2011-Citibank-Berhad-Annual-Report

CONTENTS

2 Corporate Information 32 Directors’ Report

3 Chairman’s Statement 35 Statement by Directors

4 CEO’s Statement 36 Statutory Declaration

9 Board of Directors 37 Shariah Committee‘s Report

10 Board of Directors - Profile 38 Independent Auditors’ Report

14 Statement of Corporate Governance 39 Statements of Financial Position

19 Risk Management 40 Statements of Comprehensive Income

20 Statement of Internal Audit and 41 Statements of Changes in Equity Internal Control 42 Statements of Cash Flows 21 Management Reports 44 Notes to the Financial Statements 22 Shariah Committee

24 Ratings Statement

25 Awards & Accolades

26 Corporate Citizenship at Citi

29 Valuing Our People CORPORATE INFORMATION

Registered office 45th Floor Menara Citibank 165 Jalan Ampang 50450 Kuala Lumpur

Date of incorporation 22 April 1 994

Auditors KPMG Citibank Berhad l 2011 Annual Report 003

CHAIRMAN’S STATEMENT

It is my pleasure to present the Bank's annual report for the In 2012, the Malaysian Government looks set to continue financial year ending 31 December 2011. I would like to thank focusing on domestic demand and spending to maintain the members of the board and staff of Citibank for their economic growth momentum and rebalance risk in response commitment and support as we further strengthen our to an uncertain global economy. position as a leading financial institution in Malaysia. We can look back on 2011 and be proud of a number of achievements. One significant development is Bank Negara Malaysia’s Guidelines on Responsible Financing. The Guidelines came Our parent company Citigroup reported net income of $11.1 into effect on 1 January to promote prudent, responsible and billion for the full year 2011, an increase of 4% over 2010. It transparent retail financing practices, to ensure the credit was a solid full-year performance despite a very challenging market remains resilient, and to curb household debt. fourth quarter due to depressed global market conditions. Measures include pegging loans to people's disposable net (instead of gross) income and limiting the tenure of car loans. In Asia Pacific, our operational model has weathered tough These measures will likely cause the consumer loans sector times to deliver revenues of over $15 billion and net income slowdown to continue as Malaysians adjust their spending of $4 billion for 2011. Our revenue was up by 5% over 2010 habits on big ticket items such as property and cars. and we remained the largest regional contributor to global revenue outside North America. 2012 marks Citi's 200th anniversary. This milestone is our golden opportunity to further build trust and confidence in In Malaysia, we operated under stable economic conditions Citi's proud legacy and core principles that have stood us in as the fourth quarter of 2011 exceeded our expectations good stead through two centuries. We will continue to drive with 5.2% year-on-year GDP growth. Fiscal spending excellence by being the bank that connects better - bringing provided an effective buffer against the export slowdown people the best ideas and resources anywhere in an and external supply disruptions. Government consumption increasingly dynamic world. This means strengthening client growth accelerated to a 12-year high, private consumption relationships, reducing costs while remaining productive and remained buoyant and fixed investments growth continued efficient, and delivering the earnings that contribute to our to accelerate, driven by private sector and non-financial capital strength. public enterprise capital spending. With our world-class team of employees and the right It is with great sadness that I report we lost one of our controls in place to protect our brand and reputation, I am longest-serving directors of Citibank Berhad, Allahyarham confident we will deliver on our goals. YBhg Dato’ Haji Syed Sidi Idid who passed away in February 2012. Allahyarham joined Citibank Berhad in 2000 and was also the chairman of the Audit Committee and a member of the Risk Management and Nominating Committees. Apart from his outstanding work with Citibank Berhad, he also proudly worked in the civil service of Malaysia. On behalf of Citibank Berhad, we express our deepest sympathies and sincere condolences to Jonathan Christian Larsen YBhg Datin Noorashikin Abdullah and her family. Chairman 004 Citibank Berhad l 2011 Annual Report

CEO’S STATEMENT

Overview capital base as at 31 December 2011. The Bank's net interest In 2011, the Malaysian Government responded to the income was RM1.20 billion in 2011 while non-interest income deteriorating external outlook by supporting domestic demand increased to RM659 million in 2011 from RM573 million in 2010. with fiscal policy, with a renewed focus on consumer spending. Bank Negara Malaysia (BNM) took prudent pre-emptive Business Highlights in 2011 measures to tighten mortgage lending to curb speculative Citibank achieved many business successes in 2011 despite property purchases and risky lending by banks. It also signalled increased competition following the introduction of more BNM’s concerns over the country’s high household debt. New liberalisation measures in the financial industry in 2010 . credit card rules also came into effect for lower-income earners. We continued our relentless drive to implement major The local banking sector demonstrated continued profitability, innovation and campaigns across our different product lines high levels of capitalisation and healthy growth in the loans and financial services that cemented our position as one of sector. Overall, the industry remained relatively unscathed the leading foreign banks in the country. by the global financial crisis and widespread recession due to the strong fundamentals already in place. Citi acted as the joint book runner for the multiple award winning Wakala Global Sukuk issued by Government of The Year in Review Malaysia. With a total issuance size of USD 2.0 billion in two Citibank registered a positive performance in 2011. The Bank’s separate tranches, the Wakala Global Sukuk is the largest strong performance was contributed by high levels of sovereign Sukuk ever issued. capital, liquidity and operating cash flows. Citibank went live on the Malaysian Electronic Payment System For the financial year ended 31 December 2011, the Bank Sdn Bhd (MEPS) network for the first time in February. In registered a pre-tax profit of RM855 million, compared with addition to 1.9 million Citibank and Visa ATMs in over 200 RM834 million achieved the previous year. We focused our countries, customers now enjoy added convenience through initiatives mainly on investing in infrastructure, growing talent access to over 11,000 ATMs nationwide through 20 MEPS and building our brand. member banks covering 2,000 locations nationwide. This completed the process started in 2005 when Citibank Total net income was RM1.89 billion in 2011, a marginal increase became the first foreign bank in Malaysia to gain complete from 2010. The Bank's return on equity before tax decreased to access to the MEPS Interbank GIRO. 22.4% for the financial period ended 31 December 2011 compared with 24.2% in 2010. Our liquidity continues to be We continued to strengthen the Citibank brand reputation exceptionally strong, with cash and short-term funds and for innovation in customer service with the launch of our placements with financial institutions in excess of RM13.5 billion. first state-of-the-art Smart Banking branch, underlining our commitment to customers and its continued investments in The bank's risk weighted capital adequacy ratio stood at a Malaysia. The Citibank Smart Banking branch in Malaysia is comfortable 15.3% (before dividend), based on its audited also Citi’s largest smart banking branch in the region. Citibank Berhad l 2011 Annual Report 005

CEO’S STATEMENT

For more than 50 years, we have retained our position as one of 10 pairs of flight tickets with Premium Flatbeds to Korea. the leading foreign banks in Malaysia by engaging and listening Another 10 members won Sen Heng vouchers worth a total to our customers and bringing unparalleled value to our of RM2,000 while another 10 card members were given Malaysian clients. As a franchise, we strategically leverage on 300,000 AirAsia-Citibank Rewards Points. our global reach, expertise and capabilities to adapt, innovate and provide best-in-class financial solutions and services. We kept the benefits our customers expect as part of the Citibank lifestyle coming, starting with giving a pair of exclusive We retained our leadership positions in credit cards, FX backstage passes each to 4 winners of the Citibank “Meet Options, Government Bond Trading, Securities Clearing & Maroon 5 Backstage” contest. In Johor Baru, 2 customers won Settlement, and Cash Management. We are also amongst the a pair of tickets each to Seoul, Korea as part of the “Citibank top three in the Wealth Management segment. Credit Card JB City Square Shopping Campaign Contest”. We partnered with MPH Group Malaysia to offer exclusive deals to Consumer Banking our customers at the MPH 2011 Carnival. We also collaborated with group-discount website, “I Love Discounts” on the Credit Cards three-month “Big Deals Thursday” campaign aimed at our Citibank Credit Cards maintained its leadership position in customers and Facebook fans. cards usage by enhancing its value proposition in two ways: Launched in conjunction with the year-end holidays and introducing new products in line with the impact of the festivities, Citi’s “Year End Rewards” campaign marked the economic realities on our customers, and improving existing first time Citibank was concurrently present in 9 of the products to help them get more out of their credit card. country’s biggest shopping malls in one campaign. Treats included premium gifts; instant redemption of gifts at Based on customers’ expectations and needs, we increased Citibank booths with discounts of up to 55% at KLCC Suria our value proposition with the introduction of two timely and Queensbay Mall; and shopping, dining and entertainment and relevant market leading products: the Shell Citibank offers at over 1,360 outlets nationwide. Customers with Gold Credit Card and the Giant-Citibank Credit Card. These insufficient Rewards Points could charge the remaining products have been designed to meet our customers’ balance to their credit cards to save on cash towards their increasing price sensitivity and demand for value for money holiday purchases. New customers who signed up during the in their shopping habits. campaign collected their card within an hour of application. They also enjoyed a RM1 50 cash back offer if they signed up With petrol being a compulsory item in most household for Citibank PremierMiles, Platinum, Cash Back Platinum or budgets, our new Shell Citibank Gold Credit Card helped Shell Citibank Gold Credit Card. customers save and stretch their monthly budgets by offering the highest fuel rebate in the market. Malaysian drivers using In recognition of our initiatives and performance in 2011, the card could accumulate up to 8% rebate in savings on Citibank credit cards won 4 awards in the Visa Malaysia Bank Shell fuels and all purchases in Shell Select or Kedai. Awards. Awards included excellence and innovation in launching new Visa products, effective marketing programmes and We targeted the impact of rising food prices with the launch campaigns, highest purchase volume growth for both credit of the Giant-Citibank Credit Card which set new industry and debit products and best Visa programme innovation. benchmarks with the highest rebates for daily grocery purchases in the market. By consolidating their monthly Along with all the business improvements to its customer spend on the Giant-Citibank Credit Card, customers earned value proposition, the entire Cards industry had to adapt to up to 5% rebate on purchases made at Giant stores and up significant changes as a result of new regulatory guidelines to 2% rebate on selected utilities and dining spending. issued by the central bank. Majority of the changes have Additional benefits include exclusive member prices, extra already been implemented, and the business is managing the rebates during special occasions, festive seasons and ne w policy changes while ensuring business growth momentum. store openings; and discounts and privileges at over 40,000 local and global merchant partners’ outlets. Our ongoing leadership position can be attributed to our comprehensive range of payment product suite, innovative Citibank also continued our commitment to building lasting value propositions, compelling promotions and discounts, credit card partnerships with major Malaysian brands. We exemplary service, solid brand, strong and talented people started the year by strengthening our long-running as well as our global and regional presence. partnership with Sen Heng, Malaysia’s leading consumer electrical and electronics retail chain store, with the Sen Retail Banking Heng Double Awards promotion. Through this promotion, In an increasingly competitive market, we have consistently Citibank card customers earned 2 to 3 times the number of stayed one step ahead of our competitors through our Rewards Points which helped them obtain other products unparalleled expertise in and commitment to understanding without spending additional cash. customers’ needs and matching our products to their needs.

In May, we celebrated the third anniversary of the We increased our revenue and client base by double digits, AirAsia-Citibank credit card by presenting 1 0 winners with which helped further strengthen our market share and 006 Citibank Berhad l 2011 Annual Report

CEO’S STATEMENT

ranking in the Wealth Management industry. We remain the Institutional Clients Group market leader for unit trust among the institutional unit trust agents in the country and we continue to take steps to Global Transaction Services enhance our Global Banking capabilities through services including Global View of Accounts (“GVA”) and Citi Global Treasury and Trade Solutions Transfer (“CGT”) in order to continue meeting our clients’ Citi’s corporate clients continued to benefit from the needs in this area. operational efficiency, control and security offered by our cash management platforms and solutions. Momentum remained strong and we leveraged our global network and ongoing In July, Citigroup First Investment Management Ltd. and investment in technology to build and deepen our wallet share HwangDBS Investment Management Bhd. launched the across a broad segment of clients including local corporate, HwangDBS China Select Fund. This first-of-its-kind feeder fund multinational corporations and financial institutions. Citi allowed qualified Malaysian investors who were risk tolerant, continued to play an important role in the drive to migrate to seek capital appreciation and have a long-term investment electronic payment channels, launching new services for horizon, to benefit from the expertise of China’s leading asset SOCSO and Lembaga Hasil Dalam Negeri statutory payments. management company and the growth opportunities of China companies listed locally and globally. The HwangDBS China Citi experienced significant growth in trade financing volume Select Fund was exclusively distributed by Citibank Berhad by facilitating intra-Asia trade for our clients. Citi was able to during the initial offer period from 11 July to 31 July. offer our corporate clients innovative, end-to-end trade solutions which enabled our clients to expand their own sales Our first Smart Banking branch at Menara Citibank redefined network and better manage their working capital cycles. the way we interact with our clients, aligned with our commitment to be at forefront of innovation leveraging new The bank once again won accolades for “Best Foreign Cash technologies to make banking simpler, more informative and Management Bank in Malaysia” by Asiamoney and “Best readily accessible when and where customer need or want it. Domestic Trade Finance Bank” by Euromoney in industry polls The Smart Banking branch is equipped with cutting edge conducted by these publications respectively. facilities such as the Citi Interactive Media Wall that displays a diverse range of information; the Citi Work Bench that Securities Services allows customers to conduct certain banking transactions Citi’s Securities and Fund Services (SFS) experienced strong independently; and Citi video conferencing facility that growth in both Asset Under Custody (AUC) and transaction customers can use to obtain expert opinion from Citibank volumes with improved market condition and various local specialists. We also built a state-of-the-art Citigold centre with 17 mandates won. SFS continued its success in the public sector which saw 2 more significant deals implemented, elevating private consultation rooms and dedicated tellers to exclusively Citi’s standing as the preferred custodian in this category. service the wealth management needs of Citigold clients.

During the year Citi participated actively in the development of Mortgage a number of market initiatives, including the Central Matching Bank Negara’s 2010 introduction of measures to regulate Facility and Securities Borrowing and Lending Negotiated the mortgage industry with new regulations such as Product Transaction program. Transparency guidelines and LTV controls to ensure the mortgage industry stayed relatively healthy, stable and fair. On the client service front, Citi was top-rated in the 2011 Global As the regulators become more conscious about household Custodian Emerging Markets survey. Citi was the only debt, we observe prudent lending guidelines slowly being Malaysian custodian to achieve top scores in all the client introduced to the market. segments (Leading Clients, Cross Border Clients and Domestic Clients) in the survey. In 2011, we continued our strategy to focus on cross-selling of Mortgages into our existing customer base, building Securities and Banking relationship with prime developers, improving the value-added proposition of our mortgage products and sustaining a high Global Markets The markets business continued to deliver strong revenues on performing direct sales force. the back of trade and capital flows in 2011. Market conditions were challenging with the frequent risk-off sentiment In October, we celebrated the first anniversary of “LifeStyle”, a triggered by the unravelling of further contagion with the unique value proposition to our Citibank Home Loan customers European nations. Local conditions fortunately were for the that gives home owners opportunities to save, enjoy, meet, most part unfazed by the European debt episode and with learn, access and manage funds between accounts effectively. BNM continued to hike with a 0.25% increase in the OPR rate. We will continue leveraging on LifeStyle to build customer FX & bond trading revenues enjoyed the lift from significant loyalty, satisfaction and line usage. foreign portfolio inflows into the Malaysian bond markets, but Citibank Berhad l 2011 Annual Report 007

CEO’S STATEMENT

our investment book was affected by further narrowing the • Introduce 540 high school students from Kuala Lumpur interest-carry returns for MYR bonds. The bank continued its and Penang to the basics of stock market and raise their focus on providing innovative, leading-edge solutions to its financial management capabilities along side with clients, both for investments and hedging, resulting in investment knowledge through the Citi Stock Challenge. continued healthy growth in derivatives and structured investments. • Equip low-income families living in poor housing in Kuala Lumpur with practical financial knowledge as part of a Notable progress was made in 2011 on structured credit home improvement initiative led by Habitat for Humanity. investments, namely credit linked notes which saw promising demand from our institutional investor clients. Our People We continued to help customers in various services and Our work would not be possible without the strength of a industries manage commodity, FX and interest rate risks diverse and skilled workforce. Citibank ensures that our through the volatilities and event driven risk that was people are equipped with the support systems needed to evident in much of 2011. Our efforts also entailed affording realise their professional growth, make meaningful unparalleled access to our clients to leverage our unique contributions and develop pride in their work. global footprint and harness the prowess of our network and various product platforms as clients considered Throughout the year, we made good progress on delivering investment opportunities around the globe across various “The Citibanker Differencer” for our employees. The Leadership product classes. Our preeminent position in government Enhancement & Accelerated Development (L.E.A.D) programme bonds and FX services was also reaffirmed by our clients in provided accelerated career development opportunities for 169 industry surveys. top-of-class employees across the board whose performance ranks in the 95th percentile. We hired 14 Management Islamic Banking Division Associates and 27 Graduate Executives as part of our ongoing In 2011, Citi acted as the joint book runner for the multiple goal to attract the very best talent. Both mandatory functional award winning Wakala Global Sukuk issued by Government and technical training was conducted totalling more than of Malaysia. With a total issuance size of USD 2.0 billion in 23,000 training hours for 1,328 employees achieved. two separate tranches, the Wakala Global Sukuk is the largest sovereign Sukuk ever issued. The offering was well subscribed Apart from formal professional development, the success of by investors globally, providing the Government of Malaysia the VOE programmes held throughout the year led to with a diversified and attractive source of funding. improvements across the franchise from 77% to 79%.

For Global Transaction Services, Citi successfully inducted The distinct perspectives of our employees all bring added its first client for its Shariah compliant Custody and Fund value to our clients and customers, and with Citibank’s strong Administration Services. It also successfully completed the tradition of employee volunteerism ensures that our collective implementation of a multi country Shariah compliant cash passion and talents are put to use outside the workplace as well. management solution for a Malaysian financial institution, further complementing the Government’s effort to make Key Business Priorities for 2012 Malaysia an international centre for Islamic Finance by Our key business priorities are as follows: providing critical support infrastructure to its participants. • Ensure diligent risk management practices with continuous Significant Events & Accolades emphasis on asset quality. The bank achieved several ‘firsts’ and a list of accolades, which is mentioned later in this report on page 25. • Focus our investments on driving innovations and relevant value propositions for our customers. The Community We Work and Live In A large aspect of our corporate citizenship in Malaysia • Drive operational efficiencies. focuses on helping consumers build their own financial capability by pairing financial education with access to • Leverage our competitive advantage in global and emerging appropriate products and services so they can save, wisely markets by providing intraregional connectivity through manage their money and weather setbacks. treasury, transactions services and wealth management.

We received an investment in excess of USD200,000 from • Strengthen our leadership positions in credit cards, and the Citi Foundation and worked with partners to: affluent segment.

• Educate 24 million Malaysians through our Stretching • Build our brand strategy to present our company in a Your Ringgit series of financial infomercials on ASTRO. powerful, consistent way and enhance customer delivery, In addition, we expanded this programme to include satisfaction and retention. workshops on basic financial education for over 500 kindergarten children. • Continue to identify, build and develop talent. 008 Citibank Berhad l 2011 Annual Report

CEO’S STATEMENT

Outlook for 2012 Strong domestic demand, increased government spending and major projects will be the growth drivers for Malaysia’s economy this year. This is similar to the last three years where the economy had been driven by domestic demand.

Malaysia has not been spared by global developments, especially those in Europe and the US, but with more than 50% of the country’s trade is with Asia, its export demand has been somewhat sustained. Household debt seems to be a more important factor driving rate decisions, as policymakers reiterate that macro-prudential measures will be ineffective if interest rates are not normalised. While headline inflation is expected to moderate in 2012, there is still upside risks to inflation emerging from supply disruptions as well as higher energy and commodity prices.

Private consumption will be supported by stable employment conditions, income growth and public sector measures. Investment activity will be supported by the domestic-oriented industries, the commodity sector and the public sector.

Citi is well-positioned to seize the opportunities rising from the market trends for our client’s benefit and for the overall Malaysian economy. We will continue to maximise the value we already have – such as our unmatched global presence – and by creating new value through investments in people, technology and services.

Sanjeev Nanavati Chief Executive Officer Citibank Berhad l 2011 Annual Report 009

BOARD OF DIRECTORS

From left to right - Ms. Khairatul Ilyana Kamaruddin (Company Secretary), Ms. Tang Wan Chee (Company Secretary), Mr. Terence Kent Cuddyre, Tan Sri Dato’ Hj Omar B. Ibrahim, Mr. Sanjeev Nanavati, Mr. Jonathan Christian Larsen, Ms. Agnes Liew Yun Chong, Dato’ Siow Kim Lun and Ms. Ho Li Chin (Company Secretary)

010 Citibank Berhad l 2011 Annual Report

Board of Directors - Profile

Mr. Jonathan Larsen is Citi’s Head of Consumer Banking for Before joining Citi, Mr. Larsen was a Principal in the Financial Asia Pacific. Citibank is Asia Pacific's pre-eminent retail bank Services Group of global management consultancy firm Booz, and credit card issuer with over 32 million customer accounts Allen & Hamilton (now Booz & Co). Mr Larsen spent eight years and close to 700 branches in Asia Pacific in 14 countries. with Booz, Allen, advising major financial institutions across Asia, Europe and the United States and was a recipient of the In 2011, Citibank reported revenues in its Asia Pacific Consumer firm’s Professional Excellence Award. Mr. Larsen began his Business of US$8 billion, accounting for close to 25% of Citi’s career at the insurance and banking operations of the National consumer banking revenues globally. Net income was US$1.9 Mutual Group in Australia and New Zealand (now part of AXA). billion, representing over 30% of Citibank’s Consumer Banking net income globally. Mr. Larsen is Chairman of Citibank Berhad in Malaysia and a Director of Citibank Singapore Limited. He has also served as Citibank is the leading financial services brand in Asia. It has a member of the Advisory Board of the National University of industry leading positions in credit cards and personal wealth Singapore Business School. In 2011 Mr Larsen was named by management across the region. Mr Larsen also has oversight The Asian Banker magazine as Retail Banker of the Year for of Citi's Local Commercial Banking business covering the Asia Pacific. small and medium enterprises across Asia Pacific with sales of up to US$500 million. Appointed to his current role in October Mr. Larsen holds a Bachelor of Arts with Honours (First Class) 2009, Mr Larsen is a member of Citi's Asia Pacific Executive from the University of Melbourne where he was awarded the Committee and Citi’s Global Consumer Management Committee. Enid Derham Prize for 1987.

Mr. Larsen joined Citi in 1998 and has held various leadership roles across Asia Pacific. Prior to his current role, Mr Larsen was the Country Head and Citi Country Officer for Singapore and CEO of Citibank Singapore Limited, with oversight of the Institutional Clients Group, Consumer Banking and Global Wealth Management businesses. He assumed this role in September 2008, and concurrently held the position of Product Head for Consumer Banking in the ASEAN region.

Under Mr Larsen’s leadership, Citi was named the Best Bank in Singapore by Euromoney in 2007 and 2009. During his tenure, Citi in Singapore also won the Best Bank Award from The Asset, the Best Foreign Commercial Bank Award from FinanceAsia and the Best Retail Bank Award from The Asian Banker.

He was appointed in April 2005 as the Country Business Manager and CEO for Citibank Singapore Ltd. In this role, he was instrumental in transforming Citibank’s presence from five customer touch points to over 800 and repositioning Citibank as a mainstream retail bank in Singapore. From August 2007, he assumed the additional role of Head of Citi’s Global Consumer Business across South East Asia. Prior to these roles, he was Head of Retail Banking in Asia Pacific and Head of Business Development. In this latter role he led a number of M&A transactions to expand Citi's business in Korea (acquisition of Koram Bank in 2004), China (investment in and strategic alliance with the Shanghai Pudong Development Bank in 2002) and Japan (acquisition of Diners Club Japan, 2000).

Mr. Jonathan Christian Larsen Citibank Berhad l 2011 Annual Report 011

Board of Directors - Profile

Mr. Sanjeev Nanavati was appointed the Bank’s Chief Executive Tan Sri Dato' Hj Omar joined the Bank on 3 May 2000 as an Officer on 5 October 2007. He is responsible for Citi’s retail Independent Non Executive Director. He serves as the Chairman banking, credit cards, corporate banking, investment banking, of the Nominating Committee and the Audit Committee, and a global transaction services, equities, fixed income and treasury member of the Risk Management Committee of the Bank. activities in Malaysia. Prior to this appointment, he was Citi Malaysia’s Country Head for its Institutional Clients Group He is a Non-Executive Director of UEM Group Berhad and UEM since 2005. Builders Berhad and also serves as a Non-Executive Director on the Board of KLCC (Holdings) Sdn Bhd, Cyberview Sdn Bhd, Before moving to Malaysia, he was Managing Director and PNB Commercial Sdn Bhd and Selia Senggara Sdn Bhd. Global Head of Citigroup Depository Receipt Services based in New York and Hong Kong, responsible for all aspects of the He has spent more than three decades serving the government ADR/GDR product offering globally. Mr. Nanavati joined the as a civil engineer in the Public Works Department (PWD) of Citigroup Depository Receipt Services Management team in Malaysia and during this long tenure, he held many positions July 2001 and strategically repositioned the business, creating in the department, culminating in the position of PWD's a differentiated value proposition for clients. Director-General from 1996 to 1999.

Prior to joining Citigroup, he was the Head of Corporate and Tan Sri Dato' Hj Omar has particular expertise in structural Investment Banking for 6 years at one of the largest engineering and water supply engineering, his professional international banks in India and prior to that worked for 12 work experience has been varied though, including design years with a major U.S. bank in M&A and Capital Markets, assignments as well as project management to general working in the United States and Hong Kong. Mr. Nanavati’s management. product experience extends across debt and equity capital markets; M&A and advisory; lending, cash management and He has been the President of The Board of Engineers Malaysia, trade; and more recently securities services. The Malaysian Water Association and Malaysian Structural Steel Association at various times between 1988 and 1999. Mr. Nanavati holds an MBA Degree from Syracuse University in the United States. Tan Sri Dato' Hj Omar holds a Master of Science from the University of Southampton and a Bachelor of Engineering from At present, he is the President for the American Malaysian the University of Malaya. Chamber of Commerce and also a Council member of the Association of Banks in Malaysia. He is a Fellow of the Institution of Engineers Malaysia and a professional engineer registered with the Board of Engineers Malaysia.

Mr. Sanjeev Tan Sri Dato’ Nanavati Hj Omar B. Ibrahim 012 Citibank Berhad l 2011 Annual Report

Board of Directors - Profile

Dato’ Siow Kim Lun Ms. Agnes Liew Yun Chong

Dato’ Siow Kim Lun is currently a board member of Kumpulan Ms. Agnes Liew Yun Chong was appointed as the Bank’s Non Wang Persaraan, UMW Holdings Berhad, W Z Steel Berhad, Eita Independent Non Executive Director on 1 November 2010. She Resources Berhad, Hong Leong Assurance Berhad and is also a member of the Risk Management Committee and MainStreet Advisers Sdn Bhd. He is also a member of the Land Nominating Committee of Citibank Berhad. Public Transport Commission. Ms. Agnes Liew is responsible for the Corporate Bank in Asia From 1993 to 2006, Dato’ Siow was with the Securities Pacific (excluding Japan and India). The Asia Pacific Corporate Commission (SC), where he has served as the Director of its Bank is the coverage organization that delivers the full Issues and Investment Division and the Director of its Market spectrum of product solutions and Citi’s extensive global Supervision Division. He has also served as a member of the network that spans over 100 countries, to institutional clients in Listing Committee of Bursa Malaysia Securities Berhad from Asia, including large public and private corporations. May 2007 to May 2009. Prior to joining the SC, Dato’ Siow has worked in the investment banking and financial services Ms. Agnes Liew joined Citi as a Management Associate in 1982 industry in Malaysia for over 12 years. and during her career with Citi, has held a number of diverse key management positions in Risk and Banking in Asia Pacific. Dato’ Siow holds an MBA from the Catholic University of Between 2000 and 2003, she was the Corporate Bank Head of Leuven, Belgium and a Bachelor of Economics (Hons) from the Singapore. In 2003, she was appointed Country Risk Manager National University of Malaysia. He has also attended the of the Corporate and Investment Bank, Citi Taiwan. She Advanced Management Program at Harvard Business School. subsequently moved into the Regional Risk Management Office in Asia Pacific and assumed the role of Head of Risk, ASEAN, Dato’ Siow has been a director of Citibank Berhad since April Corporate and Investment Bank in 2005. 2007. He is presently the Chairman of the Bank’s Risk Management Committee and a member of the Nominating Between 2007 and 201 0, Ms. Agnes Liew led Global Committee and Audit Committee. Subsidiaries Group in Asia Pacific (excluding Japan) and was responsible for the relationship coverage of global multinational subsidiaries across 16 markets. Under her leadership, the Global Subsidiaries Group in Asia has grown to be a significant pillar of the Global Banking franchise. During that time, she was also the Global Banking Head of ASEAN (ex Singapore), responsible for the relationship coverage of large corporate clients, including financial institutions.

Ms. Agnes Liew holds an LL.B (Hons) from the University of Singapore and is a member of the Supreme Court of Singapore. Citibank Berhadberhad l 2011 Annual Report 013

Board of Directors - Profile

Mr. Terence Cuddyre joined the Bank on 14 December 201 0 as a Non Independent Non Executive Director. He serves on the Audit Committee and Risk Management Committee of the Bank.

He is currently Citigroup Country Officer for Brunei, a position which he assumed on 1 July 2009 and cluster head for Bangladesh, Sri Lanka and Brunei. Prior to that, he spent 4 years as the Head of Training for the Asia Pacific region (Citi Centre for Advanced Learning). He has also served as Citigroup Country Officer for Thailand (2002 – 2005) and was North Asia Regional Risk Officer (2000 – 2001 ).

Mr. Cuddyre joined Citigroup in 2000 after 23 years with Bank of America. He held numerous international roles including Country Head of Ireland, Korea, Hong Kong and China. He also held several risk position in North America and Asia.

He has also been active in the American Chamber of Commerce, serving on the boards in Hong Kong, Korea and China. In Thailand, he served as Chairman.

Mr. Cuddyre holds a B.A. in Economics from University of California, Santa Barbara and a MBA from the Wharton Business School, University of Pennsylvania.

Mr. Terence Kent Cuddyre 014 Citibank Berhad l 2011 Annual Report

Statement of Corporate Governance

Statement of Corporate Governance Roles and Responsibilities The proceedings of all Board meetings are also taken down as necessary authority to carry out its work, internal audit f. Assist the Board in developing criteria to identify and Risk Management Committee e. Periodically review management reports on risk exposure, Number of Meetings Number of Meetings The Bank aspires to achieve the highest standards in ethical The primary responsibility of the Board of Directors is to official minutes and such minutes are later circulated for the findings as well as recommend action to be taken by select qualified individuals who may be nominated for Composition and Frequency of Meetings risk portfolio, composition and other risk management Name of Audit Committee Member Held Attended Name of Nominating Committee Member Held Attended conduct by delivering our promise to clients, reporting our provide effective governance in terms of the Bank's affairs for Directors' perusal prior to confirmation during the following management, whenever necessary. The reports of internal election to the Board, which shall reflect, at a minimum, all activities. Tan Sri Dato’Hj Omar B. Ibrahim (Chairman) auditors and the Audit Committee should not be subject to Tan Sri Dato’Hj Omar B. Ibrahim (Chairman) 2 2 financial results accurately and transparently and maintaining the benefit of all shareholders and also to balance the interests meetings. applicable laws, rules and governing regulations. This The Risk Management Committee was established in 2006. of different constituencies such as customers, employees, (Appointed as Chairman of Audit Committee the clearance of the Board of Directors. Mr. Jonathan Christian Larsen 2 2 includes assessing directors for re-appointment before an f. Review periodically with management, including full compliance with all laws, rules and regulations governing on 1 March 2012) 5 5 the Bank's business operations. suppliers and the local community. The attendance record for each of the Board member for the Mr Sanjeev Nanavati 2 2 application for approval is submitted to BNM. The actual The attendance record for each Risk Management Committee independent Risk Officer, Head of Compliance and Legal Dato’ Siow Kim Lun 5 5 f. Evaluate appointment, performance and provide appraisal Counsel, any correspondence(s) with or action by, financial year ended 31 December 2011 is as shown below: Dato’ Siow Kim Lun 2 2 decision as to who shall be nominated should be the member for the financial year ended 31 December 2011 is as Among other things, the Board also reviews and approves Mr. Terence Kent Cuddyre and feedback on the remuneration package offered to the regulators or governmental agencies, any material legal The Bank has also taken the necessary steps to ensure Ms. Agnes Liew Yun Chong 2 2 responsibility of the full Board. shown below: the Bank's strategic business plans annually, oversees the (Appointed as Audit Committee member on 1 March 2011) 4* 3 chief internal auditor. affairs of the Bank and the Bank’s compliance with conformity with Bank Negara Malaysia's (BNM) Guidelines Dato’ Syed Sidi Idid B. Syed Abdullah Idid management of the business and monitors the Bank's actual Number of Board Meetings Mr. Jonathan Christian Larsen (Deceased on 2 February 2012) 2 2 applicable laws and regulations. on Corporate Governance for Licensed Institutions (Revised (Resigned as Audit Committee member g. Recommend to the Board qualified individuals to become Number of Meetings performance against projections. Name of Director Held Attended g. Leverage on the Bank’s performance management and BNM/GP1). on 28 February 2012) 5 5 members of the Board. Name of Risk Management Committee Member Held Attended Mr. Jonathan Christian Larsen 6 6 talent inventory development process in overseeing the g. Report regularly to the Board on the Committee’s activities. Dato’ Syed Sidi Idid B. Syed Abdullah Idid The constitution of the Nominating Committee comprises four The Board also ensures that the infrastructure, internal controls performance evaluation of the internal auditors. Dato’ Siow Kim Lun (Chairman) 4 4 Mr. Sanjeev Nanavati 6 6 (Deceased on 2 February 2012) 5 4 non-executive directors and one executive director. h. Review and recommend periodically to the Board, the Board Composition and risk management processes within the Bank remain robust Tan Sri Dato’Hj Omar B. Ibrahim 4 4 h. Review annually and report to the Board on its own Tan Sri Dato' Hj Omar B. Ibrahim 6 6 compensation structure for non-executive directors. h. Review with the external auditors, the scope of their The Board comprises six members. and are implemented in a consistent and timely manner. * Reflects the number of meetings held during the time the Director held office Ms. Agnes Liew Yun Chong 4 3 performance. Dato’ Siow Kim Lun 6 6 audit plan, internal accounting controls, audit reports, Terms of Reference Ms. Agnes Liew Yun Chong 6 4 assistance given by the management and its staff to the The Board has approved the terms of reference for the i. Recommend to the Board the removal of a director/CEO Mr. Terence Kent Cuddyre The following is the board line-up: In addition, the Board carries out various other functions and All the Audit Committee members are non-executive directors (Appointed as Audit Committee member i. Review and assess the adequacy of its charter annually and Nominating Committee. from the Board/Management, if the director/CEO is responsibilities as stipulated in the guidelines and directives Mr. Terence Kent Cuddyre 6 6 of the Bank. auditors as well as their findings and recommended on 1 March 2011) 3* 3 recommend any proposed changes to the Board for action(s) to be taken. Select and recommend external ineffective, errant and negligent in discharging his approval. issued by BNM from time to time. Dato' Syed Sidi Idid B. Syed Abdullah Idid Dato’ Syed Sidi Idid B. Syed Abdullah Idid • Mr. Jonathan Christian Larsen The main objective of the Nominating Committee is to provide responsibilities. (Deceased on 2 February 2012) 6 5 auditors for appointment by the Board annually. (Deceased on 2 February 2012) 4 3 Non-Independent Non-Executive Director/Chairman Terms of Reference a formal and transparent procedure for the appointment of In relation to the requirements stated under the revised The Board has approved the terms of reference for the Audit i. Discuss problems and reservations arising from the directors as well as assessing the effectiveness of individual j. Assess annually the effectiveness of the Board as a whole BNM/GP1, the Bank has submitted an application to BNM for Committee. * Reflects the number of meetings held during the time the Director held office • Mr. Sanjeev Nanavati deviation of Principle 10 (shareholders should be entirely Board Committees interim and final external audits, including any matters the directors, the Board as a whole and also the performance of in meeting its responsibilities and the contribution of each Non-Independent Executive Director/Chief Executive Officer The Board of Directors established several ‘Board Committees’ external auditors may wish to deliberate (in the absence of the CEO along with other key senior management staff. director to the effectiveness of the Board, contribution of independent of the management and that the CEO should The main objective of the Audit Committee is to review the All the Risk Management Committee members are to assist them in the overall management and supervision of management, where necessary). the Board’s various committees and the performance of derive authority only from the Board) and Principle 12 (regular financial position of Citibank Berhad, its internal controls, non-executive directors of the Bank. • Tan Sri Dato' Hj Omar B. Ibrahim the Bank's business operations. The Nominating Committee’s main responsibilities are as the CEO. communication to be held with shareholders). performance and findings of the internal and external auditors j. Review external auditor’s letter to management and the follows: Independent Non-Executive Director as well as to recommend appropriate remedial action (if Terms of Reference latter’s response to the same. On 3 May 2006, BNM approved the Bank’s official request for The committee members shall be appointed by the Board upon necessary). k. Report annually to the Board with an assessment of the The Board has approved the terms of reference for the Risk a. Review and assess the adequacy of the Bank’s Code of • Dato' Siow Kim Lun the above-mentioned deviations. recommendation of the Nominating Committee. Board’s performance and such assessment is conducted Management Committee. k. Review related party transactions and identify any Conduct and other internal policies and guidelines and Independent Non-Executive Director The Audit Committee's main responsibilities are as follows: based on an objective performance criteria. Such As the Bank falls under the global structure of Citi, the Board potential conflict of interest situation(s) that may arise monitor that the principles described therein are being Each committee has its own written charter, clearly outlining performance criteria to be approved by the full Board. The main objective of the Risk Management Committee is to also ensures that the Bank adopts applicable Citi policies in within the Bank including any transactions, procedure or incorporated into the Bank’s culture and business practices. the mission and responsibilities of the respective committee as a. Ensure that the financial accounts are prepared in a timely • Ms. Agnes Liew Yun Chong course of conduct which questions the integrity of the oversee the senior management’s activities in managing relation to credit approval processes and operational manuals. and accurate manner with frequent reviews on the l. Leveraging on the Bank’s Performance Management and Non-Independent Non-Executive Director well as well-defined terms of reference approved by the Board. management. b. Establish minimum requirements for the Board, i.e. credit, market, liquidity, operational, legal and other risk(s) adequacy of provisions for contingencies, and bad and Talent Inventory development process in overseeing the while ensuring proper risk management process is properly in As a mean to ensure the Bank has a beneficial influence on required mix of skills, experience, qualification and other doubtful debts. appointment, management succession planning and place and functioning well. • Mr. Terence Kent Cuddyre the economy of the local community, the Directors have a Pursuant to the revised BNM/GP1 guideline, the Board is also l. Review resignation letters from the external auditors of core competencies required of a director. The Committee is performance evaluation of key senior management staff, Non-Independent Non-Executive Director continuous responsibility to provide banking services and required to establish the following additional committees Citibank Berhad. also responsible for establishing minimum requirements b. Review the balance sheet and profit and loss account for except that (as recommended by Bank Negara Malaysia) facilities that are conducive to a well-balanced economic growth. besides the existing Audit Committee then: for the CEO. The requirements and criteria should be The Risk Management Committee’s main responsibilities are as submission to the Board of Directors and ensure the the Committee shall play an active role in reviewing and The individual profiles of the above mentioned directors are m. Select external auditors to be appointed by the Board, approved by the full Board. follows: prompt publication of annual accounts. recommending the nominees for the position of Chief set out on pages 1 0 to 13 of this report. Frequency and Conduct of • Nominating Committee unless otherwise advised (such as not suitable for re-appointment supported by valid justifications/grounds). Executive Officer, Chief Financial Officer and Chief Risk a. Ratify the adoption of Citi risk management strategies, Board Meetings and Attendance c. Review the annual financial statements before submission c. Review the appropriateness of the size of the Board • Remuneration Committee relative to its various responsibilities. Review the overall Officer. policies, and risk tolerance; and recommend the same for The composition of the Bank's Board of Directors is in The Board of Directors meet at least six times a year in order to the Board, focusing on: n. Review any external expert’s terms and scope of composition of the Board, taking into consideration factors the Board’s approval. compliance with the Revised BNM/GP1, which requires at least to effectively discharge their duties as well as to comply with • Risk Management Committee engagement, working arrangement with the internal such as business experience and specific areas of expertise m. Assess annually to ensure the directors and key senior one-third of the board members to be independent directors. the revised BNM/GP1 guideline requirements. 1. Compliance with accounting standards and other legal requirements auditors and reporting requirements to ensure these are of each Board member and make recommendations to the management staff are not disqualified under section 56 of b. Discuss with Management the Bank’s major credit, market, The Bank has since set up the Nominating Committee and Risk clearly established. Board as necessary. the Banking and Financial Institution Act 1989 (BAFIA). liquidity and operational risk exposures and steps that the The presence of three non-independent non-executive During Board meetings, the Directors are provided with an Management Committee. 2. Changes in accounting policies and practices Management has taken to monitor and control such directors and two independent non-executive directors agenda, papers on the Bank's most recent financial o. Leverage on the oversight provided by Regional d. Review and assess that the directors do not have any n. Plan and ensure all directors receive appropriate and exposures, including the Bank’s risk assessment and risk enables the Bank to view all relevant issues objectively and in performance, risk management reports, budgets, new business 3. Significant issues and unusual events arising from the Compliance Control or engage any external party to directorship(s) which could potentially result in conflict of continuous training program in order to keep abreast with management policies. a balanced manner. This further enhances the accountability initiatives or product launches, Board committees meetings' The Bank submitted an application to BNM for a waiver from audit perform assessment on the continuing effectiveness of interest(s). the latest developments in the industry. of the decision making process within Citibank Berhad. minutes and updates on industry regulations or policy establishing the Remuneration Committee. On 3 May 2006, the internal audit function c. Assess the adequacy of risk management policies and changes. The Board also receives business presentations on BNM granted the Bank approval on the above application. 4. Going concern assumption e. Recommend to the Board the number of committees topical matters, subject to such requests. o. Conduct an annual review of the Committee’s performance framework in identifying, measuring, monitoring and The presence of the non-executive directors is also beneficial Nominating Committee required, identify their respective responsibilities, propose 5. Major judgemental areas and report the results to the Board periodically, assess the controlling risks and the extent to which these are as it provides room for new perspectives and ideas that could Audit Committee The Board meeting agenda and papers are distributed to all Composition and Frequency of Meetings a suitable Chairperson as well as suggest ordinary adequacy of its charter and recommend changes to the operating effectively. help improve the effectiveness and efficiency of the Board on Composition and Frequency of Meetings Directors prior to the scheduled meetings so as to grant them d. Conduct a complete review prior to publishing the annual members for the different committees. This includes Board as needed. the whole. sufficient time to review all materials/issues that will be report to ensure compliance with regulatory requirements. The Nominating Committee was established in 2006. advising the Board on committee member appointments d. Ensure appropriate infrastructure, resources and systems discussed during the actual meeting. This procedure goes a The Audit Committee was established in 1994. and removal of such members from the relevant p. Report regularly to the Board on the Committee’s activities. are in place for actual risk management implementation, The revised BNM/GP1 guideline stipulates the need for a long way in ensuring that all Board meeting discussions as well e. Review the effectiveness of internal controls, including the The attendance record for each Nominating Committee committees or from the Board, rotation of the committee i.e. ensure staff responsible for implementing the risk maximum of one Executive Director in the Bank's Board of as decisions made/taken, are meaningful and based on The attendance record for each Audit Committee member for scope of the internal audit programme, its role, resources member for the financial year ended 31 December 2011 is as members and Chairperson as well as proposals on q. Perform any other duties and responsibilities expressly management system perform their duties independently Directors line-up. accurate facts and figures. the financial year ended 31 December 2011 is as shown below: of the internal audit functions and ensure it has the shown below: individual committee structures and operations. delegated to the Committee by the Board from time to time. of the Bank’s risk taking activities. Citibank Berhad l 2011 Annual Report 015

Statement of Corporate Governance

Risk Management

Please refer to Pillar 3 disclosure. 020 Citibank Berhad l 2011 Annual Report

Statement of Internal Audit and Internal Control

Citibank Berhad's Board of Directors is responsible to Liability Committee, Country Legal and Compliance Committee establish and maintain adequate internal control over and Management Committee as part of its monitoring function financial reporting standards and related issues. to ensure effective management and supervision of the areas under the respective Committee's purview. The Bank's internal control system is designed to provide reasonable assurance to the company's management and Citibank Berhad has also adopted the Citi Code of Conduct Board of Directors regarding the preparation and fair which expresses the values that each employee is expected presentation of published financial statements in to appreciate and apply in their respective working life. accordance with the provisions under the Companies Act 1965 and other applicable approved standards in Malaysia. Ethics hotlines are made available to employees who wish to voice concerns about suspected violations of law or industry All internal control systems no matter how well designed regulation as well as actions that may fail to live up to the and implemented have inherent limitations. Bank's high standards of ethical conduct.

In view of the limitations, therefore, even the best of systems The Bank has an internal policy prohibiting retaliatory actions determined to be effective can only provide a reasonable against any individual for raising legitimate concerns or assurance in relation to the preparation and presentation of questions regarding ethical matters, or for reporting suspected financial statements. violations.

A comprehensive system of controls is maintained to ensure that all transactions are executed in accordance with the management's authorization, assets are safeguarded and that the financial records are reliable.

The management also takes relevant steps to see that information and communication flows are effective and monitor the performance of internal control procedures.

Citibank Berhad's risk management policies, procedures and practices set out the foundation to the risk architecture governing its business activities.

The management conducts business monitoring initiatives and periodic self-assessment in accordance with the Risk and Control Self-Assessment/Operational Risk policy for all applicable businesses.

Control system weaknesses resulting in corrective actions will be documented and escalated to the management for tracking purposes.

Citibank Berhad's Internal Audit reports to the Audit Committee. It performs regular reviews of the business processes to assess the effectiveness of the control environment and highlights significant risks affecting the company.

The scope of the audit activities are reviewed and endorsed by the Audit Committee while audits are carried out on a risk-based approach, to provide an independent and objective report on operational and management activities.

The Audit Committee regularly reviews and deliberates with management on the actions taken on internal control issues identified in reports prepared by Internal Audit, the external auditors, regulatory authorities and the management themselves.

The management of Citibank Berhad has also set up a Country Coordinating Committee, Business Risk Compliance and Control Committee, Legal Vehicle Committee, Ass et and Citibank Berhad l 2011 Annual Report 021

Management Reports

The pre-set agenda, management reports and other ad-hoc proposals or applications are circulated to the Directors prior to the actual Board meetings.

This enables the Board of Directors to assess the overall performance of the Bank and make sound management decisions.

Management reports presented to the Board comprise the following:

Economic Updates

Business Plans

Year to date Financial Performance Report

Financial performance by major business segments

Quarterly Performance Scorecard

Comparative analysis of banks

Semi-annual BNM Stress Tests Results

Credit Risk Management Report

Liquidity & Market Risk Management Report

Quarterly Derivative Outstanding Report

Minutes of Audit Committee meetings

Minutes of Risk Management Committee meetings

Minutes of Nominating Committee meetings

Minutes of Shariah Committee meetings 022 Citibank Berhad l 2011 Annual Report

Shariah Committee

Citibank Berhad's Shariah Committee is responsible for the Al-Hadith, capital adequacy standard for Islamic Banks, and the provision of Shariah oversight in relation to Citibank Berhad’s workings of monetary policy in a dual banking system. Islamic Banking business operations and activities. He holds a Ph.D from the University of Southampton, England. For the year 2011, the Shariah Committee met nine times. Additionally, individual Shariah Committee members participated in various business discussions where Shariah advice was Professor Dr. Norhashimah Mohd Yasin required prior to full submission to the Shariah Committee. Dr. Norhashimah Mohd Yasin is a Professor of Comparative Banking Law at the Civil Law department, Ahmad Ibrahim During the year, the Shariah Committee was expanded to 5 Kulliyah of Law, International Islamic University of Malaysia. members in order to comply with the requirement of Bank Negara Malaysia’s new Shariah Governance Framework for She regularly lectures, researches and presents papers at local Islamic Financial Institutions. The Shariah Committee also and international seminars and conferences on the areas of approved a new Shariah Control Manual in order to incorporate Islamic Banking, Islamic insurance (Takaful), money laundering additional requirements of the new framework for Shariah and terrorism financing. governance. She has published articles in national and international With regards to Shariah compliance review, Citibank Berhad’s journals. Her articles on Islamic Banking have also appeared in Islamic Banking Division was subjected to a full Shariah audit a book edited by Dato’ Syed Idid called Judicial Decisions conducted jointly by Citibank Berhad s Country Compliance ’ Affecting Bankers and Financiers (published by the Malayan Law and Control unit together with the Citi’s Global Islamic Control Journal). She is the author of two books, Legal Aspects of Money unit. The Shariah Committee reviewed the findings of the Laundering from the Common Law Perspective (published in Shariah audit and was satisfied with the report and its findings. No major compliance issues were identified. 2007 by LexisNexis) and Islamisation/Malaynisation: The Role of Islamic Law in the Economic Development of Malaysia (published Citibank Berhad’s Shariah Committee effective from 1 June in 1996 by A.S. Noordeen). She is a contributing editor of the 2011 included the following distinguished members: Annotated Statute on Anti-Money Laundering and Anti-Terrorism Financing Act 2001 and the Takaful Act 1984. Professor Dr. Abdul Ghafar Ismail/Chairman Dr. Abd Ghafar Ismail has been a Professor in the Banking and She is a member of the Advocates and Solicitors Disciplinary Finance faculty of Universiti Kebangsaan Malaysia (UKM) since Board and also sits on the Board of Trustees for Yayasan 2003. He is currently the Head of the Research Center for Asnita, a Non Governmental Organisation. She also conducts Islamic Economics and Finance and AmBank Group Resident training for Bank Negara Malaysia, Labuan Financial Services Fellow for Perdana Leadership Foundation. Authority, commercial banks, developing financial institutions,

insurance companies and legal firms in Malaysia and Brunei A lecturer since 1987, he has vast experience in teaching Darussalam. Islamic economics courses such as Islamic banking; risk management in Islamic banking; financial economics; advanced macroeconomics; money, Zakat and real economy; money and Professor Dr. Norhashimah holds a Ph.D in Law from the capital market in Islam; Islamic economic system; Islamic University of Warwick, England, and is a qualified Advocate and economic analysis; and deposits and the financing operations Solicitor of the High Court of Malaysia. She is also a certified of Islamic banking institutions. legal translator.

His work has been extensively published in several referred Associate Professor Dr. Shofian bin Ahmad journals, among others, Review of Islamic Economics, Journal Dr. Shofian bin Ahmad is currently an Associate Professor with of Islamic Economics, Banking and Finance, Humanomics, the Shariah Department at Universiti Kebangsaan Malaysia “International Journal of Islamic and Middle Eastern Finance (UKM) where he specialises in Islamic transactions (Muamalat) and Management”, “Journal of Financial Services Marketing”, and the Islamic economy. He is the Head of the Department of “International Research Journal of Finance and Economics” and Shariah at the Faculty of Islamic Studies and has served in “Qualitative Research in Financial Markets”. His most recent book is Money, Islamic Banks and Real Economy, published by Cengage various administrative positions at the faculty since 1994. Learning. He supervises Ph.D. and Masters candidates at UKM and His papers have been presented in many international and conducts doctoral and Masters level thesis assessments. He is local conferences including the International Seminar on also actively involved in research and is a Research Fellow at Islamic Economics and Finance, IRTI International Conference UKM’s Institut Kajian Rantau Asia Barat. He is also extensively and Malaysia Finance Association Conference. involved in publications as an article assessor for several academic journals. Professor Dr. Abdul Ghafar Ismail’s research interests include the learning process and growth theory, inter-temporal Associate Professor Dr. Shofian holds a Ph.D in Shariah and allocation of resources, learning economics from Al-Quran and Law from the University of Malaya, Kuala Lumpur.

Citibank Berhad l 2011 Annual Report 023

Shariah Committee

Mat Noor Mat Zain regular speaker for “Renungan”, a religious programme that Mat Noor Mat Zain is a member of the Citibank Berhad’s airs on THR Gegar radio. Shariah Committee where he has contributed his specialist knowledge of Fiqh Muamalah, Islamic contract law and Islamic Fluent in Arabic, Nik Abdul Rahim bin Nik Abdul Ghani holds a family law and extensive research experience in the area of Masters Degree in Shariah from UKM and a B.A (Hons) in Islamic finance since May 2011. He is also a consultant for the Shariah from the Islamic University of Medina, Saudi Arabia. He Pakarunding initiative at Universiti Kebangsaan Malaysia is currently a doctoral candidate in the field of Islamic Finance (UKM) and an expert consultant for the Malaysian at INCEIF. Government’s JAWHAR programmes related to the provision of Fidyah and Kafarah manuals.

He has presented numerous papers related to Islamic Banking and finance at both domestic and international levels and has been appointed consulting editor for The Journal Of Muamalat And Islamic Finance Research published by the Islamic Science University of Malaysia.

In addition to his consulting and editorial work, he is a lecturer at the Department of Shariah at UKM’s Faculty of Islamic Studies. He teaches several courses related to Muamalah and Islamic jurisprudence including “Fiqh Muamalat”, “Islamic Finance”, and “The Principles of Islamic Jurisprudence”.

He has a Bachelor’s degree in Shariah Studies from the Islamic University of Medina, Saudi Arabia as well as a Masters in Islamic Studies (specialising in Muamalat) from the Faculty of Islamic Studies at UKM. He is currently pursuing his studies in the field of Islamic Contracts and is researching topics including “Instruments of Islamic Hedging” and “Terms and Conditions in Standard Form Contracts”.

Nik Abdul Rahim bin Nik Abdul Ghani Nik Abdul Rahim Nik Abdul Ghani is a lecturer and former tutor at Universiti Kebangsaan Malaysia (UKM)’s Department of Shariah at the Faculty of Islamic Studies. He is an expert consultant and speaker for the UKM’s Centre for Islam and UKM’s Islamic law-related training programmes. He is also a member of the committee of Klinik Hukum Syarak and Guaman Syarie, Department of Shariah.

He is a member of the Research Center for Islamic Economics and Finance and has written in-depth research papers and articles on Shariah issues arising in Islamic Banking and finance. He is a published author featured in national and international journals, seminar proceedings and books. His most recent article, “Maslahah as a Source of Islamic Transactions (Muamalat)” has been recently published in UKM’s Journal of Islamiyyat. He has written books on Islamic teaching and motivation and is a regular columnist for the popular magazine “SOLUSI” by Telaga Biru for which he writes the “Maqasid Syariah” (Objectives of Islamic Law) column.

Apart from teaching, research and writing, he is actively involved in religious and academic activities, especially those related to economics and Islamic law, He participates in seminars and discussions conducted by Government agencies and Non Governmental Organisations (NGOs), gives religious speeches in the state of Selangor and appears on religious television programmes by major Malaysian broadcast networks including RTM, Media Prima and ASTRO. He is also a 024 Citibank Berhad l 2011 Annual Report

Ratings Statement

RAM Rating Services Berhad (RAM) has, on 13 February 2012, reaffirmed Citibank Berhad’s respective long and short term financial institution ratings of AAA and P1 with an outlook on the long term ratings remaining stable.

Citibank Berhad’s ratings are premised on its entrenched market position in the consumer banking arena, strong funding and liquidity profile, sturdy profitability, and healthy capitalization.

Bank Rating Symbols and Definitions:

AAA A financial institution rated AAA has a superior capacity to meet its financial obligations. This is the highest long-term FIR assigned by RAM Ratings.

P1 A financial institution rated P1 has a strong capacity to meet its short-term financial obligations. This is the highest short-term FIR assigned by RAM Ratings. Citibank Berhad l 2011 Annual Report 025

Awards and Accolades

The following is a list of accolades received by the Bank throughout 2011:

Banking & Payments Asia Trailblazer Awards 2011 Product Excellence Awards (Citibank Premier Miles Credit Card)

Trade Finance Best International Trade Bank in Malaysia (Highly Commended)

Readers’ Digest Readers’ Digest Trusted Brands Award (Cards)

Visa Malaysia Bank Awards 2011 Largest Payment Volume – Visa Consumer Credit Largest Payment Volume – Visa Platinum Highest Purchase Volume Growth – Visa Platinum Highest Purchase Volume Growth – Visa Super Premium

Asiamoney Cash Management Poll Best Foreign Cash Management Bank for Small Corporates Best Foreign Cash Management Bank for Medium Corporates Best Foreign Cash Management Bank for Large Corporates

Asiamoney FX Poll Best for Overall FX Services Best for Innovative FX Products & Structured Ideas Best FX Prime Broking Services Best Single-Bank Electronic Trading Platform

Contact Centre Association of Malaysia & Frost & Sullivan Best People Contact Centre (Gold Award) Best Contact Centre Professional (CPO Aria Putera Kamal) Best In-House Inbound Contact Centre above 1 00 seats (Silver Award)

Euromoney Trade Finance Survey Best Domestic Trade Finance Provider (Malaysia)

2011 Global Custodian Agent Banks in Emerging Markets Survey Top Rated in all 3 client segments (Leading, Cross-Border/Non-Affiliated and Domestic)

Islamic Finance News Award 2011 Malaysia Deal of The Year- Wakalah Global Sukuk Sovereign Deal of The Year-Wakalah Global Sukuk

IFR Asia Islamic Deal of The Year Award 2011

Finance Asia Finance Asia’s Best Islamic Financing Award 2011 026 Citibank Berhad l 2011 Annual Report

Corporate Citizenship at Citi

Managing money and using financial services can be complex and confusing for the average person because people have different financial priorities at different stages of their lives. Nevertheless, financial planning is essential for people who wish to remain financially stable and to build their assets.

As a long-established advocate and practitioner of financial capability programmes, Citibank Berhad’s priorities balance the interests of our stakeholders with the risks and opportunities that affect our business. We continually engage with our stakeholders to keep abreast with their changing needs while keeping a constant watch on local and global economic conditions and concerns. We also collaborate with local partners to design relevant, timely and actionable programmes that offer support and accountability for consumers working towards their financial goals.

In 2011, Citibank Malaysia received a philanthropic investment of US$210,000 from Citi Foundation to continue our efforts to provide free financial education for Malaysians. Our financial education programmes enable Malaysians to make the right financial decisions and develop effective financial habits to maintain and improve their standard of living and the future of their families in the face of rising costs of living.

Stretching Your Ringgit (Season 3)

In 2009, Citi launched our flagship financial education programme, ‘Stretching Your Ringgit’ in collaboration with ERA Consumer Malaysia, “Stretching Your Ringgit is a series of financial infomercials aired on national TV and radio stations which is now in its fourth season.

2011 saw the third season of ‘Stretching Your Ringgit’ focusing on strengthening consumer financial literacy in line with the current global and national economic realities of rising costs of living in relation to stagnated incomes. It covered the basics of smart money management which audiences of previous years identified as priorities. This year’s programme also expanded beyond the media A series of financial infomercials was aired on ASTRO campaign to include two additional components aimed at television stations. Topics included Making do in-between reaching the younger generation. One component was the Paychecks, Household Budgeting, Other pilot run of the “My First Ringgit” workshops which provided Ways to Earn and financial education classes for 598 kindergarten children. Retirement Planning. After the workshops, the kindergarten teachers facilitated These episodes were conversations with parents to gauge improvements in their aired for a total of children’s financial behaviour. The post survey showed a 122 times across 40.5% increase in children's ability to demonstrate basic eight major channels financial knowledge. 31% of parents also reported an example from August to the of their children's improved financial behaviour such as the end of October to willingness to start saving. coincide with two festivals - Ramadhan The second component was aimed at young workers. ERA leading up to Hari conducted a baseline survey targeted at 1,002 young working Raya and Deepavali. The radio infomercials covering Educating adults to gain insight into the current status of financial literacy Children About Money, Keeping Credit in Check and Making and behaviour which may lead them into bankruptcy. The Your Financial Plan were also broadcasted for a total of 164 survey results enabled stakeholders to identify opportunities times on three ASTRO radio channels. In total, ‘Stretching Your and develop financial literacy programmes targeted at this Ringgit’ reached nearly 24 million Malaysians in 2011. segment. These programmes will be implemented in 2012.

A pre and post evaluation survey was conducted. On average, the The survey data showed that many young workers were making survey showed an increase of 27.3% in participants’ recognition choices that led them into financial problems. Some of the key of the importance of, intent to take action, or positive findings from the survey indicated that 30% of the respondents behavioural change related to the 4 financial topics. Focus group did not save regularly, 70% of the respondents could only discussions were conducted in several states in Peninsular sustain for 4 months with their savings if they had to stop Malaysia and participants agreed on the importance of financial working, 37% never thought of retirement, more than 50% of education and improving their financial knowledge. The issues the respondents are not familiar with Credit Counselling and varied according to demographic groups. For housewives, their Debt Management Agency (AKPK), Central Bank’s website, and priority was inculcating financial literacy in their children. Young the Financial Mediation Bureau, 47% of the respondents can be workers, on the other hand, worry about the increase in debt and considered as in serious debt and only 11% of the respondents have admitted to spending beyond their means. acquired financial knowledge from the education system. Citibank Berhad l 2011 Annual Report 027

Corporate Citizenship at Citi

Citi Stock Challenge

The Citi Stock Challenge programme is designed to introduce high school students in Malaysia to stock market fundamentals and to increase their financial literacy and investment knowledge. Every year, the Citi Stock Challenge provides hundreds of 16-year-old students with a golden opportunity to role-play as stockbrokers after learning the fundamentals of trading, market trends, and taking positions on counters. Teams of students form ‘brokerage houses’ which use RM1,000 in ‘seed money’ to trade in a simulated stock market comprising 20 stocks in the energy, manufacturing, trade, communications and hospitality sectors.

Sekolah Menengah Kebangsaan Pusat Bandar Puchong from Kuala Lumpur, and Chung Ling High School and Sekolah Menengah Jenis Kebangsaan Convent Datuk Keramat from Penang emerged as the winners of the annual Citi Stock Challenge 2011. The three winning teams out-invested 33 schools and 540 students who participated in this year’s six-day programme held in Kuala Lumpur and Penang.

70% of the 250 students surveyed through the pre and post surveys demonstrated a significant increase in skills and knowledge on how a company operates and provides shares for public purchase, how stock prices change, the impact of news events and business trends on stock prices and the ability to analyse and interpret information when making investment decisions.

Since the launch of Citi Stock Challenge in 2004, over 2,000 students from all over Malaysia have taken part in this challenge. The programme partner was Learning Society, a local non-profit organisation that promotes active learning. We would also like to thank American Chamber of Commerce for assisting us in the enrolment of the schools under their Young Enterprise programme. 028 Citibank Berhad l 2011 Annual Report

Corporate Citizenship at Citi

The Habitat for Humanity Family Financial Education Programme

Habitat for Humanity Malaysia (HFH Malaysia) has been developing their Family Financial Education programme in partnership with Citi Foundation since 2010. This programme is designed to equip low-income Malaysian families with practical financial knowledge to help improve their home finances.

The goal of HFH Malaysia’s programme is to inculcate two distinct financial capabilities in their target demographic. The first is the ability create and utilise a family and home improvement budget. The second is the ability to plan, save and use credit responsibly. Results from the impact assessment should see a 70% increase in the number of families utilising a family budget and demonstrating a commitment to saving part of their income.

To achieve this goal, HFH Malaysia is leveraging on Citi Foundation’s expertise and guidance to develop a core financial curriculum that is tailor-made for the low-income Malaysian family. HFH Malaysia will then deliver this financial education curriculum to beneficiaries in partner communities.

HFH Malaysia aims to roll out the Family Financial Education programme to their targeted households by the end of 2012. At present, a needs-based assessment is being conducted. A pilot test for a total of 50 families seeking housing improvement in the Klang Valley is also currently underway.

Global Community Day

More than 500 Citi Volunteers went out on streets to feed over 800 homeless citizens around the country in conjunction with Global Community Day on October 21, 2011. In their effort of feeding the poor, our Citi Volunteers together with our community partner Pertiwi collected donations for used clothes to be distributed to the homeless. They were fed hot meals, drinks, snacks and even provided with toiletries and medicine.

Despite the heavy downpour of rain, it was a real eye-opener for the Citi Volunteers as they made way to reach out to the elderly, drug users and even children.

Citi Volunteers from Penang branch partnered with KAWAN that was set up as a drop in center in 2007 to address the pressing needs of the homeless street based community. Citibank Berhad l 2011 Annual Report 029

Valuing Our People

Best in Talent, Culture of Innovation, Attractive Rewards, tailored to the needs of our people. This strategy saw employee Unparalleled Opportunities and Leading Edge Training – these turnover in our Cards division decrease in 2011 as a result of are the five distinct advantages of “The Citibanker Difference” an enhanced focus on employee value proposition, hiring, that have made Citi the Employer of Choice for the best and on-boarding and development. 2011 was also the first year the brightest. Throughout 2011, we continued our focus on non-sales employees at levels G13, Q and R levels received delivering “The Citibanker Difference” for our employees. bonuses through the newly implemented Success Sharing plan.

Now in its third year, the Leadership Enhancement & At Citi, our key strengths are our global reach and diversity of Accelerated Development (L.E.A.D) programme provided businesses. Citibankers have unparalleled opportunities to accelerated career development opportunities for 169 hone their skills and talents within diverse international top-of-class employees across the board whose performance settings, making them some of the most versatile and ranks in the 95th percentile. We help these star performers well-rounded professionals in the world. To date, over 500 reach their fullest potential by providing unfettered access to Malaysian Citibankers have pursued (or are currently pursuing) mentors, cutting-edge training and development, networking their careers overseas in various businesses and functions opportunities, cross-functional/cross-business team challenges within the Citi world. and personalised guidance from management. In 2011, there were approximately 150 internal employee moves Our Management Associate (MA) and Graduate Executive under Citi’s 2+3 policy. Of these moves, one Malaysian (GE) programmes, which are designed to build general Citibanker was placed in Thailand for 6 months in the Mortgage management and functional leadership pipelines, continue division; Another moved to The Philippines for 6 months to to attract the best talent in the market. This is due to their train under the Risk Management division. We also successfully distinctive edge in ensuring that high potential hires have placed two candidates in Operations & Technology’s Leadership access to the best-in-class learning opportunities and Development Program in Dalian, China for their first-year development. In 2011, we hired 14 Management Associates assignment, followed by a move to Singapore for their second and 27 Graduate Executives. The Graduate Executives joined assignment. At present, overseas assignments are ongoing for Citibank divisions as diverse as Cards, Customer Experience & eXcel, Fast-Trax and Tiger programme candidates in Hong Kong Quality, Finance, Marketing, Operations & Technology, Retail and Singapore. Banking and Risk Management. Investing in learning has always been the cornerstone of Citi’s As a genuine meritocracy, our reward and recognition structure approach to talent development. Citi’s consistent approach to is competitive, transparent, tied to quality of performance and training and development across the company ensures that we 030 Citibank berhad l 2011 Annual Report

Valuing Our People

have a unified culture and set of standards that transcend Apart from formal professional development, Citi culture is business and product lines. Our developmental framework is about working hard and playing hard. Throughout the year, a driven by 3 core strategies: committee of dedicated Citibankers, many of whom are “Voice of Employee” (VOE) champions, organise employee i. On-the-Job experiences (70% of learning occurs by doing); engagement activities that strengthen the spirit of camaraderie ii. Learning from others (20% learning occurs through amongst Citibankers. The popularity of the VOE programme of relationships/exposure); and events is seen as VOE event attendance and involvement iii. Training programs (10% of learning occurs through formal improved across the franchise from 77% to 79%. education) The 2011 events organised by the VOE were balanced between Citibankers are also encouraged to identify areas for their charitable efforts and social events. Charity projects included personal career development through a structured Individual The Chariton initiative raised RM25,000 for Down Syndrome Development Planning (IDP) process. Citi also holds career kids and Citi’s Breast Cancer Awareness Week raised more than events such as Career Week which provide information to RM10,000 for PRIDE, a NGO campaigning against breast Citibankers to help them to make informed decisions about cancer. Social events where Citibankers had the opportunity to their career with us. Citibankers are then furnished with show our care and support for each other in a relaxed and fun customised training and opportunities in line with their environment included Staff Appreciation Week, the Sports professional needs under Citi’s human resource development Carnival and the Treasure Hunt. framework. In 2011, Citi’s Human Resource department facilitated 102 training programmes totalling 23,448 training At Citi, we do not simply settle for the best. We aim to make the hours for 1,328 employees. This is over and above the best better. mandatory functional and technical training that we already provide for all employees. FINANCIAL STATEMENT CONTENTS

32 Directors’ Report

35 Statement by Directors

36 Statutory Declaration

37 Shariah Committee‘s Report

38 Independent Auditors’ Report

39 Statements of Financial Position

40 Statements of Comprehensive Income

41 Statements of Changes in Equity

42 Statements of Cash Flows

44 Notes to the Financial Statements 032 Citibank Berhad l 2011 Annual Report

Directors’ Report for the year ended 31 December 2011

The Directors have pleasure in submitting their report and Current assets the audited financial statements of the Group and the Bank Before the financial statements of the Group and the Bank for the year ended 31 December 2011. were made out, the Directors took reasonable steps to ascertain that the value of any current assets, other than Principal activities debts and financing, which were unlikely to be realised in the The Bank is principally engaged in banking and related ordinary course of business, as shown in the accounting financial services that also include Islamic Banking business records of the Group and the Bank, have been written down whilst the principal activities of the subsidiaries are stated to an amount which they might be expected to realise. in Note 12 to the financial statements. There has been no significant change in the nature of these activities during At the date of this report, the Directors are not aware of any the financial year. circumstances which would render the values attributed to the current assets in the financial statements of the Group Results and the Bank misleading. Group and Bank Valuation methods RM’000 At the date of this report, the Directors are not aware of any circumstances which have arisen which would render Profit before taxation 855,193 adherence to the existing methods of valuation of assets or Taxation (165,330) liabilities in the financial statements of the Group and the

Bank misleading or inappropriate. Profit after taxation 689,863

Contingent and other liabilities Reserves and provisions At the date of this report, there does not exist: There were no material transfers to or from reserves and (a) any charge on the assets of the Group or the Bank provisions during the year under review except as disclosed which has arisen since the end of the financial year and in the financial statements. which secures the liabilities of any other person, or

Dividends (b) any contingent liabilities in respect of the Group or of Since the end of the previous financial year, the Bank paid a the Bank that has arisen since the end of the financial final ordinary dividend of 329 sen per ordinary share less year other than in the ordinary course of business. tax at 25% totaling RM300 million (247 sen net per ordinary share) in respect of the year ended 31 December 2010 on 28 No contingent or other liability of the Group and the Bank June 2011. have become enforceable, or is likely to become enforceable within the period of twelve months after the end of the The final ordinary dividend recommended by the Directors financial year which, in the opinion of the Directors, will or in respect of the year ended 31 December 2011 is 329 sen may substantially affect the ability of the Group and the per ordinary share less tax at 25% totaling RM300 million Bank to meet their obligations as and when they fall due. (247 sen net per ordinary share). Change of circumstances Bad and doubtful debts and financing At the date of this report, the Directors are not aware of any Before the financial statements of the Group and the Bank circumstances, not otherwise dealt with in this report or the were made out, the Directors took reasonable steps to financial statements of the Group and the Bank, that would ascertain that actions had been taken in relation to the render any amount stated in the financial statements writing off of bad debts and financing and the making of misleading. provisions for impaired loans and financing, and satisfied themselves that all known bad debts and financing had been Items of an unusual nature written off and adequate provisions made for impaired The results of the operations of the Group and the Bank for loans, advances and financing. the financial year were not, in the opinion of the Directors, substantially affected by any item, transaction or event of a At the date of this report, the Directors are not aware of any material and unusual nature. circumstances, which would render the amount written off for bad debts and financing, or the amount of the provision There has not arisen in the interval between the end of the for impaired loans, advances and financing, in the financial financial year and the date of this report any item, statements of the Group and the Bank inadequate to any transaction or event of a material and unusual nature likely, substantial extent. in the opinion of the Directors, to affect substantially the results of the operations of the Group and the Bank for the current financial year in which this report is made. Citibank Berhad l 2011 Annual Report 033

Directors’ Report for the year ended 31 December 2011

Compliance with Bank Negara Malaysia’s Directors of the Bank expectations on financial reporting Directors who served since the date of the last report are: In the preparation of the financial statements, the Directors have taken reasonable steps to ensure that Bank Negara • Jonathan Christian Larsen Malaysia’s expectations on financial reporting have been • Sanjeev Nanavati complied with, including those as set out in the Guidelines • Tan Sri Dato’ Hj. Omar Bin Ibrahim on Financial Reporting for Financial Institutions and the • Dato’ Siow Kim Lun @ Siow Kim Lin Guidelines on Classification and Impairment Provisions for • Agnes Liew Yun Chong Loans/Financing. • Terence Kent Cuddyre • Dato’ Syed Sidi Idid Bin Syed Abdullah Idid (Deceased on 2 February 2012)

Directors’ interests in shares The interests in the ordinary shares and options over shares of the Bank and of its related corporations of those who were Directors at year end as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares of USD1 each At At 1.1.2011* Bought Sold 31.12.2011 Shares in Citigroup Inc. Direct interests Sanjeev Nanavati 13,664 8,561 - 22,225 Jonathan Christian Larsen 23,172 ** 17,516 6,730 33,958 Dato’ Siow Kim Lun @ Siow Kim Lin 900 - - 900 Agnes Liew Yun Chong 8,576 1,536 - 10,112 Terence Kent Cuddyre 1,786 ** 199 29 1,956

Deemed interests Jonathan Christian Larsen 38,792 6,730 - 45,522

Number of ordinary shares of USD1 each At At 1.1.2011* Granted Vested 31.12.2011 Capital Accumulation Program/ Supplementary CAP/SEA in Citigroup Inc.

Sanjeev Nanavati 4,376 6,972 (8,561) 2,787 Agnes Liew Yun Chong 5,644 9,833 (1,536) 13,941 Terence Kent Cuddyre 193 1,007 114 1,086

Number of options over ordinary shares of USD1 each At At 1.1.2011/ Granted Forfeited 31.12.2011 date of appointment* Stock Option Plan in Citigroup Inc.

Sanjeev Nanavati 6,995 - 268 6,727 Jonathan Christian Larsen 41,082 - - 41,082 Agnes Liew Yun Chong 4,174 - (295) 3,879 Terence Kent Cuddyre 3,078 - 797 2,281

None of the other Directors holding office at 31 December 2011 had any interest in the ordinary shares and options over shares of the Bank and of its related corporations during the financial year.

* Reverse stock split in May 2011, share numbers divided by 10 . ** Opening balance has been restated 034 Citibank Berhad l 2011 Annual Report

Directors’ Report for the year ended 31 December 2011

Directors’ benefits Since the end of the previous financial year, no Director of the Bank has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements or the fixed salary of a full time employee of the Bank) by reason of a contract made by the Bank or a related company 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.

There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Bank to acquire benefits by means of the acquisition of shares in or debentures of the Bank or any other body corporate apart from the Directors above who were granted options to subscribe for shares in the ultimate holding company under various stock incentive and purchase schemes where the price and terms are as determined by the said schemes.

Issue of shares and debentures There were no changes in the issued and paid-up capital of the Bank during the financial year.

There were no debentures issued during the financial year.

Options granted over unissued shares No options were granted to any person to take up unissued shares of the Bank during the financial year.

Auditors The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Sanjeev Nanavati

Tan Sri Dato’ Hj. Omar Bin Ibrahim

Kuala Lumpur Date: 1 March 2012 Citibank Berhad l 2011 Annual Report 035

Statement By Directors pursuant to Section 169(15) of the Companies Act, 1965

In the opinion of the Directors, the financial statements set out on pages 39 to 133 are drawn up in accordance with the Companies Act, 1965 in Malaysia and Financial Reporting Standards issued by the Malaysian Accounting Standards Board as modified by Bank Negara Malaysia Guidelines so as to give a true and fair view of the financial position of the Group and the Bank at 31 December 2011 and of their financial performance and cash flows for the year then ended on that date.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Sanjeev Nanavati

Tan Sri Dato’ Hj. Omar Bin Ibrahim

Kuala Lumpur Date: 1 March 2012 036 Citibank Berhad l 2011 Annual Report

Declaration Pursuant to Section 169(16) of the Companies Act, 1965

I, Tang Wan Chee, the officer primarily responsible for the financial management of Citibank Berhad, do solemnly and sincerely declare that the financial statements set out on pages 39 to 133 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, 1 960.

Subscribed and solemnly declared by the above named in Kuala Lumpur on 1 March 2012.

Tang Wan Chee

Before me:

Commissioner for Oaths Citibank Berhad l 2011 Annual Report 037

Shariah Committee’s Report In the name of Allah, the Beneficent, the Merciful

In compliance with the letter of appointment, we are required to submit the following report:

We have reviewed the principles and the contracts relating to the transactions and applications introduced by Citibank Berhad’s Islamic Banking Division during the year ended 31 December 2011. We have also conducted our review to form an opinion as to whether the Citibank Berhad’s Islamic Banking Division has complied with the Shariah principles and with the Shariah rulings issued by the Shariah Advisory Council of Bank Negara Malaysia, as well as Shariah decisions made by us.

The management of Citibank Berhad’s Islamic Banking Division is responsible for ensuring that the financial institution conducts its business in accordance with Shariah principles. It is our responsibility to form an independent opinion, based on our review of the operations of the Citibank Berhad’s Islamic Banking Division, and to report to you.

We have assessed the work carried out by Shariah review and Shariah audit which included examining, on a test basis, each type of transaction, the relevant documentation and procedures adopted by the Citibank Berhad’s Islamic Banking Division.

We planned and performed our review so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Citibank Berhad’s Islamic Banking Division has not violated the Shariah principles.

In our opinion:

1. the contracts, transactions and dealings entered into by the Citibank Berhad’s Islamic Banking Division during the year ended 31 December 2011 that we have reviewed are in compliance with the Shariah principles;

2. the allocation of profit and charging of losses relating to investment accounts conform to the basis that had been approved by us in accordance with Shariah principles;

We, the members of the Shariah Committee of Citibank Berhad’s Islamic Banking Division, do hereby confirm that the operations of the Citibank Berhad’s Islamic Banking Division for the year ended 31 December 2011 have been conducted in conformity with the Shariah principles.

On behalf of the Shariah Committee

Chairman of the Shariah Committee:

Professor Dr. Abdul Ghafar Ismail

Kuala Lumpur Date: 1 March 2012 038 Citibank Berhad l 2011 Annual Report

Independent Auditors’ Report to the members of Citibank Berhad

Report on the Financial Statements Report on Other Legal and Regulatory Requirements We have audited the financial statements of Citibank In accordance with the requirements of the Companies Act, Berhad, which comprise the statements of financial position 1965 in Malaysia, we also report the following: as at 31 December 2011 of the Group and the Bank, and the statements of comprehensive income, statements of a) In our opinion, the accounting and other records and changes in equity and statements of cash flows of the Group the registers required by the Act to be kept by the Bank and the Bank for the year then ended, and a summary of and its subsidiaries have been properly kept in significant accounting policies and other explanatory notes, accordance with the provisions of the Act. as set out on pages 39 to 1 33. b) We are satisfied that the accounts of the subsidiaries Directors’ Responsibility for the Financial Statements that have been consolidated with the Bank’s financial The Directors of the Bank are responsible for the statements are in form and content appropriate and preparation of these financial statements that give a true proper for the purposes of the preparation of the and fair view in accordance with the Companies Act, 1965 financial statements of the Group and we have received and Financial Reporting Standards in Malaysia as modified satisfactory information and explanations required by by Bank Negara Malaysia Guidelines, and for such internal us for those purposes. control as the Directors determine is necessary to enable the preparation relevant to the preparation of financial c) Our audit reports on the accounts of the subsidiaries statements that are free from material misstatement, did not contain any qualification or any adverse whether due to fraud or error. comment made under Section 1 74(3) of the Act.

Auditors’ Responsibility Other Matters Our responsibility is to express an opinion on these financial This report is made solely to the members of the Bank, as a statements based on our audit. We conducted our audit in body, in accordance with Section 174 of the Companies Act, accordance with approved standards on auditing in 1965 in Malaysia and for no other purpose. We do not Malaysia. Those standards require that we comply with assume responsibility to any other person for the content of ethical requirements and plan and perform the audit to this report. obtain reasonable assurance about 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 KPMG Ahmad Nasri bin Abdul Wahab of the financial statements that give a true and fair view in Firm Number: AF 0758 Approval Number: 2919/03/12(J) order to design audit procedures that are appropriate in the Chartered Accountants Chartered Accountant 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 Petaling Jaya, Malaysia accounting policies used and the reasonableness of Date: 1 March 2012 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.

Opinion In our opinion, the financial statements have been properly drawn up in accordance with the Companies Act, 1965 and Financial Reporting Standards in Malaysia as modified by Bank Negara Malaysia Guidelines so as to give a true and fair view of the financial position of the Group and the Bank as of 31 December 2011 and of their financial performance and cash flows for the year then ended. Citibank Berhad l 2011 Annual Report 039

Statements Of Financial Position as at 31 December 2011

Group Bank 2011 2010 2011 2010 Note RM’000 RM’000 RM’000 RM’000 Assets

Cash and short term funds 3 11,968,440 10,481,033 11,968,420 10,481,013 Deposits and placements with banks and other financial institutions 4 1,516,673 811,660 1,516,673 811,660 Securities purchased under resale agreements 1,218,993 404,417 1,218,993 404,417 Financial assets held-for-trading 5 2,336,849 1,852,463 2,336,849 1,852,463 Financial investments available-for-sale 6 5,225,508 3,105,488 5,225,508 3,105,488 Loans, advances and financing 7 20,357,257 19,480,745 20,357,257 19,480,745 Other assets 9 1,306,012 1,317,760 1,306,012 1,317,760 Statutory deposits with Bank Negara Malaysia 10 398,080 - 398,080 - Deferred tax assets 11 796 59,300 796 59,300 Investments in subsidiary companies 12 - - 20 20 Plant and equipment 13 120,905 108,781 120,905 108,781

Total assets 44,449,513 37,621,647 44,449,513 37,621,647

Liabilities

Deposits from customers 14 30,051,586 28,788,863 30,051,586 28,788,863 Deposits and placements of banks and other financial institutions 15 7,777,097 2,322,925 7,777,097 2,322,925 Bills and acceptances payable 63,761 47,982 63,761 47,982 Other liabilities 16 2,537,714 2,846,402 2,537,714 2,846,402

Total liabilities 40,430,158 34,006,172 40,430,158 34,006,172

Equity

Share capital 17 121,697 121,697 121,697 121,697 Reserves 18 3,897,658 3,493,778 3,897,658 3,493,778 Total equity attributable to equity holder of the Bank 4,019,355 3,615,475 4,019,355 3,615,475

Total liabilities and equity 44,449,513 37,621,647 44,449,513 37,621,647

Off-balance sheet exposures 36 79,632,078 81,239,637 79,632,078 81,239,637

The notes on pages 44 to 133 are an integral part of these financial statements. 040 Citibank Berhad l 2011 Annual Report

Statements Of Comprehensive Income for the financial year ended 31 December 2011

Group and Bank 2011 2010 Note RM’000 RM’000

Revenue 2(b) 2,402,424 2,184,681

Interest income 20 1,713,571 1,575,460 Interest expense 21 (514,644) (391,890)

Net interest income 1,198,927 1,183,570

Net income from Islamic banking operations 37(o) 29,670 35,991 Other operating income 22 659,183 573,230

Total net income 1,887,780 1,792,791 Other operating expenses 23 (887,846) (758,190)

Operating profit 999,934 1,034,601 Allowance for loans, advances and financing 24 (144,741) (200,995)

Profit before taxation 855,193 833,606 Tax expense 25 (165,330) (194,353)

Profit for the year 689,863 639,253

Other comprehensive expense, net of income tax Net profit/(loss) on revaluation of financial investments available-for-sale 14,017 (16,110)

Other comprehensive income/(expense) for the year, net of income tax 14,017 (16,110)

Total comprehensive income for the year 703,880 623,143

Profit for the year attributable to: Owner of the Bank 689,863 639,253

Total comprehensive income attributable to: Owner of the Bank 703,880 623,143

Earnings per share - basic (sen) 26 566 525

The notes on pages 44 to 133 are an integral part of these financial statements. Citibank Berhad l 2011 Annual Report 041

Statements Of Changes In Equity for the financial year ended 31 December 2011

Attributable to owner of the Bank Non-distributable Distributable Share Share Statutory Fair Value Retained Total Note Capital Premium Reserve Reserve Profits Reserves Total Group and Bank RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2010 121,697 380,303 121,697 9,480 2,609,155 3,120,635 3,242,332 Fair value of available-for-sale financial assets - - - (16,110) - (16,110) (16,110) Total other comprehensive expense for the year - - - (16,110) - (16,110) (16,110) Profit for the year - - - - 639,253 639,253 639,253 Total comprehensive (expense)/ income for the year - - - (16,110) 639,253 623,143 623,143

Dividends to owner of the Bank 27 - - - - (250,000) (250,000) (250,000)

Total contribution to owner - - - - (250,000) (250,000) (250,000)

At 31 December 2010 121,697 380,303 121,697 (6,630) 2,998,408 3,493,778 3,615,475

At 1 January 2011 121,697 380,303 121,697 (6,630) 2,998,408 3,493,778 3,615,475 Fair value of available-for-sale financial assets - - - 14,017 - 14,017 14,017 Total other comprehensive income for the year - - - 14,017 - 14,017 14,017 Profit for the year - - - - 689,863 689,863 689,863 Total comprehensive income for the year 14,017 689,863 703,880 703,880 Dividends to owner of the Bank - - - - (300,000) (300,000) (300,000)

Total contribution to owner 27 - - - - (300,000) (300,000) (300,000)

At 31 December 2011 121,697 380,303 121,697 7,387 3,388,271 3,897,658 4,019,355

Note 17 Note 18

The notes on pages 44 to 133 are an integral part of these financial statements. 042 Citibank Berhad l 2011 Annual Report

Statements Of Cash Flows for the financial year ended 31 December 2011

Group Bank 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Cash flows from operating activities Profit before taxation 855,193 833,606 855,193 833,606 Adjustments for: Amortisation of premium less accretion of discount of financial investments available-for-sale (3,047) (2,095) (3,047) (2,095) Allowance for bad and doubtful debts (net of write-back) 144,741 200,995 144,741 200,995 Profit equalisation reserve 3,204 9,164 3,204 9,164 Depreciation 35,713 32,775 35,713 32,775 Dividends from unquoted investment securities (28) (58) (28) (58) Unrealised gain from revaluation of financial assets held-for-trading (977) (917) (977) (917) Gain from disposal of financial investments available-for-sale (13,063) (58,470) (13,063) (58,470) Loss on disposal of plant and equipment 1,023 178 1,023 178

Operating profit before working capital changes 1,022,759 1,015,178 1,022,759 1,015,178

Changes in working capital: Deposits and placements with banks and other financial institutions (705,013) 516,792 (705,013) 516,792 Securities purchased under resale agreements (814,576) (404,417) (814,576) (404,417) Financial assets held-for-trading (483,409) 475,226 (483,409) 475,226 Loans, advances and financing (1,021,253) (1,235,317) (1,021,253) (1,235,317) Other assets 70,252 (251,758) 70,252 (251,758) Statutory deposits with Bank Negara Malaysia (398,080) 5,200 (398,080) 5,200 Deposits from customers 1,262,723 (1,040,220) 1,262,723 (1,040,220) Deposits and placements of banks and other financial institutions 5,454,172 (1,371,985) 5,454,172 (1,371,985) Bills and acceptances payable 15,779 (28) 15,779 (28) Other liabilities (314,601) 716,483 (314,601) 716,483

Cash generated from/(used in) operating activities 4,088,753 (1,574,846) 4,088,753 (1,574,846) Income taxes paid (162,621) (222,611) (162,621) (222,611)

Net cash generated from/(used in) operating activities 3,926,132 (1,797,457) 3,926,132 (1,797,457)

The notes on pages 44 to 133 are an integral part of these financial statements. Citibank Berhad l 2011 Annual Report 043

Statements Of Cash Flows for the financial year ended 31 December 2011

Group Bank 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Cash flows from investing activities Dividend from investment securities 28 58 28 58 Purchase of plant and equipment (49,183) (79,781) (49,183) (79,781) Proceeds from disposal of plant and equipment 324 711 324 711 Purchase of financial investments available-for-sale (7,311,535) (7,068,298) (7,311,535) (7,068,298) Redemption of financial investments available-for-sale 499,387 - 499,387 - Proceeds from disposal of financial investments available-for-sale 4,722,254 9,361,821 4,722,254 9,361,821

Net cash (used in)/generated from investing activities (2,138,725) 2,214,511 (2,138,725) 2,214,511

Cash flows from financing activities Dividend paid to owner (300,000) (250,000) (300,000) (250,000) Repayment of subordinated loan - (400,000) - (400,000)

Net cash used in financing activities (300,000) (650,000) (300,000) (650,000)

Net increase/(decrease) in cash and cash equivalents 1,487,407 (232,946) 1,487,407 (232,946)

Cash and cash equivalents at 1 January 10,481,033 10,713,979 10,481,013 10,713,959

Cash and cash equivalents at 31 December (Note 3) 11,968,440 10,481,033 11,968,420 10,481,013

The notes on pages 44 to 133 are an integral part of these financial statements. 044 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

Citibank Berhad is a public limited liability company, • Amendments to FRS 7, Financial Instruments: incorporated and domiciled in Malaysia. The address of both Disclosures – Transfers of Financial Assets its principal place of business and registered office of the • Amendments to FRS 112, Income Taxes – Bank is as follows: Deferred Tax: Recovery of Underlying Assets

45th Floor, Menara Citibank FRSs, Interpretations and amendments effective for 165 Jalan Ampang annual periods beginning on or after 1 July 2012 50450 Kuala Lumpur • Amendments to FRS 101, Presentation of Financial Statements – Presentation of Items of The consolidated financial statements of the Bank as at and Other Comprehensive Income for the year ended 31 December 2011 comprise the Bank and its subsidiaries (together referred to as the “Group”). FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2013 The Bank is principally engaged in banking and related • FRS 10, Consolidated Financial Statements financial services that also include Islamic Banking business • FRS 11, Joint Arrangements whilst the principal activities of the subsidiaries are as • FRS 12, Disclosure of Interests in Other Entities stated in Note 12 to the financial statements. • FRS 13, Fair Value Measurement • FRS 119, Employee Benefits (2011) The immediate holding company is Citigroup Holdings • FRS 127, Separate Financial Statements (2011) (Singapore) Pte. Ltd., a company incorporated in Singapore • FRS 128, Investments in Associates and Joint and the ultimate holding company is Citigroup Inc., a Ventures (2011) company incorporated in the United States of America. • IC Interpretation 20, Stripping Costs in the Production Phase of a Surface Mine The financial statements were authorised for issue by the • Amendments to FRS 7, Financial Instruments: Board of Directors on 1 March 2012. Disclosures – Offsetting Financial Assets and Financial Liabilities • Amendments to FRS 7, Financial Instruments: 1. Basis of preparation Disclosures – Mandatory Date of FRS 9 and Transition Disclosures A. Statement of compliance FRSs, Interpretations and amendments effective for The financial statements of the Group and the Bank annual periods beginning on or after 1 January 2014 have been prepared in accordance with Financial • Amendments to FRS 132, Financial Instruments: Reporting Standards (FRS) as modified by Bank Presentation – Offsetting Financial Assets and Negara Malaysia Guidelines, accounting principles Financial Liabilities generally accepted and the Companies Act, 1965 in Malaysia. The financial statements also incorporate FRSs, Interpretations and amendments effective for those activities relating to Islamic Banking which have been undertaken by the Bank. Islamic Banking annual periods beginning on or after 1 January 2015 refers generally to the acceptance of deposits and • FRS 9, Financial Instruments (2009) granting of financing under the Shariah principles. • FRS 9, Financial Instruments (2010)

The Group and the Bank have not applied the The Group’s and the Bank’s financial statements for following accounting standards, amendments and annual period beginning on 1 January 2012 will be interpretations that have been issued by the prepared in accordance with the Malaysian Malaysian Accounting Standards Board (MASB) but Financial Reporting Standards (MFRSs) issued by are not yet effective for the Group and the Bank: the MASB and International Financial Reporting Standards (IFRSs). As a result, the Group and the FRSs, Interpretations and amendments effective Bank will not be adopting the above FRSs, for annual periods beginning on or after 1 July 2011 Interpretations and amendments. • IC Interpretation 19, Extinguishing Financial Liabilities with Equity Instruments B. Basis of measurement • Amendments to IC Interpretation 14, Prepayments The financial statements have been prepared on the of a Minimum Funding Requirement historical cost basis except as mentioned in the respective accounting policies notes. FRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2012 C. Functional and presentation of currency • FRS 124, Related Party Disclosures (revised) The financial statements are presented in Ringgit • Amendments to FRS 1, First-time Adoption of Malaysia (RM), which is the Group’s and the Bank’s Financial Reporting Standards – Severe functional currency. All financial information is Hyperinflation and Removal of Fixed Dates for presented in RM and has been rounded to the First-time Adopters nearest thousand, unless otherwise stated. Citibank Berhad l 2011 Annual Report 045

Notes To The Financial Statements

1. Basis of preparation (continued) 2. Significant accounting policies

D. Use of estimates and judgements The accounting policies set out below have been applied The preparation of financial statements in consistently to the periods presented in the financial conformity with the FRSs requires management to statements, and have been applied consistently by the make judgements, estimates and assumptions that Group and the Bank, unless otherwise stated. affect the application of accounting policies and the reported amounts of assets, liabilities, income A. Basis of consolidation and expense. Actual results may differ from these estimates. i. Subsidiaries Subsidiaries are entities, including unincorporated entities, controlled by the Group and the Bank. Estimates and underlying assumptions are Control exists when the Group and the Bank have reviewed on an ongoing basis. Revisions to the ability to exercise its power to govern the accounting estimates are recognised in the period financial and operating policies of an entity so as to in which the estimates are revised and in any future obtain benefits from its activities. In assessing periods affected. control, potential voting rights that presently are exercisable are taken into account. There are no significant areas of estimation uncertainty and critical judgements in applying Investments in subsidiaries are measured in the accounting policies that have significant effect on Company’s statements of financial position at the amounts recognised in the financial statements cost less any impairment losses, unless the other than those disclosed in the following notes: investment is held for sale or distribution. The cost of investments includes transaction costs. • Note 2(g) - Impairment losses on loans, advances and financing The accounting policies of subsidiaries are changed when necessary to align them with the Collective impairment allowance for loan losses policies adopted by the Group and the Bank. represents management's estimate of probable losses inherent in the portfolio. The allowance is ii. Accounting for business combinations Business combinations are accounted for using available to absorb probable loan losses inherent in the acquisition method from the acquisition the overall portfolio. date, which is the date on which control is transferred to the Group and the Bank. The allowance attributed to these loans is

established via a process that estimates the The Group and the Bank have changed its probable losses inherent in the portfolio based accounting policy with respect to accounting for upon various analysis. These include migration business combinations. analysis, in which historical delinquency and credit loss experience is applied to the current aging of From 1 January 2011 the Group and the Bank have the portfolio, together with analysis that reflect applied FRS 3, Business Combinations (revised) in current trends and conditions. accounting for business combinations. The change in accounting policy has been applied prospectively • Note 2(f) - Fair value estimation for financial in accordance with the transitional provisions assets and liabilities provided by the standard and does not have impact on earnings per share. The determination of fair value for financial assets and liabilities for which there is no observable Acquisitions on or after 1 January 2011 market price that requires the use of valuation For acquisitions on or after 1 January 2011, the techniques as described in accounting policy in Group and the Bank measure goodwill at the Note 2(f)(vi). acquisition date as: • The fair value of the consideration transferred; plus • Note 19 - Actuarial valuation for employee benefits • The recognised amount of any non-controlling interests in the acquiree; plus The liability for the defined benefit plan is • If the business combination is achieved in recognised as the present value of the defined stages, the fair value of the existing equity benefit obligation less the fair value of the Plan’s interest in the acquiree; plus assets, plus unrecognised actuarial gain, less • The net recognised amount (generally fair unrecognised past service cost and unrecognised value) of the identifiable assets acquired and actuarial losses as described in Note 2(o)(iii). liabilities assumed. 046 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

2. Significant accounting policies (continued) iii. Transactions eliminated on consolidation Intra-group balances and transactions, and any A. Basis of consolidation (continued) unrealised income and expenses arising from intra-group transactions, are eliminated in ii. Accounting for business combinations (continued) preparing the consolidated financial statements. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. B. Revenue

The consideration transferred does not include Revenue comprises of gross interest income, amounts related to the settlement of pre-existing commission and other income derived from banking relationships. Such amounts are generally recognised operations. in profit or loss. C. Interest and financing income and expense Costs related to the acquisition, other than those Interest income and expense are recognised in the associated with the issue of debt or equity securities, profit or loss using the effective interest method. The that the Group and the Bank incur in connection with effective interest rate is the rate that exactly a business combination are expensed as incurred. discounts the estimated future cash payments and receipts through the expected life of the financial Any contingent consideration payable is recognised asset or liability (or, where appropriate, a shorter at fair value at the acquisition date. If the period) to the carrying amount of the financial asset contingent consideration is classified as equity, it is or liability. The effective interest rate is established on not remeasured and settlement is accounted for initial recognition of the financial asset and liability within equity. Otherwise, subsequent changes to and is not revised subsequently. the fair value of the contingent consideration are recognised in profit or loss. The calculation of the effective interest rate includes all fees and points paid or received, transaction costs, When share-based payment awards (replacement and discounts or premiums that are an integral part of awards) are required to be exchanged for rewards the effective interest rate. Transaction costs are held by the acquiree’s employees (acquiree’s incremental costs that are directly attributable to the awards) and relate to past services, then all or a acquisition, issue or disposal of a financial asset or portion of the amount of the acquirer’s repayment liability. awards is included in measuring the consideration transferred in the business combination. The Interest income and expense presented in the determination is based on the market-based value statements of comprehensive income include: of the replacement awards compared with the market-based value of the acquiree’s awards and • Interest on financial assets and liabilities at the extent to which the replacement awards relate amortised cost on an effective interest rate basis to past and/or future service. • Interest on available-for-sale investment securities on an effective interest rate basis Acquisitions between 1 January 2006 and 1 January 2011 D. Fee and commission income F or acquisitions between 1 January 2006 and Fee and commission income and expenses that are 1 January 2011, goodwill represents the excess integral to the effective interest rate on a financial of the cost of the acquisition over the Group’s and asset or liability are included in the measurement of the Bank’s interest in the recognised amount the effective interest rate. (generally fair value) of the identifiable assets, liabilities and contingent liabilities of the acquiree. Other fees and commission income, including When the excess was negative, a bargain purchase placement fees, account servicing fees, investment gain was recognised immediately in profit or loss. management fees, sales commission, are recognised as the related services are performed. When a loan Transaction costs, other than those associated commitment is not expected to result in the draw-down with the issue of debt or equity securities, that the of a loan, loan commitment fees are recognised on a Group and the Bank incurred in connection with straight-line basis over the commitment period. When business combinations were capitalised as part of it is probable that a loan commitment will result in a the cost of the acquisition. specific lending arrangement, commitment fees are included in the measurement of the effective interest Acquisitions prior to 1 January 2006 rate. For acquisitions prior to 1 January 2006, goodwill represents the excess of the costs of the acquisition Other fees and commission expense relates mainly to over the Group’s and the Bank’s interest in the fair management and service fees, which are expensed as values of the net identifiable assets and liabilities. the services are received. Citibank Berhad l 2011 Annual Report 047

Notes To The Financial Statements

2. Significant accounting policies (continued) Financial assets categorised as held-to-maturity investments are subsequently measured at E. Net trading income amortised cost using the effective interest method. Net trading income comprises gains less losses related to trading assets and liabilities, and includes c. Loans and receivables all realised and unrealised fair value changes, Loans and receivables category comprises interest, dividends and foreign exchange differences. debt instruments that are not quoted in an active market. F. Financial assets and liabilities

Financial assets categorised as loans and i. Initial recognition and measurement receivables are subsequently measured at A financial instrument is recognised in the amortised cost using the effective interest statements of financial position when, and only method. when, the Group or the Bank becomes a party to the contractual provisions of the instrument. d. Available-for-sale financial assets Available-for-sale category comprises investment A financial instrument is recognised initially, at its in equity and debt securities instruments that fair value plus, in the case of a financial instrument are not held for trading. not at fair value through profit or loss, transaction costs that are directly attributable to the Investments in equity instruments that do not acquisition or issue of the financial instrument. have a quoted market price in an active market and whose fair value cannot be reliably An embedded derivative is recognised separately measured are measured at cost. Other financial from the host contract and accounted for as a assets categorised as available-for-sale are derivative if, and only if, it is not closely related to subsequently measured at their fair values the economic characteristics and risks of the host with the gain or loss recognised in other contract and the host contract is not categorised comprehensive income, except for impairment at fair value through profit or loss. The host losses, foreign exchange gains and losses contract, in the event an embedded derivative is arising from monetary items which are recognised separately, is accounted for in recognised in profit or loss. On derecognition, accordance with policy applicable to the nature of the cumulative gain or loss recognised in other the host contract. comprehensive income is reclassified from ii. Financial instrument categories and equity into profit or loss. Interest calculated for subsequent measurement a debt instrument using the effective interest method is recognised in profit or loss. The Group and the Bank categorise financial instruments as follows: All financial assets, except for those measured at fair value through profit or loss, are subject Financial assets to review for impairment (see Note 2(g)).

a. Financial assets at fair value through profit Financial liabilities or loss All financial liabilities are subsequently Fair value through profit or loss category measured at amortised cost other than those comprises financial assets that are held for categorised as fair value through profit or loss. trading, including derivatives or financial assets that are specifically designated into Fair value through profit or loss category this category upon initial recognition. comprises financial liabilities that are held for Financial assets categorised as fair value trading, derivatives or financial liabilities that through profit or loss are subsequently are specifically designated into this category measured at their fair values with the gain or upon initial recognition. loss recognised in profit or loss. Financial liabilities categorised as fair value b. Held-to-maturity investments through profit or loss are subsequently Held-to-maturity investments category measured at their fair value with the gain or comprises debt instruments that are quoted loss recognised in profit or loss. in an active market and the Group or the Bank has the positive intention and ability to hold them to maturity. 048 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

2. Significant accounting policies (continued) v. Offsetting

F. Financial assets and liabilities (continued) Financial assets and liabilities are offset and the net amount reported in the statements of financial iii. Regular way purchase or sale of financial assets position when, and only when, the Group and the Bank have a legal right to set off the amounts and A regular way purchase or sale is a purchase or intend either to settle on a net basis or to realise sale of a financial asset under a contract whose the asset and settle the liability simultaneously. terms require delivery of the asset within the time frame established generally by regulation or Income and expenses are presented on a net basis convention in the marketplace concerned. only when permitted by the accounting standards, or for gains and losses arising from a group of A regular way purchase or sale of financial assets similar transactions such as in the Group’s and the is recognised and derecognised, as applicable, Bank’s trading activity. using trade date accounting. Trade date accounting refers to: vi. Fair value measurement

a. the recognition of an asset to be received and Fair value is the amount for which an asset could the liability to pay for it on the trade date, and be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length b. derecognition of an asset that is sold, transaction on the measurement date. recognition of any gain or loss on disposal and the recognition of a receivable from the buyer The determination of fair values of financial assets for payment on the trade date. and financial liabilities is based on quoted market prices or dealer price quotation, for financial iv. Derecognition instruments traded in active markets without any deduction for transaction cost. The Group and the The Group and the Bank derecognise a financial Bank also use widely recognised valuation models asset when the contractual rights to the cash flows for determining the fair value of common and from the financial assets expire, or when they simpler financial instruments such as options and transfer the financial asset in a transaction in interest rate and currency swaps. For these which substantially all the risks and rewards of financial instruments, inputs into models are ownership of the financial asset are transferred or market observable. in which the Group and the Bank neither transfer nor retain substantially all the risks and rewards of The Group and the Bank use valuation techniques ownership and they do not retain control of the to determine the fair value of financial assets and financial asset. Any interest in transferred financial liabilities where quoted prices in an active market assets that qualify for derecognition that is created are not available. The valuation techniques used or retained by the Group and the Bank are for different financial instruments are selected to recognised as a separate asset or liability in the reflect how the market would be expected to price statements of financial position. On derecognition the instruments, using inputs that reasonably of a financial asset, the difference between the reflect risk-return factors inherent in the carrying amount of the asset (or the carrying instruments. Depending upon the characteristics amount allocated to the portion of the asset of the financial instruments, observable market transferred), and the sum of the consideration factors are available for use in most valuations, received (including any new asset obtained less while other valuations may involve a greater degree of judgement and estimation. any new liability assumed) and any cumulative gain or loss that had been recognised in equity is The value produced by a model or other valuation recognised in profit or loss. technique is adjusted to allow for a number of factors as appropriate, because valuation The Group and the Bank derecognise a financial techniques cannot appropriately reflect all factors liability when the contractual obligation is market participants take into account when discharged or cancelled or expired. On entering into a transaction. Valuation adjustments derecognition of a financial liability, the difference are recorded to allow for model risks, bid-ask between the carrying amount of the financial spreads, liquidity risks, as well as other factors. liability extinguished or transferred to another Management believes that these valuation party and the consideration paid, including any adjustments are necessary and appropriate to non-cash assets transferred or liabilities assumed, fairly state financial instruments carried at fair is recognised in profit or loss. value on the statements of financial position. Citibank Berhad l 2011 Annual Report 049

Notes To The Financial Statements

2. Significant accounting policies (continued) For the purposes of the collective evaluation of impairment, financial assets are grouped on the G. Impairment basis of similar credit risk characteristics by using a grading process that considers obligor type, i. Financial assets (excluding investment in industry, geographical location, collateral type, subsidiary companies) past-due status and other relevant factors. These characteristics are relevant to the estimation of At each reporting date, the Group and the Bank future cash flows for groups of such assets by assess whether there is objective evidence that being indicative of the likelihood of receiving all financial assets not carried at fair value through amounts due under a facility according to the profit or loss are impaired. Financial assets contractual terms of the assets being evaluated. categorised as held to maturity and loans and receivables are impaired when objective evidence In assessing the collective impairment, the Group demonstrates that a loss event has occurred after and the Bank use methods as listed below the initial recognition of the asset, and that the depending on the loan portfolio:- loss event has an impact on the future cash flows on the asset that can be estimated reliably. i) Statistical modeling of historical trends of the Impairment losses are measured as the difference probability of default, timing of recoveries and between the carrying amount of the financial the amount of loss incurred, adjusted for assets and the present value of estimated cash management’s judgement as to whether the flows discounted at the assets’ original effective current economic and credit conditions are interest rate. such that the actual losses incurred are likely to be greater or less than suggested historical The Group and the Bank assess whether objective modeling. Default rates, loss rates and evidence of impairment exists individually for expected timing of future recoveries are financial assets that are individually significant. regularly benchmarked against actual For financial assets that are not individually outcomes to ensure they remain appropriate; significant, assessment of objective evidence of impairment is done individually or/and collectively. ii) Based upon historical delinquency flow rates, charge-off statistics and loss severity, adjusted Objective evidence that a loan or a loan portfolio is for management’s judgement as to whether impaired includes observable data that could current economic and credit conditions are include the following loss events: such that actual losses are likely to be greater or less than suggested by historical modeling. • significant financial difficulty of the issuer or obligor; Losses are recognised in the profit or loss and • a breach of contract, such as a default or reflected in an allowance account against loans delinquency in interest or principal payments; and advances. • it becomes probable that the borrower will enter bankruptcy or other financial Under the revised policy issued by BNM on reorganisation; Classification and Impairment Provisions for Loan • observable data relating to a portfolio of Financing, if the repayment conduct of the loan is financial assets such as: past due for more than 90 days of either principal, i) adverse changes in the payment status of interest or both, the loan shall be classified as borrowers in the portfolio; and impaired. The Group and the Bank apply this ii) national or local economic conditions that policy in addition to the above when determining correlate with defaults on the assets in the if a loan is impaired. portfolio. • the disappearance of an active market for a An impairment loss in respect of financial security. investments available-for-sale is recognised in profit or loss and is measured as the difference If the Group and the Bank determine that no objective evidence of impairment exists for an between the asset’s acquisition cost (net of any individually assessed financial asset, whether principal repayment and amortisation) and the significant or not, it includes the asset in a group asset’s current fair value, less any impairment loss of financial assets with similar credit risk previously recognised. Where a decline in the fair characteristics and collectively assesses them for value of an available-for-sale financial asset has impairment. Assets that are individually assessed been recognised in the other comprehensive for impairment and for which an impairment loss is income, the cumulative loss in other or continues to be recognised are not included in a comprehensive income is reclassified from equity separate collective assessment of impairment. and recognised to profit or loss. 050 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

2. Significant accounting policies (continued) losses recognised in prior periods are assessed at the end of each reporting period for any G. Impairment (continued) indications that the loss has decreased or no longer exists. An impairment loss is reversed if i. Financial assets (excluding investment in subsidiary there has been a change in the estimates used to companies) (continued) determine the recoverable amount since the last impairment loss was recognised. An impairment An impairment loss in respect of unquoted equity loss is reversed only to the extent that the asset’s instrument that is carried at cost is recognised in carrying amount does not exceed the carrying profit or loss and is measured as the difference amount that would have been determined, net of between the asset’s carrying amount and the depreciation or amortisation, if no impairment loss present value of estimated future cash flows had been recognised. Reversals of impairment discounted at the current market rate of return losses are credited to profit or loss in the year in for a similar financial asset. which the reversals are recognised.

Impairment losses recognised in profit or loss for H. Repurchase and resale agreement an investment in an equity instrument is not reversed through profit or loss. Securities purchased under resale agreements are securities which the Group and the Bank had If, in a subsequent period, the fair value of a debt purchased with a commitment to resell at future dates. instrument increases and the increase can be The commitment to resell the securities is reflected as objectively related to an event occurring after the an asset on the statements of financial position. impairment loss was recognised in profit or loss, the impairment loss is reversed, to the extent that Conversely, obligations on securities sold under the asset’s carrying amount does not exceed repurchase agreements are securities which the what the carrying amount would have been had Group and the Bank have sold from its portfolio, the impairment not been recognised at the date with a commitment to repurchase at future dates. the impairment is reversed. The amount of the Such financing transactions and the obligations to reversal is recognised in profit or loss. repurchase the securities in its entirety are reflected as a liability on the statements of financial position. ii. Other assets The securities sold under repurchase agreements are treated as pledged assets and continue to be recognised The carrying amounts of other assets (except for as assets in the statements of financial position. deferred tax asset and assets arising from employee benefits) are reviewed at the end of I. Cash and cash equivalents each reporting period to determine whether there is any indication of impairment. If any such Cash and cash equivalents consist of cash and bank indication exists, then the asset’s recoverable balances and short term funds that are readily amount is estimated. convertible to known amounts of cash and which are subject to an insignificant risk of change in value, For the purpose of impairment testing, assets are with original maturity within one month. grouped together into the smallest group of assets that generates cash inflows from Cash and cash equivalents are categorised and continuing use that are largely independent of measured as loans and receivables in accordance the cash inflows of other assets or groups of with policy Note 2(f) and carried at amortised cost in assets (the “cash-generating unit”). the statements of financial position.

The recoverable amount of an asset or J. Plant and equipment cash-generating unit is the greater of its value in use and its fair value less costs to sell. In i. Recognition and measurement assessing value in use, the estimated future cash flows are discounted to their present value using Items of plant and equipment are stated at cost a pre-tax discount rate that reflects current less accumulated depreciation and accumulated market assessments of the time value of money impairment losses. and the risks specific to the asset. Cost includes expenditures that are directly An impairment loss is recognised if the carrying attributable to the acquisition of the asset and amount of an asset or its cash-generating unit any other costs directly attributable to bringing exceeds its recoverable amount. the asset to its location and working condition for its intended use, and the costs of dismantling Impairment losses are recognised in the profit or and removing the assets and restoring the site loss. Impairment losses recognised in respect of on which the assets are located. Purchased cash-generating units are allocated to reduce the software that is integral to the functionality of carrying amount of the other assets in the unit the related equipment is capitalised as part of (groups of units) on a prorata basis. Impairment that equipment. Citibank Berhad l 2011 Annual Report 051

Notes To The Financial Statements

2. Significant accounting policies (continued) Minimum lease payments made under finance leases are apportioned between the finance J. Plant and equipment (continued) expense and the reduction of the outstanding liability. The finance expense is allocated to each i. Recognition and measurement (continued) period during the lease term so as to produce a When significant parts of an item of plant and constant periodic rate of interest on the remaining equipment have different useful lives, they are balance of the liability. Contingent lease payments accounted for as separate items (major are accounted for by revising the minimum lease components) of plant and equipment. payments over the remaining term of the lease when the lease adjustment is confirmed. Gains and losses on disposal of an item of plant and equipment are determined by comparing the ii. Operating lease proceeds from disposal with the carrying amount of plant and equipment and are recognised net within “other income” or “other operating Leases, where the Group or the Bank does not expenses” respectively in the profit or loss. assume substantially all the risks and rewards of the ownership are classified as operating leases ii. Subsequent costs and, the leased assets are not recognised on statements of financial position. The cost of replacing part of an item of plant and equipment is recognised in the carrying amount of Payments made under operating leases are the item if it is probable that the future economic benefits embodied within the part will flow to the recognised in profit or loss on a straight-line basis Group and the Bank and its cost can be measured over the term of the lease unless another reliably. The carrying amount of the replaced part systematic basis is more representative of the time is derecognised to profit or loss. The costs of the pattern in which economic benefits from the leased day-to-day servicing of plant and equipment are asset are consumed. Lease incentives received are recognised in the profit or loss as incurred. recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. iii. Depreciation Contingent rentals are charged to profit or loss in the reporting period in which they are incurred. Depreciation is calculated on the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. L. Bills and acceptances payable

Depreciation is recognised in profit or loss on a Bills and acceptances payable represent the Group’s straight-line basis over the estimated useful lives and the Bank's own bills and acceptances of each part of an item of plant and equipment. rediscounted and outstanding in the market. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is M. Foreign currency reasonably certain that the Group and the Bank will obtain ownership by the end of the lease term. Transactions in foreign currencies are translated to The estimated useful lives for the current and the respective functional currencies of the Group comparative periods are as follows: entities at exchange rates at the date of the • building 40 years - 50 years transactions. • installations 8 years - 14 years • furniture and equipment 2 years - 10 years Monetary assets and liabilities denominated in foreign currencies at reporting period are Depreciation methods, useful lives and residual retranslated to the functional currency at the values are reviewed, and adjusted as appropriate exchange rate at that date. at end of the reporting period.

K. Assets under lease Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of i. Finance lease the reporting date except for those that are measured at fair value are retranslated to the Leases in terms of which the Group or the Bank functional currency at the exchange rate at the date assumes substantially all the risks and rewards of that the fair value was determined. ownership are classified as finance leases. On initial recognition the leased asset is measured at Foreign currency differences arising on retranslation an amount equal to the lower of its fair value and the present value of the minimum lease are recognised in profit or loss, except for differences payments. Subsequent to initial recognition, the arising on the retranslation of available-for-sale asset is accounted for in accordance with the equity instruments, which are recognised in other accounting policy applicable to that asset. comprehensive income. 052 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

2. Significant accounting policies (continued) A liability is recognised for the amount expected to be paid under short-term cash bonus or profit N. Income tax sharing plans if the Group and the Bank have a present legal or constructive obligation to pay this Income tax expense comprises current and amount as a result of past service provided by the deferred tax. Current tax and deferred tax are employee and the obligation can be estimated recognised in the profit or loss except to the extent reliably. that it relates to items recognised directly in equity The Group and the Bank contribute to the or other comprehensive income. Employees Provident Fund (“EPF”) for eligible employees on a monthly basis. Obligations for Current tax is the expected tax payable or receivable contributions to EPF are recognised as an expense on the taxable income or loss for the year, using tax in the statements of comprehensive income in the rates enacted or substantively enacted by the end of year to which they relate. Once the contributions the reporting period, and any adjustment to tax have been paid, the Group and the Bank have no payable in respect of previous years. further payment obligations.

Deferred tax is recognised using the liability method, ii. Defined contribution plan providing for temporary differences between the carrying amounts of assets and liabilities in the In addition to the contribution requirement by law, statements of financial position and their tax bases. the Group and the Bank are contributing additional Deferred tax is measured at the tax rates that are amounts for those employees eligible under the expected to apply to the temporary differences defined contribution plan. The contribution is when they reverse, based on the laws that have been made to Citibank Malaysia Official Staff enacted or substantively enacted by the end of the Retirement Plan ("the Plan") and is recognised as reporting period. an expense in the statements of comprehensive income as incurred. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current iii. Defined benefit plan tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same The Bank and certain related companies taxable entity, or on different tax entities, but they contribute to the Citibank Malaysia Official Staff intend to settle current tax liabilities and assets on Retirement Plan ("the Plan") for eligible officers. a net basis or their tax assets and liabilities will be Contributions are made based on an external realised simultaneously. actuarial report to the Plan, which is a defined benefit scheme and defined contribution scheme A deferred tax asset is recognised to the extent (as explained in item (ii) above), and is funded to that it is probable that future taxable profits will be the extent permitted by tax allowable Bank contributions. available against which temporary difference can be utilised. Deferred tax assets are reviewed at the The amount recognised in the statements of end of each reporting period and are reduced to financial position represents the present value of the extent that it is no longer probable that the the defined benefit obligations adjusted for related tax benefit will be realised. unrecognised actuarial gains and losses and unrecognised past service costs, and reduced by A tax incentive that is not a tax base of an asset is the fair value of the Plan’s assets. The benefit is recognised as a reduction of the expense in profit or calculated using the Projected Unit Credit Method loss as and when it is granted or claimed. Any in order to determine its present value. Any asset unutilised portion of the tax incentive is recognised as resulting from this calculation is limited to the net a deferred tax asset to the extent that it is probable total of any unrecognised actuarial losses and past that future taxable profits will be available against service costs, and the present value to any which the unutilised tax incentive can be utilised. economic benefits in the form of refunds or reductions in future contributions to the fund. O. Employee benefits Amortisation of unrecognised gains or losses are included as a component of the annual expense for i. Short-term employee benefits a year if, as of the beginning of the year, that cumulative net unrecognised gains or losses Short-term employee benefit obligations in exceeds 10% of the greater of the Plan’s liability or respect of salaries, annual bonuses, paid annual value of the Plan’s assets. If amortisation is leave and sick leave are measured on an required, the amortisation is that excess divided undiscounted basis and are expensed as the by the expected average remaining working lives related service is provided. of the employees participating in the Plan. Citibank Berhad l 2011 Annual Report 053

Notes To The Financial Statements

2. Significant accounting policies (continued) P. Foreclosed properties

O. Employee benefits (continued) Foreclosed properties are those acquired in full or partial satisfaction of debts, are stated at cost less accumulated impairment losses. iii. Defined benefit plan (continued)

Q. Provisions When the benefits of the Plan are improved, the portion of the increased benefit relating to past A provision is recognised if, as a result of a past event, service by employees is recognised as an expense the Group and the Bank have a present legal or in the profit or loss on a straight-line basis over the constructive obligation that can be estimated reliably, average period until the benefits become vested. and it is probable that an outflow of economic benefits To the extent that the benefit vests immediately, will be required to settle the obligation. Provisions are the expense is recognised in profit or loss. determined by discounting the expected future cash flows at a pre-tax rate that reflects current market iv. Share-based compensation assessments of the time value of money and the risks specific to the liability. The unwinding of the discount The Group and the Bank participate in is recognised as finance cost. equity-settled and cash-settled share based compensation plan for the employees that is R. Deposits from customers and deposits and placements of banks and financial institutions offered by the ultimate holding company, Citigroup Inc.. The fair value of the services received in Deposits from customers are stated at placement exchange for the grant of the options is recognised values and adjusted for accrued interest. Deposits as an expense in the profit or loss over the vesting and placements of banks and financial institutions periods of the grant are stated at placement values.

The total amount to be expensed over the vesting S. Profit equalisation reserves (“PER”) period is determined by reference to the fair value of the options granted, excluding the impact of PER is the amount appropriated out of the total any non-market vesting conditions. Non-market Islamic Banking gross income in order to maintain a vesting conditions are included in assumptions certain level of return to depositors which is as about the number of options that are expected to stipulated by Bank Negara Malaysia Circular on “The vest. At each reporting date, the Group and the Framework of the Rate of Return”. PER is deducted Bank revise its estimates of the number of options from the total Islamic Banking gross income in that are expected to vest. It recognises the impact deriving the net distributable gross income. The of the revision of original estimates, if any, in the amount appropriated is shared by the depositors and the Group or the Bank. profit or loss.

3. Cash and short term funds Group Bank 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Cash and balances with banks and other financial institutions 61,830 61,683 61,810 61,663 Money at call and deposit placements maturing within one month 11,906,610 10,419,350 11,906,610 10,419,350

11,968,440 10,481,033 11,968,420 10,481,013

4. Deposits and placements with banks and other financial institutions Group and Bank 2011 2010 RM’000 RM’000

Licensed banks 1,516,673 811,660 054 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

5. Financial assets held-for-trading Group and Bank 2011 2010 At fair value RM’000 RM’000

Malaysian Government Treasury Bills 101,468 101,520 Malaysian Government Securities 1,004,580 130,739 Malaysian Government Investment Issues 13,572 136,604 Bank Negara Malaysia Bills/Notes 1,217,229 1,468,506 Corporate Notes/Private debt securities - 15,094

2,336,849 1,852,463

6. Financial investments available-for-sale Group and Bank 2011 2010 At fair value RM’000 RM’000

Malaysian Government Treasury Bills/Securities* 3,368,908 2,202,157 Bank Negara Malaysia Bills - 227,218 Malaysian Government Investment Issues 1,849,101 537,506 Yankee bonds/US bonds - 131,108

5,218,009 3,097,989 At cost Unquoted securities 7,499 7,499

5,225,508 3,105,488

* Malaysian Government Securities of the Group and the Bank amounting to RM130 million at 31 December 2010 was utilised to meet the Statutory Reserve Requirement as further explained in Note 10 . Citibank Berhad l 2011 Annual Report 055

Notes To The Financial Statements

7. Loans, advances and financing

i. By type Group and Bank 2011 2010 RM’000 RM’000

Overdrafts 298,496 243,261 Term loans/financing - housing loans/financing 9,192,709 9,827,111 - hire purchase receivables 1,592 3,175 - lease receivables 698 3,678 - other term loans/financing 1,474,378 1,266,750 Bills receivable 954,240 458,410 Trust receipts 15,671 14,147 Claims on customers under acceptance credits 1,125,751 1,111,455 Staff loans 94,091 101,585 Share margin financing 182,814 189,523 Credit cards receivables 5,951,843 5,702,121 Revolving credit 1,676,429 1,197,043 Other loans 3,491 -

20,972,203 20,118,259

Unearned interest and income (30,185) (38,615)

Gross loans, advances and financing 20,942,018 20,079,644

Less: Allowance for impaired loans, advances and financing - Collective assessment allowance (365,325) (369,357) - Individual assessment allowance (219,436) (229,542)

Net loans, advances and financing 20,357,257 19,480,745

ii. By type of customer

Domestic non-bank financial institutions - others 649,573 299,856 Domestic business enterprises - small and medium enterprises 454,908 408,123 - others 3,662,378 2,727,556 Individuals 15,958,134 16,365,585 Foreign entities 217,025 278,524

20,942,018 20,079,644

056 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

7. Loans, advances and financing (continued)

iii. By interest/profit rate sensitivity Group and Bank 2011 2010 RM’000 RM’000 Fixed rate Housing loans/financing 823,612 887,577 Hire purchase receivables 1,592 3,175 Other fixed rate loans/financing 10,028,423 8,977,936 Variable rate BLR plus 9,229,388 9,825,153 Cost plus 859,003 385,803

20,942,018 20,079,644

iv. By sector

Primary agriculture 105,178 35,022 Mining and quarrying 18,991 7,708 Manufacturing (including agriculture based) 2,409,876 1,710,646 Electricity, gas and water 86,890 32,295 Construction 45,704 46,104 Wholesale, retail trade, restaurants and hotels 921,901 840,970 Transport, storage and communication 301,573 137,600 Finance, insurance, real estate and business services 800,246 512,027 Education, health and others 16,160 19,933 Household - consumption credit 6,501,532 6,246,231 - residential 9,001,842 9,623,221 - purchase of securities 182,813 189,523 - others 271,947 306,610 Other sectors 277,365 371,754

20,942,018 20,079,644

v. By purpose

Purchase of securities 182,813 189,523 Purchase of landed property 9,584,491 10,243,017 Purchase of fixed assets excluding land and building 5,406 9,545 Personal use 660,946 698,800 Credit card 5,951,859 5,702,122 Construction 22,009 8,562 Working capital 4,446,136 3,214,786 Other purposes 88,358 13,289

20,942,018 20,079,644 Citibank Berhad l 2011 Annual Report 057

Notes To The Financial Statements

7. Loans, advances and financing (continued)

vi. Residual contractual maturity Group and Bank 2011 2010 RM’000 RM’000

Maturing within one year 10,620,013 6,711,434 One to five years 714,320 3,099,068 Over 5 years 9,607,685 10,269,142

20,942,018 20,079,644

vii. By geographical distribution

Within Malaysia 20,942,018 20,079,644

8. Impaired loans, advances and financing

i. Movements in impaired loans, advances and financing are as follows: Group and Bank 2011 2010 RM’000 RM’000

At 1 January 540,814 491,317 Classified as impaired during the year 727,676 724,457 Reclassified as performing during the year (384,262) (325,418) Amount recovered (231,379) (178,916) Amount written off (162,312) (170,626)

At 31 December 490,537 540,814 Individual assessment allowance (219,436) (229,542)

Net impaired loans, advances and financing 271,101 311,272

Ratio of net impaired loans and financing to gross loans and financing less individual assessment allowance 1.31% 1.57% 058 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

8. Impaired loans, advances and financing (continued)

ii. Movements in impairment provisions for loans, advances and financing are as follows (continued):

Group and Bank 2011 2010 RM’000 RM’000 Collective assessment allowance At 1 January 369,357 360,407 (Written back)/Allowance made during the year, net (4,032) 8,950

At 31 December 365,325 369,357

As % of gross loans, advances and financing less individual assessment allowance 1.76% 1.86%

Individual assessment allowance At 1 January 229,542 221,588 Allowance made during the period 16,888 34,644 Written back during the year (19,418) (12,984) Written off during the year (7,576) (13,706)

At 31 December 219,436 229,542

iii. Impaired loans, advances and financing by sector

Primary agriculture 7,328 8,937 Mining and quarrying 373 - Manufacturing (including agriculture based) 32,041 36,178 Construction 14,934 17,026 Wholesale, retail trade, restaurants and hotels 18,082 20,070 Transport, storage and communication 84 104 Finance, insurance, real estate and business services 9,970 12,081 Household - consumption credit 86,539 116,112 - residential 299,025 307,265 - purchase of securities 20,475 20,795 Other purposes 1,686 2,246

490,537 540,814

iv. Impaired loans, advances and financing by

geographical distribution Within Malaysia 490,537 540,814 Citibank Berhad l 2011 Annual Report 059

Notes To The Financial Statements

9. Other assets Group and Bank 2011 2010 RM’000 RM’000

Interest/Income receivable 66,174 45,880 Other debtors, deposits and prepayments 414,094 264,640 Derivative assets (Note 30) 820,647 1,007,240 Tax recoverable 5,097 -

1,306,012 1,317,760

10. Statutory deposits with Bank Negara Malaysia

The non-interest bearing statutory deposits are maintained with Bank Negara Malaysia (“BNM”) in compliance with Section 37(1)(c) of the Central Bank of Malaysia Act 1958 (revised - 1994) to satisfy the Statutory Reserve Requirement (“SRR”), the amount of which is determined as a set percentage of total eligible liabilities.

In accordance with BNM’s circular titled “Regulatory Treatment related to the Statutory Reserve Requirement Incentive for Principal Dealers and Islamic Principal Dealers” issued on 10 July 2009, the Bank being a principal dealer appointed by BNM, is allowed to utilise Malaysia Government Securities (“MGS”) holdings to meet the SRR. As at 31 December 2010, MGS of the Group and the Bank with nominal amount of RM130 million are utilised for SRR determination purposes. These securities are classified under financial investments available-for-sale (Note 6).

11. Deferred tax assets

Deferred tax assets and liabilities are attributable to the followings:

Plant and Reserves equipment - - Available Capital -for-sale allowances Provisions securities Total RM’000 RM’000 RM’000 RM’000

At 1 January 2010 (8,539) 66,830 (3,149) 55,142 Recognised in profit or loss (11,055) 9,586 - (1,469) Recognised in other comprehensive income - - 5,627 5,627

At 31 December 2010 (19,594) 76,416 2,478 59,300 060 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

11. Deferred tax assets (continued)

Plant and Reserves equipment - - Available Capital -for-sale allowances Provisions securities Total RM’000 RM’000 RM’000 RM’000

At 1 January 2011 (19,594) 76,416 2,478 59,300 Recognised in profit or loss (260) (53,304) - (53,564) Recognised in other comprehensive income - - (4,940) (4,940)

At 31 December 2011 (19,854) 23,112 (2,462) 796

Deferred tax assets and liabilities are offset above as there is a legally enforceable right to set off current tax assets against current tax liabilities.

The recognised deferred tax assets and liabilities are as follows: Group and Bank 2011 2010 RM’000 RM’000 Plant and equipment - capital allowances (19,854) (19,594) Provisions 23,112 76,416 Fair value of available-for-sale securities (2,462) 2,478

796 59,300

12. Investments in subsidiary companies Bank 2011 2010 RM’000 RM’000

Unquoted shares at cost – in Malaysia 20 20

Details of the wholly owned subsidiaries are as follows:

Effective Country of Ownership Name of subsidiary Principal activity incorporation Interest 2011 2010 Citigroup Nominee (Malaysia) Sdn. Bhd. Nominee company Malaysia 100% 100% Citigroup Nominees (Tempatan) Sdn. Bhd.* Nominee company Malaysia 100% 100% Citigroup Nominees (Asing) Sdn. Bhd.* Nominee company Malaysia 100% 100%

* Wholly owned by Citigroup Nominee (Malaysia) Sdn. Bhd.

All income and expenditure arising from the activities of the subsidiaries have been recognised in the Bank’s statement of comprehensive income. Citibank Berhad l 2011 Annual Report 061

Notes To The Financial Statements

13. Plant and equipment

Building on Furniture leasehold and Group and Bank land Installations equipment Total Cost RM’000 RM’000 RM’000 RM’000

At 1 January 2010 5,877 88,041 247,073 340,991 Additions 357 9,427 69,997 79,781 Disposals - (142) (3,502) (3,644) Write offs - (56) - (56) Reclassification - (133) 133 -

At 31 December 2010/1 January 2011 6,234 97,137 313,701 417,072 Additions 347 22,489 26,347 49,183 Disposals - (5,499) (9,261) (14,760) Write offs - - (843) (843)

At 31 December 2011 6,581 114,127 329,944 450,652

Depreciation At 1 January 2010 3,644 79,696 194,987 278,327 Charge for the year 367 5,420 26,988 32,775 Disposals - (112) (2,643) (2,755) Written offs - (56) - (56) Reclassification - (35) 35 -

At 31 December 2010/1 January 2011 4,011 84,913 219,367 308,291 Charge for the year 462 6,490 28,761 35,713 Disposals - (5,412) (8,002) (13,414) Written offs - - (843) (843)

At 31 December 2011 4,473 85,991 239,283 329,747

Carrying amounts At 1 January 2010 2,233 8,345 52,086 62,664

At 31 December 2010/1 January 2011 2,223 12,224 94,334 108,781

At 31 December 2011 2,108 28,166 90,631 120,905 062 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

14. Deposits from customers

i. By type of deposit Group and Bank 2011 2010 RM’000 RM’000

Demand deposits 10,026,162 9,869,460 Saving deposits 935,372 837,370 Fixed deposits 9,559,230 11,583,915 Other deposits 9,444,737 6,393,953 Negotiable instruments of deposit 75,917 80,002 Others - cash collateral 10,168 24,163

30,051,586 28,788,863

ii. Maturity structure of fixed deposits, other deposits and negotiable instruments of deposit are as follows:

Group and Bank 2011 2010 RM’000 RM’000

Due within six months 15,085,525 13,005,161 Six months to one year 3,395,429 4,412,942 One year to three years 372,522 338,543 Three years to five years 226,408 101,224 Over five years - 200,000

19,079,884 18,057,870

iii. By type of customer Group and Bank 2011 2010 RM’000 RM’000

Government and statutory bodies 177,664 27,368 Business enterprises 17,418,167 15,065,326 Individuals 9,795,376 10,241,578 Others 2,660,379 3,454,591

30,051,586 28,788,863 Citibank Berhad l 2011 Annual Report 063

Notes To The Financial Statements

15. Deposits and placements of banks and other financial institutions Group and Bank 2011 2010 RM’000 RM’000

Licensed banks 7,777,097 2,046,727 Licensed finance companies - 276,198

7,777,097 2,322,925

16. Other liabilities Group and Bank 2011 2010 RM’000 RM’000

Interest/Profit payable 81,090 106,294 Other creditors and accruals 1,673,582 1,640,664 Provision for retirement benefits (Note 19) 701 372 Profit Equalisation Reserve (Note 37(l)) 12,391 9,187 Taxation - 45,765 Derivative liabilities (Note 30) 769,950 1,044,120

2,537,714 2,846,402

17. Share capital Group and Bank Number Number Amount of shares Amount of shares 2011 2011 2010 2010 RM’000 ’000 RM’000 ’000 Ordinary shares of RM1 each:

Authorised 500,000 500,000 500,000 500,000

Issued and fully paid 121,697 121,697 121,697 121,697

18. Reserves Group and Bank 2011 2010 RM’000 RM’000

Share premium 380,303 380,303 Statutory reserve 121,697 121,697 Fair value reserve 7,387 (6,630) Retained profits 3,388,271 2,998,408

3,897,658 3,493,778 064 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

18. Reserves (continued)

The share premium arose from the issuance of 121,696,972 ordinary shares of RM1 each at an issue price of RM4.125 per share.

The statutory reserve is maintained in compliance with Section 36 of the Banking and Financial Institutions Act 1989 and is not distributable as cash dividends. No transfers were made to the statutory reserve during the year as the Bank has met the reserve requirements.

The fair value reserve is in respect of unrealised fair value gains and losses on financial investments available-for-sale.

Subject to agreement by the Inland Revenue Board, the Bank has Section 108 tax credit and tax exempt income to frank approximately RM1.66 billion of its distributable reserves at 31 December 2011 if paid out as dividends.

The Finance Act 2007 introduced a single tier company income tax system with effect from year of assessment 2008. As such, the Section 108 tax credit balance as at 31 December 2007 will be available to the Bank until such time the credit is fully utilised or upon expiry of the six-year transitional period on 31 December 201 3, whichever is earlier.

19. Employee benefits

i. Retirement benefits

The amounts recognised in the statements of financial position are as follows: Group and Bank 2011 2010 RM’000 RM’000

Present value of the funded obligation 35,439 34,633 Fair value of plan assets (37,343) (37,488)

(1,904) (2,855) Unrecognised past service costs (12) (20) Unrecognised actuarial gains 2,617 3,247

Liability recognised in statements of financial position 701 372

The Group and the Bank make contributions to a fully funded defined benefit scheme for its employees. Contributions to the fund are made to a separately administered fund. Under the fund, eligible employees are entitled to one and a half month of the final/last drawn salary multiplied by the Plan service not in excess of 40 upon attainment of the retirement age of 55. For employees who leave before the attainment of the retirement age, the retirement benefit will be computed based on the scale rate stipulated in the rules of the Fund.

On 1 January 2007, majority of the Plan members’ benefits accrued under the Defined Benefit Plan were converted to the new Defined Contribution Plan. Only those staff who satisfied the criteria below, will continue to be maintained under the Defined Benefit Plan.

a. Age as at 31 December 2006: at least 40 years b. Years of service as at 31 December 2006: at least 5 years c. Sum of age and years of service as at 31 December 2006: at least 55 years Citibank Berhad l 2011 Annual Report 065

Notes To The Financial Statements

19. Employee benefits (continued)

i. Retirement benefits (continued)

Plan assets comprise: Group and Bank 2011 2010 RM’000 RM’000

Equities 9,709 10,984 Property 15,796 15,782 Securities 9,971 9,597 Others 1,867 1,125

37,343 37,488

Movement in the present value of the defined benefit obligations: Group and Bank 2011 2010 RM’000 RM’000

Defined benefit obligations at 1 January 34,633 34,093 Benefits paid by the plan (2,315) (2,002) Current service costs and interest 3,323 3,376 Actuarial gains (202) (834)

Defined benefit obligations at 31 December 35,439 34,633

Movement in the fair value of plan assets: Group and Bank 2011 2010 RM’000 RM’000

Fair value of plan assets at 1 January 37,488 25,972 Contributions paid into the plan 426 2,151 Benefits paid by the plan (2,315) (2,002) Expected return on plan assets 2,577 1,765 Actuarial (losses)/gains (833) 9,602

Fair value of plan assets at 31 December 37,343 37,488 066 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

19. Employee benefits (continued)

i. Retirement benefits (continued)

The amounts recognised in the statements of comprehensive income are as follows: Group and Bank 2011 2010 RM’000 RM’000

Current service costs 1,559 1,583 Interest cost 1,764 1,793 Expected return on plan assets (2,577) (1,765) Net actuarial loss recognised in the year - 618 Prior service costs 9 11

Amount included under “personnel costs” 755 2,240

Actual return on plan assets 1,745 11,367

Movement in the net liability recognised in the statements of financial position are as follows: Group and Bank 2011 2010 RM’000 RM’000

Opening net liability as at 1 January 372 283 Recommended expenses as above 755 2,240 Contributions paid (426) (2,151)

701 372

The latest valuation of the Defined Benefit Plan as at 31 December 2011 was conducted by Towers Watson (Malaysia) Sdn. Bhd.. The unfunded portion of the total liability will continue to be borne by Citibank Berhad. Projected unit credit method is used to calculate the actuarial present value of promised retirement benefits.

Principal actuarial assumptions used at the reporting date (expressed as weighted averages): Group and Bank 2011 2010

Discount rate 5.00% 5.25% Rate of increase in salary levels 7.00% 7.00% Expected long-term rate of return on plan assets 6.50% 7.00% Price inflation 3.50% 3.50%

Assumptions regarding future mortality are based on published statistics and mortality tables. The average life expectancy of an individual retiring is at the age of 55 years.

The overall expected long-term rate of return on assets is 6.5% per annum. The expected long-term rate of return is based on the portfolio as a whole and not on the sum of the returns on individual asset categories. The return is based exclusively on historical returns, without adjustments. Citibank Berhad l 2011 Annual Report 067

Notes To The Financial Statements

19. Employee benefits (continued)

i. Retirement benefits (continued)

Historical information

Group and Bank 2011 2010 2009 2008 2007 RM’000 RM’000 RM’000 RM’000 RM’000 Present value of the defined benefit obligation 35,439 34,633 34,093 26,926 25,282 Fair value of plan assets (37,343) (37,488) (25,972) (18,991) (21,295)

(Surplus)/Deficit in the plan (1,904) (2,855) 8,121 7,935 3,987 Experience adjustments arising on plan assets - losses/(gains) 833 (9,602) (2,127) 2,774 (1,132) Experience adjustments arising on plan liabilities - (gains)/losses (686) (1,342) 4,850 36 1,037 Assumption adjustment on plan liabilities - losses 484 508 566 1,262 1,251

The Group and the Bank expected RM865,040 contribution to be paid to the funded defined benefit plan in year 2012.

ii. Share option plan

The Group and the Bank have a number of stock option programmes for its officers and employees as part of a discretionary award package. Options are granted on Citigroup Inc. stock at the market value denominated in US dollar at the time of grant. Option granted in October 2011 has a six year term and will vest 33% each year over a three years period, provided the staff remains continuously employed in the Group and the Bank.

Group and Bank 2011 2010

Outstanding at 1 January 677,773 763,500 Granted - - Exercised (393) - Transfer in/(out) 21,388 (17,956) Lapsed/Cancelled (36,833) (67,771)

Outstanding at 31 December 661,935 677,773 068 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

19. Employee benefits (continued)

ii. Share option plan (continued)

Details of share options granted during the year: Group and Bank 2011 2010

Expiry dates - - Average grant price per ordinary share (RM) - - Aggregated proceeds if shares are issued (RM’000) - -

Details of share options exercised during the year:

Year of expiry 2014 - Average exercise price per ordinary share (RM) 12.97 - Aggregated issue proceeds (RM’000) 5 - Fair value at date of vesting (RM’000) 2,399 -

Terms of the options outstanding at 31 December: Group and Bank 2011 2010 Expiry dates Exercise price Jan 2011 RM 152.78 - 26,401 Aug 2011 RM 136.32 - 2,681 Jan 2012 RM 155.47 415 - Jan 2012 RM 150.84 - 414 Feb 2012 RM 133.82 26,980 - Feb 2012 RM 144.33 1,839 - Feb 2012 RM 129.19 - 1,839 Feb 2012 RM 129.85 - 28,220 Aug 2012 RM 107.74 750 - Jan 2013 RM 167.68 - 635 Jan 2013 RM 172.82 635 - Jan 2014 RM 75.39 - 11,992 Jan 2014 RM 77.70 11,188 - Oct 2015 RM 12.58 - 605,591 Oct 2015 RM 12.97 620,128 -

661,935 677,773

iii. Share capital accumulation plan (CAP)

The Group and the Bank have a number of capital accumulation programmes for its officers and employees. The Core CAP is a discretionary award of restricted shares. The number of CAP shares in a Core CAP award is calculated using a 25% discount from the market price of Citigroup common stock. Supplemental CAP is a discretionary retention award programme composed of an award of CAP shares. The difference between Supplemental CAP award and a Core CAP award is that generally, a Supplementary CAP is given in addition to the discretionary award package and the number of shares awarded will not be based on a discount from the market price of Citigroup common stock. CAP granted in 2011 typically vest 25% each year for four years, with the first vesting date occurring 12 months after the grant date. Shares acquired upon exercise of a CAP option generally may not be sold for two years following the exercise date. Citibank Berhad l 2011 Annual Report 069

Notes To The Financial Statements

19. Employee benefits (continued)

iii. Share capital accumulation plan (CAP) (continued) Group and Bank 2011 2010

Outstanding at 1 January 606,369 445,663 Granted 297,605 460,841 Vested 20,438 8,299 Lapsed/cancelled (220,324) (303,233) Net transferred out (218,563) (5,201)

Outstanding at 31 December 485,525 606,369

Details of CAP granted during the year: Group and Bank 2011 2010

Expiry dates Jan 17, 2015 Oct 19, 2014

Average grant price per ordinary share (RM) 15.95 12.54 Aggregated proceeds if shares are issued (RM’000) 4,748 5,781

Details of CAP vested during the year:

Average exercise price per ordinary share (RM) 25.02 13.44 Aggregated issue proceeds (RM’000) 6,171 10,629 Fair value at date of vesting (RM’000) 2,745 4,076

Terms of the CAP outstanding at 31 December: Group and Bank 2011 2010 Year of expiry Grant price Jan 2011 RM 167.93 - 41,071 Jan 2012 RM 62.76 19,602 - Jan 2012 RM 83.68 7,004 - Jan 2012 RM 81.19 - 133,553 Oct 2012 RM 47.96 497 - Oct 2012 RM 46.53 - 1,990 Jan 2013 RM 14.85 94,804 - Jan 2013 RM 14.41 - 194,155 Jan 2014 RM 11.17 140,932 - Jan 2014 RM 10.84 - 209,405 Jan 2015 RM 15.95 222,686 - Jan 2015 RM 12.86 - 26,195

485,525 606,369 070 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

20. Interest income Group and Bank 2011 2010 RM’000 RM’000 Loans and advances - Interest income other than recoveries from impaired loans 1,217,598 1,209,905 - Recoveries from impaired loans 45,277 36,087 Money at call and deposit placements with financial institutions 247,359 158,914 Financial assets held-for-trading 50,702 39,944 Financial investments available-for-sale 84,187 109,320 Securities purchased under resale agreements 28,367 2,138

1,673,490 1,556,308 Accretion of discount 40,081 19,152

Total interest income 1,713,571 1,575,460

21. Interest expense Group and Bank 2011 2010 RM’000 RM’000

Deposits and placements of banks and other financial institutions 31,535 25,592 Deposits from customers 478,134 350,546 Others 4,975 15,752

514,644 391,890 Citibank Berhad l 2011 Annual Report 071

Notes To The Financial Statements

22. Other operating income Group and Bank 2011 2010 RM’000 RM’000 Fee income: Commission 138,542 177,756 Service charges and fees 15,202 3,428 Guarantee fees 6,698 7,267 Bankcard fees 167,817 143,294 Insurance premium and referral 19,578 16,290 Other fee income 36,995 24,464

384,832 372,499

Trading income: Unrealised gain from revaluation of financial assets held-for-trading 977 917 Net gain from sales of securities - Financial assets held-for-trading 27,571 16,989 - Financial investments available-for-sale 7,332 58,470 Gross dividends from financial investments available-for-sale 28 58

35,908 76,434

Other income: Foreign exchange profit - unrealised gain 161,916 112,533 - realised gain 30,393 33,224 Gain/(Loss) from derivatives 47,157 (21,282) Loss on disposal of plant and equipment (1,023) (178)

238,443 124,297

659,183 573,230 072 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

23. Other operating expenses Group and Bank 2011 2010 RM’000 RM’000 Personnel costs - Salaries, allowances and bonuses 323,600 235,173 - Contributions to Employees Provident Fund 37,592 33,648 - Staff benefits and other compensations 41,300 86,950 - Others 6,927 9,985

409,419 365,756

Establishment costs - Depreciation 35,713 32,775 - Rental of premises 21,526 9,530 - Hire of equipments 2,603 25,583 - Utilities 6,677 5,593 - Others 18,436 3,398

84,955 76,879

Marketing expenses - Advertisement and promotional expenses 44,560 42,641 - Others 1,518 1,744

46,078 44,385

Administrative and general expenses - Processing cost 179,803 81,215 - Auditors’ remuneration - Statutory audit 346 338 - Other services 191 182 - Stationeries and supplies 6,748 6,049 - Communication expenses 16,055 17,058 - Maintenance of office equipment 4,385 3,641 - Others 139,866 162,687

347,394 271,170

Total other operating expenses 887,846 758,190 Citibank Berhad l 2011 Annual Report 073

Notes To The Financial Statements

23. Other operating expenses (continued) Group and Bank 2011 2010 RM’000 RM’000 i. CEO and Directors’ remuneration Executive Directors (including CEO) Salary and other remuneration, including meeting allowances 2,314 2,114 Bonuses 971 2,315 Benefits-in-kind 392 318 Share-based payment 830 (489)

Non-executive Directors Fees 300 225

4,807 4,483

ii. Other key management personnel: - short-term employee benefits 3,144 3,534

Salary Benefits- and others in- remunerations Fees Bonuses kind Total RM’000 RM’000 RM’000 RM’000 RM’000

Executive Directors and CEO Sanjeev Nanavati 2,314 - 971 392 3,677

Non-executive Directors Jonathan Christian Larsen - - - - - Tan Sri Dato’ Hj Omar Ibrahim - 100 - - 100 Dato’ Syed Sidi Idid Bin Syed Abdullah Idid - 100 - - 100 Dato’ Siow Kim Lun @ Siow Kim Lin - 100 - - 100 Agnes Liew Yun Chong - - - - - Terence Kent Cuddyre - - - - -

2,314 300 971 392 3,977 074 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

24. Allowance for loans, advances and financing Group and Bank 2011 2010 RM’000 RM’000 Allowance for loans, advances and financing:

Individual assessment - allowance made during the year 16,888 34,644 - written back (19,418) (12,984)

Collective assessment - (written back)/allowance made during the financial year, net (4,032) 8,950

Impaired loans, advances and financing - written back (79,678) (68,042) - written off 230,981 238,427

144,741 200,995

25. Taxation Group and Bank 2011 2010 RM’000 RM’000 Malaysian income tax - current year 220,302 207,671 - prior year over provision (108,536) (14,787)

111,766 192,884 Deferred tax expense - Origination and reversal of temporary differences (13,956) 1,469 - Prior year over provision 67,520 -

165,330 194,353

A reconciliation of the income tax expense between the statutory tax expense and effective tax expense is as follows:-

Group and Bank 2011 2010 RM’000 RM’000

Profit before taxation 855,193 833,606

Income tax using Malaysian tax rate of 25% 213,798 208,402 Non-deductible expenses 431 715 Others (7,883) 23

206,346 209,140 Over provision in prior year (41,016) (14,787)

165,330 194,353 Citibank Berhad l 2011 Annual Report 075

Notes To The Financial Statements

26. Earnings per share

The earnings per ordinary share has been calculated based on the net profit after taxation of RM689,863,000 ( 2010 - RM639,253,000) divided by the number of ordinary shares of RM 1 each in issue during the year of 121,696,972.

27. Dividends

Dividends recognised in the current year by the Bank are:

Sen Total per share amount Date of (net of tax) RM’000 payment 2011 Final 2010 ordinary 247 300,000 28 June 2011

2010 Final 2009 ordinary 205 250,000 25 June 2010

After the reporting period, the following dividend was proposed by the Directors. This dividend will be recognised in subsequent financial period upon approval by the equity holder of the Bank.

Sen Total per share amount (net of tax) RM’000

Final ordinary - 31 December 2011 247 300,000

28. Significant related party transactions and balances

For the purpose of these financial statements, parties are considered to be related to the Group or the Bank if the Group or the Bank has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Bank and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

The related parties of the Group and the Bank are:

(i) Parent companies

Parent companies of the Group and the Bank are Citigroup Holdings (Singapore) Pte. Ltd. and Citigroup Inc.

(ii) Other related companies

Entities which are related by virtue of having Citigroup Holdings (Singapore) Pte. Ltd. or Citibank Overseas Investment Corporation as the holding companies and having Citigroup Inc. as the ultimate holding company.

(iii) Key management personnel

Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group or the Bank either directly or indirectly. The key management personnel of the Group or the Bank includes all the Directors and certain members of senior management of the Group or the Bank. Key management personnel compensation is disclosed in Note 23. 076 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

28. Significant related party transactions and balances (continued)

Transactions and balances with parent companies and other related companies

Group and Bank Group and Bank 2011 2010 RM’000 RM’000 RM’000 RM’000 Parent Other related Parent Other related companies companies companies companies Income Interest on interest bearing deposits 66,901 49,251 48,733 70,600 Other income 24,042 348,784 17,824 185,027

90,943 398,035 66,557 255,627

Expenditure Interest on interest bearing deposits - 27,803 - 14,785 Other expenses 14,309 559,225 39,640 305,173

14,309 587,028 39,640 319,958

Amount due from Interest bearing deposits - 7,542,592 - 4,876,540 Current account balances - 1,522,230 - 641,124 Other balances 124,982 1,059,365 126,092 242,572

124,982 10,124,187 126,092 5,760,236

Amount due to Interest bearing deposits - 7,531,210 - 180,915 Current account balances 147,870 248,537 279,177 236,308 Other balances 134,169 250,231 151,790 1,630,408

282,039 8,029,978 430,967 2,047,631

All related party transactions are conducted at arm’s length basis and on normal commercial terms which are not more favourable than those generally available to public. Citibank Berhad l 2011 Annual Report 077

Notes To The Financial Statements

29. Credit transactions and exposures with connected parties Group and Bank 2011 2010 RM’000 RM’000

Outstanding credit exposures with connected parties of which: 2,438,114 1,224,100

Total credit exposure which is non-performing or in default - -

Total credit exposures 68,594,284 60,288,251

Percentage of outstanding credit exposures to connected parties - as a proportion of total credit exposures 3.55% 2.03%

- as a proportion of capital base 57.20% 32.20%

- which is non-performing or in default 0.00% 0.00%

The disclosure on Credit Transactions and Exposures with Connected Parties above are presented in accordance with para 9.1 of Bank Negara Malaysia’s revised Guidelines on Credit Transactions and Exposures with Connected Parties, which became effective on 1 January 2008.

Based on these guidelines, a connected party refers to the following:

i. Directors of the Bank and their close relatives;

ii. Controlling shareholder and his close relatives;

iii. Executive Officer, being a member of management having authority and responsibility for planning, directing and/or controlling the activities of the Bank, and his close relatives;

iv. Officers who are responsible for or have the authority to appraise and/or approve credit transactions or review the status of existing credit transactions, either as a member of a committee or individually, and their close relatives;

v. Firms, partnerships, companies or any legal entities which control, or are controlled by any person listed in (i) to (iv) above, or in which they have an interest, as a director, partner, executive officer, agent or guarantor, and their subsidiaries or entities controlled by them;

vi. Any person for whom the persons listed in (i) to (iv) above is a guarantor; and

vii. Subsidiary of or an entity controlled by the Bank and its connected parties.

Credit transactions and exposures to connected parties as disclosed above include the extension of credit facilities and/or off-balance sheet credit exposures such as guarantees, trade-related facilities and loan commitments. They also include holdings of equities and private debt securities issued by the connected parties.

The credit transactions with connected parties above are all transacted on an arm’s length basis and on terms and conditions no more favourable than those entered into with other counterparties with similar circumstances and creditworthiness. Due care has been taken to ensure that the creditworthiness of the connected party is not less than that normally required of other persons. 078 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

30. Derivative financial instruments

2011 2010 Positive Negative Positive Negative Contract fair fair Contract fair fair amount value value amount value value RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Foreign exchange related contracts: - Forwards 44,501,232 202,448 96,410 44,990,550 264,681 310,204 - Cross currency interest rate swaps 5,212,667 294,397 294,535 6,948,760 423,054 311,223 - Options 2,034,702 9,026 2,956 703,871 3,205 3,213 Interest rate contracts: - Futures 3,915,000 - - 7,384,086 - - - Swaps 22,286,981 298,967 351,462 28,199,721 281,970 372,410 - Options 474,793 397 2,494 1,082,406 2,026 5,275 Equity related contracts 178,235 7,893 7,893 1,321,876 14,927 14,956 Others 785,672 7,519 14,200 731,077 17,377 26,839

79,389,282 820,647 769,950 91,362,347 1,007,240 1,044,120

Note 9 Note 16 Note 9 Note 16 Citibank Berhad l 2011 Annual Report 079

Notes To The Financial Statements

31. Financial risk management

The Group’s and the Bank’s risk management framework are designed to monitor, evaluate and manage the principal risk they assume in conducting its activities. These risks include the following:

• credit risk • market risk • operational risk

1. Credit Risk

Credit risk is the potential for financial loss resulting from the failure of a borrower or counter party to honour its financial or contractual obligations. Credit arises in lending, trading, and derivatives transactions, securities transactions, settlement and when the Bank acts as an intermediary on behalf of its clients and other third parties.

The credit risk management process of the Bank relies on corporate-wide standards to ensure consistency and integrity, with business-specific policies and practices to ensure applicability and ownership. While business managers and independent risk management are jointly responsible for managing risk/return trade offs as well as establishing limits and risk management practices, the origination and approval roles are clearly defined and segregated. In addition to conforming to established corporate standards, independent credit risk management is responsible for establishing policies that comply with local regulations and any other relevant legal requirements.

Independent credit risk management is also responsible for implementing portfolio limits, including obligor limits through risk rating, maturity and business segments limits to ensure diversification of portfolios, monitoring business risk management performance, providing on-going assessment of portfolio credit risk and approving new products.

Continuous monitoring of credit behaviour aided by sophisticated scoring modules, plus portfolio delinquency performance allows independent credit risk management to constantly assess the health of the credit portfolio.

The Group and the Bank secure various forms of collateral to mitigate credit risk exposures. The main types of collateral obtained by the Group and the Bank to mitigate credit risk are as follows:

o for residential mortgages - charges over residential properties o for commercial property loans - charges over the properties being financed o for share margin financing - pledges over quoted securities o for other loans - charges over business assets such as premises, inventories, trade receivable or deposits 080 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

31. Financial risk management (continued)

A. Credit risk exposures and credit risk concentration

The following tables present the Group’s maximum exposure to credit risk of its on and off balance sheet financial instruments at 31 December 2011, by industry and geographical analysis, before taking into account collateral held or other credit enhancements.

i. By Industry analysis

Financial Services, Wholesale Government Insurance, Electricity, & Retail and House- Real Estate Gas & Trade, Transport, Social & Central hold & Business Services, Mining & Water Restaurants Storage & Community Other Group Banks Loans Services Agriculture Quarrying Manufacturing Supply Construction & Hotels Communication Services Sectors Total 2011 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

On-Balance Sheet Cash and short term funds 2,141,000 - 9,827,440 ------11,968,440 Deposits and placements with bank and other financial institutions - - 1,516,673 ------1,516,673

Securities purchased for resale agreements 1,218,993 ------1,218,993

Financial assets held- for-trading 2,336,849 ------2,336,849

Financial investments available-for-sale 5,218,009 ------7,499 5,225,508

Loans, advances and financing - 15,958,134 800,246 105,178 18,991 2,409,876 86,890 45,704 921,901 301,573 16,160 277,365 20,942,018

Other assets - - 947,626 10,816 747 67,573 835 20 14,156 5,997 - 258,242 1,306,012

Statutory deposits with Bank Negara Malaysia 398,080 ------398,080

11,312,931 15,958,134 13,091,985 115,994 19,738 2,477,449 87,725 45,724 936,057 307,570 16,160 543,106 44,912,573

Contingent liabilities - - 2,267,554 ------2,267,554

Commitments - 21,974,557 2,822,702 ------24,797,259

Total Credit Exposures 11,312,931 37,932,691 18,182,241 115,994 19,738 2,477,449 87,725 45,724 936,057 307,570 16,160 543,106 71,977,386 Citibank Berhad l 2011 Annual Report 081

Notes To The Financial Statements

31. Financial risk management (continued)

A. Credit risk exposures and credit risk concentration (continued)

i. By Industry analysis (continued)

Financial Services, Wholesale Government Insurance, Electricity, & Retail and House- Real Estate Gas & Trade, Transport, Social & Central hold & Business Services, Mining & Water Restaurants Storage & Community Other Group Banks Loans Services Agriculture Quarrying Manufacturing Supply Construction & Hotels Communication Services Sectors Total 2010 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

On-Balance Sheet Cash and short term funds 4,576,600 - 5,904,433 ------10,481,033 Deposits and placements with bank and other financial institutions - - 811,660 ------811,660

Securities purchased for resale agreements 404,417 ------404,417

Financial assets held- for-trading 1,837,368 - - - - - 10,095 - 5,000 - - - 1,852,463

Financial investments available-for-sale 3,097,989 ------7,499 3,105,488 Loans, advances and financing - 16,365,585 512,027 35,022 7,708 1,710,646 32,295 46,104 840,970 137,600 19,933 371,754 20,079,644

Other assets - - 624,296 1,802 2,042 87,229 173 21 13,674 17,822 3 570,698 1,317,760

9,916,374 16,365,585 7,852,416 36,824 9,750 1,797,875 42,563 46,125 859,644 155,422 19,936 949,951 38,052,465

Contingent liabilities 617 - 2,307,478 - - - - - 1,114 - - - 2,309,209

Commitments - 21,912,163 1,632,020 ------23,544,183

Total Credit Exposures 9,916,991 38,277,748 11,791,914 36,824 9,750 1,797,875 42,563 46,125 860,758 155,422 19,936 949,951 63,905,857 082 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

31. Financial risk management (continued)

A. Credit risk exposures and credit risk concentration (continued)

ii. By Geographical analysis

Hong Kong & North United Other Group Malaysia Singapore China PRC Japan Australasia America Kingdom countries Total 2011 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

On-Balance Sheet

Cash and short term funds 5,232,143 3,902,079 144,827 6,436 12,527 702,090 444,941 1,523,397 11,968,440 Deposits and placements with banks and other financial institutions 1,251,495 106,278 - 158,900 - - - - 1,516,673 Securities purchased for resale agreements 1,218,993 ------1,218,993 Financial assets held- for-trading 2,336,849 ------2,336,849 Financial investments available-for-sale 5,225,508 ------5,225,508 Loans, advances and financing 20,942,018 ------20,942,018 Other assets 758,583 14,533 681 4,904 1,520 126,964 240,823 158,004 1,306,012 Statutory deposits with Bank Negara Malaysia 398,080 ------398,080

37,363,669 4,022,890 145,508 170,240 14,047 829,054 685,764 1,681,401 44,912,573 Contingent liabilities 1,627,769 19,180 469,849 - 1,624 63,232 36,688 49,212 2,267,554 Commitments 24,797,259 ------24,797,259

Total Credit Exposures 63,788,697 4,042,070 615,357 170,240 15,671 892,286 722,452 1,730,613 71,977,386 Citibank Berhad l 2011 Annual Report 083

Notes To The Financial Statements

31. Financial risk management (continued)

A. Credit risk exposures and credit risk concentration (continued)

ii. By Geographical analysis (continued)

Hong Kong & North United Other Group Malaysia Singapore China PRC Japan Australasia America Kingdom countries Total 2010 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

On-Balance Sheet

Cash and short term funds 6,884,986 3,113,155 8,654 48,309 61,220 13,639 76,082 274,988 10,481,033 Deposits and placements with banks and other financial institutions 495,159 162,326 - 154,175 - - - - 811,660 Securities purchased for resale agreements 404,417 ------404,417 Financial assets held- for-trading 1,847,463 - - 5,000 - - - - 1,852,463 Financial investments available-for-sale 2,974,380 - - - - 131,108 - - 3,105,488 Loans, advances and financing 20,079,644 ------20,079,644 Other assets 792,891 12,958 277 20,162 513 126,856 208,795 155,308 1,317,760

33,478,940 3,288,439 8,931 227,646 61,733 271,603 284,877 430,296 38,052,465 Contingent liabilities 1,742,225 29,560 285,447 - 2,653 67,602 33,459 148,263 2,309,209 Commitments 23,544,183 ------23,544,183

Total Credit Exposures 58,765,348 3,317,999 294,378 227,646 64,386 339,205 318,336 578,559 63,905,857

The disclosures represented the Bank’s exposures except for RM20,000 cash and cash equivalents being deposited by the subsidiaries were eliminated in the above tables. 084 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

31. Financial risk management (continued)

B. Deposits and placements with banks and other financial institutions

i. Deposits and placements with banks and other financial institutions analysis by credit rating

Group and Bank 2011 2010 RM’000 RM’000

AAA 320,000 300,000 AA to AA- - 100,000 A+ to A- 1,196,673 316,501 Unrated - 95,159

1,516,673 811,660

ii. Deposits and placements with banks and other financial institutions analysis by geographical location where the credit risk of issuers reside, regardless of where the assets are booked, is as follows:

Group and Bank 2011 2010 RM’000 RM’000

Malaysia 1,251,495 495,159 Other 265,178 316,501

1,516,673 811,660

C. Other securities Group and Bank 2011 2010 RM’000 RM’000

Financial assets held-for-trading 2,336,849 1,852,463 Financial investments available-for-sale 5,225,508 3,105,488

7,562,357 4,957,951 Citibank Berhad l 2011 Annual Report 085

Notes To The Financial Statements

31. Financial risk management (continued)

C. Other securities (continued)

i. Other securities analysis by credit rating

At the reporting date, the credit quality of investment in other securities by designation of an external credit assessment institution is as follows:-

Group and Bank 2011 2010 RM’000 RM’000

AAA 6,500 11,500 A+ to A- 4,427,380 4,804,249 Unrated 3,128,477 142,202

7,562,357 4,957,951

ii. Other securities analysis by geographical location where the credit risk of issuers reside, regardless of where the assets are booked, is as follows:

Group and Bank 2011 2010 RM’000 RM’000

Malaysia 7,562,357 4,821,844 Other - 136,107

7,562,357 4,957,951

086 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

31. Financial risk management (continued)

D. Credit quality of Loans, advances and financing

Group and Bank 2011 2010 RM’000 RM’000

Loans, advances and financing - neither past due nor impaired 18,732,135 17,498,466 - past due but not impaired 1,719,346 2,040,363 - impaired 490,537 540,815

Gross amount 20,942,018 20,079,644 Individual assessment allowance (219,436) (229,542) Collective assessment allowance (365,325) (369,357)

Carrying amount 20,357,257 19,480,745

Neither past due nor impaired Included in the total loans, advances and financing neither past due nor impaired are renegotiated loans. The analysis below represents the carrying amount of loans that would otherwise be past due or impaired if their terms had not been renegotiated. These renegotiated loans are considered neither past due not impaired after they have been monitored as impaired loans until a minimum number of payments have been received under the new terms.

Group and Bank 2011 2010 RM’000 RM’000

Renegotiated loans 876,855 846,099

Past due but not impaired Analysis of loans, advances and financing to customers that are past due but not impaired analysed based on aging are as follows: Group and Bank 2011 2010 RM’000 RM’000

1 - 29 dpd 1,228,861 1,419,750 30 - 59 dpd 331,993 437,370 60 - 89 dpd 158,492 183,243 90 - 119 dpd - - 120 - 118 dpd - - >180 dpd - -

1,719,346 2,040,363 Citibank Berhad l 2011 Annual Report 087

Notes To The Financial Statements

31. Financial risk management (continued)

D. Credit quality of Loans, advances and financing (continued)

Impaired Loans and advances are classified as impaired when they meet one of the following criteria:

i. principal or interest or both are past due for three (3) months or more;

ii. where there is an individual impairment provision on the loan;

iii. impaired loans that have been rescheduled or restructured that have not met the continuous repayment behavior based on the revised rescheduled and/or restructured terms over the observation period.

Loans and advances to customers that are individually impaired analysed by age are as follows:

Group and Bank 2011 2010 RM’000 RM’000

Current 10,957 15,786 1 - 29 dpd 8,319 13,959 30 - 59 dpd 12,305 12,688 60 - 89 dpd 31,738 34,317 90 - 119 dpd 74,426 57,572 120 - 1 80 dpd 104,047 118,518 > 180 dpd 248,745 287,975

490,537 540,815

Estimated value of collaterals against past due but not impaired and impaired loans are RM766,045,000 ( 2010 - RM711,249,000).

088 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

31. Financial risk management (continued)

2. Market Risk

Market risk encompasses price risk and liquidity risk, both arising in the normal course of business operations of the Group and the Bank. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising the return on risk.

Market risk in the Group and the Bank are managed through corporate-wide standards and business-specific policies and procedures with the help of responsible personnel and committees delegated by the Board of Directors such as the Risk Management Committee, Asset and Liability Committee and Market Risk Management. The business is required to establish risk measures, limits and controls, clearly defining approved risk profiles within the parameters of the Group and the Bank’s overall risk appetite and for operating within the established market risk limit framework. Independent market risk management establishes policies and procedures, approves limits and monitors exposures against limits.

Price Risk Price risk is the risk associated to earnings arising from changes in interest rate, foreign exchange rates, equity and commodity prices and in their implied volatilities. Price risk arises in non-trading as well as trading portfolios. Price risk in non-trading portfolio is measured predominantly through earnings-at-risk and factor sensitivities supplemented with additional tools such as stress testing and cost-to-close analysis. Price risk in trading portfolios is measured through tools such as factor sensitivities, value-at-risk and stress testing.

Interest rate risk primarily results from the timing differences in the repricing of interest bearing assets, liabilities and commitments. It is also related to positions from non-interest bearing liabilities including shareholders’ funds and current accounts, as well as from certain fixed rate loans and liabilities.

The Group and the Bank are exposed to such risks associated with the effects of the fluctuations in the prevailing market interest rates on its financial positions and cash flows.

Factor sensitivities are expressed as the change in the value of a position for a defined change in a market risk factor. For the sensitivity analysis provided in this section, the Group and the Bank have used a 100 basis points movement for interest rates and a 6% movement in foreign exchange rates to measure the impact of these market risk movements on the Group and the Bank.

Interest rate risk – Sensitivity analysis At 31 December 2011, it is estimated that a general increase of 100 basis points in interest rate, with all other variables held constant, would decrease the Bank’s profit before tax by approximately RM117,588,115 whereas a general decrease of 100 basis points in interest rate, with all other variables held constant, would have an equal but opposite effect.

The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the reporting date and had been applied to the exposure to interest rate risk for both derivative and non-derivative financial instruments in existence at that date and that all other variables, in particular foreign exchange rates, remain constant. The above basis point increase or decrease represents management’s assessment of a reasonably possible change in interest rates over the period until the next annual reporting date.

Foreign currency risk – Sensitivity analysis As at 31 December 2011, it is estimated that a movement of 6% in Ringgit Malaysia (RM) against foreign currencies, with all other variables held constant, would result in maximum loss of approximately RM2,276,286.

The sensitivity analysis has been determined assuming that the change in foreign exchange rates had occurred at the reporting date and had been applied to the Group’s and the Bank’s exposure to currency risk for both derivative and non-derivative financial instruments in existence at that date, and that all other variables, in particular interest rate, remains constant. The sensitivity analysis includes balances where the denomination of the balances is in a currency other than the Ringgit Malaysia (RM).

The stated changes represent management’s assessment of reasonably possible changes in foreign exchange rates over the period until the next annual reporting date. Results of the analysis represent an aggregation of the effects on the Group’s and the Bank’s profit before tax measured in the respective functional currencies, translated into Ringgit Malaysia (RM) at the exchange rate ruling at the balance sheet date for presentation purposes. Citibank Berhad l 2011 Annual Report 089

Notes To The Financial Statements

31. Financial risk management (continued)

2. Market Risk (continued)

Liquidity Risk Liquidity risk is the risk that the Group and the Bank will not be able to meet its financial commitments when due. Under the Group’s and the Bank’s internal liquidity risk management policy, there is a set of standards for the measurement of liquidity risk in order to ensure consistency, stability in methodologies and transparency of risk. Management of liquidity is performed on a daily basis and is monitored by the Treasurer. The Asset and Liability Committee and the Treasurer undertake the joint responsibility of overall liquidity risk management which covers establishing and endorsing the annual funding and liquidity plan, liquidity limits, liquidity ratios, market triggers and periodic stress tests.

The Group and the Bank include the net cash flow position for derivatives as part of their daily liquidity reports under off balance sheet items, which are consolidated together with the on balance sheet items to monitor the overall liquidity position of the Group and the Bank. The daily report prepared to monitor the daily liquidity position is known as the Market Access Report (“MAR”). It is prepared by major currencies and it has maturity analysis ranging from overnight to more than 2 years and limits are set for each tenor bucket. Maturity mismatches are monitored through the daily MAR report for necessary treasury actions on funding and gapping.

Limits are determined by the ultimate holding company and are reviewed as often as on a quarterly basis and is done in conjunction with the liquidity stress testing.

The following table indicates the effective interest rate at the balance sheet date and periods in which the financial instruments reprice or mature, whichever is earlier.

i. Interest/profit rate risk

Effective Up to 1 > 1 - 3 > 3 - 12 > 1 - 5 Over 5 Non-interest Trading interest Group month months months years years sensitive book Total rate 2011 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

Assets Cash and short term funds 10,324,608 - - - - 1,643,832 - 11,968,440 1.55% Deposits and placements with banks and other financials institutions - 733,854 619,328 163,491 - - - 1,516,673 2.67% Securities purchased under resale agreements 1,218,993 ------1,218,993 2.10% Financial assets held-for-trading ------2,336,849 2,336,849 3.04% Financial investments available-for-sale - 307,638 1,436,145 2,807,965 673,760 - - 5,225,508 2.78% Loans, advances and financing - performing 1,725,044 1,422,520 6,993,639 632,761 9,677,517 (365,325) - 20,086,156 6.60% - impaired - - - - - 271,101 - 271,101 Other assets - - - - - 485,360 820,652 1,306,012 Statutory deposits with Bank Negara Malaysia - - - - - 398,080 - 398,080 Deferred tax assets - - - - - 796 - 796 Plant and equipment - - - - - 120,905 - 120,905

Total assets 13,268,645 2,464,012 9,049,112 3,604,217 10,351,277 2,554,749 3,157,501 44,449,513 090 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

31. Financial risk management (continued)

i. Interest/profit rate risk (continued)

Liabilities and Shareholders’ equity

Deposits from customers 24,011,170 1,485,000 3,956,486 598,930 - - - 30,051,586 1.66% Deposits and placements of banks and other financial institutions 3,365,590 3,485,651 802,972 122,884 - - - 7,777,097 0.40% Bills and acceptances payable - - - - - 63,761 - 63,761

Other liabilities - - - - - 1,767,764 769,950 2,537,714

Total liabilities 27,376,760 4,970,651 4,759,458 721,814 - 1,831,525 769,950 40,430,158 Shareholders’ equity - - - - - 4,019,355 - 4,019,355

Total liabilities and shareholders' equity 27,376,760 4,970,651 4,759,458 721,814 - 5,850,880 769,950 44,449,513

On-balance sheet interest sensitivity gap (14,108,115) (2,506,639) 4,289,654 2,882,403 10,351,277 (3,296,131) 2,387,551 Off-balance sheet interest sensitivity gap (223,464) (467,705) 811,510 92,589 95,340 - -

(14,331,579) (2,974,344) 5,101,164 2,974,992 10,446,617 (3,296,131) 2,387,551 Citibank Berhad l 2011 Annual Report 091

Notes To The Financial Statements

31. Financial risk management (continued)

i. Interest/profit rate risk (continued)

Effective Up to 1 > 1 - 3 > 3 - 12 > 1 - 5 Over 5 Non-interest Trading interest Group month months months years years sensitive book Total rate 2010 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

Assets Cash and short term funds 9,763,380 - - - - 717,653 - 10,481,033 1.50% Deposits and placements with banks and other financial institutions - 578,355 51,793 181,512 - - - 811,660 4.29% Securities purchased under resale agreements 404,417 ------404,417 1.35% Financial assets held-for-trading ------1,852,463 1,852,463 2.69% Financial investments available-for-sale - - 277,443 2,719,300 108,745 - - 3,105,488 3.39% Loans, advances and financing - performing 1,385,476 975,383 6,324,229 246,547 10,607,195 (369,357) - 19,169,473 6.71% - impaired - - - - - 311,272 - 311,272 Other assets - - - - - 310,520 1,007,240 1,317,760 Deferred tax assets - - - - - 59,300 - 59,300 Plant and equipment - - - - - 108,781 - 108,781

Total assets 11,553,273 1,553,738 6,653,465 3,147,359 10,715,940 1,138,169 2,859,703 37,621,647 092 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

31. Financial risk management (continued)

i. Interest/profit rate risk (continued)

Liabilities and Shareholders’ equity Deposits from customers 19,323,608 2,472,684 6,352,805 639,766 - - - 28,788,863 1.27% Deposits and placements of banks and other financial institutions 512,996 1,438,808 256,016 115,105 - - - 2,322,925 0.89% Bills and acceptances payable - - - - - 47,982 - 47,982 Other liabilities - - - - - 1,802,282 1,044,120 2,846,402

Total liabilities 19,836,604 3,911,492 6,608,821 754,871 - 1,850,264 1,044,120 34,006,172 Shareholders’ equity - - - - - 3,615,475 - 3,615,475 Total liabilities and Shareholders' equity 19,836,604 3,911,492 6,608,821 754,871 - 5,465,739 1,044,120 37,621,647

On-balance sheet interest sensitivity gap (8,283,331) (2,357,754) 44,644 2,392,488 10,715,940 (4,327,570) 1,815,583 Off-balance sheet interest sensitivity gap (21,735) (666,608) 4,069 844,350 (61,670) - -

(8,305,066) (3,024,362) 48,713 3,236,838 10,654,270 (4,327,570) 1,815,583 Citibank Berhad l 2011 Annual Report 093

Notes To The Financial Statements

31. Financial risk management (continued)

ii. Foreign currency risk

Foreign currency risk results in the Group's exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. The tables below summarise the RM equivalent amount of the Group's exposure to foreign currency exchange rate risk as at reporting date:

MYR USD JPY Others Group 2011 2011 2011 2011 Total 2011 RM’000 RM’000 RM’000 RM’000 RM’000

Assets Cash and short term funds 2,980,351 6,930,088 170,487 1,887,514 11,968,440 Deposits and placements with banks and other financial institutions 505,000 742,652 167,942 101,079 1,516,673 Securities purchased under resale agreements 1,218,993 - - - 1,218,993 Financial assets held- for-trading 2,336,849 - - - 2,336,849 Financial investments available-for-sale 5,225,508 - - - 5,225,508 Loans, advances and financing 18,652,984 1,537,447 156,882 9,944 20,357,257 Other assets (3,083,640) 4,901,670 868,509 (1,380,527) 1,306,012 Statutory Deposits with Bank Negara Malaysia 398,080 - - - 398,080 Deferred tax assets 796 - - - 796 Plant and equipment 120,905 - - - 120,905

Total assets 28,355,826 14,111,857 1,363,820 618,010 44,449,513

Liabilities

Deposits from customers 24,420,783 4,054,517 38,882 1,537,404 30,051,586

Deposits and placements of banks and other financial institutions 187,698 7,138,063 438,673 12,663 7,777,097

Bills and acceptances payable 913 57,499 2,372 2,977 63,761 Other liabilities (530,137) 3,382,608 885,192 (1,199,949) 2,537,714

Total liabilities 24,079,257 14,632,687 1,365,119 353,095 40,430,158 Shareholder’s equity 4,019,355 - - - 4,019,355

Total liabilities and Shareholder’s equity 28,098,612 14,632,687 1,365,119 353,095 44,449,513 094 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

31. Financial risk management (continued)

ii. Foreign currency risk (continued)

MYR USD JPY Others Group 2010 2010 2010 2010 Total 2010 RM’000 RM’000 RM’000 RM’000 RM’000

Assets Cash and short term funds 5,175,951 4,275,961 165,662 863,459 10,481,033 Deposits and placements with banks and other financial institutions 400,000 214,965 56,762 139,933 811,660 Securities purchased under resale agreements 404,417 - - - 404,417 Financial assets held- for-trading 1,852,463 - - - 1,852,463 Financial investments available-for-sale 2,974,380 131,108 - - 3,105,488 Loans, advances and financing 18,793,386 500,705 165,477 21,177 19,480,745 Other assets 9,906,252 (9,071,471) 985,692 (502,713) 1,317,760 Deferred tax assets 59,300 - - - 59,300 Plant and equipment 108,781 - - - 108,781

Total assets 39,674,930 (3,948,732) 1,373,593 521,856 37,621,647

Liabilities

Deposits from customers 22,095,674 5,676,701 28,576 987,912 28,788,863

Deposits and placements of banks and other financial institutions 539,841 1,499,724 273,162 10,198 2,322,925

Bills and acceptances payable 911 31,405 2,706 12,960 47,982 Other liabilities 12,317,226 (10,018,370) 1,064,106 (516,560) 2,846,402

Total liabilities 34,953,652 (2,810,540) 1,368,550 494,510 34,006,172 Shareholder’s equity 3,615,475 - - - 3,615,475

Total liabilities and Shareholder’s equity 38,569,127 (2,810,540) 1,368,550 494,510 37,621,647 Citibank Berhad l 2011 Annual Report 095

Notes To The Financial Statements

31. Financial risk management (continued)

iii. Analysis of assets and liabilities by remaining maturity

The following maturity profile is based on the remaining period at the balance sheet date to the contractual maturity.

N o Less than 7 days to 1 to 3 3 to 6 6 to 12 1 to 3 3 to 5 Over specific 7 days 1 month months months months years years 5 years maturity Total 2011 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Assets

Cash and short term funds 6,423,830 3,900,778 ------1,643,832 11,968,440 Deposits and placements with banks and other financial institutions - - 733,854 354,781 264,547 162,597 894 - - 1,516,673 Securities purchased under resale agreements - 1,218,993 ------1,218,993 Financial assets held-for-trading - 127,356 1,098,792 293,885 390,371 446,387 (97,677) 77,735 - 2,336,849 Financial investments available-for-sale - - 307,638 811,937 624,208 1,759,444 1,048,521 673,760 - 5,225,508 Loans, advances and financing 372,100 1,372,220 1,466,563 1,130,554 6,070,508 323,064 404,260 9,731,856 (513,868) 20,357,257 Other assets 476,993 87,648 75,400 92,727 35,722 315,181 56,571 100,344 65,426 1,306,012 Statutory Deposits with Bank Negara Malaysia ------398,080 398,080 Deferred tax assets ------796 796 Plant and equipment ------120,905 120,905

Total assets 7,272,923 6,706,995 3,682,247 2,683,884 7,385,356 3,006,673 1,412,569 10,583,695 1,715,171 44,449,513 096 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

31. Financial risk management (continued)

iii. Analysis of assets and liabilities by remaining maturity (continued)

Liabilities and Shareholders’ funds Deposits from customers 14,856,097 9,155,073 1,485,000 561,057 3,395,429 372,522 226,408 - - 30,051,586 Deposits and placements of banks and other financial institutions 1,432,250 1,933,340 3,485,651 638,927 164,045 122,884 - - - 7,777,097 Bills and acceptances payable 1,016,844 (250,384) (366,546) (336,153) - - - - - 63,761 Other liabilities 1,773,033 51,804 43,039 44,453 20,287 384,451 84,553 93,170 42,924 2,537,714

Total liabilities 19,078,224 10,889,833 4,647,144 908,284 3,579,761 879,857 310,961 93,170 42,924 40,430,158

Share capital ------121,697 121,697 Reserves ------3,897,658 3,897,658

Total equity attributable to equity holder of the bank ------4,019,355 4,019,355

Total liabilities and equity 19,078,224 10,889,833 4,647,144 908,284 3,579,761 879,857 310,961 93,170 4,062,279 44,449,513 Citibank Berhad l 2011 Annual Report 097

Notes To The Financial Statements

31. Financial risk management (continued)

iii. Analysis of assets and liabilities by remaining maturity

The following maturity profile is based on the remaining period at the balance sheet date to the contractual maturity.

N o Less than 7 days to 1 to 3 3 to 6 6 to 12 1 to 3 3 to 5 Over specific 7 days 1 month months months months years years 5 years maturity Total 2010 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Assets

Cash and short term funds 8,557,099 1,018,710 ------905,224 10,481,033 Deposits and placements with banks and other financial institutions - - 578,355 19,707 32,085 178,875 2,638 - - 811,660 Securities purchased under resale agreements - 404,417 ------404,417 Financial assets held-for-trading - 20,329 666,005 546,891 388,186 192,269 193,534 (154,751) - 1,852,463 Financial investments available-for-sale - - - 49,986 227,458 2,009,960 709,339 108,745 - 3,105,488 Loans, advances and financing 205,476 971,738 1,022,388 452,409 6,093,780 119,013 369,641 10,352,473 (106,173) 19,480,745 Other assets 323,798 72,516 138,915 230,998 32,102 283,367 107,563 69,729 58,772 1,317,760 Deferred tax assets ------59,300 59,300 Plant and equipment ------108,781 108,781

Total assets 9,086,373 2,487,710 2,405,663 1,299,991 6,773,611 2,783,484 1,382,715 10,376,196 1,025,904 37,621,647 098 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

31. Financial risk management (continued)

iii. Analysis of assets and liabilities by remaining maturity (continued)

Liabilities and Shareholders’ funds Deposits from customers 11,988,182 7,335,425 2,472,684 1,928,144 4,424,662 368,565 271,201 - - 28,788,863 Deposits and placements of banks and other financial institutions 303,475 209,521 1,438,808 226,531 29,484 1,582 113,524 - - 2,322,925 Bills and acceptances payable 1,019,456 (289,259) (497,553) (184,662) - - - - - 47,982 Other liabilities 1,835,756 75,224 154,836 94,731 84,948 275,760 197,010 60,481 67,656 2,846,402

Total liabilities 15,146,869 7,330,911 3,568,775 2,064,744 4,539,094 645,907 581,735 60,481 67,656 34,006,172

Share capital ------121,697 121,697 Reserves ------3,493,778 3,493,778

Total equity attributable to equity holder of the bank ------3,615,475 3,615,475

Total liabilities and equity 15,146,869 7,330,911 3,568,775 2,064,744 4,539,094 645,907 581,735 60,481 3,683,131 37,621,647 Citibank Berhad l 2011 Annual Report 099

Notes To The Financial Statements

31. Financial risk management (continued)

iv. Analysis of financial liabilities by contractual undiscounted cash flows

The table below details the remaining contractual maturities at the balance sheet date of the Group’s financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or if floating, based on rates current at the balance sheet date) and the earliest date the Group can be required to pay.

Total contractual Over 1 Over 3 Over Carrying undiscounted 1 month month to months to 1 year to Over Group Amount cash flows or less 3 months 1 year 5 years 5 years 2011 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Financial liabilities

Deposits from customers 30,051,586 30,207,246 24,131,510 1,405,722 4,060,241 609,773 - Deposits and placements of banks and other financial institutions 7,777,097 7,781,241 3,365,836 3,487,778 804,141 123,486 - Bills and acceptances payable 63,761 63,761 756,769 (359,864) (333,144) - - Other liabilities 2,537,714 2,537,714 1,847,240 50,237 72,927 472,592 94,718

Total 40,430,158 40,589,962 30,101,355 4,583,873 4,604,165 1,205,851 94,718

Total contractual Over 1 Over 3 Over Carrying undiscounted 1 month month to months to 1 year to Over Group Amount cash flows or less 3 months 1 year 5 years 5 years 2010 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Financial liabilities

Deposits from customers 28,788,863 28,932,550 21,242,320 1,512,703 5,523,671 623,834 30,022 Deposits and placements of banks and other financial institutions 2,322,925 2,323,975 2,164,426 605 42,985 115,959 - Bills and acceptances payable 47,982 47,982 730,196 (497,553) (184,661) - - Other liabilities 2,846,402 2,846,402 1,978,637 154,835 179,679 472,770 60,481

Total 34,006,172 34,150,909 26,115,579 1,170,590 5,561,674 1,212,563 90,503 100 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

31. Financial risk management (continued)

3. Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events. It includes reputation and franchise risk associated with business practices or market conduct that the Group and the Bank may undertake and includes the risk of failing to comply with applicable laws, regulations and Citigroup policies.

Operational risk is inherent in the Group’s and the Bank’s business activities and is managed through an overall framework with checks and balances that include recognised ownership of the risk by businesses and independent risk management oversight. The Group and the Bank mitigate their operational risk by setting up its key controls and assessments according to Citigroup’s and Regulators’ standards. They are also evaluated, monitored, and managed by its sound governance structure.

The Group and the Bank’s Self Assessments and Operational Risk Framework include the Risk and Control Self-Assessment and the Operational Risk Policy, and define the Group’s and the Bank’s approach to operational risk management. The objective of the policy is to establish a consistent approach to assessing relevant risks and the overall control environment across the Group and the Bank, to facilitate adherence to regulatory requirements and other corporate initiatives.

32. Financial assets and liabilities

32.1 Categories of financial instruments

The table below provides an analysis of financial instruments categorised as follows:

a. Loans and receivables (“L&R”); b. Fair value through profit or loss (“FVTPL”): - Held for trading (“HFT”); c. Available-for-sale financial assets (“AFS”); d. Other liabilities (“OL”). Citibank Berhad l 2011 Annual Report 101

Notes To The Financial Statements

32. Financial assets and liabilities (continued)

32.1 Categories of financial instruments (continued)

Carrying L&R/ FVTPL amount (OL) -HFT AFS Group RM’000 RM’000 RM’000 RM’000 2011

Financial Assets Cash and short-term funds 11,968,440 11,968,440 - - Deposits and placements with banks and other financial institutions 1,516,673 1,516,673 - - Securities purchased under resale agreements 1,218,993 1,218,993 - - Financial assets held-for-trading 2,336,849 - 2,336,849 - Financial investments available-for-sale 5,225,508 - - 5,225,508 Loans, advances and financing 20,357,257 20,357,257 - - Derivatives financial assets 820,647 - 820,647 - Interest/Income receivable 66,174 66,174 - -

Total financial assets 43,510,541 35,127,537 3,157,496 5,225,508

Financial Liabilities Deposits from customers 30,051,586 30,051,586 - - Deposits and placements of banks and other financial institutions 7,777,097 7,777,097 - - Bills and acceptances payable 63,761 63,761 - - Derivatives financial liabilities 769,950 - 769,950 - Interest/Profit payable 81,090 81,090 - -

Total financial liabilities 38,743,484 37,973,534 769,950 - 102 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

32. Financial assets and liabilities (continued)

32.1 Categories of financial instruments (continued)

Carrying L&R/ FVTPL amount (OL) -HFT AFS Group RM’000 RM’000 RM’000 RM’000 2010

Financial Assets Cash and short-term funds 10,481,033 10,481,033 - - Deposits and placements with banks and other financial institutions 811,660 811,660 - - Securities purchased under resale agreements 404,417 404,417 - - Financial assets held-for-trading 1,852,463 - 1,852,463 - Financial investments available-for-sale 3,105,488 - - 3,105,48 Loans, advances and financing 19,480,745 19,480,745 - - Derivatives financial assets 1,007,240 - 1,007,240 - Interest/Income receivable 45,880 45,880 - -

Total financial assets 37,188,926 31,223,735 2,859,703 3,105,488

Financial Liabilities Deposits from customers 28,788,863 28,788,863 - - Deposits and placements of banks and other financial institutions 2,322,925 2,322,925 - - Bills and acceptances payable 47,982 47,982 - - Derivatives financial liabilities 1,044,120 - 1,044,120 - Interest/Profit payable 106,294 106,294 - -

Total financial liabilities 32,310,184 31,266,064 1,044,120 - Citibank Berhad l 2011 Annual Report 103

Notes To The Financial Statements

32. Financial assets and liabilities (continued)

32.2 Fair value of financial instruments

The following table summarises the fair values of the financial assets and liabilities carried on the statements of financial position as at 31 December of the Group.

Group Carrying Fair Carrying Fair value value value value 2011 2011 2010 2010 RM’000 RM’000 RM’000 RM’000

Cash and short term funds 11,968,440 11,968,440 10,481,033 10,481,033 Deposits and placements with banks and other financial institutions 1,516,673 1,516,534 811,660 822,904 Securities purchased under resale agreements 1,218,993 1,218,993 404,417 404,417 Financial assets held-for-trading 2,336,849 2,336,849 1,852,463 1,852,463 Financial investments available-for-sale 5,225,508 5,225,508 3,105,488 3,105,488 Loans, advances and financing 20,357,257 20,234,356 19,850,102 19,018,880 Other assets 1,306,012 1,306,012 1,317,760 1,317,760

Deposits from customers 30,051,586 30,051,442 28,788,863 28,790,690 Deposits and placements of banks and other financial institutions 7,777,097 7,777,097 2,322,925 2,322,930 Bills and acceptances payable 63,761 63,761 47,982 47,982 Other liabilities 2,537,714 2,537,714 2,846,402 2,846,402

The methods and assumptions used in estimating the fair values of financial instruments are as follows:

a. Cash and Short Term Funds, and Securities Purchased under Resale Agreements

The carrying amounts are a reasonable estimate of the fair values because of their short-term nature.

b. Deposits and Placements with Financial Institutions

The fair values of deposits and placements with remaining maturities less than one year are estimated to approximate their carrying values. For deposits and placements with maturities of more than one year, the fair values are estimated based on discounted cash flows using the prevailing market rates of similar remaining maturities.

c. Financial Assets Held-for-Trading, Financial Investments Available-for-Sale and Financial Investments Held-to-Maturity

The fair values are estimated based on quoted or observable market prices as at statements of financial position date. Where such quoted or observable market prices are not available, the fair values are estimated using pricing models or discounted cash flow techniques. Where discounted cash flow technique is used, the expected future cash flows are discounted using prevailing market rates for similar instruments as at statements of financial position date. 104 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

32. Financial assets and liabilities (continued)

32.2 Fair value of financial instruments (continued)

d. Loans, Advances and Financing

The fair values of fixed rate loans with remaining maturity of less than one year and variable rate loans are estimated to approximate their carrying values. For fixed rate loans and Islamic loans with maturities of more than one year, the fair values are estimated based on expected future cash flows of contractual instalment payments and discounted at prevailing rates at statements of financial position date offered for similar loans to new borrowers with similar credit profiles, where applicable. In respect of impaired loans, the fair values are deemed to approximate the carrying values, net of individual assessment allowance for bad and doubtful debts and financing. Collective assessment allowance is excluded from the carrying value.

e. Deposits from Customers and Deposits and Placements of Banks and Other Financial Institutions

The fair values for deposit liabilities payable on demand (demand and savings deposits) or with remaining maturities of less than one year are estimated to approximate their carrying values at statements of financial position date. The fair values of fixed deposits with remaining maturities of more than one year are estimated based on discounted cash flows using rates currently offered for deposits of similar remaining maturities. The fair values of Islamic deposits are deemed to approximate their carrying values as at statements of financial position date as the profit rates are determined at the end of their holding periods based on the profit generated from the assets invested. For negotiable instrument of deposits, the estimated fair values are based on quoted or observable market prices at the statements of financial position date. Where such quoted or observable market prices are not available, the fair values of negotiable instruments of deposits are estimated using discounted cash flow techniques.

f. Bills and Acceptances Payable

The carrying amounts are a reasonable estimate of their fair values because of their short-term nature.

g. Subordinated Loan

The carrying amount of the subordinated loan approximates fair value due to its variable interest rate.

h. Other Assets and Other Liabilities

The fair values of other assets and other liabilities are assumed to approximate their carrying values due to the short term nature of these financial instruments or the fact that they are derived by using the market rates at reporting date. Citibank Berhad l 2011 Annual Report 105

Notes To The Financial Statements

32. Financial assets and liabilities (continued)

32.3 Fair value hierarchy

Comparative figures have not been presented for 31 December 2010 by virtue of paragraph 44G of FRS 7.

The table below analyses financial instruments carried at fair value by valuation method. The different levels have been defined as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). • Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Level 1 Level 2 Level 3 Total Group and Bank RM’000 RM’000 RM’000 RM’000 2011 Financial assets Financial investments available-for-sale 5,218,009 - - 5,218,009 Financial assets held-for-trading 2,336,849 - - 2,336,849 Derivative financial assets - 830,208 11,392 841,600

7,554,858 830,208 11,392 8,396,458

Financial liabilities Derivative financial liabilities - 1,404,357 10,006 1,414,363

- 1,404,357 10,006 1,414,363 106 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

32. Financial assets and liabilities (continued)

32.3 Fair value hierarchy (continued)

The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy:

Group and Bank 2011 RM’000 Financial assets Balance at 1 January 14,148 Total lossed recognised in profit or loss: Attributable to losses relating to assets or liabilities that: - have not been realised (2,756)

Balance at 31 December 11,392

Group and Bank 2011 RM’000 Financial liabilities Balance at 1 January 2,850 Total gains recognised in profit or loss: Attributable to gains relating to assets or liabilities that: - have not been realised 7,156

Balance at 31 December 10,006

The unrealised gains/(losses) have been recognised in other operating income/expenses in profit or loss.

Changing one or more of the inputs to reasonable alternative assumptions would not change the value significantly for the financial assets in Level 3 of the fair value hierarchy. Citibank Berhad l 2011 Annual Report 107

Notes To The Financial Statements

33. Lease commitments

The Group and the Bank have lease commitments in respect of rented premises and equipment for hire, all of which are classified as operating leases. A summary of the non-cancellable long term commitments, net of sub leases are as follows:

Group and Bank 2011 2010 RM’000 RM’000

Within 1 year 25,953 24,355 Between 1 and 5 years 6,199 27,570

34. Capital commitments Group and Bank 2011 2010 RM’000 RM’000 Capital expenditures: Authorised and contracted for 21,181 49,627 108 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

35. Capital adequacy

A. The capital adequacy ratios are as follows: Group and Bank 2011 2010 RM’000 RM’000 Computation of Total Risk Weighted Assets (“RWA”) Total credit RWA 22,272,830 19,954,371 Total market RWA 2,019,640 2,398,682 Total operational RWA 3,525,964 3,550,272

Total Risk Weighted Assets 27,818,434 25,903,325

Computation of Capital Ratios Tier 1 Capital 4,008,709 3,565,282 Capital Base* 4,262,475 3,801,235

Before deducting proposed dividends: Core capital ratio 14.41% 13.76% Risk weighted capital ratio 15.32% 14.67%

After deducting proposed dividends: Core capital ratio 13.33% 12.61% Risk weighted capital ratio 14.24% 13.52%

* In arriving at the capital base used in the ratio calculations of the Group and the Bank, the proposed dividends were not deducted.

Detailed information on the risk exposures above are disclosed in the Pillar 3 disclosures of the annual report as prescribed under BNM’s Risk Weighted Capital Adequacy Framework (Basel II) – Disclosures requirements (Pillar 3). Citibank Berhad l 2011 Annual Report 109

Notes To The Financial Statements

35. Capital adequacy 35. Capital adequacy (continued)

A. The capital adequacy ratios are as follows: With effect from 1 January 2010, the capital adequacy ratios of the Group and the Bank are computed in accordance with Bank Negara Malaysia’s revised Risk-Weighted Capital Adequacy Framework (RWCAF-Basel II). The Group and the Bank have Group and Bank adopted the Standardised Approach for Credit Risk and Market Risk, and the Basic Indicator Approach for Operational Risk. 2011 2010 The minimum regulatory capital adequacy requirement is 8% for the risk-weighted capital ratio. RM’000 RM’000 Computation of Total Risk Weighted Assets B. The components of Tier I and Tier II Capital are as follows: (“RWA”) Group and Bank Total credit RWA 22,272,830 19,954,371 2011 2010 Total market RWA 2,019,640 2,398,682 RM’000 RM’000 Total operational RWA 3,525,964 3,550,272 Tier I Capital Paid up ordinary share capital 121,697 121,697 Total Risk Weighted Assets 27,818,434 25,903,325 Share premium 380,303 380,303 Retained profits 3,388,271 2,998,408 Computation of Capital Ratios Other reserves 121,697 121,697 Tier 1 Capital 4,008,709 3,565,282 Less: Deferred tax assets (3,259) (56,823) Capital Base* 4,262,475 3,801,235

Total Tier I Capital (Core Capital) 4,008,709 3,565,282 Before deducting proposed dividends: Core capital ratio 14.41% 13.76% Tier II Capital Risk weighted capital ratio 15.32% 14.67% Collective assessment allowance* 253,786 235,973

After deducting proposed dividends: Total Tier II Capital 253,786 235,973 Core capital ratio 13.33% 12.61% Risk weighted capital ratio 14.24% 13.52% Total Eligible Tier II 253,786 235,973 Less: Investments in subsidiary companies (20) (20)

* In arriving at the capital base used in the ratio calculations of the Group and the Bank, the proposed dividends were not deducted. Capital Base 4,262,475 3,801,235

Detailed information on the risk exposures above are disclosed in the Pillar 3 disclosures of the annual report as * Excludes collective assessment allowance on impaired loans restricted from Tier II Capital by BNM of RM111.5 million prescribed under BNM’s Risk Weighted Capital Adequacy Framework (Basel II) – Disclosures requirements (Pillar 3). (2010: RM133.4 million). 110 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

36. Off-balance sheet exposures

The off-balance sheet exposures and their related counterparty credit risk of the Group and the Bank are as follows:

2011 Credit Risk Group and Bank Principal equivalent weighted amount amount assets Nature of item RM’000 RM’000 RM’000

Direct credit substitutes 1,707,320 1,707,320 1,410,933 Transaction related contingent items 399,731 199,865 158,071 Short term self liquidating trade related contingencies 148,283 29,657 22,854 Forward asset purchases 12,220 12,220 6,110 Foreign exchange related contracts: One year or less 24,279,480 568,900 387,454 Over one year to five years 4,180,829 532,616 322,054 Over five years 91,650 18,855 18,855 Interest/Profit rate related contracts: One year or less 6,343,210 18,265 7,496 Over one year to five years 14,940,969 474,983 158,715 Over five years 2,342,535 248,393 110,993 Equity related contracts: One year or less 54,639 4,577 1,648 Over one year to five years 123,596 16,482 8,593 Over five years - - - Debt security contracts and other commodity contracts: One year or less - 3,687 1,843 Over one year to five years 210,358 27,579 23,095 Over five years - - - Other commitments, such as formal standby facilities and credit lines, with an original maturity up to one year 990,462 198,092 198,092 Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year 598,618 299,309 227,000 Any commitments that are unconditionally cancelled at any time by the Bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrower’s creditworthiness 5,376,095 - - Unutilised credit card lines 17,832,083 3,566,418 2,677,910

Total 79,632,078 7,927,218 5,741,716 Citibank Berhad l 2011 Annual Report 111

Notes To The Financial Statements

36. Off-balance sheet exposures (continued)

The Off-balance sheet exposures and their related counterparty credit risk of the Group and the Bank are as follows: (continued)

2010 Credit Risk Group and Bank Principal equivalent weighted amount amount assets Nature of item RM’000 RM’000 RM’000

Direct credit substitutes 1,489,992 1,489,992 1,288,190 Transaction related contingent items 395,970 197,985 180,418 Short term self liquidating trade related contingencies 422,631 84,526 127,781 Forward asset purchases 617 617 - Foreign exchange related contracts: One year or less 24,729,003 758,795 561,289 Over one year to five years 3,637,939 539,734 321,023 Over five years - - - Interest/Profit rate related contracts: One year or less 7,896,887 37,105 13,589 Over one year to five years 16,604,797 586,871 255,311 Over five years 1,800,014 191,416 64,169 Equity related contracts: One year or less 388,457 25,785 12,867 Over one year to five years 153,686 24,797 12,399 Over five years - - - Debt security contracts and other commodity contracts: One year or less 175,461 34,810 32,976 Over one year to five years - - - Over five years - - - Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year 421,905 210,952 158,455 Any commitments that are unconditionally cancelled at any time by the Bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrower’s creditworthiness 5,014,737 - - Unutilised credit card lines 18,107,541 3,621,508 2,722,693

Total 81,239,637 7,804,893 5,751,160 112 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

37. The operations of Islamic Banking

Statements of financial position as at 31 December 2011

Group and Bank 2011 2010 RM’000 RM’000 Assets Cash and short term funds (a) 68,863 394,301 Financial assets held-for-trading (b) - 343,179 Financial investments available-for-sale (c) 431,792 271,553 Financing, advances and other loans (d) 444,160 500,800 Deferred tax assets 239 1,142 Other assets (f) 15,593 164,651

Total assets 960,647 1,675,626

Liabilities Deposits from customers (g) 649,448 1,089,505 Deferred tax liabilities - - Other liabilities (h) 85,107 382,071

Total liabilities 734,555 1,471,576

Islamic banking funds (i) 226,092 204,050

Total liabilities and Islamic banking funds 960,647 1,675,626

Off-balance sheet exposures (s) 658,992 1,534,730

The notes on pages 116 to 133 are an integral part of these financial statements. Citibank Berhad l 2011 Annual Report 113

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

Statements of comprehensive income for financial year ended 31 December 2011

Group and Bank 2011 2010 RM’000 RM’000

Income derived from investment of depositors’ funds and others (j) 41,732 41,197 Provision for financing, advances and other loans (k) 822 309 Transfer to Profit Equalisation Reserve (l) (3,204) (9,164)

Total attributable income 39,350 32,342 Income attributable to depositors (m) (14,240) (8,461)

Total attributable to the Bank 25,110 23,881 Income derived from investment of Islamic Banking Capital Funds (n) 5,382 12,419

Total net income 30,492 36,300 Other operating expenses (p) (2,857) (4,696)

Profit before taxation 27,635 31,604

Tax expense (q) (6,799) (8,212)

Profit for the year 20,836 23,392

Other comprehensive income/(loss), net of income tax Net gain/(loss) on revaluation of financial investments available-for-sale 1,206 (1,549)

Other comprehensive income/(loss) for the year, net of income tax 1,206 (1,549)

Total comprehensive income for the year 22,042 21,843

Profit for the year attributable to: Equity holder of the Bank 20,836 23,392

Total comprehensive income attributable to: Equity holder of the Bank 22,042 21,843

The notes on pages 116 to 133 are an integral part of these financial statements.

114 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

Statements of changes in Islamic Banking Funds for the year ended 31 December 2011

Group and Bank Capital Fair value Retained funds reserve profits Total RM’000 RM’000 RM’000 RM’000

At 1 January 2010 20,000 885 161,322 182,207 Fair value of available-for-sale financial assets - (1,549) - (1,549) Total other comprehensive expense for the year - (1,549) - (1,549) Profit for the year - - 23,392 23,392 Total comprehensive (expense)/ income for the year - (1,549) 23,392 21,843

At 31 December 2010/ 1 January 2011 20,000 (664) 184,714 204,050 Fair value of available-for-sale financial assets - 1,206 - 1,206 Total other comprehensive income for the year - 1,206 - 1,206 Profit for the year - - 20,836 20,836 Total comprehensive income for the year - 1,206 20,836 22,042

At 31 December 2011 20,000 542 205,550 226,092

Note 37(i)

The notes on pages 116 to 133 are an integral part of these financial statements. Citibank Berhad l 2011 Annual Report 115

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

Statements of cash flows for financial year ended 31 December 2011

Group and Bank 2011 2010 RM’000 RM’000 Cash flows from operating activities Profit before taxation 27,635 31,604 Adjustments for: Amortisation of premium less accretion of discount of investment securities 491 208 Allowance for bad and doubtful debts (net of write-back) (822) (309) Profit Equalisation Reserve 3,204 9,164 Gain from disposal of financial investments available-for-sale (945) (996) Mark-to-market gain on financial assets held-for-trading (88) (2,654)

Operating profit before working capital changes 29,475 37,017 Changes in working capital: Financial assets held-for-trading 343,267 (275,128) Financing, advances and other loans 57,462 26,511 Other assets 149,058 (72,935) Deposits from customers (440,057) (542,911) Other liabilities (298,864) 222,917

Cash used in operating activities (159,659) (604,529) Income taxes paid (8,994) (8,212)

Net cash used in operating activities (168,653) (612,741)

Cash flows from investing activities Purchase of financial investments available-for-sale (424,780) (273,805) Proceeds from disposal of financial investments available-for-sale 267,995 402,387

Net cash (used in)/from investing activities (156,785) 128,582

Net decrease in cash and cash equivalents (325,438) (484,159) Cash and cash equivalents at 1 January 394,301 878,460

Cash and cash equivalents at 31 December (Note 37(a)) 68,863 394,301

The notes on pages 116 to 133 are an integral part of these financial statements. 116 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

a. Cash and short term funds Group and Bank 2011 2010 RM’000 RM’000 Cash and balances with banks and other financial institutions 2,863 4,301 Money at call and deposit placements maturing within one month 66,000 390,000

68,863 394,301

b. Financial assets held-for-trading Group and Bank 2011 2010 RM’000 RM’000 At fair value

Bank Negara Malaysia Islamic Bills - 336,868 Malaysian Government Treasury Bills - 6,311

- 343,179

c. Financial investments available-for-sale Group and Bank 2011 2010 RM’000 RM’000 At fair value

Malaysian Government Investment Issues 431,792 271,553

431,792 271,553 Citibank Berhad l 2011 Annual Report 117

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

d. Financing, advances and other loans

i. By type Group and Bank 2011 2010 RM’000 RM’000 Term financing - Housing loans/financing 475,960 536,474 - Hire purchase receivables 1,592 3,175 - Lease receivables 631 2,878 - Other term loans/financing - 42

478,183 542,569 Unearned income (25,140) (32,059)

Gross financing, advances and other loans 453,043 510,510 Less: Allowance for impaired financing, advances and other loans - Collective assessment allowance (6,764) (7,626) - Individual assessment allowance (2,119) (2,084)

Total net financing, advances and other loans 444,160 500,800

ii. By contract

Bai’Bithamin Ajil 34,701 42,101 Ijarah Muntahia Bittamilik 2,223 6,095 Diminishing Musharakah 416,119 462,314

453,043 510,510

iii. By type of customer

Domestic business enterprises - Small and medium enterprises 2,206 5,812 - Others 2,419 2,829 Individuals 448,418 501,869

453,043 510,510 118 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

d. Financing, advances and other loans (continued)

iv. By profit rate sensitivity Group and Bank 2011 2010 RM’000 RM’000 Fixed rate - Housing loans/financing 450,820 504,416 - Hire purchase receivables 1,592 3,174 - Other fixed rate/financing 631 2,920

453,043 510,510

v. By sector

Manufacturing (including agriculture based) 2,156 3,923 Wholesale, retail trade, restaurants and hotels - 98 Transport, storage and communication 67 2,040 Finance, insurance, real estate and business services - 33 Household - residential 448,418 501,869 Other sectors 2,402 2,547

453,043 510,510

vi. By purpose

Purchase of landed property 450,820 504,416 Purchase of fixed assets excluding land and building 2,223 6,094

453,043 510,510 Citibank Berhad l 2011 Annual Report 119

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

e. Impaired financing, advances and other loans

i. Movements in impaired financing, advances and other loans are as follows: Group and Bank 2011 2010 RM’000 RM’000

At 1 January 13,257 10,215 Classified as impaired during the year 57 8,987 Amount recovered (3,685) (3,200) Amount written off - (2,745)

At 31 December 9,629 13,257 Individual assessment allowance (2,119) (2,084)

Net impaired financing, advances and other loans 7,510 11,173

Ratio of net impaired financing, advances and other loans to total gross financing, advances and other loans less individual assessment allowance 1.67% 2.20%

ii. Movements in impaired financing, advances and other loans are as follows:

Group and Bank 2011 2010 RM’000 RM’000 Collective assessment allowance At 1 January 7,626 8,026 Allowance written back during the year (862) (400)

At 31 December 6,764 7,626

As % of gross financing, advances and other loans less individual assessment allowance 1.50% 1.50% 120 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

e. Impaired financing, advances and other loans (continued)

ii. Movements in impaired financing, advances and other loans are as follows (continued):

Group and Bank 2011 2010 RM’000 RM’000 Individual assessment allowance At 1 January 2,084 4,743 Allowance made during the year 40 203 Amount recovered - (117) Amount written off (6) (2,745)

At 31 December 2,118 2,084

iii. Impaired financing, advances and other loans by sector

Group and Bank 2011 2010 RM’000 RM’000

Manufacturing (including agriculture based) 1,380 1,446 Household - residential 8,249 11,811

9,629 13,257

f. Other assets Group and Bank 2011 2010 RM’000 RM’000

Profit receivables 4,440 3,666 Other debtors, deposits and prepayments 8,529 14,760 Revaluation gain on profit rate undertaking contracts (Note 37(t)) 2,624 146,225

15,593 164,651 Citibank Berhad l 2011 Annual Report 121

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

g. Deposits from customers

i. By type of deposit Group and Bank 2011 2010 RM’000 RM’000 Non-Mudharabah Fund Demand deposits 495,235 878,181 Saving deposits 69,912 69,203 Other deposits 48,247 104,349

Mudharabah Fund General investment deposits 36,054 37,772

649,448 1,089,505

ii. By type of customer Group and Bank 2011 2010 RM’000 RM’000

Government and statutory bodies 8,339 24 Business enterprises 208,987 642,811 Individuals 333,959 302,084 Others 98,163 144,586

649,448 1,089,505 122 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

h. Other liabilities Group and Bank 2011 2010 RM’000 RM’000

Profit payable 8,846 11,783 Other creditors and accruals 61,246 214,876 Profit Equalisation Reserve (see Note 37(l)) 12,391 9,187 Revaluation loss on profit rate undertaking contracts (Note 37(t)) 2,624 146,225

85,107 382,071

i. Islamic banking funds Group and Bank 2011 2010 RM’000 RM’000

Fund allocated 20,000 20,000 Fair value reserve 542 (664) Retained earnings 205,550 184,714

226,092 204,050

j. Income derived from investment of depositors’ funds and others

Group and Bank 2011 2010 RM’000 RM’000 Income derived from investment of: (i) General investment deposits 39,397 36,582 (ii) Other deposits 2,335 4,615

41,732 41,197 Citibank Berhad l 2011 Annual Report 123

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

j. Income derived from investment of depositors’ funds and others (continued)

i. Income derived from investment of general deposits

Group and Bank 2011 2010 RM’000 RM’000 Finance income and hibah Financing, advances and other loans 18,916 18,120 Money at call and placements with financial institutions 8,245 5,217 Income from financial investments available- for-sale 10,046 9,205

37,207 32,542 Accretion of discount less amortisation of premium 1,966 3,010

Total finance income and hibah 39,173 35,552

Other operating income Fee income 224 1,030

Income from general investment deposits 39,397 36,582 124 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

j. Income derived from investment of depositors’ funds and others (continued)

ii. Income derived from investment of other deposits Group and Bank 2011 2010 RM’000 RM’000 Finance income and hibah Financing, advances and other loans 1,121 2,286 Money at call and placements with financial institutions 489 658 Income from financial investments available- for-sale 596 1,161

2,206 4,105 Accretion of discount less amortisation of premium 116 380

Total finance income and hibah 2,322 4,485

Other operating income Fee income 13 130

Income from investment of other deposits 2,335 4,615

k. Provision for financing, advances and other loans

Provision for financing, advances and other loans:

Individual assessment allowance - made in the financial year 179 203 - written back (138) (117) Collective assessment allowance - reversal during the year (863) (400) Impaired financing, advances and other loans - written off - 5

(822) (309) Citibank Berhad l 2011 Annual Report 125

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

l. Profit Equalisation Reserve

The movement in Profit Equalisation Reserve is as follows: Group and Bank 2011 2010 RM’000 RM’000

At 1 January 9,187 23 Movement in the financial year 3,204 9,164

At 31 December 12,391 9,187

m. Income attributable to depositors Group and Bank 2011 2010 RM’000 RM’000 Deposits from customers - Mudharabah Fund 11,272 4,902 - Non-Mudharabah Fund 2,887 3,224 Deposits and placements of banks and other financial institutions - Non-Mudharabah Fund 24 66 Others 57 269

14,240 8,461

n. Income derived from investment of Islamic Banking Capital Funds

Group and Bank 2011 2010 RM’000 RM’000

Financing, advances and other loans 2,386 2,194 Money at call and placements with financial institutions 1,040 632 Income from financial investments available-for-sale 1,267 1,115

4,693 3,941 Accretion of discount less amortisation of premium (235) 324

Total finance income and hibah 4,458 4,265 126 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

n. Income derived from investment of Islamic Banking Capital Funds (continued)

Group and Bank 2011 2010 RM’000 RM’000

Other operating income Gain/(Loss) from financial assets held-for-trading 88 (91) Gain from financial investments available-for-sale 945 2,690 Fee income 1,628 877 (Loss)/Income from trading activities (1,737) 4,678

924 8,154

Income from Islamic Banking Capital Funds 5,382 12,419

o. Income from Islamic banking operations

For consolidation with the conventional operations, income from Islamic banking operations comprises the following:

Group and Bank 2011 2010 Note RM’000 RM’000

Income derived from investment of depositors’ funds and others (j) 41,732 41,197 Profit Equalisation Reserve (l) (3,204) (9,164) Income attributable to depositors (m) (14,240) (8,461) Income derived from investment of Islamic Banking Capital Funds (n) 5,382 12,419

29,670 35,991 Citibank Berhad l 2011 Annual Report 127

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

p. Other operating expenses Group and Bank 2011 2010 RM’000 RM’000

Personnel costs - Salaries, allowances and bonuses 222 951 - Contributions to Employees Provident Fund 23 23 - Staff benefits and other compensations 14 14 - Others 1 30 Establishment costs - Depreciation 1 1 - Rental - 3 Administrative and general expenses - Others 2,596 3,674

2,857 4,696

Included in other operating expenses is the Syariah Committee’s remuneration of RM139,000 (2010 - RM108,000).

q. Taxation Group and Bank 2011 2010 RM’000 RM’000

Current tax expense 9,884 7,161 Deferred tax expense (3,085) 1,051

6,799 8,212 128 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

r. Capital adequacy

i. The capital adequacy ratios are as follows: Group and Bank 2011 2010 RM’000 RM’000 Computation of Total Risk Weighted Assets (“RWA”) Total credit RWA 199,050 436,946 Total market RWA 20,319 79,687 Total operational RWA 84,785 92,001

Total Risk Weighted Assets 304,154 608,634

Computation of Capital Ratios Tier 1 Capital 225,131 203,761 Capital Base 231,517 210,955

Core capital ratio 74.02% 33.48%

Risk weighted capital ratio 76.12% 34.66%

With effect from 1 January 2010, the capital adequacy ratios of the Group and the Bank are computed in accordance with Bank Negara Malaysia’s revised Risk-Weighted Capital Adequacy Framework (RWCAF-Basel II). The Group and the Bank have 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% for the risk-weighted capital ratio.

ii. The components of Tier I and Tier II Capital are as follows:

Group and Bank 2011 2010 RM’000 RM’000 Tier I Capital Fund allocated 20,000 20,000 Retained earnings 205,550 184,714 Less: Deferred tax assets (419) (953)

Total Tier I Capital (Core Capital) 225,131 203,761 Citibank Berhad l 2011 Annual Report 129

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

r. Capital adequacy (continued) Group and Bank 2011 2010 RM’000 RM’000 Tier II Capital Collective assessment allowance* 6,386 7,194

Capital Base 231,517 210,955

* Excludes collective assessment allowance on impaired loans restricted from Tier II Capital by BNM of RM378,000 (2010 - RM432,000).

s. Off-balance sheet exposures

The off-balance sheet exposures and their related counterparty credit risk of the Group and the Bank of the current year are as follows:

2011 Credit Risk Group and Bank Principal equivalent weighted amount amount assets Nature of item RM’000 RM’000 RM’000

Interest/Profit rate related contracts: One year or less - - - Over one year to five years 350,000 9,000 4,200 Over five years 300,000 19,721 11,144 Other commitments, such as formal standby facilities and credit lines, with an original maturity of up to one year 158 32 32 Other commitments, such as formal standby facilities and credit lines with an original maturity of over one year 8,834 4,416 3,275

Total 658,992 33,169 18,651 130 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

s. Off-balance sheet exposures (continued)

The off-balance sheet exposures and their related counterparty credit risk of the Group and the Bank for previous year were as follows:

2010 Credit Risk Group and Bank Principal equivalent weighted amount amount assets Nature of item RM’000 RM’000 RM’000

Foreign exchange related contracts: One year or less 828,235 152,975 152,975 Over one year to five years - - - Over five years - - - Interest/Profit rate related contracts: One year or less 138,758 139 139 Over one year to five years 550,000 20,842 14,546 Over five years - - - Other commitments, such as formal standby facilities and credit lines, with an original maturity of over one year 16,736 8,341 3,312 Any commitments that are unconditionally cancelled at any time by the Bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a borrower’s creditworthiness 1,001 - -

Total 1,534,730 182,297 170,972

Citibank Berhad l 2011 Annual Report 131

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

t. Derivative financial instruments

2011 2010 Positive Negative Positive Negative Contract fair fair Contract fair fair Amount value value amount value value RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Foreign exchange related contracts: - Cross currency Islamic profit rate undertaking - - - 1,521,749 139,724 139,724 Others - Islamic profit rate undertaking 800,000 2,624 2,624 927,515 6,501 6,501

800,000 2,624 2,624 2,449,264 146,225 146,225

Note 37(f) Note 37(h) Note 37(f) Note 37(h)

u. Profit rate risk

Effective Up To 1 > 1 - 3 > 3 - 12 > 1 - 5 Over 5 Non-interest Trading Interest Group and Bank Month Months Months Years Years Sensitive Book Total Rate 2011 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

Assets Cash and short term funds 66,000 - - - - 2,863 - 68,863 2.82% Financial investments available-for-sale - - 80,000 351,792 - - - 431,792 2.81% Financing, advances and other loans - performing 1,446 - 422 2,065 439,481 (6,764) - 436,650 4.80% - impaired - - - - - 7,510 - 7,510 Deferred tax assets - - - - - 239 - 239 Others assets - - - - - 12,969 2,624 15,593

Total assets 67,446 - 80,422 353,857 439,481 16,817 2,624 960,647 132 Citibank Berhad l 2011 Annual Report

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

u. Profit rate risk (continued)

Liabilities and Islamic Banking Funds Deposits from customers 592,768 - 8,432 48,248 - - - 649,448 1.53% Deferred tax liability ------Other liabilities - - - - - 82,483 2,624 85,107

Total liabilities 592,768 - 8,432 48,248 - 82,483 2,624 734,555 Islamic Banking Funds - - - - - 226,092 - 226,092

Total liabilities and Islamic Banking Funds 592,768 - 8,432 48,248 - 308,575 2,624 960,647

On-balance sheet profit sensitivity gap (525,322) - 71,990 305,609 439,981 (291,758) -

Effective Up To 1 > 1 - 3 > 3 - 12 > 1 - 5 Over 5 Non-interest Trading Interest Group and Bank Month Months Months Years Years Sensitive Book Total Rate 2010 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

Assets Cash and short term funds 390,000 - - - - 4,301 - 394,301 2.12% Financial assets held-for-trading ------343,179 343,179 13.98% Financial investments available-for-sale - - - 271,553 - - - 271,553 10.57% Financing, advances and other loans - performing 214 210 1,598 1,215 494,016 (7,626) - 489,627 4.36% - impaired - - - - - 11,173 - 11,173 Deferred tax assets - - - - - 1,142 - 1,142 Others assets - - - - - 18,426 146,225 164,651

Total assets 390,214 210 1,598 272,768 494,016 27,416 489,404 1,675,626 Citibank Berhad l 2011 Annual Report 133

Notes To The Financial Statements

37. The operations of Islamic Banking (continued)

u. Profit rate risk (continued)

Effective Up To 1 > 1 - 3 > 3 - 12 > 1 - 5 Over 5 Non-interest Trading Interest Group And Bank Month Months Months Years Years Sensitive Book Total Rate 2010 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %

Liabilities and Islamic Banking Funds Deposits from customers 973,532 5,567 49,057 61,349 - - - 1,089,505 0.76% Other liabilities - - - - - 235,846 146,225 382,071

Total liabilities 973,532 5,567 49,057 61,349 - 235,846 146,225 1,471,576 Islamic Banking Funds - - - - - 204,050 - 204,050

Total liabilities and Islamic Banking Funds 973,532 5,567 49,057 61,349 - 439,896 146,225 1,675,626

On-balance sheet profit sensitivity gap (583,318) (5,357) (47,459) 211,419 494,016 (412,480) 343,179