,19

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9 O

ther

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ets

-

-

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99,

244

-

9

9,24

4 D

efer

red

taxa

tion

-

-

-

-

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-

21,

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-

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9 S

tatu

tory

dep

osits

with

Ban

k

Neg

ara

Mal

aysi

a -

-

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-

2

69,2

24

-

269

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mou

nt d

ue fr

om h

oldi

ng

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pany

-

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-

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1

00,6

22

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100

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tang

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-

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5,9

62

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dwill

-

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136

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-

1

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00

Pro

pert

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eq

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3,8

55

-

3,8

55

tota

l ass

ets

8,8

96,0

04

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80,7

06

376

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1

85,1

38

1,2

03,1

37

2,8

42,1

09

883

,501

3,

149,

425

18,

816,

975

Page 189: Cimb Financial Statement

255Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59

th

e o

Pe

ra

tio

ns

oF

isla

Mic

Ba

nk

inG

(co

nt

inu

eD

)(a

c) P

rofi

t ra

te r

isk

(co

ntin

ued

)

th

e G

roup

non

-tra

ding

boo

k

up

to 1

>1

– 3

>3

– 6

>6

– 1

2 >1

– 5

o

ver

5 n

on-p

rofit

tr

adin

g

mon

th

mon

ths

mon

ths

mon

ths

year

s ye

ars

sens

itive

bo

ok

tota

l20

08

rM

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r

M’0

00

rM

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r

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00

rM

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r

M’0

00

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r

M’0

00

rM

’000

liab

iliti

es

Dep

osits

from

cus

tom

ers

7,6

15,4

06

3,4

44,2

57

704

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2

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32

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1

9,00

8

- 1

3,98

4,56

2 D

epos

its a

nd p

lace

men

ts o

f

bank

s an

d ot

her

finan

cial

in

stitu

tions

2

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1

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-

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-

3

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eriv

ativ

e fin

anci

al

inst

rum

ents

-

-

-

-

-

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-

4

6,45

2

46,

452

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and

acc

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pa

yabl

e 1

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1

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1

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-

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5

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s -

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93

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co

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-

-

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rovi

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for

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za

kat

-

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76

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tota

l lia

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ap

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^ In

clud

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peci

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llow

ance

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ce o

f RM

179,

989,

000.

Page 190: Cimb Financial Statement

Annual Report 2008256

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59

th

e o

Pe

ra

tio

ns

oF

isla

Mic

Ba

nk

inG

(co

nt

inu

eD

)(a

c) P

rofi

t ra

te r

isk

(co

ntin

ued

)

th

e G

roup

non

-tra

ding

boo

k

up

to 1

>1

– 3

>3

– 6

>6

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2 >1

– 5

o

ver

5 n

on-p

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tr

adin

g

mon

th

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ths

mon

ths

mon

ths

year

s ye

ars

sens

itive

bo

ok

tota

l20

07

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r

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ass

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1

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05

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25

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338

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9

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Page 191: Cimb Financial Statement

257Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59

th

e o

Pe

ra

tio

ns

oF

isla

Mic

Ba

nk

inG

(co

nt

inu

eD

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c) P

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te r

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th

e G

roup

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k

up

to 1

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th

mon

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mon

ths

mon

ths

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ok

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6

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^ In

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peci

fic a

llow

ance

s an

d ge

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l allo

wan

ce o

f RM

143,

786,

000.

Page 192: Cimb Financial Statement

Annual Report 2008258

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59

th

e o

Pe

ra

tio

ns

oF

isla

Mic

Ba

nk

inG

(co

nt

inu

eD

)(a

c) P

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t ra

te r

isk

(co

ntin

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th

e B

ank

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ding

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k

up

to 1

>1

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2 >1

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ver

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adin

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mon

th

mon

ths

mon

ths

mon

ths

year

s ye

ars

sens

itive

bo

ok

tota

l20

08

rM

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Page 193: Cimb Financial Statement

259Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(ac) Profit rate risk (continued) The tables below summarises the effective average profit rates for each class of financial asset and financial liability: the Group the Group the Bank 2008 2007 2008 % % % Myr usD sGD Myr usD usD sGD Financial assets Cash and short-term funds 3.03 2.55 - 3.55 - - - Deposits and placements with banks and other financial institutions 2.63 2.80 1.81 3.54 - 2.78 1.81 Securities held for trading 3.50 - - 3.62 - - - Available-for-sale securities 4.48 - - 4.25 5.39 - - Securities held-to-maturity 5.23 - - 4.88 - - - Financing, advances and other financing 5.86 4.34 - 5.76 5.96 4.07 - Financial liabilities Deposits from customers 2.52 1.29 0.93 3.30 4.95 - 0.93 Deposits and placements of banks and other financial institutions 2.34 2.17 - 3.21 - 2.67 -

Page 194: Cimb Financial Statement

Annual Report 2008260

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59

th

e o

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Page 195: Cimb Financial Statement

261Annual Report 2008

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59

th

e o

Pe

ra

tio

ns

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nk

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(co

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Page 196: Cimb Financial Statement

Annual Report 2008262

CIMB Bank Berhad(13491-P)

Notes to the Financial StatementsFor the financial year ended 31 December 2008

59 the oPerations oF islaMic BankinG (continueD)(ad) credit risk (continued)

the Bank

2008

short term treasury

funds and Financing, credit related related

placements Derivative advances total commitments commitments

with financial financial and other other on-balance and and

institutions instruments loans assets sheet contingencies contingencies

rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

Finance, insurance and

business services 290,053 2,349 - - 292,402 - -

Others 87,521 - 69,449 2,002 158,972 - 6,792

377,574 2,349 69,449^ 2,002 451,374 - 6,792

^ Gross loans after specific allowance but before general allowance

60 authorisation For issue oF Financial stateMentsThe Financial Statements have been authorised for issue by the Board of Directors in accordance with a resolution of the Directors dated 7 April 2009.