Southern Bank Berhad 1998 Annual Report

“At Southern Bank Berhad,

we are committed to customer

service excellence in all markets

we seek to serve, creating and

maximising value for all

constituents.”

S O U T H E R N ␣ B A N K ␣ B E R H A D ␣ ( 5 3 0 3 - W )

Contents

Notice of Annual General Meeting 2-3

Board of Directors 4

Corporate Information 4

Corporate Structure 5

Five Year Group Financial Highlights 6

Management of the Bank 7

Management of Subsidiary Companies 8

Audit Committee 9

Message to Shareholders 10-16

Performance at a Glance 17

Lending Directions 18-23

Treasury Management 24-27

IT Industry Leadership 28-30

Southern Bank as Change Catalyst 31

Corporate Restructuring 32-34

Channel Strategies 35-37

Strategic Alliances:MIMOS and SCANS 38-39

Subsidiary Companies of the Bank 40-42

Corporate Events 43-45

Financial NetworkSouthern Bank Berhad Branches 46-47Subsidiary Companies

of the Bank 48

Financial Statements 49-102

List of Bank Group’s Properties 103

Analysis of Shareholdings 104-105

Form of Proxy

S O U T H E R N ␣ B A N K ␣ B E R H A D ␣ ( 5 3 0 3 - W )2

Notice of Annual General Meeting

1. “That the Report of the Directors and the Accounts for the year ended31 December 1998 of the Bank, together with the Report of the Auditorstherein as presented be and are hereby received and adopted”. Resolution 1

2. “That the Directors’ remuneration of Ringgit One Million Seventy ThousandEight Hundred And Forty Only (RM1,070,840) for the year ended 31 December1998 be and is hereby approved”. Resolution 2

3. “That Dr Maisarah bte Abdullah who retires under Article 116 of the Bank’sArticles of Association be and is hereby re-elected as a Director of the Bank”.

Resolution 3

4. (a) “That pursuant to Section 129(6) of the Companies Act, 1965, Mr LimPak Tow be re-appointed as a Director of the Bank to hold office untilthe conclusion of the next Annual General Meeting”. Resolution 4(a)

(b) “That pursuant to Section 129(6) of the Companies Act, 1965, Dato’Dr Yahya bin Ismail be re-appointed as a Director of the Bank to holdoffice until the conclusion of the next Annual General Meeting”.

Resolution 4(b)

5. “That a first and final dividend of 4.5 % gross in respect of the financial yearended 31 December 1998, payable to entitled shareholders of the Bank, basedon the share capital of Ringgit Seven Hundred Ninteen Million Five HundredFive Thousand Six Hundred Eighty Nine Only (RM719,505,689), be and ishereby approved. Resolution 5

6. “That Messrs Kassim Chan & Co., the retiring auditors, be and are herebyre-appointed auditors of the Bank to hold office until the conclusion of the nextAnnual General Meeting of the Bank at which Accounts are laid before the Bank,and that the Directors be authorised to fix their remuneration”. Resolution 6

NOTICE IS HEREBY GIVEN THAT the Thirty-Seventh Annual GeneralMeeting of Southern Bank Berhad will be held at Ballroom A, First Floor,Renaissance Kuala Lumpur Hotel, Corner of Jalan Sultan Ismail andJalan Ampang, 50450 Kuala Lumpur on Wednesday, 16 June 1999, at 9.30 a.m.for the purpose of considering and, if thought fit, passing the following resolutions:

S O U T H E R N ␣ B A N K ␣ B E R H A D ␣ ( 5 3 0 3 - W ) 3

N O T I C E O F C L O S U R E O F B O O K S

NOTICE IS ALSO HEREBY GIVEN THAT the Transfer Books and Register ofMembers of the Company will be closed on 23 June 1999 and that duly completedtransfers received by the Company’s Share Registrars, Panama Resources Sdn Bhd,No. 23, Jalan Sri Hartamas 7, Sri Hartamas, 50480 Kuala Lumpur up to 5.00 p.m. on23 June 1999 will be registered before shareholders’ entitlement to the dividend isdetermined. If approved, the first and final dividend will be paid on 20 July 1999.

A depositor shall qualify for entitlement to the dividend only in respect of:

a. Shares deposited into the Depositor’s Securities Account on or before 12.30 p.m. on21 June 1999 (in respect of shares which are exempted from mandatory deposit);

b. Shares transferred to the Depositor’s Securities Account on or before 12.30 p.m. on23 June 1999;

c. Shares bought on the Kuala Lumpur Stock Exchange on a cum entitlement basisaccording to the Rules of the Kuala Lumpur Stock Exchange.

By Order Of The Board

Tan Ghee KayCompany Secretary

Kuala Lumpur1 June 1999

N O T E S :

The rights of Foreigners to vote in respect of their deposited securities is subject to Section 41(1)(e) and Section 41(2) of the

Securities Industry (Central Depositories) Act, 1991 and Securities Industry (Central Depositories) (Foreign Ownership)

Regulations, 1996. The position of such Depositors in this regard will be determined based on the General Meeting Record

of Depositors. Such Depositors, whose shares exceed the Company’s foreign shareholding limit of 30% as at the date of the

General Meeting Record of Depositors, may attend the above Meeting but are not entitled to vote. Consequently, a proxy

appointed by such Depositor who is not entitled to vote will also not be entitled to vote at the above Meeting.

A member of the Company entitled to attend and vote at the above Meeting is entitled to appoint a proxy to vote on his

behalf. A proxy need not be a member of the Company but shall be either an advocate, an approved company auditor

or a person approved by the Registrar of Companies. The instrument appointing the proxy shall be in writing under the

hand of the appointor or his attorney duly authorised in writing or, if the appointor is a corporation, under its Common Seal.

An instrument appointing a proxy executed in Malaysia need not be witnessed. The signature to an instrument appointing

a proxy executed outside Malaysia shall be attested by a solicitor, notary public, consul or magistrate.

Where a member appoints two proxies, the appointment shall be invalid unless he specifies the proportion of his holdings

to be represented by each proxy. In the case of joint holdings, the signatures of all joint holders are required.

The instrument appointing a proxy must be deposited at the Registered Office of the Company, 20th Floor,

Wisma Genting, 28 Jalan Sultan Ismail, 50250 Kuala Lumpur not less than 48 hours before the time set for the Meeting

and any adjournment thereof.


Corporate Information

ChairmanYBhg Tan Sri Osman S CassimPSM., JSM., KMN.

Chief Executive DirectorYBhg Dato’ Tan Teong HeanSIMP., DSAP., DIMP., FIBM.

DirectorsYBhg Dato’ Dr Yahya bin IsmailDPCM., DPMJ., DPMP., KMN.

YBhg Dato’ Dr Salim CassimDPMT., DSM.

Lim Pak Tow

Sim Kee Boon

Dr Maisarah bte Abdullah

B O A R D O F D I R E C T O R S

C O R P O R A T E I N F O R M A T I O N Secretary

Tan Ghee Kay

AuditorsKassim Chan & Co Public AccountantsLevel 19, Uptown 11, Jalan SS21/58Damansara Uptown, 47400 Petaling JayaSelangor, Malaysia

RegistrarsPanama Resources Sdn Bhd23, Jalan Sri Hartamas 7Sri Hartamas50480 Kuala LumpurTel: (03) 6511120 / 6515451Fax: (03) 6513121

Registered OfficeCorporate Headquarters20th Floor, Wisma Genting28, Jalan Sultan Ismail50250 Kuala LumpurTel: (03) 2637000Fax: (03) 2320651Web: http://www.sbbgroup.com.myE-mail: [email protected]

ListingKuala Lumpur Stock Exchange Main Board

http://www.sbbgroup.com.my

mailto:[email protected]


Corporate Structure

100% Southern Finance Company BerhadCore businesses amalgamated withthe businesses of the Bank

100% SBB Unit Trust Management BhdUnit Trust Services

100% S.B. Properties Sdn BhdProperty Management

100% Elite Constant Development Sdn BhdBuilding Construction

100% RC Nominees (Tempatan) Sdn BhdNominee Services for Locals

100% RC Nominees (Asing) Sdn BhdNominee Services for Foreigners

100% SBB Asset Management Sdn BhdFund Management Services

100% SBBAM Nominees (Tempatan) Sdn BhdNominee Services for Locals

100% SBBAM Nominees (Asing) Sdn BhdNominee Services for Foreigners

100% S.B. Venture Capital Corporation Sdn BhdVenture Capital

100% Southern Nominees (Asing) Sdn BhdNominee Services for Foreigners

100% Southern Nominees (Tempatan) Sdn BhdNominee Services for Locals

100% SBB Futures Sdn BhdDormant

51% Investil - Investimentos Associados LimitadaInvestment Holding

60% Banco Austral S.A.R.L.Banking

100% SBB Capital Markets Sdn BhdInvestment in Capital Markets

70% SBB Securities Sdn BhdStockbroking


Five Year Group Financial Highlights

1994 1995 1996 1997 1998

Results (RM’000)

Profit before tax and zakat 95,809 111,202 173,725 122,201 78,489

Profit after tax, zakat andminority interests 60,018 68,489 108,184 83,430 37,186

……………………………………………………………………………………………………………………………

Balance Sheet (RM’000)

Total assets (excluding contra) 4,981,103 5,617,676 7,324,446 9,203,476 9,075,128

Net tangible assets 321,281 585,523 675,960 1,176,759 1,176,511

Loans and advances 2,712,136 3,346,691 4,508,906 5,437,417 6,067,600

Deposits from customers 4,148,357 4,379,095 5,594,797 6,781,038 6,430,621

Paid-up capital 146,125 213,171 319,757 719,506 719,506

Shareholders’ funds 326,768 590,749 680,925 1,181,463 1,197,554……………………………………………………………………………………………………………………………

Ratio :

Dividend rate (Gross) 12% 12% 12% 10% 4.5%

Net tangible assetsper RM1 share (RM) 2.20 2.75 2.11 1.64 1.64

Net return on averageshareholders’ funds 19.9% 14.9% 17.0% 9.0% 3.1%

Basic earnings per share (sen) 18.3 15.2 22.6 17.4 5.2

Net return on average assets 1.4% 1.3% 1.7% 1.0% 0.4%

Loans and advances to deposits 65.4% 76.4% 80.6% 80.2% 94.4%


Management of the Bank

Chief Executive DirectorDato’ Tan Teong Hean

Corporate Advisory Division – Secretariat / LegalCompany Secretary / General CounselTan Ghee Kay

Chief Executive Planning GroupManager, Special Projects

(Special Assignments 1)Teh Beng Hooi

Manager, Special ProjectsSeah Chong Leng

Corporate Services & InformationGeneral ManagerNordin bin Yahaya

Manager, Administration & PropertiesLee Bee Suan

Group Financial Control DivisionChief AccountantNg Gek Siu

Group FinanceManagerYap Choi Foong

Group Information TechnologySenior ManagerTan Hui Khim

Corporate Human ResourcesDeputy ManagerIrene Loke

Retail BankingGeneral ManagerTengku Zaitun bt Tengku Mahadi

Payment SystemsGeneral ManagerWong Pin Siong

LoansGeneral ManagerChan Hon Thiam

Corporate BankingGeneral Manager, Local CorporateChan Hon Thiam

Manager, National BankingWinston Lai Tak Kong

Manager, Loan AdministrationRosalind Lee Eng Peng

Consumer BankingManager, Personal BankingMohammad Tahir Haji Hashim

International BankingDeputy ManagerLam Kam Wah

Direct BankingManager, Marketing & Product DevelopmentHelen Yeoh

Manager, Credit & Risk ManagementFoo Meng Heng

Enterprise BankingManagerConstance Goh

Electronic BankingManagerCheong Weng Seng

Islamic Banking DivisionGeneral ManagerNordin bin Yahaya

Corporate FinanceManagerRodney Koh Ngiap Teik

Internal AuditChief Internal AuditorSelvarajah s/o Namasiwayam


SBB Securities Sdn Bhd

Chief Executive Officer

James Lau Yew Kong

SBB Asset Management Sdn Bhd


Pearl Wong

SBB Unit Trust Management Berhad

General Manager

Geoff Stecyk

S.B. Venture Capital Corporation Sdn Bhd

Manager

Eu Sim Wai

Management of Subsidiary Companies

S.B. Properties Sdn Bhd

General Manager

Terry James Pilbeam

Manager

Lee Bee Suan

Southern Nominees (Tempatan) Sdn Bhd

Southern Nominees (Asing) Sdn Bhd

Company Secretary

Tan Ghee Kay

Banco Austral S.A.R.L.


K Muganthan


Audit Committee

M E M B E R S

The Audit Committee comprises the following directors:

YBhg Tan Sri Osman S Cassim (Chairman)(Independent Non-executive Director)

YBhg Dato’ Dr Yahya bin Ismail(Non-Executive Director)

Mr Lim Pak Tow(Independent Non-executive Director)

M E E T I N G S

The Audit Committee meets on a quarterly basis or at more frequent intervals as requiredto carry out its duties.

D U T I E S

The duties of the Audit Committee are:

1. To review:

(a) with the auditor, the audit plan;

(b) with the auditor, the auditor’s evaluation of the system of internalaccounting controls;

(c) with the auditor, the auditor’s audit report;

(d) the assistance given by the Company’s officers to the auditors;

(e) the scope and results of the internal audit procedures;

(f) the balance sheet and profit and loss account of the Company andthe consolidated balance sheet and profit and loss account, submitted toit by the Company, and thereafter to submit them to the Board of Directorsof the Company; and

(g) any related party transactions that may arise within the Company or Group;

2. To nominate a person or persons as auditors;

3. (a) To review the Company’s financial condition, internal controls, as wellas the performance and findings of the Company’s internal auditdepartment; and

(b) To make recommendations pertaining to corrective actions, whereappropriate; and

4. Such other functions as may be agreed to by the Audit Committee and the Boardof Directors.

Message to

Shareholders

O V E R V I E W

1998 was a difficult year, a time that brought wrenching change

to the Malaysian financial services industry. After more than a decade

of strong growth the full knock-on effects of the Asian economic

turmoil made their impact on the domestic economy. It went into

recession. The financial sector was subject to a number of shocks,

chief amongst which were the non-performing loans (“NPLs”) of

financial institutions. Net NPLs of the banking industry jumped

to 13.2% in 1998 (97: 4.1%). Doubtless, rising NPLs accompany any

economy in recession. They have a major impact on bank earnings.

The government to counter negative economic growth introduced

a number of monetary and fiscal responses. Key amongst the

measures was a rapid lowering of the interest rates that saw a high of

11% in February of 1998 to 6% in December of 1998 to redress

deflationary pressures and to spur lending in the financial system.

These measures augur well for the year ahead. However, while they

will bring significant longer-term gains, due to repricing rigidities,

the immediate impact on earnings of the financial sector is

unfavourable. Excess capacities became evident as branch networks

and people built up in the preceding years of strong economic growth

contributed to costs without matching revenue growth. Managing

profitability never easy in a downturn, is even more difficult with

the region in recession and in financial crisis.


T H E B A N K

Amidst these challenges, the Bank’s operating profit

before provisions at RM210.6 million was up 20%

from the previous year. Operating in a weakened

economic environment, pre-tax profit after provisions

at RM111.2 million was down 7%. Provisions during

the year rose to RM99.4 million from RM55.2

million as net NPLs increased to 5.8 % from 2.8%.

The financial results fully complied with Bank

Negara Malaysia’s GP3 guidelines on loan

classification and loan provisions. Adopting a

conservative income recognition policy, however,

a stricter three-month in arrears loan classification

policy for NPLs was maintained at the Bank and

also at the Group.

Net NPLs of 5.8% at the Bank compares favorably

with an industry’s average of 9.7% for commercial

banks that adopt a three months in arrears loan

classification and policy. The bank sold no loans to

T A N S R I O S M A N S C A S S I M

ChairmanD A T O ’ T A N T E O N G H E A N

Chief Executive Director

Danaharta, the Special Purpose Vehicle established

by the Government to acquire NPLs of Banks.

After-tax profit of the Bank at RM 72.8 million fell

10% when compared to the period previously.

T H E G R O U P

The Bank Group turned in a pre-tax profit of

RM78.5 million, 36% lower than that of the

previous year. After–tax profit attr ibutable

to shareholders, at RM37.2 million was down

55% from a year ago. This lower net profit is due to

higher loan losses and provisions, as well as a higher

tax charge.

Not all subsidiaries of the Group were profitable.

Amongst the key subsidiaries, SBB Securities Sdn

Bhd incurred a loss of RM19.9 million due to poor

market conditions, reduced turnover and provisions

for the diminution in value investments.



Southern Finance Company Berhad (“SFCB”) also

reported a loss of RM12.9 million. This was due

to rising NPLs, loan charge-offs, and provisions for

loan losses. A three months in arrears loan

classification policy was retained at SFCB, and on

this basis, net NPLs of SFCB rose to 22% of total

loans. A lower credit quality at SFCB is not unusual

at this point of the economic cycle. This is because

a finance subsidiary targets businesses with lower

credit standings.

On a Group basis, net NPLs rose to 8.4%. This

compares favourably with an industry average of

13.2% for Financial Institutions with a three month

NPL classification policy.

SBB Futures Sdn Bhd having made losses since its

start-up two years ago, was wound down during the

year. On closure of this business, a non-recurring

loss was reflected at the Group. SBB Unit Trust

subsidiary incurred a loss of RM0.2 million.

On the other hand all other subsidiaries were

profitable: Investimentos Associados Limitada, the

Mozambique Holding Company for Banco Austral

RM11.4 million; S.B Properties RM4.4 million;

SBB Asset Management RM1.2 million; S.B. Venture

Capital RM0.5 million; and Southern Nominees

(Tempatan) RM0.5 million.

Drawing upon an inherent Balance Sheet strength

and a strong and growing deposit base, loans advanced

18% for the Bank and 16% for the Group, from the

period previously. This loan growth reflects our belief

to stand solidly behind our customers when they

are deserving of support. It also underscores our

strategy of taking market share at the bottom of the

business cycle, and retrenching from markets when

the cycle is in boom. It in no way represents a

departure from our long-established earnings

philosophy of Income Statement and Balance Sheet

growth without sacrifice in asset quality.

Today, the Bank is one of the best capitalized financial

institutions in Malaysia and the region. At 18.8%

the Bank’s Risk Weighted Capital Ratio (“RWCR”)

is robust. Marginally lower from the previous year

due to a higher loans base, it has with amalgamation

of SFCB increased to 20.9%. This is well beyond the

banking industry’s average of 11.8% and the

minimum 8% as required under banking standards

set by the Bank of International Settlements.

The financial strength of the Bank was confirmed

by rating agencies including the domestic rating

agency, RAM which reaffirmed our A1 rating as

well as Standard and Poor’s, the international rating

agency which also maintained the Bank’s public

information rating of BBpi.

F O C U S I N G O N C U S T O M E R

S E R V I C E S

So as to broaden our product menu, and better serve

our customers, a number of new products and

services were launched in 1998.

Direct Access, launched the Easy Auto Pay system

allowing all Direct Access customers to pay their bills

to participating utilities such as Telekom Malaysia

and others.


The nation’s first Platinum Mastercard was also

launched by Direct Access. This high-end card

product was aimed at providing customized services

and increased privileges to discerning high net-worth

individuals. The Maestro Debit Card was introduced

to provide more convenience for cardholders on a

worldwide basis.

In another related development, in payment systems,

the Jet Debit Card was launched to facilitate easy

repayment by Jaring internet subscribers who

maintain the Bank’s Max Plus SJM accounts.

Customers of Malaysia’s major Internet Service

Provider Jaring, may pay their subscription/renewal

fees at any SBB branch.

The Japanese Card Bureau or JCB card was

also introduced to allow the Bank’s merchants

and our Japanese customers a broader choice of

payment card.

Apart from debit cards, the Bank broadened its stable

of niche credit cards targeting different consumer

segments. An especially designed card product for

women was relaunched with the Espre Mastercard

while other cards such as, the Excel Mastercard, the

Rotaform Gold Mastercard, the Sime Darby Travel

Discovery Mastercard and the Sime Darby Travel

Visa Corporate Card were designed to offer benefits

to specialized groups of cardholders.

Depositors were accorded a special focus in 1998.

A wider range of deposit products, namely the Max

Plus Savings Account, Max Plus Fixed Deposit and

Max Plus Two in One Account were introduced to

provide depositors with better returns and greater

flexibility in their banking transactions.

Investing in cutting edge technology so as to

continuously improve efficiency and effectiveness

to better serve our customers is always a priority.

In this regard, a number of initiatives were also

introduced during the year. So as to raise productivity

levels, the Auto-posting System was implemented

to better handle voluminous crediting and debiting

of accounts for customers. SPICK, a project

initiated by BNM to process inward clearing of

cheques using digital images to replace cheques,

was extended to the rest of the country. Several

security systems were implemented to improve on

credit card and ATM transactions. These included a

biometric ATM system to verify ATM cardholders

which was tested in the KL Main branch for

eventual bank-wide deployment.

S I G N I F I C A N T E V E N T S

A N D A C T I V I T I E S

A number of special events and occasions during

the year provided excellent opportunities to showcase

our new products and profile our service capabilities.

I T A N D E L E C T R O N I C B A N K I N G

Continuing a strategic emphasis in the area of

Electronic Banking, the Bank participated in the

INFOTECH Malaysia exhibition. This premier

IT convention and forum was used to showcase the

Bank’s IT products such as electronic commerce,

PC Banking and Enterprise Banking.


Closer to home, the Bank was among the 400

local and foreign companies that participated in the

APEC International Trade Fair 1998. This major

APEC event was held in Kuala Lumpur in

conjunction with the meeting of the Heads of

Governments and key business luminaries in the

Asia Pacific Economies. It provided an unrivalled

opportunity to raise the level of awareness of our

business in these key markets.

E X C E L L E N C E

The bank’s leadership in the industry and the

continuing effort to “shape up or ship out” has not

gone unrecognized. 1998 saw a number of industry

honours and recognition.

Recognizing Southern Bank’s IT leadership in

Malaysia and in the industry, the Chief Executive

Director was appointed a member of the

National Information Technology Council (NITC),

advising the Government on the development of

IT in Malaysia.

Southern Bank was honoured as the first direct

banking service provider in the nation to be

accredited with the internationally acclaimed ISO

9002 certificate by the Standards and Industrial

Research Institute of Malaysia (SIRIM). The ISO

9002 certification includes the processing of credit

cards, unsecured facilities, property financing and

share margin financing.

N A T I O N A L S A V I N G S

A N D H O M E - O W N E R S H I P

I N I T I A T I V E S

The Personal Banking Division actively participated

in property launches around the country during the

recent Home Ownership Campaign, that resulted

in improved sales.

In support of a National effort to encourage savings,

a special booth was set up by the Bank to promote

deposits and Unit Trust products in conjunction with

the ‘Art of Saving Competition and Art Bazaar’

organized by Bank Negara and the Association of

Financial Institutions.

I N T E R N A T I O N A L

The second largest bank in the Republic of

Mozambique, Banco Austral, adopted its present

name in 1998 to signal a new beginning as a modern

financial institution and market leader in

Mozambique.

The official launch of Banco Austral’s new corporate

identity was witnessed last July in Maputo by His

Excellency the President of the Republic of

Mozambique, Joaquim Alberto Chissano together

with the Right Honourable Prime Minister of

Malaysia, YAB Dato’ Seri Dr. Mahathir Mohamad

during his official state visit to Mozambique.


The ISO 9002 recognizes our management

philosophy which emphasizes the provision of

competitively priced and innovative products and

quality customer service to provide a competitive

edge in the financial sector.

Y 2 K C O M P L I A N C E

As our business is information and transaction

intensive, IT is relied upon as a business enabler

and used heavily in many critical areas including

service delivery, decision-support, processing and

others. In this regard, Y2K is a major issue that is

mission critical. To ensure business continuity as we

cross the third millennium, the Bank has long

focused on Y2K issues. The Group will be fully

Y2K compliant by June of 1999. The Bank is also

working closely with its customers and business

partners to ensure they are Y2K ready.

The Bank and Group have completed the renovation,

implementation and testing of all critical systems

supporting the core businesses of the Bank Group.

Contingency plans including business resumption

are in place to ensure that the Bank Group’s

operations will remain fail-safe at the critical dates.

A M A L G A M A T I O N O F

S F C B ’ S B U S I N E S S

The amalgamation of SFCB with the Bank was

completed in the Second Quarter of 1999.

Continuing a strategy of restructur ing and

rationalization of the Group, 40% of SFCB’s

branches were closed so as to avoid Branch

network duplication and overlaps.

Maintaining a Group wide effort to reduce cost,

a Voluntary Separation Scheme (VSS) was

introduced at SFCB with excellent results. Staff and

personnel at SFCB were reduced by 60% through

the VSS. This increased substantially restructuring

charges in the current year, with adverse implication

on profitability. Undoubtedly, however it will also

result in substantial savings moving forward.

D I V I D E N D S

The Board of Southern Bank are pleased to

recommend the payment of a first and final dividend

of 4.5% (1997-10%) for the year ended 31 December

1998 for approval of the shareholders at the Bank’s

37th Annual General Meeting.

This proposed dividend will absorb a net sum of

RM23.3 million (unchanged from the previous year)

which, if approved by shareholders will be paid to

shareholders on the Register of Members at a date

to be later announced.

M O V I N G I N T O T H E F U T U R E

With a solid foundation, and a past where the

common thread is consistency in earnings and a

prudential credit culture, the Bank and the Group

are in an unr ivalled position to maximize

opportunities that may arise in the markets. The

amalgamation of SFCB and the Bank, besides

strengthening a strong Risk Weighted Capital Ratio

of 18.8% to 20.9%, will also allow customer access

to a larger network of branches for their banking

convenience. Following the amalgamation of SFCB,

the Bank’s branch network will be increased to 72

branches in major cities and towns nationwide.


A milestone in the history of the Bank, is the upcoming relocation of its offices

to its new Corporate Headquarters in Bukit Damansara, Kuala Lumpur.

This new headquarters will house the main branch as well as the offices of the

Bank and is expected to further reduce real estate and occupancy cost.

With recovery well underway, the economy should show positive growth this

year. Our strong balance sheet and a Capital Adequacy Ratio that is nearly three

times that of the Bank of International Settlements Agreement of 8%, should

provide excellent opportunities for the Bank to advance its franchise in markets

where it has strengths.

The economy has recovered, but NPLs are expected to rise due mainly to

the lead-lag effects. However, NPLs are expected to remain around 10% net

for the Group.

The financial services industry is entering a phase of consolidation. The directors

remain sensitive to market developments and regulatory initiatives for fewer but

larger banks. The Bank’s exceptional balance sheet strength and its stature in the

markets should ensure that the Bank Group emerges from this process in a

position of leadership.

A P P R E C I A T I O N

To the men and women of Southern Bank Berhad, we thank them for

their dedication and their efforts. We also thank our valued customers,

shareholders, the authorities and business associates for their support during

this challenging period.

Tan Sri Osman S Cassim Dato’ Tan Teong Hean

Chairman Chief Executive Director

Kuala Lumpur

12 April 1999


Performance at a Glance

6,781,038

5,594,797

4,379,095

4,148,357

5,437,417

4,508,906

3,346,691

2,712,136

1,181,463

680,925

590,749

326,768

9,203,476

7,324,446

5,617,676

4,981,103

1,176,759

675,960

585,523

321,281

122,201

173,725

111,202

95,809

’98

’97

’96

’95

’94

’98

’97

’96

’95

’94

’98

’97

’96

’95

’94

’98

’97

’96

’95

’94

’98

’97

’96

’95

’94

’98

’97

’96

’95

’94

Lending Directions

C R E D I T P L A N

Further to Bank Negara Malaysia’s (“BNM”) guidelineson the, “Credit Plan” to moderate gross loans growth to20% by March 1998 and 15% by the end of 1998, mostbanks tightened credit and loans growth started to shrinkfaster than expected. As at end September 1998, thebanking industry’s gross loans growth stood at 4.5% andfell further to only 2.2% in the following month. Due tothe sharp drop in loans growth, all banks were stronglyadvised by BNM in October 1998 to achieve a minimumgross loans growth of 8% for that year. Despite this, thebanking industry failed to achieve the 8% growth target.

However, as the Bank is financially strong with oneof the highest Risk Weighted Capital Ratio (“RWCR”) inthe banking industry (18.8% as at year-end 1998),there were no problems in meeting the growth target set byBNM. As a conscientious corporate citizen in heeding theGovernment’s call to revive the economy and with theconcurrence of BNM, the Bank’s final loans growth figurestood at 18.0%. This was in line with our strategy to gainmarket share at the bottom end of the economic cycle so asto be well placed to take advantage of the enormous upsidepotential during the economic recovery of the country.

L O A N A S S E T S

Following the Bank’s Credit Plan, our gross loan assetsgrew to RM5.4 billion as at year-end 1998. Meanwhile,our approximate market share of good loans was 2% whileour market share of bad loans was approximately 0.5%.

L O A N P O R T F O L I O M I X

As illustrated in the pie-chart below, it is the Bank’s practiceto lend prudently to a diverse range of businesses so as toavoid over-concentration of loans to a particular sector.

S M A R T G L O V E I N D U S T R I E S

( M ) S D N B H D

Located in Klang, it is a manufacturer and

exporter of disposable gloves. We have been

its banker since 1997.

0

2000

4000

6000

RM

Mill

ion

1994 1995 1996 1997 1998

2,220 2,811 3,712 4,613

16% Manufacturing

11% Purchase ofNon-Residential Properties

10% Construction

8% Wholesale & Retail,Restaurants & Hotels

8% Finance, Insurance& Business Services

8% Personal Uses

6% Purchase ofSecurities

5% Real Estate

5% Credit Cards

3% Electricity, Gas& Water Supply

2% Other Sectors

2% Transport, Storage& Communication

1% Agriculture,Hunting, Forestry& Fishing

15% Purchase of ResidentialProperties


H O U S I N G L O A N S

The Bank contributed to the Government’s effort toencourage affordable home ownership for each Malaysianfamily by meeting the interim Special Housing Loan quotaset by BNM five months ahead of the period ended31 March 1999. This achievement was attained owingto teamwork, speedy approval and the Bank’s IT drivenprocesses and workflow.

Throughout 1998, staff from our Personal BankingDivision participated in various property developmentlaunches throughout the country, including the one monthHome Ownership Campaign launched by our PrimeMinister on 12 December 1998, to provide end-financingfacilities to purchasers.

L O A N S T O S M A L L A N D M E D I U M

E N T E R P R I S E S / I N D U S T R I E S

Small and Medium Enterprises / Industries were hit hardby the economic turmoil in 1998. This was furthercompounded by the difficulty in obtaining loans atreasonable rates. Since this sector was recognised as crucialto the nation’s economic recovery, this prompted theGovernment to allocate a fund of RM1.5 billion to Smalland Medium Industries to enable banks to lend to thissector at reasonable rates. Bank Negara also allocatedlending targets for banks to achieve with respect to Smalland Medium Enterprises.

Supporting the Government’s efforts, the Bank continuedto lend to this important sector. The Bank was also theonly commercial bank to participate in the 1998 APECTrade Fair to enable entrepreneurs to have ‘first hand’information on available financing.

A U D R E Y I N T E R N A T I O N A L

( M ) S D N B H D

Audrey International, part of the Ng Tiong

Seng Group of Companies, is a well known

manufacturer of ladies lingerie for both the

local and export markets.

C U S T O M E R P R O F I L E

Ng Tiong Seng Group

Southern Bank Berhad has been our principal

banker for over 30 years, a few years after our shoe

trading business was founded back in 1956. The

unfailing support of Southern Bank Berhad through

good and difficult times has contributed significantly

towards the Group’s success which has grown from

its modest beginnings as a shoe trading company

to a diversified group of companies involved in the

manufacturing of shoes and ladies lingerie, property

development and investment, marketing and retailing

with total assets exceeding RM100 million.

We wish the Bank every success and hope the

good relations can be further enhanced.

Ng Tiong Seng

Executive Chairman


T E N A G A N A S I O N A L B E R H A D

Tenaga Nasional Berhad, responsible for

transmission and distribution of electricity in

Peninsular Malaysia has been banking with

Southern Bank since 1996.

0

20

40

60

80

100

120

140

160

180

200

(Each bar represents a “Single Customer”)

RM

Mill

ionPublic Administration (0.4%)

Transport & Storage (0.5%)

Mining & Quarrying (0.5%)

Consumption Credit (0.6%)

Hotel (0.8%)

Purchase of Properties (1.1%)

Timber & Forestry (1.2%)

Real Estate (3.5%)

Financial Services (4.0%)

Wholesale & Retail Trade (7.6%)

Electricity (9.2%)

Manufacturing (12.0%)

Construction (19.1%)

Business Services (19.7%)

Purchase of Securities (19.9%)

T H E T E N L A R G E S T ‘ S I N G L E

C U S T O M E R S ’ O F T H E B A N K

As at year-end 1998, the Bank’s exposure to the tenlargest ‘single customers’ (as defined under Section 61,Banking and Financial Institutions Act 1989 but excludingthe Bank’s subsidiaries) amounted to RM1.25 billion.These ten largest ‘single customers’ have interests in a widevariety of business activities as represented by the followingbar chart :-


A S S E T Q U A L I T Y

Non-Performing Loans (“NPL”)The tight monetary policy initially adopted by theGovernment to combat the economic crisis led to a higherlevel of NPLs within the banking industry. However,through prudent lending and close monitoring of loanassets quality, the Bank was able to keep its 1998 NPLlevel below the industry average. The lower NPL levelwas achieved without any sale of NPLs to Danaharta.

Banks who had sold their NPLs to Danaharta had beenable to reduce their NPL ratio which is an indicator ofasset quality. Selling banks would also be able to report ahigher profit or a lower loss position. This is because thebanks were allowed to amortize any shortfall on sale overa period of five years. On the contrary, if the NPLs werenot sold to Danaharta, the banks would have had to writedown the value of the NPL within one year. In addition,sale of NPLs to Danaharta would result in the reductionof total loan base, thus enabling selling banks to report ahigher general provision ratio.

In September 1998, BNM revised the NPL classificationstandard from 3 months to 6 months. Despite this, theBank continues to adopt the more stringent 3 monthsclassification standard. The Bank’s gross NPL increasedfrom RM198 million as at year-end 1997 to RM518million as at year end-1998 with a corresponding increasein net NPL ratio from 2.8% to 5.8%. However, the netNPL ratio would have been significantly reduced to 3.9%if the Bank had adopted the 6 months classificationstandard instead.

Net NPL RatioThroughout 1998, the Bank’s net NPL ratio had alwaysbeen below the industry’s ratio. As at year-end 1998,the Bank’s net NPL ratio was 5.8% as compared to thecommercial banks’ average ratio of 9.7% (based on3 months classification).

Gross NPL Position by Product GroupsThe default ratio as at year-end 1998 for Overdrafts(“OD”), Term Loans (“TL”), Housing Loans (“HL”) andTrade Bills (“TB”) increased within the range of 2.4%to 6.0%. As for Credit Cards (“CARD”), default ratioincreased from 8.3% to 16.8%. This was due mainlyto the drop in the loans base for CARD.

0

2

4

6

8

10

12

Rat

io (

%)

SBB Industry

Dec ’98Dec ’97 Mar ’98 Jun ’98 Sept ’98

2.8

4.9 5.2

7.2

5.8

3.2

5.8

7.3

10.59.7

0

500

1000

1500

2000

2500

3000

0

5

10

15

20

RM

Mill

ion

Rat

io (

%)

Loan Assets Default Ratio

OD

1,609 2,527 582 402 283

9.59.8

7.46.2

16.8

TL HL TB CARD


0

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150

200

250

300

350

400

450

0

1

2

3

4

5

6

7

8

RM

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Rat

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%)

Net NPL Outstanding Net NPL Ratio

1994 1995 1996 1997 1998

104 97 103 136 324

4.7

3.4

2.6 2.8

5.8

Gross NPL Position by Sectors

LOAN PURPOSE CODE LOAN GROSS DEFAULT % DEFAULT %ASSETS NPL WITHIN AGAINST

SECTOR LOANASSETS

RM Million RM Million % %

Agriculture, Hunting, Forestry & Fishing 80 3 3.8 0.1

Mining & Quarrying 25 0 0.0 0.0

Manufacturing 824 62 7.5 1.1

Electricity, Gas & Water Supply 185 0 0.0 0.0

Construction 552 38 6.9 0.7

Real Estate 293 51 17.4 0.9

Purchase of Landed Property 1,343 117 8.7 2.2Residential 752 79 10.5 1.5Non-Residential 591 38 6.4 0.7

Wholesale & Retail, Restaurants & Hotels 459 24 5.2 0.4

Transport, Storage & Communication 105 9 8.6 0.2

Finance, Insurance & Business Services 432 20 4.6 0.4

Purchase of Securities 349 102 29.2 1.9

Purchase of Transport Vehicles 4 0 0.0 0.0

Personal Uses 415 39 9.4 0.7

Credit Cards 283 48 17.0 0.9

Other Sectors 78 5 6.4 0.1

TOTAL 5,427 518 9.5

Developing a team of dedicated

and motivated bank staff.


Quality of NPL PortfolioNPLs which are in arrears for 3 months but less than 9are classified as “Sub-standard”. NPLs which are in arrearsfor 9 months but less than 12 months, and for 12 monthsand above are classified as “Doubtful” and “Bad”respectively.

Out of the total gross NPLs of RM518 million as atyear-end 1998, 36.7% or RM190 million was classified as“Sub-standard”, 25.1% or RM130 million as “Doubtful”,and the remaining 38.2% or RM198 million as “Bad”.

Loan Loss Provision RatioThe Bank’s loan loss provision ratio, defined as a percentageof the total general provision, specific provision andinterest-in-suspense against the gross NPL, is 53.4%.

This ratio which is comparable to the commercialbanks’ average ratio of 53.7%, reflects the Bank’s adoptionof the 3 months classification standard and prudentprovisioning policy.

1999 Outlook on NPLThe various measures taken by the Government andBank Negara Malaysia have eased access to capital andthese have helped build investors’ confidence and put theeconomy on the road to recovery. Against this backdrop,we view 1999 with optimism and we expect the NPLlevel to moderate.

Service excellence and product innovation

to cater to the discerning needs of our

customers.

Quality of NPL Portfolio

38.2% Bad

36.7% Sub-standard

25.1% Doubtful


The International Banking Group (IBG) carries out thetreasury function of the Bank under the guidance of theAsset and Liability Management Committee (ALCO).It is responsible for managing and mitigating the marketrisks that arise from the business activities of the Bank.Market risk is the exposure to an adverse change inthe value of financial instruments caused by a change inmarket prices or rates. The major risks to which the Bankis exposed are liquidity risk, price risk, foreign exchangerisk and interest rate risk.

Liquidity risk is the risk that an institution will be unableto meet a financial commitment to a customer whencommitment falls due. To be able to conduct its normalbusiness activities, an institution needs to have continuousaccess to sufficient, reasonably priced funding. Price riskis the risk to earnings that arises from volatility in interestrates and foreign exchange rates which may have adverseimpact. Foreign exchange risk arises from exposure to

fluctuations in exchange rates when assets and liabilities inthe same currency are not of the same magnitude. Interestrate risks result primarily from differences in the maturityor repricing dates of assets and liabilities.

Southern Bank’s risk management is guided by predefinedrisk management principles, including:

1. Formal definition of risk management guidelines;

2. Risk oversight by ALCO;

3. Utilisation of risk management systems, includingdaily mark-to-market analysis and portfolio stresstesting. A key element in the Bank’s on-goingprocess to effectively measure and manage interestrate risks is the utilisation of simulation models; bothInterest Rate Sensitivity and Net Interest Incomesimulation.

Treasury: Providing professional services

to help customers manage foreign exchange

and interest rate risk.


Treasury Management

A S S E T L I A B I L I T Y M A N A G E M E N T

Risk management and oversight are governed by ALCOwhich approves a general risk mandate to oversee theseactivities. ALCO is made up of Senior Managers of allbusiness departments, operating within Asset/LiabilityManagement Policy with the following objectives:

1. Primary ObjectiveTo maintain a balance between risk and return.The focus is on identification, measurement andmanagement of both risks and returns, ensuring thatrisks are maintained at known and acceptable levels.

2. Specific ObjectivesTo manage and maintain in all manner consistentwith the overall goals of the Bank:

• Asset Quality and credit risk within acceptablelevels;

• Interest rate risk within acceptable levels;

• Liquidity sufficient to meet projected loan demandand deposit withdrawal;

• Capital adequacy at or above the requiredregulatory guidelines;

• Earnings and profitability at optimum levels; and

• Growth which is sound, profitable and balanced.

ALCO’s responsibilities also include the measurement,monitoring, assessment and control of market riskthroughout Southern Bank. These cover setting andoverseeing risk limits, approving unique, non-standardtransactions, evaluating and approving new products,developing risk measurement and capital allocationmethodologies and portfolio stress tests.

The Bank’s limits structure extends to desk-level activitiesand includes a listing of authorized instruments, maximumtenors, loss appetite and maximum holding dependingon the type of instruments. The limit structure helps ensurealignment of corporate risk appetite with trading andinvestment risk-taking activities.

S T R E S S T E S T

Stress testing is done to capture the effects of worst-casemarket movements on a portfolio. It discloses the risk ofthe unlikely but plausible events in abnormal markets.The risks incorporated in typical stress tests includethose of liquidity, correlation, prepayment speeds andterm structures. Stress testing helps understand andcommunicate the risk profile of a complicated portfolio.The Bank’s stress tests are focused around changes inmarket rates and prices that result from pre-specifiedeconomic scenarios.

Presently, the Bank performs the stress test on the NetInterest Income (NII), taking into consideration thevarious interest rate scenarios. Results from the stress testare thoroughly analysed and appropriate strategies derivedand taken by the Bank to address the various scenarios.

K L A N G M U L T I T E R M I N A L

S D N B H D

Located in Port Klang, Klang Multi Terminal

Sdn Bhd is the operator of Westport, the newest terminal

in Port Klang. We have been its banker since 1995.


I N T E R E S T R A T E S E N S I T I V I T Y

Maturity or repricing dateof interest sensitive instruments InterestUp to Above 3 to Over 12 Rate

RM Million, as at 31 December 1998 3 months 12 months months Sensitive Total

AssetsCash and short-term funds 67.7 55.7 - 221.7 345.1Dealing and Investment Securities 384.1 552.0 581.7 82.3 1,600.1Gross Loans and Advances - - - - -Loans sold to Cagamas 4,576.2 131.1 764.0 204.2 5,675.5Others - - - 565.5 565.5

Total Assets 5,028.1 738.8 1,345.7 1,073.7 8,186.3

Liabilities and shareholders’ equityCustomer deposits, borrowing, rediscounts and liabilities arising from Loans sold to Cagamas 3,894.3 1,676.3 76.9 769.6 6,417.1Subordinated bonds issued - - 300.0 - 300.0Others - - - 1,469.2 1,469.2

Total Liabilities and shareholders’ equity 3,894.3 1,676.3 376.9 2,238.8 8,186.3

Interest rate sensitivity gap 1,133.8 (937.5) 968.8 (1,165.1)

Cumulative interest rate sensitivity gap 1,133.8 196.3 1,165.1 0.0

Notes:

1. Data relates to the Bank only and excludes positions of subsidiaries.

2. Assumptions made:

a. Savings account deposits deemed to be repriced within 3 months;

b. Credit card loans, housing loans under prescribed rate and staff loans deemed to reprice longer than 12 months.

N E W L I Q U I D I T Y F R A M E W O R K

As announced by BNM in March 1998, one of themeasures to be implemented under the stabilisationpackage was the review of the present liquidity framework.Under the old framework, financial institutions wererequired to hold liquid assets equivalent to a specifiedpercentage of their eligible liabilities.

The New Liquidity Framework is to ensure that thereis sufficient liquidity to meet the maturing liabilitiesobligations with maturing assets and also to sustainunexpected heavy withdrawals.

0

200

400

600

800

RM

Mill

ion

Up to 3 mths >3 mths-1 yr >1 yr

760.6 705.2 0.0


N A G A D D B S D N B H D

One of the top advertising agencies in Malaysia

with the Enterprise 50 qualification.


Naga DDB Sdn Bhd

We have enjoyed tremendous support from

Southern Bank since our incorporation in 1985.

We strongly believe this partnership has helped

us become one of the leading advertising agencies in

Malaysia. The same support from Southern Bank

has further helped us in being selected as an

Enterprise 50 company. The Enterprise 50 award

recognises the achievements of Malaysia’s 50 most

enterprising home grown companies. We would like

to share this award with the Bank.

Lionel Koh

General Manager

BNM conducted a six-month trial run of the NewLiquidity Framework, which began in July 1998 in parallelto the existing liquidity framework. Effective 1999,banking institutions that are capable and ready to complywith the stringent requirements can switch over to thenew framework. All banking institutions will be requiredto comply with the new framework by 1 January 2000.

Beginning in 1999, Southern Bank Berhad was amongstthe pioneer financial institutions that have adopted theNew Liquidity Framework.

T R E A S U R Y M A N A G E M E N T S Y S T E M

Against a backdrop of a highly competitive environmentand the fact that market risks (comprising price andliquidity risks) are an inherent part of banking activities,IBG has upgraded its front office operations by acquiringthe Treasury Management System.

The system enables on-line deal inputs and counter partyverifications, and to improve the Bank’s risk managementculture to manage risks better from the front and back-end treasury operations through interfacing to othercritical treasury related systems.


N I T C R E P R E S E N T A T I O N

In September, Chief Executive Director (CED)Dato’ Tan Teong Hean was appointed as the solebanker to the National Information Technology Council(NITC), reflecting Southen Bank’s leading position inthe IT sector. The NITC acts as a think-tank at thehighest level to advise the Government on thedevelopment of IT in Malaysia.

The NITC is chaired by the Prime Minister of MalaysiaYAB Dato’ Seri Dr. Mahathir Mohamad and wasestablished to spearhead Malaysia’s advancement intothe Information Technology era in line with the objectivesof the National IT Agenda and the Multi-MediaSuper Corridor.

Y E A R 2 0 0 0 C O M P L I A N C E B Y M I D 1 9 9 9

All financial transactions, in the era of increasinglyimportant computerised services rely on accurate datesand times. A bank’s date-sensitive systems must be able todifferentiate between dates using “00” as year 2000 insteadof the year 1900.

Southern Bank has long been aware of the risk associatedwith the Y2K or Millennium Bug problems. As a resultthe Bank has placed significant emphasis on identifyingand addressing the Year 2000 problems, completing thebulk of the conversion process in 1998 in order to achieveY2K compliance status by June 1999. This will leave therest of this year as a buffer for testing and fine tuning allsystems, in order to ensure that all possible details of theY2K problem have been considered and that all aspectshave been completely verified.

IT Industry Leadership

R O N S E N G P A P E R P R O D U C T S

S D N B H D

A manufacturer of corrugated carton boxes and

related products. Our banking relationship was

started together with the establishment of the

business in 1978.

Forerunner in the IT Industry


Under the aegis of Bank Negara, the Bank during 1998completed the renovation, testing and implementation ofthe mainframe systems, as well as all the critical systemssupporting the core banking business. An audit by BankNegara in 1998 placed the Bank in the highest satisfactoryY2K preparedness category.

The Bank has been conducting final testing with externalpartners like VISA, MasterCard and MEPS and iscompleting “marginal” items such as personal computersand non IT systems like the telephone exchange systemsor fax machines.

The Bank has initiated measures to ensure that customers,business partners and service providers are Y2K compliant.Necessary contingency plans have been implemented toensure that all Bank operations will run smoothly oncritical dates such as January 1 or February 29, 2000.

The Board has been regularly briefed and consulted onthe Banks Y2K progress in compliance with the BankNegara guidelines. Training kits have been made availableto assist Managers in briefing Bank staff and Y2K leafletshave been distributed to customers.

Southern Bank can be considered in the top preparednesscategory in terms of Millennium Compliance in Malaysia.Accordingly the Bank’s clients can enjoy absoluteconfidence that all their financial records will remainintact and that the Year 2000 challenge will not disruptany business process vital to the Bank’s operations orcustomer requirements.


A L L T H E B A N K ’ S C O R E S Y S T E M S A R E Y 2 K C O M P L I A N T

MainframeAutomatedTeller Machines

Fixed Assets

Payroll

InterbankClearing

Loans

TellerWorkstations

Deposits

Credit Cards General Ledger

EnterpriseBanking

Direct AccessCall Centre


I T D R I V E N P R O D U C T I V I T Y G A I N S

The Bank has always positioned itself as one of the keymovers in Malaysia in the early adoption of emergingtechnologies. In line with this approach, the Bank testedthe Biometric ATM using finger-scanning to verify theATM cardholders. This technology offers greater securityin verifying the cardholders. The Biometric data is storedon a chip card during the initial “personalised process”and verification entails checking the present image againstthe stored image.

The Bank completed the implementation of theAutoposting System which has the ability to handlevoluminous crediting and debiting of accounts forcustomers.

SPICK, a project initiated by Bank Negara Malaysia toprocess inward clearing of cheques using digital imagesinstead of paper cheque, was extended throughout thecountry. Treasury System was also upgraded in December1998 to improve productivity and efficiency. In orderto tighten up protection against credit card fraud,a sophisticated Account Activity Monitoring Systemwas implemented.

Other major implementations for the year includeRecurring Payment System and Change-Off AccountsSystem which greatly improved efficiency in monitoringcredit card accounts.

With technology the Bank was able to develop newpayment products to meet the changing needs of thelatest demands of the customers. The Corporate Cardand Platinum Card were developed and launched inAugust 1998 with many high valued features.

The technology for the Maestro Debit Card was put inplace in February 1998 to provide more convenience forthe cardholders to pay at checkout counters worldwide,in addition to cash withdrawal via ATM.

Enhancements were made to the Enterprise BankingSystem to include the convenience of printing Letters ofGuarantee and Letters of Credit, and broadcasting newsand information via customers’ own computer systems.

The Bank after pioneering the first implementation ofa Secure Electronic Transmission (SET) system in 1997upgraded this version to a higher security level in 1998.

The Bank provided assistance to its sister institution,Banco Austral in Mozambique to computerise bankingoperations. In 1998, the Bank successfully implementedSavings Account, Current Account, Fixed Deposit Accountand Loans Systems for Banco Austral.

O S K S E C U R I T I E S

B E R H A D

OSK Securities has been in the

industry for over 14 years and has

become one of the largest stockbroking

houses in Malaysia. The banking relationship

with this customer dates back to 1985.


Southern Bank as Change Catalyst

The CED, Dato Tan Teong Hean through his participationas a speaker, panellist and moderator, represented the Bankin the following fora in Kuala Lumpur covering issuesranging from Information Technology and Finance to theNational Economic Recovery:

At the NITC InfoTech Malaysia 1998 Conference,a premier conference on information technology on the“Impact of E-Commerce on the Financial Sector.”

At the Multimedia Asia (MMA) Conference andExhibition 1998 on “Developing Multimedia ContentIndustry in MSC: Challenges and Opportunities”. ThisInternational event was the largest and most specialisedmultimedia conference and exhibition in Asia in 1998.

At the CEO Forum organised by Business Week inOctober 1998, a bankers perspective on “CorporateResponses to the Financial Crisis : Managing the NewEconomic Reality” together with other internationalspeakers on the Panel that included CEOs from diversesectors ranging from airline and hotel industries to tradingand investment.

At an international conference on “Managing theAsia Financial Crisis” on “Malaysia’s Road to Recovery:the Key Tasks Ahead”, which included distinguishedspeakers such as the Second Finance Minister, YB DatukMustapa Mohamed.


K I M S W E E L O O N G

D E V E L O P M E N T S D N B H D

As the developer of Temerluh Industrial Park, it has been banking with us since 1992. However, the bank has been supporting its palm oil businessunder Kim Swee Loong Sdn Bhd since 1985.


Kim Swee Loong Development Sdn BhdWe would like to take this opportunity to

express our appreciation to the Bank whose supporthad been invaluable in helping us grow from our

beginnings in palm oil plantations to the developerof the successful Temerluh Industrial Park.

Lee Kim Seng Kong Foo LeongExecutive Chairman Executive Director

Corporate Restructuring

L E A N E R A N D F L A T T E R

Flattening the organisations is not a mere buzz byword in the Bank Group. It has happened and it isstill happening.

Delayering, launched four years back, way before theJuly 1997 regional downturn, has already benefited theBank Group’s operations. We are now much leaner.

Along with the above phenomenon, the multi-taskingculture has grown and spread out beyond the top-mostlayers.

It is this re-engineering of people resources that will drivethe Group well into the next millennium and we are proudof what we have accomplished so far.

C L O S U R E O F S B B F U T U R E S

SBB Futures having made losses since start-up two yearsago wound down in 1998. Its closure in August whichresulted in all employees leaving the Bank Group resultedin substantial savings in personnel, operational andoffice costs.

Islamic Banking: Alternative banking services to cater

to the changing needs of the community.

A M A L G A M A T I O N O F B A N K

A N D F I N A N C E C O M P A N Y :

A 7 2 B R A N C H N E T W O R K

The amalgamation of the business of Southern Finance

Company Berhad (“SFCB”) and the Bank was completed

April 12, 1999. The customers of SFCB now have access to

an enlarged branch network of 72 as well as the Bank’s

expanding non-branch delivery channels. A merger of eleven

finance branches with the Bank’s branches arising from close

proximity was necessary to allow for a more efficient

management of human resources and other infrastructure

leaving sixteen finance branches to be converted to

bank units.

There will be a tangible benefit to the Bank from the

amalgamation scheme in terms of the expansion of assets

and liabilities which is expected to register an increase of

RM1.0 billion from the exercise. Cost-savings are also to

be reaped in other areas amounting to no less than RM3.2

million in the first post-amalgamation year and RM6.4

million in the second year.

SFCB offered all its employees a Voluntary Separation

Scheme (“VSS”) to address the excess in human resources

at branch and Corporate HQ arising from the branch

network rationalisation and duplication of functions at

HQ. With its in-built elements of fairness and competitive

characteristics, the scheme was favourably received

resulting in a 60% reduction in staff force after the

implementation of the VSS Scheme. Thus, from a total

staff number of 295,118 will be joining the Bank upon

amalgamation as the number of staff have been reduced

by 177. The staff who will be joining the Bank will

be retrained and this process of skill enhancement will

also serve the best interest of the staff as they acquire

multi-skills.

As not to inconvenience the customers of SFCB as

the Bank winds down the hire purchase (HP) portfolio,

a Hire Purchase Centre is being set up as a one-stop centre

to interface with branches on all HP matters. The Bank,

nevertheless, will continue to serve all markets in whichSFCB has built up a distinct franchise.

C O M P U T E R F O R M S

( M A L A Y S I A ) B E R H A D

CFM is involved in the printing and

distribution of computer forms, stock forms

and specialised forms and has been banking

with us since 1996.


C O R P O R A T E R E L O C A T I O N T O

G E N E R A T E S A V I N G S

The Bank will be relocating from its downtownlocation on Jalan Sultan Ismail to its new corporateheadquarters at Plaza Damansara, Damansara Heights in1999. In view of the rapid price escalations for primeoffice space within the Golden Triangle during theproperty boom of the mid 1990s the Bank made a decisionto reduce its long-term overhead costs by building itsown office space in the suburb of Damansara Heights,strategically located between Kuala Lumpur City Centreand Petaling Jaya/Shah Alam and easily accessible toPutra Jaya and Cyberjaya.

Its close proximity and accessibility to the major highwayssuch as the Lebuhraya Damansara-Puchong and theMiddle Ring Road, has brought about the speedy successof Damansara Heights as an up and coming majorcommercial hub away from the city centre. There arepresently about 20 large commercial buildings inDamansara Heights as more offices relocate to the suburbsin view of the lower rentals and easier accessibility awayfrom the traffic congestion in the city centre.

The new building with net lettable space of 170,000 sq.ft., comprises seven levels of office and retail spaceand four levels of carparks. It will accommodate 70% ofHQ and will satisfy the need for prime space requirementof the Banks front liners. It will include a new state ofthe art bank branch with smart offices and biometricsecurity systems. The remaining 30% of the office spacefor support and back offices will stay at premises withrelatively lower priced rentals to be more cost effective.

Model of the Bank’s new headquarters.

Purchase of additional space for these offices will beconsidered when funding cost and pricing of office spacereturn to a more reasonable level. In the meantime theBank will be benefiting from considerable savings by nolonger paying premium rental rates for its corporate officewhile retaining the bank branch in Wisma Genting forthe convenience of customers.

B E T T E R C O S T - T O - I N C O M E R A T I O

Reaping the benefits on our bankwide cost cuttingmeasures, the Bank’s cost-to-income ratio improved to43% from 48% previously.

At the Group, cost-to-income ratio increased to 59% from51% a year ago. The increase was due to the first yearconsolidation of the Mozambican subsidiary’s overheadexpenses which amounted to RM74.2 million(the Mozambican subsidiary’s results were equityaccounted for in 1997). Excluding these expenses,the adjusted cost-to-income ratio of the Malaysianoperation will be marginally higher at 52%.

Moreover, included in the Bank and the Group’s overheadcost are non-recurring expenses such as personnel costsfor employees who left with no replacement totallingnearly RM8.0 million.

Adjusted for all the above, the Bank and the Group’scost-to-income ratio would be even lower at 42% and51% respectively.



Channel Strategies

D I R E C T A C C E S S : B I L L P A Y M E N T

S E R V I C E

Easy Auto Pay (EAP) marked the introduction of DirectAccess’ bill payment service. EAP is available to all DirectAccess’ valued customers where they can nowconveniently pay their bills to a variety of participatingDirect Access billers. This is in line with the Bank’scommitment of extending convenience to its base andadding more value to the way they bank.

In a successful three month campaign initiated by theBank, four organisations were designated as participatingDirect Access billers. They are Telekom Malaysia Berhad(TMB), Petaling Jaya Municipal Council (MPPJ),Shah Alam Municipal Council (MPSA) and KlangMunicipal Council (MPK).

As the concept was developed ‘in-house’, the cost for theentire campaign was kept to a minimum.

In a special Bonus Promotion (BP) tied in with thiscampaign, bonus points were given to customers whosigned up for this facility during promotion period.Executed as a direct mail effort, the EAP-BP mail-outwas sent to the entire customer base. Additionally, thispromotion was supported by the internal telephonemessage-on-hold service. Customers were encouraged tosign-up during this promotion period as they would beeligible for free bonus points which will be credited intotheir Direct Access credit card account.

L I O N E L E C T R O N I C S

E N T E R P R I S E ( M ) S D N B H D

A subsidiary of Paracorp Bhd which is listed

on the Main Board of KLSE, it manufactures

transformers and coils for the electronic and

telecommunication industry. Lion has been

banking with us since 1994.

Telephone Banking: An alternative to conventional banking.


The EAP list is still growing as the bank continually buildsrelationships with other organisations. The number ofparticipating billers or organisations have since increasedand Direct Access is now poised to embark on its nextEAP campaign.

E N T E R P R I S E B A N K I N G : A D I V I S I O N

S P E C I A L L Y F O R B U S I N E S S

Information Technology (IT) plays a growing integral andimportant role in making business operations acrossboundaries and between other businesses seamless.Enterprise Banking Division (EBD) has been at theforefront of enhancing the perception that Southern Bankis an IT driven bank. EBD is now one of the Bank’s

recognised alternative delivery channels. It is becomingwidely accepted among an increasing number of corporatemember managers who use it on a daily basis to gainup-to-date real-time information on their accounts.The uptake by corporates has been very good, and the1998 target has been exceeded. Transaction throughput,which was zero in January 1998, exceeded RM1.5 billionby the end of 1998.

Customer service is a major consideration of the serviceprovided and EBD has been pleased with many favorablecomments from our clients in 1998. As part of thecontinuous improvement of customer service, we havehad two major upgrades of the software. These haveimproved the system and have enhanced the servicesprovided to the customers.

K U O K B R O T H E R S S D N B H D

The company is an investment holding company

involved in commodities, industrial products,

property, trading and hotels. Our banking

relationship started in 1998.

Enterprise Banking: Convenience at the touch of a button.

At the APEC Conference, the Bank’s electronic bankingwas on display with the Enterprise Banking System oneof the featured systems.

EBD, as part of the Bank, participated in the ITX ’98(IT Exhibition).

At the AGM, the Bank’s IT products were also showcased.

EBD has continued to forge ahead in IT area, with anupgrading of its IT services. The EBD system is Y2Kcompliant. It uses the latest technology available. Also,nodes have been set up across the country where userscan access EBD through a local call.

The customers of EBD range from SMIs to largecorporations. Industries range from manufacturing,hi-tech companies, construction, financial services,medical, hotels, services, trading and shipping. EBD expectsto continue to forge inroads into these and other industriesin 1999, as well as providing a complete banking solutionfor our customers.

S O U T H E R N B A N K ’ S W E B S I T E :

I M P A C T O N A W I D E R P U B L I C

Southern Bank’s corporate website (http://www.sbbgroup.com.my) launched in 1995, posts informationon the Bank’s banking products and services, corporateinformation and current news.

The website was redesigned in 1998 with a friendlier look.Pages were reconfigured for easier reading. Interactiveforms and search engines were added to assist users tofind information more quickly.

The web site is popular with an average of 6500 user/visitors every month generating more than 1.6 millionshits in 1998. Malaysians make up 43% of the traffic with57% of the visitors originating from foreign countries.

In 1998, Southern Bank began disseminating its 1997Annual Report via the web site and CD-ROM. This hasproven to be popular with our IT-savvy shareholders.The Annual Report was downloaded on an average of190 times per month during 1998. In this way the Bankwas able to save publishing costs as well as demonstratingecological sensitivity.

The website is maintained and operated within the Bankby IT staff who also host the website for Southern UnitTrust Sdn. Bhd. (http://www.sbbut.com.my).

S C B D E V E L O P M E N T B E R H A D

A subsidiary of Boustead Holdings Bhd,

both companies are listed on the Main Board of KLSE.

SCB’s principal businesses are to cultivate and process oil

palm and natural rubber as well as investment holding.

SCB started its banking relationship with us in 1998.


http://www.sbbut.com.my




Strategic Alliances: MIMOS and SCANS

In order to stay competitive in the future Southern Bankis striking strategic alliance with partners that will addvalue to stakeholders – customers, shareholders and staff.Strategic partners with diverse core competencies can assistSouthern Bank compete in a market where the traditionalrole of banking is blurring. The cross-selling opportunitiesand value-added services are among the benefits that canbe derived from these strategic alliances.

A good example of a Southern Bank alliance partner isMIMOS Berhad. MIMOS Berhad started Malaysia’s firstInternet Service Provider, JARING. Backed by itstechnically superior network and personnel, JARING isthe choice of many Malaysians and corporations for itsinnovative and excellent services. The management teamsof Southern Bank and MIMOS share the same vision ofproviding excellent products and services to an increasinglytechnology-literate population in Malaysia.

The strategic alliance between Southern Bank andMIMOS has brought immediate benefit to bothorganisations. JARING subscribers can now pay throughautomatic payment arrangements using credit cards.MIMOS is using Southern Banks Enterprise Bankingservice that allows transactions and fund management ofits accounts electronically.

In December 1998, Southern Bank and MIMOSextended their strategic alliance further by launchingthe JET Debit Card. The JET Debit cardholders willearn free Internet hours based on their Southern Banksavings or current account balances, in addition to otherdebit card benefits.

Another example of an alliance is the Banks relationshipwith the Securities Clearing Automated Network Servicesor SCANS as it is better known. SCANS is a subsidiaryof the KLSE and is the clearing house for membercompanies of the KLSE i.e. Securities Companies.Southern Bank is one of the select approved clearing banksfor SCANS.

This strategic alliance has benefited all parties. SCANSnow gets payments from the Securities Companies ona real-time basis by means of the Banks EnterpriseBanking System. As the system identifies who has paid,together with the date, time and message, SCANS cannot only control its cash position, but can also bettermanage its relationship with the Securities Companies.

The Securities Companies use the branch networkwhere their customers can walk in and make payment.Through the Enterprise banking System, they canimmediately identify which customer has paid them.This SBB/SCANS alliance has thus increased efficiency,reduced costs and has made another contributiontowards the paperless office.

The Jet Debit Card: Malaysia’s first debit card for the banking,

shopping and net surfing convenience of our customers.


M E L A K A T O N G B E E

G R O U P O F C O M P A N I E S

( “ M T B G R O U P ” )

MTB Group is one of the oldest and largest

family owned businesses in Melaka. With its core

business of oil palm and rubber, the Group has

diversified into property development,

manufacturing, hotels and real estate.


Melaka Tong Bee Group

Our banking relationship with Southern Bank

Berhad was established in 1970 and Southern

Bank has been one of our principal bankers since

then. We are grateful to Southern Bank for its

continued support and are confident that we will

be business partners for many more years to come.

Datuk Yeo Kian Yam Yang Chien Chu

Chairman Managing Director

T H E N E W S T R A I T S T I M E S

P R E S S ( M ) B H D

The New Straits Times was first

published in 1845. Over the last 154

years, the company became a major

publisher and began banking with

Southern Bank in 1998.


Subsidiary Companies of the Bank

S B B S E C U R I T I E S S D N B H D

SBB Securities, which is the Bank’s stockbroking arm isbased in Ipoh and has been a member company of theKuala Lumpur Stock Exchange for more than 15 years.SBB Securities provides a wide range of stockbrokingservices and this includes in-house research as well asdomestic and foreign custodian and nominees servicesthrough its subsidiaries.

During the year, SBB Securities successfully participatedin various readiness tests and mock runs carried out bythe Malaysian Exchange of Securities Dealing andAutomated Quotation (“MESDAQ”). SBB Securities hasalso been admitted as a member of MESDAQ and is readyto participate as an inaugural member of the exchangewhen it commences trading.

During the year, further investments were made toenhance the use of information technology in trading.The capabilities of the in-house real-time marketinformation dissemination system were refined andexpanded to facilitate on-line broking and other areas ofclient service.

On the operating front, SBB Securities managedto increase its market share from 2.1% in 1998 to 2.7%.The higher market share is reflective of the overall increasein SBB Securities’ client base.

In line with the difficult trading environment,SBB Securities has taken several measures to ensurecontinued cost competitiveness. These include monitoringoperating cost and expenditure, credit and client tradinglimits and staff levels. Appropriate risk managementmeasures have also been implemented in line with controlsundertaken by the authorities to enhance transparencyand efficiency in the market.

S O U T H E R N N O M I N E E S

( T E M P A T A N ) S D N B H D

S O U T H E R N N O M I N E E S

( A S I N G ) S D N B H D

Southern Nominees (Tempatan) and Southern Nominees(Asing) were set up to provide nominee services for bothMalaysian and foreigners. The companies are authoriseddirect members of Malaysian Central Depository Sdn Bhdand ensure speedy and confidential handling of nomineeservices in scripless form.

S B B A S S E T M A N A G E M E N T

S D N B H D ( “ S B B A M ” )

SBBAM, a wholly owned subsidiary of the Bankundertakes investment management services under itsFund Manager’s Licence issued in accordance withSecurities Industry Act 1983. The Company beganoperations in 1992 and is currently a fully integrated fundmanagement company with functions ranging fromformulating investment strategy to administrative recordkeeping and custody of scrips.

The fund managers are long experienced in handling awide cross section of long-term institutional funds suchas pension funds, insurance funds, foundations, statutoryfunds and corporate funds. In addition, SBBAM alsomanages the unit trust funds launched by the Bank.

Trading activities at SBB Securities.


In the last six years, SBBAM has consistently achievedabove-average performance by adopting a long-termapproach to investment and avoiding excessive short-termspeculation. The company adopts a combination of‘top-down’ and ‘bottom-up’ approaches by examiningboth macro-economic factors and micro aspects ofthe investment in question to minimise exposure toundue risks.

1998 was a tough year for fund managers. It was the secondyear where the stock market was severely affected bythe crisis. For SBBAM, it was a hectic year with manychanges taking place such as new Government policies,trading amidst unsettling market conditions and copingwith a severe economic recession in the country.To successfully adapt to the changing circumstances,SBBAM undertook tactical changes to its investmentpolicies throughout the year in order to emerge from thiscurrent crisis stronger than ever.

S B V E N T U R E C A P I T A L C O R P O R A T I O N

S D N B H D ( “ S B V C C ” )

SBVCC is another wholly owned subsidiary of the Bankand is principally involved in providing venture capitalto companies with good growth potential. Investmentsare usually made in growing and emerging companieswith proprietary products, production processes or servicesoperating in niche markets which may not need tobe profitable currently but must have turnaround potential.

The participation of risk capital could be in any of thefollowing categories :-

• Development Financing - investment in new businessand development of new products.

• Intermediate Financing - investment in existingbusiness to support growth through internal expansionor acquisitions.

• Secondary Purchases - acquisition of issued sharesfrom existing shareholders of established businesses.

S . B . P R O P E R T I E S S D N B H D

( “ S . B . P R O P E R T I E S ” )

S.B. Properties is the wholly owned subsidiary of the Bankresponsible for management of the Bank group’s propertiesin Malaysia.

For the year ended 31 December 1998 profit beforetax was RM4,414,720.56 an increase of 97.4% over theprevious year’s profit before tax of RM2,236,771.97.This substantial increase was achieved mainly by theextension of its project management services to BancoAustral as well as through its subsidiary Elite ConstantDevelopment Sdn Bhd which undertook constructioncontracts for Banco Austral, the Bank’s subsidiary companyin Mozambique.

During 1998 the Company made major headwaywith the development and construction of the Bank’sheadquarters in Plaza Damansara, Bukit Damansara,Kuala Lumpur.

S B B U N I T T R U S T

M A N A G E M E N T B E R H A D

SBB Unit Trust Management Berhad or better knownas Southern Unit Trust (“SUT”) is wholly owned bythe Bank and was incorporated in 1995.

SUT is the manager for the SBB Premium Capital Fundand the SBB Retirement Balanced Fund and was thefirst unit trust company in Malaysia to be accredited withthe ISO 9002 certification. In 1998, SUT also launcheda new programme designed for children’s future educationcalled the SBB Total Education Plan. The SBB TotalEducation Plan will allow for realistic monthly savings,insurance protection and inflation protected investment.

SUT is responsible for the day-to-day managementand administration of the various Funds in accordancewith the provisions of the Trust Deed. The main dutiesof SUT include maintaining a register of unitholders,arranging the sale and repurchase of units, valuing theinvestments, keeping proper records of the Funds andreporting to Unitholders.


B A N C O A U S T R A L –

S O U T H E R N B A N K I N M O Z A M B I Q U E

Southern Bank Berhad, in September 1997, through its51% owned subsidiary, Investimentos Associados Limitada,a holding company incorporated in the Republic ofMozambique, acquired 60% of Banco Austral, S.A.R.L.(formerly Banco Popular de Desenvolvimento S.A.R.L).

In February 1998, Banco Austral, S.A.R.L. assumed itspresent name, reflecting the transformation of the Bankinto a modern financial institution and a leader in thefinancial services industry contributing positively to thedevelopment of the economy.

Banco Austral, one of six licensed banks in Mozambique,has moved to the forefront of the industry during 1998.The Bank has led the way by being the first commercialbank in Mozambique to substantially lower its interestrates and to introduce a Prime Rate, in an initiative toreduce interest rates in Mozambique in order to achievesustainable economic growth in the country.

Banco Austral is among the leading banks in Mozambique.With its extensive branch network of 131 branchesstrategically located throughout the country, it has one ofthe widest reaches of any bank in terms of distributionand provides a full range of financial products and services.

In line with the core strategies of Southern Bank Berhadto utilise cutting edge banking technology, Banco Australhas embarked on an intensive program of retailtransformation and to computerise its delivery channelsto provide on-line efficient and effective delivery.

Given the buoyant growth of the economy inMozambique, Banco Austral is well positioned tobecome the market leader and to set the higheststandard of banking in Mozambique.

The official launch of the new image of Banco AustralS.A.R.L. took place in July in Maputo, Mozambique.The event was presided over by the Prime Ministerof Malaysia, YAB Dato’ Seri Dr Mahathir Mohamadand the President of the Republic of Mozambique,His Excellency Mr Joaquim Alberto Chissano.

The newly renovated banking hall at Banco Austral.

Official Launch of the new logo for Banco Austral.


Corporate Events

F E B R U A R Y

• Banco Popular de Desenvolvimento S.A.R.L.,Southern Bank’s subsidiary in Mozambique wastransformed into Banco Austral, S.A.R.L.

M A R C H

• Southern Bank installed the first batch of 25 unitsof new generation Autobank ATMs.

A P R I L

• Southern Bank displayed its forte in applyingstate-of-the-art information technology for thebenefit and convenience of customers at the annualInfotech Malaysia held at Putra World Trade Centrein Kuala Lumpur. It showcased the high-techadvantage of the Bank’s successful Direct Access andEnterprise Banking services for individuals andcorporates.

M A Y

• Direct Access became the first direct banking serviceprovider in the country to be accredited with theinternationally acclaimed ISO 9002 certificatefrom the Standards and Industrial Research Instituteof Malaysia.

• Easy Auto Pay (EAP) marked the introduction ofDirect Access’s bill payment service for its customers topay their bills to participating billers such as TelekomMalaysia and Petaling Jaya Municipal Council.

• Chairman, Tan Sri Osman S Cassim officially launchedTotal Education Plan, Southern Unit Trust’seducation trust account that offers a fine-tuned balanceof investment and protection for a child’s long-termeducation plan and his/her future.

• Southern Bank was a co-sponsor of the HarvardProject for Asian and International Relationsheld at the Putra World Trade Centre. Over 200students from the world’s top universities such asHarvard, Oxford, Yale and Malaysian universitiesjoined leading politicians, corporate leaders andrenowned scholars to exchange perspectives oncritical issues in the international arena.

J U N E

• In conjunction with its 36th Annual GeneralMeeting, Southern Bank held a special exhibitionof its industry-leading IT products and services toshareholders and the public at Hotel Istana inKuala Lumpur.

• Southern Unit Trust issued its Master Prospectusfor the SBB Premium Capital Fund andRetirement Balanced Fund, designed as a friendly,interactive facility explaining to investors the currentschemes, strategies and management skills of the twoFunds in one package.

• The Retail Banking Group launched the new rangeof Max Plus Savings, Max Plus Fixed Depositand Max Plus Two-In-One, a combination ofsavings and deposit accounts.

• The Bank’s Butterworth branch commenced branchbroking operations.

• Sales of the KL’98 Commonwealth GamesCommemorative RM50 Polymer Notes took offat the Bank’s branches and by the end of the salescampaign in November 1999, a total of 21,315 pieceswere sold.

Banco Austral, our first overseas subsidiary.


• The Bank contributed RM 35,000 as an officialco-sponsor of the Petronas Jet Sports RacingProgramme.

• Chief Executive Director, Dato’ Tan Teong Heanrepresented the Bank in signing the MOU to markthe Islamic Banking Division’s success in offeringBridging Financing under the Special Schemefor Low and Medium Cost Houses, funded byBank Negara Malaysia, totalling RM30.0 million toBukit Cerakah Development Sdn. Bhd. for itsproject in Puncak Alam, Selangor.

• SBB Card Centre teamed up with Rotary Foundationof Malaysia to launch the Rotafom GoldMasterCard, an affinity programme especially forRotary Club members, in which the first yearannual fee, part of subsequent years’ annual fee anda percentage cardholders’ spending are contributedto the Rotary Club.

At the launching of E.Excel MasterCard.

J U L Y

• SBB Card Centre launched its Espré MasterCardspecially designed for women, with its affinity partner,Extra Excel (M) Sdn. Bhd., the E. Excel MasterCard.

• At a ceremony held in conjunction with the MalaysianPr ime Minister’s state visit to Mozambique,Banco Austral S.A.R.L. officially launched itsnew logo and corporate identity in Maputo.

A U G U S T

• Direct Access introduced the country’s first platinumcredit card, the Direct Access PlatinumMastercard. Platinum card membership comes withan unprecedented range of services world wide andwill be offered to a select group of existing andpotential customers.

The launch of the Rotafom Gold MasterCard.

S E P T E M B E R

• The Bank made a contribution of RM50,000 to theBangsar Carnival in support of the CommonwealthGames in Kuala Lumpur.

• The Bank launched its new Autokad with debitcard features.


• SBB Card Centre, in association with Sime DarbyTravel, launched card programmes for travellers:the Sime Darby Travel Discovery MasterCardfor individuals and the Sime Darby Travel VisaCorporate Card for corporations. Card membersalso get to enjoy loyalty programmes of Sime Darby.

N O V E M B E R

• Kuala Lumpur played host to the third Asia PacificEconomic Co-operation or APEC forum. At theAPEC International Trade Fair ’98 held inconjunction with the forum at MINES, Southern Bank,the sole banking institution to participate, manifestedits top-of-the-league Corporate Banking Services,SBB Direct PC Banking, SBB EnterpriseBanking, SBB E-Commerce and Retail Banking.

The Southern Bank Exhibit at theAPEC International Trade Fair.

Launching of the Sime Darby Discovery MasterCardand Travel Visa Corporate Card.

D E C E M B E R

• Southern Bank launched its JET Debit Card forJaring subscribers who are SBB Max Plus SJMaccounts holders.

• The Bank’s first biometric Autobank ATM facilitydebuts as a pilot project at Kuala Lumpur Main Branchat Wisma Genting.

• The Bank’s Retail Banking Group participated inthe “Art of Saving” Competition and Art Bazaarorganised by Bank Negara Malaysia and Associationsof Financial Institutions and took the opportunityto promote the Bank’s deposit and unit trust productsat the three-day event held at Bank Negara Malaysia.

YB Dato’ Seri Rafidah Aziz, Minister of International Trade,trying out the SBB Enterprise Banking System.


F i n a n c i a l N e t w o r k

Southern Bank Berhad Branches

W I L A Y A H

P E R S E K U T U A N

Kuala Lumpur MainGround Floor, Wisma Genting28, Jalan Sultan Ismail50250 Kuala LumpurTel: (03) 2637000Fax: (03) 2016320Telex: MA 31023 SOBANK

Bangsar19, Lorong Ara Kiri 1Taman Lucky, Bangsar59100 Kuala LumpurTel: (03) 2542344/2777Fax: (03) 2531913

Bukit TunkuJ2 & K1 Taman TunkuBt. Tunku, 50480 Kuala LumpurTel: (03) 6514188Fax: (03) 6513328

Jalan Hang Lekiu49, Jalan Hang Lekiu50100 Kuala LumpurTel: (03) 2300222Fax: (03) 2011748

Jalan Imbi43, Jalan Barat, Off Jalan Imbi55100 Kuala LumpurTel: (03) 2446496Fax: (03) 2451329

Jalan Kuchai Lama5, Jalan 2/116BKuchai Entrepreneurs’ ParkOff Jalan Kuchai Lama58200 Kuala LumpurTel: (03) 7808442/7817935Fax: (03) 7804286

Jalan Pudu317-319, Jalan Pudu55100 Kuala LumpurTel: (03) 2222552/4222Fax: (03) 2217688

Jalan Raja Laut338, Jalan Raja Laut50350 Kuala LumpurTel: (03) 4425888Fax: (03) 4434909

Jalan Sentul704 & 706, Jalan Sentul51000 Kuala LumpurTel: (03) 4412418Fax: (03) 4433787

Jalan Sultan59, Jalan Sultan50000 Kuala LumpurTel: (03) 2322653/2654Fax: (03) 2325758

Jinjang6055, Jalan Jambu GajusJinjang Selatan52000 Kuala LumpurTel: (03) 6278222Fax: (03) 6270179

Kampung Pandan63 & 65, Jalan Kampung PandanKampung Pandan55100 Kuala LumpurTel: (03) 9840355Fax: (03) 9828043

Kepong47, Jalan 3/34AKepong Entrepreneurs’ Park52100 Kuala LumpurTel: (03) 6221242/2245Fax: (03) 6214122

Taman Connaught197 & 199, Jalan SarjanaTaman Connaught, Cheras56000 Kuala LumpurTel: (03) 9316466Fax: (03) 9326392

Taman Sri Rampai21 & 23, Jalan 46A/26Taman Sri Rampai, Setapak53300 Kuala LumpurTel: (03) 4121013Fax: (03) 4124959

Taman Tun Dr Ismail1, Jalan 2/71, Taman Tun Dr Ismail60000 Kuala LumpurTel: (03) 7183688Fax: (03) 7190878

J O H O R

Bukit Gambir167, Jalan Besar84800 Bukit Gambir, MuarTel: (06) 9762488Fax: (06) 9762606

Johor Bahru2-8, Jalan AbiadTaman Tebrau Jaya80400 Johor BahruTel: (07) 3327577Fax: (07) 3317750Telex: MA 60274 SOBANK

Johor Jaya2 & 4, Jalan Dedap 20Taman Johor Jaya81100 Johor BahruTel: (07) 3548666Fax: (07) 3548669

Senai18, Jalan Belimbing, 81400 SenaiTel: (07) 5992188Fax: (07) 5994855

Skudai48, Jalan Hang Tuah 4Taman Skudai Baru,81300 SkudaiTel: (07) 5589688Fax: (07) 5583803

Tampoi24 & 26, Jalan Padi 1Bandar Baru UDA, Tampoi81200 Johor BahruTel: (07) 2379655Fax: (07) 2379653

K E L A N T A N

Kota Bahru3764-5, Jalan Temenggong15000 Kota BahruTel: (09) 7483942Fax: (09) 7483623Telex: MA 53252 SOBANK

K E D A H

Alor Setar1564, Jalan Kota, 05000 Alor SetarTel: (04) 7319522Fax: (04) 7318058Telex: MA 42271 SOBANK

Kulim32, Jalan Raya, 09000 KulimTel: (04) 4905237/5545Fax: (04) 4900805

M E L A K A

Air Keroh36 & 37, Lorong Setia 1Air Keroh Heights, 75450 MelakaTel: (06) 2322188Fax: (06) 2322190

Melaka110, Jalan Bendahara, 75100 MelakaTel: (06) 2828655Fax: (06) 2848986Telex: MA 62884 SOBANK

N E G E R I S E M B I L A N

Bahau27, Jalan Raja Muda Serting72100 BahauTel: (06) 4543960/3950Fax: (06) 4545780

LukutLot 3110, Jalan BesarLukut, 71010 Port DicksonTel: (06) 6511944Fax: (06) 6511858

Nilai5724, Ground FloorJalan TS2/1D,Taman Semarak, 71800 NilaiTel: (06) 7995934/5935Fax: (06) 7995933

Seremban111 & 113, Jalan Yam Tuan70000 SerembanTel: (06) 7610588Fax: (06) 7610590Telex: MA 63977 SOBANK

P A H A N G

Bentong87, Jalan Loke Yew, 28700 BentongTel: (09) 2225866/2966Fax: (09) 2226113

Kuantan34-40, Jalan Telok Sisek25050 KuantanTel: (09) 5554488Fax: (09) 5551927Telex: MA 50171 SOBANK

Ringlet31, Main Road 39200 RingletTel: (05) 4956866/6877Fax: (05) 4957096

P E R A K

Bagan Serai266, Main Rd, 34300 Bagan SeraiTel: (05) 7212711/2712Fax: (05) 7213911

Kampar99 & 101, Jalan Gopeng31900 KamparTel: (05) 4651155Fax: (05) 4651854Telex: MA 44255 SOBANK

Langkap3104 C & D, Jalan Kampar36700 LangkapTel: (05) 6591249Fax: (05) 6592313Telex: MA 44291 SOBANK

Menglembu31 & 33, Jalan Lee Ming Hin31450 MenglembuTel: (05) 2813655Fax: (05) 2826416

Persiaran Greenhill54, Persiaran GreenhillGreentown, 30450 IpohTel: (05) 2415745/5736Fax: (05) 2537893

Tasik613 & 615, Jalan TasikTaman Sri Tasik31400 IpohTel: (05) 5465622Fax: (05) 5460632


Ipoh45, Jalan Tun Sambanthan30000 IpohTel: (05) 2412166Fax: (05) 2535962Telex: MA 44361 SOBANK

P U L A U P I N A N G

Bayan Lepas1223-4, Jalan Raya11900 Bayan LepasTel: (04) 6436001Fax: (04) 6448426Telex: MA 40611 SOBANK

Butterworth4992-3, Jalan New Ferry12100 ButterworthTel: (04) 3332875Fax: (04) 3221408

Jalan Dato Keramat29-B Jalan Dato Keramat10150 Pulau PinangTel: (04) 2273880/2263768Fax: (04) 2266620

Nibong Tebal2904, High Street14300 Nibong TebalTel: (04) 5933235/3236Fax: (04) 5934800

Pulau Pinang21, Lebuh Pantai10300 Pulau PinangTel: (04) 2624351Fax: (04) 2618100Telex: MA 40188 SOBANK

Seberang JayaD20-638, Gerbang TunaSeberang Jaya, 13700 PeraiTel: (04) 3906401Fax: (04) 3901157

Tanjung Bungah1, Jalan Concord 1311200 Tanjung BungahTel: (04) 8990144Fax: (04) 8991812

S A B A H

Kota KinabaluLot No. 62 & 63Inanam Commercial Centre88450 Kota KinabaluTel: (088) 439731Fax: (088) 439709Telex: MA 81394 SOBANK

SandakanBlok B, Lot No. 2,Bandar Ramai-Ramai, Jalan Leila90000 SandakanTel: (089) 218366Fax: (089) 210175Telex: MA 82855 SOBANK

S A R A W A K

KuchingNo. 10, Lot 543, Bangunan CheemaJalan Tun Ahmad Zaidi Adruce93400 KuchingTel: (082) 429661Fax: (082) 429678Telex: MA 70363 SOBANK

S E L A N G O R

Ampang16 & 17, Jalan Besar68000 AmpangTel: (03) 4910533Fax: (03) 4934399

Bandar Sunway23, Jalan PJS 11/28BBandar Sunway46150 Petaling JayaTel: (03) 7377607Fax: (03) 7377613

Cheras1 & 3, Jalan PCR IKawasan Perniagaan Cheras RayaOff Jalan Balakong, Batu 11Cheras, 43200 CherasTel: (03) 9068382Fax: (03) 9068395

Dengkil195, Jalan Besar43800 DengkilTel: (03) 8186899Fax: (03) 8187670

Jalan Gasing111 & 113, Jalan Gasing46000 Petaling JayaTel: (03) 7578918Fax: (03) 7586422

Jalan Klang Lama14 & 16, Jalan MJ/7Medan Maju Jaya, Batu 7Jalan Klang Lama46000 Petaling JayaTel: (03) 7936929Fax: (03) 7936927

Kelana Jaya12, Jalan SS6/3, Kelana Jaya47301 Petaling JayaTel: (03) 7031448Fax: (03) 7037153

Pelabuhan Klang55-59, Jalan Cungah42000 Pelabuhan KlangTel: (03) 3681515Fax: (03) 3684021Telex: MA 39685 SOBANK

PuchongNo. 12 & 13, Jalan Kenari 1Bandar Puchong Jaya471000 PuchongTel: (03) 4325008Fax: (03) 4325009

Rawang49, Jalan Maxwell, 48000 RawangTel: (03) 6912771/2775Fax: (03) 6912844

Seksyen 1424, Jalan 14/14, Seksyen 1446100 Petaling JayaTel: (03) 7560902Fax: (03) 7573872

Seksyen 17933, Jalan 17/38, Seksyen 1746400 Petaling JayaTel: (03) 7553343Fax: (03) 7568567

Selayang14, Jalan Sri SelayangTaman Sri Selayang68100 Batu CavesTel: (03) 6897655Fax: (03) 6862102

Seri Kembangan26368, Jalan College43300 Seri KembanganTel: (03) 9485052/5085Fax: (03) 9424236

Shah Alam1, Jalan Wau A 11/A, Seksyen 1140100 Shah AlamTel: (03) 5500633Fax: (03) 5506701

Subang Jaya40 & 42, Jalan SS15/4DSubang Jaya, 47500 Petaling JayaTel: (03) 7340919Fax: (03) 7352555

Sungai Buloh386, Jalan 1A/3Bandar Baru Sungai Buloh47000 Sungai BulohTel: (03) 6561386Fax: (03) 6561589

Sungai Chua (Kajang)3, Taman CahayaSungai Chua, 43000 KajangTel: (03) 8335711Fax: (03) 8369031

Taman Intan (Klang)49 & 51, Jalan Batai LautTaman Intan, 41300 KlangTel: (03) 3421272Fax: (03) 3424832

T E R E N G G A N U

Kuala Terengganu104A-B, Jalan Sultan Ismail20200 Kuala TerengganuTel: (09) 6223188Fax: (09) 6229058Telex: MA 51367 SOBANK

W I L A Y A H

P E R S E K U T U A N

L A B U A N

LabuanLot 15, Jalan MelatiOff Jalan Tun Mustapha87007 Wilayah Persekutuan LabuanTel: (087) 414532Fax: (087) 415525Telex: MA 85098 SOBANK

Number of Branches

E A S T

M A L A Y S I A

P E N I N S U L A R

M A L A Y S I A

7

21

7

1

1619

42

6

1

12

3


F i n a n c i a l N e t w o r k

Subsidiary Companies of the Bank

ELITE CONSTANTDEVELOPMENT SDN BHD

1, Jalan Ampang50450 Kuala LumpurTel: (03) 2389000Fax: (03) 2329702

SOUTHERN NOMINEES (TEMPATAN) SDN BHDSOUTHERN NOMINEES (ASING) SDN BHD20th Floor,Wisma Genting28, Jalan Sultan Ismail50250 Kuala LumpurTel: (03) 2637000Fax: (03) 2320651

SBB UNIT TRUST MANAGEMENT BHD10th Floor, Wisma PerdanaJalan DungunDamansara Heights50490 Kuala LumpurTel: (03) 2542288Fax: (03) 2540605/0684

SBB CAPITAL MARKETS SDN BHD16th Floor, Wisma Genting28, Jalan Sultan Ismail50250 Kuala LumpurTel: (03) 2093737Fax: (03) 2642190

BANCO AUSTRAL S.A.R.L.1184 Av. 25 de Selimbro MaputoRepublic of MozambiqueTel: 2581-428125/7Fax: 2581-424122

SOUTHERN BANK BERHADCorporate Headquarters20th Floor, Wisma Genting28, Jalan Sultan Ismail50250 Kuala LumpurTel: (03) 2637000Fax: (03) 2320651Web: http://www.sbbgroup.com.my

SBB SECURITIES SDN BHD51-53, Persiaran Greenhill30450 Ipoh, PerakTel: (05) 2530888Fax: (05) 2537666Telex: MA44150 SBBSEC

SBB ASSET MANAGEMENT SDN BHD17th Floor (Old Wing),Wisma Genting28, Jalan Sultan Ismail50250 Kuala LumpurTel: (03) 2628823Fax: (03) 2016881

S.B. VENTURE CAPITALCORPORATION SDN BHD

4th Floor (New Wing),Wisma Genting28, Jalan Sultan Ismail50250 Kuala LumpurTel: (03) 2641148Fax: (03) 2647800

S.B. PROPERTIES SDN BHD1, Jalan Ampang50450 Kuala LumpurTel: (03) 2389000Fax: (03) 2329702



Financial Statements

Directors’ Report 50-55

Balance Sheets 56

Profit and Loss Accounts 57

Consolidated Cash Flow Statement 58-59

Notes to the Accounts 60-100

Statement by Directors 101

Statutory Declaration 101

Report of the Auditors to the Members

of Southern Bank Berhad 102

98


The directors have pleasure in submitting their report and the audited accounts of the Bank and of the Group forthe financial year ended 31 December 1998.

P R I N C I P A L A C T I V I T I E S

The Bank is principally engaged in all aspects of the banking business and the provision of related services, whichalso include Islamic banking services.

The principal activities of the Bank’s subsidiary companies are stated in Note 10 to the accounts.

Other than as indicated in Note 10 to the accounts, there have been no significant changes in the nature of the activitiesof the Bank and of the Group during the financial year.

R E S U L T S

The Bank The GroupRM’000 RM’000

Profit before taxation and zakat 111,229 78,489Taxation (38,429) (42,627)Zakat (14) (14)

Profit after taxation and zakat 72,786 35,848Minority interests – 1,338

Net profit after minority interests 72,786 37,186Transfer to statutory reserve (36,394) (36,394)Retained profit brought forward 89,895 112,665

Profit available for distribution 126,287 113,457Proposed dividend of 4.5% less tax (23,312) (23,312)

Retained profit carried forward 102,975 90,145

D I V I D E N D S

Since the end of the previous financial year, the Bank paid a final dividend of 10% less tax in respect of the previousfinancial year and dealt with in the previous directors’ report amounting to RM23,024,182 on the issued and fullypaid-up ordinary shares of the Bank that ranked for dividend for that year.

The directors now recommend a first and final dividend of 4.5% less tax in respect of the current financial year totallingRM23,311,984 on the issued and fully paid-up ordinary shares of the Bank.

R E S E R V E S A N D P R O V I S I O N S

There were no material transfers to or from reserves and provisions during the financial year other than those disclosedin the accounts.

Directors’ Report


Directors’ Report (Cont’d.)

I S S U E O F S H A R E S A N D D E B E N T U R E S

The Bank has not issued any new shares or debentures during the financial year.

S H A R E O P T I O N

During the financial year, the Bank has not issued any options to any parties to take up unissued shares of the Bank.

No shares have been issued during the financial year by virtue of the exercise of any option to take up unissued sharesof the Bank. As at the end of the financial year, there were no unissued shares of the Bank under options.

B A D A N D D O U B T F U L D E B T S A N D F I N A N C I N G

Before the accounts of the Bank and of the Group were made out, the directors took reasonable steps to ascertainthat action had been taken in relation to the writing off of bad debts and financing and the making of provisionfor doubtful debts and financing, and had satisfied themselves that all known bad debts and financing had been writtenoff and that adequate provisions had been made for bad and doubtful debts and financing.

At the date of this report, the directors are not aware of any circumstances which would render the amount writtenoff for bad debts and financing, or the amount of the provision for bad and doubtful debts and financing, in the accountsof the Bank and of the Group inadequate to any substantial extent.

C U R R E N T A S S E T S

Before the accounts of the Bank and of the Group were made out, the directors took reasonable steps to ascertainthat any current assets, other than debts and financing, which were unlikely to realise their value as shown in theaccounting records of the Bank and of the Group in the ordinary course of business have been written down to anamount which they might be expected to realise.

At the date of this report, the directors are not aware of any circumstances which would render the values attributedto the current assets in the accounts of the Bank and of the Group misleading.

V A L U A T I O N M E T H O D S

At the date of this report, the directors are not aware of any circumstances which have arisen which render adherenceto the existing methods of valuation of assets or liabilities in the accounts of the Bank and of the Group misleadingor inappropriate.



C O N T I N G E N T A N D O T H E R L I A B I L I T I E S

At the date of this report, there does not exist:

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

(b) any contingent liability in respect of the Bank and of the Group which has arisen since the end of the financialyear other than those arising in the ordinary course of banking business.

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

C H A N G E O F C I R C U M S T A N C E S

At the date of this report, the directors are not aware of any circumstances, not otherwise dealt with in this reportor the accounts, that would render any amount stated in the accounts of the Bank and of the Group misleading.

I T E M S O F A N U N U S U A L N A T U R E

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

Other than the uncertainties resulting from the economic slowdown, there has not arisen in the interval betweenthe end of the financial year and the date of this report any item, transaction or event of a material and unusual naturelikely to affect substantially the results of operations of the Bank and of the Group for the financial year in whichthis report is made.

D I R E C T O R S A N D T H E I R I N T E R E S T S I N S H A R E S

The names of the directors of the Bank in office since the date of the last report and at the date of this report are:

YBhg Tan Sri Osman S Cassim (Chairman)YBhg Dato’ Tan Teong Hean (Chief Executive Director)YBhg Dato’ Dr. Yahya bin IsmailYBhg Dato’ Dr. Mohammad Abdus Salim bin CassimSim Kee BoonLim Pak TowDr. Maisarah bte Abdullah

Dr. Maisarah bte Abdullah retires by rotation under Article 116 of the Bank’s Articles of Association and, being eligible,offers herself for re-election.

YBhg Dato’ Dr. Yahya bin Ismail and Mr Lim Pak Tow retire pursuant to Section 129 of the Companies Act, 1965and resolutions will be proposed for their re-appointment as directors under the provision of Section 129 (6) of thesaid Act to hold office until the next Annual General Meeting of the Bank.



According to the Register of Directors’ Shareholdings maintained by the Bank in accordance with Section 134 ofthe Companies Act, 1965, the directors’ beneficial interests in the shares and warrants of the Bank and its relatedcorporations are as follows:

Number of ordinary shares of RM1 each

As at As at1.1.1998 Additions Disposals 31.12.1998

YBhg Tan Sri Osman S Cassim – direct 14,391,000 – – 14,391,000(Chairman) – indirect – – – –

YBhg Dato’ Tan Teong Hean – direct 2,664,685 – – 2,664,685(Chief Executive Director) – indirect 272,036,231 917,000 37,280,000 235,673,231

YBhg Dato’ Dr. Yahya bin Ismail – direct 8,248,762 – – 8,248,762– indirect 1,119,310 – – 1,119,310

YBhg Dato’ Dr. MohammadAbdus Salim bin Cassim – direct 33,742,062 – – 33,742,062

– indirect 225,111,076 – 37,280,000 187,831,076

Lim Pak Tow – direct 55,579 – – 55,579– indirect 96,761 10,000 – 106,761

By virtue of their shareholdings in the Bank, the above directors are deemed to have beneficial interest in the sharesof its subsidiary companies.

Number of warrants

As at As at1.1.1998 Additions Disposals 31.12.1998

YBhg Tan Sri Osman S Cassim – direct 2,782,260 – – 2,782,260(Chairman) – indirect – – – –

YBhg Dato’ Tan Teong Hean – direct 515,169 – – 515,169(Chief Executive Director) – indirect 53,591,065 – – 53,591,065

YBhg Dato’ Dr. Yahya bin Ismail – direct 2,149,933 – 502,077 1,647,856– indirect 324,595 – – 324,595

YBhg Dato’ Dr. MohammadAbdus Salim bin Cassim – direct 6,954,997 – – 6,954,997

– indirect 42,870,494 – – 42,870,494

Lim Pak Tow – direct 10,744 – – 10,744– indirect 44,524 7,000 – 51,524

Each warrant entitles the holder to subscribe for one new ordinary share of RM1 each in the Bank at any time duringthe exercise period. The exercise period is from 18 June 1997 to 17 June 2001.



D I R E C T O R S ’ B E N E F I T S

Since the end of the previous financial year, none of the directors of the Bank has received or become entitled toreceive any benefit (other than the benefit included in the aggregate amount of emoluments received or due andreceivable by directors shown in the accounts, or the fixed salary of a full-time employee of the Bank) by reason ofa contract made by the Bank or a related corporation with the director or with a firm of which the director is amember, or with a company in which the director has a substantial financial interest.

Neither at the end of the financial year nor at any time during the financial year did there subsist any arrangementsto which the Bank was a party whereby directors might acquire benefits by means of the acquisition of shares in,or debenture of, the Bank or any other body corporate.

S I G N I F I C A N T E V E N T S

During the financial year,

(i) the Bank transferred its 30.6% equity interest in its then associated company, Banco Austral S.A.R.L. (formerlyknown as Banco Popular de Desenvolvimento), a bank incorporated in the Republic of Mozambique, to Investil– Investimentos Associados Limitada (IIAL), a private company incorporated in the Republic of Mozambique,in return for 51% interest in the capital of IIAL.

In addition to the shares transferred from the Bank, Invester S.A.R.L. also transferred its shareholding in BancoAustral S.A.R.L. of 29.4% to IIAL. Consequently, IIAL has a total of 60% equity interest in Banco Austral S.A.R.L..

Banco Austral S.A.R.L. became an indirect subsidiary company of the Bank and its accounts are consolidatedwith the accounts of the Bank for the current financial year.

(ii) The Bank obtained the approvals from Bank Negara Malaysia and other relevant authorities for the proposedamalgamation of the finance business of the Bank’s wholly-owned subsidiary company, Southern Finance CompanyBerhad (SFCB), with that of the Bank. The Bank also obtained a court vesting order for the takeover by theBank of all assets and liabilities of SFCB pursuant to the amalgamation.

The amalgamation is expected to be completed by 11 April 1999.

A U D I T O R S

The auditors, Messrs. Kassim Chan & Co., have indicated their willingness to continue in office.

B U S I N E S S S T R A T E G Y A N D O U T L O O K

During the year, a further contraction in the domestic economy led to an easing of interest rates to address deflationarypressures.

The Group responded by focussing on the better cost management which led to lower expenses.

In a continuing drive to raise productivity, with the amalgamation of its business, 11 branches of the finance subsidiarywere closed-down. Staff level was also reduced substantially through a voluntary separation scheme.



Leveraging on the strength of the Bank’s balance sheet and management, on a selective basis, the Bank expanded itsbusiness in the markets where it has a niche. The Group’s loan growth, at 15.8% reflects its belief that its balancesheet growth should not be at the expense of asset quality.

Looking ahead, we will continue to focus on the cost discipline, better operation efficiency and improved risk management.

Our solid business franchise, a superior risk weighted capital ratio of 19.85%, and the depth of management, positionsthe Group strategically to take advantage of opportunities amidst crises and to gain significantly as the economy recovers.

Y E A R 2 0 0 0 C O M P L I A N C E

The Bank has completed the renovation and implementation of the critical systems supporting the core banking businessincluding Branch Teller System, Deposit System, Loans System, General Ledger System, ATM System, Funds TransferSystem and Credit Card System.

The Bank is in the midst of renovating the marginal or less critical systems. The Bank is also conducting testing withexternal parties like VISA, MasterCard and MEPS. We expect all the systems to be fully Y2K compliant by June 1999.

The Bank has initiated actions to ensure that customers, business partners and service providers are Y2K compliant.The necessary contingency plans have also been developed to ensure that operations will run smoothly on the criticaldates.

To date, progress of our compliance efforts remains on schedule and the Bank is confident that the Y2K issue willnot disrupt business processes which are vital to its operations.

Signed on behalf of the Board in accordancewith a resolution of the directors,

YBhg TAN SRI OSMAN S CASSIMChairman

YBhg DATO’ TAN TEONG HEANChief Executive Director

Kuala Lumpur31 March 1999


The Bank The Group

1998 1997 1998 1997Note RM’000 RM’000 RM’000 RM’000

ASSETSCash and short-term funds 3 222,415 534,022 222,806 622,696Securities purchased under

resale agreements – – 5,692 651Deposits and placements with

financial institutions 4 78,897 123,816 98,366 179,052Dealing securities 5 156,478 292,941 160,220 313,082Investment securities 6 1,497,037 1,260,385 1,653,395 1,421,292Loans, advances and financing 7 5,150,571 4,472,723 6,067,600 5,437,417Other assets 8 227,264 172,757 356,687 236,738Statutory deposits with

Bank Negara Malaysia 9 185,829 725,170 215,149 841,250Investment in subsidiary companies 10 250,307 229,520 – –Investment in associated company 11 – 14,001 – 17,019Fixed assets 12 70,849 73,545 274,170 129,575Goodwill on consolidation – – 21,043 4,704

TOTAL ASSETS 7,839,647 7,898,880 9,075,128 9,203,476

LIABILITIES AND SHAREHOLDERS’ FUNDS

Deposits from customers 13 4,876,188 4,604,636 5,727,669 5,245,104Deposits and placements of banks

and other financial institutions 14 631,228 1,111,746 702,952 1,535,934Obligation on securities sold under

repurchase agreements 306,050 181,730 386,190 266,548Bills and acceptances payable 346,099 327,921 353,258 327,621Other liabilities 15 218,981 262,243 362,055 318,8095.5% Redeemable unsecured

subordinated bonds 16 300,000 300,000 300,000 300,000

TOTAL LIABILITIES 6,678,546 6,788,276 7,832,124 7,994,016

MINORITY INTERESTS – – 45,450 27,997

Share capital 17 719,506 719,506 719,506 719,506Reserves 18 441,595 391,098 478,048 461,957

SHAREHOLDERS’ FUNDS 1,161,101 1,110,604 1,197,554 1,181,463

TOTAL LIABILITIES ANDSHAREHOLDERS’ FUNDS 7,839,647 7,898,880 9,075,128 9,203,476

COMMITMENTS ANDCONTINGENCIES 29 4,932,239 6,177,521 5,255,664 6,372,591

The accompanying notes form an integral part of the Accounts.

Balance Sheetsa s a t 3 1 D e c e m b e r 1 9 9 8


The Bank The Group

1998 1997 1998 1997Note RM’000 RM’000 RM’000 RM’000

Interest income 19 746,322 633,547 894,913 769,532Interest expense 20 (456,008) (379,165) (537,911) (455,362)

Net interest income 290,314 254,382 357,002 314,170SPI income 35 2,012 315 2,012 315

292,326 254,697 359,014 314,485Loan and financing loss and

provision 21 (99,390) (55,217) (120,812) (73,725)

192,936 199,480 238,202 240,760Non-interest income 22 74,208 80,273 128,064 87,445Provision for commitments

and contingencies (54) – (54) –

Net income 267,090 279,753 366,212 328,205Overhead expense 23 (155,861) (159,707) (287,723) (206,979)

111,229 120,046 78,489 121,226Share in results of associated

company – – – 975

Profit before taxation and zakat 111,229 120,046 78,489 122,201Taxation 26 (38,429) (39,452) (42,627) (41,230)Zakat (14) – (14) –

Profit after taxation and zakat 72,786 80,594 35,848 80,971Minority interests – – 1,338 2,459

Net profit after minority interests 72,786 80,594 37,186 83,430Transfer to statutory reserves 18 (36,394) (40,297) (36,394) (47,557)Retained profit brought forward 89,895 72,620 112,665 99,814

Profit available for distribution 126,287 112,917 113,457 135,687Proposed dividend of 4.5%

(1997: 10%) less tax (23,312) (23,022) (23,312) (23,022)

Retained profit carried forward 18 102,975 89,895 90,145 112,665

Earnings per share (sen) 28– Basic 5.2 17.4

The accompanying notes form an integral part of the Accounts.

Profit and Loss Accountsf o r t h e y e a r e n d e d 3 1 D e c e m b e r 1 9 9 8


1998 1997RM’000 RM’000

CASH FLOW FROM OPERATING ACTIVITIES

Profit before taxation and minority interests 78,489 122,201Adjustments for investing and financing items and items

not involving the movement of cash and cash equivalents:

Depreciation of fixed assets 24,538 16,552Net gain/loss on disposal of fixed assets 124 (837)Fixed assets written off 490 285Interest income from investment securities (103,141) (56,608)Loan and financing loss and provision 136,989 88,438Amortisation of premium/(accretion of discount) – net (2,988) 1,155Amortisation of goodwill 975 261Share of profit retained in associated company – (975)Net (gain)/loss from sale of investment securities (1,998) 7,375(Write back)/Provision for diminution in value of investment securities (3,838) 14,445Dividend income (2,287) (1,861)Provision for diminution in value of dealing securities 292 12,083

Operating profit before working capital changes 127,645 202,514Decrease in deposits and placements with financial institutions 203,322 460,317(Increase)/decrease in dealing securities 118,693 (94,073)Increase in loans, advances and financing (584,145) (1,018,670)Increase in other assets (19,548) (38,574)(Increase)/decrease in statutory deposits with Bank Negara Malaysia 626,101 (267,338)Increase in deposits from customers 59,706 462,832Increase/(decrease) in deposits and placements of banks and

other financial institutions (838,355) 723,409Increase in obligations on securities sold under repurchase agreements 119,642 172,617Increase in bills and acceptance payable 12,408 2,235Increase/(decrease) in other liabilities (49,466) 18,384

Cash generated from/(used in) operations (223,997) 623,653Income taxes paid (45,749) (58,195)

Net cash generated from/(used in) operating activities (269,746) 565,458

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of investment securities (2,262,315) (1,227,657)Purchase of fixed assets (61,486) (46,878)Proceeds from disposal of fixed assets 271 1,608Dividend received 1,665 1,361Proceeds from sale of investment securities 2,081,383 586,891Purchase of shares in associated company – (14,001)Interest received from investment securities 102,115 50,088Acquisition of subsidiary company net of cash and cash equivalents acquired 34,136 –

Net cash used in investing activities (104,231) (648,588)

Consolidated Cash Flow Statementf o r t h e y e a r e n d e d 3 1 D e c e m b e r 1 9 9 8


1998 1997RM’000 RM’000

CASH FLOW FROM FINANCING ACTIVITIES

Share issue expenses – (2,543)Proceeds from shares issued to minority shareholders of a subsidiary company – 15,000Net proceeds from issue of shares – 443,786Dividend paid to shareholders (23,024) (17,906)Dividend paid to minority shareholders of a subsidiary company – (3,067)

Net cash generated from/(used in) financing activities (23,024) 435,270

Net increase/(decrease) in cash and cash equivalents (397,001) 352,140Cash and cash equivalents at 1 January 622,696 270,556Currency translation difference (2,889) –

Cash and cash equivalents at 31 December 222,806 622,696

ANALYSIS OF CASH AND CASH EQUIVALENTS

Cash and short-term funds (Note 3) 222,806 622,696

1998RM’000

ANALYSIS OF NET ASSETS OF SUBSIDIARYCOMPANY ACQUIRED DURING THE FINANCIAL YEAR

Cash and short-term funds 34,136Deposits and placement with financial institutions 139,480Investment securities 11,448Loans, advances and financing 199,947Other assets 99,307Fixed assets 118,565Deposits from customers (461,949)Deposits and placement of banks and other financial institutions (5,870)Bills and acceptances payable (14,452)Other liabilities (104,585)

Net assets acquired 16,027Goodwill on consolidation 17,315Minority interests (16,323)

Purchase consideration 17,019Satisfied by reclassification from investment in associated company (17,019)

Satisfied by cash –Cash and cash equivalents acquired 34,136

Net cash from acquisition of subsidiary company 34,136

The accompanying Notes form an integral part of the Accounts.

Consolidated Cash Flow Statement (Cont’d.)

f o r t h e y e a r e n d e d 3 1 D e c e m b e r 1 9 9 8


Notes to the Accounts3 1 D e c e m b e r 1 9 9 8

1 . B A S I S O F P R E P A R A T I O N

The financial statements of the Bank and of the Group have been prepared in compliance with the CompaniesAct, 1965, modified to comply with the Principles of Syariah, the applicable approved accounting standards ofMalaysian Accounting Standards Board and BNM/GP8: Guidelines on the Specimen Financial Statements forthe Banking Industry.

2 . S I G N I F I C A N T A C C O U N T I N G P O L I C I E S

(a) Accounting Convention

The accounts of the Bank and of the Group have been prepared under the historical cost convention.

(b) Basis of Consolidation

The consolidated accounts of the Group comprise the audited accounts of the Bank and all its subsidiarycompanies listed under Note 10, made up to 31 December.

All significant intercompany transactions and balances have been eliminated on consolidation.

(c) Income Recognition

Interest on loans and advances and commitment fees are recognised on an accrual basis. Interest from hire-purchase, block discounting and leasing transactions is recognised on the ‘sum-of-the-digits’ method.

Where a customer account is classified as non-performing, recognition of interest income is suspendeduntil it is realised on a cash basis. Customers’ accounts of the Bank and its finance subsidiary companyare classified as non-performing where repayments are in arrears for 3 months or more for all loans andadvances and overdrafts and 1 month after maturity date for trade bills, bankers’ acceptances and trust receipt.This policy of classifying non-performing accounts is more stringent than the requirement of Bank NegaraMalaysia guidelines, BNM/GP3 (Revised 1998) “Guidelines on Classification of Non-performing Loansand Provision for Bad and Doubtful Debts and Financing”, which require that accounts be classified asnon-performing where repayments are in arrears for 6 months or more for all loans and advances andoverdrafts.

Customers’ accounts of the foreign bank subsidiary company, Banco Austral S.A.R.L. (formerly knownas Banco Popular de Desenvolvimento), are classified as non-performing where repayments are in arrearsfor 1 month or more for all loans and advances in accordance with the rules of the Bank of Mozambique.Interest income on non-performing loans and advances is recognised on a cash basis except for loans tothe Government of Mozambique and loans secured on real estate which is accrued.

In previous financial year, trade bills, bankers’ acceptances and trust receipt were classified as non-performing14 days after their maturity dates.

Loan arrangement fees, commissions, guarantee fees and dividends from investment securities are recognisedon a cash basis.

Income from Islamic banking (SPI) is recognised on a cash basis in accordance with the Syariah principles.


Notes to the Accounts (Cont’d.)

3 1 D e c e m b e r 1 9 9 8

2 . S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( C O N T ’ D . )

(d) Provision for Bad and Doubtful Debts and Financing

Specific provisions are made for doubtful debts and financing which have been individually reviewed andspecifically identified as bad or doubtful.

A general provision based on a percentage of the loan and financing portfolio is also made to cover possiblelosses which are not specifically identified.

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

(e) Repurchase Agreements

Securities purchased under resale agreements are securities which the Group has purchased with a commitmentto resell at future dates. The commitment to resell the securities is reflected as an asset on the balance sheet.

Conversely, obligation on securities sold under repurchase agreements are securities which the Group hassold from its portfolio, with a commitment to repurchase at future dates. Such financing transactions andthe obligation to repurchase the securities are reflected as a liability on the balance sheet.

(f) Dealing Securities

Dealing securities are marketable securities that are acquired and held with the intention of resale in theshort-term and are stated at the lower of cost and market value.

Transfers, if any, between dealing and investment securities are made at the lower of cost and market value.

(g) Investment Securities

Investment securities are securities that are acquired and held for yield or capital growth or to meet minimumliquid assets requirement pursuant to Section 38 of the Banking and Financial Institutions Act, 1989, andare usually held to maturity.

Malaysian Government securities, Malaysian Government investment issues, Cagamas and Danamodal bonds,other Government securities and Bank Guaranteed Private Debt Securities held for investment are statedat cost adjusted for amortisation of premium or accretion of discount to maturity date. Other Private DebtSecurities are valued at the lower of cost and market value. Long-term investments in quoted shares arestated at cost less provision for diminution in value. Provision is made for any permanent diminution invalue of such investments as determined on an individual basis.

Transfers, if any, between investment and dealing securities are made at the lower of carrying value andmarket value.

(h) Investment in Subsidiary Companies

A subsidiary company is a company in which the Bank controls the composition of its board of directorsor more than half of its voting power, or holds more than half of its issued ordinary share capital.

Investment in subsidiary companies is stated at cost in the accounts of the Bank and a provision for diminutionin value is made when the directors consider that there is a permanent diminution in the value of suchinvestment.



3 1 D e c e m b e r 1 9 9 8


(i) Investment in Associated Company

An associated company is a company in which the Group has a long term equity interest of between20% to 50% and where the Group is in a position to exercise significant influence in its management.

Investment in associated company is stated at cost less provision for diminution in value of investmentof a permanent nature, if any, in the Bank’s financial statements. In the consolidated financial statements,the results of associated company is accounted for under the equity method based on management accountswhereby the Group’s share of post acquisition profits less losses of associated company is included in theconsolidated profit and loss account and the Group’s interest in the associated company is stated at costplus adjustments to reflect changes in the Group’s share of the net assets of the associated company inthe consolidated balance sheet.

(j) Depreciation

Freehold land is not depreciated. Leasehold land is depreciated on a straight-line basis over the periodof the lease. Other fixed assets are depreciated on a straight-line basis over their estimated useful lives. Theprincipal annual rates are:-

Buildings 2.5%Office equipment, furniture, fittings and renovations 10.0% – 20.0%Computer equipment and software 10.0% – 50.0%Motor vehicles 20.0%

(k) Assets Under Lease

Assets under lease which in substance transfer the risks and benefits of ownership of the assets are capitalisedunder fixed assets. The assets and the corresponding lease obligations are recorded at the lower of presentvalue of the minimum lease payments or the fair value of the leased assets at the beginning of the leaseterm. Such leased assets are subject to depreciation consistent with that for depreciable assets which areowned.

Leases which do not meet such criteria are classified as operating leases and the related rentals are chargedto profit and loss account as incurred.

(l) Bills and Acceptances Payable

Bills and acceptances payable represent the Bank’s own bills and acceptances rediscounted and outstandingin the market.

(m) Forward Exchange ContractsUnmatured forward exchange contracts are stated at their original contracted forward rates applicable tothe respective dates of maturity and unrealised losses and gains are taken up in the profit and loss accountfor the year on a time-apportionment basis over the individual life of the contracts.

(n) Interest Rate Swaps and Futures Contracts

The Bank uses interest rate swaps and futures contracts in its trading account activities and in an overallinterest rate risk management.



3 1 D e c e m b e r 1 9 9 8


Interest income or interest expense associated with interest rate swaps that qualify as hedges is recognisedover the life of the swap agreement as a component of interest income or interest expense. Gains andlosses on interest rate futures contracts that qualify as hedges are generally deferred and amortised overthe life of the hedged assets or liabilities as adjustments to interest income or interest expense.

Gains and losses on interest rate swaps and futures contracts that do not qualify as hedges are recognisedin the current year using the mark-to-market method, and are included in the net result from dealingsecurities.

(o) Currency Translations

Individual foreign currency assets and liabilities are stated in the balance sheet at spot rate of exchangewhich closely approximate those ruling at the balance sheet date. Transactions in foreign currencies aretranslated at rates prevailing on transaction dates. Exchange gains and losses are recognised in the profitand loss account in the year they arise.

For the purpose of consolidation, the financial statements of associated/subsidiary company expressed inforeign currency are translated into Ringgit Malaysia at the rates of exchange ruling at the balance sheetdate. Gains or losses arising on translation into Ringgit Malaysia are taken up in the exchange fluctuationreserve. Translation losses in excess of amount in the exchange fluctuation reserve, if any, is taken up inthe profit and loss account.

(p) Deferred Taxation

Provision for deferred taxation using the ‘liability’ method is made in respect of all material timing differencesbetween profit as reported for accounting and taxation purposes to the extent where it is probable thata liability for taxation will crystallise in the foreseeable future.

Timing differences which give rise to net deferred tax benefits are generally not recognised except forthe tax effects which arise from the difference in the recognition of amortisation of premiums, unrealisedloss on securities and interest income suspended for tax and accounting purposes.

(q) Goodwill

Goodwill arising on consolidation represents the excess of the purchase price over the fair value of thenet assets of the subsidiary company at the date of acquisition and is amortised over twenty-five yearsin compliance with the recommendation of Malaysian Accounting Standard No. 6, “Accounting For Goodwill”.

(r) Deferred Asset

Deferred asset of a subsidiary company is reduced annually by an amount computed in accordance withthe guidelines of the rescue scheme sponsored by Bank Negara Malaysia (see Note 8), and is based onnet loans recoveries and income arising from utilisation of long-term deposits placed by Bank NegaraMalaysia as provided for under the said scheme. This amount was fully amortised to the profit and lossaccount during the financial year.

(s) Cash and Cash Equivalents

Cash equivalents are short-term, highly liquid investments which are readily convertible to cash withinsignificant risk of changes in value.



3 1 D e c e m b e r 1 9 9 8

3 . C A S H A N D S H O R T - T E R M F U N D S

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Cash and balances with banks andother financial institutions 81,985 128,572 110,152 135,084

Money at call and deposit placementsmaturing within one month 140,430 405,450 112,654 487,612

222,415 534,022 222,806 622,696

4 . D E P O S I T S A N D P L A C E M E N T S W I T H F I N A N C I A L I N S T I T U T I O N S

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Licensed banks – 66,521 69,786 67,732Licensed finance companies 51,558 32,595 500 86,620Other financial institutions 27,339 24,700 28,080 24,700

78,897 123,816 98,366 179,052

5 . D E A L I N G S E C U R I T I E S

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Money market instruments:

Malaysian Government securities 62,081 24,058 62,081 24,058Cagamas bonds and notes – 9,863 – 9,863Bankers’ acceptances and

Islamic accepted bills 94,397 259,020 95,954 274,592

156,478 292,941 158,035 308,513Quoted securities in Malaysia:

Quoted shares and unit trusts – – 2,185 4,569

156,478 292,941 160,220 313,082

Market value of quoted securities:

Malaysian Government securities 63,197 24,058 63,197 24,058Cagamas bonds and notes – 9,863 – 9,863Quoted shares and unit trusts in Malaysia – – 3,185 5,569

63,197 33,921 66,382 39,490


6 . I N V E S T M E N T S E C U R I T I E S

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000


Malaysian Government securities 273,062 154,064 334,424 219,491Cagamas bonds and notes 205,324 257,783 215,325 278,807Negotiable instruments of deposits 795,132 733,973 807,132 773,973KLIA’s Islamic Primary Notes 30,528 30,528 30,513 30,513Private debt securities 10,437 10,464 10,437 10,464Danamodal bonds 96,587 – 108,806 –

1,411,070 1,186,812 1,506,637 1,313,248Quoted shares:

In Malaysia 25,774 21,092 72,400 67,398Outside Malaysia 52,706 50,432 52,706 50,432

Unquoted shares:In Malaysia 3,885 3,885 12,302 12,302Outside Malaysia – – 25,962 –

1,493,435 1,262,221 1,670,007 1,443,380Amortisation of premium less

accretion of discount 3,602 (1,836) 3,602 (1,836)

Provision for diminution in value ofinvestment securities:

Quoted shares – – (12,294) (14,445)Unquoted shares – – (7,920) (5,807)

1,497,037 1,260,385 1,653,395 1,421,292

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

(i) Market value of quoted securities:

Malaysian Government securities 282,242 148,208 343,947 211,437Cagamas bonds and notes 208,492 256,292 218,492 277,292KLIA’s Islamic Primary Notes 25,603 32,100 25,603 32,100Private debt securities 10,838 10,260 10,838 10,260Shares quoted in Malaysia 20,297 21,339 50,046 51,356Shares quoted outside Malaysia 77,350 74,033 77,350 74,033Danamodal bonds 100,874 – 113,129 –

725,696 542,232 839,405 656,478


3 1 D e c e m b e r 1 9 9 8



3 1 D e c e m b e r 1 9 9 8

6 . I N V E S T M E N T S E C U R I T I E S ( C O N T ’ D . )

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

(ii) The maturity structure of moneymarket instruments held forinvestments are as follows:

Maturing within one year 934,097 886,419 966,302 951,066One year to three years 198,258 156,481 242,006 180,057Three years to five years 118,388 23,831 135,376 52,363Over five years 160,327 120,081 162,953 129,762

1,411,070 1,186,812 1,506,637 1,313,248

7 . L O A N S , A D V A N C E S A N D F I N A N C I N G

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Overdrafts 1,609,496 1,431,428 1,650,634 1,427,165Term loans 3,108,992 2,421,237 3,734,341 2,455,942

– Fixed rate 939,524 240,664 1,053,955 287,515– Floating rate 2,169,468 2,180,573 2,680,386 2,168,427

Lease receivables – – 11,846 16,925Hire-purchase – – 364,354 558,367Credit/charge cards receivables 283,046 311,862 297,595 331,226Bills receivable 58,557 82,039 58,557 82,039Trust receipts 18,022 19,524 18,022 19,524Claims on customers under

acceptance credits 325,394 306,456 325,394 306,456Staff loans 40,044 35,871 64,179 39,555Other loans 744 6,755 52,671 490,071

5,444,295 4,615,172 6,577,593 5,727,270Unearned interest and income (17,117) (7,383) (66,959) (104,994)

Gross loans, advances and financing 5,427,178 4,607,789 6,510,634 5,622,276Provision for bad and doubtful debts

and financing– Specific (123,045) (40,591) (208,606) (59,829)– General (82,749) (73,026) (99,239) (87,945)

Interest-in-suspense/income-in-suspense (70,813) (21,449) (135,189) (37,085)

Net loans, advances and financing 5,150,571 4,472,723 6,067,600 5,437,417



3 1 D e c e m b e r 1 9 9 8

7 . L O A N S , A D V A N C E S A N D F I N A N C I N G ( C O N T ’ D . )

Included under provision for bad and doubtful debts and financing, and interest-in-suspense of the Group in1997 is an amount of RM0.12 million and RM0.31 million respectively which relates to loans and advancesof Eu Finance Berhad taken over in 1990 by the finance subsidiary company under a rescue scheme sponsoredby Bank Negara Malaysia.

Specific provision for doubtful debts and financing is made by the Bank and its finance subsidiary companyfor non-performing accounts in compliance with Bank Negara Malaysia’s guidelines, BNM/GP3 (Revised 1998),“Guidelines on Classifications of Non-performing Loans and Provision for Bad and Doubtful Debts and Financing”,generally as follows:

(a) at 20% of the estimated uncollateralised portion of the accounts which are in arrears for 6 months butless than 9 months;

(b) at 50% of the estimated uncollateralised portion of the accounts which are in arrears for 9 months butless than 12 months; and

(c) at 100% of the estimated uncollateralised portion of the accounts which are in arrears for 12 months andabove

In previous financial year, the specific provision was made for non-performing accounts at 50% of the estimateduncollateralised portion of the accounts in arrears for 6 months but less than 12 months, and at 100% of theestimated uncollateralised portion of the accounts in arrears for 12 months and above.

Specific provision for doubtful debts is made by the foreign bank subsidiary company, Banco Austral S.A.R.L.(formerly known as Banco Popular de Desenvolvimento) in accordance with the rules of Bank of Mozambiquecalculated on a percentage basis depending on the period the accounts are past due.

(i) The maturity structure of loans, advances and financing are as follows:

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Within one year 3,455,822 2,802,838 3,850,716 3,051,577One year to three years 227,755 199,994 511,384 463,976Three years to five years 229,909 297,792 453,031 631,189Over five years 1,513,692 1,307,165 1,695,503 1,475,534

5,427,178 4,607,789 6,510,634 5,622,276



3 1 D e c e m b e r 1 9 9 8


(ii) Loans, advances and financing analysed by their economic purposes are as follows:

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Agriculture 80,420 55,879 181,866 67,771Mining and quarrying 24,842 21,704 30,740 28,282Manufacturing 823,905 615,905 916,800 674,182Electricity, gas and water 184,961 61,821 185,358 62,254Construction 552,225 499,975 626,956 573,888Real estate 293,267 290,016 434,860 423,501Purchase of landed properties 1,342,799 1,169,731 1,474,462 1,284,932

(of which: i. Residential 752,063 629,692 851,939 718,400ii. Non-residential) 590,736 540,039 622,523 566,532

General commerce 458,957 445,865 516,387 469,744Transport, storage and communication 105,137 78,662 120,084 89,857Finance, insurance and business services 431,428 172,412 385,980 159,176Purchase of securities 349,231 331,213 458,561 490,071Purchase of transport vehicles 3,646 3,893 223,273 296,569Consumption credit 698,385 764,756 803,820 879,609Others 77,975 95,957 151,487 122,440

5,427,178 4,607,789 6,510,634 5,622,276

(iii) Movements in non-performing loans and financing including interest receivables (NPL) are as follows:

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Balance as at 1 January 197,737 151,288 356,524 249,057Non-performing during the year

(gross) 772,252 249,891 1,019,663 358,156Recoveries (89,496) (121,921) (155,285) (156,528)NPL reclassified as performing (333,113) (45,446) (333,113) (46,156)Amount written-off (29,538) (36,533) (119,024) (48,463)NPL of subsidiary company

acquired during the year – – 135,099 –Currency translation difference – – (11,432) –Adjustment – 458 – 458

Balance as at 31 December 517,842 197,737 892,432 356,524

% of NPL to total loans 5.8 2.8 8.4 4.4



3 1 D e c e m b e r 1 9 9 8


(iv) Movements in provision for bad and doubtful debts and financing and interest-in-suspense accounts areas follows:

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

General provision (GP)

Balance as at 1 January 73,026 42,608 87,945 52,100Provisions made during the year 9,723 30,418 9,005 35,845Amount written-back during

the year – – (2,639) –GP of subsidiary company

acquired during the year – – 5,383 –Currency translation difference – – (455) –


% of total loans less SP and IIS 1.5 1.5 1.5 1.5

Specific provision (SP)

Balance as at 1 January 40,591 22,512 59,829 34,118Provisions made during the year 140,767 45,239 307,115 64,730Amount written-back in respect

of recoveries (36,094) (8,068) (174,401) (12,137)Amount written-off (22,219) (19,092) (33,006) (26,882)SP of subsidiary company

acquired during the year – – 53,606 –Currency translation difference – – (4,537) –


Interest-in-suspense (IIS)

Balance as at 1 January 21,449 26,062 37,085 40,241Provisions made during the year 91,736 26,116 147,348 43,166Amount written-back in respect of

recoveries (35,354) (13,570) (51,920) (25,023)Amount written-off (7,018) (17,159) (26,716) (21,299)IIS of subsidiary company

acquired during the year – – 32,109 –Currency translation difference – – (2,717) –




3 1 D e c e m b e r 1 9 9 8

8 . O T H E R A S S E T S

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Other debtors, deposits and prepayments 226,987 172,479 356,049 225,998Deferred asset – net – – – 9,288Foreclosed properties – net of provision

for diminution in value 277 278 638 1,452

227,264 172,757 356,687 236,738

The Deferred Asset net of recoveries of RM75.4 million (1997: RM66.1 million) represents the net considerationincurred by the finance subsidiary company relating to the takeover in 1990 of business operations, assets andliabilities of Eu Finance Berhad (a finance company) pursuant to a Rescue Scheme of Arrangement sponsoredby Bank Negara Malaysia. This amount has been fully amortised to the profit and loss account during the financialyear.

9 . S T A T U T O R Y D E P O S I T S W I T H B A N K N E G A R A M A L A Y S I A

The non-interest bearing statutory deposits are maintained with Bank Negara Malaysia in compliance with Section37(1) (c) of the Central Bank of Malaysia Ordinance 1958 (Revised – 1994), the amounts of which are determinedat set percentages of total eligible liabilities.

1 0 . I N V E S T M E N T I N S U B S I D I A R Y C O M P A N I E S

The Bank

1998 1997RM’000 RM’000

Unquoted shares at cost 253,076 229,520Less: Provision for diminution in value (2,769) –

250,307 229,520

During the financial year, SBB Futures Sdn. Bhd. (SBBF), a subsidiary company of the Bank, ceased operationseffective 1 September 1998. A provision for diminution in value of investment in SBBF has been made in theaccounts of the Bank.



3 1 D e c e m b e r 1 9 9 8

1 0 . I N V E S T M E N T I N S U B S I D I A R Y C O M P A N I E S ( C O N T ’ D . )

The subsidiary companies of the Bank, all of which are incorporated in Malaysia except as stated otherwise,are as follows:

Effective Percentageof Equity

1998 1997Direct Subsidiary Companies Principal Activities % %

Southern Finance Company Berhad Accepting deposits and advancing loans 100 100

Southern Nominees (Tempatan) Sdn. Bhd. Providing nominee services (local) 100 100

Southern Nominees (Asing) Sdn. Bhd. Providing nominee services (foreign) 100 100– Dormant

S.B. Properties Sdn. Bhd. Property ownership and management 100 100

S.B. Venture Capital Corporation Providing risk capital 100 100Sdn. Bhd.

SBB Asset Management Sdn. Bhd. Investment and asset management 100 100

SBB Capital Markets Sdn. Bhd. Investment holding 100 100

SBB Unit Trust Management Berhad Sale and management of unit trusts 100 100

SBB Futures Sdn. Bhd. Trading in futures and options 100 100 – Dormant

Investil – Investimentos Associados Investment holding 51 –Limitada* (incorporated in theRepublic of Mozambique)

Indirect Subsidiary Companies

SBB Securities Sdn. Bhd. Stockbroking 70 70

RC Nominees (Tempatan) Sdn. Bhd. Providing nominee services (local) 70 70

RC Nominees (Asing) Sdn. Bhd. Providing nominee services (foreign) 70 70– Dormant

SBBAM Nominees (Tempatan) Sdn. Bhd. Providing nominee services (local) 100 100

SBBAM Nominees (Asing) Sdn. Bhd. Providing nominee services (foreign) 100 100

Elite Constant Development Sdn. Bhd. Building construction 100 100

Banco Austral S.A.R.L. (formerly Banking business 30.6 –known as Banco Popular deDesenvolvimento)* (incorporated inthe Republic of Mozambique)

* The accounts of these subsidiary companies were audited by auditors other than the auditors of the Bank.



3 1 D e c e m b e r 1 9 9 8

1 0 . I N V E S T M E N T I N S U B S I D I A R Y C O M P A N I E S ( C O N T ’ D . )

The auditors’ report on the accounts of Banco Austral S.A.R.L., a company incorporated in the Republic ofMozambique, was qualified as follows:

(a) the auditors were unable to determine the fairness of, or adjustments, if any, that is necessary for the following:

(i) a deposit of RM22.5 million (Mts73,025 million) which could not be reconciled to the amountof RM27.4 million (Mts89,000 million) reported by the central bank of Mozambique; and

(ii) an inter-branch account balance of RM13.1 million (Mts42,644 million), of which about RM8.3million was cleared in January 1999; and

(b) an overstatement of profit resulting from the deferment of provision for doubtful loans amounting toapproximately RM25.3 million (Mts81,973 million) which is to be charged to the profit and loss accountsof Banco Austral S.A.R.L. over four years.

The said deferred provision however has been adjusted for in the consolidated accounts of the Group.

During the financial year, the Bank transferred its 30.6% equity interest in its then associated company, BancoAustral S.A.R.L. (formerly known as Banco Popular de Desenvolvimento), a bank incorporated in the Republicof Mozambique to Investil – Investimentos Associados Limitada (IIAL), a private company incorporated in theRepublic of Mozambique, in return for 51% interest in the capital of IIAL.

In addition to the shares transferred from the Bank, Invester S.A.R.L. also transferred its shareholding in BancoAustral S.A.R.L. of 29.4% to IIAL. Consequently, IIAL has a total of 60% equity interest in Banco Austral S.A.R.L..

Banco Austral S.A.R.L. became an indirect subsidiary company of the Bank and its accounts are consolidatedwith the accounts of the Bank for the current financial year.

1 1 . I N V E S T M E N T I N A S S O C I A T E D C O M P A N Y

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Share of net assets at date of acquisition – 7,450 – 7,450Premium on acquisition – 6,551 – 6,551

Cost of investment – 14,001 – 14,001Gain on foreign exchange – – – 2,482Share of post acquisition profit before tax – – – 975Share of taxation – – – (439)

– 14,001 – 17,019



3 1 D e c e m b e r 1 9 9 8

1 1 . I N V E S T M E N T I N A S S O C I A T E D C O M P A N Y ( C O N T ’ D . )

The associated company of the Bank in 1997 is Banco Austral S.A.R.L. (formerly known as Banco Popularde Desenvolvimento), a bank incorporated in the Republic of Mozambique, in which the Bank has a 30.6%equity interest.

During the financial year, the Bank acquired a 51% interest in Investil – Investimentos Associados Limitada (IIAL),a private company incorporated in the Republic of Mozambique, following the transfer of its equity interestin Banco Austral S.A.R.L. as explained in Note 10. Also during the financial year, Banco Austral S.A.R.L. becamea 60% owned subsidiary company of IIAL and therefore an indirect subsidiary company of the Bank.

1 2 . F I X E D A S S E T S

Balance As Balance As AtAt 1 January Additions Disposals Write-off 31 December

RM’000 RM’000 RM’000 RM’000 RM’000

The Bank

1998Cost

Freehold land and buildings 1,515 – – – 1,515Office equipment,

furniture, fittings andrenovations 34,719 1,236 (8) (577) 35,370

Computer equipmentand software 86,358 11,988 (409) (2,002) 95,935

Motor vehicles 8,668 20 (150) (2) 8,536

131,260 13,244 (567) (2,581) 141,356

Accumulated Depreciation

Freehold land and buildings 395 20 – – 415Office equipment, furniture,

fittings and renovations 17,695 2,931 (3) (533) 20,090Computer equipment

and software 37,212 11,097 (301) (1,971) 46,037Motor vehicles 2,413 1,698 (145) (1) 3,965

57,715 15,746 (449) (2,505) 70,507



3 1 D e c e m b e r 1 9 9 8

1 2 . F I X E D A S S E T S ( C O N T ’ D . )

Balance As Balance As AtAt 1 January Additions Disposals Write-off 31 December

RM’000 RM’000 RM’000 RM’000 RM’000

The Bank

1997Cost

Freehold land and buildings 1,515 – – – 1,515Office equipment,

furniture, fittings andrenovations 31,363 4,654 (32) (1,266) 34,719

Computer equipmentand software 66,703 19,826 (19) (152) 86,358

Motor vehicles 5,418 4,821 (1,571) – 8,668

104,999 29,301 (1,622) (1,418) 131,260


Freehold land and buildings 375 20 – – 395Office equipment, furniture,

fittings and renovations 16,241 2,647 (22) (1,171) 17,695Computer equipment

and software 28,618 8,751 (12) (145) 37,212Motor vehicles 2,443 1,190 (1,220) – 2,413

47,677 12,608 (1,254) (1,316) 57,715

1998 1997RM’000 RM’000

Net Book Value

Freehold land and buildings 1,100 1,120Office equipment, furniture, fittings and renovations 15,280 17,024Computer equipment and software 49,898 49,146Motor vehicles 4,571 6,255

70,849 73,545



3 1 D e c e m b e r 1 9 9 8


Balance Currency BalanceAs At Translation As At 31

1 January Additions Disposals Write-off Acquisition Difference DecemberRM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

The Group

1998Cost

Freehold land andbuildings 32,950 35,528 – (281) 101,603 (8,598) 161,202

Leasehold land andbuildings– less than 50 years 2,152 – – – – – 2,152– 50 years or more 7,827 1 – – – – 7,828

Office equipment,furniture, fittingsand renovations 49,929 7,837 (15) (1,073) 16,759 (1,418) 72,019

Computer equipmentand software 97,292 16,825 (714) (2,092) 5,658 (479) 116,490

Motor vehicles 13,968 1,295 (273) (2) 12,180 (1,031) 26,137

204,118 61,486 (1,002) (3,448) 136,200 (11,526) 385,828


Freehold land andbuildings 1,258 1,779 – – 7,688 (650) 10,075

Leasehold land andbuildings– less than 50 years 735 56 – – – – 791– 50 years or more 923 143 – – – – 1,066

Office equipment,furniture, fittingsand renovations 24,360 5,455 (7) (915) 5,131 (433) 33,591

Computer equipmentand software 43,325 13,746 (449) (2,042) 1,528 (130) 55,978

Motor vehicles 3,942 3,359 (153) (1) 3,288 (278) 10,157

74,543 24,538 (609) (2,958) 17,635 (1,491) 111,658



3 1 D e c e m b e r 1 9 9 8


Balance Currency BalanceAs At Translation As At 31

1 January Additions Disposals Write-off Acquisition Difference DecemberRM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

The Group

1997Cost

Freehold land andbuildings 21,695 11,255 – – – – 32,950

Leasehold land andbuildings– less than 50 years 2,152 – – – – – 2,152– 50 years or more 7,818 9 – – – – 7,827

Office equipment,furniture, fittingsand renovations 44,876 6,777 (57) (1,667) – – 49,929

Computer equipmentand software 76,292 21,282 (19) (263) – – 97,292

Motor vehicles 8,751 7,555 (2,289) (49) – – 13,968

161,584 46,878 (2,365) (1,979) – – 204,118


Freehold land andbuildings 1,167 91 – – – – 1,258

Leasehold land andbuildings– less than 50 years 679 56 – – – – 735– 50 years or more 779 144 – – – – 923

Office equipment,furniture, fittingsand renovations 21,510 4,318 (31) (1,437) – – 24,360

Computer equipmentand software 33,508 10,042 (12) (213) – – 43,325

Motor vehicles 3,636 1,901 (1,551) (44) – – 3,942

61,279 16,552 (1,594) (1,694) – – 74,543

1998 1997RM’000 RM’000

Net Book ValueFreehold land and buildings 151,127 31,692Leasehold land and buildings

– less than 50 years 1,361 1,417– 50 years or more 6,762 6,904

Office equipment, furniture, fittings and renovations 38,428 25,569Computer equipment and software 60,512 53,967Motor vehicles 15,980 10,026

274,170 129,575



3 1 D e c e m b e r 1 9 9 8

1 3 . D E P O S I T S F R O M C U S T O M E R S

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Demand deposits 734,386 702,172 1,085,595 701,360Savings deposits 327,103 365,969 355,894 396,155Fixed deposits 2,423,524 2,715,281 2,810,635 3,190,523Negotiable instruments of deposits 1,389,800 819,800 1,461,100 955,450Others 1,375 1,414 14,445 1,616

4,876,188 4,604,636 5,727,669 5,245,104

(i) The maturity structure of fixed deposits and negotiable instruments of deposits are as follows:

Due within six months 3,431,165 3,092,857 3,778,982 3,488,575Six months to one year 346,064 372,008 432,941 572,449One year to three years 35,985 69,435 56,391 83,365Three years to five years 110 781 3,421 1,584

3,813,324 3,535,081 4,271,735 4,145,973

(ii) The deposits are sourced from the following customers:

Business enterprises 1,585,311 1,107,162 1,825,855 1,238,765Individuals 2,398,066 2,474,227 2,958,336 2,869,216Others 892,811 1,023,247 943,478 1,137,123

4,876,188 4,604,636 5,727,669 5,245,104

1 4 . D E P O S I T S A N D P L A C E M E N T S O F B A N K S A N D O T H E R F I N A N C I A L I N S T I T U T I O N S

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Licensed banks 230,918 778,099 276,046 982,099Licensed finance companies 33,350 31,481 68,350 76,757Other financial institutions 366,960 302,166 358,556 477,078

631,228 1,111,746 702,952 1,535,934



3 1 D e c e m b e r 1 9 9 8

1 5 . O T H E R L I A B I L I T I E S

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Proposed dividend 23,312 23,022 23,312 23,022Taxation payable 40,273 35,100 46,605 49,332Zakat payable 14 – 14 –Deferred taxation (Note 27) 13,404 13,969 10,568 12,544Obligations under finance lease – – 525 579Provision for commitment and

contingencies* 54 – 54 –Other liabilities 141,924 190,152 280,977 233,332

218,981 262,243 362,055 318,809

* Movements in provision for commitment and contingencies are as follows:

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Balance as at 1 January – – – –Provision made during the year 272 – 272 –Amount written-back in respect of

recoveries (218) – (218) –

Balance as at 31 December 54 – 54 –

1 6 . 5 . 5 % R E D E E M A B L E U N S E C U R E D S U B O R D I N A T E D B O N D S 1 9 9 6 – 2 0 0 1

Pursuant to a trust deed dated 13 June 1996, the Bank issued RM300 million nominal value 5.5% redeemableunsecured subordinated bonds 1996 – 2001 with 53,292,750 detachable warrants at 100% of the nominal valueof the bonds to a primary subscriber on a bought deal basis. The detachable warrants were offered for sale bythe primary subscriber to the shareholders of the Bank at an offer price of RM0.767 per warrant on the basisof one warrant for every four ordinary shares held in the Bank.

The salient features of the bonds are as follows:

(a) The bonds bear interest at a fixed coupon rate of 5.5% per annum based on the nominal amount of thebonds. The interest is payable annually in arrears.

(b) The bonds constitute direct, unsecured and unconditional obligations of the Bank and between the bondholdersrank pari passu without any preference or priority amongst themselves and with all other present andfuture obligations of the Bank.

(c) Unless previously redeemed, cancelled or purchased by the Bank, the bonds will be redeemed at 100%of their nominal value together with the interest accrued on the maturity date of 17 June 2001.

(d) The bonds will not be listed on the Kuala Lumpur Stock Exchange (KLSE) or any other Stock Exchange.(e) The bonds are not convertible into any form of securities in the Bank.



3 1 D e c e m b e r 1 9 9 8

1 6 . 5 . 5 % R E D E E M A B L E U N S E C U R E D S U B O R D I N A T E D B O N D S 1 9 9 6 – 2 0 0 1 ( C O N T ’ D . )

The bonds qualify as Tier-2 capital for the purpose of determining the Capital Adequacy Ratio of the Bankand is subordinated to all other general creditors.

The salient features of the warrants are as follows:

(a) Each warrant carries the right to subscribe for one new ordinary share of RM1 each in the Bank at thesubscription price of RM5.70, payable in cash at anytime within the subscription period commencingfrom the first anniversary date of issue of the warrants and expiring on 17 June 2001, being a period of4 years from the date of issue of the rights to allotment of the warrants.

(b) After the expiry of the subscription period, any subscription rights represented by the warrants whichhave not been exercised and delivered to the Registrar will lapse and every such warrant will cease thereafterto be valid for any purposes.

(c) The warrants are listed and quoted on the Kuala Lumpur Stock Exchange with effect from 2 September1996.

Consequential to the Bank’s bonus issue in December 1996 of 106,585,500 new ordinary shares of RM1 each,the number of warrants in issue were adjusted from 53,292,750 to 79,939,125 warrants and the subscriptionprice for the Bank’s ordinary shares of RM1 each was adjusted from RM5.70 to RM3.80 per share, in accordancewith condition 3A(ii) of the Second Schedule of the Deed Poll. Also, consequential to the Bank’s bonus issuein November 1997 of 159,890,153 new ordinary shares of RM1 each and the rights issue in December 1997of 239,835,230 new ordinary shares of RM1 each, the number of warrants in issue were further adjusted from79,939,125 to 139,423,286 warrants, after taking into account warrants already exercised, and the subscriptionprice was adjusted from RM3.80 to RM2.18 per share, in accordance with condition 3A(ii) and (iv) of theSecond Schedule of the Deed Poll.

The movements in the number of warrants during the financial year are as follows:

The Bank

1998 1997

Balance of units as at 1 January 139,423,286 79,939,125Additions during the year – 59,507,967Exercised during the year – (23,806)

Balance of units as at 31 December 139,423,286 139,423,286



3 1 D e c e m b e r 1 9 9 8

1 7 . S H A R E C A P I T A L

The Bank

1998 1997RM’000 RM’000

Authorised:

Balance as at 1 January 2,000,000 500,000Created during the year – 1,500,000

Balance as at 31 December 2,000,000 2,000,000

Issued and fully paid:

Balance as at 1 January 719,506 319,757Bonus issue 1:2 – 159,890Rights issue 1:2 at RM1.85 per share – 239,835Shares issued by virtue of exercise of warrants – 24

Balance as at 31 December 719,506 719,506

During the financial year, no warrants were exercised to subscribe for new ordinary shares of RM1.00 eachof the Bank.

1 8 . R E S E R V E S

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Share Premium 201,419 200,396 201,419 200,396Statutory Reserve 137,201 100,807 169,294 132,896Capital Reserve – – 16,000 16,000Exchange Fluctuation Reserve – – 104 –Other Reserve – – 1,086 –Retained Profit 102,975 89,895 90,145 112,665

441,595 391,098 478,048 461,957

Share Premium

Balance as at 1 January 200,396 39,664 200,396 39,664Capitalisation for bonus issue – (39,539) – (39,539)Arising from rights issue – 203,927 – 203,927Share issue expenses – (3,656) – (3,656)Provision for share issue expenses

no longer required 1,023 – 1,023 –




3 1 D e c e m b e r 1 9 9 8

1 8 . R E S E R V E S ( C O N T ’ D . )

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Statutory Reserve

Balance as at 1 January 100,807 180,861 132,896 205,690Capitalisation for bonus issue – (120,351) – (120,351)Acquisition – – 4 –Transfer from profit and loss account 36,394 40,297 36,394 47,557


The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Capital Reserve

Balance as at 1 January – – 16,000 16,000

Balance as at 31 December – – 16,000 16,000

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Exchange Fluctuation Reserve

Balance as at 1 January – – – –Translation of foreign susbidiary company – – 104 –

Balance as at 31 December – – 104 –

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Other Reserve

Balance as at 1 January – – – –Movement during the year – – 1,086 –

Balance as at 31 December – – 1,086 –



3 1 D e c e m b e r 1 9 9 8

1 9 . I N T E R E S T I N C O M E

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Loans and advances 672,261 529,395 840,156 647,871Money at call and deposit placements

with financial institutions 20,211 47,453 15,548 56,354Dealing securities 17,736 20,838 18,976 23,448Investment securities 83,145 47,535 103,141 56,608Others 5,772 1,265 9,532 4,549

799,125 646,486 987,353 788,830Accretion of discount/(amortisation

of premium) – net 3,579 (393) 2,988 (1,155)Net interest suspended (56,382) (12,546) (95,428) (18,143)

746,322 633,547 894,913 769,532

2 0 . I N T E R E S T E X P E N S E

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Deposits and placements of banksand other financial institutions 47,242 69,816 56,600 78,204

Deposits from other customers 336,941 259,666 389,146 302,888Others 71,825 49,683 92,165 74,270

456,008 379,165 537,911 455,362

2 1 . L O A N A N D F I N A N C I N G L O S S A N D P R O V I S I O N

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Provision for bad and doubtful debtsand financing:– specific provision (net) 104,673 37,171 130,623 52,593– general provision (net) 9,723 30,418 6,366 35,845

Bad debts– written-off 492 869 492 869– recovered (15,498) (13,241) (16,669) (15,582)

99,390 55,217 120,812 73,725



3 1 D e c e m b e r 1 9 9 8

2 2 . N O N - I N T E R E S T I N C O M E

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Fee income:

Commissions 6,349 7,294 35,273 36,079Service charges and fees 9,636 15,548 19,905 24,691Guarantee fee 3,042 3,359 4,934 3,359Other fee income 29,432 36,667 29,228 36,085

48,459 62,868 89,340 100,214

Investment income:

Net profit/(loss) from dealingsecurities 1,604 (2,705) 1,423 (15,306)

Gain/(loss) on sale of investment securities 1,339 (8,442) 1,998 (7,375)

Gross dividends from:Malaysia:

Investment securities 444 272 685 355Dealing securities – 387 540 693Subsidiary companies 4,968 11,446 – –

Outside Malaysia:Investment securities 1,062 813 1,062 813

9,417 1,771 5,708 (20,820)

Provision for diminution in valueof investment securities – – – (14,445)

Write-back of provision for diminutionin value of investment securities – – 3,838 –

9,417 1,771 9,546 (35,265)

Other income:Foreign exchange gain 8,572 7,285 19,911 7,286Rental income 257 295 765 718Gain on disposal of fixed assets 46 750 56 904Net profit/(loss) on sale of unit trusts – – (304) 5,836Gain on disposal of foreclosed properties 11 143 241 356Other operating income 7,446 7,161 8,509 7,396

16,332 15,634 29,178 22,496

74,208 80,273 128,064 87,445



3 1 D e c e m b e r 1 9 9 8

2 3 . O V E R H E A D E X P E N S E

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Personnel costs 66,024 75,392 136,403 95,537Establishment costs 49,588 46,951 66,755 55,665Marketing expenses 7,608 10,807 12,059 20,506Administration and general expenses 32,641 26,557 72,506 35,271

155,861 159,707 287,723 206,979

The above expenditure includes the following:

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Directors’ emoluments (Note 25)– Bank 1,071 1,075 1,071 1,075– Subsidiary companies – – 1,293 1,703

Rental of premises 14,200 13,896 16,037 15,996Hire of equipment 251 276 317 465Lease rental 6,701 8,637 6,705 8,641Auditors’ remuneration

– Statutory audit 195 195 488 290– Over provision in prior years – (15) – (12)– Special audit – – 2 –

Provision for diminution in value ofinvestment in subsidiary company 2,769 – – –

Depreciation of fixed assets (Note 12) 15,746 12,608 24,538 16,552Amortisation of goodwill – – 975 261Loss on disposal of fixed assets 79 32 180 67Fixed assets written-off 76 102 490 285



3 1 D e c e m b e r 1 9 9 8

2 4 . S I G N I F I C A N T R E L A T E D C O M P A N Y T R A N S A C T I O N S A N D B A L A N C E S

Subsidiary Companies

1998 1997RM’000 RM’000

Income

Interest on fixed deposit 6,669 3,055Interest on advances 12,698 4,248Dividend income 4,968 11,446Management fees 2,390 1,300Others 897 1,047

27,622 21,096

Expenditure

Interest on fixed deposit 1,082 1,566Interest on advances 5,866 2,999Management fees 753 465Rental of premises and equipment 13,483 12,790Others 1,510 1,857

22,694 19,677

Amount due from

Deposits and placements 142,394 32,595Loans and advances 68,262 9,603Negotiable instruments of deposits 70,000 35,000Others 33,387 29,309

314,043 106,507

Amount due to

Deposits and borrowings 67,273 54,500Others 3,427 510

70,700 55,010



3 1 D e c e m b e r 1 9 9 8

2 5 . D I R E C T O R S ’ E M O L U M E N T S

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

The aggregate emoluments of thedirectors are:

Fees 280 280 591 585Other emoluments:

Executive directors– Bank 767 767 767 767

– Subsidiary companies – – 16 –Non-executive directors 24 28 990 1,426

1,071 1,075 2,364 2,778

The estimated cash value of benefits-in-kind received but not included in the above amounted to RM67,200(1997: RM68,007).

2 6 . T A X A T I O N

The charge for taxation, which is based on the profit for the year, comprises:

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Malaysian income tax @ 28% 38,620 35,100 40,701 43,081Overseas taxation – – 3,983 –Transfer (from)/to deferred taxation

(Note 27) (565) 6,782 (1,976) 4,265Under/(Over) provision in respect

of prior years 374 (2,430) (81) (6,555)Share in taxation of associated company – – – 439

38,429 39,452 42,627 41,230

The tax charge for the Bank and the Group reflects an effective tax rate which is higher than the statutory incometax rate as certain charges and provisions are not considered deductible for tax purposes.



3 1 D e c e m b e r 1 9 9 8

2 7 . D E F E R R E D T A X A T I O N

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Balance as at 1 January 13,969 7,187 12,544 8,279Transfer (to)/from profit and loss account (Note 26) (565) 6,782 (1,976) 4,265


The deferred taxation is in respect ofthe following:

Timing differences betweendepreciation and correspondingcapital allowances on fixed assets 14,209 12,883 15,328 13,609

Other short-term timing differences (805) 1,086 (4,744) 1,367Deferred assets – – – (2,432)

13,404 13,969 10,584 12,544

Net deferred tax benefit not recognisedin the account:

Timing differences on interest-in-suspense – – (4,348) –Timing differences between depreciation

and corresponding capital allowanceson fixed assets – – 555 –

Other short-term timing differences – – 169 –

– – (3,624) –

2 8 . E A R N I N G S P E R S H A R E ( E P S )

The basic earnings per share have been calculated based on the Group’s profit after taxation and minority interestsof RM37.2 million (1997: RM83.4 million) and on the number of 719,505,689 (1997: on the weighted averageof 480,308,496) ordinary shares of RM1 each in issue during the financial year.

The fully diluted earnings per share are not shown for 1998 as there is an anti-dilution on the earnings pershare, after taking into account the assumed conversion of the outstanding warrants during the financial year.

The fully diluted earnings per share are not shown for 1997 as the dilution on the earnings per share after takinginto account of the assumed conversion of the outstanding warrants during the financial year is immaterial.



3 1 D e c e m b e r 1 9 9 8

2 9 . C O M M I T M E N T S A N D C O N T I N G E N C I E S

In the normal course of business, the Bank and its finance subsidiary company make various commitments andincur certain contingent liabilities with legal recourse to their customers. No material losses are anticipatedas a result of these transactions.

Risk-weighted exposure as at 31 December is as follows:

1998 1997

Credit CreditPrincipal Equivalent Principal EquivalentAmount Amount Amount AmountRM’000 RM’000 RM’000 RM’000

The Bank

Direct credit substitutes 109,474 109,474 93,937 93,937Certain transaction-related

contingent items 111,424 55,712 167,389 83,695Short-term self-liquidating trade-

related contingencies 24,613 4,923 65,994 13,199Housing loans sold directly and

indirectly to Cagamas Berhad 352,211 352,211 324,858 324,858Irrevocable commitments to extend credit:

– maturity exceeding one year 478,469 239,235 675,040 337,520– maturity not exceeding one year 3,468,052 – 3,762,530 –

Foreign exchange related contracts– less than one year 288,709 35,615 1,057,201 119,537

Interest rate related contracts– one year to less than five years 50,000 1,000 – –

Miscellaneous commitments andcontingencies 49,287 9,857 30,572 6,114

4,932,239 808,027 6,177,521 978,860



3 1 D e c e m b e r 1 9 9 8

2 9 . C O M M I T M E N T S A N D C O N T I N G E N C I E S ( C O N T ’ D . )

1998 1997

Credit CreditPrincipal Equivalent Principal EquivalentAmount Amount Amount AmountRM’000 RM’000 RM’000 RM’000

The Group

Direct credit substitutes 110,961 110,961 95,599 95,599Certain transaction-related

contingent items 116,424 58,212 167,389 83,695Short-term self-liquidating trade-

related contingencies 42,325 8,465 65,994 13,199Housing loans sold directly and

indirectly to Cagamas Berhad 394,720 394,720 339,498 339,498Irrevocable commitments toextend credit:

– maturity exceeding one year 529,445 264,661 849,242 424,621– maturity not exceeding one year 3,528,443 – 3,767,096 –

Foreign exchange related contracts– less than one year 288,709 35,615 1,057,201 119,537

Interest rate related contracts– one year to less than five years 50,000 1,000 – –

Miscellaneous commitments andcontingencies 194,637 38,927 30,572 6,114

5,255,664 912,561 6,372,591 1,082,263

Housing loans sold to Cagamas Berhad are administered by the Bank and its finance subsidiary company. The Bankand its finance subsidiary company are committed to buy back any loans which are regarded as delinquent.

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

Market Risk

Market risk is the potential change in value caused by movement in market rates or prices. The contractualamounts stated above provide only a measure of involvement in these types of transactions and do not representthe amounts subject to market risk. Exposure to market risk may be reduced through off-setting on and off-balance sheet positions. As at the end of 1998, the amount of contracts which were not hedged and, hence,exposed to market risk was RM0.7 million (1997: RM23.7 million).

Credit Risk

Credit risk arises from the possibility that a counterparty may be unable to meet the terms of a contract inwhich the Bank has a gain position. As at the end of 1998, the amounts of credit risk, measured in term ofthe cost to replace the profitable contracts, was RM37.4 million (1997: RM86.4 million). This amount will increaseor decrease over the life of the contracts, mainly as a function of maturity dates and market rates or prices.

The stockbroking subsidiary company, SBB Securities Sdn. Bhd., is contingently liable for an unsecured guaranteeof RM5 million (1997: RM5 million) given to a local bank in respect of standby credit facilities extended toSCANS.



3 1 D e c e m b e r 1 9 9 8

3 0 . L E A S E C O M M I T M E N T S

Non-cancellable long-term operating lease commitments of the Bank and of the Group in respect of rentalof premises and equipment are as follows:

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Expiry of operating lease:

Within one year 529 6,621 10,608 21,230Between one and two years 265 446 1,924 11,994After two years 101 337 557 2,526

3 1 . C A P I T A L C O M M I T M E N T S

Capital expenditure approved by the directors but not provided for in the accounts are as follows:

The Bank The Group

1998 1997 1998 1997RM’000 RM’000 RM’000 RM’000

Capital expenditure:

Contracted for 1,053 3,909 40,293 40,379Authorised but not contracted for 199 500 3,718 500

3 2 . C A P I T A L A D E Q U A C Y

The capital adequacy ratios of the Bank are as follows:The Bank

1998 1997RM’000 RM’000

Tier-1 capital

Paid-up share capital 719,506 719,506Share premium 201,419 200,396Other reserves 240,176 190,806

Total Tier-1 capital 1,161,101 1,110,708

Tier-2 capital

Subordinated bonds 120,000 180,000General provision for bad and doubtful debts and financing 82,749 73,026

Total Tier-2 capital 202,749 253,026



3 1 D e c e m b e r 1 9 9 8

3 2 . C A P I T A L A D E Q U A C Y ( C O N T ’ D . )

The Bank

1998 1997RM’000 RM’000

Total capital 1,363,850 1,363,734

Less: Investment in subsidiary companies (250,307) (229,520)Holding of other banking institutions’ capital (51,456) (63,184)

Total (301,763) (292,704)

Capital base 1,062,087 1,071,030

Capital Ratios:

Core capital ratio 18.83% 20.34%Risk-weighted capital ratio 18.83% 20.34%

Breakdown of risk-weighted assets in the various categories of risk-weights:

0% 993,656 1,293,98010% 210,668 372,10420% 1,380,408 1,610,20150% 1,113,250 1,095,170100% 4,786,619 4,356,466

3 3 . S E G M E N T A N A L Y S I S

The analysis by activity of the Group’s operations for the year ended 31 December are as follows:

Operating Profit Before AssetsRevenue Taxation Employed

By Activity RM’000 RM’000 RM’000

1998

Banking 908,517 122,626 8,413,062Finance 119,521 (12,924) 802,713Share broking and fund management 22,700 (20,049) 120,171Others 24,531 (1,790) 60,564

1,075,269 87,863 9,396,510Consolidation adjustments (58,184) (9,374) (321,382)

1,017,085 78,489 9,075,128



3 1 D e c e m b e r 1 9 9 8

3 3 . S E G M E N T A N A L Y S I S ( C O N T ’ D . )

Operating Profit Before AssetsRevenue Taxation Employed

By Activity RM’000 RM’000 RM’000

1997

Banking 714,135 121,021 7,899,416Finance 136,574 15,019 1,450,724Share broking and fund management 38,728 (2,204) 221,564Others 31,345 10,565 58,295

920,782 144,401 9,629,999Consolidation adjustments (52,955) (22,200) (426,523)

867,827 122,201 9,203,476

By Geographical Location

1998

Malaysia 931,110 67,806 8,482,516Overseas 85,975 10,683 592,612

1,017,085 78,489 9,075,128

1997

Malaysia 867,827 121,226 9,186,457Overseas – 975 17,019

867,827 122,201 9,203,476

3 4 . C O M P A R A T I V E S

Certain accounts in 1997 have been reclassified to conform with their presentation in 1998, which is in compliancewith Bank Negara Malaysia’s guidelines on the presentation of financial statements.



3 1 D e c e m b e r 1 9 9 8

3 5 . I S L A M I C B A N K I N G S C H E M E ( S P I )

The state of affairs as at 31 December 1998 and the results for the year ended on that date under SPI of theBank which are incorporated in the accounts of the Bank and of the Group are as follows:

BALANCE SHEET AS AT 31 DECEMBER 1998

The Bank and The Group

1998 1997Note RM’000 RM’000

ASSETS

Cash and short-term funds i 8,702 21,415Dealing securities ii 94,397 1,416Loans, advances and financing iii 11,064 1,552Fixed assets iv 103 100Other assets v 383 1,013Deposits with Bank Negara Malaysia 2,441 772

TOTAL ASSETS 117,090 26,268

LIABILITIES AND ISLAMIC BANKING FUNDS

Deposits from customers vi 50,504 18,059Deposits and placements of banks and other financial institutions vii 37,534 3,104Other liabilities viii 691 109

TOTAL LIABILITIES 88,729 21,272

ISLAMIC BANKING FUND ix 28,361 4,996

TOTAL LIABILITIES AND ISLAMIC BANKING FUNDS 117,090 26,268

COMMITMENTS AND CONTINGENCIES xiii 25,002 845



3 1 D e c e m b e r 1 9 9 8

3 5 . I S L A M I C B A N K I N G S C H E M E ( S P I ) ( C O N T ’ D . )

PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 DECEMBER 1998


1998 1997Note RM’000 RM’000

Income x 2,012 315Loans and financing loss and provision xi (144) (24)

Net income 1,868 291Overhead expense xii (1,300) (612)

Profit/(Loss) before taxation and zakat 568 (321)Taxation (200) –Zakat (14) –

Profit/(Loss) after taxation and zakat 354 (321)Accumulated loss brought forward (550) (229)

Accumulated loss carried forward (196) (550)

NOTES TO THE ISLAMIC BANKING SCHEME FINANCIAL STATEMENTS

i. Cash and Short-Term Funds


1998 1997RM’000 RM’000

Cash and balances with banks and other financial institutions 3,701 1,336Money at call and deposit placements maturing within one month 5,001 20,079

8,702 21,415

ii. Dealing SecuritiesThe Bank and The Group

1998 1997RM’000 RM’000


Islamic accepted bills 94,397 1,416



3 1 D e c e m b e r 1 9 9 8


iii. Loans, Advances and FinancingThe Bank and The Group

1998 1997RM’000 RM’000

Term financing 24,417 3,788Staff loans 7 –Unearned income (13,192) (2,212)

Gross loans, advances and financing 11,232 1,576General provision for bad and doubtful debts and financing (168) (24)

Net loans, advances and financing 11,064 1,552

Loans, advances and financing analysed by concepts are as follows:


1998 1997RM’000 RM’000

Al-Bai’ Bithaman Ajil 11,232 1,576

The maturity structure of loans, advances and financing are as follows:


1998 1997RM’000 RM’000

Maturing within one year 15 –Over five years 11,217 1,576

11,232 1,576

Loans, advances and financing analysed by their economic purposes are as follows:


1998 1997RM’000 RM’000

Construction 8 –Housing 11,217 1,576Consumption credits 7 –

11,232 1,576



Movements in the provision for bad and doubtful debts and financing are as follows:


1998 1997RM’000 RM’000

General Provision

Balance as at 1 January 24 –Provisions made during the year 144 24

Balance as at 31 December 168 24

iv. Fixed Assets

Balance As Balance As AtAt 1 January Additions Adjustment* 31 December

The Bank and The Group RM’000 RM’000 RM’000 RM’000

Cost

1998

Office equipment, furniture,fittings and renovations 98 – (3) 95

Computer equipment and software 17 19 – 36

115 19 (3) 131


Office equipment, furniture,fittings and renovations 12 10 – 22

Computer equipment and software 3 3 – 6

15 13 – 28

* Prior year’s adjustment

Cost

1997

Office equipment, furniture,fittings and renovations 112 9 (23) 98

Computer equipment and software 14 7 (4) 17

126 16 (27) 115


3 1 D e c e m b e r 1 9 9 8



Balance As Balance As AtAt 1 January Additions Adjustment* 31 December



Office equipment, furniture,fittings and renovations 3 10 (1) 12

Computer equipment and software 1 2 - 3

4 12 (1) 15

Net Book Value1998 1997

RM’000 RM’000

Office equipment, furniture,fittings and renovations 73 86

Computer equipment and software 30 14

103 100

v. Other AssetsThe Bank and The Group

1998 1997RM’000 RM’000

Other debtors, deposits and prepayments 383 1,013

vi. Deposits From CustomersThe Bank and The Group

1998 1997RM’000 RM’000

Demand deposits 27,033 12,219Saving deposits 6,902 3,742General investment deposits 16,569 2,098

Total deposits 50,504 18,059


3 1 D e c e m b e r 1 9 9 8



Maturity structure of investment deposits are as follows:The Bank and The Group

1998 1997RM’000 RM’000

Due within six months 15,606 2,098Six months to one year 963 –

16,569 2,098

The deposits are sourced from the following customers:


1998 1997RM’000 RM’000

Business enterprises 13,810 6,476Individuals 20,617 9,895Others 16,077 1,688

50,504 18,059

vii. Deposits and Placements of Banks and Other Financial InstitutionsThe Bank and The Group

1998 1997RM’000 RM’000

Licensed banks 29,031 3,000Other financial institutions 8,503 104

37,534 3,104

viii. Other LiabilitiesThe Bank and The Group

1998 1997RM’000 RM’000

Taxation 200 –Zakat 14 –Other liabilities 477 109

691 109


3 1 D e c e m b e r 1 9 9 8



ix. Islamic Banking Fund (IBF)The Bank and The Group

1998 1997RM’000 RM’000

Funds allocated from Head Office 28,557 5,546Accumulated losses (196) (550)

28,361 4,996

x. IncomeThe Bank and The Group

1998 1997RM’000 RM’000

Income derived from investment of depositors’ funds 2,862 427Income attributable to depositors

– other customers (1,013) (194)– banks and financial institutions (70) –

Income attributable to Bank 231 80Other SPI income 2 2

2,012 315

Details of the income derived from investment of depositors’ funds and funds allocated from Head Officeare as follows:

1998 1997

Depositors’ Depositors’Funds IBF Funds IBF

RM’000 RM’000 RM’000 RM’000

Income from financing 660 53 14 3

Investment income:Net profit from dealing securities 2,200 178 413 74

2,200 178 413 74

Fee income:Service charges and fees 2 – – –

2 – – –

Other income:Other non-operating income – – – 3

– – – 3

2,862 231 427 80


3 1 D e c e m b e r 1 9 9 8



xi. Loans and Financing Loss and ProvisionsThe Bank and The Group

1998 1997RM’000 RM’000

General provision for bad and doubtful debts and financing 144 24

xii. Overhead ExpenseThe Bank and The Group

1998 1997RM’000 RM’000

Personnel costs 508 193Establishment costs 143 127Marketing expenses 74 251Administration and general expenses 575 41

1,300 612

xiii. Commitments and Contingencies

In the normal course of business, the Bank makes various and incurs certain contingent liabilities withlegal recourse to its customers. No material losses are anticipated as a result of these transactions.

The commitments and contingencies constitute the following:

1998 1997

Credit CreditPrincipal Equivalent Principal EquivalentAmount Amount Amount Amount


Irrevocable commitments toextend credits:– maturity exceeding one year 25,002 12,501 845 423

3 6 . C R E D I T R A T I N G

On 20 July 1998, the rating of the Bank and its RM300 million 5.5% Redeemable Unsecured SubordinatedBonds (1996/2001) were reaffirmed by Rating Agency Malaysia Berhad as follows:

July 1998 July 1997

Long-term rating A1 A1Short-term rating P1 P1Rating for RM300 million 5.5% Redeemable

Unsecured Subordinated Bonds 1996/2001 A2 A2


3 1 D e c e m b e r 1 9 9 8


Statement by Directors

The directors of SOUTHERN BANK BERHAD state that, in their opinion, the accounts set out on pages 56 to100 are drawn up in accordance with the provisions of the Companies Act, 1965 and the applicable approved accountingstandards in Malaysia so as to give a true and fair view of the state of affairs of the Bank and of the Group at 31December 1998 and of the results of the Bank and of the Group and the cash flows of the Group for the year endedon that date.

Signed in accordance with a resolution of the directors,

YBhg TAN SRI OSMAN S CASSIMChairman

YBhg DATO’ TAN TEONG HEANChief Executive Director


Statutory Declaration

I, NG GEK SIU, being the officer primarily responsible for the financial management of SOUTHERN BANK BERHAD,do solemnly and sincerely declare that the accounts set out on pages 56 to 100 are, in my opinion, correct andI make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of theStatutory Declarations Act, 1960.

Subscribed and solemnly declared )by the abovenamed NG GEK SIU, )at KUALA LUMPUR )this 31st day of March 1999. )

Before me,

Commissioner for OathsKuala Lumpur


Report of the Auditors to the Members ofSouthern Bank Berhad

We have audited the accompanying balance sheets as of 31 December 1998, the related profit and loss accounts andconsolidated cash flow statement, together with the notes thereto, for the year then ended. These accounts are theresponsibility of the Bank’s directors. Our responsibility is to express an opinion on these accounts based on our audit.

We conducted our audit in accordance with approved standards on auditing in Malaysia. These standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the accounts are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. Anaudit also includes assessing the accounting principles used and significant estimates made by the directors, as wellas evaluating the overall accounts presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion:

(a) the abovementioned accounts are properly drawn up in accordance with the provisions of the Companies Act,1965 and the applicable approved accounting standards in Malaysia so as to give a true and fair view of:

(i) the state of affairs of the Bank and of the Group as of 31 December 1998 and of the results of the Bankand of the Group and the cash flows of the Group for the year ended on that date; and

(ii) the matters required by Section 169 of the Act to be dealt with in the accounts and consolidated accounts;and

(b) the accounting and other records and the registers required by the Act to be kept by the Bank and by the subsidiarycompanies of which we have acted as auditors have been properly kept in accordance with the provisions ofthe Act.

We have considered the accounts and the auditors’ reports of the subsidiary companies of which we have not actedas auditors as indicated in Note 10 to the accounts, being accounts that have been included in the consolidated accounts.

We are satisfied that the accounts of the subsidiary companies that have been consolidated with the accounts of theBank are in form and content appropriate and proper for the purposes of the preparation of the consolidated accounts,and we have received satisfactory information and explanations as required by us for these purposes.

The auditors’ reports on the accounts of the subsidiary companies were not subject to any qualification except asindicated in Note 10 to the accounts and did not include any comment made under sub-section 3 of Section 174of the Act.

KASSIM CHAN & COAF0080Public Accountants

TAN BUN POO1304/5/00(J/PH)Partner



List of Bank Group’s PropertiesA s a t 3 1 A p r i l 1 9 9 9

Location Description Existing Land Area Tenure No. of Expiry Age of Net BookUse (Sq. Meters) Years Date Building Value

(Years) (RM)

Kedah

No. 1564, 4 1/2 Storey Branch & 393 Leasehold 60 25/11/2023 16 1,036,911.55Jalan Kota, 0500 Alor Setar Building Tenanted

Melaka

No. 110, Jalan Bendahara, 2 Storey Branch 1335 Freehold – – 71 1,444,197.8075100 Melaka Building

Negeri Sembilan

No. 111 & 113, Jalan Yam 5 Storey Branch & 357 Freehold – – 1 2,297,008.27Tuan, 70000 Seremban Building Tenanted

Perak

No. 33, Jalan Lee Ming Hin, 2 1/2 Storey Branch 180 Freehold – – 12 175,988.1931450 Menglembu Building

Lot Nos. 2673 & 2674 2 Storey Branch 298 Leasehold 99 18/8/2085 9 394,174.71Main Road, 36700 Langkap Building

No. 99 & 101, Jalan Gopeng, 2 Storey Branch 446 Freehold – – 74 366,065.1131900 Kampar Building

No. 613 & 615, Jalan Tasik, 2 Storey Branch 286 Leasehold 88 11/3/2079 13 191,004.4131400 Ipoh Building

Pulau Pinang

No. 33 & 33B, Lebuh Pantai 2 Storey Tenanted 3418 Freehold – – 61 2,750,454.00& No. 9 Pengkalan Weld, Building10300 Penang

No. 21, Lebuh Pantai, 5 1/2 Storey Branch & 929 Freehold – – 34 1,099,963.1110300 Penang Building Tenanted

Lot 636-640, Block D 20, 2 Storey Branch & 393 Leasehold 99 28/8/2082 12 451,988.65Gerbang Tuna, Seberang Jaya, Building Tenanted13700 Perai

Selangor

No. 14, Jalan Sri Selayang, 4 Storey Branch 334 Freehold – – 13 1,554,065.44Taman Sri Selayang, Building68100 Batu Caves

No. 40 & 42, 4 Storey Branch 327 Freehold – – 13 1,289,497.16Jalan SS15/4D, Subang Jaya, Building & Tenanted47500 Petaling Jaya

No. 12, Jalan SS6/3 Kelana Jaya, 4 Storey Branch 186 Leasehold 99 – 13 479,457.5547301 Petaling Jaya Building & Tenanted

Wilayah Persekutuan

No. 13, Jalan Barat, Off Jalan 2 Storey Tenanted 163 Leasehold 99 30/3/2025 71 325,239.18Imbi, 55100 Kuala Lumpur Building

No. 43, Jalan Barat, Off Jalan 4 1/2 Storey Branch & 374 Leasehold 99 30/1/2073 21 3,672,828.15Imbi, 55100 Kuala Lumpur Building Tenanted

Lot 50574, Geran 12753, Land – 4166 Freehold – – Building 10,575,721.95Bukit Damansara, UnderMukim Kuala Lumpur Construction

Tanjung Bungah

Block 21 & 22 2 Units – 209 Freehold – – Building 1,451,075.26Prima Tanjung, 4 Storey UnderTown of Tanjung Tokong, Shop-Cum- ConstructionPulau Pinang Office


Analysis of ShareholdingsA s a t 3 0 A p r i l 1 9 9 9

D I S T R I B U T I O N O F S H A R E H O L D I N G S

No. of % of Total % of IssuedSize of Shareholdings Shareholders Shareholders No. of Shares Share Capital

1 - 499 609 4.79 109,619 0.02500 - 5,000 8,238 64.79 20,206,475 2.81

5,001 - 10,000 1,794 14.11 13,677,127 1.9010,001 – 100,000 1,852 14.56 47,763,798 6.64

100,001 - 1,000,000 175 1.38 48,672,269 6.761,000,001 and above 47 0.37 589,076,401 81.87

Total 12,715 100.00 719,505,689 100.00

T W E N T Y L A R G E S T S H A R E H O L D E R S A S P E R R E G I S T E R O F M E M B E R S

ShareholdingNo. of Shares % of Total

1. Aseam Malaysia Nominees (Tempatan) Sdn Bhd 82,807,083 11.512. Keppel TatLee Bank Limited 71,948,252 10.003. Multi-Purpose Bank Nominees (Tempatan) Sdn Bhd 50,727,966 7.054. Mazal Sdn Bhd 43,736,230 6.085. Amalan Istimewa Sdn Bhd 36,891,249 5.136. Citicorp Nominees (Asing) Sdn Bhd 35,977,601 5.007. KLCS Asset Management Sdn Bhd 35,280,000 4.908. Malaysia Focus Investment Fund Limited 33,776,420 4.699. Malaysia Nominees (Tempatan) Sendirian Berhad 24,952,584 3.4710. Southern Nominees (Tempatan) Sdn Bhd 20,394,022 2.8411. Mayfair Finance Corp. 20,000,000 2.7812. The Central Depository (PTE) Limited 13,106,483 1.8213. Asia Life (M) Berhad 10,339,020 1.4414. Public Nominees (Tempatan) Sdn Bhd 10,000,000 1.3915. Malaysia Nominees (Tempatan) Sendirian Berhad 8,344,612 1.1616. The Asia Insurance Company Limited 7,209,312 1.0017. Capital Properties Berhad 6,867,000 0.9518. Employees Provident Fund Board 6,211,500 0.8619. Glenmarie Estates Sdn Berhad 6,181,000 0.8620. Kenanga Nominees (Tempatan) Sdn Bhd 5,466,656 0.76

Total 530,216,990 73.69


S U B S T A N T I A L S H A R E H O L D E R S

A S P E R R E G I S T E R O F S U B S T A N T I A L S H A R E H O L D E R S

Beneficially Interested Deemed Interested % of Total

Killinghall (Malaysia) Bhd 192,430,655 - 26.74

Ramuda Sdn Bhd 103,431 193,143,645 26.86

Dato’ Tan Teong Hean 2,664,685 241,089,231 33.88

Dato’ Dr Mohammad Abdus Salim S Cassim 33,742,062 193,247,076 31.55

Keppel Bank of Singapore Limited 71,948,252 - 10.00

KI Investment (HK) Limited 35,977,601 - 5.00

Amalan Istimewa Sdn Bhd 47,842,155 - 6.65

Mazal Sdn Bhd 43,736,230 - 6.08

Altima, Inc. 35,280,000 - 4.90

Malaysian Focus Investment Fund Limited 33,776,420 - 4.69

Mayfair Finance Corp 20,000,000 - 2.78

Tan Sri Osman S Cassim 14,391,000 - 2.00

No. of Shares Held

(ADDRESS)

( FULL NAME IN BLOCK LETTERS)

(ADDRESS)

(FULL NAME)

(ADDRESS)

I/We NRIC No.

of

being a member of SOUTHERN BANK BERHAD hereby appoint the Chairman of the Meeting* or

of

or failing him,

of

as my/our proxy, to vote for me/us on my/our behalf at the 37th Annual General Meeting of the Bank, to be held on16 June 1999, and at any adjournment thereof.

Form of Proxy3 7 t h A n n u a l G e n e r a l M e e t i n g

SOUTHERN ␣ BANK ␣ BERHAD ␣ (5303 -W) ( Incorporated in ␣ Ma lay s ia )

Please indicate with an “X” in the spaces how you wish your votes to be cast. If you do not indicate how you wishyour proxy to vote on any Resolution, the proxy will vote as he thinks fit, or, at his discretion, abstain from voting.

Dated this day of , 1999.

Witness Signature or Common Seal of Member

* Delete the words “Chairman of the Meeting” if you wish to appoint some other person(s) to be your proxy.

Notes: A member of the Bank entitled to attend and vote at the above Meeting is entitled to appoint a proxy to vote on his behalf. A proxy neednot be a member of the Bank but shall be either an advocate, an approved company auditor or a person approved by the Registrar of Companies. The instrumentappointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing, or, if the appointor is a corporation,under its Common Seal. An instrument appointing a proxy executed in Malaysia need not be witnessed. The signature to an instrument appointinga proxy executed outside Malaysia shall be attested by a solicitor, notary public, consul or magistrate.

Where a member appoints two proxies, the appointment shall be invalid unless he specifies the proportion of his holdings to be representedby each proxy.

In the case of joint holdings, the signatures of all joint holders are required.

The instrument appointing a proxy must be deposited at the Registered Office of the Bank, 20 th Floor, Wisma Genting, 28 Jalan Sultan Ismail,50250 Kuala Lumpur not less than 48 hours before the time set for the Meeting and at any adjournment thereof.

(FULL NAME)

Resolutions Description of Resolutions For Against

1 Adoption of Reports and Accounts

2 Directors Remuneration

3 Re-election of Dr Maisarah bte Abdullah inaccordance with the Bank’s Articles of Association

4 Re-appointment of Directors in compliance withSection 129(6) of the Companies Act, 1965(a) Mr Lim Pak Tow

(b) YBhg Dato’ Dr Yahya bin Ismail

5 Declaration of Dividend

6 Appointment of Auditors

Fold here

Stamp

Southern Bank Berhad

20th Floor, Wisma Genting

28, Jalan Sultan Ismail

50250 Kuala Lumpur

Fold here

Southern Bank Berhad 1998 Annual Report

Documents

Transcript of Southern Bank Berhad 1998 Annual Report