Alliance Financial Group Berhad STAYING ON COURSE...Jul 03, 2009 · Alliance Financial Group...

Alliance Financial Group Berhad (6627-X)

3rd Floor, Menara Multi-PurposeCapital SquareNo. 8, Jalan Munshi Abdullah50100 Kuala Lumpur, Malaysia

Tel : 03-2694 4888Fax : 03-2694 6200

www.alliancegroup.com.my

STAYING ON COURSE

2009 annual report

(6627-X)

Staying on course... with responsibility and resilienceAt Alliance, we are committed to staying on course by delivering on our promises in a tangible manner. Even as we commit to working hand in hand with our customers to provide them unique financial solutions and a robust and stable banking platform, our customers can rest easy knowing that our promises are not mere empty words but are our concrete commitment to proactively delivering on all our undertakings in a highly responsible manner.

Moreover, by constantly exploring new ways and means to push the envelope on performance and innovative solutions, we are continually strengthening our competitive edge and reinforcing our market standing as a leading integrated financial solutions provider. This resilience bodes well for us as a financial institution, especially amidst today’s challenging economic landscape.

Even as we accelerate forward to elevate the personal banking experience to new heights of excellence, our stakeholders can be rest assured that the Group will continue to stay on course in a responsible and resilient manner to deliver on our maxim Banking Made Personal.

1

vision

mission

values

A leading integrated financial solutions provider with regional reach, delivering the best customer experience and creating long term shareholder value.

We will deliver excellent customer experience through strategic alliances and enhanced group synergy, employing best-in-class technology and human capital.

CARINGBeyond just our business objectives,we care about people – their existence,welfare, passions and dreams.

And we are committed to treating people fairly and compassionately through open communication, mutual respect and team spirit.

CONVICTIONWe believe in always exceeding expectations, by having the courage to raise the bar and challenging the status quo.

And we will take responsibility for our actions in this pursuit of success in the marketplace.

CREATIVITYWe will constantly push the boundaries of conventional thinking to come up with innovative solutions.

RESILIENCEWe will stay focused and relentlessly pursue our promise of excellence. Staying the course in good times and hard times to achieve our goals.

We will stay strong in the face of new challenges by being flexible – continuously adapting and improving.

INTEGRITYWe practise uncompromising integrity and ethics in all our dealings.

4 corporate profile

5 corporate information

6 group corporate structure

7 group products and services

11 group financial highlights

contents

leadership14 board of directors

18 board of directors of major subsidiaries

22 group senior management

perspectives28 statement by chairman of

alliance financial group berhad

32 statement by chairman of alliance bank malaysia berhad

40 business and operations review by group chief executive officer of alliance bank malaysia berhad

68 calendar of significant events

accountability80 statement on corporate governance

87 audit committee report

90 statement on internal control

91 risk management

97 corporate responsibility report

2

financials121 financial statements of

alliance financial group berhad– statement of board of directors’ responsibilities– directors’ report– statement by directors– statutory declaration– independent auditors’ report– balance sheets– income statements– consolidated statement of changes in equity– statement of changes in equity– consolidated cash flow statement– cash flow statement– notes to the financial statements

251 abridged financial statements of alliance bank malaysia berhad

additional information

notices and form

105 additional compliance information

106 list of properties

109 group directory

117 analysis of shareholdings

119 substantial shareholders

120 directors’ shareholdings

275 notice of annual general meeting

276 notice of nomination of new auditors

form of proxy

ALLIANCE FINANCIAL GROUP BERHAD (6627-X) • 2009 annual report 3

Alliance Financial Group Berhad (AFGB or the Company) was incorporated in Malaysia on 7 April 1966 and was listed on the Main Board of Bursa Malaysia Securities Berhad (Bursa Securities) on 6 July 1979. The Group is principally involved in the provision of financial services through Alliance Bank Malaysia Berhad (ABMB).

ABMB, together with its subsidiaries, Alliance Investment Bank Berhad (AIBB), Alliance Islamic Bank Berhad (AIS) and Alliance Investment Management Berhad (AIMB) provide a wide range of financial products and services in commercial banking, financing, investment banking, stockbroking, Islamic banking, unit trust funds management, fund management, investment advisory and other related financial services.

corporateprofile

4

5

corporateinformation

DIRECTORS

Datuk Oh Chong Peng Chairman, Independent Non-Executive Director

Dato’ Thomas Mun Lung Lee Senior Independent Non-Executive Director

Tan Yuen Fah Independent Non-Executive Director

Tee Kim Chan Independent Non-Executive Director

Stephen Geh Sim Whye Independent Non-Executive Director

Phoon Siew Heng Non-Independent Non-Executive Director

Megat Dziauddin bin Megat Mahmud Independent Non-Executive Director

Kung Beng Hong Non-Independent Non-Executive Director

Datuk Bridget Anne Chin Hung Yee (also known as Datuk Bridget Lai)

Non-Independent Non-Executive Director

GROUP COMPANY SECRETARY

Lee Wei Yen (MAICSA 7001798)

REGISTERED OFFICE

3rd Floor, Menara Multi-PurposeCapital SquareNo. 8, Jalan Munshi Abdullah50100 Kuala Lumpur, Malaysia

Tel: 03-2694 4888Fax: 03-2694 6200Website: www.alliancegroup.com.myE-mail: [email protected]

REGISTRAR

Shareworks Sdn Bhd No. 10-1, Jalan Sri Hartamas 8Sri Hartamas50480 Kuala Lumpur, Malaysia

Tel: 03-6201 1120Fax: 03-6201 3121

AUDITORS

Ernst & YoungChartered AccountantsLevel 23A, Menara MileniumJalan DamanlelaPusat Bandar Damansara50490 Kuala Lumpur, Malaysia

PRINCIPAL BANKER

Alliance Bank Malaysia Berhad

BURSA MALAYSIA STOCK NAME/CODE

AFG/2488

INTERNATIONAL SECURITIES IDENTIFICATION NUMBER (ISIN)

MYL2488OO004

5ALLIANCE FINANCIAL GROUP BERHAD (6627-X) • 2009 annual report

6

group corporate structureas at 29 may 2009

100% ALLIANCE BANK MALAYSIA BERHAD

100% Alliance Investment Bank Berhad

100% Alliance Islamic Bank Berhad

100% Alliance Direct Marketing Sdn Bhd

100% AllianceGroup Nominees (Tempatan) Sdn Bhd

100% AllianceGroup Nominees (Asing) Sdn Bhd

70% Alliance Investment Management Berhad

100% Alliance Trustee Berhad

100% Alliance Research Sdn Bhd

This chart features the main operating companies and does not include inactive companies and companies that are under members’ voluntary liquidation.

100% AIBB Nominees (Tempatan) Sdn Bhd

100% AIBB Nominees (Asing) Sdn Bhd

ALLIANCE FINANCIAL GROUP BERHAD (6627-X) • 2009 annual report 7ALLIANCE FINANCIAL GROUP BERHAD

group products and services

Personal BankingDeposits• AllianceSaveManjaku• AllianceSavePendidikan• SavingsAccount/BasicSavingsAccount• CurrentAccount/BasicCurrentAccount• FixedDeposit• AllianceSave• AllianceSeniorSavers• AllianceFDGold• AllianceInvest• AllianceHybridAccount

Loans• AllianceSaveLinkHomeLoan• AllianceConventionalHomeLoan• AllianceSaveLinkInterestPaymentOption• AllianceOD/FDExpress• AllianceHirePurchase

Cards• Alliance Bank Gold and

Classic Credit Cards• AllianceBankPlatinumCreditCard• IKEAFriendsCreditCard• AllianceBankCPA

Australia Gold Credit Card• AllianceBankCNIGoldCreditCard• AllianceBankChinese

Independent School (CIS) Affinity Credit Card

• AllianceBankBusiness Platinum Card

• IKEAFriendsLoyaltyPaymentCard• AllianceBankCNIGoldPaymentCard

• AllianceBankChinese Independent School (CIS) Payment Card

• Alliance Bank You:niqueRates Credit Cards

• Alliance Bank You:niqueRewards Credit Cards

• Alliance Bank You:niqueRebates Credit Cards

• Alliance Bank Allianz InsuranceGold & Platinum Credit Cards

• Alliance Standard Debit MasterCard• Alliance Platinum Debit MasterCard• Alliance Premium Debit MasterCard

Wealth Management• Alliance GoldenCare Plus• Alliance FutureCare Series• Alliance FutureCare Series

with Critical Illness• Alliance EduCare• Alliance MedCare Plus• Alliance InvestCare• Alliance PrestigeCare • Alliance EasiSave • Alliance EasiSave-Edu• Alliance Cash Plus• Alliance MaxWealth• Alliance Motor Guard• Alliance Safe Deposit Guard • AllianceLegacy• AlliancePrivilege

Share Trading and Margin Facilities• AllianceShareMarginFinancing• AllianceShareTrading

Corporate Banking

• TradeFacilities– Letter of Credits– Trust Receipts– Bankers Acceptances– Export Bills Purchased/Discounting– Export Credit Refinancing– Export LC Negotiation– Collection Bills – Shipping Guarantees– Export LC Advising/Confirmation– Bank Guarantees (BGs)– Promissory Notes

• CreditFacilities• ForeignExchange• CashManagement


8

Commercial Banking

• CreditFacilitiesforSMI/SME• SMESchemespromotedby

Bank Negara Malaysia• IndustrialHirePurchase• AllianceBankBusinessPlatinumCard• RakanBusinessLoan• RakanBusinessFinancingPlus• Bancassurance

– General Insurance Products– Credit Life Insurance– Rakan CashBack Protector

• CashManagement– Account Management

– Business Current Account– Business Islamic Current Account– Business Fixed Deposit– Business Foreign Currency

Current Account– Business Foreign

Currency Fixed Deposit– Biz-Xpress Card: Deposit cum

Withdrawal function via Self-Service Terminals (ATM, CDM and CES)

– Collection Management– Payee Corporation Service– Auto Debit Service– iBayar Facility– Bulk Cheque Collection Service– Cash in Transit– Cash Concentration Solution

– Liquidity Management– Auto Sweeping Service– Bounce Cheque Protection Service– Current Account-i

– Payment Management– Payroll (Salary/EPF Monthly

Contribution/PCB-LHDN Payment)– Bulk Payment – Bulk Payment with Remittance Advice– Remittances

(CO/DD/FTT/FDD/IBG/RENTAS)– Fund Transfer (Own account transfer/

Group account transfer/ Designated 3rd Party Transfer)

– Bulk Cheque Printing– Bills Payment

• BusinessPremisesFinancing– Savelink Business

Premises Financing– Conventional Business

Premises Financing• TradeFacilities

– Letter of Credits– Trust Receipts– Bankers Acceptances– Export Bills Purchased/Discounting– Export Credit Refinancing– Export LC Negotiation– Collection Bills – Shipping Guarantees– Export LC Advising/Confirmation– Bank Guarantees (BGs)– Promissory Notes

Alliance Islamic Bank BerhadDeposits • Savings Account-i• Current Account-i• Basic Savings Account-i• Basic Current Account-i• General Investment Account-i• Special Investment Account-i• Mudharabah Savings Account-i• Mudharabah Current Account-i• Hybrid Account-i

Financing• Alliance CashVantage Personal

Financing-i• Alliance Home Financing-i• Alliancei-Wish Home Financing-i• Alliance i-Wish Flexi Home Financing-i• Alliance Hire Purchase-i• Rakan Personal Financing-i• i-Wish Business Premises Financing-i• Personal Financing Koperasi-i

Corporate & Commercial Financing• Term Financing-i• Leasing-i• Biz Prop Financing-i• Cash Line Facility-i• Revolving Credit-i• Alliance i-Wish Flexi Home Financing-i• Alliancei-Wish SaveLink

Business Financing-i• Bridging Financing-i• Contract Financing-i• Project Financing-i

Trade Financing• LettersofCredit-i• TrustReceipt-i• ShippingGuarantee-i• AcceptedBills-i• BillofExchangeNegotiated/Purchase-i• ExportCreditRefinancing-i

Pre-Shipment & Post-Shipment• BankGuarantee-i• MurabahahWorkingCapitalFinancing-i

Cards• ASLAMInternationalDebitCard• Debit MasterCard-i

group products and services (cont’d)


ALLIANCE FINANCIAL GROUP BERHAD (6627-X) • 2009 annual report 9ALLIANCE FINANCIAL GROUP BERHAD

Alliance Investment Bank BerhadCorporate Finance• InitialPublicOfferings–involvingpublic issues of new

securities and/or offers for sale of existing securities in companies seeking listing and quotation on the Main Market* and the ACE Market* of Bursa Malaysia Securities Berhad as well as listing of Real Estate Investment Trusts (REITs).Note*: The new Main and ACE Markets are only

effective 3 August 2009.

• SecondaryOfferings–involvingraisingoffundssubsequent to the initial public offering through rights issues, restricted issues, private placements and special issues of both equity and equity-linked instruments.

• CorporateRestructuringAdvisory• Merger,TakeoverandAcquisitionAdvisory• IndependentAdvicetoMinorityShareholders• ValuationofCompanies

Debt Finance & AdvisoryCustomised solutions via Conventional and Islamic:• StructuredFinancing• AssetSecuritisation• ProjectFinancing• Fixed/FloatingRateBonds• CommercialPapers/

Medium Term Note Programmes• LoanSyndication

Financial Markets• AcceptanceofAuthorised

Term Deposits• ForeignTransactionsandHedging• Inter-BankDepositsandPlacements• TreasuryBills• BankNegaraBills• CagamasNotes• NegotiableInstrumentsofDeposit• BankersAcceptances• MalaysianGovernmentSecurities• PrivateDebtSecurities

Equity Capital Markets• UnderwritingsandPrivatePlacementsofInitialPublic

Offerings• UnderwritingsofRightsIssues• PrimaryandSecondaryPrivatePlacementsofEquityand

Equity-Linked Instruments• UnderwritingandPrivatePlacementsofRealEstate

Investment Trusts (REITs)• Book-Building/Accelerated

Book-Building of Equity and Equity-Linked Instruments

Corporate Banking• CreditFacilities• BankersAcceptance• BankGuarantee• TermLoans

Islamic Banking• Bal’BithamanAjil• MurabahahWorking

Capital Financing• IslamicAcceptedBills• MudharabahInvestment

Account Deposits• KafalahBankGuarantee

Stockbroking Services• InstitutionalandRetailShareTrading• Inter-BrokingServices• OnlineShareTradingServices• ShareMarginFinancing• NomineesandCustodianServices

10

• EquityResearch• EconomicResearch• IndustryResearch• CorporateResearch• InvestmentAdvisoryServices

Alliance Research Sdn Bhd

Alliance Investment Management BerhadManagement of Unit Trust Funds• AllianceFirstFund• Alliance Vision Fund• Alliance Moneyplus Fund• Alliance Dana Adib• Alliance Tactical Growth Fund• Alliance Optimal Income Fund• Alliance Islamic Money Market Fund• Alliance Global Equities Fund• Alliance Global Bond Fund• Alliance Global Diversified Property Fund• Alliance Dana Alif• Alliance ADVANTAGE GEM Treasures Fund• Kinabalu Institutional Money Market Fund• Alliance Islamic Institutional Money Market Fund

Provision of Fund Management and Investment Advisory Services• Equity• FixedIncome• Mixed/Balanced• MoneyMarket• DirectMandates

Agency Development• AlternativeDistributionChannel

group products and services (cont’d)


group financial highlightsFINANCIAL YEAR ENDED 31 MARCH 2009 2008 2007 2006 2005

OPERATING RESULTS (RM Million)Net income 1,058 1,018 922 768 872 Profit/(loss) before tax 303 502 151 (283) 297 Profit/(loss) for the year 229 380 107 (201) 214

KEY BALANCE SHEET DATA (RM Million)Total assets 31,854 27,6751 26,390 23,581 23,660 Gross loans, advances and financing 19,590 16,545 14,493 14,581 15,241 Total liabilities 29,088 25,0811 24,443 21,834 21,701 Deposits from customers 25,575 21,352 19,104 17,666 16,917 Paid-up capital 1,548 1,548 1,218 1,168 1,163 Shareholders’ equity 2,762 2,589 1,943 1,742 1,955 Commitments and contingencies 15,242 13,976 7,973 7,509 6,977

SHARE INFORMATION AND VALUATIONSShare Information Earnings/(loss) per share (sen) 14.9 25.4 9.1 (17.3) 18.4Diluted earnings/(loss) per share (sen) 14.8 25.4 7.9 (17.3) 15.7Gross dividend per share (sen) 6.252 6.25 – – 3.00Net assets per share (RM) 1.79 1.67 1.60 1.49 1.68Share price as at 31 March (RM) 1.69 2.68 2.87 2.16 2.75Market capitalisation (RM Million) 2,616 4,149 3,496 2,523 3,198

FINANCIAL YEAR ENDED 31 MARCH 2009 2008 2007 2006 2005

Share ValuationsGross dividend yield (%) 3.70 2.33 – – 1.09Dividend payout ratio (%) 41.9 19.1 – – 11.7Price to earnings multiple (times) 11.3 10.6 31.5 – 14.9Price to book multiple (times) 0.9 1.6 1.8 1.4 1.6

FINANCIAL RATIOS (%)Profitability RatiosNet interest margin on average interest-earning assets 2.8 2.8 2.9 2.5 2.8Net return on average equity 8.6 16.8 5.8 (10.9) 11.5Net return on average assets 0.8 1.4 0.4 (0.9) 0.9Net return on average risk-weighted assets 1.2 2.3 0.7 (1.3) 1.4Cost to income ratio 53.3 46.23 53.4 56.9 40.9

Asset Quality RatiosLoan loss coverage 99.7 79.9 67.5 48.5 29.9 Gross non-performing loans ratio 4.5 7.0 10.8 14.6 13.4 Net non-performing loans ratio 1.8 3.3 5.5 9.5 11.1 Gross loan to deposit ratio 76.4 76.3 67.2 75.1 81.1

Capital Adequacy Ratios4

(after deducting proposed final dividend)Core capital ratio 10.30 11.191 10.73 10.23 9.86Risk-weighted capital ratio 14.65 16.061 16.47 15.08 14.49

1 Comparatives were restated to conform with current year’s presentation2 Tax exempt under the single tier tax system3 Included once-off write-back of other operating expenses4 Computed in accordance with Bank Negara Malaysia’s revised Risk-Weighted Capital Adequacy Framework-Basel II with effect from 1 January 2008

‘05 ‘06 ‘07 ‘08 ‘09

Improved Earnings

Profit/(Loss) Before Tax(RM Million)

Strong Balance Sheet Growth Continued Improvement in Assets Quality Enhanced Shareholders Value

151

‘05 ‘06 ‘07 ‘08 ‘09

Loans & Deposits (RM Million)

15,2

4116

,917

14,5

81 17,6

66

14,4

9319

,104

16,5

4521

,352

19,5

9025

,575

502

297

303

(283

)

‘05 ‘06 ‘07 ‘08 ‘09

Total Assets (RM Million)

23,6

60

23,5

81 26,3

90

31,8

54

27,6

75

‘05 ‘06 ‘07 ‘08 ‘09

Earnings/(Loss) Per Share (sen)

(17.3)

18.4

9.1

25.4

14.9

‘05 ‘06 ‘07 ‘08 ‘09

Net Non-Performing Loans Ratio (%)

11.1

9.5

5.53.3

1.8

‘05 ‘06 ‘07 ‘08 ‘09

Loan Loss Coverage (%)

29.9

48.5

67.579.9

99.7

‘05 ‘06 ‘07 ‘08 ‘09

Net Return on Average Equity (%)

11.5

(10.9)

5.8

16.8

8.6

‘05 ‘06 ‘07 ‘08 ‘09

Net Assets Per Share (RM)

1.68

1.49

1.601.67

1.79

Loans Deposits

12

Staying on course...We take care of the little details, so you can focus on what’s truly important.“ ”


14

Aged 64, a Malaysian, was appointed Chairman to the Board on 21 April 2006. He had undertaken his accountancy training in London from 1964 and qualified as a Chartered Accountant in 1969. He is a Fellow of the Institute of Chartered Accountants in England and Wales as well as a member of the Malaysian Institute of Certified Public

Accountants (MICPA) and the Malaysian Institute of Accountants.

Datuk Oh joined Coopers & Lybrand (now called PricewaterhouseCoopers) in London in 1969 and in Malaysia in 1971. He was a Partner of Coopers & Lybrand Malaysia from 1974. He had serviced clients of Coopers & Lybrand

throughout Malaysia and ASEAN, which covered a broad range of industries. He retired as a Senior Partner of Coopers & Lybrand in 1997 and then joined the Rashid Hussain Berhad Group of Companies in 1998 until 2003.

Datuk Oh is a Government appointed member of the Labuan Offshore Financial Services Authority and the Malaysian Accounting Standards Board. He is also a trustee of the Huaren Education Foundation and the

UTAREducationFoundation,andacouncilmemberofUniversityTunkuAbdulRahman. He is a member of the Listing Committee of Bursa Malaysia.

His past appointments included being a Government appointed Member of the Kuala Lumpur Stock Exchange (1990-1996), a Council member (1981-2001) and a past President (1994-1996) of MICPA.

Datuk Oh currently sits on the Boards of British American Tobacco (Malaysia) Berhad, IJM Corporation Berhad, IJM Plantations Berhad, Kumpulan Europlus Berhad, Malayan Flour Mills Berhad, Dialog Group Berhad and

several other private companies.

Datuk Oh Chong Peng(Chairman, Independent Non-Executive Director)

Chairman of Nomination Committee, Remuneration Committee and

Employees’ Share Participating Scheme Committee

board of directors


Aged 54, a Malaysian, was appointed to the Board on 20 June 2007. She holds a Master of BusinessAdministrationdegree(withDistinction)fromtheUniversityofHull,UK,andisaCertified Financial Planner. She is also a member of the Malaysian Association of Company Secretaries and a Council Member of the Association of Banks Malaysia.

She joined ABMB as a Director on 19 July 2005 and was appointed Group Chief Executive Officer of ABMB on 1 September 2005.

Prior to her appointment, Datuk Bridget Lai was attached to a leading multinational bank for a considerable period and has extensive experience in most aspects of commercial banking. She was the Country Head of Consumer Banking Malaysia prior to an international posting with the same bank as the Global Head of Distribution. Her key responsibilities included branch channel and alternative channels of sales and service distribution and international banking.

She also sits on the Boards of AIBB, Alliance Investment Management Berhad (AIMB), Alliance Islamic Bank Berhad (AIS) and several other private companies.

Datuk Bridget Lai(Non-Independent Non-Executive Director)

Aged 71, a Malaysian, was appointed to the Board on 26 September 2005. He is a barrister at law (England) who holds a Master of Arts (MA) and a Master of Law (LLM) degrees from Cambridge

University,Englandandhasbeeninlegalpracticeasanadvocateandsolicitorforover40years.Heisamember of the Appeals Committee of Bursa Malaysia Berhad. He is also an arbitrator with the Court of

Arbitration for Sport, Lausanne, Switzerland.

Dato’ Thomas Lee is currently a Senior Partner of Lee Hishammuddin Allen & Gledhill. He is the Chairman of Alliance Bank Malaysia Berhad (ABMB) and Alliance Investment Bank Berhad (AIBB). He also holds directorships in AIG General Insurance (Malaysia) Berhad, American International Assurance Berhad,

AIA Takaful International Berhad, Saujana Resort (M) Berhad and several other private companies.

Dato’ Thomas Mun Lung Lee(Senior Independent Non-Executive Director)

Member of Nomination Committee, Remuneration Committee and

Employees’ Share Participating Scheme Committee

16

board of directors (cont’d)

Tan Yuen Fah(Independent Non-Executive Director)Chairman of Audit Committee

Aged 64, a Singaporean, was appointed to the Board on 1 July 2005. HeholdsaBachelorofAccountancy from theUniversityofSingaporeand a Bachelor of Law from the University of Wolverhampton, UK.He also holds a post-graduate diploma in Business Administration from the Manchester Business School, UK. He is a Fellow of theInstitute of Certified Public Accountants of Singapore, CPA (Australia),

theAssociationofCharteredCertifiedAccountants,UKandanAssociate of theChartered Institute ofManagementAccountants,UK.

Mr Tan was in the commerce and industry sector for 11 years prior to joining the banking and finance sector. He joined Overseas Union Bank Ltd, Singapore in 1979, holding various senior positions andretired in 2002 as Executive Vice President.

He is currently a Director of ABMB, Chartered Semiconductor Manufacturing Ltd, Guthrie GTS Limited, OverseasUnionInsuranceLtd,FullertonFundManagementCompanyLtd,WildlifeReservesSingaporePte Ltd and the National Kidney Foundation in Singapore.

Tee Kim Chan(Independent Non-Executive Director) Member of Audit Committee, Nomination Committee, Remuneration Committee and Employees’ Share Participating Scheme Committee

Aged 55, a Malaysian, was appointed to the Board on 15 January 2004.He was admitted to the Honourable Society of Lincoln’s Inn, London in 1978 and enrolled as an advocate and solicitor of the High Court in Malaya in 1979. He is a practising advocate and solicitor.

Mr Tee was formerly the Chairman of the Negeri Sembilan Bar Committee and a member of the Bar Council. He has practical experience in several

areas of legal work, in particular civil litigation, conveyancing, corporate matters including banking and finance, estate matters and trust.

He currently sits on the Boards of ABMB, AIMB, Alliance Trustee Berhad, The Nomad Group Berhad and several other private companies. He is the Board Chairman of International Commercial Bank (Lao) Limited.

Stephen Geh Sim Whye(Independent Non-Executive Director) Member of Audit Committee

Aged 53, a Malaysian, was appointed to the Board on 5 May 2004. He is an accountant by profession. He was admitted as a member of MICPA in 1985.

In 1987, Mr Geh was admitted into the Malaysian Institute of Accountants as a Chartered Accountant and became a member of

Malaysian Institute of Taxation in 1992. Since 1984, he has been a practising accountant and consultant to several companies. He has wide experience in the financial management of companies involved in tin mining, oil palm and rubber plantations, manufacturing, property development and construction.

He was also involved in the financial management of a number of Malaysian companies with overseas investments which were involved in manufacturing and trading of their products and also acted as tax adviser to these companies.

He is currently the Managing Director of GSW Consultants Sdn Bhd and sits on the Boards of several other private companies.

Phoon Siew Heng(Non-Independent Non-Executive Director)Member of Nomination Committee, Remuneration Committee and Employees’ Share Participating Scheme Committee

Aged 45, a Singaporean, was appointed to the Board on 12 July 2005. Mr Phoon is currently the Senior Managing Director, Strategy in Temasek Holdings (Private) Limited. He was with Temasek from 1999 to September 2007, and later with Wah Hin & Co (Pte) Ltd as an Executive Advisor from October 2007 to October 2008, before rejoining Temasek in November 2008. Mr Phoon was with Standard Chartered Merchant Bank Asia Limited from 1992 to 1999. He was

a Deputy Director in the Ministry of Finance, Singapore, from 1988 to 1992.

MrPhoonholdsaBachelorofEconomics(Hons)degreefromMonashUniversity,Australia.HesitsontheBoards of ABMB and AIBB.


Megat Dziauddin bin Megat Mahmud(Independent Non-Executive Director)Member of Audit Committee, Nomination Committee, Remuneration Committee and Employees’ Share Participating Scheme Committee

Aged 63, a Malaysian, was appointed to the Board on 26 September 2005. He holds a Bachelor of Science (Econs) (Hons) degree from theQueen’sUniversityofBelfast,NorthernIrelandandisaFellowof the Institute of Chartered Accountants in Ireland as well as a Chartered Accountant with MIA.

With more than 30 years of experience in senior managerial capacities, Tuan Haji Megat had served with Golden Hope Plantations Berhad as Group Director-Finance, Arab-Malaysian Merchant Bank Berhad first as General Manager-Operations and later as General Manager-Investment, Bank Simpanan Nasional as Finance Manager and the Accountant-General’s Department as Treasury Accountant.

He currently sits on the Boards of ABMB, AIBB, AIMB, AIS, MNRB Holdings Berhad, MNRB Retakaful Berhad, Malaysian Reinsurance Berhad, Pernec Corporation Berhad and four subsidiaries of Felda Holdings Berhad.

Kung Beng Hong(Non-Independent Non-Executive Director)Member of Audit Committee

Aged 64, a Malaysian, was appointed to the Board on 21 April 2006. He holds a Bachelor of Arts (Hons) degree in Economics from the UniversityofMalaya.HeisaFellowandaCouncilMemberoftheInstitute of Bankers Malaysia.

Mr Kung has 41 years working experience in the banking industry and has held numerous senior management positions, mainly in Malaysia, including CEO/Directorship positions in three banks. His

experienceincludespositionsheldinCitibankN.A.intheUnitedStatesandSingapore.

He is currently the Advisor of Fullerton Financial Holdings Pte Ltd and sits on the Boards of ABMB and AIBB. HealsoholdsdirectorshipsinFinancialServicesEducationCentreBerhadandUOAAssetManagementSdn Bhd.

OTHER INFORMATION OF DIRECTORS

(i) Family Relationship

None of the Directors has any family relationship with each other and/or major shareholders of the Company.

(ii) Conflict of Interest

None of the Directors has any conflict of interest with the Company.

(iii) List of Convictions for Offences

None of the Directors has been convicted for any offences (other than traffic offences, if any) within the past 10 years.

(iv) Attendance of Directors at Board Meetings

There were eight Board Meetings held during the financial year ended 31 March 2009. Details of attendance of the Directors at Board Meetings are as follows:

Name of Director Attendance

1. Datuk Oh Chong Peng 8/8

2. Dato’ Thomas Mun Lung Lee 7/8

3. Tan Yuen Fah 8/8

4. Tee Kim Chan 8/8

5. Stephen Geh Sim Whye 8/8

6. Phoon Siew Heng 8/8

7. Megat Dziauddin bin Megat Mahmud 8/8

8. Kung Beng Hong 8/8

9. Datuk Bridget Lai 8/8

(v) Securities Holdings in the Company and its Subsidiaries

The Directors’ shareholdings are disclosed on Page 120 of this Annual Report.

18

board of directors of major subsidiaries

Dato’ Thomas Mun Lung Lee(Chairman/Independent Non-Executive Director)

Datuk Bridget Lai(Group Chief Executive Officer/Executive Director)

Peter Seah Lim Huat (Non-Independent Non-Executive Director)

Megat Dziauddin bin Megat Mahmud(Independent Non-Executive Director)

Chua Eng Kee(Independent Non-Executive Director)

Phoon Siew Heng(Non-Independent Non-Executive Director)

Kung Beng Hong(Non-Independent Non-Executive Director)

Tan Yuen Fah(Independent Non-Executive Director)

Tee Kim Chan(Independent Non-Executive Director)

Zakaria bin Abd Hamid(Independent Non-Executive Director)

Dato’ Lim Heen Peok (Independent Non-Executive Director)(Resigned on 31 December 2008)

Tan Soo Soon (Independent Non-Executive Director)(Retired on 12 April 2009)



Alliance Investment Bank Berhad Alliance Islamic Bank Berhad

Dato’ Thomas Mun Lung Lee(Chairman/Independent Non-Executive Director)


Sachi Ratnajoothy (Chief Executive Officer/Executive Director)

Megat Dziauddin bin Megat Mahmud(Independent Non-Executive Director)

Phoon Siew Heng(Non-Independent Non-Executive Director)


Kung Beng Hong(Non-Independent Non-Executive Director)

Tan Soo Soon (Independent Non-Executive Director)(Retired on 12 April 2009)

Megat Dziauddin bin Megat Mahmud(Chairman/Independent Non-Executive Director)


Tuan Haji Yahya bin Ibrahim(Chief Executive Officer/Executive Director)


Liew Swee Lin(Non-Independent Non-Executive Director)

Dato’ Lim Heen Peok (Independent Non-Executive Director(Resigned on 31 December 2008)

20

board of directors of major subsidiaries (cont’d)

Peter Seah Lim Huat Aged 62, a Singaporean, was appointed to the Board of Alliance Bank Malaysia Berhad (ABMB) on 19 July 2005. Mr Peter Seah graduated with a Bachelor of Business Administration(Hons)degreefromtheformerUniversityof Singapore in 1968. He retired as Vice Chairman and Chief Executive Officer in 2001 after serving 24 years with Overseas Union Bank Ltd, Singapore. With morethan 32 years experience in the banking and financial industry, Mr Peter Seah is currently the Chairman of SembCorp Industries Ltd, Singapore Technologies Engineering Ltd, Singapore Health Services Pte Ltd and LaSalle Foundation Limited and a member of the Temasek Holdings Advisory Panel.

He is the Deputy Chairman of Global Crossing Limited, Singapore Technologies Telemedia Pte Ltd, STT Communications Ltd and CapitaLand Limited in Singapore. He is also a director of the Government of Singapore Investment Corporation and Fullerton Financial Holdings Pte Ltd.

Chua Eng KeeAged 62, a Malaysian, was appointed to the Board of ABMB on 28 January 2003. He holds a Bachelor of Economics(Hons)degreefromUniversityofMalaya.Hehas over 30 years of experience in the banking industry having worked in merchant bank, finance company, commercial bank and as an appointee of Bank Negara Malaysia from 1987 to 1991.

Mr Chua has held senior positions in various financial institutions and has vast experience in corporate and investment banking as well as commercial and retail banking. In addition to banking, Mr Chua has experiences in the building and construction industry, and property development. He is a director in a number of privately owned construction and property development companies.

Currently, he is the Chairman of the Group Risk Management Committee and a member of the Group Nominating Committee. He has also served as Chairman of Group Operational Risk Management Committee and as a member of Group Audit Committee.

Zakaria bin Abd HamidAged 56, a Malaysian, was appointed to the Board of ABMB on 24 April 2009. With over 33 years of experience in banking, corporate finance and advisory services, he is also a director of Alliance Investment Bank Berhad (AIBB) and Alliance Islamic Bank Berhad (AIS).

Encik Zakaria has held senior positions in various organisations including Maybank Berhad, Bumiputra Merchant Bankers Berhad, Technology Resources Industries Berhad, Malaysia Helicopters Services Berhad, Natwide Group of Companies and KYM Holdings Berhad.

Encik Zakaria possesses a Bachelor of Economics degreefromtheUniversityofMalaya.HeisaqualifiedCertified Financial Planner and is a member of the Financial Planning Association of Malaysia.


Dato’ Lim Heen Peok(Resigned on 31 December 2008)

Aged 61, a Malaysian, was appointed to the Board of ABMB on 19 July 2005. Dato’ Lim graduated from the University of Strathclyde, UK with a Bachelor ofScience (First Class Honours) degree in Mechanical Engineering. He was also a Director of AIS and is currently the Chairman of Furniweb Industrial Products Berhad and also holds directorships in Proton Holdings BerhadGroupofCompaniesandUnitedstarCorporation Sdn Bhd.

Dato’ Lim was with the Public Works Department from 1970to1973andtheUMWGroupfrom1975to2004,where he held various senior managerial positions and acquired vast experience in the production, management and development of automotive business in Malaysia and the ASEAN region.

Tan Soo Soon(Retired on 12 April 2009)

Aged 54, a Malaysian, was appointed to the Board of ABMB on 13 April 2001. He is a member of the Malaysian Institute of Certified Public Accountants (MICPA) and Malaysian Institute of Accountants (MIA) and has over 27 years experience in banking and finance.

He qualified as a Certified Public Accountant while with PricewaterhouseCoopers in 1979. He was with RHB Bank Berhad from 1980 to 1998 as Head of Finance before joining International Bank Malaysia Berhad in 1998 as Senior General Manager. He was the Acting CEO of International Bank Malaysia Berhad prior to its merger with ABMB in 2000. Mr Tan also served as an Executive Director of Alliance Financial Group Berhad in 2001. He was the Chairman of Kuala Lumpur City Securities Sdn Bhd and KLCS Asset Management Sdn Bhd before they were merged within the Group.

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Datuk Bridget LaiGroup Chief Executive Officer

group senior management

Liew Swee LinExecutive Vice PresidentHead, Consumer Banking

Shim Kon TeckExecutive Vice PresidentGroup Chief Operating Officer

Fung Kai JinExecutive Vice PresidentHead, Commercial Banking

Philip Goh Teck SiangExecutive Vice PresidentGroup Chief Financial Officer


Choo Joon KeongExecutive Vice PresidentHead, Corporate Banking

Sachi RatnajoothyExecutive Vice President, Chief Executive Officer, Alliance Investment Bank BerhadHead, Financial Markets, Alliance Bank Malaysia Berhad

Nik Azhar bin AbdullahExecutive Director Head, Alliance Investment Management Berhad

Low Choon SeongExecutive Vice President, Group Chief Credit OfficerHead, Group Special Assets

Lee Wei YenSenior Vice PresidentGroup Company Secretary

Tuan Haji Yahya bin IbrahimSenior Vice PresidentChief Executive Officer, Alliance Islamic Bank Berhad

Tan Lye SimSenior Vice PresidentGroup Chief Risk Officer

Kay Chuan SengSenior Vice PresidentHead, Group Internal Audit

Datuk Bridget LaiGroup Chief Executive Officer

Datuk Bridget Lai joined as a Director of Alliance Bank Malaysia Berhad (ABMB or the Bank) and Alliance Investment Bank Berhad (AIBB) on 19 July 2005. She was appointed Group Chief Executive Officer of ABMB with effect from 1 September 2005.

Prior to her appointment, Datuk Bridget Lai was attached to a leading multinational bank for a considerable period and gained experience in most aspects of commercial banking. During that time, she held several key positions including Country Head of Consumer and SME Banking Malaysia and later took on an international posting with the same bank as the Global Head of Distribution. Her main responsibilities included branch channels and alternative channels for sales and service distribution as well as international banking.

Datuk Bridget Lai holds a Master of Business Administration degree (with distinction) from the University of Hull, United Kingdom (UK) and is aCertified Financial Planner. She is a member of the Malaysian Association of Company Secretaries and a Council Member of the Association of Banks Malaysia. She also sits on the Boards of Alliance Financial Group Berhad (AFGB), Alliance Investment Bank Berhad (AIBB), Alliance Investment Management Berhad (AIMB) and Alliance Islamic Bank Berhad (AIS).

Shim Kon TeckExecutive Vice PresidentGroup Chief Operating Officer

Mr Shim joined the Bank on 9 September 2005 as Group Chief Operating Officer, bringing with him over 25 years of banking experience and a strong operations background in sales management, branch operations and human capital management. He provides strategic direction on overall operational needs which includes aligning and centralising all operational processes to respective business needs so as to improve business processes to achieve cost efficiencies and productivity. He also

oversees Human Resources, Legal and Compliance, Information Systems and Property Services for the Group, in addition to other group operational functions for the other subsidiaries.

Mr Shim holds a Master of Business Administration degree from the University of Hull (UK) and is aCertified Financial Planner. Prior to joining ABMB, he was with an international bank and was instrumental in doubling the growth of the Mortgage business in five years and making it one of the most profitable businesses for the bank. He is an Associate member oftheCharteredInstituteofBankers(UK).

Philip Goh Teck SiangExecutive Vice PresidentGroup Chief Financial Officer

With ABMB since 2001, Mr Goh was appointed Group Chief Financial Officer on 1 October 2005 and is responsible for Group Financial Control, Taxation, Corporate Planning, BNM Regulatory Reporting, Business Finance, Treasury Support, Telecommunications, Investor Relations and Capital Management.

Prior to joining the Bank, Mr Goh had 23 years in various industrial and commercial sectors. In addition to financial management, he was also involved in turnaround management and corporate finance work. Mr Goh qualified as an accountant with the Malaysian Institute of Certified Public Accountants and is also a member of the Malaysian Institute of Accountants.

He is an honorary member of the Finance & General Purpose Committee of Kolej Tuanku Ja’afar and was a Director and Chairman of the Audit Committee of Diperdana Holdings Berhad. His other appointments included senior positions in Westport Malaysia Sdn Bhd, Malaysian Tobacco Company Berhad, Arab-Malaysian Insurance Berhad, and about six years with an Indonesian conglomerate which had various foreign joint venture interests.

Liew Swee LinExecutive Vice PresidentHead, Consumer Banking

As the Head of Consumer Banking since 20 September 2005, Ms Liew is responsible for setting the strategic direction, strategy development and implementation of retail banking business plans as well as delivery of performance targets. Her retail banking portfolio includes mortgage, hire purchase, credit cards and personal loans, share margin financing and other secured loans, direct sales, wealth management as well as branch banking. She also oversees the Group’s Decision Science and Corporate Branding portfolios, drawing on her expertise and previous experience.

Ms Liew brings with her over 20 years of management experience in financial services, consulting and manufacturing industries with multinational companies spanning Hong Kong, Malaysia and Singapore. She is able to draw on her strengths in business franchise building, change management as well as her implementation of optimal business models and improvement efforts in product management portfolio, channel, risk and operational capabilities.

Ms Liew possesses a Master in Science degree in International Marketing (UK) and is an accreditedCertifiedFinancialPlanner(CFP,USA).

Fung Kai JinExecutive Vice PresidentHead, Commercial Banking

Mr Fung joined the Bank on 16 September 2005 as Head of Commercial Banking. His overall objective is to grow and position the Bank’s Commercial and SME Banking businesses into a significant player in the market. His main responsibilities include formulating business strategy and leading the delivery of sustainable growth and earnings performance targets. His other portfolio includes expanding the Bank’s cash management and trade services as well as product development for Commercial and SME Banking.

Prior to joining the Bank, Mr Fung served in various senior management positions with a foreign bank, gaining a wide range of experience ranging from corporate banking, commercial and SME banking, trade and cash management and credit process improvement.

He graduated with a Bachelor of Construction Economics degree from Royal Melbourne Institute of Technology, Melbourne in 1986 followed by a Master of Business Administration degree from Curtin University,WesternAustralia,in1988.

Choo Joon KeongExecutive Vice PresidentHead, Corporate Banking

Mr Choo Joon Keong was appointed as the Head of Corporate Banking on 26 May 2008. In his present role, he is responsible for the strategic development of the business and managing key Corporate Banking client relationships to ensure the highest level of proactive customer servicing and account management.

Mr Choo brings with him over 15 years of management experience in financial services spanning Malaysia and China. Prior to joining the Bank, he was the Deputy President (Business) of a locally incorporated foreign bank in China, headquartered in Shanghai, primarily responsible for business development activities of the Corporate Banking Division. He also assisted in setting up the Personal Financial Services and Treasury Divisions. He is able to draw on his experience and strengths in regional market knowledge, cross selling expertise, strategic planning and market network to strengthen key initiatives in product development and management, credit underwriting and credit risk management.

Mr Choo possesses a Bachelor of Business in AccountingdegreefromRMITUniversity,Melbourne,Australia.

group senior management (cont’d)

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Sachi RatnajoothyExecutive Vice President, Chief Executive Officer, Alliance Investment Bank BerhadHead, Financial Markets, Alliance Bank Malaysia Berhad

Ms Sachi Ratnajoothy was appointed the Executive Director and Chief Executive Officer (CEO) of AIBB on 1 July 2008. Concurrently, she continues to serve as the Head of Financial Markets of ABMB, a position she has held since November 2006. As CEO, she oversees AIBB’s provision of value-added end-to-end investment banking servicing capabilities for AIBB’s clients which include corporate finance, debt capital market, stockbroking services, institutional and retail share trading and research.

In her role as Head of Financial Markets, she is responsible for managing and developing the treasury business of the Group, especially in the area of liquidity, interest rate and foreign exchange risk management; she is also actively involved in creating product and services for distribution to the Bank’s clients for purposes of risk management and investments.

Ms Sachi, a Fellow Member of the Chartered Institute of Management Accountants (UK), hasmore than 15 years experience in treasury and debt capital market. Prior to joining the Group, Ms Sachi held senior positions in a number of major financial institutions in Malaysia including a stint as the Country Head of Debt in a foreign bank in Kuala Lumpur responsible for private debt origination, distribution and trading.

Low Choon SeongExecutive Vice President, Group Chief Credit OfficerHead, Group Special Assets

Mr Low joined the Bank on 1 December 2005 as Head of Group Special Assets where he is responsible for the recoveries function of the Group. In December 2008, he also assumed the role of Group Chief Credit Officer. His responsibilities now include the development and maintenance of the Group’s overall credit policies, as well as the management and supervision of all aspects of the Group’s credit exposure.

Mr Low has over 30 years experience in both foreign and local banks, primarily in corporate and commercial lending, recovery and credit risk management. During his tenure with the foreign bank, he was also involved in group projects and had a secondment in an overseas branch of the bank as the Chief Credit Officer.

Mr Low holds a Diploma in Banking from the Chartered Institute of Bankers, London, and is a Senior Associate of the Institute of Bankers, Malaysia.

Kay Chuan SengSenior Vice PresidentHead, Group Internal Audit

Mr Kay joined the Bank in 1985 and has over 30 years of banking experience. He heads the Group Internal Audit function which covers AFGB, ABMB, AIBB, AIS and all the other subsidiaries of the Group.

Having spent 26 years performing various types of audits at commercial banks, finance companies and merchant banks, Mr Kay has vast exposure to auditing most aspects of banking operations covering corporate, commercial and consumer banking business including treasury and information systems.

As the Head of Group Internal Audit, Mr Kay is responsible for providing independent assurance to the Group Audit Committee/Board that the risk management processes are sound and implemented with integrity by management. He and his team also independently evaluate whether the system of internal control in place is adequate and effective enough to mitigate all critical risks identified.

Mr Kay is a member of the Institute of Bankers, Malaysia.

Tan Lye SimSenior Vice PresidentGroup Chief Risk Officer

Ms Tan joined the Bank on 11 October 2006 as Senior Vice President, Head of Group Operational Risk. During her tenure, she has successfully implemented a Group-wide robust Operational Risk Management (ORM) solution and created heightened risk awareness among staff.

In July 2008, Ms Tan was appointed to Group Chief Risk Officer; her many responsibilities include ensuring that the Group’s risk management framework with its structured risk governance model of comprehensive risk management policies, tools and risk systems infrastructure are in place. This will ensure that a sound risk and control culture remains embedded at all levels throughout the Group’s business models. She reports to the Group Risk Management Committee on all matters and updates related to group management framework.

Ms Tan is a Fellow Member of the Association of Chartered Certified Accountants (London). She has more than 20 years of experience working in various localbanksandfinancialinstitutionsintheUK.

Tuan Haji Yahya bin IbrahimSenior Vice PresidentChief Executive Officer, Alliance Islamic Bank Berhad

Tuan Haji Yahya is the Chief Executive Officer of AIS. Prior to his present appointment, he was the Group Head for Islamic Banking at ABMB and led the project team that was instrumental in the formation of AIS.

During his 14-year tenure with ABMB, he has held various positions including heading the then Multi-PurposeUnitTrustBerhadandMulti-PurposeFinanceBerhad. Prior to joining the Bank, he has served in the property development and merchant banking sectors.

Tuan Haji Yahya has a holistic appreciation of banking operations. He is also well-versed on the Malaysian property scene as a result of previous stints prior to joining the Bank. He possesses a Master in Business Administration degree from Southern Illinois UniversityEdwardsville,USA.

Nik Azhar bin AbdullahExecutive Director Head, Alliance Investment Management Berhad

Encik Nik Azhar bin Abdullah joined the Group in March 2007 as Executive Director/Head of AIMB. In his capacity, he is responsible for the business growth and operations of AIMB.

Encik Nik Azhar’s breadth of experience is drawn from his stints as a Fund Manager and Chief Investment Officer with a merchant bank, an asset management company and investment bank locally and abroad. Besides fund management, he is experienced in corporate advisory work, client servicing, business development and research.

He is a member of the Chartered Institute of Management Accountants (UK) and holds anhonours degree in Accountancy from the Portsmouth University,UK.

Lee Wei YenSenior Vice President Group Company Secretary

Mr Lee joined AFGB on 1 April 2004 and was appointed to the Bank as Company Secretary on 1 December 2004. He brings with him extensive experience and exposure in corporate matters and has been actively involved in corporate restructuring, mergers, takeovers, initial public offerings and other corporate exercises.

His area of exposure covers companies in banking, insurance, stockbroking, asset management, unit trust management, property development, trading and manufacturing.

Mr Lee holds a Master of Business Administration degree with a major in Finance from UniversitiPutra Malaysia and is an Associate Member of the Malaysian Institute of Chartered Secretaries & Administrators.


26

“ ”Staying on course... We help develop your financial well-being, so you can nurture your special interests.


28

Dear Shareholders

PERFORMANCE REVIEW

For the financial year ended 31 March 2009, the Group made a profit before tax of RM303.3 million representing a decline of 39.6% compared to the previous financial year. This was mainly due to prudently making higher allowances for losses on loans, advances and financing in anticipation of the rapidly deteriorating economic environment.

statement by chairmanof Alliance Financial Group Berhad

Profit attributable to shareholders for the financial year under review was RM229.1 million, which represents a return on average shareholders funds of 8.6%.

Earnings per share was 14.9 sen as compared with 25.4 sen in the previous financial year.

The decline in performance was registered despite a net income growth of RM40.6 million or 4.0% higher as compared with that of the previous financial year.

Shareholders’ funds increased from RM2.59 billion to RM2.76 billion as at 31 March 2009. Total assets at year end stood at RM31.85 billion, up from RM27.67 billion in the previous financial year while net assets per share rose from RM1.67 to RM1.78.

Our loans portfolio quality continued to improve with net non-performing loans ratio strengthening from 3.3% at the end of previous financial year to 1.8%.

As a pre-emptive move, the Company raised a total of RM600 million of four-year term loan funds in the last quarter of our financial year at very competitive rates as standby funds to enhance the capital resources of the Group.

DIVIDENDSDuring the financial year under review, the Company declared two interim dividend payments totaling 6.25 sen per share, tax exempt under the single tier tax system.

The first interim dividend of 2.50 sen was paid on 27 August 2008 whilst the second interim dividend of 3.75 sen was paid on 3 March 2009.

OVERALL BUSINESS ENVIRONMENT AND ECONOMIC OUTLOOKThe year under review was unprecedented in terms of economic turmoil in the world. We saw rapid increases in fuel and commodity prices to record levels which was soon followed by rapid declines to very low levels which panicked the world. On top of that, the financial meltdown during the second half of 2008 was again unprecedented in seeing most of the world’s largest financial institutions going to a crisis mode, facing huge liquidity problems and massive losses.

Malaysia has not been spared the effect of the global economic downturn with exports impacted and loan demand on the decline. In response to the deteriorating global and local economic conditions, the Group took steps to further strengthen its risk management practices by sustaining good credit portfolio quality, maintaining high liquidity and strong capital levels as well as improving productivity, efficiency and services levels.

The Malaysian Government has recently reported a first quarter 2009, negative growth of 6.2% and has revised its forecast economic performance for the country to a negative growth of between 4.0% to 5.0% for the whole of 2009. In response to the economic crisis, the Government has acted swiftly by undertaking expansionary fiscal and monetary policies. Together with the two stimulus plans, interest rate cuts, and liberalisation of the financial sector, the economy is expected to withstand the effects of declining exports and slowing consumer spending.

The outlook therefore is very much dependent on stability being restored in the crisis-affected economies in the second half of the year as well as the effectiveness of stimulus measures. Should the financial sector problems globally remain unresolved, we can expect conditions to continue to decline.


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CORPORATE RESPONSIBILITYThe Board has adopted best practices in corporate governance in all its activities to ensure that we achieve business prosperity for the benefit of all shareholders. We are cognisant of our corporate accountability and responsibility to safeguard the interests of shareholders and enhance shareholder value.

The Group continues to strive beyond philanthropy and mere social and charitable obligations by promoting sustainable economic development and self-sufficiency through various programmes and activities which are in line with the Group’s vision, mission and core values.

GOING FORWARDWe approach the new financial year with cautious optimism, having recognised the challenging times ahead. In this period of uncertainty, we believe that the business foundations that we laid over the last three years of transformation and consolidation will provide us with an added advantage from a financial stand point and business positioning.

The Group will continue to make Customer Relationship Excellence a top priority. Through a strong focus on customer orientation, we continue to make improvements in customer service and product innovation across the board.

Human capital development and talent management will continue to remain a key agenda for the Group. We will continue to increase competency levels of employees through rigorous training and development programmes. We will continue to motivate employees by promoting a performance culture that aims to provide quality customer service and meet customer satisfaction levels.

statement by chairman of Alliance Financial Group Berhad (cont’d)

The Group will continue to strengthen its risk management practices to maintain the credit quality of its loan portfolios, improve cost efficiencies and ensure liquidity and customer capital positions stay strong. In light of the continued challenging economic environment, the Group expects to record a reasonable performance for the financial year ending 31 March 2010.

ACKNOWLEDGEMENTI would like to take this opportunity, on behalf of the Board, to thank the Management and staff for their enormous dedication, passion and hard work in the face of challenging market conditions. I have no doubt that they will rise up to the challenges in the tough year ahead with great determination and enthusiasm.

I thank my fellow Directors of the Board and the Directors of our subsidiaries for their unstinting support, commitment and untiring contributions to the Group.

I wish to record the Board’s appreciation for the valuable contributions of Mr Tee Kim Chan, who will be retiring from the Board and will not be seeking re-election at the forthcoming Annual General Meeting of the Company. Mr Tee will, however, continue to serve the Group with his recent appointment to the Board of Alliance Bank Malaysia Berhad on 24 April 2009.

On behalf of the Board and Management, I wish to express my heartfelt thanks to our customers and clients for their support, to Bank Negara Malaysia, the Securities Commission, Bursa Securities and other regulatory authorities for their assistance and guidance, and to our business partners and associates for their support and confidence in the Group.

To all our shareholders, your Board, the Management and staff remain absolutely committed to delivering value on your investment.

DATUK OH CHONG PENGChairman, Alliance Financial Group Berhad


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The financial year ended 31 March 2009 was a difficult one for Alliance Bank Malaysia Berhad (ABMB or the Bank) and its subsidiaries in view of the economic situation of the country. In these circumstances, the Bank’s pre-tax profit declined to RM304.8 million while net income registered a growth of RM45.5 million year-on-year. This is a commendable effort by management under stressful conditions as they concentrated on:

• protectingtheearningsoftheGroupwhilstmaintaininggood credit portfolio quality;

• maintainingastrongcapitallevel;

• maintaininghighliquidity;and

• drivinghigherproductivityandefficiencythroughcostmanagement.

statement by chairman of Alliance Bank Malaysia Berhad

PURSUING OUR TRANSFORMATION AGENDAThe year saw us continuing with our transformation agenda when we:

• enhancedourbranchnetworkstructureanddistributionchannels for optimumimpact;

• expandedourfinancialsolutionsofferingbyintroducinginnovativeproductsandservices;

• embeddedtechnologicalinnovationthroughouttheenterprisetodrivegrowth;

• centraliseddisparatesupportservicestoenhanceproductivityandreducecosts;

• investedinourhumancapitaltofurtherinculcateacultureofperformance;

• establishedourownIslamicbankingentitytotaptheexponentialgrowthinthissector; and

• rolledoutnewbusinessstrategiesandbusinessmodels.

In response to deteriorating global and local economic conditions, we also implemented a more robust Integrated Risk Management Framework to sustain the quality of our credit. We also maintained high liquidity and strong capital levels.

To withstand current financial industry concerns, we strengthened our asset quality and maintained consistently healthy non-performing loan (NPL) ratios well below the industry average. By implementing stringent underwriting standards and consistent and prudent practices in loans provisioning, we are ensuring that our balance sheet health is well-insulated. We are improving our functional and operational effectiveness and efficiency to take advantage of any opportunities that may avail themselves during this time of crisis and when circumstances improve.

CREATING CREDIBLE SHAREHOLDERS’ VALUEABMB contributed very significantly to the total group profit before tax of Alliance Financial Group Berhad (AFGB) for the financial year ended 31 March 2009. Some highlights of the financial performance of ABMB for the financial year are as follows:

• HighernetinterestincomeatCommercialBankingandhighernetincomefromthe Islamic banking business collectively contributed RM78.2 million (or 10.5%) to net income growth, fuelled by strong loans performance in both segments;

• asset quality ratios improved year-on-year i.e. gross non-performing loans(GNPLs) declined from 7.0% to 4.5%; net NPL ratio from 3.3 % to 1.8% and GNPL provisioning cover increased from 79.9% to 99.7%; and

• overallloanassetsgrewby18.4%comparedto14.2%lastyear,withtheloansportfolio mix in line with the desired mix. Consumer Banking posted loan growth at 22.8%, Commercial/SME loan growth at 11.5%, and Corporate Banking at 39.3%.


34

statement by chairman of Alliance Bank Malaysia Berhad (cont’d)

ABMB declared a final net dividend of RM23.7 million for the financial year ended 31 March 2009. The total dividends (including preference shares) paid and declared by ABMB to AFGB for the financial year is 14.8 sen per share or 34.2% of its net profit after tax.

As at 31 March 2009, the Bank remained well-capitalised with our core capital of 12.6% (12.5% on 31 March 2008) and our Risk-Weighted Capital Ratio (RWCR) at 13.1% (14.7% on 31 March 2008). In light of the current economic climate, the Group has made an additional RM600 million in standby funds available for any opportunistic investment we may have.

The Group’s long-term view to growth and shareholder value creation has helped us build strong fundamentals and provided us a sustainable and steady business momentum despite the current adverse economic climate. We are confident of maintaining above industry average performance in our leadership segments. Our strategic business model is based on strong and sound fundamentals and is targeted at long-term, sustainable growth. We will also continue to evaluate every business decision with a long-term view and keep healthy financial ratios in a steady growth momentum.

PRIORITISING CUSTOMER RELATIONSHIPSThe Group has made Customer Relationship Excellence a top priority and this continues to drive our best practices in both business and operational productivity and efficiency. With a strong focus on customer orientation, we fulfilled our promise of Banking Made Personal through continuous improvements in customer service and product innovation across the board.

To meet the expectations of our consumers and the business community, we expanded our branch footprint to a total of 100 branches (inclusive of our Alliance Rakan branches) as well as grew our Privilege Banking Centres and Alliance Business Centres to 19 and 26 centres respectively. We also expanded our multiple touch points and today have 170 Automated Teller Machines (ATMs), 93 Cash Deposit Machines (CDMs) and 87 Cheque Express Service (CES) within our network for our customers’ banking convenience.

With the aim of raising the bar on personalised service, we introduced three pilot Alliance Personal Concept Stores at the end of 2008 whereby customers can drop by and enjoy a hot beverage and complimentary access to Alliance’s OnePay terminals plus our suite of ATMs, CDMs and CES. Product innovation also came by way of two other personalised products – the Alliance Debit MasterCard which is linked to the high interest-bearing Alliance Hybrid Account and the You:nique Picture Card, Malaysia’s first personalised picture credit card complete with a customised plan for rebates, rates and rewards.

We enhanced operational efficiency across all our businesses and harnessed the synergies within the Group, while consolidating and streamlining roles, functions and processes to help us grow our customer relationships. Our customers and other stakeholders are assured that a robust risk architecture and culture covering all aspects of our business, solutions and operations, is in place to protect their interests.

OPTIMISING OUR INVESTMENT IN HUMAN CAPITAL The Bank is committed to building a high-performance workforce to drive business growth and high standards of service and product excellence. The year saw us continuing to build up our employees’ expertise through extensive investment in training and development programmes. By empowering staff and establishing more challenging expectations at every level, we are looking to elevate their skills set and outlook and produce employees who are more engaged with the organisation. The balanced scorecard system introduced in the preceding financial year is bearing fruit even as employees have specific performance goals and rewards to work towards.

To build a high-calibre pool of talent, the Bank continues to run the Alliance Young Executive Programme. This comprehensive six-month business-centric training programme aims to produce well-rounded bankers in selected business streams. Over the course of the financial year, a total of 18 trainees graduated from the programme which is now in its third year of implementation.

Through collaboration with the International Centre for Education in Islamic Finance (INCEIF), the Institute of Banks Malaysia and other recognised institutions of higher learning, we are providing our employees the opportunity to pursue professional certification courses and training programmes in the areas of finance and Islamic banking, among other areas. Our employees also have exposure to overseas training and field trips, and are given the opportunity to attend external leadership programmes and specialised certification programmes to better their career advancement prospects.

TAPPING TECHNOLOGY FOR GROWTH The use of Information Technology (IT) plays such a crucial rule in ABMB’s operations that it is embedded within our Mission: “We will deliver excellent customer experience through strategic alliances and enhanced group synergy, employing best-in-class technology and human capital.” Our strong competitive edge today stems from the implementation of a cohesive IT strategy and enterprise architecture that has been integral to our transformation.

Today, the Bank is using IT to drive business growth in the areas of infrastructure, operational and service efficiency; business transformation; organisational efficiency; information management; and risk management. We have upgraded our bandwidth and many of our systems, and we now have the ability to increase our productivity and cope with other challenges.

IT is also helping us create a more efficient workplace and new opportunities for our employees even as many new positions are being created to support our technology transformation. With the introduction of new business applications and technologies, we are also providing new learning opportunities as we continue to re-skill our staff. By re-engineering and automating many of our work processes via centralisation, standardisation and streamlining of operations, we have been able to reduce many tedious and time consuming manual tasks.


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CULTIVATING RESPONSIBLE CORPORATE CONDUCTAs a progressive and responsible corporate citizen, ABMB is committed to elevating the quality of life and helping the many communities with which we do business. To truly make a difference, we encourage employee volunteerism, undertake charitable giving and a variety of initiatives, as well as promote economic opportunities and personal development. We are privileged to be a part of the communities we operate in and are always looking for innovative new ways to make our presence felt and our contributions count.

The Bank’s responsible corporate conduct also extends to the areas of the workplace, marketplace and environment and we are careful to ensure that business growth and productivity are not attained at the cost of corporate responsibility. Going forward, responsible corporate conduct will continue to be part and parcel of the Bank’s strategic agenda.

IN RECOGNITION OF OUR ACHIEVEMENTSThe success of ABMB’s transformation journey is best summed up by the many local and regional awards that the Bank and our people have achieved, most notably in the way of leadership and IT initiatives.

October 2008 saw our Group Chief Executive Officer, Datuk Bridget Lai being conferred the CEO Award for Leadership at the Technology Business Review ASEAN Awards 2008. This leadership excellence award is bestowed on CEOs who have contributed to the growth or turnaround of their respective organisations during their tenure. At the same event, the Bank was awarded the Corporate Award for Excellence in the ASEAN Banking & Finance Sector.

In recognition of our commitment to tapping information technology to transform the Bank, we received the award for Innovation in Enterprise Transformation by leading independent research and advisory firm, Financial Insights (an IDC company) at the Asian Financial Services Congress in Singapore in February 2009.

Alliance Investment Management Berhad’s (AIMB) flagship Islamic growth fund, Alliance Dana Adib was hailed the Best Equity Malaysia Islamic Fund in the three-year category for the period ended December 2008 for the second consecutive year. The Fund was recognised as the “leader” in terms of total returns and consistent returns and continues to be ranked in the top quartile of 36 funds in the same category since February 2006. AIMB’s strategic alliances with external fund manager, Fullerton Fund Management Company Limited, which co-manages AIMB’s global funds, also resulted in them being recognised at The Edge-Lipper Singapore Fund Awards 2009.

I wish to congratulate our Group Chief Executive Officer and her team on these achievements.

statement by chairman of Alliance Bank Malaysia Berhad (cont’d)

APPRECIATING OUR STAKEHOLDERSOn behalf of the Board of Directors of ABMB, I wish to convey my sincere appreciation to our customers and clients for their support, trust and confidence in us. My sincere thanks goes to the communities which we serve for receiving us into their midst. Our gratitude goes to the government agencies and authorities, particularly Bank Negara Malaysia, the Securities Commission and Bursa Malaysia for their valuable guidance and support.

I would also like to express the gratitude of the Board of Directors to Datuk Bridget Lai and all our Alliance family for the dedication they have shown in the service of our Bank and its customers throughout Malaysia.

I welcome to the Board Mr Tee Kim Chan and En Zakaria Abd Hamid and look forward to their contribution. The Board wishes to record our appreciation to Dato’ Lim Heen Peok and Mr Tan Soo Soon for all their contributions during the past years and we wish them both the very best in future.

Finally, I wish to thank Datuk Oh Chong Peng and the Board of our holding company, Alliance Financial Group Berhad, and all my colleagues on ABMB’s Board for their guidance and wise counsel to both myself and the management. I truly appreciate their support and constant contributions to best practices and good corporate governance as well as sound banking strategies. They are truly the wind beneath my wings.

As the Bank moves forward, we recognise that there is still uncertainty in these troubling economic times. However, adversity is not new to the Bank and we are in a stronger position than before to address the challenges and explore potential opportunities with the necessary due diligence. The Bank remains focussed and committed to our business strategy with a business model that is resilient and positioned to cope with the uncertain economic conditions.

DATO’ THOMAS MUN LUNG LEEChairman, Alliance Bank Malaysia Berhad


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Staying on course... We help you rise above financial obstacles, so you can soar to new heights of excellence.

“”


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business and operations reviewby Group Chief Executive Officer of Alliance Bank Malaysia Berhad

We have been experiencing an unprecedented global credit bubble and we are clearly in a recessionary mode. Capital expenditure is on the decline even as businesses tighten their budgets and capital market activities continue to wane. Amidst a challenging operating environment aggravated by difficult global economic and financial conditions especially in the latter part of the financial year, the Group turned in a reasonable performance. Our financial performance was achieved while continuing the vigorous roll out of our transformation agenda for the financial year ended 31 March 2009.

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Despitenewsofthesub-primecrisisintheUnitedStates,manyinthefinancialservicesindustry at the start of the financial year had originally felt that they were on pace for another good year. However, the dramatic decline of the global economy in the second half of the financial year derailed expectations across the board.

The Group’s financial performance for the cumulative 12 months ended 31 March 2009 is a reflection of this increasingly difficult operating environment. Nevertheless, as a result of our prudent financial management practices, the Group’s results were absorbed by stricter pre-emptive provisioning for potential credit losses. The adoption of this stance proved to be advantageous as it helps us mitigate potentially higher losses against the declining economic background.

Nonetheless, I believe that our solid financial fundamentals, strong franchise and culture of service excellence will provide us a resilient platform from which we can overcome the challenges before us. Our sound foundation will also essentially provide us a springboard for future growth as we build on the synergies created by our strategic partnerships. We have strengthened our balance sheet through early action to manage credit risks in customer lending and maintained good cost control while investing in the long-term development of our business.

I am confident that the business transformation initiatives that we undertook three years ago, together with supportive government policies, will drive our relative position for long-term growth and success. On the whole, the Group will strive to improve its pre-provision earnings capacity through defending loan margins, strengthening risk management processes and improving the efficiency of balance sheet management.

CHALLENGING OPERATING ENVIRONMENTThe year 2008 saw the global economy rapidly deteriorating as increased inflationary pressures on the back of escalating global fuel and commodity prices in the first half of the year led to a slowdown of the global economy in the second half of 2008. The uneven distribution of credit risks in the international financial system translated into rising unemployment rates, restricted access to credit and a collapse in the value of retirement funds and household equity across many countries.

Despite the turmoil in the global financial markets, Malaysia’s banking system remained strong and well-capitalised with banks exceeding the 8% minimum regulatory requirement. The Malaysian economy registered growth of 4.6% on the back of strong performance in the first half of the year which helped offset the decline in exports and industrial production in the latter part of 2008.

Malaysia’s banking sector was able to embrace the crisis from the position of strength thanks to several factors. These included ongoing industry consolidation, Bank Negara Malaysia’s (BNM) proactive and stringent supervisory and surveillance initiatives, as well as the banking system’s effective adoption of more disciplined financial guidelines and tightened risk management standards. The diversified credit extension between business and household loans too helped reduce the risk of heavy exposure to any single segment.

SMOOTH TRANSFORMATION ROLL OUTAmidst this backdrop, the Group continued to roll out the transformation agenda which we had embarked on three years ago to evolve our business model and strategy. Notwithstanding the fact that the solid momentum we had sustained was somewhat interrupted by flagging economic conditions in the last two quarters of the year under review, we pressed onwards to successfully achieve the year’s transformation objectives. Our robust stress test methodology and portfolio management capabilities continued to keep us in good stead and set us apart from the competition even as we mitigated risk and manoeuvred nimbly in a difficult market environment.

ALLIANCE FINANCIAL GROUP BERHAD (6627-X) • 2009 annual report

To transform ourselves for industry leadership in several key areas, we optimised our branch network structure, undertook productivity and cost improvement measures, incorporated technological innovation and centralised support services. We also merged and consolidated our subsidiary operations, implemented a more robust integrated risk management framework, expanded our financial solution offerings and invested in our workforce, among other initiatives; all of which form the foundations for our future.

Branch Optimisation

Alliance Bank Malaysia Berhad’s (ABMB or the Bank) Branch Optimisation Project was fully implemented in 2008. Aimed at transforming the existing branch business model from an operational-centric to one with a greater focus on sales and distribution activities, it has had the effect of simplifying ABMB’s work flow, centralising backroom functions and enhancing customer service efforts. The Branch Optimisation Project resulted in:

• over500staffatABMB’sbrancheswerere-skilledtoundertakesalesortoassumenewly-created positions within the Group;

• over RM10 million in annualised operational expenses in savings via thecentralisation of backroom functions and the elimination of duplicate tasks; and

• an optimum branch manning model was created based on expected businessvolume while a branch management guide akin to a set of standard operational procedures was developed to guide each branch’s management in their customer service delivery efforts.

A similar organisational transformation project, Branch Transformation Project, was applied to the stockbroking business of Alliance Investment Bank Berhad (AIBB) resulting in the consolidation and merger of AIBB’s retail stockbroking business with the stock trading centres located within ABMB’s branches. This exercise garnered annualised savings for the Group and there are plans to consolidate other such operations throughout Malaysia.

Productivity and Cost Efficiency Improvements

During the period under review, the Group also embarked on several projects aimed at improving productivity and cost efficiencies, which included:

• the implementation of an automated Debt Management System which raisedcollector productivity and resulted in a significant reduction in our non-performing loans (NPLs);

• the roll out of the Trade Finance System, an integrated workflow-orientedprocessing system, which increased productivity and resulted in higher fee income ratios;

• thedeploymentoftheGroupLoansOriginationSystem(GLOS)toallowautomaticand seamless submission, approval and disbursement of consumer loans;

• theestablishmentoftheexternally-drivenBankNegaraMalaysia(BNM)ChequeTruncation and Conversion System that complemented our own centralised banking operations infrastructure. With all processing of cheques now completely centralised at a processing hub in Kuala Lumpur, the unit cost of cheque processing activities has been effectively reduced; and

• thedeploymentofa fully integratedTreasurySystemwhich isnowutilised forfront-end treasury dealing as well as effective trade processing and market risk management.

Technology Enablement

Our strategy of applying innovative technology to create sustainable business value has led to the deployment of an impressive enterprise-wide transformation within the Group. The year saw our Group Information System Division effectively collaborating with several technology partners to help us fulfil our strategic goals.

Among the technology infrastructure initiatives undertaken were the continuation of the implementation of an end-to-end integrated risk management infrastructure and system which we have started in the preceding year, as well as the embedding of scoring models loans origination systems. Notwithstanding these initiatives, we also leveraged on technology to support the launch of new, innovative products and services. In addition, we harnessed our technological capabilities to achieve operational efficiencies Group-wide by supporting the centralisation and transformation exercises of back office functions and stock banking operations.

Finally, mindful that ours is very much a relationship-based banking approach, we embarked on a series of Branch Franchise Value Creation initiatives to ensure optimum customer service delivery.

All these various IT initiatives culminated in ABMB being awarded the Technology Business Review (TBR) Corporate Award for Excellence in its adaption of new technologies and innovation. ABMB was also hailed as the most innovative bank in enterprise transformation by an independent research and advisory firm, Financial Insights, an IDC company.

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business and operations review (cont’d)

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Centralisation of Operations

We also focused our efforts on centralising our operations to optimise our resources, garner greater economies of scale, as well as eliminate duplication and wastage. Our centralisation initiatives included the creation of a centralised banking operations hub in Kuala Lumpur in place of over 33 backroom processes previously done at our branches, the creation of a single credit administrative hub to provide greater control and productivity in the area of consumer loan disbursements, plus the creation of the Kuala Lumpur Hire Purchase Centre.

Going forward, we are confident that these and other measures will result in more effective and efficient Group operations to better support our objective of becoming a premier integrated financial services provider that meets the needs of our customers at every stage of their lives and business evolution.

Business Model and Key Business Drivers

Through our flexible business model which allows for periodic change and rebalancing, we are in a position to refocus our strategies and priorities to help customers and businesses brace themselves for the tough times ahead. At the same time, this flexibility enables us to better manage the health of our portfolio as well as optimise our distribution, product and service channels. The Group is focused on shoring up our position by driving greater operational efficiency, enhancing customer service quality and strengthening customer relationships built upon trust and integrity. We are increasingly transitioning to a consultative-needs approach based on segmented propensity analysis.

The key drivers of our business remain unchanged with Consumer and Commercial/small- and medium-sized enterprise (SME) Banking maintaining their position as the main engines of growth. Leveraging on this, we will continue to harness the synergies within the Group to enhance cross-selling and promote a one-organisation mindset throughout our operations. We are confident that the business model we have built up over the last three years will support our long-term aspirations and will enable us to successfully deliver consistently strong earnings, cash flows and returns on invested capital in today’s rapidly changing business environment.

This is a critical and exciting time to lead the Group forward into a challenging environment. We will drive growth by bringing into play our robust capabilities, resources, product and service offerings in an innovative and disciplined manner while leveraging on our outstanding team of employees led by our strong management team.

STRONG FINANCIAL PERFORMANCE

Comparison of net income and operating profit with the preceding year

The Group registered net income growth of RM40.6 million, an increase of 4.0% over the last financial year, despite a sharp decline in Investment Bank fee income of RM40.1 million or 59.0% resulting from adverse equity and capital market conditions. The higher net income came on the back of higher net interest income from Commercial Banking as well as higher net income from the Islamic Banking business; both collectively contributing RM73.4 million or 9.8% to net income growth, supported largely by strong loans growth. Included in this RM73.4 million was an over-provision of RM10.8 million in deposit insurance premiums which had been written back in the first quarter.

The Group registered an operating profit of RM493.7 million, a 9.8% decrease over the preceding financial year. The decline was mainly contributed by the one-off write-back of overhead provisions of RM51.8 million in the last financial year and decline in earnings in our Investment Bank and wealth management due to weak capital market. Excluding this write-back, the operating profit was on par with the last financial year.

Comparison of profit before taxation with the preceding year

The Group registered a profit before taxation of RM303.3 million for the 12 months ended 31 March 2009, a decrease of RM198.7 million or 39.6% against the last financial year. This lower pre-tax profit included higher allowance for losses on loans, advances and financing of RM172.7 million attributable to the following:

• anadditionalspecificallowanceofRM56.5millionduringtheyearinanticipationof present and future economic conditions impacting upon the businesses of some customers;

• ahighergeneralallowanceofRM7.2millionduetoloansgrowthof18.4%duringthe year; and

• lowerrecoveryofloansandfinancing,includingrecoveryfromwritten-offloansby RM103.5 million largely due to the one-off recovery of a lumpy written-off loan reported in the first quarter results last year.


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ABMB recommended a final net dividend of RM23.7 million payable to Alliance Financial Group Berhad in the first quarter of the following financial year.


PBT : Profit Before TaxationPAT : Profit After TaxationROE : Return On EquityROA : Return On Assets

GNPL : Gross Non-Performing LoanNNPL : Net Non-Performing LoanLLP : Loan Loss ProvisionEPS : Earnings Per Share

DPS : Dividend Per ShareDIV/PAT : Dividend/PATP/BV : Price to Book Value

Profitability

PBT : RM502.0 millionPAT : RM380.1 millionROE : 16.8%ROA : 1.4%

PBT : RM303.3 millionPAT : RM228.9 millionROE : 8.6%ROA : 0.8%

Pre-Tax Profit at RM303.3 million was 39.6% lower year-on-year (RM198.7 million) due to:• InvestmentBankfeeincomebeinglowerbyRM40.1millionaffectedby

weak capital market conditions;• higherallowanceforlossesonloans,advancesandfinancingby

RM172.7 million; and• lastyear’sresultsincludedaone-offwrite-backofoverheadprovisions

of RM51.8 million.

Asset Quality Performance

GNPL : 7.0%NNPL : 3.3%LLP : 79.9%

Continued improvement on loan asset quality ratios from continued recoveries and quality loan asset growth.

GNPL : 4.5% (4.0%)*NNPL : 1.8% (2.2%)*LLP : 99.7% (86.4%)*

Shareholders’Value

EPS : 25.4 senDPS : 6.25 sen1st interim DPS : 1.75sen2nd interim DPS : 4.5 senDIV/PAT : 19.1%P/BV : 1.6x

EPS : 14.9 senDPS : 6.25 sen1st interim DPS : 2.50 sen2nd interim DPS : 3.75 senDIV/PAT : 41.9%P/BV : 0.9x

FY 31/3/2008 FY 31/3/2009 Comments

* Industry Average

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Monetary Easing Buffered by Low Cost of Funds

During the fourth quarter ended 31 March 2009, the Group’s net income margin (NIM) declined from 2.9% (in third quarter for the financial year ended 31 March 2009) to 2.6% as a result of the drop in overnight policy rates (OPR) by 150 basis points (between November 2008 and March 2009) and the consequential drop in base lending rate (BLR) by 120 basis points. The “ripple effect” was almost immediately apparent as approximately 85% of the Bank’s loan portfolio lies in floating rate loans. In retrospect, the Bank has a small volume of hire purchase loans because it was not a core product focus of the Group.

The drop in BLR called for an immediate repricing of the loans, which takes effect only when fixed deposits mature. As at 31 March 2009, approximately 18% of our deposits had a remaining maturity of more than six months. Meanwhile, the ratio for current account-savings account (CASA) to total deposits is at a healthy 33%.

Asset Quality and Capital Adequacy

Meanwhile, the Group’s loan asset quality continued to improve with the net non-performing loans (NPL) ratio declining from 3.3% as at 31 March 2008 to 1.8% as at 31 March 2009. Gross loans provisioning coverage improved from 79.9% as at 31 March 2008 to 99.7% as at 31 March 2009.

The Group’s gross loans and advances grew by 18.4% to RM19.6 billion compared to 31 March 2008. Consumer and Commercial/SME loans registered 22.8% and 11.5% growth respectively for the 12-month period.

At present, the Bank remains well-capitalised with its Core Capital at 12.6% (31 March 2008: 12.5%) while the Group’s Core Capital stands at 10.3% (31 March 2008: 11.2%). As at 31 March 2009, the Bank’s Risk-Weighted Capital Ratio (RWCR) stood at 13.1% while at the Group’s level it was 14.7% (31 March 2008: 14.7% at Bank level and 16.1% at Group level). The Group’s RWCR of 14.7% is ahead of the industry average of 13.4%. In view of the current economic climate, Alliance Financial Group Berhad, the listed holding company of the Group, has made available an additional RM600 million in standby funds for any opportunistic investment.

The Group will continue to strengthen its risk management practices to maintain the credit quality of its loan portfolios, improve cost efficiencies and ensure that its liquidity and capital positions stay strong. In the light of the continued challenging economic environment, the Group expects to record a reasonable performance for the financial year ending 31 March 2010.

OPERATIONAL HIGHLIGHTS

ALLIANCE BANK MALAYSIA BERHAD The financial year under review saw ABMB’s Consumer Banking, Commercial Banking, Corporate Banking, Islamic Banking and Wholesale/Investment Banking business units working together to harness the respective synergies within the Group to gain customers’ share-of-wallet. Cross-selling and cross-referral activities featured high on the agenda as the Bank’s business units collaborated together to reach out to various customer segments in more impactful ways.

As a result of the success of its advantaged business model, Consumer Banking delivered a new growth trajectory. Its core business segments, namely mortgage and secured loans, hire purchase, unsecured lending and wealth management, all turned in a credible performance to help Consumer Banking contribute 26.5% of the Group’s pre-tax profit. In its bid to drive business growth through product innovation, Consumer Banking introduced the Alliance Debit MasterCard which is linked to the high interest-bearing Alliance Hybrid Account, and the Alliance Bank You:nique Picture Card, Malaysia’s first personalised picture credit card. To raise the bar on personalised service, several novel Alliance Personal Concept Stores were established.

Commercial Banking was the main contributor to the Group turning in a pre-tax profit contribution of 43% against the previous year’s contribution of 26%. Amidst challenging market conditions which saw slower loans growth in the second half of the financial year, Commercial Banking successfully delivered loans growth of 12% with SME lending remaining the main engine of growth with some RM1.5 billion worth of loans disbursed.


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Corporate Banking turned in an exceptional performance, growing its loan base by some 40%, although still within the 15% cap of our total loan portfolio. The unit’s focus on realigning its people, portfolio, platform and processes did much to strengthen its deliverables and performance. Going forward, Corporate Banking will agilely manage its cost base while focusing its efforts on cross-selling products and services.

In support of the Government’s policies and in line with the Group’s strategy of tapping the burgeoning Islamic financial sector, we have established Alliance Islamic Bank Berhad. Commencing business on 1 April 2008, this licensed Islamic bank and wholly-owned subsidiary of ABMB offers a full suite of Shariah-compliant banking products and services, thereby solidifying the Group’s position as a provider of a complete suite of integrated financial products and services. This entity achieved financing growth of 15% for the year with its financing portfolio mix in line with the desired mix.

On the Treasury and Financial Market front, AIBB’s performance was impaired by market forces following the sharp decline in the equity market in the financial year. The team took the opportunity to strengthen their fundamentals and explore new opportunities to remain competitive while integrating their stockbroking business into the Consumer Banking unit for greater operational efficiency.

The Bank, as a whole, focused its efforts on further strengthening its risk management fundamentals with the aim of sustaining the quality of our good credit portfolio, maintaining high liquidity and strong capital levels, as well as driving higher productivity, efficiency and services levels. We essentially sought for opportunities where we could, without sacrificing the fundamentals.

The financial year also saw us consciously taking steps to improve the credit quality of our loans asset portfolio. We exited relationships with high risk borrowers and strengthened our risk infrastructure that complied with the BASEL II framework by including underwriting standards and introducing end-to-end processes for new business models – all of which translated into continued improvements to our asset quality ratios.

We also took into consideration the fact that a bottoming out of the economic environment was as yet not evident and adopted a more prudent approach in our provisioning for impairment of loans and securities. At the same time, regular stress testing of our business portfolio enabled us to proactively manage anticipated stresses, while recognising opportunities in the market.

As a result, ABMB achieved overall loans growth of 18.4% and the desired loans portfolio mix for the financial year. The quality of our loan asset portfolio continued to improve quarter on quarter, with both net NPL and loan loss ratios at 1.8% and 99.7% respectively (as at 31 March 2009) ahead of the industry average.

To manage the possibility of a rise in the default rate, the Bank has adopted a two-pronged approach. The first involves educating customers on the importance of prudent financial and cash-flow/cash flow management, while the second prong will see us improving our collection infrastructure by leveraging on the latest collection management software and careful capacity planning.

CONSUMER BANKING

Delivering Value

As a result of Consumer Banking’s advantageous business model roll out in 2006, this business delivered a new growth trajectory, contributing some 40% of the Group’s revenue for the year under review. Transitioning from the strategic theme of “Accelerating Growth” in the preceding financial year to “Delivering Value” in the current year, the Consumer Banking team implemented a three-pronged strategy through:

• asteadfastfocusontop-linegrowth;

• cultivatingoperationaldiscipline;and

• thecontinuousimplementationofarobustriskmanagementframework.

The successful adoption of this strategy led to Consumer Banking shoring up assets and wealth management growth as well as improving the Bank’s market share tremendously. As a consequence, Consumer Banking registered the following financial achievements for the year under review:

• totalloansgrewfrom24%,wellaheadoftheindustry’saverageof10.5%;

• depositsrecordat13%againsttheindustry’saverageof9%;and

• healthy current account and savings account (CASA) ratio at 33% (industryaverage at 24%).

Despite a rapid expansion of loan bonds, on the whole, our Consumer Banking portfolio credit health has improved with NPLs declining from 2.6% to 2.1% year-on-year (y-o-y).


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Facilitating Top-line Growth

In line with the Bank’s efforts to enhance top-line growth and strengthen the customer franchise, the Consumer Banking unit embarked on several initiatives that involved rolling out innovative new platforms and strengthening existing ones.

To build long-term relationships with the increasingly influential mass affluent segment, we introduced the Alliance Personal Concept Stores which provide a personalised, fun, quick and hassle-free banking experience. In addition, we have expanded our existing branch network from 82 to 100 branches and grew our total branch sales force by some 15%.

Cultivating Operational Discipline

The culture of operational discipline inculcated within ABMB has helped improve cost structure, enabling us to take advantage of economies of scale via improvements in productivity. Consumer Banking has successfully rebalanced its asset mix by growing its high-yielding assets while aggressively pursuing sales skewed towards more profitable products.

Through optimising our technology capabilities, we have successfully begun to scale up our business to achieve economies of scale. We expanded our Self-Service Terminal (SST) networks comprising Automated Teller Machines (ATMs), Cash Deposit Machines (CDMs) and Cheque Express Service (CES) facilities as well as introduced Internet self-service kiosks and OnePay kiosks for the first-time ever to differentiate ourselves from our competition. Our SSTs are extended to more strategic locations and the uptime availability of our electronic lobby capabilities remains consistently above 95%.

Concurrently, we also launched a host of new Alliance Online Services including an online Rentas STP offering, fund transfer capabilities, online trade financing solutions and much more.

During the year under review, the queue time for over-the-counter (OTC) service saw some 81% of branch customers being served within five minutes (65% previously) despite an increase in transactions by 165% y-o-y without any increase in manpower resources. This service delivery improvement resulted from an extensive branch service and operations’ optimisation exercise in which we streamlined non-value added processes and centralised key tasks aimed at improving branch staff productivity.

Other process improvements took the form of enhancements credit card processing and merchant settlement systems, as well as improvements to the mortgage and credit card complaint resolution and e-banking fulfilment processes.

All these initiatives have done much to shore up the Bank’s competitive position. On top of this, we have also been able to bolster our competitive strength as a result of our successful sourcing strategy; successful partnerships with winning business partners, top performing fund managers, 12 Direct Sales Agencies and over 700 emplaced business referral partners; as well as an active portfolio management strategy driven by the active use of analytics.

Strong service delivery continues to remain high on the Bank’s strategic agenda. Driven by the Bank’s brand promise of Banking Made Personal and as part of its ongoing commitment to raise the bar on customer service, Consumer Banking established a Service Quality Committee to identify opportunities to enhance the servicing platform, upgrade servicing competencies and harness feedback from internal and external stakeholders. As a result, operational and service standard guidelines at branches were developed and a series of service-based improvements were implemented. We introduced performance-based incentive systems to our branch service staff and have since seen significant improvement in service delivery standards reflected in queue time, SST availability, cash management and migration to SSTs.


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Continuous Emphasis on Robust Risk Management

Underpinningourinitiativesisarobustriskmanagementarchitecturewhichsupportsour lending business. The year saw Consumer Banking effectively leveraging on technological solutions such as the Group’s loans origination systems (GLOS), automated debt management system (DMS), credit card behavioural scorecard and personal loans application scorecard, among others, to improve our loan underwriting standards, processing efficiency and productivity. We also streamlined our day-to-day processes, enhanced capacity planning and introduced vigorous reviews and end-to-end credit cycle assessment. Our robust portfolio management strategies and stringent end-to-end risk management-cycle management have resulted in improvements in portfolio health.

Core Consumer Banking Segments

In the year under review, the core Consumer Banking segments – mortgage and secured loans, hire purchase, unsecured lending and wealth management – all turned in a reasonable performance amidst challenging market conditions.

Mortgage and Secured Loans

During the financial year under review, mortgage and secured loans constituted about 78% of the Bank’s total consumer portfolio. Asset building (via new sales and retention) and improved asset quality were the main thrusts of our mortgage business for the year. Total asset grew 31% against the preceding year, with asset quality (as reflected by the net NPL ratio) declining to 2.7% from 3.6% previously. Our market share in this area continued to grow to 4.3% from 3.6% over the corresponding period. On the other hand, interest margins compressed further as market competition heated up, exacerbated by the drop in the BLR. Nevertheless, adjacent revenue from fee income was successfully created to cushion the dip in revenue where we saw a 13% increase from last year. The increase in fee income has somewhat prevented the significant drop in pre-tax profit and it only decreased by 5.9% from the previous year.

The local property market was adversely affected by the global financial turmoil despite the positive government measures introduced over the 2007/2008 period. As such, there was a marked 57% decline in new residential projects launches in 2008 compared to the previous year. Despite the crisis denting consumer confidence which led to many buyers holding back on new property purchases, the Bank nevertheless developed new products and tapped on a selected market segment to sustain asset and revenue growth.

Correspondingly, we have seen increasing interest from bank and non-bank customers in refinancing their properties to leverage on their mortgages either to grow wealth and/or to reduce borrowing costs. In response, we are addressing these needs through a myriad of mortgage solutions.

Conventional redraw home loans were launched to cushion and sustain product profitability as compared to full flexi products. The sales mix was also skewed to focus more on completed properties to compensate for the anticipated lower financing volume from under-construction properties.

Moving forward, ABMB will focus on value creation and the effective use of capital while lowering the cost of acquisition and realigning products to maximise returns. A mortgage credit underwriting scorecard project is currently in the development stage and is expected to go live in June 2009. This will further enhance our credit underwriting quality, slash processing costs and further enhance the loan approval turnaround time (TAT) from the current 1.5 days. Marketing and product plans will also be customised for specific customers segments. This customer segmentation approach will increase product holdings while enabling better management of risks and returns to maximise our revenue and strengthen customer loyalty.

Hire Purchase

The financial year saw competition in the hire purchase business among local banks continuing to intensify. To capture and protect market share, our competitors resorted towards low pricing and flexible credit acceptance criteria as main differentiators. With the lending spread within the Bank’s Hire Purchase segment continuing to erode and profitability driven below the cost of capital, the Hire Purchase team faced the challenge of sustaining profitability and growth for the hire purchase business.

In a conscious decision to focus on higher yield segments, ABMB consolidated the hire purchase business for the year. The Hire Purchase team focused its efforts on maintaining a healthy portfolio by leveraging on data warehousing activities for better risk and portfolio analytics as well as credit risk management to reassess and adjust the hire purchase policy. In terms of new sales, the new car segment became the primary target due to better credit risk while cross-selling initiatives such as motor insurance and product bundling of hire purchase and other products were aggressively pursued.


To optimise sales and backroom initiatives, hire purchase hubs and work processes were realigned for better efficiency and productivity. This resulted in the reduction and redeployment of 15 staff and significant improvements in the turnaround time for loan applications approved within one working day. Collection activities and efforts were also intensified. By leveraging on our DMS and dedicated collection staff, the hire purchase gross NPL continued to improve to 2.20% in comparison to 2.50% in the preceding period. All in all, the hire purchase portfolio contracted some 6% y-o-y due to the strategic intent to accelerate and grow high yield assets.

Unsecured Lending

The Bank’s total Unsecured Lending portfolio comprising credit cards and personalloans registered another year of strong growth despite trying market conditions and prudent lending imposition. Its 21% y-o-y growth was spurred by first-in-the-market new credit card products and the penetration of a new lending segment for personal loans.

Credit Cards

The credit card industry experienced some strong headwinds in 2008. Consumer spending was adversely impacted by the energy price hikes and economic downturn and the prevailing fears of credit deterioration. To provide relief to cardholders, BNM mandated a new interest rate regime which reduced interest by as much as 4.5% per annum. With diminishing interest income and increasing payment alternatives like debit cards, the competitive heat intensified further and taken new directions.

Despite these headwinds, ABMB’s credit card business stayed on course. On the issuing front, we achieved a milestone by becoming the first issuer in Malaysia to launch the picture credit card, known as You:nique Picture Card. This innovative card enables customers to personalise the entire card face with their own photos or designs. You:nique Picture Card also allows customers choose their own product features, be it rebates, rewards or rates. This first-of-its-kind card in the country truly embodies our brand promise of Banking Made Personal.

ABMB made strong strides forward on all key competitive indicators as tracked by VISA, rising up to five ranks in the member ranking table. Most importantly, voluntary attrition of cards reduced sharply by 59% from the previous year with more efforts undertaken to portfolio-manage credit card customers.

The Bank’s strong progress in these last three years had impacted positively on our credit card business. Following our acquisition efforts going into high gear in 2006, we have doubled in size in terms of total card accounts and average net receivables. In 2007, we ramped up our portfolio actions and grew the balance per card aggressively to achieve parity with industry benchmarks. In 2008, we restaged product propositions to strengthen our core segments. This resulted in a series of bold steps last year, such as altering the revolving composition of our customer base, carving the generic segment into more profitable sub-segments, limiting exposure to discretionary spending categories and plugging balance leakages in the portfolio. By continuing to build on these successes and embarking on new innovative measures, the credit card business should do well in 2009 and beyond.

Personal Loans

The financial year ending 31 March 2009 proved to be the most challenging for the personal financing business as it was peppered with economic uncertainty. Despite the many challenges, we continue to differentiate our personal loans from the competition via an innovative suite of products and an active portfolio engagement strategy. As a result, ABMB’s personal loans portfolio grew by a respectable 28% over the year, on par with the industry growth rate. From a personal loan account base of 19,600 accounts, the base has expanded by 54% to reach approximately 30,100 accounts at the close of the financial year; a testament to our successful sourcing strategies.

Marketing Efforts and Initiatives

The Bank’s Unsecured Lending segment continues to grow strongly mainly as theresult of marketing efforts and initiatives in the way of new product development and innovation, cross-selling activities, the introduction of new pricing and segmentation models, strategic alliances, as well as the ability to improve TAT and service standards.

Product Development and New SegmentsAfter launching the first unique personal loan last year (the Cash Vantage 2-Tier which emphasises flexible repayments), ABMB engaged heavily in developing new products that cater to the specific needs of different customer segments. Co-brand loans remain a largely untapped segment for us to further leverage on. With ABMB’s rich and diverse co-brand base, we are well-poised to further engage several new segments.


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Portfolio Management as a Key EnablerPortfolio Management remains a key enabler for us to build a profitable balance sheet. We have further refined our portfolio management methods by launching multiple cross-selling and top-up programmes. The ease and simplicity of the application process (due to it being a pre-qualified proposition) has enabled the Portfolio Cross-selling team to garner a tremendous increase in sales. This team contributed approximately 30% of ABMB’s overall sales volume for the financial year. ABMB also launched customer anti-attrition measures and various strategies to engage and strengthen customer loyalty. Our customer service personnel were equipped with the right skill-sets to support these initiatives.

New Pricing and Segmentation Models New pricing and engagement models have been introduced in relation to our personal loans portfolio. We have also segmented our customers in order to better understand their profiles and psychographics. As such, loyal customers with good conduct have been rewarded with favourable pricing and other offers.

Strategic AlliancesWe continue to focus on forming and improving strategic alliances as this is one of the main items on our agenda. We have formed fruitful partnerships with various parties, where benefits such as free personal accident insurance are passed down to our customers. Moreover, some of these alliances have also enabled us to have a greater point-of-sales (POS) presence and enabled us to further enlarge our distribution net.

Improving Turnaround Time and Service StandardsHaving achieved good success in sales, strategic tie-ups and channel development initiatives, ABMB’s next big initiative is to improve service delivery efforts by exceeding existing competitive benchmarks. To this end, ABMB has invested in a new loans origination system to automate workflow and provide online retrieval of key credit information. To date, we begin to experience good traction in TAT of loan approvals without having to compromise on the control and defect rate.

Share Services

ABMB’s Share Services Division currently has 10 Share Trading Centres (STCs) with four located in Peninsula Malaysia, four in Sabah and two in Sarawak. Each STC has an average of two dealers managing it. To date, we have also tied up with 25 other investment banks or brokers as a means to increase our share margin business footprint. This business model is serving us well and will help us hold on to our market position during this challenging economic period.

For the financial period under review, the Share Services Division managed to increase its share margin loan size to RM250 million in the first quarter from RM218 million previously despite the flat volume in our stock market. However, our loan size started to decline in the second quarter due to heavy forced-selling and regularisation of accounts by customers. The sell down was triggered by theUS sub-prime crisiswhich eventually draggeddown global equity markets. On the local front, Bursa Malaysia recorded a big slide in retail participation from a high of more than 60% in 2007 to an average of 23% in 2008. This impacted ABMB’s trading business and caused turnover to drop 50% against the preceding year. However, the credit health of our share margin portfolio remains healthy.

While trading activity by retail segment took a dive during the bear market, ABMB took the opportunity to make full use of this period to increase customer base. To leverage on our growing affluent segment base, ABMB will realign the Share Services Division with our wealth management unit to complete full suite of investment products.

Wealth Management

ABMB continues to solidify its position as a truly independent wealth management provider. Through the independent licensed investment advisor, Normandy Perkasa, quantitative and qualitative due diligence is carried out on our business partners and funds. There is also continuous benchmarking and review of fund and portfolio performance while stringent policies are in place for the selection of new unit trust and bancassurance investment-linked funds.

We see the economic downturn as an opportunity to educate customers and move them to a more sophisticated advisory-oriented mode that falls in line with our wealth management philosophy of providing consultative selling to customers. Via the research and advisory web-portal, Alliance Wealth Guide, Normandy Perkasa is able to recommend a model portfolio of funds to suit each individual’s customer risk profile, investment objective and financial goals.



Unit Trust Funds

Despitetheyear’sfinancialturmoil,unittrustaccountsundermanagement(AUM)grewby 60% on the back of investor education and communications initiatives as well as customer investment portfolio monitoring and rebalancing activities. Our customers risk profiling and financial goals were reassessed to ensure that they matched the customer investment objective which may have changed over the course of the financial crisis. As a responsible bank, we go all out to ensure our customer are fully informed and aware of their investment objectives and time horizon, as well as the risk associated with their respective investments.

Bancassurance

For the bancassurance business, we focused on the regular premium general and life insurance products rather than investment-linked products. Regular premiums increased 25% y-o-y while bancassurance revenue as a whole increased by 14% y-o-y. Going forward, there will be extension of product suites to complement our existing ones. This will include the Lady Cancer Plan plus Savings/Wealth Protection Plan, an excellent savings plan that will allow customers to enjoy higher interest in addition to insurance protection.

Our Banking Made Personal brand promise underscores the fact that we value our customers and offer financial solutions to suit their respective lifestyle needs. We introduced the Alliance Debit MasterCard in September 2008; its Premium and Platinum cards which are the first of its kind in Asia. The Alliance Debit MasterCard is linked to the high yield deposit Hybrid Account, a financial management offering for our customers. It serves as a convenient payment tool while helping them exercise financial prudence. Two of the cards, the Alliance Debit MasterCard Platinum and Premium cards, are the first of such products introduced in the Malaysian market for the mass affluent segment, while the Standard card is specifically for the mass market segment.

This secure, convenient and innovative cash management tool allows cardholders to personalise their ATM and daily spending limit. The Alliance Debit MasterCard provides customers with rebates of up to 2% for every Ringgit that they spend on all POS transactions worldwide. With the Hybrid Account, customers are also able to enjoy high interest rates for every Ringgit they save. This financial management tool has registered encouraging growth and contributed greatly towards increasing the Bank’s current account (CA) growth by 27% in comparison to the industry growth at 11% (in December 2008). The Bank’s fixed deposit (FD) growth is in line with industry growth while our liabilities portfolio outgrew the industry by 2%.

In the new financial year, we will continue to improve our CASA:FD mix. Segmentation strategies will be adopted based on customer needs and the Bank will focus on offering customised products and services to cater to different market segments. With our extensive range of wealth services covering deposits, unit trust funds, bancassurance, investment-linked funds and will-writing, coupled with our network of branches and privilege banking centres, we are expanding our reach in terms of banking and financial solutions offering, thus setting the stage for unlimited growth for the Bank over the long-term. Our decisive shift in strategy from selling all products, to selling robust products in the right way, augurs well for us going forward.

Privilege Banking

In the year under review, we focused our efforts on strengthening our customer franchise and enhancing our distribution reach. In line with this, five new Privilege Banking Centres at affluent areas, namely Bandar Puteri Puchong and Aman Suria in Selangor, Jalan Laksamana in Kuching, Sarawak, and Inanam and Luyang Damai in Kota Kinabalu, Sabah, were established, giving us a total of 19 Privilege Banking Centres.

Embracing our promise to go the extra mile to better understand customers’ needs and requirements, the Bank introduced business and family propositions through the launch of the Gentlemen’s Club and the Alliance Academy. These initiatives were supported by a strong customer value proposition premised around providing total solutions to customers through an array of product suites, enhanced e-capabilities as well as portfolio and financial management. As a result, our customer acquisition rate grew 38% with attrition capped at 4% per annum.

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We also continued to enhance privileges benefits and improve the customer experience for Privilege Banking customers. New initiatives included phone and fax banking, green lane processing on loan applications and a higher withdrawal limit over the counter. We were also the first to launch the Premium Debit MasterCard exclusively for our Privilege Banking customers that gives 2% cash back on whatever they spend, anywhere around the world. On the whole, Privilege Banking continued to contribute significantly to the Consumer Banking business providing a 31% contribution to Consumer Banking’s total revenueand49%contributiontoAUM.

Alliance Personal Concept Stores

To cater to the growing mass affluent segment, the Bank introduced the Alliance Personal Concept Stores, a proposition premised around building long-term relationships with this segment while proving a new banking experience which is personalised, fun, quick and hassle-free. Alliance Personal Concept Stores were established at three pilot locations with a high

concentration of traffic flow of the mass affluent segment, namely at Tesco Desa Tebrau in Johor, as well as at the Sunway Pyramid Shopping Centre and Ikano Power Centre at Mutiara Damansara, both of which are in Selangor.

This concept has raised the bar on personalised banking service as customers may now drop by and have a cup of hot beverage while enjoying complimentary access to Alliance’s OnePay terminals to settle their bill payments, ticketing, mobile phone reloads and many more. There is also a full suite of Automated Teller Machines (ATMs), Cash Deposit Machines (CDMs) and Cheque Express Service (CES) for customers’ bankingconvenience,plusaPlayStation3topasstime.Uponsigningup,customersare also assigned a dedicated Personal Financial Consultant who will be on hand to advise and manage their unique financial needs befitting their lifestyle.

Mass Market

Traditionally, banks have been targeting the mass affluent, Commercial and Corporate Banking customers in the market, making it difficult for mass market customers to obtain funding. This is where Mass Market business would play a part in helping this customer segment grow their businesses. Since the inception of the Alliance Rakan branch in 2007 catering solely to the mass market segment, we have been employing a relationship-based approach to service our customers, giving us a distinct competitive edge over other players that mainly employ a product-pushing strategy. In an effort to further distinguish ourselves from our competitors, we developed a segmentation model to better address the financial needs of the mass market segment. This has also provided us with a more in-depth understanding of customers’ credit behaviour.

Based on the findings that we have obtained, we have been able to implement tighter credit control, review our existing portfolio more efficiently and further enhance our loan rescheduling criteria.

Staying true to the notion of being a community bank to the mass market, the Alliance Rakan Head Office and branches have initiated several community projects including refurbishing orphanages and undertaking gotong-royong campaigns to reach out to the communities in which they operate. Alliance Rakan celebrated its first anniversary in 2008 with encouraging portfolio growth. Going forward, Alliance Rakan will focus on transforming from a pilot model to a full rollout model.

Distribution Channels

The Bank’s multi-channel distribution network today comprises branch sales and service teams, direct sales teams, direct sales agencies and sales partners, Internet banking, automated banking and SST facilities. Over the course of the year, we continued to bolster and diversify our distribution channels with a view to improving operational and process efficiencies as well as enhancing customer service standards.

We focused on improving our branch service quality standards by kicking off initiatives like the Service Quality Campaign to inculcate a spirit of excellence among staff members. The recently launched Branch Service Incentive Campaign proved to be very successful and resulted in service standards at branches going up several notches. We improved our Internet banking facilities and offered customers the ability to apply for Internet banking at their convenience at any of our ATMs. In relation to SST facilities, we increased the total number of ATMs and CDMs from 200 to 257 with the aim of serving a larger number of customers and offering access to banking facilities at strategic high-traffic locations.

In evolving from a product-oriented approach to a relationship banking approach, we have reviewed all our core processes and products and provided our staff intensive professional sales training to raise the bar on sales delivery and customer satisfaction. We are also tapping the various synergies within the Group and our strategic partnerships for cross-selling opportunities so we can broaden our market access and gain market share.


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Branch Banking

For the financial year ended 31 March 2009, ABMB’s branch network increased from 82 to 91 branches while the branch sales force grew by 15%. Among the new branches joining the Alliance Bank family are branches at Bandar Puteri Puchong, Seri Kembangan, Jalan Mega Mendung, Bandar Baru Air Itam, Jalan Tun Tan Cheng Lock, Taman Desa Cheng Perdana, Kota Damansara, Tesco Desa Tebrau and Sunway Pyramid Alliance Personal Concept Stores. We also invested in the development of a fully automated sales incentive system and performance analytic management reports (scheduled to go live in August 2009) to further improve efficiency and productivity. All in all, the aggressive growth of our distribution channels resulted in higher sales across Consumer Banking businesses from Hybrid CASA, mortgages, hire purchase and personal loans to balance transfers and bancassurance.

Direct Sales Channel

To support our aggressive business growth plan, we continued to scale-up our direct sales force and undertake the expansion of Alliance Direct Marketing Sdn Bhd (ADM), a wholly-owned subsidiary of ABMB. We also equipped these teams with multi-products skills and knowledge to improve sales productivity and elevate customer service efforts. Another four new ADM sales offices were added to the network bringing the total ADM offices to 11, while the direct sales force grew by 28%.

Creating Branch Franchise Value

Quick WinsEven as we continued to roll out AFG’s Change Management Programme over the year under review, I am happy to report that the “Quick Wins” phase of our rigorous, demanding but rewarding transformation journey was a great success. These quick wins helped kick-start our transformation journey by bringing about solid improvements to our branches’ over-the-counter (OTC) activities, our queue time and ATM/CDM network.

We achieved the following results:

• Better management of the teller roster by matching OTC capacity against thevolume of anticipated customer traffic by time of day and day of week/month;

• Effective diversion of appropriate OTC cash deposit transactions to CDMs (for branches with CDMs);

• Effective elimination ofATM cash-out downtime and CDM cash-full downtimethrough effective planning and execution; and

• Effective redesigning of process flows (and/or time sequencing) of selected time-consuming transactions to better manage OTC queue time.

Branch Optimisation ProjectBranch Optimisation Project, a major component of our Change Management Programme, was rolled out in the second quarter of the financial year. It incorporated comprehensive initiatives which helped us address elements beyond the current issues and challenges facing our branches as well as helped position the Bank’s branch network as a value-creating servicing and distribution channel.

Through the Branch Optimisation initiative, we focused our efforts on developing and identifying a Group-wide differentiating edge and advantage that would render us more competitive. We also worked hard to create a branch franchise value proposition which was equipping and transforming our existing branch channel to support our Group-wide high growth agenda. Our goal is to build a “Branch of the Future” – one that is capable of moving forward in tandem with the changing times; which will safeguard our relevance amidst the marketplace; and deliver on the Group’s brand promise in terms of people, product and service quality.


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Among the many transformation initiatives that were rolled out last year and which have greatly benefited our branches are:

• Roles and ResponsibilitiesAlignment – this has created greater clarity amongbranch staff and promoted better accountability of performance;

• PoliciesandProceduresAlignment–thishascreatedstandardisedworkflowsandcentralisation of branch activities;

• Self-ServiceTerminalsTransactionTargets–thishasincreasedtheutilisationofour ATMs, CDMs and CES, and reduced the use of tellers for routine transactions;

• Team-basedOperations–thishasdrivenhigherlevelsofproductivityandcreateda more conducive working environment for branch staff;

• Branch Management Enhancement – this has resulted in clear managementguidelines at branch and head office levels; and

• Branch Value Creating key performance indicators (KPIs) – this is driving theexpected value-creating performance, namely net account and customer growth, customer retention, service quality, staff retention, cost management and operational risk management.

These transformation initiatives are ongoing and are being further improved upon:

• Branch Scope Simplification – through elimination or centralisation of non-customer facing activities;

• Branch Workflow Redesign – to improve servicing TAT and promote greaterservice effectiveness;

• Systems Enhancements – to support the redesigned processes and to enablecentralisation of non-customer facing activities; and

• COREExperienceServiceQuality–toensureabaselineandminimalstandardofservicing quality from which higher levels of service quality standards are to be developed and applied.

We also undertook the centralisation of ‘High Value Cheque Confirmation’ covering the SPICK KL Clearing Zone. Other zones in the north, south and east will be covered later pending the nationwide rollout out of the Cheque Truncation and Conversion System (CTCS) by BNM. Other initiatives included the centralisation of customer and account maintenance and the automation of transactional statistics gathering. The year also saw us making system enhancements to our account opening process, remittance system, foreign currency system and staff directory.

Impact of ChangesAs a result, the service and sales teams are now more focused on delivering on our brand promise of Banking Made Personal. These positive customer experiences forms the basis for further growing the Bank’s customer base. At the same time, a disciplined focus on cost and risk management will ensure that the value of customer growth is not diluted by disproportionate growth in operating costs and risks.

The Change Management Programme has also created branch franchise value through enabling optimum allocation of resources and more focused management of branches which, in turn, will lead to better operational control and management of overheads and operating expenses. The new standardised branch operating model is facilitating better movement of staff as well as training and management activities. Service quality standards too have risen now that clearer objectives, goals and KPIs are available throughout the organisation. AFG’s Change Management Programme has also brought about improved coordination between the Service and Sales teams as well as a better understanding of how they are to inter-relate. It has also given us greater leverage on our SST investments.


Service Quality ExcellenceMoving forward, the Group will continue to review its processes to increase efficiency at its branches. The introduction of Key Results Areas (KRAs) which are specifically designed for improving Branch Service Quality Level and the measurable KPIs will help us work towards improving the Group’s Service Quality (SQ) standard. To underscore our commitment towards moving forward in this area, we appointed a consultant to help us move our SQ to the next level. To inculcate the fact that SQ excellence should form part and parcel of our staff’s day-to-day routine, we have introduced a new manual titled “Service MAD” to futher motivate staff to boldly “Make A Difference” in their customer service efforts.

Over the course of the year, we achieved the following results in the way of SQ KPIs and eBanking activities:

Alternative Channels & e-Banking

In an increasingly fast-paced and complex world, our customers’ needs have evolved to the extent that they require services that are more seamless and timely in nature. In line with this, the Bank continues to be relevant to our customers by providing effective and convenient solutions as well as positioning ourselves to meet customers’ future demands. The growth of our Alternative Channels & e-Banking segment serves as a testimony of our commitment in this key area.

To provide our customers with an improved customer experience, we have made enhancements to our self-service networks, our Internet banking platform (Alliance Online) and our contact centres. These efforts have yielded us strong growth in the number of transactions conducted and provided better cost savings through the migration of low cost transactions to low cost channels.

We expanded our self-service network comprising all our SSTs (including ATMs, CDMs and CES) by 18%. This has included deploying newer SST machines nationwide at our branches and e-lobbies and setting up ATMs in high-traffic areas including retail malls and commercial areas for customer convenience. We also introduced Internet self-service kiosks and OnePay kiosks for the first-time ever at our Alliance Personal Concept Stores to differentiate ourselves and position our branch network as a convenient and comprehensive stop for all our customers. The Internet kiosks deliver media-rich content and enable customers to discover products and services of the bank by themselves. Our OnePay kiosks allow customers to purchase mobile reloads and tickets which serve as a differentiating service to our customers.

In taking a multi-pronged approach to the development of our SST network, we made improvements in several areas. These included:

• ExtensionoftheMEPSe-Debittransactionuptimeto24hourstoenablecustomersto make payments any time, any day;

• Provisionofoptionalreceiptprintingover theATMnetwork in linewithbeingamore environmentally-friendly bank;

• Continuousmonitoringof theSSTnetworkaswellas regular reviewswithourbranch operations and vendors to ensure peak performance;

• Provision of communication and marketing materials to our customers andbranches to promote and educate our customers on the use of the Bank’s electronic channels;

• Continuededucationandtrainingofoursupportstaffandtoensurethatcustomers’queries are handled in a timely and professional manner;

• Introduction of mini-statements that will help keep customers abreast of theirlatest transactions; and

• Provision of an alternative touch point for customers to register theirAllianceOnline PINs through ATMs. This resulted in encouraging take-up of Internet banking services among our customers.


Service Quality KPIs and eChannel Achievements

SQ KPI FY07/08 FY08/09 Improvement

1 Customers’ Q-Time 69% 85% + 16%

2 Branch Error Correction Transactions 0.26% 0.21% + 0.05%

3 Channel Migration 67% 86% + 19%

4 ATM Card Penetration 64% 65% + 1%

5 ATMUptime 95% 96.3% +1.3%

6 ATM Out of Cash Incident 18% 3.9% + 14.1%

7 CDMUptime 93% 94.3% +1.3%

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These continuous improvements have resulted in y-o-y utilisation growth for all SSTs with ATM utilisation rising from 78% to 83%; CDM utilisation rising from 63% to 72%; and CES utilisation growth rising from 88% to 98%. These numbers indicate that utilisation across all our machines experienced healthy growth which in turn helped boost our cost savings and revenue.

To further encourage utilisation of our SSTs, debit cards were developed together with MasterCardTM International and MEPS to offer our customers the convenience of transacting via our SSTs and at merchant POS via the swipe of a card. These combo cards (otherwise known as debit cards) were well received as they helped inculcate responsible spending. Another major enhancement was the introduction of the two-factor authentication for our Alliance Online Commercial Banking customers which addressed their ongoing need for security assurance.

With our successes to-date, we will continue to grow the Alternative Channels & e-Banking segment to deliver a more robust platform for customers to interact with the Bank. This growth will focus on four main areas which includes improving offerings and capabilities; improving uptime and availability of the electronic channels; continuous education for both staff and customers of the Group; and lastly, regular performance review of our electronic channels. By focusing on these areas, the Group will be in a stronger position to continuously engage our customers and enable multi-channel interaction.

Playing to Win

Going forward, ABMB’s Consumer Banking business unit will also focus on protecting the Bank’s earnings, building counter cyclical income streams, optimising margins by rebalancing the portfolio mix and scaling up and defending our profitable customer franchise. In the new financial year, Consumer Banking will also make every effort to enhance productivity and efficiency gains to achieve cost optimisation while leveraging on cross-selling and other synergistic efforts between the Group and its strategic partners.

COMMERCIAL BANKING

A Challenging Year

In the first half of the financial year, Commercial Banking unit’s growth in loan acceptance volume remained stable and consistent as we focused on delivering our promises to our customers and staying true to our business model. During this period, we continued our efforts to build upon staff’s technical expertise and made further investments in risk management processes and tools.

However, in the second half of the year, the market experienced a marked slowdown as the global economic recession set in. As a consequence, the Commercial Banking business experienced lower business volume and growth. In addition, the lowering of the OPR by BNM placed some pressure on our revenue and lending margins. At the same time, the downturn put our risk management process to the test. Thus far, it has shown itself to be robust as evidenced by the healthy gross NPL of less than 2% for the financial year. We also took the opportunity to assist our clients who were facing increasing financial challenges by assisting them to reschedule and restructure their loans where appropriate. We are confident that our strong team and the investment made in the risk management process will help us increase our market share when the economy recovers.

Key Operational Initiatives

The year saw Commercial Banking undertaking several major operational initiatives to drive performance:

• TodrivegreaterserviceefficiencyandTAT,theCommercialBankingteamfocusedits efforts on improving its management information and automation systems especially in the area of trade capabilities;

• Tomeetcustomers’needs,theunitgrewitsproductsuite,inparticularitscashmanagement solutions;

• To face the downturn and prepare for an eventual upturn in the economy,Commercial Banking continued to build a strong foundation in risk management by undertaking the necessary pre-emptive measures; and

• To improve the customer selection process and strengthen risk managementactivities, the team is working on developing a statistical scorecard for SMEs.


Performance and Results

For the financial year ended 31 March 2009, Commercial Banking was the main contributor to the Group turning in a pre-tax profit contribution of 43% (RM131 million) against the previous year’s contribution of 26%. In spite of tough market conditions, Commercial Banking loans grew 12% y-o-y with SME lending remaining the main engine for growth at RM1.5 billion worth of loan disbursements. Loans acceptance stood at RM1.5 billion as we instilled the same drive in our sales force to deliver our promise to our customers albeit on a more cautious note.

Commercial Banking’s sales team is supported by its credit, risk and documentation teams. In the last six months, their engines have been pushed to the maximum even as they have gone all out to overcome the challenges of the marketplace. From reinforcing the remedial and fraud workforce to conducting stress tests on selected risky portfolios; from sharpening early warning tools to managing the loans portfolio proactively; their efforts have paid off in terms of the robust loans quality that we have achieved.

As a result of the OPR reductions, the BLR has been revised accordingly, putting downward pressure on our revenue as most of the loans are pegged against the BLR. Amidst such challenging market conditions, the Commercial Banking business will focus on enhancing profitability through intensive cross-selling initiatives. The unit will also focus on supporting our customers through this difficult period, and in doing so, will reaffirm our commitment to building long-term relationships with them.

Serving the SME Community

The SME segment has always been a core focus of Alliance and we remain committed to supporting our SME clients. In support of our value proposition of being the sole banker and main financial services provider for the SMEs, we introduced several new features to complement our product and service offerings. One of this is the Industrial Hire Purchase (IHP) programme, an equipment financing programme for new and existing customers.

Over the last one year, we have enhanced our cash management proposition in collection, payment and account services. This has proven to be effective as reflected in an increase of approximately 12% in the average deposit balance for the year ended 31 March 2009. To further enhance our customer service offerings, we provided our customers with a dedicated fax number and a 1-300-88-0880 hotline number to enable them to find out more about our products, services and other trade-related enquiries.

To underscore our commitment to the SME industry, we continued to be the main sponsor of the Nanyang Golden Bull Award for the sixth consecutive year. To keep SMEs abreast of the economic situation, we launched a series of Alliance Bank Business Club Talks with the theme “Amidst the Current Turmoil” in the Klang Valley, Northern and Southern regions. We also collaborated with the Chinese and Indian Chambers of Commerce, the Federation of Malaysian Manufacturers (FMM) and the Association of Banks Malaysia (ABM), among others, to run workshops and hold dialogues as part of our efforts to educate SMEs on the financing opportunities within the banking industry.

Forging Ahead

The prospects for the new financial year will be challenging with revenue and margins under further downward pressure. The need for credit lines remains constant although we expect to see higher credit losses. In such an environment, the Commercial Banking unit will focus on defending its margins through aggressive cross-selling initiatives and introducing innovative products and services. We will also maintain good credit quality by reinforcing risk management tools and undertaking measures to ensure robustness of the process. We will also look out for opportunities to help our existing customers through the difficult times and continue to grow our customer base.

We have invested in the soon-to-be-launched GLOS, a system that enables us capture all loan applications for the purpose of better tracking to deliver faster TAT time and to enable better portfolio and risk management.

The Business Platinum Card, an addition to our current product offering, will be the highlight going forward. Cash lines offered through the card to SME customers can be utilised during this weakened market where funds’ availability and borrowings are needed to pull through such tough times and to enable SMEs to seize business opportunities. This will indirectly assist the growth of the SME market segment.

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CORPORATE BANKING

Strong Performance

Our Corporate Banking business unit remains on a steady course. During the year under review, notwithstanding the overall challenging operating environment, Corporate Banking’s loan base grew by approximately 40%. This growth was underscored by the disciplined execution of client-focused strategies based on Corporate Banking’s new business model which placed an emphasis on effective management of risk-reward relationships. The year saw Corporate Banking focusing its efforts on realigning its people, portfolio, platform and processes which ultimately strengthened its deliverables and performance. Currently, the loan base in Corporate Banking is well within the 15% cap set vis-a-vis ABMB’s total loan base as part of the Bank’s overall loan portfolio diversification strategy and risk management framework.

Moving Ahead

Moving into the current financial year, we believe the financial crisis presents us with opportunities to significantly strengthen and deepen our relationships with our existing clientele base, as well as to selectively underwrite new relationships within our target industry sectors. This will improve our market share and place us in a good position to seize further market potential when the economy recovers. Corporate Banking will continue to remain nimble in

managing its cost base while focusing its efforts on cross-selling products and services customised to enhance customer experience and revenue mix.

As this business unit’s market focus is essentially local-centric, the recent stimulus packages announced by the Malaysian Government as well as the liberalisation of selected industry sectors within the domestic market, augurs well for Corporate Banking’s growth as the majority of its target markets are poised to benefit from these policies.

ALLIANCE ISLAMIC BANK BERHAD

Poised For Further Growth

The incorporation of Alliance Islamic Bank Berhad (AIS), a wholly-owned subsidiary of ABMB and a licensed Islamic bank will spur the Group on to tap the huge potential in the Islamic banking industry. Commencing business on 1 April 2008, AIS today offers Shariah-compliant banking products and services along two major business lines – Commercial Banking and new businesses. AIS will leverage on existing conventional banking sales and distribution channels to market and promote its products and services. In addition, this entity will enable the Group to explore opportunities for strategic tie-ups to introduce new Islamic banking and financing products for sustainable long-term growth.

Within AIS’s portfolio are Malaysia’s first Islamic deposit-linked home financing facility – the Alliance i-Wish Home Flexi, which allows Malaysians to own their homes faster; as well as Alliance CashVantage Personal Financing-i, a new two-tiered personal financing offering 35% lower repayment for the first year.

To ensure strict compliance with Shariah principles, AIS has established a Shariah Compliance Framework and is in the midst of reviewing all Islamic Product Development Documents (PDDs) from end-to-end. Working hand in hand with our Shariah Committee, AIS will ensure full deliberation on Shariah requirements at the Shariah Committee level; advising the Board on issues of Shariah compliance; validating documentations such as terms and conditions, proposal forms, contracts, agreements and other related documents; and providing advice on matters to be referred to the Shariah Advisory Committee (SAC) of BNM.


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Commendable Results

During the year, AIS achieved financing growth of 15%, with the financing portfolio mix in line with the desired mix. The quality of its financing asset portfolio continued to improve quarter by quarter, with both the net non-performing financing and financing loss ratios at 1.2% and 123% respectively as at 31 March 2009 (better than the industry average of 1.6% and 105% respectively). AIS financing-deposit ratio remains healthy and its RWCR remains strong. At present, AIS is well-capitalised with its core capital standing at 12.23% and its RWCR at 13.92%.

The year saw seven Islamic Banking Centres being set up within ABMB branches, namely at Capital Square, Ampang Point and Kota Damansara in Selangor, Sinsuran in Sabah, Taman Desa Cheng Perdana in Melaka, Beach Road in Penang and Taman Pelangi in Johor. In line with ABMB’s tagline, Banking Made Personal, AIS launched Malaysia’s first Alliance Islamic Debit MasterCard, which is linked to the profit-bearing Alliance Hybrid Account with profit rates of up to 1.8%, one of the highest rates currently offered in the market.

Key Drivers for Growth

Moving forward, AIS will not only focus on Consumer Banking, Commercial Banking and SMEs in terms of financing and deposits, but also on new areas which include Islamic Investment Banking especially in the wealth management, unit trust and capital market sectors. Product innovation will be one of the key drivers of growth, as will the AIS team’s commitment to creativity, conviction and integrity. Our Islamic banking entity will continue to strengthen its risk management practices to maintain the quality of its financing portfolios, improve its cost efficiencies and ensure liquidity and capital position stay strong.

In order to further drive product innovation and raise the performance of Islamic finance within the Group to greater heights, coupled with its commitment to creating a substantial pool of talented and highly skilled professionals, AIS encourages its staff to enhance their knowledge and skills by attending Islamic banking and professional courses conducted by relevant parties. These courses include those conducted by the Islamic Banking and Finance Institute Malaysia (IBFIM), the Association of Islamic Banking Institutions Malaysia (AIBIM) and the International Centre for Education in Islamic Finance (INCEIF). Despite the continued challenging economic environment, AIS expects to grow its revenue and profitability albeit at a slower pace for the financial year ending 31 March 2010.

WHOLESALE/INVESTMENT BANKING

Performance Impaired by Market Forces

Due to the global economic uncertainties, the Malaysian equity market suffered a sharp decline in 2008 after a strong performance in 2007. Alliance Investment Bank Berhad (AIBB) was not spared this backlash – its revenue stream declined by 37% due to market fears and the cautious stance of investors. Coupled with the prudent approach of provisioning for impairment of loans and securities, AIBB posted a loss of RM26.8 million in the financial year under review. Nevertheless, during those tough times, AIBB focused on strengthening its fundamentals by increasing productivity, reducing wastage, implementing strict cost management measures and strengthening risk management, while exploring new opportunities to remain competitive.


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Operational Highlights

Stockbroking

The year saw AIBB continuing through with its transformation exercise to integrate its stockbroking business into the Consumer Banking business of ABMB. This will provide greater operational efficiency and complement the integrated suite of financial products and services that ABMB offers its customers.

AIBB’s stockbroking business which is dependent on strong market confidence for higher trading volume from retail and institutional clients faced severe challenges in the year under review. Monthly trading volume plummeted to just above RM11 billion a month in December 2008 from a high of over RM30 billion before the sell down. The high fixed operating costs structure immediately placed pressure upon business profitability. The uneven landscape of volume distributions among stockbrokers and client type further pressured the financial results. AIBB’s trading income from brokerage and fees were down by 69% y-o-y from RM45.5 million to RM14.1 million, while interest income from share margin financing activity also dropped by some 27% from RM6.6 million to RM4.8 million. A high proportion of retail contributions, estimated at around 65% to 85% of overall monthly volume together with additional prudent risk management controls were among the reasons for the sharp decline in volume. AIBB recorded RM19 million in revenue, a sharp decline from its peak of RM52.8 million the year before.

Capital Market

AIBB’s Capital Market (CM) arm was not spared the negative effects of the equity markets. The bearish market and economy resulted in certain mandated jobs being put on hold while lower income yielding jobs were secured. Furthermore, due to the weak market, a number of Initial Public Offerings (IPOs) which had been approved earlier by the Securities Commission could not be launched. This resulted in unrealised advisory fees as well as placement and underwriting

commissions causing a 54% decline in business revenue. However, the CM arm did manage to complete a handful of IPO jobs for listing on Bursa Malaysia as well as the Alternative Investment Market (AIM). These included Fibon Berhad on the MESDAQ Market, as well as Red Hot Media and DataLink, both listings on the AIM in London. Despite the challenges it faced, AIBB managed to maintain its ranking among the top 10 companies in Bloomberg’s 2008 Malaysian IPO League Table.

Other than IPOs, AIBB also completed privatisation exercises for Industrial Concrete Products Berhad and Saujana Consolidated Berhad, as well as fund raising exercises for Oriental Media Group Berhad, Asdion Berhad and Furqan Business Organisation Berhad. The CM arm was also involved in other types of corporate proposals such as disposals, recurrent related-party transactions and transfers to the Main Board, among other proposals. In line with AIBB’s business model and in order to move forward under the existing circumstances, CM has had to re-focus its efforts on restructuring and merger and acquisition activities.

Debt Financing & Advisory

Over the course of the year, market uncertainties and rising yields created an unfavourable environment for debt issuances and underwriting. As such, the Debt Financing & Advisory (DFA) unit did not originate any private debt security (PDS) issuances. This impacted its revenue, which declined by 40% against the previous financial period. However, the DFA unit did manage to generate revenue from advisory activities and as a lead arranger/joint lead arranger for loan syndications.

Financial Markets

During the economic crisis, the Treasury unit’s performance was impacted slightly when it changed its focus to liquidity and low risk investments to mitigate the uncertainty as well as liquidity and credit risks. Treasury worked on optimising its investment portfolio returns, actively managing portfolio risk, increasing client initiatives to sell Financial Markets’ products, and enhancing network ties with selected financial institutions.

For the financial year under review, Treasury actively managed its portfolio via gapping, hedging and liquidation of securities for capital gains. With the lowering of interest rates which affected yields and the Bank’s focus on liquidity and credit risk, interest income was impacted. However, this impact was cushioned by sales revenue even as the Treasury unit actively leveraged on internal clients and capital gains.

The Treasury unit introduced two new products, namely Islamic Money Market Deposits and the Dual Currency Investment. The unit also focused its efforts on enhancing customer relationships, improving service standards and undertaking regular credit reviews of its debt securities.


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Optimistic Outlook

Despite the dismal economic scenario, AIBB is expected to be in the black for the new financial year largely due to recoveries, with revenues being maintained and costs expected to remain flat. The Financial Markets and Stockbroking businesses are expected to be the main contributors to AIBB’s revenue turning in contributions of 54% and 29% respectively. In anticipating a protracted economic slowdown, AIBB will focus on building core capabilities for all its business units to ensure a strong foundation exists for sustained long-term growth.

AIBB will also continue to utilise the investment banking resources to meet clients’ increasing needs for fund raising, business restructuring and risk management. This will remain a priority as AIBB’s businesses represent a core product capability of the Group. In order to meet clients’ diverse demands, AIBB will strive to provide investment banking solutions via capital markets as well as act as a bridge to connect corporate and commercial clients to our capital market solutions.

To equip itself amidst challenging market conditions, AIBB will focus on enhancing competency levels throughout the organisation, while its respective business segments will continue to identify their core competencies and keep abreast of industry developments and products offered by the competitors. In the current economic climate with falling demands and margin compression, AIBB aims to strengthen its traditional product offering as well as serve its clients via investment banking enhanced capabilities and excellent services.

ALLIANCE INVESTMENT MANAGEMENT BERHAD

Challenging Investment Landscape

2008 will be remembered in history as the tipping point where the investment landscape changed significantly due to the unprecedented near collapse of the global financial system. In line with the global equity markets, the key barometer Kuala Lumpur Composite Index (KLCI) plunged more than 30% during this period as investors generally shied away from the capital market waiting for a clearer perceptive of things (which to date has not materialised). Investors by and large experienced significant erosion in their personal wealth with total Net Asset Value (NAV) of the unit trust industry declining by RM34 billion or about 20% y-o-y against RM169 billion in the preceding year.

To facilitate continued growth and enhance the competitiveness of the industry, the SC introduced more relaxed wholesale fund guidelines. Asset management houses took the opportunity to capitalise on the broadened “qualified Investors” definition and flexible performance fee structure to offer more sophisticated funds going forward. At the same time, many domestic and foreign asset management entities entered the incentive-rich Islamic asset management space. As at end December 2008, the total NAV for the Malaysian Shariah-based funds segment had increased to RM17 billion from RM6 billion in 2004 and total number of Shariah-based funds had mushroomed to 147 from 65 during the corresponding period.

Forward Momentum

Amidst this backdrop, Alliance Investment Management Berhad (AIMB) successfully revamped and streamlined its Agency business. Training programmes were conducted for all registered agents in the early part of the financial year and since then Agency sales have thrived on a y-o-y basis registering more than 100% growth and surpassing set targets. For the current year, the Agency force contributed total sales of RM90 million compared to RM47 million in the preceding financial year. In recent months, new cross-selling arrangements have enabled AIMB’s agents to sell Consumer Banking products such as mortgage and co-operative loans, and this is expected to grow.

ORGANISATIONAL EXCELLENCE

Group Special AssetsTasked with improving the Group’s gross and net NPLs ratios, the Group Special Assets unit rose to the challenge by enhancing tried-and-proven processes as well as proactively exploring creative new ways of recovering debt. As a result, our gross and net NPLs improved further from 7.0% and 3.3% respectively in the preceding financial year to 4.12% and 1.84% respectively in the year under review. Most significant was the fact that the Group’s net NPL ratio of 1.8% for the year was lower than the industry’s average of 2.2% for the first time ever with a loan loss coverage of 99.7% (vs industry’s average of 86.4%), thus underpinning the Group’s strong financial performance.


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These commendable results came on the back of the following initiatives:

• expansionofournetworkofrealestateagentstopromotethesaleofpropertiesheld as securities;

• conversionof future receivablesuncertainofpayment into tangibleassets (theBank gains not only from the certainty of recovery, but additional recovery at an earlier date than expected. From a ‘net present value’ perspective, this translates into higher recoveries); and

• assisting borrowers with specialised financing needs to overcome cash-flowconstraints.

As part of our efforts to ensure a high quality loans portfolio, we have adopted a robust credit approval process whereupon all responsibilities and accountabilities are clearly defined and independent of the lending function. To support this approach, the Group invested significantly in people and technology resources. This helps ensure that activities related to monitoring account performance, recognising early warning bells and undertaking restructuring and remedial measures, are adequately institutionalised. With the ability to review and manage our loans portfolio constantly, we are able to avoid incidences of NPLs. Even as we adopted a more prudent and businesslike approach to credit risk, we were able to grow our loan assets by 18.4% for the year under review.

GROUP RISK MANAGEMENT The Group continues to establish a strong risk management structure by strengthening its Integrated Risk Management Framework and ensuring that risk management practices are well-placed to deal with the challenges arising from the global financial turmoil.

Group Risk Management is responsible for overseeing the Group’s overall risk philosophy and strategies as well as setting the risk appetite, tolerance limits and control measures are applied consistently across the Group. The Group’s business units assume the ownership as well as management of the risks inherent in the respective business activities and

adhere to policies and standards set by Group Risk Management.

UndertheBasel IIAccord,werolledoutthe Basel II Solution which comprises the Basel II Capital Adequacy Calculator and Collateral Management module in compliance with the implementation of BNM’s Standardised Approach. We are also building capabilities towards the Basel II Internal Rating Based approach, whereupon rating models are developed to enhance our business decisions.

Our Operational Risk team has to-date embedded a strong risk culture throughout the entire Group and is implementing ongoing training programmes. A comprehensive Group-wide integrated Operational Risk Management (ORM) system with Loss Data Capture, Risk Control and Self Assessment as well as Key Risk Indicator modules is in place, and ready for BNM’s Standardised Approach.

Under our Market Risk Management function, we haveimplemented a new treasury system with a limits module to facilitate pre-deal limit checks. We also periodically review and revise our portfolio policies and risk limits. An Assets & Liabilities Management (ALM) system was set up to enable better management of interest rate/profit rate risks and liquidity risks across the Bank.

Moving forward, the Group is undertaking stress tests to gauge the impact of extreme events on the Group’s earnings, balance sheet and capital, and we have formulated contingency responses for a variety of situations. We are also monitoring our capital adequacy position to ensure compliance with BNM’s requirements as well as managing our capital in proportion to the risk profile arising from the Group’s lending and investment activities. All in all, the Group is committed towards adhering to the established international standards to protect our shareholders and customers against the risk of bank failure.

GROUP INTERNAL AUDITThe Group Internal Audit function provides an independent evaluation of risk management practices and processes that are critical to the achievement of the Group’s business and strategic objectives. Following the establishment of Alliance Islamic Bank Berhad, Group Internal Audit has developed audit programmes to review the various infrastructure and procedures to ensure that our Islamic banking entity complies with Shariah principles. To further enhance our proficiency in this area, we sponsored three auditors to pursue the Chartered Islamic Finance Professional qualification at the International Centre of Education for Islamic Finance.

While the Group’s half-yearly and annual review of the financial statements is undertaken by our external auditors, Ernst & Young, our first quarter and third quarter financial statements are reviewed by Group Internal Audit on a high level basis so as to complement the review carried out by external auditors. With the implementation of the Credit Risk Management system for Basel II Accord, Group Internal Audit has initiated a validation of the system and successfully verified the completeness and accuracy of data transmitted from source.


GROUP TECHNOLOGY CAPABILITYThe year under review saw us continuing to build upon our strategic technology capabilities to drive sustainable business performance and customer relationship management activities. We tapped the Group’s enterprise architecture to support our strategic business goals that included advancing our technological capabilities, enhancing our information management process among other processes, as well as elevating the customer service experiences.

Product and service innovation features high on our technology agenda. We implemented a new treasury system and launched our Premium Debit MasterCard, the first of its kind in the market. This was followed by Islamic Standard Debit MasterCard and the first-of-its-kind You:nique Picture Card which allows customers to select their own card face. By upgrading our loyalty systems, we were also able to cater for online redemptions by onsite customers at IKEA stores.

As the Group continues to roll out its risk transformation roadmap and set in place a best-in-class risk management infrastructure, technology continues to play an integral role in our risk management process. To support the end-to-end management of our lending business, we have implemented an integrated credit risk management infrastructure that covers everything from applications to loan assessments to payments and debt management. The infrastructure also facilitates the implementation of scoring models and manage wallet sizing, payments and collection for our respective targeted segments.

In addition to our collateral management and debt management systems which were developed as part of this integrated framework, a loans origination system was implemented in September 2008, providing the capacity to embed scoring into the loans approval process. This enables us to focus on ‘good’ customers to fast-track their applications.

Technology is also playing a pivotal role in facilitating the Group achieve operational efficiency. By consolidating technology platforms, optimising enterprise integration and application usage, as well as deploying collaboration technologies, we have effectively harnessed technology to promote efficiency throughout the length and breadth of the organisation.

Through re-engineering IT-enabled workflows, we have successfully undertaken numerous re-engineering projects including the centralisation of Branch back office functions and transformation of stockbanking operations. The implementation of a shared technology support model has enabled us to harness group synergy and

centralise all group support services into one single entity. Our centralisation projects have also brought about substantial cost savings through process rationalisation and systems workflow redesign to drive economies of scale.

The year also saw us embarking on a series of Branch Franchise Value Creation initiatives to optimise our branch servicing capacity and elevate the customer service experience. These measures included increasing our touch points and enabling easier access to our products and services. As a result, the Group’s distribution channels were strengthened and further diversified as follows:

Strengthened and Diversified Distribution ChannelsDistribution Channels

Branch Banking

Alliance Direct Marketing (ADM)

Share Trading Centres (STC)

Privilege Banking

Self-Service Terminals (SST)

Islamic Banking Centres (IBC)

Telemarketing

Alliance Online

Alliance Business Centres

Key Achievements

• Branchexpandedfrom77to100(current)

• Totalsalesforceincreasedfrom 90 (2005) to 1,582 (current)

• PrivilegeBankingCentresdoubledsince 2005 to 19 currently

• 11ADMbrancheswith565salesforce compared to 4 ADM branches and 215 sales force in August 2006

• SignificantincreaseinATM(170),CDM (93) and CES (87) currently compared to 141, 49 and 49 respectively in 2005

• Establishmentof26AllianceBusinessCentres compared to 7 in 2005

• Upgradingcallcentrestoincreaseability to offer more banking products

• ShareTradingCentres(STC) currently at 10

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GROUP HUMAN CAPITAL AGENDAAn organisation is only as good as the people behind it and that is why the Group is committed to employing and retaining top calibre employees from a wealth of backgrounds and cultures to set us apart from the competition. As an employer of choice, we believe in investing in our people by providing them every opportunity to acquire the knowledge and training they need to perform to the best of their abilities. As such, training opportunities are open to staff at every level of the organisation. Group Organisational Learning, which is responsible for facilitating access to training, makes every effort to ensure that staff members attend at least the minimum hours of developmental training per calendar year (separate from the mandatory training programmes).

For the year under review, the Group’s training expenses increased by 12% over the preceding year even as the Individual Developmental Plan (IDP) was revamped. Incorporating a more proactive approach in support of business objectives, the new IDP incorporates a map outlining Individual Training Needs within the various business units and a focus on the development and management of talent. This holistic approach is going a long way in helping us to cope with the dynamic demands of the business.

In view of the changing business landscapes, the year’s training focused on customer relationship management (CRM) and marketing courses where ample opportunities were provided for horizontal mobility and the learning of new skills through job rotation and job enlargement. As we are very much a customer responsive organisation, these CRM courses are helping ensure the speed and reliability of service delivery efforts and the Group’s continuous expansion programme. The Group is also supportive of staff who wish to attend external leadership programmes or pursue specialised certification programmes to improve their career advancement prospects. Under the Sales andService Courses outline, the Training Competency Model for Sales & Service was revamped to drive productivity and inculcate more proactive behaviour.

The Alliance Young Executive Programme is a business-centric trainee programme which aims to produce bankers who are well-rounded in their selected business streams. The programme consists of classroom training and on-the-job attachments, with trainees’ progress closely monitored by appointed mentors. In 2008, the Bank trained and graduated 18 trainees. In line with our objectives of nurturing young talent and building a talent pipeline for the Group, we also sponsored the Sunway ApprenticeChallenge2008wherestudentsfromSunwayUniversitydemonstratedtheirentrepreneurial mettle and the winner was given a conditional offer to join the Bank upon graduation.

As part of the Group’s commitment to nurturing, rewarding and building strong long-term relationships with our staff, we continue to roll out a host of initiatives that aim to benefit staff and their families. Over the course of the financial year, the new Alliance Bank Staff Visa and Master credit cards were introduced incorporating enhanced benefits such as significantly lower interest rates, double timeless bonus points and special merchant tie-ups. By bringing our staff members the best values and savings possible, we are spelling out to them that they are important to us.

To recognise the loyalty and commitment of our long service staff, the Group continues to reward staff who has served the Group for 15 and 25 years respectively. A total of 224 recipients received the long service award last year. To recognise and reward the academic achievements of staff members’ children, we continue to roll out our annual Cahaya Mata Scholarship Scheme where recipients are also given the opportunity to join the Bank upon graduation.


BRAND TRANSFORMATION JOURNEY

“A journey of a thousand miles begins with a single step”

Brand building is a continuous journey and at Alliance, we have successfully created and maintained a strong, positive and credible image for the Group, clearly differentiating us from the competition in an environment marked by consolidation and impending liberalisation and deregulation.

The Group’s identity is a sincere personification of who we are and the values that we stand for. It is the expression of our function, uniqueness, credibility and personality. Our mantra Banking Made Personal and our values of Caring, Conviction, Creativity, Resilience and Integrity have been ingrained in every staff and this is also evident in everything that we do – from our product and service offering to delivering a consistent customer experience with our customers throughout their life stages.

We continue to raise awareness of our brand personality at all our branches in line with our concerted efforts to bring a new banking experience to the local communities that we serve. During the year, we rebranded another 10 branches with more to come in the new financial year. We also leveraged on our branch franchise whereby branch facades at 22 of our branches were modified into advertising billboards to further reinforce our brand promise of “relationship” and to making banking a personal experience for our customers.

Through the various initiatives taken in internalising and externalising the Alliance brand, we have built and reinforced affinity with all our stakeholders, be they our shareholders, staff, customers or business partners. The Group’s brand achievements were highlighted in the recent Brand Equity Study – we achieved comparatively healthy brand health scores in the areas of brand awareness, image association and brand perception. Based on insights gathered from the brand study, we have also identified areas that require further improvement and plans are now in the pipeline to address these gaps.

Moving ahead, we will continue to establish the Alliance brand amid an ever-changing environment with the ultimate aim of creating a seamless and cohesive brand identity throughout the entire Group. To do this, we will be responsive to shifting markets and customers’ needs. Even as Alliance continues to transform itself, we aspire to build upon our strengths, identity and values in order to remain relevant in an increasingly competitive and regionalised market.

CORPORATE RESPONSIBILITYThe Group is committed to carrying out its businesses in an ethical, responsible and sustainable manner so that all stakeholders, be they our employees, partners, customers or the communities, and the environment we operate in, will benefit positively. This is the simple thrust of our corporate responsibility efforts which form an integral part of how we run and develop our business. Our stakeholders can be rest assured that our business growth and decision-making processes will continue to be conveyed in an open and transparent manner.

The Group’s full Corporate Responsibility Report, found elsewhere in this Annual Report, spells out our initiatives in the areas of the Marketplace, Workplace, Community and Environment.


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ECONOMIC AND BUSINESS OUTLOOK

A Challenging Outlook

At the time of writing, there are no visible signs that the global financial crisis is abating. The global economy is expected to continue to weaken significantly in 2009 with all advanced economies continuing to experience sharp economic contractions. The delay in addressing the financial sector problems within several of the advanced economies has increased the prospect of a protracted and deeper economic downturn. Going forward, financial system stability and economic recovery can only happen if comprehensive measures are undertaken including the restoration of the financial intermediation process and the resumption of lending activity. While a number of stimulus measures are being undertaken worldwide to counter the effects of the economic downturn, the full impact of these measures are expected to only begin yielding tangible results in a year or two. This challenging situation is expected to test industry players for some time to come.

Nearer to home, the Government recently revised its prediction of economic performance for 2009 to contract between 4% and 5% from a previously forecasted -1% to 1% on the account of sluggish manufacturing sector and plummeting exports. The Government has responded swiftly by undertaking expansionary fiscal and monetary policies. Together with the two stimulus plans, interest rate cuts, and liberalisation of the financial sector, our economy is expected to withstand the headwinds of plunging exports and slowing consumer spending. Yet, the Malaysian economy needs to brace itself as the global recession is expected to continue to exert downward pressure on international trade and financial markets.

Going forward, the outlook is very much dependent on stability being restored in the crisis-affected economies in the second half of the year as well as the effectiveness of stimulus measures. Should the financial sector problems globally remain unresolved, we can expect conditions to continue to decline.


MOVING FORWARDToday, the Group stands on the threshold of becoming a far more significant player in Malaysia’s banking industry, not only because of the high corporate governance and banking standards we are adopting, but because of the many talented professionals within our organisation. In respect of this, we will develop and mentor our younger talent as we focus on bolstering the strength of our management team. Our goal is to ensure that we leverage on our people and our growing economies of scale. We will endeavour to hold true to our tagline Banking Made Personal in all that we commit to. We aim to focus locally on the home front, where we have a distinct advantage because we understand the language, business and cultural environment.

While the journey ahead is not without its challenges, we are here for the long haul. With competition on the rise and the advent of liberalisation in line with the Financial Market Masterplan, customers will be exposed to more choices than ever and customer service metrics will have to be systematically managed and tracked. In such an operating environment, industry players are expected to compete in the way of competitive pricing, attractive terms, product innovation and higher service standards. In this regard, we will focus our efforts on growing our high-return consumer and SME banking franchise by developing and expanding the fee-based and recurring income streams to offset pressures on net interest margins. The recent announcement of a second stimulus package, especially the credit guarantee scheme by the Government, will provide the Group with the opportunity to further expand its SME lending programme and complement the Government’s support of SMEs.

We are already making good strides forward but these are only the first steps of a long marathon. Business relationships will be built on mutual trust and understanding as the key differentiating factor without compromising on asset quality. We are committed to being at the forefront of risk management practices and standards among banks in Malaysia. Our best practice international risk and credit management systems will differentiate our banking franchise from others. We remain on schedule to meet the regulators’ Basel II qualification timelines.

Even as we learn from the past, live in the present and prepare for the future, the Group will always be mindful of the need to meet the rising expectations of shareholders, customers, staff and regulators for long-term sustainable growth. Going forward, we will continue to bolster our competitive position and ensure the Group becomes a leading integrated financial solutions provider, one that is capable of delivering the best customer experience and creating sustainable shareholder value. The opportunities for growth are out there even as we continue to establish ourselves as the leading “niche bank” targeting the underserved.

APPRECIATIONThe year’s successes would not have been possible without the hard work and sacrifices of our dedicated and loyal staff, the confidence of our customers and shareholders, as well as the support and guidance of our Board of Directors and regulators especially BNM, the SC and Bursa Malaysia. To all these parties, a big thank you for your unwavering encouragement and we look forward to your continuing support even as we prepare to explore new opportunities and face new challenges.

DATUK BRIDGET LAIGroup Chief Executive OfficerAlliance Bank Malaysia Berhad

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