KAF-Investment Bank Berhad. Annual Report 2012
Contents
Corporate Information
Directors’ Report
2
3 - 14
Statement Of Financial Position
15
Statement Of Comprehensive Income
16
Statement Of Changes In Equity
17
Statement Of Cash Flow
18 - 19
Summary Of Significant Accounting Policies
20 - 30
Notes To The Financial Statements
31 - 78
Statement By Directors
79
Pursuant To Section 169(15) Of The Companies Act, 1965
Statutory Declaration
80
Pursuant To Section 169(16) Of The Companies Act, 1965
Independent Auditors' Report
81 - 82
To The Member Of KAF Investment Bank Berhad
Basel II Pillar 3 Disclosure
83 - 112
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2
KAF-Investment Bank Berhad. Annual Report 2012
Corporate Information
BOARD OF DIRECTORS
RISK MANAGEMENT COMMITTEE
MANAGEMENT
Tan Sri Dato’ Ahmad bin Mohd Don
Chairman
Independent Non-Executive Director
Peter Lee Siew Choong
Chairman
Independent Non-Executive Director
Datuk Khatijah binti Ahmad
Managing Director
Tan Sri Dato’ Seri Siti Norma binti Yaakob
Independent Non-Executive Director
Dato’ Wira Syed Abdul Jabbar bin Syed Hassan
Independent Non-Executive Director
Dato’ Wira Syed Abdul Jabbar bin Syed Hassan
Independent Non-Executive Director
Paisol bin Ahmad
Non-Independent Non-Executive Director
Peter Lee Siew Choong
Independent Non-Executive Director
Thariq Usman bin Ahmad
Non- Independent Non-Executive Director
Thariq Usman bin Ahmad
Non- Independent Non-Executive Director
Paisol bin Ahmad
Non-Independent Non-Executive Director
Datuk Khatijah binti Ahmad
Managing Director
AUDIT COMMITTEE
Rohaizad bin Ismail
Capital Market
Manimakudom a/l Karuppiah
Treasury
Abd. Rahman bin Haji Yatim
Islamic Banking
NOMINATION COMMITTEE
Dato’ Wira Syed Abdul Jabbar bin Syed Hassan
Chairman
Independent Non-Executive Director
Datuk Khatijah binti Ahmad
Managing Director
Paisol bin Ahmad
Non-Independent Non-Executive Director
Dato’ Wira Syed Abdul Jabbar bin Syed Hassan
Chairman
Independent Non-Executive Director
Peter Lee Siew Choong
Independent Non-Executive Director
Tan Sri Dato’ Seri Siti Norma binti Yaakob
Independent Non-Executive Director
Tan Sri Dato’ Seri Siti Norma binti Yaakob
Independent Non-Executive Director
Paisol bin Ahmad
Non-Independent Non-Executive Director
REMUNERATION COMMITTEE
Peter Lee Siew Choong
Independent Non-Executive Director
Faisol Zulkifli
Director, Operations
Peter Lee Siew Choong
Chairman
Independent Non-Executive Director
Shaiful Hadi bin Shaharuddin
Marketing and Communications
Nadia binti Ahmad Adzmi
Risk Management
Abdul Saheed
Information Technology
Aishara binti Abdul Rahim
Internal Audit
Syed Ali Haidar bin Syed Shahabuddin
Legal & Corporate Affairs
Junaidah binti Ladi
Compliance
AUDITORS
Dato’ Wira Syed Abdul Jabbar bin Syed Hassan
Independent Non-Executive Director
PricewaterhouseCoopers
Level 10, 1 Sentral, Jalan Travers
Kuala Lumpur Sentral
PO Box 10192
50706 Kuala Lumpur
Paisol bin Ahmad
Non-Independent Non-Executive Director
REGISTERED OFFICE
COMPANY SECRETARY
Level 14 Chulan Tower
No. 3 Jalan Conlay
50450 Kuala Lumpur
Siti Nurmazita binti Mustapha
(LS 0009160)
Telephone : 603-2168 8800 (General)
603-2168 8144 (Treasury)
Facsimile : 603-2168 8586
KAF-Investment Bank Berhad. Annual Report 2012
Directors’ Report
for the year financial ended 31 May 2012
The Directors hereby submit their report with the audited financial statements of the Bank for the financial year ended 31 May 2012.
Principal activities
The Bank is principally engaged in investment banking, Islamic banking and the provision of related financial services.
There have been no significant changes to these principal activities during the financial year.
FINANCIAL RESULTS
Net profit for the financial year
RM’000
124,261
Dividend
The dividend paid by the Bank since 31 May 2011 were as follows:
In respect of the financial year ended 31 May 2011:
- Final dividend of 50 sen less 25% tax, paid on 28 October 2011
RM’000
30,000
At the forthcoming Annual General Meeting, a final gross dividend in respect of the current financial year of RM1.00 less 25%
tax amounting to RM60,000,000 will be proposed for shareholders’ approval. These financial statements do not reflect this
final dividend which will be accounted for in the shareholders’ equity as an appropriation of retained profits in the financial
year ending 31 May 2013 when approved by the shareholder.
RESERVES AND PROVISIONS
All material transfers to or from reserves and provisions during the financial year are as disclosed in the financial statements.
Business strategy and outlook for the current financial year
Despite the promising start for the year, downside risk to global economic growth has reemerged as the European sovereigndebt crisis enters into its fourth year with no clear solutions in sight. Rising borrowing costs in Spain and Italy highlights the
ineffectiveness of the European Union in arresting the crisis from spreading to core euro-zone countries. Economic activities in
advanced and developing countries should remain subdued, with financial market uncertainty and fiscal consolidation associated
with the high deficits and debt levels of high-income countries to sustain market volatility. According to World Bank estimates,
global real Gross Domestic Product (GDP) growth should decelerate further to 2.5 percent in 2012 from 2.7 percent in 2011, with
growth forecast to recover to 3.0 percent and 3.3 percent in 2013 and 2014, respectively.
The Malaysian economy continues to benefit from domestic demand, driven by consumption and investment activity. Initiatives
announced in the 2012 Budget, such as the one-off financial assistance to low- and middle income groups, and the higher increment
of public sector wages should support private consumption and mitigate the potential slowdown from weaker external demand.
Bank Negara Malaysia (BNM) anticipates private investment will be supported by continued investment by domestic-oriented
industries and the ongoing implementation of projects under the Economic Transformation Programme. The public sector will
remain supportive of growth, with higher capital expenditure by both the Federal Government and the non-financial public
enterprises. As such, BNM expects the economy to grow a modest 4-5 percent in 2012 compared to 5.1 percent in 2011.
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KAF-Investment Bank Berhad. Annual Report 2012
Directors’ Report
for the year financial ended 31 May 2012
Headline inflation is expected to moderate in 2012 with improved domestic supply and stable demand conditions. Upside
risks to inflation could emerge, particularly from global supply disruptions and result in higher global prices for energy and
commodities. BNM forecasts headline inflation to moderate, averaging between 2.5 - 3.0% in 2012.
Given the prospects of moderate economic growth and modest inflation, we expect the Overnight Policy Rate to remain steady
at 3.00% for the year.
For the current year, the Bank will remain focused on protecting its strong balance sheet, maintaining its high quality fixedincome portfolio, and to be selective in its trading and origination activities.
Rating by rating agencies
Malaysian Rating Corporation Berhad has affirmed the long-term and short-term financial institution ratings of AA-/MARC-1
respectively on KAF Investment Bank Berhad on October 2011.
Directors
The Directors of the Bank in office since the date of the last report are:
Tan Sri Dato’ Ahmad bin Mohd Don
Tan Sri Dato’ Seri Siti Norma binti Yaakob
Dato’ Wira Syed Abdul Jabbar bin Syed Hassan
Lee Siew Choong Datuk Khatijah binti Ahmad
Thariq Usman bin Ahmad
Paisol bin Ahmad
Chairman/Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Managing Director
Non-Independent Non-Executive Director
Non-Independent Non-Executive Director
In accordance with the Article 94 of the Company’s Articles of Association, Tan Sri Dato’ Ahmad Mohd Don retires from the
Board at the Annual General Meeting and, being eligible, offers himself for reelection.
Datuk Khatijah binti Ahmad, Dato’ Wira Syed Abdul Jabbar bin Syed Hassan and Lee Siew Choong, being over the age of 70
years, having consented as required pursuant to Section 129(6) of the Companies Act, 1965 to be reappointed as directors of the
Bank by way of a resolution of which no shorter notice period than that required to be given to the shareholders of the Bank for
an Annual General meeting has been duly given, passed by a majority of not less than three-fourths of those present and voting
at a general meeting of the Bank.
Pursuant to Section 129(2) of the Companies Act, 1965, Tan Sri Dato’ Seri Siti Norma binti Yaakob will retire at the forthcoming
Annual General meeting of the Bank and does not wish to offer herself for re-election.
KAF-Investment Bank Berhad. Annual Report 2012
Directors’ Report
for the year financial ended 31 May 2012
DIRECTORS’ INTEREST IN SECURITIES
According to the register of directors’ shareholdings, the directors in office at the end of the financial year holding securities of
the Bank and its related corporations are as follows:
Number of Ordinary Shares at RM1.00 each
At
At
1.6.2011
Bought
Sold
31.5.2012
The Bank
KAF Investment Bank Berhad
Datuk Khatijah binti Ahmad
- deemed interest
Thariq Usman bin Ahmad
- deemed interest
47,456,000
-
-
47,456,000
47,456,000
-
-
47,456,000
29,660,000
-
-
29,660,000
29,660,000
-
-
29,660,000
20,000,000
5,000,000
-
-
20,000,000
5,000,000
2,500,000
22,500,000
-
-
2,500,000
22,500,000
Holding company
KAF Securities Sdn. Bhd.
Datuk Khatijah binti Ahmad
- deemed interest
Thariq Usman bin Ahmad
- deemed interest
Ultimate holding company
AKKA Sdn. Bhd.
Datuk Khatijah binti Ahmad
- direct interest
- indirect interest
Thariq Usman bin Ahmad
- direct interest
- indirect interest
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6
KAF-Investment Bank Berhad. Annual Report 2012
Directors’ Report
for the year financial ended 31 May 2012
Number of Ordinary Shares at RM1.00 each
At
At
1.6.2011
Bought
Sold
31.5.2012
Related corporations
AKKA Holding Sdn. Bhd.
Datuk Khatijah binti Ahmad
- deemed interest
Thariq Usman bin Ahmad
- deemed interest
7,750,000
-
-
7,750,000
7,750,000
-
-
7,750,000
KAF Fund Management Sdn. Bhd.
Datuk Khatijah binti Ahmad
- deemed interest
Thariq Usman bin Ahmad
- deemed interest
8,000,000
-
-
8,000,000
8,000,000
-
-
8,000,000
KAF Capital Sdn. Bhd.
Datuk Khatijah binti Ahmad
- deemed interest
Thariq Usman bin Ahmad
- deemed interest
500,000
-
-
500,000
500,000
-
-
500,000
KAF Properties Sdn. Bhd.
Datuk Khatijah binti Ahmad
- deemed interest
Thariq Usman bin Ahmad
- deemed interest
3
-
-
3
3
-
-
3
KAF-Astley & Pearce Sdn. Bhd.
Datuk Khatijah binti Ahmad
- deemed interest
Thariq Usman bin Ahmad
- deemed interest
71,184
-
-
71,184
71,184
-
-
71,184
KAF Trustee Berhad
Datuk Khatijah binti Ahmad
- deemed interest
Thariq Usman bin Ahmad
- deemed interest
87,573 *
-
-
87,573 *
87,573 *
-
-
87,573 *
1
-
-
1
1
-
-
1
90,000
83,950,000
4,000,000
-
-
90,000
83,950,000
4,000,000
4,000,000
90,000
83,950,000
-
-
4,000,000
90,000
83,950,000
Laman Alpha Sdn. Bhd.
Datuk Khatijah binti Ahmad
- deemed interest
Thariq Usman bin Ahmad
- deemed interest
KAF-Seagroatt & Campbell Berhad
Datuk Khatijah binti Ahmad
- direct interest
- deemed interest
- indirect interest
Thariq Usman bin Ahmad
- direct interest
- indirect interest
- deemed interest
* Nominal amount of each issued share is RM10.00 fully paid.
Other than the above, none of the other Directors holding office at the end of the financial year had any interest in the securities
of the Bank and of its related companies during the financial year.
KAF-Investment Bank Berhad. Annual Report 2012
Directors’ Report
for the year financial ended 31 May 2012
Directors’ benefits
Since the end of the previous financial year, no director of the Bank has received or become entitled to receive any benefit (other
than directors’ remuneration and benefits-in-kind as disclosed in Note 20 to the financial statements) by reason of a contract made
by the Bank or a related corporation with the director or with a firm of which the director is a member, or with a company in
which the director has a substantial financial interest.
During and at the end of the financial year, no arrangements subsisted to which the Bank or its subsidiaries is a party, being
arrangements with the object or objects of enabling the directors of the Bank to acquire benefits by means of the acquisition of
shares in, or debentures of, the Bank or any other body corporate.
RESPONSIBILITY STATEMENT BY THE BOARD OF DIRECTORS
In the course of preparing the annual financial statements of the Bank, the Directors are collectively responsible in ensuring that
these financial statements are drawn up in accordance with Malaysian Accounting Standards Board approved accounting standards in
Malaysia for Entities Other than Private Entities, Bank Negara Malaysia Guidelines and the provisions of the Companies Act, 1965.
It is the responsibility of the Directors to ensure that the financial reporting of the Bank present a true and fair view of the state of
affairs of the Bank as at 31 May 2012 and of the financial results and cash flows of the Bank for the financial year ended 31 May 2012.
The financial statements are prepared on the going concern basis and the Directors have ensured that proper accounting records
are kept, applied the appropriate accounting policies on a consistent basis and made accounting estimates that are reasonable and
fair so as to enable the preparation of the financial statements of the Bank with reasonable accuracy.
The Directors have also taken the necessary steps to ensure that appropriate systems are in place for the assets of the Bank to be
properly safeguarded for the prevention and detection of fraud and other irregularities. The systems, by their nature, can only
provide reasonable and not absolute assurance against material misstatements, whether due to fraud or error.
The Statement by Directors pursuant to Section 169 of the Companies Act, 1965 is set out in page 79 of the financial statements.
CORPORATE GOVERNANCE STATEMENT
(a)
Board Responsibility and Oversight
The Board of Directors (‘Board’) has overall responsibility for instituting an appropriate corporate governance framework,
setting the strategic direction of KAF Investment Bank Berhad (‘Bank’) and ensuring proper conduct of business with the
long-term objective of enhancing shareholder value, increasing customer trust and building a competitive organisation.
The Bank adopts the principles and best practices of corporate governance as recommended by the Malaysian Code of
Corporate Governance (Revised 2009) and Bank Negara Malaysia’s Guidelines on Corporate Governance for Licensed
Institutions (BNM/GP1).
The Board comprises seven (7) members, made up of one (1) Managing Director, two (2) Non-Independent Non-Executive
Directors and four (4) Independent Non-Executive Directors (including the Chairman). The composition of the Board
is well-balanced and reflects a diverse mix of professional skills and experience, from finance and banking, to legal and
corporate backgrounds. The Independent Directors are independent of management and free from any business or other
relationship which could interfere with the exercise of independent judgement or the ability to act in the best interest of the
Bank. They fulfill their roles in the decision-making process of the Board through their unbiased participation and objective
consideration of the issues.
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KAF-Investment Bank Berhad. Annual Report 2012
Directors’ Report
for the year financial ended 31 May 2012
The Board is responsible for the overall governance of the Bank, including its strategic direction, establishing goals for
management and monitoring the achievement of these goals. The Board has a formal schedule of matters reserved for approval,
performance targets, procedures for monitoring and control of operations, acquisitions and disposals above pre-determined
thresholds and any substantial changes in the balance sheet. The Board carries out various functions and responsibilities as
laid down by guidelines and directives that are issued by Bank Negara Malaysia from time to time.
The Board receives reports on the progress of the Bank’s business operations and minutes of meetings of Board Committees
established by it for review at each of its meetings. At these meetings, the members also consider a variety of matters including
the Bank’s financial results, major investment and strategic decisions and corporate governance matters.
The agenda for every Board meeting, together with management reports, proposal papers and supporting documents
are distributed to the Directors in advance of all Board meetings, to allow time for appropriate review and to enable full
discussion at the meetings. All proceedings from the Board meetings are recorded in the minutes which are properly kept.
There were five (5) Board meetings held during the financial year ended 31 May 2012. A summary of the attendance at
Board meetings is set out below:
Name of Directors No. of Meetings Attended
Tan Sri Dato’ Ahmad bin Mohd Don (Chairman/ Independent Non-Executive Director)
5 out of 5
Tan Sri Dato’ Seri Siti Norma binti Yaakob (Independent Non-Executive Director) 4 out of 5
Dato’ Wira Syed Abdul Jabbar bin Syed Hassan (Independent Non-Executive Director)
4 out of 5
Lee Siew Choong (Independent Non-Executive Director)
5 out of 5
Datuk Khatijah binti Ahmad (Managing Director)
5 out of 5
Thariq Usman bin Ahmad (Non-Independent Non-Executive Director)
5 out of 5
Paisol bin Ahmad (Non-Independent Non-Executive Director)
5 out of 5
The Board has established the following Board Committees to assist the Board in discharging their duties.
KAF-Investment Bank Berhad. Annual Report 2012
Directors’ Report
for the year financial ended 31 May 2012
(b)
Audit Committee
The members of the Audit Committee and their attendance at Audit Committee meetings are set out below:
Name Position No. of Meetings Attended
Chairman
8 out of 8
Tan Sri Dato’ Seri Siti Norma binti Yaakob (Independent Non-Executive Director)
Member
6 out of 8
Paisol bin Ahmad (Non-Independent Non-Executive Director)
Member
8 out of 8
Member
8 out of 8
Dato’ Wira Syed Abdul Jabbar bin Syed Hassan (Independent Non-Executive Director)
Lee Siew Choong (Independent Non-Executive Director)
(Appointed on 1 June 2011)
The Audit Committee comprises of all Non-Executive Directors, of which three (3) committee members are Independent
Directors. The Chairman of the Audit Committee is an Independent Non-Executive Director and there are no alternate
directors who were appointed as members of the Audit Committee during the year. The Audit Committee meets at least
once in every quarter and reports regularly to the Board.
The Audit Committee assists the Board in meeting its responsibilities in ensuring adequate and effective internal control and
risk management system and compliance with established policies and procedures. The Audit Committee also assists the
Board in meeting its external financial reporting obligations and compliance with laws and regulations. The Audit Committee
shall be directly responsible on behalf of the Board for the selection, oversight and remuneration of the external auditor.
Its principal functions are to:
1)
2)
3)
4)
5)
6)
Provide assistance to the Board of Directors in fulfilling their statutory and fiduciary responsibilities and in monitoring
its accounting and financial reporting practices.
Determine that the Bank has adequate administrative, operational and internal accounting controls and that the Bank
is operating in accordance with its prescribed procedures and code of conduct.
Serve as independent and objective party in the review of the financial information presented by Management for
distribution to shareholders and the public.
Provide independent oversight of the Bank’s internal audit function and the external auditors.
Review the effectiveness of internal controls and risk management processes.
Review any related party transactions that may arise within the Bank.
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KAF-Investment Bank Berhad. Annual Report 2012
Directors’ Report
for the year financial ended 31 May 2012
(c)
Remuneration Committee and Nomination Committee
The Remuneration Committee and Nomination Committee are responsible for all Board remuneration and nominationrelated matters, respectively.
The members of the Remuneration Committee and their attendance at Remuneration Committee meetings are set out below:
Name Position No. of Meetings Attended
Chairman 1 out of 1
Dato’ Wira Syed Abdul Jabbar bin Syed Hassan (Independent Non-Executive Director)
Member
1 out of 1
Paisol bin Ahmad
(Non-Independent Non-Executive Director)
Member 1 out of 1
Lee Siew Choong (Independent Non-Executive Director)
The members of the Nomination Committee and their attendance at Nomination Committee meetings are set out below:
Name Position No. of Meetings Attended
Chairman 3 out of 3
Member 3 out of 3
Paisol bin Ahmad
(Non-Independent Non-Executive Director)
Member 3 out of 3
Lee Siew Choong (Independent Non-Executive Director)
(Appointed on 19 April 2012)
MemberN/A
Tan Sri Dato’ Seri Siti Norma binti Yaakob (Independent Non-Executive Director)
(Appointed on 19 April 2012)
MemberN/A
Dato’ Wira Syed Abdul Jabbar Syed Hassan (Independent Non-Executive Director)
Datuk Khatijah binti Ahmad (Managing Director)
Remuneration Committee comprises only of Non-Executive Directors, and chaired by an Independent Director. The
Committee meets at least once a year and at such other times as the Chairman of the Committee shall require. The Committee
is responsible for Board remuneration matters, and is responsible for formulating the remuneration policy and packages
for Directors.
Nomination Committee is chaired by an Independent Director. The Committee meets at least once a year and at such other
times as the Chairman of the Committee shall require. The Committee reviews and recommends any proposed
re-appointment of Directors for Board approval, prior to seeking approval from Bank Negara Malaysia. The Committee also
manages the overall composition of the Board with respect to appropriate size, professional diversity, and balance between
Executive, Non-Executive, and Independent Directors.
KAF-Investment Bank Berhad. Annual Report 2012
Directors’ Report
for the year financial ended 31 May 2012
(d)
Risk Management Committee
The members of the Risk Management Committee and their attendance at Risk Management Committee meetings are set
out below:
Name Position No. of Meetings Attended
Chairman
5 out of 5
Dato’ Wira Syed Abdul Jabbar bin Syed Hassan (Independent Non-Executive Director)
Member
5 out of 5
Paisol bin Ahmad (Non-Independent Non-Executive Director)
Member 5 out of 5
Thariq Usman bin Ahmad (Non-Independent Non-Executive Director)
Member
5 out of 5
Lee Siew Choong (Independent Non-Executive Director)
The Board, through the Risk Management Committee, maintains overall responsibility for risk oversight within the Bank.
The Risk Management Committee ensures that the proper infrastructure, resources and systems are in place for effective
risk management.
The Committee comprises only of non-executive directors and chaired by an independent non-executive director. The
Committee may invite any director, executive or other person to attend any meeting(s) of the Committee as it may from
time to time consider desirable to assist the Committee in the attainment of its objective. The Committee Secretary circulates
such reports and minutes of the Risk Committees as are appropriate to all members of the Committee.
The Committee meets with such frequency and at such times as it may determine but in any event, not less than once every
quarter. The quorum for meetings is two non-executive directors, including one independent non-executive director. At
all meetings of the Committee, the Chairman of the Committee, if present, shall preside. If the Chairman is absent, the
members present at the meeting shall elect a chairman of the meeting, who shall be an independent non-executive director.
The Board has established dedicated committees with clear reporting structures, roles and responsibilities to manage major
sources of risk. These committees, details of which are set out below, report to the Risk Management Committee:
(i)
Treasury Management Committee and Investment Committee, for market and liquidity risks; and
(ii) Credit Committee, for credit risk.
The Risk Management Department is responsible for implementing and monitoring compliance with risk policies set
by the Risk Management Committee, and actively supports the Risk Management Committee through identifying and
recommending tools and measures to augment the risk management process.
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KAF-Investment Bank Berhad. Annual Report 2012
Directors’ Report
for the year financial ended 31 May 2012
(e)
Shariah Committee
Muamalah Financial Consulting Sdn Bhd (‘Muamalah’) has been appointed as the Bank’s Shariah Adviser. Muamalah is
registered with the Securities Commission as a Syariah Adviser.
The roles of Muamalah as the Syariah Adviser are:
•
to act as the Shariah Committee for the Bank and its scope would include evaluating and approving Syariah related
products and services;
•
to act as point of reference for advise on all aspects of Islamic Investment Banking business in accordance with Syariah
principles.
(f)
Internal Audit
The Bank has in place an adequately resourced independent internal audit department, which provides independent assessment
on the reliability, adequacy and effectiveness of the Bank’s risk management, internal control and governance systems. The
internal audit department observes the requirements set out by Bank Negara Malaysia in its Guidelines on Internal Audit
Function of Licensed Institutions and the guidance set out by the Institute of Internal Auditors Malaysia.
The internal audit department adopts risk-based audit approach and prepares its audit strategy and plan based on the risk
profiles of the Bank’s major business units. Internal audit reports the outcome of its review on the Bank’s internal control
and risk management processes to the Audit Committee on a quarterly basis. The Audit Committee reviews the internal
audit reports, audit recommendations and management’s response to these recommendations.
(g)
Management Reports
The Board meetings are structured around a pre-set agenda and reports for discussion, notation and approvals are circulated
in advance of the meeting dates. To enable Directors to keep abreast with the performance of the Group and the Bank,
reports submitted to the Board include:
(i) Correspondences with Bank Negara Malaysia
(ii) Monthly Financial Performance
(iii) Monetary and Financial Developments
(iv) Debt Capital Market Activities Report
(v) Corporate Finance & Advisory Activities Report
(vi) Treasury Activities Report
(vii) Operations Activities Report
(viii) Risk Management Report that covers market, credit and operational risk
(ix) Minutes of Investment Committee meetings
BAD AND DOUBTFUL DEBTS AND FINANCING
Before the financial statements of the Bank were made out, the directors took reasonable steps to ascertain that proper actions
have been taken in relation to the writing off of bad debts and financing and the making of allowance for non-performing debts
and financing, and satisfied themselves that all known bad debts and financing have been written off and adequate allowance had
been made for non-performing debts and financing.
At the date of this report, the directors are not aware of any circumstances which would render the amount written off for bad
debts or the amount of allowance for non-performing debts and financing in the financial statements of the Bank inadequate to
any substantial extent.
KAF-Investment Bank Berhad. Annual Report 2012
Directors’ Report
for the year financial ended 31 May 2012
CURRENT ASSETS
Before the financial statements of the Bank were made out, the directors took reasonable steps to ensure that any current assets,
other than debts and financing, which were unlikely to realise in the ordinary course of business, their values as shown in the
accounting records of the Bank, had been written down to an amount which they might be expected so to realise.
At the date of this report, the directors are not aware of any circumstances which would render the values attributed to the current
assets in the financial statements of the Bank misleading.
VALUATION METHOD
At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the existing
methods of valuation of assets or liabilities of the Bank misleading or inappropriate.
CONTINGENT AND OTHER LIABILITIES
At the date of this report, there does not exist:
(a)
any charge on the assets of the Bank which has arisen since the end of the financial year which secures the liabilities of any
other person; or
(b) any contingent liability of the Bank which has arisen since the end of the financial year other than in the ordinary course of
business.
No contingent or other liability of the Bank has become enforceable, or is likely to become enforceable, within the period of
twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability
of the Bank or the Bank to meet its obligations as and when they fall due.
ISSUE OF SHARES AND DEBENTURES
There were no issue of shares and debentures in the Bank during the financial year.
OPTIONS GRANTED OVER UNISSUED SHARES
There were no options granted over unissued shares in the Bank during the financial year.
CHANGE OF CIRCUMSTANCES
At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or the financial
statements of the Bank which would render any amount stated in the financial statements misleading or inappropriate.
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KAF-Investment Bank Berhad. Annual Report 2012
Directors’ Report
for the year financial ended 31 May 2012
ITEMS OF AN UNUSUAL NATURE
The results of the operations of the Bank for the financial year were not, in the opinion of the directors, substantially affected by
any item, transaction or event of a material and unusual nature.
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event
of a material and unusual nature likely, in the opinion of the directors, to affect substantially the results of the operations of the
Bank for the financial year in which this report is made.
IMMEDIATE AND ULTIMATE HOLDING COMPANY/BODY
The Directors regard KAF Securities Sdn Bhd, a company incorporated in Malaysia, as the immediate holding company of the
Bank and AKKA Sdn Bhd, a company incorporated in Malaysia as the ultimate holding company of the Bank.
AUDITORS
The auditors, PricewaterhouseCoopers, have expressed their willingness to continued in office.
Signed on behalf of the Board of Directors in accordance with a resolution of the Directors.
Datuk Khatijah binti Ahmad
DIRECTOR
PAISOL BIN AHMAD
DIRECTOR
Kuala Lumpur
18 October 2012
KAF-Investment Bank Berhad. Annual Report 2012
Statement Of Financial Position
as at 31 May 2012
2012
RM’000
2011
RM’000
1,375,400
184,000
1,335,742
4,800,792
548
1,015
17,432
52,500
3,138,440
104,000
3,517,144
3,854,608
549
792
17,379
52,500
7,767,429
10,685,412
9
3,486,098
4,508,813
10
11
12
3,146,848
6,970
968
7,303
8,242
5,106,396
8,247
9,898
14,287
11,323
6,656,429
9,658,964
80,000
1,031,000
80,000
946,448
Total equity
1,111,000
1,026,448
Total equity and liabilities
7,767,429
10,685,412
704,153
858,455
Note
Assets
Cash and short term funds
Statutory deposits with Bank Negara Malaysia
Financial assets held-for-trading
Financial investments available-for-sale
Loans, advances and financing
Other receivables and prepayments
Property, plant and equipment
Intangible asset
2
3
4
5
6
7
8
Total assets
Liabilities
Deposits from customers
Deposits and placements of banks
and other financial institutions
Other liabilities
Derivative liabilities
Provision for taxation and zakat
Deferred tax liabilities
13
Total liabilities
Equity
Share capital
Reserves
Commitments and contingencies
14
15
25
The accompanying accounting policies and notes form an integral part of these financial statements.
15
16
KAF-Investment Bank Berhad. Annual Report 2012
Statement Of Comprehensive Income
for the financial year ended 31 May 2012
Note
2012
RM’000
2011
RM’000
Interest income
Interest expense
16
17
156,079
(133,862)
154,181
(101,481)
Other operating income
18
22,217
111,561
52,700
77,853
28
133,778
74,211
130,553
77,746
207,989
(24,999)
(15,000)
208,299
(28,844)
-
167,990
179,455
(41,874)
(1,855)
(67,351)
(1,944)
124,261
110,160
Income from Islamic banking operations
Other operating expenses
Impairment loss on other assets
19
Profit before taxation and zakat
Taxation
Zakat
21
28(n)
Net profit for the financial year
Other comprehensive income:
Financial investments available-for-sale
- Net unrealised (loss)/gain on revaluation
- Income tax relating to net fair value changes
Other comprehensive income for the financial year,
net of tax
Total comprehensive income for the financial year
The accompanying accounting policies and notes form an integral part of these financial statements.
(12,946)
3,237
36,282
(9,070)
(9,709)
27,212
114,552
137,372
KAF-Investment Bank Berhad. Annual Report 2012
Statement Of Changes In Equity
for the financial year ended 31 May 2012
Non-distributable
Note
Share
capital
RM’000
Distributable
Property Available
Statutory revaluation
for sale
reserve
reserve
reserve
RM’000 RM’000
RM’000
Funds
allocated
to Islamic
Banking
Division
RM’000
Retained
earnings
RM’000
Total
RM’000
Balance as at 1 June 201180,000227,62413,22635,306
105,000565,292
1,026,448
Comprehensive income:
Net profit for the financial year
-
-
-
Other comprehensive income:
Financial investments available-for-sale
- Net unrealised gain on revaluation
- Income tax relating to net fair value changes
-
-
-
Total comprehensive income for
the financial year
Transfer to statutory reserve
Dividend paid - 2011 final
-
18,639
-
-
22
-
-
124,261
(12,946)
3,237
-
-
(9,709)
-
-
124,261
(18,639)
(30,000)
124,261
(12,946)
3,237
114,552
(30,000)
Balance as at 31 May 201280,000246,26313,22625,597
105,000640,914
1,111,000
Balance as at 1 June 2010 80,000 211,100 13,226 8,094105,000 477,656 895,076
Comprehensive income:
Net profit for the financial year
-
-
-
Other comprehensive income:
Financial investments available-for-sale
- Net unrealised gain on revaluation
- Income tax relating to net fair value changes
-
-
-
Total comprehensive income for
the financial year
Transfer to statutory reserve
Dividend paid - 2010 final
-
16,524
-
-
22
-
-
110,160
36,282
(9,070)
-
-
27,212
-
-
110,160
(16,524)
(6,000)
110,160
36,282
(9,070)
137,372
(6,000)
Balance as at 31 May 201180,000227,62413,22635,306
105,000565,292
1,026,448
The accompanying accounting policies and notes form an integral part of these financial statements.
17
18
KAF-Investment Bank Berhad. Annual Report 2012
Statement Of Cash Flow
for the financial year ended 31 May 2012
Note
Cash flows from operating activities
Profit before taxation and zakat
Adjustments for:
Amortisation of premium less accretion of discount
Property, plant and equipment:
- Depreciation
- Gain on disposal
- Written off
Impairment loss on other assets
Financial assets held-for-trading
- Interest income
Financial investments available-for-sale
- Net gain on sale
- Interest income
- Dividend income
Financial investments held-to-maturity
- Net gain on sale
- Interest income
- Dividend income
Unrealised (gain)/loss:
- revaluation of financial assets held-for-trading
- revaluation of derivative
- foreign exchange
Operating loss before working capital changes
(Increase)/decrease in operating assets:
Deposits and placements with banks and other financial institutions
Financial assets held-for-trading
Other receivables and prepayments
Loans, advances and financing
Increase/(decrease) in operating liabilities:
Deposits from customers
Deposits and placements of banks and other financial institutions
Other liabilities
Derivative liabilities
Financial assets held-for-trading
- Interest received
2012
RM’000
2011
RM’000
167,990
179,455
-
(190)
767
(75)
15,000
1,876
675
-
(24,996)
(10,049)
(56,526)
(116,585)
(76,257)
(28,794)
(101,981)
(65,266)
-
(31,010)
(27,050)
(12,849)
(2,394)
(9,128)
4,212
(5,082)
8,263
(2,647)
(97,992)
(94,649)
(80,000)
2,190,057
(223)
1
(46,000)
(3,250,763)
816
(123)
(1,022,715)
(1,959,548)
(1,277)
(4,014)
109,965
1,349,790
(98,081)
15,032
18,735
9,936
Net cash used in operating activities
before taxation and zakat paid
Taxation and zakat paid
(956,976)
(50,557)
(2,004,077)
(47,619)
Net cash used in operating activities
(1,007,533)
(2,051,696)
The accompanying accounting policies and notes form an integral part of these financial statements.
KAF-Investment Bank Berhad. Annual Report 2012
Statement Of Cash Flow
for the financial year ended 31 May 2012
Note
Cash flows from investing activities
Net purchases of financial
investments available-for-sale
Net disposal of financial
investments held-to-maturity
Property, plant and equipment
- purchase
- proceeds from transfer/disposal
Financial investments available-for-sale
- Interest received
- Dividend received
Financial investments held-to-maturity
- Interest received
- Dividend received
2012
RM’000
2011
RM’000
(906,082)
(565,060)
(821)
76
Net cash (used in)/generated from investing activities
2,888,871
(118)
-
111,432
69,888
101,391
73,322
-
37,669
20,418
(725,507)2,556,493
Cash flows from financing activity
Dividend paid
(30,000)
Net cash used in financing activity
(6,000)
(30,000)(6,000)
Net (decrease)/increase in cash and cash equivalents
(1,763,040)
498,797
Cash and cash equivalents at begining of financial year
3,138,440
2,639,643
Cash and cash equivalents at end of financial year
1,375,400
3,138,440
1,375,400
3,138,440
Analysis of cash and cash equivalents
Cash and short-term funds
2
The accompanying accounting policies and notes form an integral part of these financial statements.
19
20
KAF-Investment Bank Berhad. Annual Report 2012
Summary Of Significant Accounting Policies
for the financial year ended 31 May 2012
The following accounting policies have been used consistently in dealing with items which are considered material in relation to
the financial statements, unless otherwise stated.
1. BASIS OF PREPARATION
The financial statements of the Bank have been prepared in accordance with Financial Reporting Standards (‘FRS’), the
Malaysian Accounting Standards Board (‘MASB’) approved accounting standards in Malaysia for Entities Other Than Private
Entities, together with directives and guidelines issued by Bank Negara Malaysia (‘BNM’) and comply with the provisions of
the Companies Act, 1965.
The financial statements have been prepared under the historical cost convention, as modified by the revaluation of availablefor-sale securities and financial assets and liabilities at fair value through profit or loss.
The financial statements of the Bank incorporate those activities relating to the Islamic Banking Scheme (SPI) which have been
undertaken by the Bank. SPI generally refers to the acceptance of deposits and granting of financing under the Shariah principles.
The preparation of financial statements in conformity with FRS requires the use of certain critical accounting estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and expenses during the reported financial year. It
also requires directors to exercise their judgement in the process of applying the Bank’s accounting policies. Although these
estimates and judgement are based on the directors’ best knowledge of current events and actions, actual results may differ
from those estimates.
(a)
Standards, amendments to published standards and interpretations to existing standards that are applicable to the Bank
and are effective
The new accounting standards, amendments and improvements to published standards and interpretations that are
effective for the Bank’s financial year beginning on or after 1 June 2011 are as follows:
•
•
•
•
•
•
•
Revised FRS 1 “First-time adoption of Financial Reporting Standards”
Revised FRS 127 “Consolidated and Separate Financial Statements”
Amendments to FRS 7 “Financial Instruments: Disclosures – improving disclosures about financial instruments”
Amendments to FRS 1 “First-time adoption of Financial Reporting Standards”
Amendment to FRS 132 “Financial Instruments: Presentation - Classification of rights issues”
IC Interpretation 4 “Determining whether an arrangement contains a lease”
Improvements to FRSs (2010)
The adoption of the above standards, amendments to published standards and interpretations to existing standards does
not give rise to any material financial impact to the Bank.
KAF-Investment Bank Berhad. Annual Report 2012
Summary Of Significant Accounting Policies
for the financial year ended 31 May 2012
(b)
Standards, amendments to published standards and interpretations to existing standards that are applicable to the Bank
but not yet effective
On 19 November 2011, the Malaysian Accounting Standards Board formally announced the Malaysian reporting entities
would be required to comply with the new International Financial Reporting Standards (‘IFRS’) - compliant framework,
Malaysian Financial Reporting Standards (‘MFRS’) for financial years commencing on or after 1 January 2012.
For reporting periods commencing 1 June 2012, the Company will be adopting the new International Financial Reporting
Standards (“IFRS”) compliant framework, MFRS.
The Bank does not expect the adoption of MFRS 1 to give rise to any significant impact on the financial statements
of the Bank.
The Bank will apply the following standards, amendments to standards in the following period:
(i)
Financial year beginning on/after 1 June 2012
The revised MFRS 124 – “Related party disclosures” (effective from 1 January 2012) simplifies the definition of
a related party. It clarifies its intended meaning and eliminates inconsistencies from the definition.
The revised MFRS 124 removes the exemptions to disclose transaction between government-related entities and
the government, and all other government-related entities. The following new disclosures are now required for
government-related entities:
• the name of the government and the nature of their relationship;
• the nature and amount of each individually significant transactions;
• the extent of any collectively significant transactions, qualitatively or quantitatively need to be disclosed.
Amendment to MFRS 1 “First-time adoption on fixed dates and hyperinflation” (effective from 1 January 2012)
includes two changes to MFRS 1. The first replaces references to a fixed date of 1 January 2004 with ‘the date
of transition to MFRSs’, thus eliminating the need for entities adopting MFRSs for the first time to restate derecognition transactions that occurred before the date of transition to MFRSs. The second amendment provide
guidance on how an entity should resume presenting financial statements in accordance with MFRSs after a
period when the entity was unable to comply with MFRSs because its functional currency was subject to severe
hyperinflation.
Amendment to MFRS 7 “Financial instruments: Disclosure on transfers of financial assets” (effective from 1
January 2012) promotes transparency in the reporting of transfer transactions and improve users’ understanding
of the risk exposure relating to transfers of financial assets and the effect of those risks on an entity’s financial
position, particularly those involving securitization of financial assets.
21
22
KAF-Investment Bank Berhad. Annual Report 2012
Summary Of Significant Accounting Policies
for the financial year ended 31 May 2012
(ii)
Financial year beginning on/after 1 June 2013
MFRS 13 “Fair value measurement” (effective from 1 January 2013) aims to improve consistency and reduce
complexity by providing a precise definition of fair value and a single source of fair value measurement and
disclosure requirements for use across MFRSs. The requirements do not extend the use of fair value accounting but
provide guidance on how it should be applied where its use is already required or permitted by other standards.
The enhanced disclosure requirements are similar to those in MFRS 7 “Financial instruments: Disclosures”, but
apply to all assets and liabilities measured at fair value, not just financial ones.
Amendment to MFRS 101 “Presentation of items of other comprehensive income” (effective from 1 July
2012) requires entities to separate items presented in ‘other comprehensive income’ (OCI) in the statement of
comprehensive income into two groups, based on whether or not they may be recycled to profit or loss in the future. The amendments do not address which items are presented in OCI.
(iii) Financial year beginning on/after 1 June 2015
MFRS 9 “Financial instruments - classification and measurement of financial assets and financial liabilities”
(effective from 1 January 2015) replaces the multiple classification and measurement models in MFRS 139
with a single model that has only two classification categories: amortised cost and fair value. The basis of
classification depends on the entity’s business model for managing the financial assets and the contractual cash
flow characteristics of the financial asset.
The accounting and presentation for financial liabilities and for de-recognising financial instruments has been
relocated from MFRS 139, without change, except for financial liabilities that are designated at fair value through
profit or loss (“FVTPL”). Entities with financial liabilities designated at FVTPL recognise changes in the fair
value due to changes in the liability’s credit risk directly in other comprehensive income (OCI). There is no
subsequent recycling of the amounts in OCI to profit or loss, but accumulated gains or losses may be transferred
within equity.
The guidance in MFRS 139 on impairment of financial assets and hedge accounting continues to apply.
The adoption of the above standards and amendments to standards is not expected to have material impact on
the financial statements of the Bank.
KAF-Investment Bank Berhad. Annual Report 2012
Summary Of Significant Accounting Policies
for the financial year ended 31 May 2012
2. CURRENCY CONVERSION AND TRANSLATION
(a)
Functional and presentation currency
The financial statements are presented in Ringgit Malaysia, which is the Bank’s functional and presentation currency.
(b)
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the profit or loss except when deferred in other comprehensive
income as qualifying cash flow hedges and qualifying net investment hedges.
Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are
analysed between translation differences resulting from changes in the amortised cost of the security and other changes
in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in
profit or loss, and other changes in carrying amount are recognised in other comprehensive income.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit
or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary
financial assets, such as equities classified as available-for-sale, are included in other comprehensive income.
3. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists of cash in hand and bank balances and short term deposits and placements with maturities
of less than one month.
23
24
KAF-Investment Bank Berhad. Annual Report 2012
Summary Of Significant Accounting Policies
for the financial year ended 31 May 2012
4. PROPERTY, PLANT AND EQUIPMENT
Freehold land and building is shown at fair value less accumulated depreciation for building. Any accumulated depreciation
at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the
revalued amount of the asset. All other property, plant and equipment is stated at historical cost less depreciation. Historical
cost includes expenditure that is directly attributable to the acquisition of the items.
The Bank revalues its property comprising land and building every 5 years and at shorter intervals whenever the fair value of
the revalued assets is expected to differ materially from their carrying value.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured
reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the profit
or loss during the financial period in which they are incurred.
Increases in the carrying amount arising on revaluation of freehold land and buildings are credited to other comprehensive
income and shown as other reserves in shareholders’ equity. Decreases that offset previous increases of the same asset are
charged in other comprehensive income and debited against other reserves directly in equity; all other decreases are charged to
the profit or loss. Each year the difference between depreciation based on the revalued carrying amount of the asset charged to
the profit or loss, and depreciation based on the asset’s original cost is transferred from ‘other reserves’ to ‘retained earnings’.
Freehold land is not depreciated. Depreciation on other property, plant and equipment is calculated using the straight-line
method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as follows:
Building
Office furniture and equipment
Renovations
Motor vehicles
5 - 50 years
5 years
5 years
5 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within
‘Other operating income’ in profit or loss.
When revalued assets are sold, the amounts included in other reserves are transferred to retained earnings.
5. INTANGIBLE ASSETS
Intangible assets represents banking license granted by Bank Negara Malaysia and is stated at cost less impairment losses, if
any. Intangible assets with an indefinite useful life are not amortised but are tested annually for impairment.
KAF-Investment Bank Berhad. Annual Report 2012
Summary Of Significant Accounting Policies
for the financial year ended 31 May 2012
6. IMPAIRMENT OF NON-FINANCIAL ASSETS
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are
subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.
For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows (cash-generating units). Non-financial assets that suffered impairment are reviewed for possible reversal of the
impairment at each reporting date.
The impairment loss is charged to the profit or loss unless it reverses a previous revaluation in which case it is charged to the
revaluation surplus. In respect of other assets, any subsequent increase in recoverable amount is recognised in profit or loss
unless it reverses an impairment loss on a revalued asset in which case it is taken to revaluation surplus.
7. FINANCIAL ASSETS
Classification
The Bank classifies its financial assets into the following categories: at fair value through profit or loss, loans and receivables,
held-to-maturity and available-for-sale. The classification depends on the purpose for which the financial assets were acquired.
Management determines the classification of its financial assets at initial recognition.
(i)
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held-for-trading. A financial asset is classified
in this category if acquired principally for the purpose of selling in the short term. Derivative are also categorised as
held-for-trading unless they designated as hedges.
(ii)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market.
(iii) Financial investments held-to-maturity
Financial investments held-to-maturity are non-derivative financial assets with fixed or determinable payments and
fixed maturities that the Bank’s management has the positive intention and ability to hold to maturity. If the Bank
was to sell other than an insignificant amount of financial investments held-to-maturity, the whole category would be
tainted and reclassified as available-for-sale.
(iv) Financial investments available-for-sale
Financial investments available-for-sale are those intended to be held for an indefinite period of time, which may be sold
in response to needs for liquidity or changes in interest rates, exchange rates or equity prices or that are not classified
as financial assets at fair value through profit or loss, loans and receivables and financial investments held-to-maturity.
25
26
KAF-Investment Bank Berhad. Annual Report 2012
Summary Of Significant Accounting Policies
for the financial year ended 31 May 2012
Recognition and measurement
(i)
Recognition and initial measurement
Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value
through profit or loss. Transaction costs for securities carried at fair value through profit or loss are taken directly to
the profit or loss.
(ii) Subsequent measurement
Financial assets at fair value through profit or loss and financial investments available-for-sale are subsequently carried
at fair value, except for investments in equity instruments that do not have a quoted market price in an active market
and whose fair value cannot be reliably measured in which case the investments are stated at cost. Gains and losses
arising from changes in the fair value of the financial assets held at fair value through profit or loss are included in the
profit or loss in the period which they arise. Gains and losses arising from changes in fair value of financial investments
available-for-sale are recognised directly in equity, until the securities are derecognised or impaired at which time the
cumulative gains or loss previously recognised in equity are recognised in the profit or loss. Foreign exchange gains or
losses of financial investments available-for-sale are recognised in the profit or loss in the period it arises.
Financial investments held-to-maturity are subsequently measured at amortised cost using the effective interest method.
Gains or losses arising from de-recognition or impairment of the securities are recognised in the profit or loss.
Interest from financial assets held at fair value through profit or loss, financial investments available-for-sale and
financial investments held-to-maturity is calculated using the effective interest method and is recognised in the profit
or loss. Dividends from available-for-sale equity instruments are recognised in the profit or loss when the entity’s right
to receive payment is established.
Loans and receivables are initially recognised at fair value – which is the cash consideration to originate or purchase
the loan including the transaction costs, and measured subsequently at amortised cost using the effective interest rate
method. Interest on loans is included in the profit or loss. In the case of impairment, the impairment loss is reported
as a deduction from the carrying value of the loan and recognised in the profit or loss.
Derecognition
Financial assets are derecognised when the contractual rights to receive the cash flows from these assets have ceased to exist
or the assets have been transferred and substantially all the risks and rewards of ownership of the assets are also transferred.
KAF-Investment Bank Berhad. Annual Report 2012
Summary Of Significant Accounting Policies
for the financial year ended 31 May 2012
8. FINANCIAL LIABILITIES
Financial liabilities are measured at amortised cost, except for trading liabilities and liabilities designated at fair value, which
are held at fair value through profit or loss. Financial liabilities are initially recognised at fair value plus transaction costs for
all financial liabilities not carried at fair value through profit or loss. Financial liabilities at fair value through profit or loss
are initially recognised at fair value, and transaction costs are expensed in profit or loss. Financial liabilities are derecognised
when extinguished.
(i)
Financial liabilities at fair value through profit or loss
This category comprises two sub-categories: financial liabilities classified as held-for-trading, and financial liabilities
designated at fair value through profit or loss upon initial recognition.
A financial liability is classified as held-for-trading if it is acquired or incurred principally for the purpose of selling or
repurchasing it in the near term or if it is part of a portfolio of identified financial instruments that are managed together
and for which there is evidence of a recent actual pattern of short-term profit-taking. Derivatives are also categorised
as held-for-trading unless they are designated and effective as hedging instruments.
The Bank did not have any financial liabilities at fair value through profit or loss upon initial recognition during the
financial year ended 31 May 2011 other than trading derivatives.
(ii) Financial liabilities at amortised cost
Financial liabilities that are not classified as at fair value through profit or loss fall into this category and are measured at
amortised cost. The financial liabilities measured at amortised cost are deposits from customers, deposits and placements
of banks and other financial institutions.
9. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently
remeasured at their fair values. Fair values are obtained from quoted market prices in active markets, including recent market
transactions, and valuation techniques, including discounted cash flow models and option pricing models, as appropriate. All
derivative are carried as assets when fair value is positive and as liabilities when fair value is negative. Changes in the fair value
of any derivative are recognised immediately in the profit or loss.
27
28
KAF-Investment Bank Berhad. Annual Report 2012
Summary Of Significant Accounting Policies
for the financial year ended 31 May 2012
10. IMPAIRMENT OF FINANCIAL ASSETS
(i)
Assets carried at amortised cost
A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of
impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred
'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the
group of financial assets that can be reliably estimated.
The criteria the Bank uses to determine that there is objective evidence of impairment loss include indications that the
borrower or a group of borrowers is experiencing significant financial difficulty, the probability that they will enter
bankruptcy or other financial reorganisation, default of delinquency in interest or principal payments and where
observable data indicates that there is a measurable decrease in the estimated future cash flows, such as changes in
arrears or economic conditions that correlate with defaults.
The Bank first assesses whether objective evidence of impairment exists individually for financial assets that are
individually significant, and individually or collectively for financial assets that are not individually significant. If the
Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether
significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively
assesses them for impairment.
The amount of the loss is measured as the difference between the asset's carrying amount and the present value of
estimated future cash flows discounted at the financial assets’ original effective interest rate. The carrying amount of
the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the profit or
loss. If a loan or financial investments held-to-maturity have a variable interest rate, the discount rate for measuring
any impairment loss is the current effective interest rate determined under the contract.
If in a subsequent period, the amount of impairment losses decreases and the decrease can be related objectively to
an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the
previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is
recognised in the profit or loss.
(ii)
Assets classified as available-for-sale
The Bank assesses at each reporting date whether there is objective evidence that the financial asset is impaired.
For debt securities, the Bank uses criteria and measurement of impairment loss applicable for “assets carried at amortised
cost” above. If in a subsequent period, the fair value of a debt instrument classified as financial investments available-forsale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised
in profit or loss, the impairment loss is reversed through profit or loss.
In the case of equity instruments classified as financial investments available-for-sale, in addition to the criteria for
“assets carried at amortised cost” above, a significant or prolonged decline in the fair value of the security below its cost
is considered in determining whether the securities are impaired. If there is an objective evidence that an impairment
loss on financial investments available-for-sale has been incurred, the cumulative loss that has been recognised directly
in equity is removed from equity and recognised in the profit or loss. The amount of cumulative loss that is reclassified
to profit or loss is the difference between the acquisition cost and current fair value, less any impairment loss on that
financial asset previously recognised in profit or loss. Impairment losses recognised in profit or loss on equity instruments
are not reversed through the profit or loss.
KAF-Investment Bank Berhad. Annual Report 2012
Summary Of Significant Accounting Policies
for the financial year ended 31 May 2012
11. LEASED ASSETS
Operating lease
Leases of assets under which all the risks and benefits of ownership are retained by the lessor are classified as operating leases.
Payments made under operating leases are charged to the profit or loss on a straight line basis over the period of the lease.
When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by
way of penalty is recognised as an expense in the period in which termination takes place.
12. PROVISIONS
Provisions are recognised by the Bank when all of the following conditions have been met:
(i) the Bank has a present legal or constructive obligation as a result of past events:
(ii) it is probable that an outflow of resources to settle the obligation will be required; and
(iii) a reliable estimate of the amount of obligation can be made.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined
by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect
to any one item included in the same class of obligations may be small.
Provisions are measured at the present values of the expenditures expected to be required to settle the obligation using a pretax rate that reflects current market assessments of the time value of money and risks specific to the obligation. The increase
in the provision due to passage of time is recognised as interest expense.
13. TAXATION
The tax expense for the period comprises current and deferred tax. Tax is recognised in the profit or loss, except to the extent
that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised
in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date
in the country where the Bank operates and generates taxable income.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a
net basis.
29
30
KAF-Investment Bank Berhad. Annual Report 2012
Summary Of Significant Accounting Policies
for the financial year ended 31 May 2012
14. EMPLOYEE BENEFITS
Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured
on an undiscounted basis and are expensed as the related service is provided.
A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Bank
has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the
obligation can be estimated reliably.
The Bank’s contribution to statutory pension funds are charged to the profit or loss in the year to which they relate. Once the
contributions have been paid, the Bank has no further payment obligations.
15. CONTINGENT LIABILITITES
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably,
the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible
obligations, whose existence will only be confirmed by the occurrence of one or more future events, are also disclosed as
contingent liabilities unless the probability of outflow of economic benefits is remote.
16. RECOGNITION OF INTEREST INCOME AND EXPENSE/ISLAMIC FINANCING INCOME AND EXPENSE
Interest income and expense for all interest-bearing financial instruments are recognised as “interest income” and “interest
expense” in the profit or loss using the effective interest rates of the financial assets or financial liabilities to which they relate.
The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of
allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments or receipts through the expected life of the financial instruments or, when appropriate,
a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest
rate, the Bank takes into account all contractual terms of the financial instrument and includes any fees or incremental costs
that are directly attributable to the instrument and are an integral part of the effective interest rate, but not future credit losses.
Income and expense from Islamic financing is recognised on accrual basis applying the effective profit rate method in accordance
with the Principles of Shariah. Finance cost and income attributable on deposits and borrowings relating to Islamic Banking
operations are amortised using the effective profit rate method in accordance with the Principles of Shariah.
17. FEES AND OTHER INCOME
(i)
(ii)
Fees received from capital market activities are recognised when the Bank’s right to receive payment is established.
Income from Islamic banking operations is recognised on an accrual basis.
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
1. GENERAL INFORMATION
KAF Investment Bank Berhad is a limited liability company, incorporated and domiciled in Malaysia. The address of its
registered office and principal place of business is as follows:
Level 14, Chulan Tower
No. 3, Jalan Conlay
50450 Kuala Lumpur
The Bank is principally engaged in investment banking, Islamic banking and the provision of related financial services.
The immediate holding company is KAF Securities Sdn. Bhd., a company incorporated in Malaysia, which owns 100% of
the issued share capital of the Bank. The Directors regard AKKA Sdn. Bhd., a company incorporated in Malaysia, as the
ultimate holding company.
2. CASH AND SHORT TERM FUNDS
Cash and balances with banks and other financial institutions
Deposits and placements with Bank Negara Malaysia
Deposits placed with licensed bank
2012
RM’000
2011
RM’000
5,797
1,369,603
-
26,991
3,010,549
100,900
1,375,400
3,138,440
3. STATUTORY DEPOSITS WITH BANK NEGARA MALAYSIA
2012
2011
RM’000
RM’000
Bank Negara Malaysia
184,000
104,000
The deposits with Bank Negara Malaysia represent non-interest bearing statutory deposit maintained in compliance with
Section 26(2)(c) of the Central Bank of Malaysia Act, 2009, the amount is determined at set percentages of total eligible liabilities.
31
32
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
4. FINANCIAL ASSETS HELD-FOR-TRADING
At fair value:
Money market instruments:
Bankers’ acceptances
Commercial papers
Malaysian government investment issues
Malaysian government securities
Bank Negara Malaysia bills
Negotiable instrument deposits
Unquoted securities
Private and Islamic debt securities
Total
2012
RM’000
2011
RM’000
37,562
129,104
833,436
483,226
15,800
9,983
22,112
2,364,502
449,085
1,000,102
3,344,708
335,640
172,436
1,335,742
3,517,144
2012
RM’000
2011
RM’000
212,575
1,252,624
446,991
240,361
751,629
771,264
1,912,190
1,763,254
2,888,292
310
2,090,044
310
2,888,602
2,090,354
-
1,000
4,800,792
3,854,608
5. FINANCIAL INVESTMENTS AVAILABLE-FOR-SALE
At fair value:
Money market instruments:
Cagamas Residential Mortgage
Backed Securities (‘RMBS’)
Malaysian government investment issues
Malaysian government securities
Unquoted securities
Private and Islamic debt securities
Shares Quoted securities in Malaysia:
Shares Total
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
6. LOANS, ADVANCES AND FINANCING
(i)
(ii)
(iii)
2012
RM’000
2011
RM’000
By type
Staff loans/financing
548
549
By type of customer
Individuals
548
549
By interest/profit rate sensitivity
Fixed rate
- Other fixed rate loans/financing
548
549
548
549
(iv) By sector
Others
7. PROPERTY, PLANT AND EQUIPMENT
Freehold
land
2012
RM’000
Cost
Balance as at the beginning
of the financial year
Additions
Disposal
Writen-off
Balance as at the end
of the financial year
Office
furniture and
Buildingequipment
Renovations
RM’000
RM’000
RM’000
Motor
vehicles
RM’000
Total
RM’000
14,800
1,716
7,028
3,948
922
28,414
-
- 161
-660821
-
-
(3)
-
(777)
(780)
-
-
(2,272)
(1,159)
-
(3,431)
Accumulated depreciation
Balance as at the beginning
of the financial year
Charge for the financial year
Disposal
Writen-off
-
-
-
-
122
62
-
-
Balance as at the end
of the financial year
-
184
4,510
2,775
123
7,592
Net book value as at the end
of the financial year
14,800
1,532
404
14
682
17,432
14,800
1,716
4,914
6,286
498
(3)
(2,271)
2,789
3,755
179
-
(1,159)
805
872
28
(777)
-
25,024
11,035
767
(780)
(3,430)
33
34
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
2011
Office
Freehold
furniture and
Motor
land Buildingequipment
Renovations
vehicles
Total
RM’000 RM’000RM’000RM’000RM’000RM’000
Cost
Balance as at the beginning
of the financial year
Additions
Written-off
14,800
-
-
1,715
1
-
14,800
1,716
Balance as at the end
of the financial year
Accumulated depreciation
Balance as at the beginning
of the financial year
Charge for the financial year
Written-off
Balance as at the end
of the financial year
Net book value as at the end
of the financial year
-
-
-
82
40
-
8,079
117
(1,168)
3,948
-
-
922
-
-
29,464
118
(1,168)
7,028
3,948
922
28,414
5,637
1,142
(493)
3,197
558
-
736
136
-
9,652
1,876
(493)
-
122
6,286
3,755
872
11,035
14,800
1,594
742
193
50
17,379
Revaluation
The freehold land and building stated at Directors’ valuation was first revalued on 16 April 1997 by the Directors based on
a professional valuation carried out by an independent professional valuer on a fair market value basis. The valuation was
updated based on a valuation by an independent professional valuer based on the comparison method on 13 April 2004. The
valuation was further updated based on a valuation by Regroup Associates Sdn Bhd, an independent professional valuer based
on the comparison method on 15 May 2009.
The net book value of revalued freehold land and building that would have been included in the financial statements had these
assets been carried at cost less depreciation is RM2.95 million (2011: RM2.98 million).
2012
Office
Freehold
furniture and
Motor
land Buildingequipment
Renovations
vehicles
Total
RM’000 RM’000RM’000RM’000RM’000RM’000
Representing items at:
Cost
Directors’ valuation
16
4,914
2,789
805
8,524
14,800
1,700---
16,500
14,800
1,716
4,914
2,789
805
25,024
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
8. INTANGIBLE ASSET
Merchant banking license
2012
RM’000
2011
RM’000
52,500
52,500
The merchant banking license represents contribution by the Bank to Bank Negara Malaysia to carry on merchant banking
business and is deemed to have an indefinite useful life as there is no expiry date. The merchant banking license is not amortised
and is assessed for impairment annually. The recoverable amount of the license has been assessed using the value-in-use method,
by discounting the estimated cash flows based on three years financial budgets of the Bank. An impairment will be recognised
only when the carrying amount of the license exceeds the recoverable amount.
9. DEPOSITS FROM CUSTOMERS
2012
RM’000
2011
RM’000
2,513,254
972,844
2,449,360
2,059,453
3,486,098
4,508,813
1,798,322
1,073,609
23,297
590,870
1,856,511
2,319,936
7,003
325,363
3,486,098
4,508,813
3,423,808
62,290
4,348,268
160,545
3,486,098
4,508,813
(i) By type of deposits
Fixed deposits
General Investment Deposits
(ii) By type of customers
Government and statutory bodies
Business enterprises
Individuals
Others (iii) The maturity structure of term deposits
Due within three months
Three months to one year
35
36
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
10. DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS
Licensed banks Licensed merchant banks
Other financial institutions
2012
RM’000
2011
RM’000
470,147
101,527
2,575,174
504,842
71,398
4,530,156
3,146,848
5,106,396
2012
RM’000
2011
RM’000
5,851
1,119
7,576
671
6,970
8,247
11. OTHER LIABILITIES
Other payables and accruals
Profit Equalisation Reserves (Note 28(f))
12. DERIVATIVE LIABILITIES
Derivative financial instruments are financial instruments whose values change in response to changes in prices or rates (such
as foreign exchange rates and interest rates) of the underlying instruments.
The table below shows the Bank’s derivative financial instruments as at the date of statement of financial position. The
contractual or underlying principal amounts of these derivative financial instruments and their corresponding gross positive
(derivative financial asset) and gross negative (derivative financial liability) fair values at the date of statement of financial
position are analysed below.
2012
Foreign exchange related contracts:
- swaps - spot - futures
Contract or
Underlying
principal
amount
RM’000
Year-end
negative
fair value
RM’000
522,800
635
24,638
769
199
548,073
Foreign exchange related contracts:
- swaps 773,659
968
2011
9,898
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
13. DEFERRED TAX
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax assets against
current tax liabilities and when the deferred taxes relate to the same authority. The following amounts determined after
approximate set-off, are shown in the statements of financial position:
2012
2011
RM’000
RM’000
Deferred tax assets
1,530
1,417
Deferred tax liabilities
(9,772)
(12,740)
Deferred tax liabilities (net)
(8,242)
(11,323)
Deferred tax assets
- Settled within 12 months
1,530
1,417
(8,531)
(1,241)
(11,768)
(972)
(9,772)
(12,740)
Deferred tax liabilities
- Settled within 12 months
- Settled more than 12 months
The movements in deferred tax assets and liabilities during the financial year comprise the following:
Revaluation
Financial
of property,
Property,
investments
plant and
plant and
available
equipment equipment Provisions
for sale
Others
Total
2012
RM’000 RM’000RM’000RM’000RM’000RM’000
Balance as at the beginning
of the financial year
(404)
(568)
1,417
(11,768)
-
(11,323)
Transfer to/(from) income
statement (Note 21)
-
(269)
113
-
-
(156)
Transferred from AFS reserve
-
-
-
3,237
-
3,237
Balance as at the end
of the financial year
2011
Balance as at the beginning
of the financial year
Transfer to/(from) income
statement (Note 21)
Transferred from AFS reserve
Balance as at the end
of the financial year
(404)
(837)
1,530
(8,531)
-
(8,242)
(404)
(666)
23,346
(2,698)
-
19,578
98
-
(21,929)
-
-
(9,070)
-
-
(21,831)
(9,070)
(568)
1,417
(11,768)
-
(11,323)
-
-
(404)
37
38
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
14. SHARE CAPITAL
Number Number
Amount
of shares
Amount of shares
2012
2012
2011
2011
RM’000
‘000 RM’000
‘000
Authorised:
Ordinary shares of RM1 each
100,000
100,000
100,000
100,000
Issued and fully paid:
Ordinary shares of RM1 each
80,000
80,000
80,000
80,000
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at general meetings of the Bank.
15. RESERVES
Statutory reserve
Property revaluation reserve
Available-for-sales reserve
Funds allocated to Islamic Banking Division
Retained earnings
(i)
(ii)
(iii)
(iv)
2012
RM’000
2011
RM’000
246,263
13,226
25,597
105,000
640,914
227,624
13,226
35,306
105,000
565,292
1,031,000
946,448
(i) The statutory reserve is maintained in compliance with the provisions of the Banking and Financial Institutions Act,
1989 and is not distributable as cash dividends.
(ii) Property revaluation reserve of the Bank is non distributable and it relates to the revaluation of a piece of freehold land
and building of the Bank.
(iii) The financial investments available-for-sale reserve arose from the changes in the fair value of the available-for-sale
securities and is not distributable as cash dividends.
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
(iv) Retained earnings
A single tier company tax was introduced effective 1 January 2008. Under this single tier system, tax on a company’s
profits is a final tax, and dividends distributed to shareholders will be exempted from tax. Companies with Section
108 tax credit balance are given an option to elect to move to a single tier system immediately or allowed to use the
Section 108 credit balance for the purpose of dividend distribution during a transitional period of 6 years until 31
December 2013.
The Bank has elected to use its Section 108 credit balance for the purpose of dividend distribution during a transitional
period of 6 years until 31 May 2013. The Section 108 balance of the Bank will be frozen and can only be adjusted
downwards for any tax discharged, remitted or refunded during the 6 years period.
Subject to agreement by the Inland Revenue Board, the Bank has sufficient tax credit under Section 108 of the Income
Tax Act, 1967 and tax exempt income under Section 12 of the Income Tax (Amendment) Act, 1999 to pay dividends out
of its entire distributable retained earnings at 31 May 2012.
16. INTEREST INCOME
Money at call and deposits and placements with
banks and other financial institutions
2012
RM’000
2011
RM’000
14,479
14,794
Loans, advances and financing
Financial investments available-for-sale
Financial investments held-to-maturity
Amortisation of premium less accretion of discount
19
116,585
-
116
101,981
27,051
190
Financial assets held-for-trading
131,083
24,996
144,132
10,049
156,079
154,181
2012
RM’000
2011
RM’000
62,010
71,852
50,560
50,921
133,862
101,481
17. INTEREST EXPENSE
Deposits and placements of banks and other
financial institutions
Deposits from customers
39
40
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
18. OTHER OPERATING INCOME
Fee income
Agency fees
Underwriting fees
Corporate advisory fees
Commitment fees
Commission
Net income from securities
Net gain from financial assets held-for-trading
Net gain from financial investments available-for-sale
Net gain from financial investments held-to-maturity
Net unrealised gain on revaluation of financial assets held-for-trading
Other income
Gain on disposal of property and equipment (net)
Net realised gain/(loss) from dealing in foreign currency
Net realised loss on trading of derivative
Net unrealised (loss)/gain from dealing in foreign currency
Net unrealised gain on revaluation of derivative Others 2012
RM’000
2011
RM’000
100
1,889
251
25
100
758
456
240
-
2,265
1,554
45,246
56,526
2,394
22,023
28,794
31,010
5,082
104,166
86,909
75
63
(4,481)
(4,212)
9,128
4,557
(3,181)
(1,999)
2,647
(8,263)
186
5,130
(10,610)
111,561
77,853
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
19. OTHER OPERATING EXPENSES
2012
RM’000
2011
RM’000
1,162
649
767
661
1,162
573
1,877
675
568
3,239
4,855
504
235
97
435
338
56
836
829
85
379
173
40
1,532
207
1,034
-
55
322
141
43
1,847
170
436
462
3,450
3,476
13,404
1,629
1,729
712
16,426
1,120
1,434
704
17,474
19,684
24,999
28,844
Establishment related expenses
Rental of premises
Equipment rental
Depreciation of property, plant and equipment
Property, plant and equipment written off
Others Promotion and marketing related expenses
Brokerage fees
Advertising, travelling and entertainment
Others General administrative expenses
Auditors remuneration - statutory audit
Maintenance expenses
Printing and stationery
Donations
Professional fees
Bank charges
Others Provision for litigation (Note 25.1)
Personnel expenses
Salaries, bonus and allowances
Directors’ remuneration
EPF and SOCSO
Others 41
42
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
20. DIRECTORS’ REMUNERATION
The aggregate remuneration of the Managing Director and Non-Executive Directors of the Bank are as follows:
2012
RM’000
2011
RM’000
1,010
219
540
180
1,229
720
400
400
1,629
1,120
Salary,
bonuses
and other
emoluments
RM’000
Benefits-inkind (based on
an estimated
monetary
value)
RM’000
Total
RM’000
1,010
219
1,229
Managing Director
- Salary, bonuses and other emoluments
- Benefits-in-kind
Non-Executive Directors
- Fees
2012
Managing Director
Datuk Khatijah binti Ahmad
Non-executive Directors
Tan Sri Dato’ Ahmad bin Mohd Don (Chairman)
Tan Sri Dato’ Seri Siti Norma binti Yaakob
Dato’ Wira Syed Abdul Jabbar bin Syed Hassan
Lee Siew Choong
Paisol bin Ahmad
Thariq Usman bin Ahmad
Fees
RM’000
100
60
60
60
60
60
400
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
2011
Managing Director
Datuk Khatijah binti Ahmad
Salary,
bonuses
and other
emoluments
RM’000
Benefits-inkind (based on
an estimated
monetary
value)
RM’000
Total
RM’000
540
180
720
Non-executive Directors
Tan Sri Dato’ Ahmad bin Mohd Don (Chairman)
Tan Sri Dato’ Seri Siti Norma binti Yaakob
Dato’ Wira Syed Abdul Jabbar bin Syed Hassan
Lee Siew Choong
Paisol bin Ahmad
Thariq Usman bin Ahmad
Fees
RM’000
100
60
60
60
60
60
400
21. TAXATION
2012
RM’000
2011
RM’000
Malaysian income tax
- Current year
- Under/(Over) provision in prior years
40,823
895
45,655
(135)
Deferred tax expense (Note 13)
41,718
156
45,520
21,831
41,874
67,351
The numerical reconciliation between the tax expense rate and the product of accounting profit multiplied by the Malaysian
tax rate is as follows:
2012
2011
RM’000
RM’000
Profit before taxation
Income tax using Malaysian tax rates of 25% (2011: 25%)
Non-deductible expenses
Other temporary differences not recognised previously
Under/(Over) provision in prior years
167,990
179,455
41,998
(1,323)
304
895
44,865
(272)
22,893
(135)
41,874
67,351
43
44
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
22. DIVIDENDS
Dividend declared and proposed are as follows:
2012
2011
Gross Amount of Gross
Amount of
dividend dividends,
dividend dividends,
per share net of tax
per share net of tax
sen
RM’000
sen
RM’000
Ordinary Shares
- Final dividend for 2011
50.0
30,000
- Final dividend for 2010
-
-
50.0
30,000
-
10.0
6,000
10.0
6,000
At the forthcoming Annual General Meeting, a final gross dividend in respect of the current financial year of RM1.00 less 25%
tax amounting to RM60,000,000 will be proposed for shareholders’ approval. These financial statements do not reflect this
final dividend which will be accounted for in the shareholders’ equity as an appropriation of retained profits in the financial
year ending 31 May 2013 when approved by the shareholder.
Dividend recognised as distribution to ordinary equity holders of the Bank:
2012
2011
Gross Amount of Gross
Amount of
dividend dividends,
dividend dividends,
per share net of tax
per share net of tax
sen
RM’000
sen
RM’000
Ordinary Shares
- Final dividend for 2011
50.0
30,000
- Final dividend for 2010 -
-
50.0
30,000
-
10.0
6,000
10.0
6,000
23. SIGNIFICANT RELATED PARTY DISCLOSURES
(a)
Related parties and relationships
The related parties of, and their relationships with the Bank, are as follows:
Relationship
Related parties
Ultimate holding company
AKKA Sdn Bhd
Holding company
KAF Securities Sdn Bhd
Related companies
AKKA Sdn Bhd and its subsidiaries which include
KAF Securities Sdn Bhd’s subsidiaries and
KAF Seagroatt & Campbell Berhad’s subsidiaries.
Key management personnel
The key management personnel of the Bank includes
Managing Director and all the Head of Departments
of the Bank who make certain critical decisions in relation
to the strategic direction of the Bank.
KAF-Investment Bank Berhad. Annual Report 2012
45
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
(b) Significant related party balances and transactions
2012
Ultimate
Key
Other
holding
Holding management
related
company
company
personnel companies
RM’000RM’000 RM’000RM’000
Income
Interest on loans, advances and financing 7
Commitment fee on revolving credit
-
-
-
251
IT maintenance
-
-
-
156
-
-
7
407
Expenditure
Interest on deposit from customers 128
90
1,898
Brokerage fee
145
128
90
-
2,043
Amount due from
Loans, advances and financing
307
Other assets
-
-
-
89
-
-
307
89
Amount due to
Deposit from customers
7,848
75,066
Other liabilities
-
-
-
4
7,848
-
-
75,070
2011
Income
Interest on loans, advances and financing 8
Commitment fee on revolving credit
-
-
-
240
Interest on revolving credit
-
-
-
92
IT maintenance
-
-
-
150
-
-
8
482
Expenditure
Interest on deposit from customers 18
45
880
Brokerage fee
150
18
45
-
1,030
Amount due from
Loans, advances and financing
400
Other assets
-
-
-
182
-
-
400
182
Amount due to
Deposit from customers
1,816
48,854
Other liabilities
-
-
-
12
1,816
-
-
48,866
46
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
(c) Key management personnel
The remuneration of key management personnel are as follows:
Short-term employee benefits
- Fee
- Salary, bonuses and other emoluments
- Benefits-in-kind
2012
RM’000
2011
RM’000
400
3,465
219
400
2,850
180
4,084
3,430
The above remuneration includes directors’ remuneration as disclosed in Note 20.
(d) Credit exposure arising from transactions with connected parties
Credit exposures with connected parties as per Bank Negara Malaysia’s revised Guidelines on Credit Transactions and
Exposure with Connected Parties are as follows:
2012
2011
RM’000
RM’000
Outstanding credit exposures with connected parties (RM’000)
50,000
50,000
Percentage of outstanding credit exposures to connected parties as
a proportion of total credit exposures
4.6%
5.1%
-
-
2012
RM’000
2011
RM’000
263
58
1,350
259
321
1,609
Percentage of outstanding credit exposures to connected parties which
is non-performing or in default
26. OPERATING LEASE COMMITMENTS
Non-cancellable operating lease rental are payable as follows:
Less than one year
Between one and five years
The Bank leases office premises and equipments under operating leases. The leases typically run for a period ranging 1 to 5
years, with an option to renew the leases after that date. Lease payments are at market rates.
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
25. COMMITMENTS AND CONTINGENCIES
Obligation arising from rediscounting of bankers’
acceptances of the other financial institutions
Foreign exchange related contracts
Other commitments with maturity over one year
*
2012
Credit
Risk
Principal equivalent weighted
amount amount* amount*
RM’000
RM’000
RM’000
2011
Credit
Principal equivalent
amount amount*
RM’000
RM’000
Risk
weighted
amount*
RM’000
94,842
18,968
3,794
23,558
4,712
942
548,073
11,930
2,573
773,659
7,598
1,520
61,238
30,619
30,619
61,238
30,619
30,619
704,153
61,517
36,986
858,455
42,929
33,081
The credit equivalent amount and the risk weighted amount are arrived at using the credit conversion factor and risk
weights respectively, as per Bank Negara Malaysia guidelines.
25.1 Litigation 1 – In relation to ABBA Bonds issuance which was part of a RM365 million Financing Scheme (“Pesaka ABBA
Bond Suit”)
The Pesaka ABBA Bond Suit was as a result of the Issuer’s, Pesaka Astana Sdn Bhd, (“Pesaka”) failure in honoring its
obligations under the ABBA Bonds (which was part of the Financing Scheme of RM365 million by Pesaka), which
resulted in the Bondholders taking action against, among others, Pesaka, the Bank and Mayban Trustee Berhad (“MTB”)
for a sum of RM149.315 million. The High Court found the Bank liable to the Bondholders on a 60 (the Bank):40 (MTB)
basis and had also dismissed the Bank’s indemnity claim against Pesaka.
The Bank paid RM90,461,718.90 to the Bondholders pursuant to the High Court judgment delivered on the 30 June 2010.
On appeal by the Bank to the Court of Appeal, the Court of Appeal reduced the Bank’s liability to the Bondholders from
60:40 to 50:50 basis. Pursuant to the Court of Appeal’s judgment, the Bank had received from MTB the reimbursement
of 10% of the judgment sum in the total amount of RM15,060,000.00 on 7 December 2011. The Bank’s appeal against
dismissal of its indemnity claim against Pesaka was also allowed and Pesaka is to (1) jointly pay the Bank and MTB, the
sum of 2/3 of RM149,300,000.00 together with penalty charges at the nominal rate of 3% on 2/3 of RM149,300,000.00
from 30 September 2005 to 30 June 2010, and penalty charges at the rate of 4% on 2/3 of RM149,300,000.00 from 30
June 2010 to the date of satisfaction, and (2) to pay the Bank and MTB costs of their appeal. The Court of Appeal also
allowed the cross-appeal by the Bondholders on the issue of pre judgment penalty charges resulting in the Bank and MTB
having to pay 3% penalty charges on the judgment sum from 30 September 2005 to 30 June 2010, and also the costs of
the Bondholders cross-appeal which the Bank had paid the Bondholders the sum of RM10,864,158.91 on 9 April 2012.
The Bank had obtained leave to appeal to the Federal Court on 5 April 2012, and is now waiting for the Federal Court
to fix the hearing dates for the appeal.
47
48
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
25.2 Litigation 2 - MIDF Amanah Investment Bank Berhad (formerly Amanah Short Deposits Berhad vs Pesaka Astana &
4 Ors (CP/MTN Suit)
The CP/MTN Programme (“the Programme”) was also part of the Financing Scheme of RM365 million by Pesaka. The
Bank was, amongst others, the lead arranger and facility agent to the Programme. The Plaintiff, who was a Noteholder,
claimed against the Bank and other defendants, amongst others, the sum of RM13 million for damages.
This suit was brought about by Pesaka’s default under the ABBA Bonds issue which in turn had triggered a cross-default
in the Programme. The Plaintiff alleges, amongst others, breaches of contract and breaches of duty of care under Section
32B(1) of the Securities Commission Act 1993.
The trial dates were fixed earlier but had been vacated by the High Court pursuant to the grant of stay applied by the
Bank to the Federal Court on 5 April 2012. The trial will resume after the disposal of all appeals in relation to Litigation
1 above.
26. FINANCIAL INSTRUMENTS
A. Financial risk management objectives and policies
Overview and organisation
Risk is inherent in banking business and sound risk management is the cornerstone of prudent and successful banking.
In compliance with best practices under the Malaysian Code of Corporate Governance, the Board of Directors (‘Board’ or
‘BOD’) through the Risk Management Committee (‘RMC’) and Risk Management Department (‘RMD’), are responsible
for identifying principal risks and ensuring that there are an ongoing process to continuously manage the Bank’s risks
actively.
In addition to that, the Bank is requested to comply with the Risk Governance Guideline by Bank Negara Malaysia.
The RMC provides oversight and management of all risks in an integrated way. The RMD is independent and reports
directly to this Committee. The RMD assists the RMC and Board in formulating risk related policies, advises the Board
on the risk impact of business strategies, and reviews compliance by the management to the risk policy framework that
is approved by the Board.
The RMC comprises Non-Executive Directors with at least four (4) members. Members of the RMC are directors who
are exclusively non-executive in all of their directorships within the Bank.
Overriding objectives of the RMC:
(i)To provide oversight and governance of risks of the Bank;
(ii) To oversee senior management’s activities in managing credit, market, liquidity, operational, legal and other risks
and to ensure that the risk management process is in place and functioning;
(iii) To deliberate and make recommendations to the BODs in respect of risk management matters.
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
The primary responsibility for managing risks, however, rests with respective heads of departments. They are best
equipped to ensure that risk management and control are continuously focused on the way daily operations are conducted.
There are continuous reviews of business activities and processes to identify significant risk areas and implement control
procedures to operate within established corporate policies and limits. Additionally, the management of risks associated
with financial instruments are continuously carried out in the Bank. The Board has set up policies and procedures to
manage the risks that may arise in connection with the use of financial instruments.
The Bank has risk management policies and guidelines which sets out its overall business strategies, tolerance to risk and
general risk management philosophy. In addition to that the Bank’s has established processes to monitor and control
trading and investment positions in a timely and accurate manner. Such policies are reviewed at least annually by the Board
of Directors to ensure that the Bank’s policy and guidelines are dynamic. The Credit Committee, Investment Committee
(‘IC’), Treasury Management Committee (‘TMC’) and Risk Management Department (‘RMD’) are collectively responsible
to effectively manage overall operational, market, liquidity and credit risk management of the Bank’s exposures.
Major areas of risk
As a banking institution’s key activities covering corporate banking and advisory services, treasury products and services,
the Bank is subject to business risks which are inherent in the financial services industry. Generally, these business risks
can be broadly classified as follows:
(i) Market risk - the risk of potential loss resulting from adverse movements in the level of market prices, interest rate,
foreign currency exchange and volatility.
(ii) Liquidity risk - the risk of the Bank being unable to maintain sufficient liquid assets to meet its financial commitments
and obligations when they fall due at a reasonable cost.
(iii)Credit risk - the risk of potential loss due to changes in the quality of counter-parties and the market values of
collaterals.
(iv) Operational risk - the risk of loss resulting from inadequate or failed internal processes, people, systems or external
events as well as the risk of breaches of applicable laws and regulatory requirements.
Market risk management
Market risk arising from trading activities is controlled by mark-to-market of trading positions against their predetermined
market risk limits.
Market risk is the risk of loss arising from adverse movement in the level of market prices or rates, the key components
being interest rate risk and foreign currency exchange rates. This is managed through the Investment Committee and
Treasury Management Committee.
The effects of changes in the levels of interest rates on the market value of financial assets held-for-trading are monitored
closely and mark-to-market valuations are regularly reported to management.
49
50
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
For currency risk
Approved overall position limits are applied for foreign exchange spot trading portfolio. Trading loss limits are imposed
on each trading desk. The levels of these exposures by overall total for both intra-day and overnight positions, are
monitored daily for compliance with the approved limits.
For interest rate risk
Investment Committee and Treasury Management Committee monitors the balance sheet position and assesses the
impacts arising from sensitivity to interest rate movements.
Credit risk management
The Bank manages its credit risk through the Credit Committee and other committees established by the Board of
Directors and the exposures to credit risk are monitored on an ongoing basis by the Risk Management Department.
Credit evaluations are required to be performed by Credit Research Department on all financial instruments purchased
where possible. The credit worthiness of the issuers of financial instruments are assessed based on their ability to service
and redeem the financial instruments with regard to their management capabilities and current and future financial
positions. External risk ratings are utilised as part of the assessment where the financial instruments are accorded with
external ratings. For financial instruments not accorded with external ratings, where possible an internal risk grading
system would be utilised.
At balance sheet date, there were no significant concentrations of credit risk. The maximum exposure to credit risk for
the Bank is represented by the carrying amount of each financial asset.
Interest rate risk management
Interest rate risk is managed through the Investment Committee and Treasury Management Committee. Changes in
interest rates affect the Bank’s earnings by changing its net interest income and the level of other interest-sensitive income
and operating expenses. Changes in interest rates also affect the underlying economic value of the Bank’s assets, liabilities
and off-balance sheet items. As a financial intermediary, the Bank accepts and manages interest rate risk as an inherent
part of their business.
In managing interest rate risk, the Bank has established a cut loss policy in guiding the Bank’s tolerance for interest rate
risk, identifying lines of authority and responsibility for managing risk, and ensuring adequate resources are devoted to
interest rate risk management.
Liquidity risk management
It is the Bank’s policy to maintain sufficient liquidity to fund daily operations and to meet its obligations to depositors
and borrowers. The Bank’s Investment Committee and Treasury Management Committee are also responsible for the
management of liquidity of the Bank. The Investment Committee and Treasury Management Committee reviews and
monitors the liquidity position using Bank Negara Malaysia’s Liquidity Framework for Investment Bank that is based on
the behavioural cash flow of assets, liabilities and off balance sheet commitments. One of the objectives of the Investment
Committee and Treasury Management Committee is to ensure that the Bank is able to meet liquidity shortfalls in all
market conditions in a cost-effective manner.
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
Operational risk
The Bank recognises the importance of a well-managed banking operation is to cultivate an organisational wide discipline
and prudent risk management culture among its staff.
Operational risks arise from inadequate or failed internal processes, people and systems or from external events. These
risks are managed by the Bank through the following key measures:
(a)
(b)
(c)
(d)
The respective business units are primarily responsible for managing operational risk on a day-to-day basis.
The Bank has a Business Continuity Planning (‘BCP’) programme for its major critical business operations and activities.
The BCP programme is subject to regular testing as required by BNM as well to ensure efficiency, reliability and
functionality to cater for any unexpected events.
The Bank continually refines and strengthens existing policies, procedures and internal controls measures; and continually
conducts internal review, compliance monitoring, and audit to prevent and minimise unexpected losses.
B.
Financial instruments by category:
Sound risk management practices in accordance with Basel II and regulatory guidelines
Board and senior management oversight
Well defined responsibilities for all personnel concerned
Establishment of a risk management culture
Assets at fair value
through Loans and profit and Available
receivables
loss
for-sale
2012 RM’000
RM’000
RM’000
Total
RM’000
Cash and short-term funds
Financial assets held-for-trading
Financial investments available-for-sale
Loans, advances and financing
Other financial assets
1,375,400
-
548
879
-
-
1,335,742
- 4,800,792
-
-
-
-
1,375,400
1,335,742
4,800,792
548
879
Total
1,376,827
1,335,742 4,800,792
7,513,361
2012 Liabilities at fair value
through profit and
loss
RM’000
Other financial
liabilities
RM’000
Total
RM’000
Deposits from customers
- 3,486,098
3,486,098
Deposits and placements of banks and other financial institutions
- 3,146,848
3,146,848
Derivative liabilities968-968
Other financial liabilities
-
5,851
5,851
Total
968 6,638,797
6,639,765
51
52
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
Assets at fair value
through Loans and profit and Available
receivables
loss
for-sale
2011 RM’000
RM’000
RM’000
Cash and short-term funds
Financial assets held-for-trading
Financial investments available-for-sale
Loans, advances and financing
Other financial assets
Total
3,138,440
-
-
549
709
-
-
3,517,144
-
- 3,854,608
-
-
-
-
3,138,440
3,517,144
3,854,608
549
709
3,139,698
3,517,144 3,854,608
10,511,450
2011 Total
RM’000
Liabilities at fair value
through profit and
loss
RM’000
Other financial
liabilities
RM’000
Total
RM’000
Deposits from customers
Deposits and placements of banks and other financial institutions
Other financial liabilities
Derivative liabilities
- 4,508,813
- 5,106,396
-
5,776
9,898
-
4,508,813
5,106,396
5,776
9,898
Total
9,898 9,620,985
9,630,883
C. Market risk
Market risk sensitivity analysis is based on the changes in key variables, like interest rates foreign currency rates and
volatility, while other variables remain constant. The sensitivity analysis assumed that there are parallel shifts in the key
variables in order to project the impact on the Bank’s assets and liabilities position as at 31 May 2012.
The scenarios are simplified whereby it assumed that all key variables for all maturities move in tandem and by the same
magnitude and do not incorporate actions that would be otherwise taken by the business units and risk management to
mitigate the effect of this movement in key variables. In reality, the Bank will proactively seek to ensure that the interest
rate risk profile is being managed in order to minimise loss.
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
(i) Interest rate sensitivity analysis
The following table shows the sensitivity of the Bank’s profit after tax and its equity to an immediate parallel shift
of up and down +/-50 basis point ('bps') in the interest rate.
2012
+50 bps
-50 bps
Impact
on profit
after tax
RM’000
Impact
on equity
RM’000
(30,800)
30,900
(141,590)
113,314
(22,849)
23,062
(77,239)
81,641
2011
+50 bps
-50 bps
The results above represent financial assets and liabilities that have been prepared on the following basis:
Impact on the profit after tax is the sum of valuation changes on fixed income and discounted papers instruments
held in the trading portfolio and earnings movement for all short term interest rate sensitive assets and liabilities
(with maturity or re-pricing tenure of up to one year).
While the impact on equity represent the changes in revaluation from the banking portfolio. Impact on equity
represents the changes in fair value of the fixed income instruments held in the available-for-sale portfolio arising
from the shift in the interest rate.
(ii) Foreign currency sensitivity analysis
The foreign currency sensitivity represents the effect of the appreciation or depreciation of the foreign currency
rates on the consolidated currency position, while other variables remain constant.
2012
+ 5%
- 5%
Impact
on profit
after tax
RM’000
2,701
(2,701)
2011
+ 5%
- 5%
3,000
(3,000)
53
54
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
Interest rate risk
The table below summarise the Bank's exposure to interest rate risks. The carrying amount of assets and liabilities
(includes non-financial instruments) are categorised by the earlier of contractual re-pricing or maturity dates:
2012
Non-
Up to 1
>1-3
>3-12
1-5 Over 5
interest Trading
month months months
years
years sensitive
book Total
RM’000 RM’000RM’000 RM’000RM’000 RM’000RM’000RM’000
Cash and short term funds
Statutory deposits with
Bank Negara Malaysia
Financial assets held-for-trading
Financial investments
available-for-sale
Loans, advances and financing
Other receivables and prepayments
Property, plant and equipment
Intangible asset
1,369,603
-
-
-
-
-
-
-
-
-
10,199
-
6,288
-
Total assets 1,379,802
Deposits from customers
Deposits and placements of banks
and other financial institutions
Other liabilities
Derivative liabilities
Provision for taxation and zakat
Deferred tax liabilities
3,217,720
206,088
62,290
-
-
-
- 3,486,098
2,977,724
-
168,077
-
1,047
-
-
-
6,970
7,303
8,242
- 3,146,848
6,970
968
968
7,303
8,242
Total liablities
Total equity
Total equity and liabilities
6,195,444
374,165
63,337
-
-
22,515
968 6,656,429
-
-
-
-
- 1,111,000
- 1,111,000
6,195,444
374,165
63,337
-
- 1,133,515
968 7,767,429
(4,815,642) (367,877)
213,864
2,098,642
Total interest sensitivity gap
277,198 2,098,264 2,408,533
3
378
167
-
5,797
- 1,375,400
184,000
- 184,000
- 1,335,742 1,335,742
310
1,015
17,432
52,500
- 4,800,792
548
1,015
17,432
52,500
6,288 277,2012,098,6422,408,700 261,0541,335,7427,767,429
2,408,700
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
2011
Non-
Up to 1
>1-3
>3-12
1-5 Over 5
interest Trading
month months months
years
years sensitive
book Total
RM’000 RM’000RM’000 RM’000RM’000 RM’000RM’000RM’000
Cash and short term funds
Statutory deposits with
Bank Negara Malaysia
Financial assets held-for-trading
Financial investments
available-for-sale
Loans, advances and financing
Other receivables and prepayments
Property, plant and equipment
Intangible asset
3,111,449
-
-
-
-
-
-
-
-
-
6,198
-
6,660
-
Total assets 3,117,647
Deposits from customers
Deposits and placements of banks
and other financial institutions
Other liabilities
Derivative liabilities
Provision for taxation and zakat
Deferred tax liabilities
3,440,010
908,258
160,545
-
-
-
- 4,508,813
4,248,882
-
600,526
-
256,988
-
-
-
8,247
14,287
11,323
- 5,106,396
8,247
9,898
9,898
14,287
11,323
Total liablities
Total equity
Total equity and liabilities
7,688,892 1,508,784
417,533
-
-
33,857
9,898 9,658,964
-
-
-
- 1,026,448
- 1,026,448
7,688,892 1,508,784
417,533
-
- 1,060,305
9,898 10,685,412
(4,571,245) (1,502,124) (303,882)
1,166,260
Total interest sensitivity gap
-
113,621 1,165,935 2,560,884
30
325
194
-
26,991
- 3,138,440
104,000
- 104,000
- 3,517,144 3,517,144
1,310
792
17,379
52,500
- 3,854,608
549
792
17,379
52,500
6,660 113,6511,166,2602,561,078 202,9723,517,144
10,685,412
2,561,078
55
56
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
D.Liquidity risk
The table below analyses the carrying amount of assets and liabilities (includes non-financial instruments) as at 31 May
2012 based on the remaining contractual maturity and is disclosed in accordance with the requirements of BNM GP8:
Up to 1
>1-3
>3-12
>1 No specific
month months
months
year maturity
Total
2012
RM’000RM’000RM’000 RM’000RM’000RM’000
Assets
Cash and short term funds
1,375,400 -
-
-
- 1,375,400
Statutory deposits with BNM
-
-
-
184,000
184,000
Financial assets held-for-trading
287,169
423,894
379,965
244,714
- 1,335,742
Financial investments available-for-sale
10,199
6,288
277,198
4,506,797
310 4,800,792
Loans, advances and financing
-
-
3
545
548
Other receivables and prepayments
-
-
-
1,015
1,015
Property, plant and equipment
-
-
-
17,432
17,432
Intangible asset
- - -52,500
52,500
Total assets Liabilities
Deposits from customers
Deposits and placements of banks
and other financial institutions
Other liabilities
Derivative liabilities
Provision for taxation and zakat
Deferred tax liabilities
Total liablities
1,672,768
430,182
657,166
4,752,056
255,257
7,767,429
3,217,720
206,088
62,290
-
-
3,486,098
2,977,724
168,077
1,047
-
- - -4,389
(308)
(3,113)
-
-
-
-
-
-
-
-
6,970
7,303
8,242
3,146,848
6,970
968
7,303
8,242
22,515
6,656,429
6,199,833
373,857
60,224
-
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
Up to 1
>1-3
>3-12
>1 No specific
month months
months
year maturity
Total
2011
RM’000RM’000RM’000 RM’000RM’000RM’000
Assets
Cash and short term funds
3,138,440 -
-
-
- 3,138,440
Statutory deposits with BNM
-
-
-
104,000
104,000
Financial assets held-for-trading
565,338
994,510
1,762,915
194,381
- 3,517,144
Financial investments available-for-sale
6,198
6,660
113,621
3,726,819
1,310 3,854,608
Loans, advances and financing
-
30
519
549
Other receivables and prepayments
-
-
-
792
792
Property, plant and equipment
-
-
-
17,379
17,379
Intangible asset
- - -52,500
52,500
Total assets Liabilities
Deposits from customers
Deposits and placements of banks
and other financial institutions
Other liabilities
Derivative liabilities
Provision for taxation and zakat
Deferred tax liabilities
Total liablities
3,709,976
1,001,170
1,876,566
3,921,719
3,440,010
908,258
160,545
-
-
4,508,813
4,248,882
600,526
256,988
-
- - -5,052
154
4,692
-
-
-
-
-
-
-
-
8,247
14,287
11,323
5,106,396
8,247
9,898
14,287
11,323
33,857
9,658,964
7,693,944
1,508,938
422,225
-
175,981 10,685,412
57
58
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
The following table presents the cash outflows for the Bank’s financial liabilities by remaining contractual maturities on
undiscounted basis. The balances in the table below will not agree to the balances reported in the statement of financial
position as the table incorporates all contractual cash flows, on an undiscounted basis, relating to both principal and
interest payments.
Up to 1
>1-3
>3-12
>1
month
months
months
year
Total
2012
RM’000RM’000 RM’000RM’000RM’000
Liabilities
Deposits from customers
3,574,782
247,177
66,381
- 3,888,340
Deposits and placements of banks
and other financial institutions
3,223,160
254,025
1,047
- 3,478,232
Other liabilities
3295,5225,851
- Gross settled derivative
- Inflow
(296,926)
(88,447) (127,040)
- (512,413)
- Outflow 299,186
112,958
124,802
536,946
Total financial liabilities
6,800,531
525,713
70,712
2011
Liabilities
Deposits from customers
3,444,222
912,075
162,754
Deposits and placements of banks
and other financial institutions
4,252,493
603,293
259,270
Other liabilities
269
43
5,457
- Gross settled derivative
- Inflow
(476,551)
(40,998) (171,931)
- Outflow 551,903
50,669
178,500
Total financial liabilities
7,772,336
1,525,082
434,050
-
7,396,956
-
4,519,051
- 5,115,056
7
5,776
-
(689,480)
781,072
7
9,731,475
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
The following table presents the contractual expiry by maturity of the Bank’s commitments and contingencies:
Less than More than
1 year
1 year
2012
RM’000
RM’000
Commitments and contingencies
Obligation arising from rediscounting of bankers’ acceptances of the other
financial institutions
94,842
Other commitments with maturity over one year
61,238
Total commitments and contingencies 2011
94,842
61,238
Total
RM’000
94,842
61,238
156,080
Commitments and contingencies
Obligation arising from rediscounting of bankers’ acceptances of the other
financial institutions
Other commitments with maturity over one year
Total commitments and contingencies E.
Credit risk
(i) Maximum exposure to credit risk
23,558
-
61,238
23,558
61,238
23,558
61,238
84,796
The maximum exposure to credit risk at the statement of financial position is the amounts on the statement of financial
position as well as off balance sheet financial instruments, without taking into account of any collateral held or other
credit enhancements. For contingent liabilities, the maximum exposure to credit risk is the maximum amount that
the Bank would have to pay if the obligations of the instruments issued are called upon. For credit commitments,
the maximum exposure to credit risk is the full amount of the undrawn credit facilities granted to customers. The
table below shows the maximum exposure to credit risk for the Bank:
2012
RM’000
2011
RM’000
1,375,400
3,138,439
1,335,742
4,800,482
548
879
3,517,144
3,853,298
549
709
Credit risk exposure of off-balance sheet items:
Commitments and contingencies
7,513,051
10,510,139
156,080
84,796
Total maximum credit risk exposure
7,669,131
10,594,935
Credit risk exposure relating to on-balance sheet assets:
Short term funds
Financial assets and investments portfolio:
- Financial assets held-for-trading
- Financial investments available-for-sale (excluding shares)
Loans, advances and financing
Other financial assets 59
60
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
(ii) Credit quality
The credit quality of financial assets other than loans, advances and financing and other receivables are determined
based on the ratings of counterparties as defined by Moody's or equivalent ratings of other international rating
agencies as defined below:
Aaa to Aa
- A1 to A3
- Baa1 to Ba3
- B1 to C
- P1 to P3
(a) Short term funds, financial assets and investments portfolios, loans, advances and financing and other financial
assets of the Bank are summarised as follows:
FinancialLoan, Financial investments
advances Other Short term assets heldavailableand
financial
funds for-trading
for-sale financing
assets
RM’000
RM’000
RM’000
RM’000
RM’000
2012
Neither past due nor impaired
1,375,400
1,335,742
4,800,482
548
879
3,138,439
3,517,144
3,853,298
549
709
2011
Neither past due nor impaired
(i)
Analysis of short term funds, financial assets and investments portfolios, loans, advances and financing and
other financial assets which are neither past due nor impaired, for the Bank by rating agency designation
as at 31 May 2011 are as follows:
2012
FinancialLoan, Financial investments
advances Other Short term assets heldavailableand
financial
funds for-trading
for-sale financing
assets
RM’000RM’000 RM’000RM’000RM’000
Aaa to Aa
1,955
407,751 2,205,721
-
A1 to A3
2,973
102,387
Baa1 to Ba3
-
6,253
P1 to P3
49,558
-
Unrated
1,370,472
878,433
2,486,121
548
of which:
- Bank Negara Malaysia
1,369,907
-
-
- Malaysian government securities
-
446,991
- Malaysian government investment issues
-
1,252,625
- Private debt securities
-
786,505
- Others
565
878,433
548
1,375,400
1,335,742
4,800,482
548
879
879
879
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
2011
FinancialLoan, Financial investments
advances Other Short term assets heldavailableand
financial
funds for-trading
for-sale financing
assets
RM’000RM’000 RM’000RM’000RM’000
Aaa to Aa
900
644,180 1,988,600
-
A1 to A3
100,000
11,481
295,773
Baa1 to Ba3
-
-
-
P1 to P3
15,800
-
Unrated
3,037,539
2,845,683
1,568,925
549
of which:
- Bank Negara Malaysia
3,010,549
2,364,503
-
- Malaysian government securities
22,112
771,264
- Malaysian government investment issues
9,983
751,630
- Private debt securities
-
46,031
- Others
26,990
449,085
549
3,138,439
3,517,144
3,853,298
549
709
709
709
(b) The following table sets out the credit risk concentrations of the Bank by asset class:
2012
Financial FinancialLoans,
Commit
assets investments advances
Other
Onments
Short held-for- available-
and financial
balance
and
term funds
trading for-sale* financingassets
sheet total contingencies
RM’000RM’000RM’000RM’000 RM’000 RM’000 RM’000
Agricultural
-33,45987,989
-
-121,448
Manufacturing --
20,775- -
20,775 Electricity, gas and water
-
75,168
657,901
-
-
733,069
Construction --
10,462- -
10,462 Real estate --
119,080- -
119,080
11,238
Wholesale & retail trade and
restaurants & hotels
-
44,997
620,427
-
-
665,424
Transport, storage and
communication --
549,852- -
549,852 Finance, insurance and
business services
5,797 1,182,118
821,807
-
- 2,009,722
144,842
Government and government
agencies 1,369,603
- 1,912,189
-
- 3,281,792
Others ---
548
879
1,427 Total 1,375,4001,335,7424,800,482
* Excludes equity instruments amounting to RM 310,000.
548
879 7,513,051
156,080
61
62
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
2011
Financial FinancialLoans,
Commit
assets investments advances
Other
Onments
Short held-for- available-
and financial
balance
and
term funds
trading for-sale* financingassets
sheet total contingencies
RM’000RM’000RM’000RM’000 RM’000 RM’000 RM’000
Agricultural
- 5,21488,395
-
- 93,609
Manufacturing
- 5,05252,187
-
- 57,239
Electricity, gas and water
-
36,154
751,411
-
-
787,565
Construction --
30,598- -
30,598 Real estate
-42,65879,581
-
-122,239 11,238
Wholesale & retail trade and
restaurants & hotels
-
5,192
61,497
-
-
66,689
Transport, storage and
communication
-
51,757
267,143
-
-
318,900
Finance, insurance and
business services
127,177
974,520
759,231
-
- 1,860,928
73,558
Government and government
agencies 3,011,262 2,396,597 1,763,255
-
- 7,171,114
Others ---
549
709
1,258 Total 3,138,4393,517,1443,853,298
*
549
70910,510,139
84,796
Excludes equity instruments amounting to RM1,310,000.
F.
Fair value risk
Amendments to FRS 7 “Financial Instruments: Disclosures – improving disclosures about financial instruments”
(effective from 1 June 2011) require disclosure of fair value measurements by level of a fair value measurement hierarchy.
Comparatives disclosures is not required by the standard.
The Bank measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in
making the measurements:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations
in which inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly.
Level 3: Valuations derived from valuation techniques in which one or more significant inputs are not based on observable
market data.
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
The table below analyses financial instruments carried at fair value analysed by level within the fair value hierarchy:
Level 1
2012 RM’000
Level 2
RM’000
Level 3
RM’000
Total
RM’000
67,794
1,335,742
4,732,998
-
1,335,742
4,800,792
67,794
6,068,740
-
6,136,534
968
-
-
968
Financial assets:
Financial investments held-for-trading
Financial investments available-for-sale
Financial liabilities:
Derivative liabilities
The fair values are based on the following methodologies and assumptions:
Cash and short-term funds and deposits and placements with financial institutions
For cash and short-term funds and deposits and placements with financial institutions with maturities of less than one year,
the carrying value is a reasonable estimate of fair value. For deposits and placements with maturities one year and above,
estimated fair value is based on discounted cash flows using prevailing money market interest rates at which similar deposits
and placements would be made with financial institutions of similar credit risk and remaining period to maturity.
Financial investments held-to-maturity
The fair value for financial investments held-to-maturity is based on quoted and observable market prices. Where there
is no ready market in certain securities, fair values have been assessed by reference to market indicative interest yields or
net tangible asset backing of the investee. Where discounted cash flow technique is used, the estimated future cash flows
are discounted using the prevailing market rates for a similar instrument at the date of statements of financial position.
Loans, advances and financing
For floating rate loans, the carrying amount is generally a reasonable estimate of fair value.
For fixed rate loans, the fair value is estimated by discounting the estimated future cash flows using the prevailing market
rates of loans with similar credit risks and maturities.
The fair values of impaired floating and fixed rate loans are represented by their carrying amounts, net of impairment
allowance.
Other assets and liabilities
The carrying value less any estimated impairment allowance for financial assets and liabilities included in ‘other assets and
liabilities’ are assumed to approximate their fair values as these items are not materially sensitive to the shift in market
interest rates.
63
64
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
Deposits from customers
For deposits from customers with maturities of less than one year, the carrying amounts are reasonable estimates of their
fair values. For deposits with maturities of one year and above, fair values are estimated using discounted cash flows
based on prevailing market rates for similar deposits from customers.
Deposits and placements of banks and other financial institutions
The estimated fair values of deposits and placements of banks and other financial institutions, with maturities of less than
one year approximate the carrying values. For the items with maturities one year and above, the fair values are estimated
based on discounted cash flows using prevailing money market interest rates with similar remaining period to maturities.
27. CAPITAL ADEQUACY
The capital adequacy ratios of the Bank are computed in accordance with Bank Negara Malaysia’s revised Risk-weighted
Capital Adequacy Framework (RWCAF-Basel II). The Bank has adopted the Standardised Approach for Credit Risk and
Market Risk, and the Basic Indicator Approach for Operational Risk. The minimum regulatory capital adequacy requirement
is 8.0% for the risk-weighted capital ratio (RWCR).
The detailed disclosures on the risk-weighted assets are presented in accordance with para 4.3 of Bank Negara Malaysia’s – Risk
Weighted Capital Adequacy Framework (Basel II) and Capital Adequacy Framework of Islamic Banks (CAFIB) – Disclosure
Requirements (Pillar 3.)
Approach
Credit Risk
Market Risk
Operational Risk
Standardised Approach
Standardised Approach
Basic Indicator Approach
KAF-Investment Bank Berhad. Annual Report 2012
65
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
(i)
The capital adequacy ratio of the Bank is as follows:
2012
RM’000
2011
RM’000
80,000
246,263
105,000
640,914
693
80,000
227,624
105,000
565,292
849
1,072,870
978,765
Tier II capital
Revaluation reserve
6,666
6,666
Total Tier II capital
6,666
6,666
Total capital base
1,079,536
985,431
Total risk weighted assets
1,035,318
1,162,088
2012
%
2011
%
Before deducting proposed dividends
Core capital ratio
Risk-weighted capital ratio
103.63
104.27
84.22
84.80
After deducting proposed dividends
Core capital ratio Risk-weighted capital ratio 97.83
98.48
81.64
82.22
Tier I capital
Paid up share capital
Statutory reserves
SPI working funds
Retained profits
Deferred tax liabilities/(assets)
Total Tier I capital
(ii) Breakdown of gross risk weighted assets in various categories of risk weights are as follows:
2012
2011
Risk-
Principal
weighted
RM’000
RM’000
Principal
RM’000
Riskweighted
RM’000
0%
20%
50%
100%
4,059,806
2,215,424
109,262
36,907
-
443,085
54,631
36,907
4,684,707
2,176,520
181,574
96,865
435,304
90,787
96,865
6,421,399
534,623
7,139,666
622,956
260,274
240,421
298,903
240,229
1,035,318
1,162,088
Risk weighted asset equivalent for market risk
Risk weighted asset equivalent for operational risk
66
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
28. OPERATIONS OF ISLAMIC BANKING (SKIM PERBANKAN ISLAM (SPI))
STATEMENT OF FINANCIAL POSITION
AS AT 31 MAY 2012
Assets
Cash and short term funds
Financial assets held-for-trading
Financial investments available-for-sale
(a)
(b)
(c)
Total assets
Liabilities
Deposits from customers
Deposits and placements of banks and other financial institutions
Other liabilities
Provision for tax expense and zakat
Deferred tax liabilities
Note
Total Islamic banking capital funds
Total liabilities and Islamic banking capital funds
The accompanying notes form an integral part of these financial statements.
2011
RM’000
709,702
59,803
1,728,065
1,291,976
1,909,775
1,412,091
2,497,570
4,613,842
(d)
972,844
2,059,453
(e)
1,226,782
2,252,362
(f)14,71523,392
(g)
2,241
20,348
(h)
1,084
5,380
Total liabilities
Islamic banking capital funds
Islamic banking fund allocated
Reserves
2012
RM’000
2,217,666
4,360,935
105,000
174,904
105,000
147,907
279,904
252,907
2,497,570
4,613,842
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 31 MAY 2012
Income derived from investment of depositors’ funds and others
Transfer (to)/from profit equalisation reserve
Less: Income attributable to depositors
Net income
Other operating expenses
Income before taxation and zakat
Tax expense
Zakat
Net profit for the financial year
Other comprehensive income:
Financial investments available-for-sale
- Net unrealised gain on revaluation
- Income tax relating to net fair value changes
Other comprehensive income for the financial year, net of tax
Total comprehensive income for the financial year
The accompanying notes form an integral part of these financial statements.
Note
2012
RM’000
2011
RM’000
(j)
(k)
169,086
(448)
(94,273)
188,715
2,713
(113,288)
(l)
74,365
(154)
78,140
(394)
(m)
74,211
(17,806)
77,746
(19,082)
(n)
(1,855)
(1,944)
54,550
56,720
(16,737)
4,184
8,379
(2,095)
(12,553)
6,284
41,997
63,004
67
68
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 MAY 2012
Note At 1 June 2011
Comprehensive income:
Profit for the financial year
Other comprehensive income:
Financial investments available-for-sale
- Net unrealised gain on revaluation
- Income tax relating to net
fair value changes
Islamic
BankingAvailable-
Distributable
fund for-sale Retained
allocated
reserve
earnings
Total
RM’000
RM’000
RM’000
RM’000
105,000
16,644
131,263
252,907
-
-
54,550
54,550
-
(16,737)
-
(16,737)
(h)
-
4,184
-
4,184
(i)
-
-
(12,553)
-
Total comprehensive income for the financial year
Dividend paid - 2011 final
At 31 May 2012
105,000
At 1 June 2010
105,000
10,360
80,543
195,903
Comprehensive income:
Profit for the financial year
-
-
56,720
56,720
-
8,379
-
8,379
(o)
-
(2,095)
-
(2,095)
(k)
-
6,284
-
Other comprehensive income:
Financial investments available-for-sale
- Net unrealised gain on revaluation
- Income tax relating to net
fair value changes
Total comprehensive income for the financial year
Dividend paid - 2010 final
At 31 May 2011
The accompanying notes form an integral part of these financial statements.
54,550
(15,000)
41,997
(15,000)
4,091 170,813279,904
56,720
(6,000)
63,004
(6,000)
105,000 16,644 131,263252,907
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
STATEMENT OF CASH FLOW
FOR THE FINANCIAL YEAR ENDED 31 MAY 2012
CASH FLOWS FROM OPERATING ACTIVITIES
2012
RM’000
Income before taxation and zakat
Adjustments for:
Net gain from sales of financial investments available-for-sale
Dividend income:
- Financial investments available-for-sale
- Financial investments held-to-maturity
Profit equalisation reserve
Unrealised (gain)/loss:
- revaluation of held-for-trading
Amortisation of premium less accretion of discount
Operating loss before changes in operating assets
(39,649)
(Increase)/decrease in operating assets:
Financial assets held-for-trading
Other receivables
1,846,858
-
Increase/(decrease) in operating liabilities:
Deposits from customers
Deposits and placements of banks and other financial institutions
Other liabilities
(1,086,609)
(1,025,580)
(4,941)
(68,567)
578,103
9,875
Net cash used in operating activities before income taxes and zakat paid (309,921)
(1,350,834)
Taxation and zakat paid
NET CASH USED IN OPERATING ACTIVITIES
The accompanying notes form an integral part of these financial statements.
74,211
2011
RM’000
77,746
(41,165)
(35,236)
(76,257)
-
448
(65,266)
(12,849)
(2,712)
3,114
-
(42,064)
(351,985)
(3,615)
(75)
(42,007)
(1,853,354)
25,116
(16,344)
(1,367,178)
69
70
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
CASH FLOWS FROM INVESTING ACTIVITIES
Net (purchases)/disposal of financial investments available-for-sale
Net disposal of financial investments held-to-maturity
Dividend received:
- Financial investments available-for-sale
- Financial investments held-to-maturity
Note
2012
RM’000
2011
RM’000
(285,177)
-
128,479
901,726
69,888
-
73,322
20,418
(215,289)
NET CASH (USED IN)/GENERATED FROM
INVESTING ACTIVITIES
Dividend paid
(15,000)
(6,000)
NET CASH USED IN FINANCING ACTIVITY
(15,000)
(6,000)
NET DECREASE IN CASH
AND CASH EQUIVALENTS
(582,274)
(249,233)
1,123,945
CASH FLOWS FROM FINANCING ACTIVITY
CASH AND CASH EQUIVALENTS
AT BEGINNING OF FINANCIAL YEAR
CASH AND CASH EQUIVALENTS
AT END OF FINANCIAL YEAR
The accompanying notes form an integral part of these financial statements.
1,291,976
1,541,209
(a)
709,702
1,291,976
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
NOTES TO THE SPI OPERATION
FINANCIAL STATEMENTS 31 MAY 2012
(a)Cash and short term funds
Cash and balances with banks and other financial institutions
Deposits and placements with Bank Negara Malaysia
2012
RM’000
2011
RM’000
182
709,520
736
1,291,240
709,702
1,291,976
At fair value:
Islamic bankers acceptances
Islamic Bank Negara Malaysia bills
Islamic corporate notes
Islamic negotiable instruments deposits
51,812
1,408,878
449,085
59,803
(b)Financial assets held-for-trading
-
-
59,803
-
(c)Financial investments available-for-sale
At fair value:
Islamic Cagamas Residential Mortgage Backed Securities (‘RMBS’) 62,653
Islamic debts securities
749,264
Islamic government investment issues
916,148
1,909,775
81,580
820,587
509,924
1,728,065
1,412,091
972,844
2,059,453
682,847
289,997
880,075
1,179,378
972,844
2,059,453
(iii)The maturity structure of term deposits
Due within three months
Three months to one year
873,371
99,473
1,922,874
136,579
972,844
2,059,453
(d)Deposits from customers
(i) By type of deposits
Al-Mudharabah General Investment Deposits
(ii) By type of customers
Government and statutory bodies
Business enterprise
71
72
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
(e)Deposits and placements of banks and other financial institutions
-
1,226,782
154,484
2,097,878
1,226,782
2,252,362
(f) Other liabilities
Licensed banks
Other financial institutions
Other payables
Profit equalisation reserves (Note 11)
2012
RM’000
2012
RM’000
13,596
1,119
14,715
2011
RM’000
2011
RM’000
22,721
671
23,392
The movements in profit equalisation reserves are as follows:
2012
RM’000
At beginning of year
Provision made during the year
Write back of provision
13,167
(12,719)
At the end of year
671
448
1,119
2011
RM’000
3,383
9,717
(12,429)
(2,712)
671
Profit equalisation reserve (‘PER’) refers to the amount appropriated out of total gross income of Skim Perbankan Islam
in order to maintain a certain level of return for depositors.
In building up the PER, the Bank is allowed to deduct an amount up to 15% of the total gross income from its Skim
Perbankan Islam, plus net trading income and other income.
The mechanism of PER has been approved and endorsed by the National Advisory Council for Islamic Banking and
Takaful of Bank Negara Malaysia.
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
(g)Provision for taxation and zakat
2012
RM’000
2011
RM’000
Taxation
Zakat
-
2,241
18,404
1,944
2,241
20,348
(h)Deferred taxation
Deferred tax assets
Deferred tax liabilities
2012
RM’000
280
(1,364)
2011
RM’000
Deferred tax liabilities (net)
Deferred tax assets
- Settled within 12 months
Deferred tax liabilities
- Settled within 12 months
(1,084)
280
(1,364)
168
(5,548)
(5,380)
168
(5,548)
The movements in deferred tax assets and liabilities during the financial year comprise the following:
Financial
investments
available Provisions
for-sale
Total
2012
RM’000RM’000RM’000
Balance as at the beginning of the financial year
168
(5,548)
(5,380)
Transfer to income statement (Note 28(m))
112
112
Transferred from AFS reserve
4,184
4,184
Balance as at the end of the financial year
280
(1,364)
(1,084)
846
(678)
-
(3,453)
(2,095)
(2,607)
(678)
(2,095)
168
(5,548)
(5,380)
2011
Balance as at the beginning of the financial year
Transfer to income statement (Note 28(m))
Transferred from AFS reserve
Balance as at the end of the financial year
73
74
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
(i)Dividends
Dividend declared and proposed are as follows:
2012
2011
Gross
Amount of
Gross
Amount of dividend
dividends,
dividend
dividends,
per share
net of tax
per share
net of tax
sen
RM’000
sen
RM’000
Ordinary Shares
Final dividend for 2011
50.0
15,000
- Final dividend for 2010 -
10.0
6,000
50.0
15,000
10.0
6,000
At the forthcoming Annual General Meeting, a final gross dividend in respect of the current financial year of 33 sen less
25% tax amounting to RM20,000,000 will be proposed for shareholders’ approval. These financial statements do not reflect
this final dividend which will be accounted for in the shareholders’ equity as an appropriation of retained profits in the
financial year ending 31 May 2013 when approved by the shareholder.
Dividend recognised as distribution to ordinary equity holders of the Bank:
Gross
dividend
per share
sen
2012
Amount of
dividends,
net of tax
RM’000
2011
Gross
Amount of dividend
dividends,
per share
net of tax
sen
RM’000
Ordinary Shares
Final dividend for 2011
50.0
15,000
- Final dividend for 2010 -
10.0
6,000
50.0
15,000
10.0
6,000
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
(j) Income derived from investment of depositors’ funds and others
Income derived from investment of:
General investment deposits
2012
RM’000
2011
RM’000
86,906
108,156
9,791
858
76,257
-
-
29,965
65,267
12,849
75
Total finance income and hibah
Other operating income
Gain from sales of financial assets held-for-trading
Gain from sales of financial investments available-for-sale
Unrealised gain from revaluation of financial assets held-for-trading
Fees income:
- Arrangement fees
- Agency fees
86,906
108,156
44,079
41,165
(3,114)
41,509
35,236
3,614
Finance income and hibah
Placement with financial institutions
Financial assets held-for-trading
Financial investments available-for-sale
Financial investments held-to-maturity
Amortisation of premium less accretion of discount
169,086
50
150
188,715
(k)Income attributable to depositors
Al-Mudharabah General Investment Deposits
- Deposits from customers
- Deposits and placements of banks and other financial institutions
50
57,314
36,959
94,273
70,685
42,603
113,288
(l) Other operating expenses
General administrative expenses
Bank charges
Brokerage fees
Government Deposit Guarantee Fee
18
136
-
13
110
271
154
394
75
76
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
(m)Tax expense
Malaysian income tax
- Current year
- Under provision in prior years
2012
RM’000
18,277
(359)
2011
RM’000
18,404
-
Deferred tax expense (Note 28(h))
17,918
(112)
18,404
678
17,806
19,082
Reconciliation of tax expense:
Profit before taxation
74,211
77,746
Income tax using Malaysian tax rates
Others
Under provision in prior years
18,553
(388)
(359)
19,436
(354)
-
(n)Zakat
Current year
17,806
2012
RM’000
1,855
19,082
2011
RM’000
1,944
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
(o)Financial instruments
Interest rate risk
The table below summarises the Bank's exposure to interest rate risks. The carrying amount of assets and liabilities (includes
non-financial instruments) are categorised by the earlier of contractual re-pricing or maturity dates:
2012
Cash and short term funds
Financial assets held-for-trading
Financial investments
available-for-sale
709,520
-
-
-
Total assets Deposits from customers
Deposits and placements of banks
and other financial institutions
Other liabilities
Provision for taxation and zakat
Deferred tax liabilities
Total liablities
Total equity
Total equity and liabilities
Total interest sensitivity gap
Non-
Up to 1
>1-3
>3-12
1-5 Over 5
interest Trading
month months months
years
years sensitive
book Total
RM’000 RM’000RM’000 RM’000RM’000 RM’000RM’000RM’000
-
-
-
182
-
59,803
-
118,118 1,014,021
595,926
-
- 1,728,065
709,520
-
118,118 1,014,021
595,926
182
59,803 2,497,570
824,684
88,015
60,145
-
-
-
1,225,735
-
-
1,047
-
-
-
14,715
2,241
1,084
- 1,226,782
14,715
2,241
1,084
2,050,419
88,015
61,192
-
-
18,040
- 2,217,666
-
-
-
-
-
279,904
-
2,050,419
88,015
61,192
-
-
297,944
- 2,497,570
(1,340,899)
(88,015)
56,926 1,014,021
595,926
-
709,702
59,803
972,844
279,904
(p)Capital adequacy
The capital adequacy ratios of the Bank are computed in accordance with Bank Negara Malaysia’s revised Risk-weighted
Capital Adequacy Framework (RWCAF-Basel II). The Bank has adopted the Standardised Approach for Credit Risk
and Market Risk, and the Basic Indicator Approach for Operational Risk. The minimum regulatory capital adequacy
requirement is 8.0% for the risk-weighted capital ratio (RWCR).
The detailed disclosures on the risk-weighted assets are presented in accordance with para 4.3 of Bank Negara Malaysia’s
– Risk Weighted Capital Adequacy Framework (Basel II) and Capital Adequacy Framework of Islamic Banks (CAFIB)
– Disclosure Requirements (Pillar 3.)
Approach
Credit Risk
Standardised Approach
Market Risk
Standardised Approach
Operational Risk
Basic Indicator Approach
77
78
KAF-Investment Bank Berhad. Annual Report 2012
N o t e s To T h e F i n a n c i a l S t a t e m e n t s
for the financial year ended 31 May 2012
(i)
The capital adequacy ratio of the SPI operation of the Bank is as follows:
Tier I capital
Islamic banking fund allocated
Retained earnings
Deferred tax (assets)/liabilities
2012
RM’000
2011
RM’000
105,000
170,813
(280)
105,000
131,263
(168)
Total Tier I capital
275,533
236,095
Total capital base
275,533
236,095
Total risk weighted assets
169,910
319,999
Before deducting proposed dividends
Core capital ratio
Risk-weighted capital ratio
After deducting proposed dividends
Core capital ratio
Risk-weighted capital ratio
(ii)
2011
%
162.16%
162.16%
73.78%
73.78%
150.39%
150.39%
69.09%
69.09%
Breakdown of gross risk weighted assets in various categories of risk weights are as follows:
2012
2011
RiskRisk-
Principal
weighted
Principal
weighted
RM’000
RM’000
RM’000
RM’000
0%
20%
50%
100%
2012
%
Risk weighted asset equivalent for market risk
Risk weighted asset equivalent for operational risk
2,005,585
432,182
-
-
-
86,436
-
-
1,749,707
886,176
19,425
39,266
177,235
9,713
39,266
2,437,767
86,436
2,694,574
226,214
2,794
80,680
15,653
78,132
169,910
319,999
29. APPROVAL OF FINANCIAL STATEMENTS
The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 18 October 2012.
KAF-Investment Bank Berhad. Annual Report 2012
Statement By Directors
P u r s u a n t To S e c t i o n 1 6 9 ( 1 5 ) O f T h e C o m p a n i e s A c t , 1 9 6 5
We, Datuk Khatijah binti Ahmad and Paisol bin Ahmad, being two of the directors of KAF Investment Bank Berhad, state
that, in our opinion, the financial statements set out on pages 15 to 78 are drawn up so as to give a true and fair view of the
state of affairs of the Bank as at 31 May 2012 and of its results and cash flows of the Bank for the financial year ended on
that date in accordance with the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities,
Bank Negara Malaysia Guidelines and the provisions of the Companies Act, 1965.
Signed on behalf of the Board of Directors in accordance with their resolution dated 18 October 2012.
DATUK KHATIJAH BINTI AHMAD
DIRECTOR
PAISOL BIN AHMAD
DIRECTOR
Kuala Lumpur
79
80
KAF-Investment Bank Berhad. Annual Report 2012
Statutory Declaration
P u r s u a n t To S e c t i o n 1 6 9 ( 1 6 ) O f T h e C o m p a n i e s A c t , 1 9 6 5
I, Datuk Khatijah binti Ahmad, the Director primarily responsible for the financial management of KAF Investment Bank Berhad,
do solemnly and sincerely declare that the financial statements set out on pages 15 to 78 are, to the best of my knowledge and
belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions
of the Statutory Declarations Act, 1960.
DATUK KHATIJAH BINTI AHMAD
Subscribed and solemnly declared by the abovenamed Datuk Khatijah binti Ahmad at Kuala Lumpur in Malaysia on
18 October 2012.
BEFORE ME:
COMMISSIONER FOR OATHS
Kuala Lumpur
KAF-Investment Bank Berhad. Annual Report 2012
Independent Auditors' Report
To T h e M e m b e r O f K A F I n v e s t m e n t B a n k B e r h a d
(Incorporated in Malaysia)
(Company No. 20657 W)
Report on the Financial Statements
We have audited the financial statements of KAF Investment Bank Berhad which comprise the statement of financial position
as at 31 May 2012 of the Bank, and the statements of comprehensive income, changes in equity and cash flows of the Bank
for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages
15 to 78 .
Directors’ Responsibility for the Financial Statements
The Directors of the Bank are responsible for the preparation of financial statements that give a true and fair view in
accordance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities, Bank Negara
Malaysia Guidelines and the Companies Act, 1965, and for such internal control as the Directors determine are necessary
to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit
in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement
of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control
relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness
of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
81
82
KAF-Investment Bank Berhad. Annual Report 2012
Independent Auditors' Report
To T h e M e m b e r O f K A F I n v e s t m e n t B a n k B e r h a d
(Incorporated in Malaysia)
(Company No. 20657 W)
Opinion
In our opinion, the financial statements have been properly drawn up in accordance with MASB Approved Accounting
Standards in Malaysia for Entities Other than Private Entities, Bank Negara Malaysia Guidelines and the Companies Act,
1965 so as to give a true and fair view of the financial position of the Bank as of 31 May 2012 and of its financial performance
and cash flows for the year then ended.
Report on Other Legal and Regulatory Requirements
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that, in our opinion, the
accounting and other records and the registers required by the Act to be kept by the Bank have been properly kept in
accordance with the provisions of the Act.
Other Matters
This report is made solely to the members of the Bank, as a body, in accordance with Section 174 of the Companies Act, 1965
in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report
PRICEWATERHOUSECOOPERS
(No. AF: 1146)
Chartered Accountants
MOHAMMAD FAIZ BIN MOHAMMAD AZMI
(No. 2025/03/14 (J))
Chartered Accountant
Kuala Lumpur
18 October 2012
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
1.0
OVERVIEW
The Basel II capital adequacy framework for financial institution is described within three distinct Pillars. Pillar 1 sets the
minimum capital requirements for the financial institutions, Pillar 2 addresses the supervisory review process and Pillar 3
focuses on disclosure requirements in respect of the capital and risk profile of the Bank.
KAF Investment Bank Berhad disclosure requirements policy is based on Bank Negara Malaysia Risk Weighted Capital
Adequacy Framework (“BNM RWCAF”) Pillar 3 guidelines and for banking services conducted under the Islamic banking
window the Capital Adequacy Framework for Islamic Banks (“CAFIB”) is used. The Bank adopted the Standardised
Approach in calculating the capital requirement for credit risk and market risk and used the Basic Indicator Approach for
operational risk according to Pillar 1 of BNM RWCAF.
A BNM prescribed risk weight is used in computing the capital requirement for credit and market risk under the Standardised
Approach. For the Basic Indicator Approach the method is based on a fixed percentage set by BNM over the Bank’s average
quarterly income for the past 3 years to calculate the capital requirement. These disclosures are available in the external
website of the Bank (www.kaf.com.my).
2.0
SCOPE OF APPLICATION
The disclosures provided herein refer to the investment banking services of the Bank and Islamic banking services provided
under the Bank’s Islamic banking window.
3.0
CAPITAL MANAGEMENT
The Bank has put in placed an Internal Capital Adequacy Assessment Process (“ICAAP”) policy for its capital management.
The Bank will review its business mix and identify all material risk to ensure capital levels remain sufficient to support its
existing and future business. The Board of Directors of the Bank has set a minimum internal capital target which is doubled
than what is required by the regulator. This is to ensure the Bank maintains a prudent capital to risk asset relationship.
Comparison between actual reported risk weighted capital ratios and the internal target is reported during the Board of
Directors meeting. Stress testing conducted under simulated scenarios is also being used to ascertain the robustness of the
Bank’s capital under extreme conditions.
83
84
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
3.1 Capital Adequacy Ratio
The following table presents the capital adequacy ratio of the Bank before and after proposed dividends.
Table 1(a): Capital Adequacy Ratio before and after proposed dividends for KAF
Before deducting proposed dividends
Core capital ratio
Risk-weighted capital ratio
After deducting proposed dividends
Core capital ratio
Risk-weighted capital ratio
2012
(%)
2011
(%)
103.63
104.27
84.22
84.80
97.83
98.48
81.64
82.22
Table 1(b): Capital Adequacy Ratio before and after proposed dividends for KAF- Islamic Banking Window
Before deducting proposed dividends
Core capital ratio
Risk-weighted capital ratio
After deducting proposed dividends
Core capital ratio
Risk-weighted capital ratio
2012
(%)
2011
(%)
162.16
162.16
73.78
73.78
150.39
150.39
69.09
69.09
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
3.2 Regulatory Capital Requirement
The table below sets out the risk weighted assets for each of the exposure class and the minimum capital to hold in
accordance to BNM’s requirement. The computation follows the standardised approach for credit risk and market
risk and basic indicator approach for operational risk.
Table 2 (a): Disclosure on total risk weighted assets and minimum capital requirement for KAF
2012
Total Risk
Gross Net
Weighted Minimum
Exposures/ Exposures/
Risk Assets after
Capital
EAD EAD after
Weighted
effects of Requirement
before CRM
CRM
Assets
PSIA
at 8%
Exposure Class
RM’000RM’000RM’000RM’000RM’000
1.0 Credit Risk
Exposures under the Standardised Approach
On-Balance Sheet Exposures
Sovereigns/Central banks
2,664,137
2,664,137--
Banks, DFIs and MDBs
2,136,172
2,136,172
184,807
184,807
14,785
Corporate
1,559,572
1,559,572
312,830
312,830
25,026
Other Assets
1
1
-
-
Total for On- Balance Sheet Exposures
6,359,882
6,359,882
497,637
497,637 39,811
Off-Balance Sheet Exposures
Short term liquidating trade related contingencies
18,968
18,968
3,794
3,794
304
Foreign exchange related contracts
11,930
11,930
2,573
2,573
206
Other commitment30,61930,61930,61930,619 2,450
Total Off- Balance Sheet Exposures
Total On and Off- Balance Sheet Exposures
2.0 Market Risk (standardised approach)
Interest Rate Risk
Foreign Currency Risk
61,517
61,517
36,986
36,986
2,960
6,421,399
6,421,399
534,623
534,623
42,771
LongShort
positionposition
1,335,742 -
5,478
32,200
1,335,742
32,200
228,074 32,200 228,074
32,200 18,246
2,576
1,341,220 32,200
1,367,942260,274260,274 20,822
3.0 Operational Risk
(basic indicator approach)
240,421
240,421
19,234
4.0 Total RWA and Capital Requirements
1,035,318
1,035,318
82,827
85
86
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
2011
Total Risk
Gross Net
Weighted Minimum
Exposures/ Exposures/
Risk Assets after
Capital
EAD EAD after
Weighted
effects of Requirement
before CRM
CRM
Assets
PSIA
at 8%
Exposure Class
RM’000RM’000RM’000RM’000RM’000
1.0 Credit Risk
Exposures under the Standardised Approach
On-Balance Sheet Exposures
Sovereigns/Central banks
4,638,157
4,638,157--
Banks, DFIs and MDBs
809,035
809,035
200,608
200,608
16,049
Corporate
1,622,267
1,622,267
388,267
388,267
31,061
Other Assets
27,278
27,278
1,000
1,000 80
Total for On- Balance Sheet Exposures
7,096,737
7,096,737
589,875
589,875
47,190
Off-Balance Sheet Exposures
Short term liquidating trade related contingencies
4,712
4,712
942
942
75
Foreign exchange related contracts
7,598
7,598
1,520
1,520
122
Other commitment30,61930,61930,61930,619 2,450
Total Off- Balance Sheet Exposures
Total On and Off- Balance Sheet Exposures
2.0 Market Risk (standardised approach)
Interest Rate Risk
Foreign Currency Risk
42,929 42,929 33,081
33,081
2,647
7,139,666
7,139,666
622,956
622,956
49,837
LongShort
positionposition
3,517,144
-
9,601
13,650
3,517,144 13,650
285,253 13,650
285,253 13,650
22,820
1,092
3,526,745 13,650
3,530,794298,903298,903 23,912
3.0 Operational Risk
(basic indicator approach)
240,229 240,229 19,218
4.0 Total RWA and Capital Requirements
1,162,088
1,162,088
92,967
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
Table 2 (b): Disclosure on total risk weighted assets and minimum capital requirement for KAF- Islamic Banking
Window
2012
Total Risk
Gross Net
Weighted Minimum
Exposures/ Exposures/
Risk Assets after
Capital
EAD EAD after
Weighted
effects of Requirement
before CRM
CRM
Assets
PSIA
at 8%
Exposure Class
RM’000RM’000RM’000RM’000RM’000
1.0 Credit Risk
Exposures under the Standardised Approach
On-Balance Sheet Exposures
Sovereigns/Central banks
1,296,017
1,296,017--
Banks, DFIs and MDBs
709,568
709,568
-
-
Corporate
432,182
432,182
86,436 86,436
6,915
Total for On- Balance Sheet Exposures
2,437,767 2,437,767
86,436
86,436
6,915
Total On and Off- Balance Sheet Exposures
2,437,767
2,437,767 86,436 86,436
6,915
LongShort
positionposition
59,803
-
59,803
2,794 2,794
224
3.0 Operational Risk
(basic indicator approach)
80,680 80,680 6,454
169,910
169,910
13,593
2.0 Market Risk (standardised approach)
Interest Rate Risk
4.0 Total RWA and Capital Requirements
87
88
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
2011
Total Risk
Gross Net
Weighted Minimum
Exposures/ Exposures/
Risk Assets after
Capital
EAD EAD after
Weighted
effects of Requirement
before CRM
CRM
Assets
PSIA
at 8%
Exposure Class
RM’000RM’000RM’000RM’000RM’000
1.0 Credit Risk
Exposures under the Standardised Approach
On-Balance Sheet Exposures
Sovereigns/Central banks
1,749,648
1,749,648---
Banks, DFIs and MDBs
60,238
60,238
12,048
12,048
964
Corporate
884,629
884,629
214,166
214,166
17,133
Other Assets
59
59
-
-
Total for On- Balance Sheet Exposures
2,694,574
2,694,574
226,214
226,214
18,097
Total On and Off- Balance Sheet Exposures
2,694,574
2,694,574
226,214
226,214
18,097
LongShort
positionposition
1,909,775
-
1,909,775
15,653
15,653
1,252
2.0 Market Risk (standardised approach)
Interest Rate Risk
3.0 Operational Risk
(basic indicator approach)78,13278,132 6,250
4.0 Total RWA and Capital Requirements
319,999319,999 25,599
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
4.0
CAPITAL STRUCTURE
Structurally the Tier-1 capital comprising of paid up capital, statutory reserves and retained earnings represent the main
component of the Bank’s capital base. There is no issuance of Tier-2 capital for capital requirement at the moment. The
Bank aims to manage its capital prudently by ensuring the utilisation of capital goes towards supporting good quality assets
and to maintain a healthy capital base against risk weighted assets.
Table 3(a): Summary of Capital Structure and Total Risk Weighted Assets for KAF
Tier 1 Capital
Paid up share capital
Statutory reserves
SPI working funds
Retained profits
Deferred tax liabilities
2012
RM’000
2011
RM’000
80,000
246,263
105,000
640,914
693
80,000
227,624
105,000
565,292
849
1,072,870
978,765
Tier II Capital
Revaluation reserve
6,666
6,666
Total Tier II capital
6,666
6,666
Total capital base
1,079,536
985,431
Total risk weighed assets
1,035,318
1,162,088
Total Tier 1 capital
Table 3(b): Summary of Capital Structure and Total Risk Weighted Assets for KAF- Islamic Banking Window
Tier 1 Capital
Islamic banking fund allocated
Retained profits
Deferred tax assets
2012
RM’000
2011
RM’000
105,000
170,813
(280)
105,000
131,263
(168)
Total Tier 1 capital
275,533
236,095
Total capital base
275,533
236,095
Total risk weighed assets
169,910
319,999
89
90
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
5.0
RISK MANAGEMENT
In the Bank, the policy setting committee for risk lies with the Board Risk Management Committee (“RMC”). The committee
is ultimately responsible for approving all risk related policies in the Bank. All new banking products will require approval
from the Board which would assess the underlying risk before it can be traded by the relevant business unit. The principal
objectives of the RMC is :i) To provide oversight and governance of risks of the Bank;
ii) To oversee senior management’s activities in managing various risk exposures and to ensure that the risk management
process is within the risk appetite set by the Board;
iii) To deliberate and make recommendations to the Board of Directors in respect of risk management matters.
The implementation of various risk policies and management of risks of the Bank are subsequently delegated to management
committees set up by the Bank. These committees will perform the functions outline under their respective terms of reference
which are briefly mentioned below:Table 4: Management Committees
Management Committee
Scope and Responsibility
Treasure Management Committee (TMC) The management of assets and liabilities of the bank
Investment Committee (IC)
Formulate investment strategy and assess market outlook.
Credit Committee (CC)
Management of credit risk and approval of credit limits Management Loan Committee (MLC)
Approval and granting of loans
The management of risk for the Bank is further supported by Risk Management Department (“RMD”) that reports to the
RMC. The RMD will oversee the day to day risk management process so that the Bank operates within established risk
policies and limits. RMD will also identify potential risk areas and implement control procedures where necessary. All risk
policies and procedures will be reviewed annually to ensure the policies are current and effective.
Each business units is required to assess their own risk profile based on the strategic risk profiling. Business units, as the
first line of defense against risk will review their existing risk and determine the effectiveness of the current controls and
identify potential new risk arising from the current business activities. Risk identified will be ranked based on likelihood
of occurrence and the extent of impact if occur. This information will then be used to determine the overall risk profile of
the Bank.
Part of the risk management function is to also ensure that the Bank has sufficient capital to support the operations from
the various business units. The function of capital management is documented in the Internal Capital Adequacy Assessment
Process (ICAAP) Policy of the Bank.
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
6.0
CREDIT RISK MANAGEMENT
The Bank define credit risk as the potential loss due to the adverse changes in the quality of counterparty or issuer of
securities or other instruments held, that failed to honour its contractual obligations to the Bank. The source of credit risk
for the Bank comes from the holdings and trading of marketable securities, settlement of transactions, lending activities
and commitments arising from guarantee provided to clients.
The Bank manages its credit risk primarily through the Credit Committee and the exposures to credit risk are monitored
on an ongoing basis by the RMD. Credit evaluations are required to be performed on all financial instruments purchased
where possible. The credit worthiness of the issuers of financial instruments are assessed based on their ability to service and
redeem the financial instruments with regards to their management capabilities and current and future financial positions.
External risk ratings are used as part of the assessment where the financial instruments are accorded with an external rating.
For financial instruments not accorded with external ratings, where possible an internal risk grading system would be used.
Credit reviews on the issuer of financial instruments are carried out at least annually and more frequent whenever there
are material information on the issuer that can affect their risk profile. The credit exposure of the Bank is represented by
the tables provided below. The geographical breakdown refers to the origin country of the entity issuing the financial
instruments while the sector breakdown and the maturity profile of the credit exposures are classified according to different
types of asset classes.
Table 5(a): Geographical Distribution of credit exposures for KAF
2012
Exposure Class
On-Balance Sheet Exposures
Sovereign / Central banks
Banks, Development Financial Institution and MDBs
Corporates
Other assets
Total for On-Balance Sheet Credit Exposures
Off-Balance Sheet Exposures
Short term liquidating trade related contingencies
Foreign exchange related contracts
Other commitments
Total for Off-Balance Sheet Credit Exposures
Total On and Off-Balance Sheet Credit Exposures
Malaysia
RM’000
2,664,137
2,068,378
1,559,572
1
6,292,088
Other Countries
RM’000
67,794
67,794
18,968
11,265
30,619
665
-
60,852
6,352,940
665
68,459
91
92
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
2011
Exposure Class
On-Balance Sheet Exposures
Sovereign / Central banks
Banks, Development Financial Institution and MDBs
Corporates
Other assets
Malaysia
RM’000
4,638,157
617,679
1,622,267
27,278
6,905,381
Total for On-Balance Sheet Credit Exposures
Other Countries
RM’000
191,356
191,356
Off-Balance Sheet Exposures
Short term liquidating trade related contingencies
Foreign exchange related contracts
Other commitments
4,712
4,840
30,619
2,758
-
Total for Off-Balance Sheet Credit Exposures
40,171
2,758
6,945,552
191,114
Total On and Off-Balance Sheet Credit Exposures
Table 5(b): Geographical Distribution of credit exposures for KAF- Islamic Banking Window
2012
Exposure Class
On-Balance Sheet Exposures
Sovereign / Central banks
Banks, Development Financial Institution and MDBs
Corporates
Malaysia
RM’000
Other Countries
RM’000
-
Total for On-Balance Sheet Credit Exposures
1,296,017
709,568
432,182
2,437,767
Total On and Off-Balance Sheet Credit Exposures
2,437,767
-
-
93
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
2011
Exposure Class
On-Balance Sheet Exposures
Sovereign / Central banks
Banks, Development Financial Institution and MDBs
Corporates
Other assets
Malaysia
RM’000
Other Countries
RM’000
Total for On-Balance Sheet Credit Exposures
1,749,648
60,238
884,629
59
2,694,574
-
Total On and Off-Balance Sheet Credit Exposures
2,694,574
-
Table 6(a): Distribution of credit exposures by sectors for KAF
2012
Financial
FinancialLoans,
Commit
assets investments
advances
Other
Onments
Short
held-for
available
and
financial
balance
and
term funds
trading
for-sale
financingassets
sheet total contingencies
RM’000RM’000RM’000RM’000RM’000RM’000 RM’000
Agriculture
-
Manufacturing
-
Electricity, gas and water
-
Construction
-
Real estate
-
Wholesale & retail trade and
restaurants & hotels
-
Transport, storage and
communication
-
Finance, insurance and
business services
5,797
Government and government agencies 1,369,603
Others
-
Total 1,375,400
33,459
-
75,168
-
-
87,989
20,775
657,901
10,462
119,080
-
-
-
-
-
-
121,448
20,775
733,069
10,462
119,080
11,238
44,997
620,427
-
-
665,424
-
-
549,852
-
-
549,852
-
1,182,118
-
-
821,807
1,912,189
-
548
-
-
879
2,009,722
3,281,792
1,427
144,842
-
1,335,742
4,800,482
548
879
7,513,051
156,080
94
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
2011
Financial
FinancialLoans,
Commit
assets investments
advances
Other
Onments
Short
held-for
available
and
financial
balance
and
term funds
trading
for-sale
financingassets
sheet total contingencies
RM’000RM’000RM’000RM’000RM’000RM’000 RM’000
Agriculture
-
Manufacturing
-
Electricity, gas and water
-
Construction
-
Real estate
-
Wholesale & retail trade and
restaurants & hotels -
Transport, storage and
Communication
-
Finance, insurance and
business services
122,177
Government and government agencies 3,011,262
Others
-
Total 3,138,439
5,214
5,052
36,154
-
42,658
88,395
52,187
751,411
30,598
79,581
-
-
-
-
-
-
93,609
57,239
787,565
30,598
122,239
11,238
5,192
61,497
-
-
66,689
-
51,757
267,143
-
-
318,900
-
974,520
2,396,597
-
759,231
1,763,255
-
549
-
-
709
1,860,928
7,171,114
1,258
73,558
-
3,517,144
3,853,298
549
709 10,510,139
84,796
Table 6(b): Distribution of credit exposures by sectors for KAF- Islamic Banking Window
2012
Financial
FinancialLoans,
Commit
assets investments
advances
Other
Onments
Short
held-for-
available-
and
financial
balance
and
term funds
trading
for-sale
financingassets
sheet total contingencies
RM’000RM’000RM’000RM’000RM’000RM’000 RM’000
Agriculture
Manufacturing
Electricity, gas and water
Construction
Real estate
Wholesale & retail trade and
restaurants & hotels
Transport, storage and
communication
Finance, insurance and
business services
Government and government agencies
Total
-
-
-
-
-
-
-
-
-
15,346
20,775
151,127
10,462
45,978
-
-
-
-
-
-
15,346
20,775
151,127
10,462
45,978
-
-
44,995
209,464
-
-
254,459
-
-
-
285,976
-
-
285,976
-
182 709,520
14,808
-
10,137
978,801
-
-
-
25,127
1,688,321
-
709,702
59,803
1,728,065
-
-
2,497,570
-
95
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
2011
Financial
FinancialLoans,
Commit
assets investments
advances
Other
Onments
Short
held-for-
available-
and
financial
balance
and
term funds
trading
for-sale
financingassets
sheet total contingencies
RM’000RM’000RM’000RM’000RM’000RM’000 RM’000
Agriculture
-
Manufacturing
-
Electricity, gas and water
-
Construction
-
Real estate
-
Wholesale & retail trade and
restaurants & hotels -
Transport, storage and
Communication
-
Finance, insurance and
business services
50,058
Government and government agencies 1,241,918
Total 1,291,976
-
-
-
-
-
15,898
21,107
493,969
20,908
21,278
-
-
-
-
-
-
15,898
21,107
493,969
20,908
21,278
-
-
40,926
-
-
40,926
-
-
196,256
-
-
196,256
-
500,897 1,408,878
10,245
591,504
-
-
-
561,200
3,242,300
-
1,909,775
1,412,091
-
-
4,613,842
-
Table 7(a): Distribution of credit exposures by residual maturity for KAF
2012
Up to > 1 to 3 > 3 to 5
> 5 and
1 Year
Years
Years
Years
Total
RM’000RM’000RM’000RM’000 RM’000
Agriculture
Manufacturing
Electricity, gas and water
Construction
Real estate
Wholesale & retail trade and restaurants & hotels
Transport, storage and communication
Finance, insurance and business services
Government and government agencies
Others
Total
20,419
-
153,024
-
32,200
44,997
20,414
1,119,458
1,369,603
882
8,040
20,775
102,962
10,462
51,421
10,225
85,857
352,050
1,021,855
378
92,989 -
23,770
-
-
15,722
29,294
229,496
238,598
-
2,760,997
1,664,025
629,869
-
-
453,313
-
35,459
594,480
414,287
308,718
651,736
167
121,448
20,775
733,069
10,462
119,080
665,424
549,852
2,009,722
3,281,792
1,427
2,458,160
7,513,051
96
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
2011
Up to > 1 to 3 > 3 to 5
> 5 and
1 Year
Years
Years
Years
Total
RM’000RM’000RM’000RM’000 RM’000
Agriculture
Manufacturing
Electricity, gas and water
Construction
Real estate
Wholesale & retail trade and restaurants & hotels Transport, storage and communication
Finance, insurance and business services
Government and government agencies
Others
-
5,052
104,040
-
-
-
10,143
1,065,738
5,375,765
739
31,356
21,107
197,746
9,690
54,359
5,192
74,466
193,545
14,949
325
46,307
31,080
107,454
20,908
25,222
20,356
89,389
171,546
114,879
-
Total
6,561,477
602,735
627,141
2,718,786
10,510,139
15,946
-
378,325
-
42,658
41,141
144,902
430,099
1,665,521
194
93,609
57,239
787,565
30,598
122,239
66,689
318,900
1,860,928
7,171,114
1,258
Table 7(b): Distribution of credit exposures by residual maturity for KAF- Islamic Banking Window
2012
Up to > 1 to 3 > 3 to 5
> 5 and
1 Year
Years
Years
Years
Total
RM’000RM’000RM’000RM’000 RM’000
Agriculture
Manufacturing
Electricity, gas and water
Construction
Real estate
Wholesale & retail trade and restaurants & hotels
Transport, storage and communication
Finance, insurance and business services
Government and government agencies
Total
15,346
-
51,459
-
20,762
44,995
20,414
25,127
709,520
-
20,775
22,531
10,462
10,036
10,226
37,111
-
638,157
- -
18,074
-
-
5,240
29,294
-
212,117
-
-
59,063
-
15,180
193,998
199,157
-
128,527
15,346
20,775
151,127
10,462
45,978
254,459
285,976
25,127
1,688,321
887,623
749,298
264,725
595,925
2,497,570
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
2011
Up to > 1 to 3 > 3 to 5
> 5 and
1 Year
Years
Years
Years
Total
RM’000RM’000RM’000RM’000 RM’000
Agriculture
Manufacturing
Electricity, gas and water
Construction
Real estate
Wholesale & retail trade and restaurants & hotels
Transport, storage and communication
Finance, insurance and business services
Government and government agencies
- -
41,277
-
-
-
10,143
550,955
2,650,796
Total
3,253,171
15,898
21,107
63,160
-
21,278
-
47,214
10,245
14,949
-
-
39,355
-
-
20,356
45,754
-
41,160
-
-
350,177
20,908
-
20,570
93,145
-
535,395
15,898
21,107
493,969
20,908
21,278
40,926
196,256
561,200
3,242,300
193,851
146,625
1,020,195
4,613,842
6.1 Past Due but Not Impaired Credit Exposure
Part of credit risk management involves dealing with late payment from customers. The Bank defined past due but not impaired credit
exposures as non receipt of payment from counterparty within 3 months from the due date. During this period of time the management
will undertake preventive measures to protect the credit exposure from becoming impaired.
6.2 Impaired Credit Exposure
When the time frame of payment deteriorates beyond 3 months from the due date the credit exposure is deemed as impaired.
Currently the Bank has no exposure classified under past due but not impaired and impaired credit exposure.
97
98
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
7.0
CREDIT RISK DISCLOSURE UNDER THE STANDARDISED APPROACH
The Bank adopts the Standardised Approach to calculate the capital requirement for credit risk. These are the following
Eligible Credit Assessment Institutions (ECAIs) ratings used by the Bank which is provided in the BNM RWCAF guidelines.
Table 8: List of ECAIs Comparable by Rating Category
Rating Category
1
2
3
4
5
6
Standard & Poor’s Rating Services Moody’s Investors)
Fitch Ratings
(S&P)
Service (Moody’s
(Fitch)
AAA to AA-
A+ to A-
BBB+ to BBB-
BB+ to BB-
B+ to B-
CCC to D
Aaa to Aa3
A1 to A3
Baa1 to Baa3
Ba1 to Ba3
B1 to B3
Caa1 to C
AAA to AA-
A+ to A-
BBB+ to BBB-
BB+ to BB-
B+ to B-
CCC+ to D
RAM Rating
Services Berhad
(RAM)
Malaysian Rating
Corporation
Berhad (MARC)
AAA to AA3
A1 to A3
BBB1 to BBB3
BB1 to BB3
B1 to B3
C1 to D
AAA to AAA+ to ABBB+ to BBBBB+ to BBB+ to BC+ to D
The rating is applied to exposures from the following categories of counterparties for the computation of risk weighted
assets for regulatory capital requirement:a) Sovereign and Central Banks
b) Banking Institutions
c)Corporates
Based on the above mentioned counterparties the Bank will map their respective ratings to the relevant risk weight provided
by BNM and determine the risk weighted credit exposures. A summary of the rating and counterparty matrix are provided
in the following table.
Table 9: Risk Weight According to Rating Categories and Counterparties
Banking Institutions
Sovereign and Rating Category
Central Banks
Risk Weight
Risk Weight
Risk Weight
(original maturity (original maturity (original maturity
of more than 6 of 6 months of 3 months
months)
or less)
or less)
Corporate
1
0%
20%
20%
20%
2
20%
50%
20%
50%
20%
3
50%
50%
4
100%
100%
20%
50%
100%
5
100%
100%
50%
150%
6
150%
150%
150%
150%
100%
99
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
For short term exposures the counterparty ratings are map according to the following risk weight in accordance to BNM
RWCAF guidelines.
Table 10: Risk Weight for Short Term Exposure According to Rating Categories and Counterparties
Rating Category
Standard Malaysian
& Poor’s Moody’s
RAM Rating
Rating
Rating Services
Investors)
Fitch Ratings Services Berhad
Corporation
(S&P) Service (Moody’s
(Fitch)
(RAM) Berhad (MARC)
1
2
3
4
A-1
A-2
A-3
Others
P-1
P-2
P-3
Others
F1+, F1
F2
F3
B to D
P-1
P-2
P-3
NP
MARC-1
MARC-2
MARC-3
MARC-4
Risk Weight
20%
50%
100%
150%
Generally the credit rating refers to the credit exposure or issuer of financial instruments. In the event that no credit rating is available
but the issue is guaranteed by a rated counterparty, the rating of the guarantor will be used to determine the risk weight of the exposure.
For counterparty rated by more than one rating agencies, the lower rank rating will be used. The tables below summarised the total credit
exposures of the Bank according to risk weight followed by the breakdown of exposure class ratings assigned by the ECAIs.
Table 11(a): Disclosures On Risk Weights under the Standardised Approach for KAF
2012 Credit Exposure by Risk Weights
Exposures after Netting and Credit Risk Mitigation
Total Exposure
Sovereigns after Netting & Total Risk
& Central
Banks, MDBs Credit Risk Weighted
Banks
and FDIs
Corporates
Other Assets Mitigation
Assets
Rating Category RM'000RM'000
RM'000 RM'000RM'000RM'000
0%
20%
50%
100%
2,664,137
1,375,095
20,573 -
682,713 1,532,711
-109,262
-
-
-
36,907
1
4,059,806
-
2,215,424
443,085
-109,262 54,631
-
36,907
36,907
Total
2,664,1372,167,070
1,590,191
16,421,399 534,623
Average Risk Weight
-
9%
22%
-
8%
-
100
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
2011 Credit Exposure by Risk Weights
Exposures after Netting and Credit Risk Mitigation
Total Exposure
Sovereigns after Netting & Total Risk
& Central
Banks, MDBs Credit Risk Weighted
Banks
and FDIs
Corporates
Other Assets Mitigation
Assets
Rating Category RM'000RM'000
RM'000 RM'000RM'000RM'000
0%
20%
50%
100%
4,638,157
20,272
-
26,278
4,684,707
-
658,223
1,518,297
-
2,176,520
435,304
-142,850
38,724
-181,574 90,787
-
-
95,865
1,000
96,865
96,865
Total 4,638,157
821,345
1,652,886
27,278
7,139,666
622,956
Average Risk Weight
-
25%
25%
4%
9%
-
Table 11(b): Disclosures On Risk Weights under the Standardised Approach for KAF - Islamic Banking Window
2012 Credit Exposure by Risk Weights
Exposures after Netting and Credit Risk Mitigation
Total Exposure
Sovereigns after Netting & Total Risk
& Central
Banks, MDBs Credit Risk Weighted
Banks
and FDIs
Corporates
Other Assets Mitigation
Assets
Rating Category RM'000RM'000
RM'000 RM'000RM'000RM'000
0%
20%
1,296,017
-
709,568
-
-
432,182
-
-
2,005,585
432,182
86,436
Total
1,296,017
709,568
432,182
-
2,437,767
86,436
Average Risk Weight
-
-
20%
-
4%
-
2011 Credit Exposure by Risk Weights
Exposures after Netting and Credit Risk Mitigation
Total Exposure
Sovereigns after Netting & Total Risk
& Central
Banks, MDBs Credit Risk Weighted
Banks
and FDIs
Corporates
Other Assets Mitigation
Assets
Rating Category RM'000RM'000
RM'000 RM'000RM'000RM'000
0%
20%
50%
100%
1,749,648
-
-
-
-
60,238
-
-
-
825,938
19,425
39,266
59
-
-
-
1,749,707
886,176
19,425
39,266
177,235
9,713
39,266
Total 1,749,648
60,238
884,629
59
2,694,574
226,214
Average Risk Weight
-
20%
25%
-
10%
-
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
Table 12(a): Disclosures on Rated Exposures according to Rating by ECAIs for KAF
2012 Credit Exposure Class By Rating Category
Ratings of Corporate by Approved ECAIs
Moodys
Aaa to Aa3
Baa1 to Ba3
B1 to C
Unrated
S&P
AAA to AA-
A+ to A- BBB+ to BB-
B+ to D
Unrated
Exposure Class
Fitch
AAA to AA-
A+ to A-
BBB+ to BB-
B+ to D
Unrated
A to A3 BBB+ to BB3
B to D
Unrated
RAM AAA to AA3
A1 to A3
MARC
AAA to AA-
A+ to A- BBB+ to BB-
B+ to D
Unrated
Rating &
Investment Inc
AAA to AA-
A+ to A-
BBB+ to BB-
B+ to D
Unrated
RM'000
RM'000
RM'000
RM'000
-
-
-
36,907
On and Off-Balance-Sheet
Exposures
Credit Exposures
(using Corporate Risk Weights)
Corporates
Total
RM'000 1,553,284
1,553,284
--- 36,907
2011 Credit Exposure Class By Rating Category
Ratings of Corporate by Approved ECAIs
Moodys
Aaa to Aa3
S&P
Exposure Class
Fitch
Baa1 to Ba3
B1 to C
Unrated
AAA to AA-
A+ to A- BBB+ to BB-
B+ to D
Unrated
AAA to AA-
A+ to A-
B+ to D
Unrated
BBB+ to BB-
A to A3 BBB+ to BB3
B to D
Unrated
MARC
AAA to AA-
A+ to A- BBB+ to BB-
B+ to D
Unrated
Rating &
Investment Inc
AAA to AA-
A+ to A-
BBB+ to BB-
B+ to D
Unrated
RM'000
RM'000
RM'000
RM'000
On and Off-Balance-Sheet
Exposures
Credit Exposures
(using Corporate Risk Weights)
Corporates
Total
RAM AAA to AA3
A1 to A3
RM'000 1,518,29738,724
-
-95,865
1,518,29738,724
-
-95,865
101
102
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
Table 12(b): Disclosures on Rated Exposures according to Rating by ECAIs for KAF – Islamic Banking Window
2012 Credit Exposure Class By Rating Category
Ratings of Corporate by Approved ECAIs
Moodys
Aaa to Aa3
S&P
Exposure Class
Fitch
Baa1 to Ba3
B1 to C
Unrated
AAA to AA-
A+ to A- BBB+ to BB-
B+ to D
Unrated
AAA to AA-
A+ to A-
B+ to D
Unrated
BBB+ to BB-
A to A3 BBB+ to BB3
B to D
Unrated
MARC
AAA to AA-
A+ to A- BBB+ to BB-
B+ to D
Unrated
Rating &
Investment Inc
AAA to AA-
A+ to A-
BBB+ to BB-
B+ to D
Unrated
RM'000
RM'000
RM'000
RM'000
432,182
-- -
-
432,182
-- -
-
On and Off-Balance-Sheet
Exposures
Credit Exposures
(using Corporate Risk Weights)
Corporates
Total
RAM AAA to AA3
A1 to A3
RM'000 2011 Credit Exposure Class by Rating Category
Ratings of Corporate by Approved ECAIs
Moodys
Aaa to Aa3
S&P
Fitch
Exposure Class
Baa1 to Ba3
B1 to C
Unrated
AAA to AA-
A+ to A- BBB+ to BB-
B+ to D
Unrated
AAA to AA-
A+ to A-
RAM AAA to AA3
A1 to A3
BBB+ to BB-
B+ to D
Unrated
A to A3 BBB+ to BB3
B to D
Unrated
MARC
AAA to AA-
A+ to A- BBB+ to BB-
B+ to D
Unrated
Rating &
Investment Inc
AAA to AA-
A+ to A-
BBB+ to BB-
B+ to D
Unrated
RM'000
RM'000
RM'000
RM'000
On and Off-Balance-Sheet
Exposures
Credit Exposures
(using Corporate Risk Weights)
Corporates
Total
RM'000 825,93819,425
-
-39,266
825,93819,425
-
-39,266
103
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
Table 13(a): Disclosures on Rated Exposures according to Rating by ECAIs for KAF
2012 Credit Exposure by Rating Category
Ratings of Sovereigns and Central Banks by Approved ECAIs
Moodys
Aaa to Aa3
A1 to A3
Baa1 to Ba3
S&P
AAA to AA-
A+ to A-
BBB+ to BB-
BB+ to B- CCC+ to D
Unrated
Fitch
AAA to AA-
A+ to A-
BBB+ to BB-
BB+ to B- CCC+ to D
Unrated
Rating &
Investment Inc
AAA to AA-
A+ to A-
BBB+ to BB-
BB+ to B- CCC+ to C
Unrated
RM'000
RM'000
RM'000
RM'000
-
-
-
- 2,664,137
-
-
-
- 2,664,137
Exposure Class
On and Off-Balance-Sheet
Exposures
Sovereigns and Central Banks
-
Total
-
Ba1 to B3
Caa1 to C Unrated
RM'000
RM'000
Ratings of Banking Institutions by Approved ECAIs
Moodys
Aaa to Aa3
A1 to A3
Baa1 to Ba3
Ba1 to B3
Caa1 to C Unrated
S&P
AAA to AA-
A+ to A-
BBB+ to BB- BB+ to B- CCC+ to D Unrated
Exposure Class
Fitch
AAA to AA-
A+ to A-
BBB+ to BB-
BB+ to B- CCC+ to D
Unrated
RAM
AAA to AA3
A+ to A3 BBB1 to BBB3 BB1 to B3
C1 to D
MARC
AAA to AA-
A+ to A-
BBB+ to BB- BB+ to B-
C+ to D Unrated
Rating &
Investment Inc
AAA to AA-
A+ to A-
BBB+ to BB-
RM'000
RM'000
RM'000
RM'000
RM'000
103,009
6,253
-
-
-
103,009
6,253
-
-
-
On and Off-Balance-Sheet
Exposures
RM'000
Banks, MDBs and FDIs
2,057,808
Total
2,057,808
BB+ to B- CCC+ to C
Unrated
Unrated
104
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
2011 Credit Exposure by Rating Category
Ratings of Sovereigns and Central Banks by Approved ECAIs
Moodys
Aaa to Aa3
A1 to A3
Baa1 to Ba3
S&P
AAA to AA-
A+ to A-
BBB+ to BB-
Fitch
AAA to AA-
A+ to A-
BBB+ to BB-
Rating &
Investment Inc
AAA to AA-
Exposure Class
Ba1 to B3
Caa1 to C Unrated
BB+ to B- CCC+ to D
Unrated
BB+ to B- CCC+ to D
Unrated
A+ to A-
BBB+ to BB-
BB+ to B- CCC+ to C
RM'000
RM'000
RM'000
RM'000
Unrated
On and Off-Balance-Sheet
Exposures
Sovereigns and Central Banks
-
-
-
-
- 4,638,157
Total
-
-
-
-
- 4,638,157
RM'000
RM'000
Ratings of Banking Institutions by Approved ECAIs
Moodys
Aaa to Aa3
A1 to A3
S&P
AAA to AA-
Baa1 to Ba3
Ba1 to B3
Caa1 to C Unrated
A+ to A-
BBB+ to BB- BB+ to B- CCC+ to D Unrated
BBB+ to BB-
Unrated
Exposure Class
Fitch
AAA to AA-
A+ to A-
RAM
AAA to AA3
A+ to A3 BBB1 to BBB3 BB1 to B3
C1 to D
Unrated
MARC
AAA to AA-
A+ to A-
BBB+ to BB- BB+ to B-
C+ to D Unrated
Rating &
Investment Inc
AAA to AA-
A+ to A-
BBB+ to BB-
RM'000
RM'000
RM'000
RM'000
142,850
-
-
-
-
142,850
-
-
-
-
On and Off-Balance-Sheet
Exposures
RM'000
Banks, MDBs and FDIs
678,495
Total
678,495
BB+ to B- CCC+ to D
BB+ to B- CCC+ to C
Unrated
RM'000
105
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
Table 13(b): Disclosures on Rated Exposures according to Rating by ECAIs for KAF - Islamic Banking Window
2012 Credit Exposure by Rating Category
Ratings of Sovereigns and Central Banks by Approved ECAIs
Exposure Class
Moodys
Aaa to Aa3
A1 to A3
Baa1 to Ba3
Caa1 to C Unrated
S&P
AAA to AA-
A+ to A-
BBB+ to BB-
BB+ to B- CCC+ to D
Unrated
Fitch
AAA to AA-
A+ to A-
BBB+ to BB-
BB+ to B- CCC+ to D
Unrated
Rating &
Investment Inc
AAA to AA-
A+ to A-
BBB+ to BB-
BB+ to B- CCC+ to C
Unrated
RM'000
RM'000
RM'000
RM'000
-
-
-
- 1,296,017
-
-
-
- 1,296,017
On and Off-Balance-Sheet
Exposures
Sovereigns and Central Banks
-
Total
-
Ba1 to B3
RM'000
RM'000
Ratings of Banking Institutions by Approved ECAIs
Moodys
Aaa to Aa3
A1 to A3
S&P
AAA to AA-
A+ to A-
BBB+ to BB- BB+ to B- CCC+ to D Unrated
Fitch
AAA to AA-
A+ to A-
BBB+ to BB-
RAM
AAA to AA3
A+ to A3 BBB1 to BBB3 BB1 to B3
C1 to D
MARC
AAA to AA-
A+ to A-
BBB+ to BB- BB+ to B-
C+ to D Unrated
Rating &
Investment Inc
AAA to AA-
A+ to A-
BBB+ to BB-
RM'000
RM'000
RM'000
RM'000
RM'000
-
-
-
-
-
-
-
-
-
-
Exposure Class
On and Off-Balance-Sheet
Exposures
RM'000
Banks, MDBs and FDIs
709,568
Total
709,568
Baa1 to Ba3
Ba1 to B3
Caa1 to C Unrated
BB+ to B- CCC+ to D
BB+ to B- CCC+ to C
Unrated
Unrated
Unrated
106
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
2011 Credit Exposure by Rating Category
Ratings of Sovereigns and Central Banks by Approved ECAIs
Moodys
Aaa to Aa3
A1 to A3
Baa1 to Ba3
S&P
AAA to AA-
A+ to A-
BBB+ to BB-
Fitch
AAA to AA-
A+ to A-
BBB+ to BB-
Rating &
Investment Inc
AAA to AA-
RM'000
Exposure Class
On and Off-Balance-Sheet
Exposures
Sovereigns and Central Banks
-
Total
-
Ba1 to B3
Caa1 to C Unrated
BB+ to B- CCC+ to D
Unrated
BB+ to B- CCC+ to D
Unrated
A+ to A-
BBB+ to BB-
BB+ to B- CCC+ to C
RM'000
RM'000
RM'000
-
-
-
- 1,749,648
-
-
-
- 1,749,648
RM'000
Unrated
RM'000
Ratings of Banking Institutions by Approved ECAIs
Moodys
Aaa to Aa3
A1 to A3
Baa1 to Ba3
Ba1 to B3
Caa1 to C Unrated
S&P
AAA to AA-
A+ to A-
BBB+ to BB- BB+ to B- CCC+ to D Unrated
BBB+ to BB-
Exposure Class
Fitch
AAA to AA-
A+ to A-
RAM
AAA to AA3
A+ to A3 BBB1 to BBB3 BB1 to B3
C1 to D
MARC
AAA to AA-
A+ to A-
BBB+ to BB- BB+ to B-
C+ to D Unrated
Rating &
Investment Inc
AAA to AA-
A+ to A-
BBB+ to BB-
RM'000
RM'000
RM'000
RM'000
RM'000
-
-
-
-
-
-
-
-
-
-
On and Off-Balance-Sheet
Exposures
RM'000
Banks, MDBs and FDIs
60,238
Total
60,238
8.0
BB+ to B- CCC+ to D
BB+ to B- CCC+ to C
Unrated
Unrated
Unrated
CREDIT RISK MITIGATION DISCLOSURES
Credit exposures are largely confined to financial instruments. Mitigation of credit risk arising from these exposures
may exist in the form of a third party guarantee and such credit support must cover for both the principal and interest
amount. For approval of loans, the designated committee will be guided by the requirements set forth under the credit
administration policies.
107
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
Table 14(a): Disclosure on Credit Risk Mitigation for KAF
2012
Exposure Class
Exposures
before
CRM
RM'000
Credit Risk
On-Balance Sheet Exposures
Sovereigns/Central Banks
Banks, Development Financial Institutions & MDBs
Corporates
Other Assets
2,664,137
2,136,172
1,559,572
1
-
-
-
Total for On- Balance Sheet Exposures
6,359,882
-
-
-
Off-Balance Sheet Exposures
Short term liquidating trade related contingencies
Foreign exchange related contracts
Other commitment
18,968
11,930
30,619
-
-
-
Total for Off- Balance Sheet Exposures
61,517
-
-
-
6,421,399
-
-
-
Exposure Class
Exposures
before
CRM
RM'000
Exposures
Covered by
Guarantees/
Credit
Derivatives
RM'000
Credit Risk
On-Balance Sheet Exposures
Sovereigns/Central Banks
Banks, Development Financial Institutions & MDBs
Corporates
Other Assets
4,638,157
809,035
1,622,267
27,278
-
-
-
Total for On- Balance Sheet Exposures
7,096,737
-
-
-
Off-Balance Sheet Exposures
Short term liquidating trade related contingencies
Foreign exchange related contracts
Other commitment
4,712
7,598
30,619
-
-
-
Total for Off- Balance Sheet Exposures
42,929
-
-
-
7,139,666
-
-
-
Total On and Off- Balance Sheet
Exposures
Exposures
Covered by
Guarantees/
Credit
Derivatives
RM'000
Exposures Exposures
Covered by Covered by
Eligible
Other
Financial
Eligible
Collateral Collateral
RM'000
RM'000
2011
Total On and Off- Balance Sheet
Exposures
Exposures Exposures
Covered by Covered by
Eligible
Other
Financial
Eligible
Collateral Collateral
RM'000
RM'000
108
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
Table 14(b): Disclosure on Credit Risk Mitigation for KAF- Islamic Banking Window
2012
Exposure Class
Exposures
Covered by
Guarantees/
Credit
Derivatives
RM'000
Exposures Exposures
Covered by Covered by
Eligible
Other
Financial
Eligible
Collateral Collateral
RM'000
RM'000
Exposures
before
CRM
RM'000
Credit Risk
On-Balance Sheet Exposures
Sovereigns/Central Banks
Banks, Development Financial Institutions & MDBs
Corporates
1,296,017
709,568
432,182
-
-
-
Total for On- Balance Sheet Exposures
2,437,767
-
-
-
Total On and Off- Balance Sheet
Exposures
2,437,767
-
-
-
Exposure Class
Exposures
before
CRM
RM'000
Exposures
Covered by
Guarantees/
Credit
Derivatives
RM'000
Credit Risk
On-Balance Sheet Exposures
Sovereigns/Central Banks
Banks, Development Financial Institutions & MDBs
Corporates
Other Assets 1,749,648
60,238
884,629
59
-
-
-
Total for On- Balance Sheet Exposures
2,694,574
-
-
-
Total On and Off- Balance Sheet
Exposures
2,694,574
-
-
-
2011
Exposures Exposures
Covered by Covered by
Eligible
Other
Financial
Eligible
Collateral Collateral
RM'000
RM'000
KAF-Investment Bank Berhad. Annual Report 2012
109
Basel II Pillar 3 Disclosure
as at 31 May 2012
9.0
DISCLOSURE FOR OFF-BALANCE SHEET EXPOSURES AND COUNTERPARTY CREDIT RISK (CCR)
The Bank does not undertake derivatives transactions which contribute to off-balance exposures and counterparty credit
risk. However the Bank does engage in repo transaction with Bank Negara Malaysia which involved the posting of securities
as collateral. These transactions are carried for funding purposes and are strictly guided by rules specified by BNM.
Table 15(a): Disclosure on Off-Balance Sheet and Counterparty Credit Risk for KAF
2012
Principal Amount
Description
RM'000
Credit Equivalent
Amount
RM'000
Risk Weighted
Assets
RM'000
Short Term Self Liquidating trade related contingencies
Foreign exchange related contracts-one year or less
Other commitments, such as formal standby facilities and
credit lines, with an original maturity of over one year
94,842
548,073
61,238
18,968
11,930
30,619
3,794
2,573
30,619
Total
704,153
61,577
36,986
Principal Amount
Description
RM'000
Credit Equivalent
Amount
RM'000
Risk Weighted
Assets
RM'000
2011
Short Term Self Liquidating trade related contingencies
Foreign exchange related contracts-one year or less
Other commitments, such as formal standby facilities and
credit lines, with an original maturity of over one year
23,558
773,659
61,238
4,712
7,598
30,619
942
1,520
30,619
Total
858,455
42,929
33,081
10.0 MARKET RISK (DISCLOSURES FOR PORTFOLIO UNDER THE STANDARDISED APPROACH)
Market risk is defined as potential loss resulting from adverse movements in the level of market price, interest rates, foreign
exchange rates and equity prices.
The Treasury Management Committee (TMC) is responsible for the overall management of market risk for the Bank. Market
risk arising from trading activities are monitored through marked-to-market of trading portfolios against their predetermined
market risk limits and are regularly reported to management.
The Bank uses the Standardised Approach from BNM RWCAF to calculate the market risk capital requirements for the
trading portfolio.
The following tables summarised the minimum capital requirements for market risk based on the risk exposure type.
110
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
Table 16(a): Minimum Regulatory Requirement for Market Risk for KAF
2012
Risk
Total
Weighted
RWA
Long
Short
Net
Assets
after
Capital
Position Position Exposure
(RWA)
PSIA
Requirement
Exposure Type
RM’000RM’000RM’000RM’000RM’000 RM’000
Interest rate risk
Foreign exchange risk
1,335,742
5,478
-
32,200
1,335,742
32,200
228,074
32,200
228,074
32,200
18,246
2,576
Total
1,341,220
32,200
1,367,942
260,274
260,274
20,822
2011
Risk
Total
Weighted
RWA
Long
Short
Net
Assets
after
Capital
Position Position Exposure
(RWA)
PSIA
Requirement
Exposure Type
RM’000RM’000RM’000RM’000RM’000 RM’000
Interest rate risk
Foreign exchange risk
Total
3,517,144
9,601
-
13,650
3,517,144
13,650
285,253
13,650
285,253
13,650
22,820
1,092
3,526,745
13,650
3,530,794
298,903
298,903
23,912
Table 16(b): Minimum Regulatory Requirement for Market Risk for KAF- Islamic Banking Window
2012
Risk
Total
Weighted
RWA
Long
Short
Net
Assets
after
Capital
Position Position Exposure
(RWA)
PSIA
Requirement
Exposure Type
RM’000RM’000RM’000RM’000RM’000 RM’000
Interest rate risk
59,803
-
59,803
2,794
2,794
224
Total
59,803
-
59,803
2,794
2,794
224
2011
Risk
Total
Weighted
RWA
Long
Short
Net
Assets
after
Capital
Position Position Exposure
(RWA)
PSIA
Requirement
Exposure Type
RM’000RM’000RM’000RM’000RM’000 RM’000
Interest rate risk
1,909,775
-
1,909,775
15,653
15,653
1,252
Total
1,909,775
-
1,909,775
15,653
15,653
1,252
KAF-Investment Bank Berhad. Annual Report 2012
111
Basel II Pillar 3 Disclosure
as at 31 May 2012
11.0 DISCLOSURE FOR INTEREST RATE RISK/RATE OF RETURN RISK IN THE BANKING BOOK (IRR/RORBB)
The interest rate risk/rate of return risk in the banking book refers to changes in interest rates affecting the Bank’s earnings
by changing its net interest income and the level of other interest-sensitive income and operating expenses.
This interest rate risk which has effect on the underlying economic value of the Bank’s asset and off-balance sheet items is
managed through the Investment Committee and Treasury Management Committee. The Bank uses several approaches
to manage volatility of interest income / profit income including monitoring of funding cost, sensitivity analysis and gap
mismatch for asset and liabilities based on contractual maturity date.
The Bank adopts Standardised Approach to compute market risk capital requirement under the Bank Negara Malaysia’s
guideline on RWCAF. In assessing the sensitivity of earnings in the banking book to interest rate, the Bank applies a parallel
shift of 50bps in interest rate movements.
The table below presents the effect on the banking book earnings arising from a movement in interest rates.
Table 17: Effect on Net Interest Income / Net Profit Income for KAF
Impact on Earnings Based on 50 basis points Parallel Shift
Increase / (Decline) in Earnings
2012 (RM’000)
Increase / (Decline) in Earnings
2011 (RM’000)
Ringgit Malaysia
30,900 / (30,800)
23,062 / (22,849)
Total 30,900 / (30,800)
23,062 / (22,849)
In deriving the above impact, the Bank assumes a static portfolio where no new assets and liabilities are added into the
portfolio. In reality the Bank will initiate proactive measures to mitigate impact of adverse interest rate movements on
net interest income. The projection also assumes all assets and liabilities under the same maturity bucket react in the same
manner to an interest rate movement. All foreign currency transactions are convert to Malaysia Ringgit for financial reporting
purposes, therefore no separate analysis for foreign currency transactions are applied.
112
KAF-Investment Bank Berhad. Annual Report 2012
Basel II Pillar 3 Disclosure
as at 31 May 2012
12.0 OPERATIONAL RISK DISCLOSURES
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, systems or external events
as well as the risk of breaches of applicable laws and regulatory requirements. Therefore the Bank recognizes the importance
of a well-managed banking operation is to cultivate an organizational wide discipline and prudent risk management culture
among its staffs.
Management of the Bank’s Operational risk carried out through the following measures:a) Sound risk management practices in accordance with Basel II and regulatory guidelines;
b) Board and senior management oversight
c) Well defined responsibilities for all personnel concerned
d) Establishment of a risk management culture
Identification of operational risk and the formulation of applicable control measures are regularly carried during the strategic
risk profiling exercise of the Bank. Existing control measures were reviewed and updated to ensure effectiveness; while
obsolete procedures will be replaced.
In determining the regulatory capital requirement for operational risk the Bank adopts the Basic Indicator Approach as
provided under then BNM RWCAF.
The table below indicates the capital requirement for operational risk under the basic indicator approach.
Table 18(a): Minimum Capital Requirement for Operational Risk for KAF
Operational risk
2012
2011
Risk-Weighted
Assets
RM’000
Minimum Capital
Requirement
RM’000
Risk-Weighted
Assets
RM’000
Minimum Capital
Requirement
RM’000
240,421
19,234
240,229
19,218
Table 18(b): Minimum Capital Requirement for Operational Risk for KAF - Islamic Banking Window
Operational risk
2012
2011
Risk-Weighted
Assets
RM’000
Minimum Capital
Requirement
RM’000
Risk-Weighted
Assets
RM’000
Minimum Capital
Requirement
RM’000
80,680
6,454
78,132
6,250